2018-11-07 (01) SRR PSDA Amend No. 3AMENDMENT NO. 3 TO PURCHASE, SALE, AND
DEVELOPMENT AGREEMENT
THIS AMENDMENT NO. 3 TO PURCHASE, SALE, AND DEVELOPMENT
AGREEMENT ("Amendment No. 3" or "Agreement") is dated as of November .29 , 2018
("Signature Date"), by and between the CITY OF LA QUINTA, a California municipal
corporation and charter city (the "City"), and SILVERROCK DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company ("Developer").
RECITALS:
A. Except for portions of land transferred to Developer as described in Recital C
of this Amendment No. 3, City owns fee title to that certain real property of approximately
525 acres located at the southwest intersection of Jefferson Street and Avenue 52, in the
City of La Quinta, California, a general depiction of which is the Site Map attached as
Exhibit "A" and incorporated herein, as defined in the Original PSDA as the "SilverRock
Resort Area." City and Developer entered into that certain Purchase, Sale, and
Development Agreement dated November 19, 2014 (the "Original PSDA"), pursuant to
which City agreed to sell to Developer specified "Planning Areas" that are part of
approximately 130 acres comprising the "Property" (as that term is defined in the PSDA) in
the SilverRock Resort Area, and Developer agreed to purchase from City those specified
"Planning Areas" to thereafter construct, complete, and operate thereon a commercial
project containing a luxury resort hotel and spa and associated branded luxury residential
units, a lifestyle hotel and associated lifestyle branded residential units, a conference and
shared service facility, a temporary and permanent clubhouse for the SilverRock Resort's
Arnold Palmer Classic Course, a mixed use village, a resort residential village, and
associated amenities, all as further described in the PSDA as the "Project Components."
B. City and Developer entered into that certain Amendment No. 1 to Purchase,
Sale, and Development Agreement dated October29, 2015 ("Amendment No. 1") to,
among other things, update the Site Map and various timeframes within the Original PSDA,
including certain timeframes within the Schedule of Performance. City and Developer
entered into that certain Amendment No. 2 to Purchase, Sale, and Development Agreement
dated April 18, 2017 ("Amendment No. 2") to, among other things, specify the golf -course
realignment and modify the development of the hotels and residential projects from the
Original PSDA, as more particularly described therein. The Original PSDA, as modified by
Amendment No. 1 and Amendment No. 2, is hereinafter referred to as the "PSDA."
C. Pursuant to the PSDA, on or about May 3, 2017, Developer acquired from the
City approximately 44.6 acres of the SilverRock Resort Area referred to in Amendment No. 2
as the Phase 1A Property.
D. The PSDA and SilverRock Resort Specific Plan ("Specific Plan"), among
other land use governing documents, permits, and entitlements, are centered around the
existing use and enjoyment, by residents, guests of the City, and members of the public, of
the SilverRock Resort's Arnold Palmer Classic Course (the "Golf Course").
E. Pursuant to the PSDA and other City permits and entitlements, Developer
completed a realignment of the Golf Course (the "Golf Course Realignment"), so that the
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construction, development, use, and operation of all other "Project Components" (as that
term is defined in the PSDA) may now proceed.
F. City approved Tentative Parcel Map No. 37207, attached as Exhibit "B'' to
Amendment No. 2 and as Exhibit "B" to this Amendment No. 3, incorporated herein by
reference (the "Parcel Map"), which, in accordance with the Subdivision Map Act,
subdivided the SilverRock Resort Area in the following parcels: Parcels 1-20 inclusive, and
Parcels A-G inclusive (collectively, the "Parcels"). The Parcels are more particularly
described in the legal descriptions attached as Exhibit "C" to Amendment No. 2 and as
Exhibit "C" to this Amendment No. 3 and incorporated herein by reference (the "Parcel
Legal Description(s)").
G. Pursuant to the PSDA, the Parcel Map subdivided the SilverRock Resort Area
to, among other reasons, create legally separate parcels that correspond to the Site Plan,
and to further enable the financing and development of the Project and Project Components.
A schedule that matches the acreage for the Parcels and Planning Areas, as well as a more
specific schedule of the Phases of the development and Parcel conveyances, as set forth in
the PSDA and modified, is attached as Exhibit "D" to Amendment No. 2 and as Exhibit "D"
this Amendment No. 3, and incorporated herein by reference (the "Schedule of Acreage").
H. In connection with the financing obtained by Developer for the construction of
the Project, the ownership of Developer has been restructured and The Robert Green
Company, a California corporation ("RGC"), is now the manager of Developer.
I. To further the coordination of the development of the various phases with
financing obtained by Developer and to reflect the current status of the Project, City and
Developer now wish to amend the PSDA to (i) update the Scope of Development, the
Schedule of Performance, and various timeframes. and phasing of development, and
((ii) amend various terms of the PSDA required to facilitate the financing and marketability
of the Project Components.
J. Unless otherwise specifically defined herein, all terms used herein shall have
the meanings ascribed to such terms in the PSDA and all Section references below refer to
Sections of the PSDA.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, which are
incorporated herein by this reference and a substantive part of this Agreement, and for other
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Effectiveness. The effectiveness of this Agreement is conditioned upon and shall
not be effective until Developer has satisfied the conditions to conveyance of Phase 1 B set
forth in Section 6.1(d) of Amendment No. 2 as amended by this Agreement, which shall be
evidenced by the recordation of a deed of trust in favor of such construction lender against
the Phase 1A Property and Phase 1 B Property. The "Effective Date" of this Agreement shall
be the date all conditions to conveyance of the Phase 1 B Property have been satisfied. If
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the conditions to conveyance are not satisfied, or otherwise waived by City under this
Agreement or through escrow instructions, as evidenced by a written confirmation of the
same from the City or the recordation of a deed of trust in favor of such construction lender
against the Phase 1A Property and Phase 1 B Property, City may terminate this Amendment
No. 3 by written notice to Developer and this Agreement shall be deemed to not have taken
effect, and the PSDA, as amended by Amendment No. 1 and Amendment No. 2, shall be
the operative agreement between the parties.
2. Site Map. The "Site Map" is the same Site Map as attached to Amendment No. 2
and to this Amendment No. 3, and incorporated herein. References to Planning Areas or
PAs shall correspond to the Site Map attached hereto.
3. Schedule of Performance. The PSDA is hereby amended by replacing the Schedule
of Performance. The "Schedule of Performance" is hereby modified pursuant to the
schedule attached hereto as Exhibit "E" and incorporated herein. The Schedule of
Performance as so amended shall control over the "Anticipated Closing Dates" set forth in
Amendment No. 2.
4. Scope of Development. The PSDA is hereby amended by replacing the Depiction of
the Master Site Infrastructure Improvements set forth in Exhibit A to the Scope of
Development with Exhibit "F" attached hereto.
5. Section 603 -Transfers of Interests in Property or Agreement or in Developer.
5.1 Section 603.1. The second paragraph of Section 603.1 in the Original PSDA
is hereby replaced with the following:
"Notwithstanding the foregoing, City approval of a Transfer prior to the Fee
Transfer Release Date for a particular Project Component shall not be required in connection
with any of the following:
(a) The conveyance or dedication of any portion of the Property to an
appropriate governmental agency, or the granting of easements or permits to facilitate
construction of the Project.
(b) Any assignment for financing purposes (subject to such financing
being permitted pursuant to Section 311 of this Agreement), including the grant of a deed of
trust to secure the funds necessary for land acquisition, construction, and permanent financing
of the Project or of a Project Component.
(c) The Transfer to a lender who has provided financing to Developer
(subject to such financing being permitted pursuant to Section 311 of this Agreement) as a
result of the exercise by such lender of its rights or remedies pursuant to the documents
evidencing or securing the financing for land acquisition, construction, and permanent
financing of the Project or of a Project Component.
(d) A Transfer to a duly formed legal entity, provided the entity owning
the subject Project Component or portion thereof after the Transfer is an entity (i)whose
managing member, manager, or managing general partner is RGC or is directly or indirectly
controlled by RGC, and (ii) which engages as the project/development manager for the Project
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Component or subject portion thereof and which is at least fifty-one percent (51 %) owned and
controlled by RGC.
(e) Subject to the terms of Sections 305.1 and 305.2, the sale of
Resort Residential Units to third party buyers.
(f) Developer may sell a Project Component within Planning Areas 7,
8 and 9, provided the following conditions have been satisfied or have been waived in writing
by the City:
(i) the City has issued a site development permit for the development
of the Project Components within Planning Areas 7, 8 and 9;
(ii) Each of the following relating to the Master Site Infrastructure Work
shall have been completed:
a. Mass grading of all of Phase 1A and Phase 1 B (as defined in
Amendment No. 2) other than Planning Area 7, 8 and 9.
b. All SilverRock Way improvements.
c. All Ahmanson Way improvements.
(iii) City has received (A) reasonable evidence that a construction loan
providing construction loan funds for the completion of the Luxury
Hotel has closed; and, (B) either (a) (i) reasonable evidence (which
evidence may take the form of a certification of net worth or funds
availability and shall not require a set aside of funds) of the
availability to the lender under such loan of the funds required to
loan to Developer the projected costs of completion of the Luxury
Hotel in excess of the equity available to Developer to pay such
costs and already expended to pay such costs, and (ii) reasonable
evidence of Developer's receipt of an equity commitment from one
or more investors for the portion of the equity required for the
completion of the Luxury Hotel that has not yet been expended and
reasonable evidence of such equity investor's availability of funds
with which to fulfill its funding obligations to Developer (which
evidence may take the form of a certification of net worth or funds
availability and shall not require a set aside of funds), or (b) the
certification of the City building official or its designee stating that
the rough framing of the guest rooms of the Luxury Hotel has been
substantially completed and the rough framing of the reception
building for the Luxury Hotel has commenced;
(iv) A copy of the fully executed construction contract for the
construction of the Luxury Hotel has been delivered to City;
(v) City has received a completion guaranty in substantially the same
form as received from the Luxury Hotel construction lender and
from the same guarantor as the guarantor under such completion
guaranty provided to such lender under which the guarantor
guarantees to the City the funding of any costs required to complete
the Luxury Hotel that are not funded by such construction loan;
(g) Provided the terms of Section 6.1(d) of Amendment No. 2
are complied with in connection with the same, the Transfers required to restructure
the ownership of Developer as depicted in Exhibit "G" attached hereto and
incorporated by this reference.
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(h) The Project Components that may be transferred along with
the authorized sales of Planning Areas 7, 8, and 9 are the Promenade Mixed -Use
Village component and Resort Residential Village component, as well as the Master
Site Infrastructure Improvements that accompany those two Project Components."
5.2 Separate Ownership of PA 7, 8 and 9. Subject to the terms and conditions of
the PSDA, Planning Area 7, 8 and 9 may be developed by a different owner than the
balance of the Phase 1 Property (as defined in the Original PSDA and modified by
Amendment No. 2). In such event, the requirements of the PSDA shall be interpreted and
applied such that the owner of Planning Area 7, 8 and 9 shall be not liable or responsible
for the performance or failed performance of an owner(s) of the balance of Phase 1 Property
and vice -a -versa.
5.3 Section 603.2. Transfers of Operational Obligations. Section 603.2 of the
Original PSDA is hereby replaced to read as follows:
"RGC La Quinta LLC and Montage Hotels & Resorts, LLC, a Nevada limited liability
company ("Montage") have entered into a Resort Management Agreement ("RMA") dated
March 1, 2017 with respect to both the Luxury Hotel (to be operated as a "Montage" branded
hotel) and the Lifestyle Hotel (to be operated as a "Pendry" branded hotel). Montage has
been approved by the City as the Hotel Operator for the Luxury Hotel and as the Hotel
Operator for the Lifestyle Hotel and therefore Montage is both the Luxury Hotel Operator
and the Lifestyle Hotel Operator. Notwithstanding anything in Section 603.1 to the contrary,
until the later of (a) the date the TOT Covenant Agreement for the Luxury Hotel expires or
is earlier terminated by the Parties pursuant to the terms thereof, or (b) the date the TOT
Covenant Agreement for the Lifestyle Hotel expires or is earlier terminated by the Parties
pursuant to the terms thereof, if the Luxury Hotel Operator or the Lifestyle Hotel Operator is
to be replaced (such as in the case of a termination of cancellation of the RMA) or, to the
extent Developer has a right under the RMA to approve or consent to the same, an
assignment by the Hotel Operator of the RMA or a change in ownership of the Hotel
Operator is proposed, Developer will not consent to such change unless City has provided
to Developer the City's consent to such change, such City consent not to be unreasonably
withheld, conditioned or delayed. Notwithstanding the foregoing, such City approval or
consent shall not be required with respect to the Luxury Hotel if the transfer or change in
ownership is to any of the entities approved by City to act as Luxury Hotel Operator, as set forth
in Section 205.1 m hereof (any of the foregoing, an "Approved Luxury Hotel Operator"), or with
respect to the Lifestyle Hotel if the transfer or change in ownership is to any of the entities
approved by City to act as Lifestyle Hotel Operator, as set forth in Section 205.1(m) hereof (any
of the foregoing, an "Approved Lifestyle Hotel Operator"). In connection with any required City
approval with respect to a change in operator of the Luxury Hotel to any entity that is not
designated as an Approved Luxury Hotel Operator, Developer or Developer's successor in
interest shall demonstrate that the proposed operator has experience and reputation for
operating luxury hotels that is equivalent to the experience and reputation of an Approved Luxury
Hotel Operator (an "Experience Equivalent Luxury Hotel Operator"). In connection with any
required City approval with respect to a change in operator of the Lifestyle Hotel to any entity
that is not designated as an Approved Lifestyle Hotel Operator, Developer or Developer's
successor -in -interest shall demonstrate that the proposed operator has the experience and
reputation in operating lifestyle hotels that is equivalent to the experience and reputation of an
Approved Lifestyle Hotel Operator (an "Experience Equivalent Lifestyle Hotel Operator")."
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5.4 Section 603.3. Assignment and Assumption of Obligations. Section 603.3 of
the Original PSDA is hereby replaced to read as follows:
"Except for the sale of individual Resort Residential Dwelling Units, any Transfer (including
Transfers not requiring prior City approval) by Developer of any interest in the Property or of any
interest in this Agreement shall require the execution of an assignment and assumption of
obligations substantially in the form attached hereto and incorporated herein as Attachment
No. 9 (an "Assignment and Assumption Agreement"). Transfers of Developer's rights and/or
obligations under this Agreement made without an executed Assignment and Assumption
Agreement are null and void. The requirement for the provision to City of an executed
Assignment and Assumption Agreement shall apply regardless of whether City approval is
required for the Transfer. Developer agrees that (a) at least thirty (30) days prior to any Transfer
it shall give written notice to City of such proposed Transfer; and (b) within five (5) days after
any Transfer it shall provide City with a copy of the fully executed Assignment and Assumption
Agreement evidencing that the assignee has assumed in writing all applicable obligations under
this Agreement. A Party proposing to assign its obligations under this Agreement (i) shall remain
liable for the obligations until and unless City has received a fully executed Assignment and
Assumption Agreement, and (ii) shall remain liable for any default hereunder that occurred prior
to the effective date of the assignment. Developer or Developer's successor in interest shall
reimburse City for any costs (other, than staff time) City incurs in reviewing any Assignment and
Assumption Agreement required hereunder."
6. Section 305 Phasinq of Development. Section 305 is amended hereby by deleting
Sections 305.1(a) and (b) and Section 305.2(a). Section 305.1(c) and Section 305.2(b)
remain operative and enforceable, and are not deleted by this Amendment No. 3.
7. Satisfied Cit 's Conditions Precedent and Requirements. City acknowledges that the
following actions have occurred and/or the following City's Conditions Precedent to the
Closing have been satisfied:
7.1 The Golf Course Realignment has been completed except for certain final
payments to contractors working on the Golf Course Realignment. Upon the Effective Date
of this Third Amendment, the City promptly will cause Parcel 3 and Parcel 4 to be released
from the Covenant Affecting Real Property (Golf Course Use) by means of a recordable
release in the form of Release of Covenant Affecting Real Property (Golf Course Use)
attached hereto as Exhibit U.
7.2 The following closing documents (collectively referred to in as the "PSDA
Covenant Documents") relating to Developer's purchase of the Phase 1A Property and
Phase 1 B Property have been executed and delivered:
7.2.1 A Covenant Affecting Real Property (Golf Course Use) dated May 3,
2017 by and between Developer and City was entered into and recorded on May 11, 2017
as Document No: 2017-0189004.
7.2.2 An Agreement Containing Covenants, Conditions, and Restrictions
Affecting Real Property (Luxury Hotel) dated May 3, 2017 by and between Developer and
City was recorded on November 6, 2017 as Document No: 2017-0463952.
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7.2.3 A Covenant Affecting Real Property (Perimeter Landscaping and Trails)
dated May 3, 2017 by and between Developer and City was entered into and recorded on
May 11, 2017 as Document No: 2017-0189266.
7.2.4 A Covenant Affecting Real Property (Ahmanson Ranch House) dated
May 3, 2017 by and between Developer and City was entered into and recorded on May 11,
2017 as Document No: 2017-0189769.
7.3 Developer has reviewed and approved the environmental condition of the
Property and has not elected to terminate the PSDA and the City Condition Precedent to
Closing under Section 205.1(i) [Environmental] has been satisfied.
7.4 The City Condition Precedent to Closing under Section 205.1(m) [Hotel
Management Agreement and Letter of Intent] has been satisfied.
7.5 The City Condition Precedent to Closing under Section 205.1(p) [Signage
Agreement] shall be waived until completion of the Luxury Hotel Project Component.
7.6 The City Condition Precedent to Closing under Section 205.1(q) [Security for
Luxury Hotel Fence] has been waived but such waiver does not release or relieve Developer
of any obligation it may have under Section 12 of Amendment No. 2.
7.7 Parcel Map No. 37207 has been recorded and, therefore, the City Condition
Precedent under Section 205.1(s) has been satisfied.
7.8 Developer has submitted to City and City has approved a Master Site
Infrastructure Improvements Phasing Plan and, therefore, the City Condition Precedent
under Section 205.1(t) has been satisfied. The "Master Site Infrastructure Improvements
Phasing Plan" is attached hereto as Exhibit "H" and incorporated by reference.
8. Ahmanson Ranch House, Temporary Golf Clubhouse and Temporary Driving Range.
City and Developer agree to modify of the requirements under the PSDA for rehabilitation of
the Ahmanson Ranch House and for the construction of a temporary golf clubhouse and
Temporary Driving Range described as follows: In lieu of constructing a temporary golf
clubhouse, the existing golf clubhouse (i.e., existing Ahmanson Ranch House) and the
operations thereof shall continue (subject to modifications to cart storage and staging,
parking, and minor utility adjustments, as approved by City and Developer) until the
Permanent Golf Clubhouse has been completely constructed and is ready for regular
operations. Also, in lieu of constructing a Temporary Driving Range, the existing driving
range has been retained with some changes in operation and shall remain available for use
and operations in the same manner as of the Effective Date of this Agreement. The existing
Ahmanson Ranch House shall remain operational until renovated, with renovation of the
Ahmanson Ranch House to begin after the Permanent Golf Clubhouse is completely
constructed and is ready for regular operations (the "Permanent Golf Clubhouse Completion
Date"). Upon the Permanent Golf Clubhouse Completion Date, the use of the existing
Ahmanson Ranch House as the temporary golf clubhouse shall cease and renovations
thereof shall proceed pursuant to the PSDA. References in the PSDA to "temporary golf
clubhouse" or "Temporary Golf Clubhouse" shall mean the existing Golf Club House as
modified by this Amendment No. 3, and references to the "Temporary Driving Range" shall
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mean the existing driving range as modified by this Amendment No. 3. All costs of creating
the temporary facilities, including any site modifications and leased facilities or equipment
required to create the temporary facilities are the sole expense and responsibility of the
Developer. In addition, while Developer is not responsible for the general costs of operating
the temporary facilities, if there are operational costs thereof that would not have been
incurred but for the nature of the temporary improvements, such as the costs of operating a
water or sewer holding tank serving the temporary facility because connection to the
applicable utility is not feasible, then Developer shall be responsible for those operating
costs. For purposes of this paragraph, "temporary facilities" includes but is not limited to the
Temporary Golf Clubhouse and Temporary Driving Range, as modified by this Amendment
No. 3.
The references in the PSDA to the Temporary Golf Clubhouse, Temporary Driving Range,
and the Ahmanson Ranch House shall be interpreted to give effect to the foregoing
modifications in scope and timing.
9. Amendments to Phase 1 B Conditions to Closing.
9.1 Section 6.1 of Amendment No 2. Section 6.1 of Amendment No. 2 is hereby
replaced with the following:
"City shall have no obligation to sell or convey the Phase 1 B Property, and Developer
shall have no right to purchase or acquire, the Phase 1 B Property unless and until
the following conditions are met: (a) the Phase 1A Closing shall have occurred;
(b) Developer shall have completed construction of the Golf Course Realignment
(including, prior to or concurrent with the conveyance, making any outstanding final
payments to contractors working on the Golf Course Realignment); (c) Developer has
provided and complied with City's approval of financing for the Master Site
Infrastructure Improvements (as described in Sections 205.1(h) and 211 of the PSDA
but as modified to reflect the Master Site Infrastructure Improvements Phasing Plan
attached to this Amendment No. 3); (d) Developer has provided satisfactory evidence
to the City Manager or authorized designee that Developer has (i) the financial
capacity and sufficient equity to close on all financing necessary to finance
construction of the Master Site Infrastructure Improvements (except for the Master
Site Infrastructure Improvements for the Project Components within Planning Areas
7, 8 and 9) to be constructed on the Phase 1A Property and Phase 1 B Property, and
(ii) Developer has provided satisfactory evidence to the City Manager or authorized
designee that Developer has obtained a construction loan for the financing of the
vertical improvements for all Project Components (other than the Project
Components within Planning Area 7, 8 and 9) to be constructed on the Phase 1A
Property and Phase 1 B Property; provided, however, such loan may be conditioned
upon Developer obtaining a commitment satisfactory to the lender for the additional
equity required for the vertical improvements; (e) Developer has received any and all
permits required to commence mass grading pursuant to City -approved grading plans
or the City is ready to issue such permits upon payment of required fees, and (f) the
City's Conditions Precedent to the Closing set forth in Section 205.1 of the PSDA with
respect to Phase 1 B and the Phase 1 B Property shall have been satisfied, or waived
by City; provided, however, for the Phase 1 B closing, the parties acknowledge that
the Water Agreement referred to in Section 205.1(n) is in near final form but remains
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under review by CVWD and therefore agree that it is not a requirement for the Phase
1 B Closing and agree to use their diligent efforts to cause CVWD to finalize and enter
into such Water Agreement as soon as possible."
10. Clarification of Phase 1C Conditions to Closing. Section 7.1(f) of Amendment No. 2
states that a condition to the conveyance to Developer the Phase 1 C (Golf Course) Property
is that the City's Conditions Precedent to Closing set forth in Section 205.1 of the PSDA with
respect to Phase 1 C and the Phase 1 C Property shall have been satisfied or waived by the
City. City hereby acknowledges that in connection with the closing of the Phase 1 C (Golf
Course) Property the Option Agreement and Memorandum of PSDA to be recorded against
Phase 1 C (Golf Course) Property will reflect that they will be released upon completion of
the Luxury Hotel and Lifestyle Hotel.
11. Master Site Infrastructure Improvements Phasing Plan, The Master Site
Infrastructure Improvements, and requirements relating thereto, referred to in the PSDA,
including Sections 205.1 and 304.2, shall be interpreted and, to the extent necessary, shall
be deemed amended to give effect to and be consistent with the Master Site Infrastructure
Improvements Phasing Plan attached to this Amendment No. 3.
12. Changes to Closing_ Documents for Phase 1 B Closing. In connection with the
Phase 1 B Closing, as part of the Phase 1 B Closing, Parcels D, E, F, and G will be conveyed
by City to Developer and the following amendments shall be entered into by the applicable
parties and recorded: Amendment No.1 to Grant Deed (Phase 1A Property) in the form of
Exhibit I attached hereto; Amended and Restated Agreement Containing CC&Rs Affecting
Real Property (Luxury Hotel) in the form of Exhibit J attached; and Amendment to
Memorandum of Purchase, Sale and Development Agreement (Phase 1A) in the form of
Exhibit K attached hereto. In addition, the form of the TOT Covenant (Lifestyle) to be
entered into and recorded in connection with the Phase 1 B Closing is attached hereto as
Exhibit L and in lieu of the form of Option Agreement attached to the PSDA, the form of
Memorandum of Purchase, Sale, and Development Agreement (Phase 1 B) to be entered
into and recorded in connection with the Phase 1 B Closing is attached hereto as Exhibit T
in lieu of the form of Memorandum of Purchase, Sale, and Development Agreement attached
to the PSDA, and in connection with the Phase 1 B Closing, both the form of Option
Agreement (Phase 1 Excluding PA 7, 8 And 9) and Termination Of Phase 1A Option
Agreement) attached hereto as Exhibit M and the form of Option Agreement (PA 7, 8 and 9)
attached hereto as Exhibit N will be entered into and recorded.
13. Section 306 — Insurance Reguirements. The first paragraph of Section 306.1 is
hereby amended to read as follows:
"306.1 Commencing with the Effective Date hereof and ending on the recordation
of a Release of Construction Covenant for all of Phase 1A and all of Phase 1B,
Developer shall procure and maintain, at its sole cost and expense, in a form and
content reasonably satisfactory to the City Manager, the following policies of
insurance:"
14. Section 406. Section 406 is hereby amended by deleting the portion thereof the last
sentence of the first full paragraph thereof through the end of clause (f) thereof so that said
Section 406 reads as follows:
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Effect of Violation of the Terms and Provisions of this Agreement After
Completion of Construction. City is deemed the beneficiary of the terms and provisions of
this Agreement and of the covenants running with the land, for and in its own right, without
regard to whether City has been, remains or is an owner of any land or interest therein in
the Property. City shall have the right, if this Agreement or the covenants herein are
breached, to exercise all rights and remedies, and to maintain any actions or suits at law or
in equity or other proper proceedings to enforce the curing of such breaches and to avail
itself of the rights granted herein to which it may be entitled, except as may be otherwise set
forth in this Agreement. The covenants contained in this Agreement shall not benefit or be
enforceable by any owner of any other real property, or any person or entity having an
interest in such other real property.
15. Adverse Economic Event. Upon closing of the construction loan described in Section
6.1 of Amendment No. 2 as amended above, clause (ii) of the definition of "Adverse
Economic Effect" set forth in Section 100 of the PSDA shall be deemed deleted.
16. PSDA Exhibits. Attachment No. 4. [Form of Grant Deed] is hereby replaced by the
Form of Grant Deed attached hereto as Exhibit O. Attachment No. 7. [Form of Option
Agreement] is hereby replace by the Form Option Agreement attached hereto as Exhibit P.
Attachment No. 8. [Form of Release of Construction Covenants] is hereby replace by the
Form of Release of Construction Covenants attached hereto as Exhibit Q. Attachment
No. 10. [Form of Memorandum of Purchase, Sale and Development Agreement] is hereby
replace by the Form of Memorandum of Purchase, Sale and Development Agreement
attached hereto as Exhibit R. Attachment No. 6 — [Preliminary Budget] is hereby replaced
by the Preliminary Budget attached hereto as Exhibit S.
17. Miscellaneous
17.1 PSDA in Full Force and Effect. Except as otherwise expressly provided in this
Amendment No. 3, all of the covenants, terms and conditions of the PSDA (including the
GENERAL PROVISIONS in Article 600, as modified in Amendment No. 1) shall remain in
full force and effect.
17.2 Governing Law. This Amendment No. 3 and the PSDA shall be governed by
the internal laws of the State of California, without regard to conflict of law principles, and
any question arising hereunder shall be construed or determined according to such law. The
Superior Court 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 Amendment No. 3 or PSDA. Service of process on City shall be
made in accordance with California law. Service of process on Developer shall be made in
any manner permitted by California law and shall be effective whether served inside or
outside California.
17.3 Interpretation. The PSDA, as amended by this Amendment No. 3, shall be
read and interpreted in a comprehensive, integrated manner, and in a manner that best
implements the provisions of this Amendment No. 3. However, in the event the terms of this
Amendment No. 3 result in ambiguity, the parties will meet and confer to attempt to resolve
the ambiguity, each in their reasonable discretion. But if the terms of this Amendment No. 3
directly conflict with the terms of the PSDA, then the terms of this Amendment No. 3 will be
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controlling and the PSDA, as amended, shall be interpreted to implement the intent of this
Amendment No. 3
17.4 Time is of Essence. Time is of the essence of this Amendment No. 3 and of
each and every term and provision hereof.
17.5 City Approvals and Actions. City shall maintain authority over and
implementation of this Amendment No. 3 pursuant to Section 605 of the PSDA.
17.6 Representations. The person(s) executing this Amendment No. 3 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 Amendment No. 3 on behalf
of said party, (iii) by so executing this Amendment No. 3 such party is formally bound to the
provisions of this Amendment No. 3, and (iv) the entering into this Amendment No. 3 does
not violate any provision of any other agreement to which such party is bound.
17.7 Counterparts. This Amendment No. 3 may be executed in counterparts, each
of which, when this Amendment No. 3 has been signed by all of the parties hereto, shall be
deemed an original, and each such counterpart shall constitute one and the same
instrument.
17.8 Estoppel_ Statement. City and Developer certify to one another that as of the
Effective Date: (i) except as modified by this Amendment No. 3 and the documents recorded
in connection with the conveyance of Phase 1 B to Developer, the PSDA and the PSDA
Covenant Documents are unmodified and in full force and effect; (ii) once this Amendment
No. 3 is fully effective on the Effective Date, there are no outstanding defaults under the
Original PSDA, Amendment No. 1, Amendment No. 2, or the PSDA Covenant Documents,
and there is no condition or circumstance which with the giving of notice and/or the passage
of time would become a default thereunder. City also acknowledges that Developer intends
to close a loan with Mosaic SilverRock, LLC ("Lender") and that in connection therewith (i)
any future default or demand notice to Developer with respect to the PSDA or any other
agreements between City and Developer will be sent to Lender at the below address at the
same time the notice is sent to Developer, (ii) City consents to the collateral assignment by
Developer to Lender of Developer's interest under the PSDA, and (iii) Lender may rely on
the terms of this Section 17.8.
Mosaic SilverRock, LLC c/o Mosaic Real Estate Investors, LLC
23975 Park Sorrento, Suite 420
Calabasas, California 91302
Attn: Vicky Schiff
Email: vs@mosaicrei.com
[End of Amendment No. 3 — Signature page follows]
11
127114684
4819-2019-1097 4
IN WITNESS WHEREOF, City and Developer have executed this Amendment
No. 3 as of the date set forth above.
"DEVELOPER"
SILVERROCK DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company
By: The Robert Green Company,
a California corporation Its: Manager
By.
Name: Robert S. Greerigr.
Its: President and Chief
Executive Officer
Date: 2018
[Signatures continued to next page]
12
12711468.4
4819-2019-1097.4
"CITY"
CITY OF LA QUINTA, a California municipal
Date: '` 2018
��M.
Its: City Nl 6nager
ATTEST:
Monika Radeva, City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
By. r
William H. Ihrke, City Attorney
13
127114684
4819-2019-1097.4
3
EXHIBIT "A"
SITE MAP
LAND USE SUMMARY
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12711468 4
4819-2019-1097.4
EXHIBIT "B"
PARCEL MAP
[See following page]
EXHIBIT "B"
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12711468.4
4819-2019-1097.4
EXHIBIT "B"
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12711468.4
4819-2019-1097.4
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EXHIBIT "C"
LEGAL DESCRIPTIONS OF PARCELS
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF LA
QUINTA IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS
DESCRIBED AS FOLLOWS:
PARCELS 1-20 INCLUSIVE AND PARCELS A-G INCLUSIVE OF PARCEL MAP NO.
37207, IN THE CITY OF LA QUINTA, COUNTY OF RIVERSIDE, -STATE OF
CALIFORNIA, FILED IN BOOK 242, PAGES 72 THROUGH 87 OF PARCEL MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXHIBIT "C"
-1-
12711468.4
4819-2019-1097.4
EXHIBIT "D"
SCHEDULE OF ACREAGE
[See following page]
EXHIBIT "D"
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4819-2019-1097 4
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-2-
12711468.4
4819-2019-1097.4
EXHIBIT "E"
SCHEDULE OF PERFORMANCE
[See following pages]
EXHIBIT "E"
-1-
12711468.4
4819-2019-1097.4
SCHEDULE OF PERFORMANCE
Item of Performance
Start
Completion*
TRANSACTIONAL AGREEMENTS
Execution of PSDA, TOT Sharing
Agreements, and TOT Covenant Agreements
N/A
COMPLETE
Open Phase 1 Escrow and Phase 2 Escrow
N/A
COMPLETE
PRE -DEVELOPMENT
i
Land & Site Planning
- Prepare, submit to City for approval,
and obtain City's approval of, plans for
Golf Course Realignment
- Master site design
Planning & Entitlements
N/A
COMPLETE
N/A
COMPLETE
N/A
COMPLETE
- Preliminary Engineering & Mapping
- Site development plans
N/A
PA (2, 3, 4, 5, 6, and
10A): COMPLETE.
PA (7, 8 and 9): within
six months of Luxury
Hotel opening.
- Prepare, submit to City for approval,
and obtain City's approval of, Master
Site Infrastructure Improvements
Design/Construction Development
Drawings (relevant to particular phase)
N/A
By date set forth in
Master Site
Infrastructure
Improvements Phasing
Plan.
Conditions to Closingl
15 Business Days prior
to anticipated Phase la
Closing or Phase 1 b
Closing
- All of Developer's Conditions
Precedent to the Closing and City's
Conditions Precedent to the Closing
have been satisfied, or waived by the
appropriate art
N/A
CONSTRUCTION AND INSTALLATION OF
MASTER SITE IMPROVEMENTS
EXHIBIT "E"
-2-
12711468.4
4819-2019-1097.4
Item of Performance
Start
Completion*
Construct Golf Course Realignment
5/1/17
COMPLETE
Install construction fencing around Luxury
N/A
Prior to
Hotel site as required to separate golf play
commencement of
All other MSII
mass grading
Prior to issuance of any
N/A
certificate of occupancy
for the vertical
improvements served
by those Master Site
Infrastructure
Improvements
necessary for the
subject phase of
development.
CONSTRUCTION OF PROJECT
COMPONENTS
Prepare and submit to City for approval, and
3 months
Prior to start of
obtain City's approval of, Project Component
prior to
construction of
(or portion thereof) Design/Construction
anticipated
applicable Project
Development Drawings
start of
Component or portion
construction
thereof.
of applicable
Project
Component or
portion
_
satisfies all conditions to develop
thereof.
N/A
Prior to start of
TDeveloper
forth in Section 304 of Agreement
construction of
applicable Project
Component
_
Luxury Hotel
8/01 /19
12/31 /20
(PA 2)
Luxury Branded Residential Development
12/31 /19
4 years after start.
(PA 3)
Project Component**
considered complete
when 70% of units are
Conference and Shared Services Facility
complete.
8/1/19
12/31/20
(PA 4)
Lifestyle Hotel
8/1 /19
12/31 /20
(PA 5)
EXHIBIT "E"
-3-
12711468.4
4819-2019-1097.4
Item of Performance
Lifestyle Branded Residential Development
(PA 6)
Promenade Mixed -Use Village
(PA 7 and PA 9)
Resort Residential Village
(PA 8)
Permanent Golf Clubhouse
(PA 10A)
Start
12/31 /19
Completion*
4 years after start.
Project Component**
considered complete
when 70% of units are
complete.
7/1 /22 5 years after start.
Project Component**
considered complete
when 70% of units are
complete.
7/1 /22 5 years after start.
Project Component**
considered complete
when 70% of units are
complete.
10/31 /19 12/31 /20
*Completion dates or timeframes listed in this table are the outside dates permissible under this
Agreement and are subject to the terms of the Agreement.
** However, if Developer provides evidence reasonably satisfactory to the City that then existing
market conditions do not allow for the development on economically feasible terms and orderly
absorption of such product type to the point of completion within said initial 5-year period, then
such period shall be extended for 3 years.
EXHIBIT "E"
-4-
12711468.4
4819-2019-1097 4
EXHIBIT "F"
DEPICTION OF THE MASTER SITE INFRASTRUCTURE IMPROVEMENTS
ATTACHED AS EXHIBIT A TO SCOPE OF DEVELOPMENT
PSDA Lend TW"CUM Phim K" S I LV E K KO C K RESORT
PUN 1•
�. Ptw 1e
LA QUINTA, CALIFOKNIA
{1 P.. 1.
f Pwe td
P,re 1a
Phan s Option
EXHIBIT "F"
—1—
ROBE14: GREEN
10/01/2018
12711468.4
4819-2019-1097.4
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EXHIBIT "F"
-2-
C* H N m v tn
12711468.4
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EXHIBIT "G"
SILVERROCK OWNERSHIP STRUCTURE
SILVERROCK OWNERSHIP STRUCTURE
`= Managed by The Robert Green Co, r,[uny indicates formed out staled to charge. - m6cales an entty that wie be formed
only if PA 7, Sand 9 are not said and, instead, are developed by an ROC controlled entity
Green Family Tnat
f
The Robert Green Company RGC La Ouinta, LLC•
Member InCRY"l Investors
and taenager [ALTERNAT - .f1( Partner]
IAemaer \ !J /
SitverRock Developmeril Com arry, LLC (SRDC)'
(Owns Phase 1A to be transferred to SRP at dosing
Lodging Components (PA 2 and 41Parcets 1, 3.7)
and Luxury Residential (PAI31Parcel 1))
Member Member
T
SilerRodk'�F$rkYK L.irLw.. '�
+ Reaidenoea, uc.'
4awgnp Comprimatb ( nnalg Areas 2. a and 5 11—W Corivileal5ivrrtage-Handed RESiderru�s
Ipsrods 3.71 am. ewnlWay GoH Covrse IPA I and (Flaming Area 7. 8 and
IORParcera 17, 4J. Crave HGnw IPA 50t.NPatt`e1 9/Parcels 10A2) (panning Area 31Parce1 l)
81 end Ahmanson Ranch House (PA tyPamal 3I1
Note ParcHs E i and 6 Urn to be transferred to
this early as part of Phase 1 B dosing
EXHIBIT "G"
-1-
NOTE Upon oornpletion of PSDA Amendment No 3 and provided the Loan is ready to
close. SRDC is to trarrafer Phase 1 A to SRP, SRP is to acquire Phase 1® (PA 5.9 and 14A.
1r1'arcels 7-12) and Parcels 0, E, F and G and Loan is to close SRP will than commence
and complele site wok (other than as to PA 7, Band 9) and pre -development work PA 7,B
and 91Parcefs 10-12 are to be Gold to developer thereof and the site wok Internal thereto will
be done by said developer Excluding PA 7, B and 9, upon completion of site work and pnor
to arty vertical development thereon, SRP to transfer iraflvidual poled components to
affiliated entries as shown at bottom of page
SSNrerRock Lifestyle Residences, LLC•
PendrybrandOd Ro4Kknm (Planning
Area 81Parcel 9)
/817.000}0017 10
12711468.4
4819-2019-1097.4
EXHIBIT "H"
MASTER SITE INFRASTRUCTURE IMPROVEMENTS PHASING
f,f
puso to nd Trap WcOon Pho" Kay S I L V E P.,R.O C K R E S O U
tafe
p-16 LA QUINTA, CALIFORNIA
plate k
Pip 1d
F,� 18
Phaw 2 COW
EXHIBIT "H"
-1-
ROB[I -r, GRECN
10/01/2018
12711468.4
4819-2019-1097.4
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EXHIBIT "H"
-2-
12711468 4
4819-2019-1097 4
EXHIBIT 66
1"
AMENDMENT NO.1 TO GRANT ❑EED PHASE 1A PROPERTY
[See following page]
EXHIBIT "I"
-1-
12711468 4
4819-2019-1097 4
RECORDING REQUESTED BY,
MAIL TAX STATEMENTS TO
AND WHEN RECORDED MAIL TO:
SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas, California 92024
This document is exempt from payment of a recording fee
pursuant to Government Code Section 27383
AMENDMENT TO GRANT DEED
(Phase —1A Property — PSDA Amendment No. 2)
THIS AMENDMENT TO GRANT DEED (Phase — 1A Property — PSDA Amendment No.
2) (this "Amendment") is entered into by and between The CITY OF LA QUINTA, a California
municipal corporation and charter city (the "City"), and SILVERROCK DEVELOPMENT
COMPANY, LLC, a Delaware limited liability company ("Developer").
For and in consideration of the mutual covenants and conditions herein set forth, the City
and the Developer hereby agree as follows:
1. This Amendment is made to GRANT DEED (Phase — 1A Property — PSDA
Amendment No. 2) dated May 3, 2017 and recorded November 6, 2017 as Document #2017-
0463950 in Official Records of the County of Riverside, California (the "Grant Deed"), wherein the
City granted to Developer, that certain real property hereinafter referred to as the "Phase 1A
Property," described in Exhibit A, attached hereto and incorporated herein, subject to the existing
easements, restrictions, covenants of record described in the Grant Deed.
2. The Phase 1A Property was conveyed in accordance with and subject to the
Redevelopment Plan for the La Quinta Redevelopment Project Area No. 1 ("Redevelopment
Plan") which was approved and adopted by Ordinance No: 43, on November 29, 1983, of the City
Council of the City of La Quinta, and a Purchase, Sale, and Development Agreement entered into
between City and Developer dated November 19, 2014 ("Original PSDA"), as amended by
Amendment No. 1 to Purchase, Sale and Development Agreement dated October 29, 2015
("Amendment No. 1 ") and by Amendment No. 2 to Purchase, Sale and Development Agreement
dated on or about April 18, 2017 ("Amendment No. 2") (collectively, the "PSDA").
3. Subsequent to the date of the Grant Deed, the PSDA was further amended by
Amendment No. 3 to Purchase, Sale and Development Agreement dated on or about November
2018 ("Amendment No. 3")
4. In connection with Amendment No. 3, Developer and City desire to amend the
Grant Deed.
5. Section 2 of the Grant Deed is hereby amended to revise the definition of the term
"PSDA" to read as follows:
"Purchase, Sale, and Development Agreement entered into between City
and Developer dated November 19, 2014 ('Original PSDA'), as amended
by Amendment No. 1 to Purchase, Sale and Development Agreement
dated October 29, 2015 (`Amendment No. 1') and by Amendment No. 2 to
4824-7113-9445.2
Purchase, Sale and Development Agreement dated on or about April 18,
2017 (`Amendment No, 2') and by Amendment No. 3 to Purchase, Sale and
Development Agreement dated on or about November _, 2018
(`Amendment No. 3') (collectively, and as may be further amended, the
PSDA')"
6. Section 4 of the Grant Deed is hereby amended and restated to read in its entirety
as follows:
"Restrictions on Transfer. Developer further agrees that, except as
permitted or approved by City pursuant to Section 603 of the PSDA, (i) no
voluntary or involuntary successor in interest of Developer shall acquire
any rights or powers under the PSDA or this Grant Deed, nor shall
Developer make any total or partial sale, transfer, conveyance,
assignment, subdivision, refinancing or lease of the whole or any part of
the Phase 1A Property or the Phase 1A Project thereon, and (ii) Developer
shall retain full managerial and operational control of the Phase 1A Project.
The restrictions set forth in this Section 4 shall automatically terminate (1)
as to any individual residential dwelling unit that has been sold and
transferred to a buyer pursuant to the terms of the PSDA, and (11) as to any
Project Component (as that term is described in Section 100 of the Original
PSDA) for which City has recorded a Release of Construction Covenants
(as that term is described in Section 100 of the original PSDA), substantially
in the form of Attachment No. 8 to the PSDA, with no further action required
of City or Developer."
7. Section 10 of the Grant Deed is hereby deleted in its entirety.
8. The Grant Deed shall remain in full force and effect, with only such
supplementation and changes as are expressly set forth in this Amendment.
9. This Amendment may be executed in counterparts and when so executed, each
such counterpart will constitute an original document and such counterparts will constitute one
and same instrument.
[signatures on next page]
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4824-7113-9445.2
CITY:
CITY OF LA QUINTA, a California municipal
corporation and charter city
Date: 2018 By.
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
William H. Ihrke
City Attorney
City Manager
[signatures continue on next page]
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4824-7113-9445.2
DEVELOPER:
SILVERROCK DEVELOPMENT COMPANY, LLC,
a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
Date: 2018 By:
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
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4824-7113-9445.2
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
Am
, before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On
, before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
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4824-7113-9445.2
EXHIBIT A
LEGAL DESCRIPTION
PHASE 1A PROPERTY:
Those portions of Sections 5, 6 and 8 Township 6 South, Range 7 East, San Bernardino
Meridian, in the City of La Quinta, County of Riverside, State of California, described as follows:
Parcels 1, 3, 4, 5, and 6 of Parcel Map No. 37207 in the City of La Quinta, County of Riverside,
State of California, per map filed May 3, 2017 in Book 242, Pages 72 through 87, inclusive, of
Parcel Maps, in the office of the County Recorder of Riverside County, State of California.
EXHIBIT A
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4824-7113-9445.2
EXHIBIT "J"
AMENDE❑ AN❑ RESTATED AGREEMENT CONTAINING CC&RS AFFECTING
REAL PROPERTY (LUXURY HOTEL)
[See following page]
EXHIBIT "J"
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12711468.4
4819-2019-1097.4
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Clerk
[SPACE ABOVE FOR RECORDER.]
EXEMPT FROM RECORDER'S FEE PER GOV. CODE §27383
AMENDED AND RESTATED
AGREEMENT CONTAINING COVENANTS CONDITIONS AND RESTRICTIONS
AFFECTING REAL PROPERTY
(Luxury Hotel)
This AGREEMENT CONTAINING COVENANTS, CONDITIONS, AND RESTRICTIONS
AFFECTING REAL PROPERTY (the "Covenant Agreement") is entered into as of this day
of 20_ ("Covenant Agreement Effective Date"), by and between the CITY OF
LA QUINTA, a California municipal corporation and charter city ("City"), and SILVERROCK
DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Owner") (individually a
"Party" and collectively the "Parties").
RECITALS
A. City is the owner of that certain real property located in the City of La Quinta,
County of Riverside, State of California, which is more particularly described in the legal
description attached hereto as Exhibit No. 1 and incorporated herein by this reference (the "Site").
B. City has agreed to sell to Owner the Site pursuant to that certain Purchase, Sale,
and Development Agreement dated November 19, 2014 ("Original PSDA"), as amended by
Amendment No. 1 to Purchase, Sale, and Development Agreement dated October 29, 2015
("Amendment No. 1"), Amendment No. 2 to Purchase, Sale, and Development Agreement dated
April 18, 2017 ("Amendment No. 2"), and Amendment No. 3 to Purchase, Sale, and Development
Agreement dated _, 2018 ("Amendment No. 3") (collectively and as may
be further amended, the "PSDA"). The PSDA sets forth the terms and conditions for City to sell
to Owner the Site and certain adjacent real property (collectively, the "Development Property"),
and for Owner to thereafter develop and operate on the Development Property a commercial
project containing hotels and associated amenities, branded residential units, a mixed use village,
and a resort residential village (the "Development Project").
C. Pursuant to the PSDA, Owner has agreed to,develop on the Site a portion of the
Development Project consisting of the hotel defined in the PSDA as the Luxury Hotel (the "Hotel').
D. Pursuant to the PSDA, Participant is required to enter into a hotel management
agreement and all ancillary agreements, including, without limitation, a technical services
agreement, hotel brand licensing agreement, and use and access development agreement
(collectively, a "Hotel Management Agreement"), with a City -approved hotel operator (the "Hotel
Operator"), who shall be responsible for the management and operation of the Hotel pursuant to
the terms of the Hotel Management Agreement.
E. Pursuant to the PSDA, City and Owner entered into that certain Agreement
Containing Covenants, Conditions, and Restrictions Affecting Real Property (Luxury Hotel) dated
4852-4696-1781.2
May 3, 2017 and recorded November 6, 2017 as Doc #2017-0463952 in the Official Records of
the County of Riverside (the "Original Covenant Agreement (Luxury Hotel") and concurrently
therewith, City and Owner entered into that certain unrecorded Agreement to Share Transient
Occupancy Tax Revenue (the "Agreement").
F. Pursuant to Amendment No. 3, City and Owner desire to amend and restate the
Original Covenant Agreement (Luxury Hotel) as set forth herein.
G. In consideration for Owner's rights and obligations set forth in the Agreement and
within this Covenant Agreement, City has agreed to make certain payments to Owner, the amount
of which are measured by the "Transient Occupancy Tax" (as that term is defined below)
generated by the operation of the Hotel on the Site. City and Owner have agreed that the portion
of Transient Occupancy Tax required to be paid by City to Owner hereunder during each
"Payment Period" of the "Operating Period" (as those terms are defined below) provided for herein
is a fair exchange for the consideration to be furnished by Owner to City in that Payment Period.
COVENANTS
Based upon the foregoing Recitals, which are incorporated herein by this reference, and
for other good and valuable consideration, the receipt and sufficiency of which is acknowledged
by both Parties, City and Owner hereby agree as follows:
DEFINED TERMS.
In addition to the terms that may be defined elsewhere in this Covenant, Agreement, the
following terms when used in this Covenant Agreement shall have the meanings set forth below:
The term "Affiliate" shall mean any corporation, partnership, limited liability company or
other organization or entity which is Controlled by, Controlling or under common Control with
(directly or indirectly) Owner.
The term "Aggregate Preopening Expenses" shall mean.all hard and soft costs actually
incurred by Owner in connection with the Hotel prior to the Commencement Date including,
without limitation, (i) permit fees and other entitlement costs, (ii) professional fees and costs paid
to architects, engineers, lawyers and accountants, (iii) all horizontal and vertical construction
costs including grading, excavation, demolition, construction and landscaping, (iv) general and
administrative development expenses, (v) development fees, (vi) insurance premiums,
(vi) property taxes, (vii) costs associated with procuring construction financing and interest paid
in connection with such construction financing, (viii) the cost to purchase and install all furniture,
fixtures and equipment including, without limitation, all information systems hardware and
software, (ix) license fees, (x) costs to install and use utilities including electricity, water, gas,
telephone, internet and cable or satellite television, (xi) wages and other costs associated with
hiring and training employees prior to the opening of the Hotel to the public, and (xii) the cost of
all movable personal property and inventory required to open the Hotel for business on the
Commencement Date including, without limitation, linen, bathroom supplies, food and beverages.
The term "Agreement" shall have the meaning ascribed to it in Recital E of this Covenant
Agreement.
The term "Auditor" shall have the meaning ascribed to it in Section 4.1.3 of this Covenant
Agreement.
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4852-4696-1781.2
The term "Budgeted Preopening Expenses" shall mean all hard and soft costs estimated
to be incurred by Owner in connection with the Hotel prior to the Commencement Date, as set
forth in the Hotel Budget.
The term "Business Day" shall mean a calendar day which is not a weekend day or a
Federal or State holiday, and a day upon which the City is open for business.
The term "Commencement Date" shall mean the first day of the first full calendar month
following the date upon which the Hotel opens for business and accepts its first paying overnight
guest.
The term "Control', "Controlled" or "Controlling" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of an entity
or person, whether through the ability to exercise voting power, by contract or otherwise.
The term "Covenant Agreement" shall mean this Agreement Containing Covenants,
Conditions, and Restrictions Affecting Real Property.
The term "Covenant Payments" shall mean the amounts to be paid by City to Owner with
respect to each Payment Period during the Operating Period.
The term "Default" shall have the meaning ascribed to it in Section 5.1 of this Covenant
Agreement.
The term "Default Notice" shall have the meaning ascribed to it in Section 2 of this
Covenant Agreement.
The term "Estimated NOI Notice" shall have the meaning ascribed to it in Section 4.1.2[a]
of this Covenant Agreement.
The term "Gross Revenue" shall mean, for each Payment Period or Operating Year (as
applicable) during the Operating Period, all revenue generated by the Hotel from all sources
during such Payment Period or Operating Year (as applicable) including, without limitation, room
rentals, food and beverage sales, parking charges, television charges, telephone charges and
sundry services.
The term "Hotel' shall have the meaning ascribed to it in Recital C of this Covenant
Agreement.
The term "Hotel Budget" shall mean the budget of all hard and soft costs to be incurred
by Owner in connection with the development and opening of the Hotel (including costs of the
type included within the definition of Aggregate Preopening Expenses), which budget shall be
prepared by Owner and delivered to City for review and approval, which approval shall not be
unreasonably withheld, prior to the commencement of construction of the Hotel and which budget
may be revised from time to time subject to the reasonable approval of City.
The term "Hotel Management Agreement" shall have the meaning ascribed to it in
Recital D of this Covenant Agreement.
The term "Hotel Operator" shall have the meaning ascribed to it in Recital D of this
Covenant Agreement.
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4852-4696-1781.2
The term "Improvements" shall mean and include all buildings, structures, fixtures,
parking, sidewalks, pedestrian lighting, landscaping, irrigation of landscaping, and other
improvements of whatsoever character to be constructed or performed by Owner on the Site.
The term "Mortgage" shall mean any mortgage, deed of trust, pledge (including a pledge
of equity interests in Owner), hypothecation, charge, encumbrance or other security interest
granted to a lender, made in good faith and for fair value, encumbering all or any part of Owner's
interest in (i) this Covenant Agreement, (ii) the Site, (iii) the Improvements, or (iv) any equity
interest in Owner.
The term "Mortgagee" shall mean any mortgagee or beneficiary under any Mortgage.
The term "Municipal Code" shall mean the La Quinta Municipal Code.
The term "Net Operating Income" shall mean, for each Payment Period or Operating
Year (as applicable) during the Operating Period, the Gross Revenue generated by the Hotel
during such Payment Period or Operating Year (as applicable), less the Operating Expenses
incurred in connection with , the Hotel during such Payment Period or Operating Year (as
applicable).
The term "Operating Expenses" shall mean, for each Payment Period or Operating Year
(as applicable) during the Term, all ordinary expenses actually incurred by Owner during such
Payment Period or Operating Year (as applicable) and relating to the operation and/or
maintenance of all the facilities of the Hotel determined in accordance with generally accepted
accounting principles, including, without limitation, (a) centralized sales and marketing expenses,
(b) charges related to programs implemented by the Hotel Operator and chargeable to the Owner,
whether such programs are optional or required under the Hotel Management Agreement (e.g., a
loyalty rewards program), (c) expenses incurred by the Hotel Operator and reimbursable by the
Owner pursuant to the Hotel Management Agreement, (d) hotel personnel expenses including,
without limitation, salaries, benefits and severance payments, (e) repair costs, (f) maintenance
costs, (g) utility charges, (h) administrative expenses, (i) costs of advertising, marketing and
business promotion, 0) all amounts payable to the Hotel Operator pursuant to the Hotel
Management Agreement including, without limitation, the management fee, (k) taxes,
(1) insurance premiums and deductibles, (m) capital expenditures, (n) expenditures on furniture,
fixtures and equipment, (o) funding of reserves required under the Hotel Management Agreement,
(p) "asset management" costs and expenses incurred by Owner's personnel in relation to the
Hotel, provided such costs and expenses do not exceed one percent (1 %) of Gross Revenue for
the applicable Payment Period or Operating Year (as applicable), (q) professional fees and costs
including fees paid to attorneys, accountants, auditors and appraisers, provided that the types
and amounts of such fees and costs shall be reasonable and consistent with the industry standard
for such fees and costs, (r) capital and equipment leases expenses, (s) costs of all goods and
services provided to guests and patrons in the normal course of business for all departments of
the Hotel (t) permit and license fees; provided, however, "Operating Expenses" expressly
excludes (i) principal and interest on any third party debt, (ii) capital expenditures, and (iii)
depreciation.
The term "Operating Period" refers to the period commencing upon the
Commencement Date and ending upon the Termination Date.
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4852-4696-1781.2
The term "Operating Year" shall mean a period of twelve (12) consecutive months,
the first of which shall commence upon the Commencement Date, with each subsequent
Operating Year commencing upon the day immediately following the expiration of the
preceding Operating Year.
The term "Payment Date" shall mean the date that is thirty (30) days after the later to
occur of (i) City's receipt of an Estimated NOI Notice, or (ii) if applicable, the Auditor's final
determination of the Net Operating Income for the applicable Payment Period pursuant to
Section 4.1.3 below.
The term "Payment Period" shall mean a period of three (3) consecutive calendar
months during the Operating Period, with the first Payment Period commencing upon the
Commencement Date and each successive -Payment Period commencing upon the first day
immediately following the expiration of the immediately preceding Payment Period.
The term "PSDA" shall have the meaning ascribed to it in Recital B of this Covenant
Agreement.
The term "Required Annual Return" means, for each Operating Year during the
Term, an amount equal to eleven percent (11 %) of the lesser of (i) the Aggregate Preopening
Expenses, or (ii) the Budgeted Preopening Expenses.
The term "RGC" means The Robert Green Company, a California corporation.
The term "Site" shall have the meaning ascribed to it in Recital A of this Covenant
Agreement.
The term "Term" shall mean the term of this Covenant Agreement, which shall be the
period commencing on the Commencement Date and ending on the Termination Date.
The term "Termination Date" shall mean the date that is the earlier of (i) the fifteenth
(15th) anniversary of the Commencement Date; or (ii) the date upon which this Covenant
Agreement is terminated pursuant to Section 5.2 or Section 5.3.
The term "Transient Occupancy Tax" means, for each Payment Period, or part thereof,
during the Operating Period, that portion of transient occupancy taxes remitted by Owner or the
Hotel Operator to City pursuant to Chapter 3.24 of the Municipal Code (and any amendments or
replacements to the Municipal Code) and are generated from the use and occupancy of hotel
guest rooms in the Hotel. If said Municipal Code Section is amended or repealed during the
Operating Period such that Transient Occupancy Taxes are no longer payable to City, then, for
the purposes of this Agreement, the term "Transient Occupancy Tax" shall include any substitute
tax imposed upon occupants of hotel guest rooms and payable to the City of La Quinta.
Notwithstanding anything herein to the contrary, Transient Occupancy Tax shall not
include any interest or penalty that has been paid by Owner or the Hotel Operator pursuant to
Chapter 3.24 of the Municipal Code, and any costs City incurs during a particular Payment Period
in enforcing Chapter 3.24 of the Municipal Code or any provision of this Covenant Agreement
shall be deducted from the amount of the Covenant Payment payable by City to Owner for such
Payment Period.
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4852-4696-1781.2
2. CONDITION TO OWNER'S RIGHT TO RECEIVE COVENANT PAYMENTS.
City's obligation to make the Covenant Payments pursuant to Section 4.1 of this Covenant
Agreement for any Payment Period (or portion thereof) during the Operating Period shall be
contingent and conditional upon Owner's performance of its obligations set forth in Section 3 of
this Covenant Agreement during such Payment Period. If Owner is in Default under this Covenant
Agreement and City has provided written notice of the commencement of the Default to Owner (a
"Default Notice"), then the amount of the Covenant Payment(s) due to Owner shall be reduced
in accordance with Section 4.1.2(d) below, but City shall remain obligated to pay all Covenant
Payments due to Owner pursuant to Section 4.1.2 for those periods prior to Owner's receipt of a
Default Notice and for those periods subsequent to Owner's cure of such Default.
3. OWNER'S OBLIGATIONS.
3.1 Continuous Operation. During the Operating Period, Owner covenants and agrees
to cause the Hotel to be continuously operated on the Site, subject to temporary and reasonable
interruptions for casualty losses, repairs, labor unrest, "acts of God" and the like, or "seasonality"
which shall be confined to a temporary closure when one of the following conditions are present:
(a) one or more Approved Luxury Hotel Operator (as defined in Section 6.1.2. below and the
PSDA) in the Coachella Valley temporarily closes; or (b) industry standard for hotels similar to the
Luxury Hotel in the Coachella Valley allows for temporary closures based on seasonality;
provided, however, such temporary closure only occurs for no more than 60 days and any
temporary closure does not occur between the Friday immediately before Labor Day in the United
States (or the Friday before the first weekend in September) and the next Monday immediately
after the Fourth of July (each, a "Permitted Closure").
3.2 Use Restriction. During the Operating Period, the Site shall not be put to any use
other than the operation of the Hotel and uses ancillary thereto, and such use shall qualify as a
transient occupancy use under Chapter 3.24 of the Municipal Code.
3.3 Maintenance and Repair of Site and Hotel, Landsca in .
(a) During the Operating Period, Owner, at its sole cost and expense, shall
keep and maintain the Site and the Improvements thereon and all facilities appurtenant thereto in
good condition and repair, in accordance with the "Maintenance Standards" (as that term is
hereinafter defined).
(b) To comply with the maintenance obligations set forth in this Section 3.3,
Owner shall cause the Hotel Operator to either staff or contract with and hire licensed and qualified
personnel to perform the maintenance work, including the provision of labor, equipment,
materials, support facilities, and any and all other items necessary to comply with the
requirements of this Covenant Agreement.
(c) Owner shall, or shall cause the Hotel Operator and its/their maintenance
staff, contractors or subcontractors to comply with the following standards ("Maintenance
Standards"):
1. Landscape maintenance shall include, but not be limited to:
watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning;
trimming and shaping of trees and shrubs to maintain a healthy, natural appearance, safe
road conditions, including visibility, and irrigation coverage; replacement, as needed, of all
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4852-4696-1781.2
plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other
planted areas; and staking for support of trees.
2. Clean-up maintenance shall include, but not be limited to:
maintenance of all sidewalks, paths and other paved areas in clean and weed- free
condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter
which is unsafe or unsightly; removal of all trash, litter and other debris from improvements
and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to
the end of the day on which the maintenance operations are performed to ensure that all
cuttings, weeds, leaves and other debris are properly disposed of by maintenance
workers.
3. All maintenance work shall conform to all applicable federal and
state Occupational Safety and Health Act standards and regulations for the performance
of maintenance.
4. Any and all chemicals, unhealthful substances, and pesticides used
in and during maintenance shall be applied in strict accordance with all governing
regulations. Precautionary measures shall be employed recognizing that all areas are
open to public access.
5. The Site and Hotel shall be maintained in conformance and in
compliance with the approved Site construction and architectural plans and design
scheme, and reasonable commercial development maintenance standards for similar
projects, including but not limited to: painting and cleaning of all exterior surfaces and
other exterior facades comprising all private improvements and public improvements to
the curbline.
6. The Site shall be maintained as required by this Section in good
condition.
(d) During the Operating Period, Owner shall not abandon any portion of the
Site or leave the Site unguarded or unprotected, and shall not otherwise act or fail to act in such
a way as to unreasonably increase the risk of any damage to the Site or of any other impairment
of City's interest set forth in this Covenant Agreement.
3.4 Failure to Maintain Site and Hotel. In the event Owner does not maintain the Site
or the Hotel, or otherwise cause the Site or the Hotel to be maintained. in the manner set forth
herein and in accordance with the Maintenance Standards, City shall have the right, but not the
obligation, to maintain such private and/or public improvements, or to contract for the correction
of such deficiencies, in accordance with the provisions of this Section 3.4. City shall notify Owner
in writing if the condition of said improvements do not meet with the Maintenance Standards and
to specify the deficiencies and the actions required to be taken by Owner to cure the deficiencies.
Subject to the following sentence, upon notification of any maintenance deficiency, Owner shall
have thirty (30) days within which to correct, remedy or cure the deficiency, provided that if the
deficiency cannot reasonably be cured within thirty (30) days and Owner provides written
notification to City of the time reasonably required by Owner to correct, remedy or cure the
deficiency, then Owner shall have up to but not exceeding ninety (90) days within which to correct,
remedy or cure the deficiency so long as Owner commences to correct, remedy or cure the
deficiency within said thirty (30) day period and diligently prosecutes the correction, remedy or
cure to completion. If the written notification states the problem is urgent relating to the public
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4852-4696-1781,2
health and safety of City, then Owner shall have forty-eight (48) hours to correct, remedy, or cure
the problem.
In the event Owner or any person or entity acting on behalf of Owner fails to correct,
remedy, or cure after notification and after the period of correction has lapsed (or, for deficiencies
that cannot reasonably be corrected, remedied, or cured within such period, if Owner or any
person or entity acting on behalf of Owner has not commenced correcting, remedying or curing
such maintenance deficiency within such period and diligently pursued such correction, remedy
or cure to completion), then City shall have the right to maintain such improvements. Owner
agrees to reimburse City for its actual costs reasonably incurred in connection with such
maintenance performed by City pursuant to this Section. Until so paid, City shall have a lien on
the Site for the amount of such unpaid reimbursement, which lien shall be perfected by the
recordation of a "Notice of Claim of Lien" against the Site. Upon recordation of a Notice of a Claim
of Lien against the Site, such lien shall constitute a lien on the fee estate in and to the Site prior
and superior to all other monetary liens except: (i) all taxes, bonds, assessments, and other levies
which, by law, would be superior thereto; (ii) the lien or charge of any mortgage, deed of trust, or
other security interest then of record made in good faith and for value, it being understood that
the priority of any such lien for costs incurred to comply with this Covenant Agreement shall date
from the date of the recordation of the Notice of Claim of Lien. Any lien in favor of City created or
claimed hereunder is expressly made subject and subordinate to the lien of any mortgage or deed
of trust made in good faith and for value, recorded as of the date of the recordation of the Notice
of Claim of Lien describing such lien as aforesaid, and no such lien shall in any way defeat,
invalidate, or impair the obligation or priority of any such mortgage or deed of trust, unless the
mortgage or beneficiary thereunder expressly subordinates his interest, of record, to such lien.
Upon foreclosure of any mortgage or deed of trust made in good faith and for value and recorded
prior to the recordation of any unsatisfied Notice of Claim of Lien, the foreclosure -purchaser shall
take title to the Site free of any lien imposed by City that has accrued up to the time of the
foreclosure sale, and upon taking title to the Site, such foreclosure -purchaser shall only be
obligated to pay costs associated with this Covenant Agreement accruing after the foreclosure -
purchaser acquires title to the Site. Owner acknowledges and agrees City may also pursue any
and all other remedies available in law or equity as a result of a maintenance deficiency by Owner
hereunder. Owner shall be liable for any and all reasonable attorneys' fees, and other legal costs
or fees incurred in collecting said maintenance costs.
3.5 Level of Service. During the Term, Owner shall cause the Hotel to be operated as
a hotel offering luxury amenities, full service accommodations, on -site full service restaurants and
a level of personalized and professional service by Hotel Operator or such other hotel operator
approved by City pursuant to the terms of the PSDA, and in accordance with the terms of the
Hotel Management Agreement. Subject to Owner's and the Hotel Operator's right to use their
commercially reasonable business judgment in the day-to-day operation of the Hotel, Owner shall
use its best efforts to cause the Hotel to be operated in a manner that maximizes the generation
of Transient Occupancy Tax to be remitted to City.
3.6 Compliance with Laws. During the Operating Period, Owner shall cause the Hotel
to be operated on the Site (i) in conformity with all valid and applicable federal, state (including
without limitation the California Civil Code, the California Government Code, the California Health
& Safety Code, the California Labor Code, the California Public Resources Code, and the
California Revenue & Taxation Code), and local laws, ordinances, and regulations, provided that
Owner does not waive its right to challenge the validity or applicability thereof to Owner or the
Site, and (ii) in compliance with all of the requirements of the PSDA and any discretionary permits
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4852-4696-1781.2
issued by City for the Hotel, including, without limitation, all of the conditions of approval issued
in connection therewith, if any.
Nothing herein constitutes a representation or warranty by City that the construction of the
Hotel is not or will not be a "public work" or otherwise subject to California Health and Safety Code
Sections 33423 through 33426, or Chapter 1 of Part 7 of the California Labor Code (commencing
with section 1720), and all applicable statutory and regulatory provisions related thereto, and
Owner expressly waives any right of reimbursement for any "increased costs" under California
Labor Code Section 1781 or otherwise with respect to the Hotel or Owner's development thereof.
Owner shall indemnify, defend, and hold City and City's representatives, volunteers, officers,
officials, member, employees, and agents harmless, including, but not limited to, litigation costs,
expert witness fees, and reasonable attorneys' fees, from and against any and all claims
pertaining to the payment of wages in connection with Owner's development of the Hotel on the
Site or failure to comply with federal or state labor laws, regulations, or standards.
3.7 Compliance with Hotel Management Agreement. Owner shall comply with all of
Owner's obligations under the Hotel Management Agreement. Owner shall promptly provide City
with copies of any notices of default received by Owner from the Hotel Operator with respect to
Owner's obligations under the Hotel Management Agreement.
3.8 Non -Discrimination. Owner shall cause the Hotel Operator to open and operate
the Hotel in a manner that does not violate applicable laws that prohibit discrimination against any
person or class of person by reason of gender, marital status, sexual orientation, race, color,
creed, mental or physical disability, religion, age, ancestry, or national origin.
3.9 Indemnification of City. Owner shall defend, indemnify, assume all responsibility
for, and hold City, and City's representatives, volunteers, officers, officials, members, employees
and agents, harmless from- any and all claims, demands, damages, defense costs or liability of
any kind (including reasonable attorneys' fees and costs), that arise from Owner's operation of
the Hotel on the Site or which may be caused by any acts or omissions of the Owner under this
Covenant Agreement whether such activities or performance thereof be by Owner or by anyone
directly or indirectly employed or contracted with by Owner and whether such damage shall
accrue or be discovered before or after termination of this Covenant Agreement.
3.10 Insurance Requirements.
3.10.1 Owner shall procure and maintain, at its sole cost and expense, in a form
and content reasonably satisfactory to the City Manager (as that term is described in Section 100
of the PSDA), the following policies of insurance:
(a) Commencing with the Covenant Agreement Effective Date and ending
on the earlier of the date this Covenant Agreement expires or is earlier terminated by the Parties
pursuant to the terms hereof, a policy of commercial general liability insurance written on a per
occurrence basis in an amount not less than Five Million Dollars ($5,000,000.00) per occurrence
and Five Million Dollars ($5,000,000.00) in the aggregate.
(b) Commencing on the date City issues a Release of Construction
Covenants for the Luxury Hotel and ending on the earlier of the date this Covenant Agreement
expires or is earlier terminated by the Parties pursuant to the terms hereof, an "All Risks" property
insurance policy on a replacement cost basis in an amount equal to the full replacement cost of
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the Luxury Hotel and Conference and Shared Service Facility, as the same may change from time
to time and which shall not contain a coinsurance provision.
3.10.2 The following additional requirements shall apply to the insurance policies
required under subsection 3.10.1 above:
(a) Such policies shall be primary insurance and the commercial general
liability insurance shall name City and City's officers, officials, members, employees, agents and
representatives as additional insureds, using a pre-2004 additional insured endorsement (or
equivalent). To the extent allowable by applicable law, the insurer shall waive all rights of
subrogation and contribution it may have against City and City's officers, officials, members,
employees, agents and representatives, and their respective insurers. All of said policies of
insurance shall provide that said insurance may not be materially amended or cancelled without
providing thirty (30) days' prior written notice to City. In the event any of said policy of insurance
are cancelled, Owner shall, prior to the cancellation date, submit new evidence of insurance in
conformance with this Section 3.10 to the City Manager. Owner shall provide City Manager with
Certificates of Insurance or appropriate insurance binders evidencing the above insurance
coverages and said Certificates of Insurance or binders shall be subject to the reasonable
approval of the City Manager.
(b) The policies of insurance required by this Covenant Agreement shall be
satisfactory only if issued by companies (i) licensed and admitted to do business in California,
rated "A" or better in the most recent edition .of Best Rating Guide, The Key Rating Guide or in
the Federal Register, and only if they are of a financial category Class VII or better, or (ii)
authorized to do business in California, rated "A+" or better in the most recent edition of Best
Rating Guide, The Key Rating Guide or in the Federal Register and only if they are of a financing
category Class XV. Notwithstanding the foregoing, in the event that the policies required
hereunder are not available from such insurers at commercially reasonable rates, the City
Manager shall have the authority, in his or her sole and absolute discretion, to waive one or more
of such requirements provided the proposed policies will adequately protect City's interests
hereunder.
(c) City may reasonably require coverage increases, provided that the
percentage increase in coverage shall not be required to exceed the percentage increase in the
Consumer Price Index published by the United States Department of Labor, Bureau of Labor
Statistics, for Urban Wage Earners and Clerical Workers, Los Angeles — Riverside — Orange
County Average, All Items (1984 = 100) or, if applicable to the Coachella Valley in Riverside
County, the Riverside -San Bernardino -Ontario area average (the "Index"), from and after the date
of this Covenant Agreement, or, if said Index is discounted, such official index as may then be in
existence and which is most nearly equivalent to said Index (the "CPI Adjustment"). Unless
otherwise approved in advance by City Manager, the insurance to be provided by Owner may
provide for a deductible or self -insured retention of not more than Fifty Thousand Dollars
($50,000); provided, however, that the deductible or self -insured retention for the earthquake
coverage may be up to, but not exceed, ten percent (10%) of the replacement cost of the Luxury
Hotel and/or Conference and Shared Service Facility (as applicable).
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4. OBLIGATIONS OF CITY.
4.1 Covenant Payments to Owner.
4.1.1 Determination of Required Annual Return. As soon as reasonably possible
following the Commencement Date, Owner shall deliver to City written notice (the "Annual Return
Notice") of Owner's determination of the Aggregate Preopening Expenses and the Required
Annual Return, together with a line item summary of each category of costs included in the
Aggregate Preopening Expenses and reasonable backup to substantiate that all such costs were
actually incurred. Within thirty (30) days following City's receipt of the Annual Return Notice, City
shall have the right to either accept or reject Owner's determination of the Required Annual
Return; provided, however, if City rejects such determination, then it shall provide Owner with a
reasonably detailed explanation for its rejection (the "City's Rejection Notice"). If the Parties are
not able to reach agreement on the amount of the Required Annual Return within thirty (30) days
following Owner's receipt of City's Rejection Notice, then the Parties shall jointly engage a certified
public accountant (the "Auditor") to review Owner's books and records and determine the amount
of the Required Annual Return. If the Parties cannot agree upon a choice of the Auditor within
forty-five (45) days following Owner's receipt of City's Rejection Notice, then (i) each Party shall
engage, at its sole cost, an auditor, provided each such auditor must be a certified public
accountant with a nationally recognized firm and with at least ten (10) years of experience auditing
hotel developers and operators. If said auditors' determinations of Required Annual Return differ
by less than ten percent (10%), then the final determination of Required Annual Return shall be
the average of amounts determined by said two auditors. If said auditors' determinations of
Required Annual Return differ by ten percent (10%) or more, then the Parties shall instruct said
auditors to engage a third auditor with the qualifications described above and the final
determination of Required Annual Return shall be the average of the two auditors' determinations
that are closest in value. The fees of such third auditor, if required, shall be paid by the Parties
in equal fifty percent (50%) shares. The determination of the Required Annual Return pursuant
to this Section shall be final and binding on the Parties for all purposes under this Covenant
Agreement.
4.1.2 Amount of Covenant Payments. In consideration for Owner's undertakings
pursuant to this Covenant Agreement, City shall make payments (each, a "Covenant Payment")
to Owner on each Payment Date during the Operating Period The amount of each Covenant
Payment shall be calculated as follows:
(a) As soon as reasonably possible following the end of each Payment
Period, Owner shall deliver to City (1) a summary of profit and loss reports for the Hotel
for the Payment Period, and (2) a written notice in the form of the sample attached hereto
as Exhibit No. 2 (each, an "Estimated NOI Notice") that includes all of the following
information:
(i) The actual Net Operating Income for such Payment Period
and for all previous Payment Periods during the applicable Operating Year, and in
the Estimated NOI Notice for the fourth (4th) Payment Period during the applicable
Operating Year, the actual Net Operating Income for such Operating Year;
(ii) In the Estimated NOI Notice for the first three (3) Payment
Periods during the applicable Operating Year, Owner's reasonable estimate of (1)
the Net Operating Income for each of the Payment Periods remaining in such
Operating Year, and (11) the annual Net Operating Income for such Operating Year;
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(iii) In the Estimated NOI Notice for the first three (3) Payment
Periods during the applicable Operating Year, the percentage of the estimated
annual Net Operating Income for the applicable Operating Year that is represented
by the actual or estimated (as applicable) Net Operating Income for each Payment
Period, which percentages are referred to on Exhibit No. 2 as the "Percentage of
estimated annual NOI". In the Estimated NOI Notice for the fourth (4th) Payment
Period during the applicable Operating Year, the percentage of the actual annual
Net Operating Income for the applicable Operating Year that is represented by the
actual Net Operating Income for each Payment Period, which percentages are
referred to on Exhibit No. 2 as the "Percentage of actual annual NOI;
(iv) the estimated or actual (as applicable) amount of revenue
that Owner needs to receive during the applicable Operating Year that, when
added to the estimated or actual (as applicable) Net Operating Income for the
applicable Operating Year, will achieve the Required Annual Return for such
Operating Year, which amount shall be (1) the difference between the Required
Annual Return and the estimated or actual (as applicable) Net Operating Income
for such Operating Year, and (II) apportioned and attributed to each of the
Payment Periods in the amount of the "Percentage of estimated annual NOI" or
"Percentage of actual annual NOI" (as applicable) attributed to such Payment
Periods as of the applicable Payment Date. Such amounts are referred to on
Exhibit No. 2 as the "Amount needed to achieve Required Annual Return";
(v) the amount of Transient Occupancy Taxes actually paid to
City for the applicable Payment Period. Such amount is referred to on
Exhibit No. 2 as the "TOT paid to City"; and
(vi) the amount available for rebate by City for the applicable
Payment Period, which shall be the amount of the Transient Occupancy Taxes
actually paid to City for such Payment Period, multiplied by (1) ninety-five percent
(95%) if such Payment Period is within the first ten (10) years of the Operating
Period, or (II) seventy-five percent (75%) if such Payment Period is within the last
five (5) years of the Operating Period, which amounts are referred to on
Exhibit No. 2 as the "Amount available for rebate".
(b) On each Payment Date, City shall pay to Owner the difference
between (1) the amount that is the lesser of (1) the aggregate of the "Amount needed to
achieve Required Annual Return" attributable to the applicable Payment Period and all
prior Payment Periods during that Operating Year, (2) the aggregate of the "Amount
available for rebate" attributable to the applicable Payment Period and all prior Payment
Periods during that Operating Year, and (3) the "Amount needed to achieve Required
Annual Return," and (11) the aggregate of the Covenant Payments previously paid to
Owner for such Operating Year. Notwithstanding anything to the contrary in this Covenant
Agreement, if upon the fourth Payment Date for any Operating Year, the calculation of the
difference between clause (1) and (11) in this subparagraph (b) results in a negative
number, then on such Payment Date Owner shall pay the amount of such difference to
City.
(c) The Parties hereby acknowledge and agree that the above
calculations will rely on estimates that will be updated by Owner following the end of each
Payment Period; accordingly, any estimated amounts included in a previously submitted
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Estimated NOI Notice may be adjusted as reasonably necessary to provide for the Hotel's
actual performance in prior Payment Periods and for the Owner's reasonable expectations
that the Hotel's future performance may be negatively or positively impacted by factors
that would warrant an adjustment in the estimated Net Operating Income for the Hotel
during the applicable Operating Year.
(d) Notwithstanding anything to the contrary in this Covenant
Agreement, if Owner is in Default, then upon Owner's receipt of a Default Notice from City,
all Transient Occupancy Taxes paid to City for the period of time commencing upon the
date that Owner receives the Default Notice from City and continuing through and until the
date that Owner cures such Default (each, a "Default Period"), shall be excluded from
the amounts included in the Estimated NOI Notice as "TOT paid to City" and "Amount
available for rebate" pursuant to Subsections 4.1.2 a v and Dill above, and shall not be
considered for purposes of calculating the amount of a Payment Period. For example, if
Owner pays to City Transient Occupancy Taxes in the amount of $300,000 for a particular
Payment Period, but $50,000 of such Transient Occupancy Taxes were generated during
a Default Period, the amount included in the Estimated NOI Notice for such Payment
Period as 'TOT paid to City" shall be $250,000, and the amount included in the Estimated
NOI Notice for such Payment Period as "Amount available for rebate" (during the first ten
years of the Operating Period) shall be $237,500.
4.1.3 Determination of Net ODerating Income. Within thirty (30) days following
City's receipt of an Estimated NOI Notice, City shall have the right to review the books and records
of the Hotel to determine the accuracy of the Estimated NOI Notice and to either accept or reject
Owner's determination of the estimated and/or actual (as applicable) Net Operating Income in
such Estimated NOI Notice; provided, however, if City rejects any of such determinations, then it
shall provide Owner with a reasonably detailed explanation for its rejection (a "City's NOI
Rejection Notice"). If the Parties are not able to reach agreement on the amount of the estimated
and/or actual (as applicable) Net Operating Income in dispute within thirty (30) days following
Owner's receipt of a City's NOI Rejection Notice, then the Parties shall jointly engage a certified
public accountant (the "Auditor") to review Owner's books and records and determine the amount
of the estimated and/or actual (as applicable) Net Operating Income in dispute. If the Parties
cannot agree upon a choice of the Auditor within forty- five (45) days following Owner's receipt of
City's NOI Rejection Notice, then (i) each Party shall engage, at its sole cost, an auditor, provided
each such Auditor must be a certified public accountant with a nationally recognized firm and with
at least ten (10) years of experience auditing hotel operators. If said auditors' determinations of
the estimated and/or actual (as applicable) Net Operating Income in dispute differ by less than
ten percent (10%), then the final determination of estimated and/or actual (as applicable) Net
Operating Income in dispute shall be the average of the two amounts determined by said two
auditors. If said auditors' determinations of the estimated and/or actual (as applicable) Net
Operating Income in dispute differ by ten percent (10%) or more, then the Parties shall instruct
said auditors to engage a third auditor with the qualifications described above and the final
determination of the estimated and/or actual (as applicable) Net Operating Income in dispute shall
be the average of the two auditors' determinations that are closest in value. The fees of such
third auditor, if required, shall be paid by the Parties in equal fifty percent (50%) shares.
4.2 Source of Payments. The Covenant Payments shall be payable from any source
of funds legally available to City. In this regard, it is understood and agreed that the Transient
Occupancy Tax is being used merely as a measure of the amount of the Covenant Payments that
are periodically owing by City to Owner, and that City is not pledging any portion of the actual
Transient Occupancy Tax generated from the Site to Owner.
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4.3 Books and Records. Upon the written request of either Party, the other Party shall
make available for inspection (at City Hall in the event of a review of City records and at Owner's
place of business in La Quinta in the event of a review of Owner's records) such of its books and
records as the requesting Party may reasonably determine must be reviewed in order to
determine whether the correct amount of Covenant Payments have been made or are being made
hereunder. Notwithstanding the foregoing, City shall not be required to produce any books or
records that it is prohibited from producing by law and Owner shall not be required to produce
information that violates the statutorily prescribed privacy rights of individual customers.
4.4 No Acceleration. It is acknowledged by the Parties that any payments by City
provided for in this Covenant Agreement are in consideration for the performance by Owner
during the time period(s) for which payments are due. Therefore, City's failure to timely make any
payments or City's failure to perform any of its other obligations hereunder shall not cause the
acceleration of any anticipated future Covenant Payments by City to Owner.
5. DEFAULTS AND REMEDIES,
5.1 Defaults. Subject to Section 8.7 of this Covenant Agreement, the occurrence of
any of the following shall constitute a "Default":
- (a) the failure by either Party to perform any obligation of such Party for the
payment of money under this Covenant Agreement if such failure is not cured within ten
(10) calendar days following receipt of written notice of default; or
(b) the failure by either Party to perform any of its obligations (other than
obligations described in clause (a) of this Section 5.1) set forth in this Covenant Agreement, if
such failure is not cured within thirty (30) days following receipt of written notice of default, or, if
such failure is of a nature that cannot reasonably be cured within thirty (30) days and the non-
performing Party provides written notification to the other Party thereof, the failure by the non-
performing Party to commence such cure within such thirty (30) days and thereafter diligently
prosecute such cure to completion; or
(c) any representation or warranty by a Party set forth in this Covenant
Agreement proves to have been incorrect in any material respect when made; or
(d) Owner closes the Hotel, except for a Permitted Closure; or
(e) Owner defaults under the Hotel Management Agreement or the PSDA and
has not cured the default within the applicable cure period (if any); or
(f) the Hotel is materially damaged or destroyed by fire or other casualty
during the Operating Period and Owner fails to commence restoration of the improvements within
a reasonable time or thereafter fails to diligently proceed to complete such restoration in
accordance with this Covenant Agreement; or
(g) Owner concludes a "Transfer" (as defined below) without the prior written
approval of City, except for a "Permitted Transfer" (as defined below); or
(h) Owner, or any constituent member of Owner (1) is the subject of an order
for relief for a bankruptcy court, or is unable or admits its inability to pay its debts as they mature,
or makes an assignment for the benefit of creditors; (2) applies for or consents to the appointment
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of any receiver, trustee, custodian; conservator, liquidator, rehabilitator or similar officer for it or
any part of its property; or (3) institutes or consents to any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation,
rehabilitation or similar proceeding relating to it or any part of its property, or any similar
proceeding is instituted without the consent of Owner and continues undismissed or unstayed for
ninety (90) days; or
(i) any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed without the application or consent of Owner, and the appointment
continues undischarged or unstayed for ninety (90) days; or any judgment, writ, warrant of
attachment or execution, or similar process is issued or levied against the Site and is not released,
vacated, or fully bonded within ninety (90) days after its issue or levy; or
0) Owner is enjoined or otherwise prohibited by any governmental agency
from occupying the Site at any time during the Operating Period and such injunction or prohibition
continues unstayed for ninety (90) days or more for any reason.
5.2 City's Remedies Upon Default by Owner. Upon the occurrence of any Default by
Owner, and after Owner's receipt of a Default Notice, City may, at its option:
(a) Deduct the amount of Transient Occupancy Tax generated during any
Default Period from the "TOT paid to City" and the "Amount available for rebate" for purposes of
determining the amount of any Covenant Payment. Notwithstanding anything in this Covenant
Agreement to the contrary, any Transient Occupancy Tax generated during a Default Period shall
never be considered in determining the amount of a Covenant Payment, regardless of whether
Owner subsequently cures the Default.
(b) if the Default continues uninterrupted for a period of six (6) months
following Owner's receipt of written notice thereof, City may terminate this Covenant Agreement,
in which case City's obligation to make payments to Owner for any period of time after the
occurrence of the Default shall be finally terminated and discharged.
5.3 Owner's Remedies Upon Default by City. Upon the occurrence of any Default by
City, Owner may terminate this Covenant Agreement by written notice to City and/or seek
whatever legal or equitable remedies may be available to Owner, subject to the provisions of this
Section 5.3, Section 4.4 (No Acceleration) and Section 8.4 (Legal Actions). Notwithstanding the
foregoing, in no event shall Owner be entitled to recover damages of any kind from City, except
for damages up to, but not exceeding, the amount that Owner would have received under this
Covenant Agreement but for City's default of its covenants under this Covenant Agreement, but
excluding damages for economic loss, lost profits, or any other economic or consequential
damages of any kind.
5.4 Cumulative Remedies; No Waiver. Except as expressly provided herein, the
nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights
and remedies provided by law from time to time and the exercise by the nondefaulting Party of
any right or remedy shall not prejudice such Party in the exercise of any other right or remedy.
None of the provisions of this Covenant Agreement shall be considered waived by either Party
except when such waiver is delivered in writing. No waiver of any Default shall be implied from
any omission by City to take action on account of such Default if such Default persists or is
repeated. No waiver of any Default shall affect any Default other than the Default expressly
waived, and any such waiver shall be operative only for the time and to the extent stated. No
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waiver of any provision of this Covenant Agreement shall be construed as a waiver of any
subsequent breach of the same provision. A Party's consent to or approval of any act by the
other Party requiring further consent or approval shall not be deemed to waive or render
unnecessary the consenting Party's consent to or approval of any subsequent act. A Party's
acceptance of the late performance of any obligation shall not constitute a waiver by such Party
of the right to require prompt performance of all further obligations. A Party's acceptance of any
performance following the sending or filing of any notice of Default shall not constitute a waiver of
that Party's right to proceed with the exercise of its remedies for any unfulfilled obligations. A
Party's acceptance of any partial performance shall not constitute a waiver by that Party of any
rights relating to the unfulfilled portion of the applicable obligation.
5.5 t=imitations on City's Liability. Owner acknowledges and agrees that: (i) this
Covenant Agreement shall not be deemed or construed as creating a partnership, joint venture,
or similar association between Owner and City, the relationship between Owner and City pursuant
to this Covenant Agreement is and shall remain solely that of contracting Parties, that the
operation of the Hotel is a private undertaking, and City neither undertakes nor assumes any
responsibility pursuant to this Covenant Agreement with respect to the operation of the Hotel on
the Site other than as expressly provided for herein, and Owner shall rely entirely on its own
judgment with respect to such matters; provided, that nothing herein is intended to release City
from whatever obligations it may have pursuant to applicable laws independent of this Covenant
Agreement; (ii) by virtue of this Covenant Agreement, City shall not be directly or indirectly liable
or responsible for any loss or injury of any kind to any person or property resulting from any
occupancy or use of the Site, whether arising from: (a) any defect in any building, grading,
landscaping, or other onsite or offsite improvement; any act or omission of Owner or any of
Owner's agents, employees, independent contractors, licensees, lessees, or invitees; or (c) any
accident on the Site or any fire or other casualty or hazard thereon, and (iii) by accepting or
approving anything required to be performed or given to City under this Covenant Agreement,
including any certificate, NOI Notice, or insurance policy, City shall not be deemed to have
warranted or represented the sufficiency or legal effect of the same, and no such acceptance or
approval shall constitute a warranty or representation by City to anyone.
6. ASSIGNMENT AND TRANSFER.
6.1 Transfers of Interest in Site or Covenant Agreement. The qualifications and
identity of Owner as the developer and operator of high quality commercial resort developments
are of particular concern to City. Furthermore, the Parties acknowledge that City has negotiated
the terms of this Covenant Agreement in contemplation of the development and operation of the
Hotel on the Site and the property tax and Transient Occupancy Tax revenues to be generated
by the operation of the Hotel on the Site.
6.1.1 Transfers of Interest in Site or Covenant A reement Prior to Cit 's Issuance
of a Release of Construction Covenants. Except as provided in this Section 6.1.1, until the date
City issues a Release of Construction Covenants for the Hotel (the "Fee Transfer Release Date"),
(1) no voluntary successor in interest of Owner shall acquire any rights or powers under this
Covenant Agreement with respect to the Hotel; (2) Owner shall not make any total or partial sale,
transfer, conveyance, assignment, or lease of the whole or any part of the Hotel or Site: and (3) no
changes shall occur with respect to the ownership and/or control of Owner, including, without
limitation, stock transfers, sales of issuances, or transfers, sales or issuances of membership or
ownership interests, or statutory conversions (any of the above, a "Transfer"). Prior to the Fee
Transfer Release Date, City may approve or disapprove a proposed Transfer in its sole and
absolute discretion; provided, however, City agrees to reasonably consider a Transfer to a
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transferee that has substantial experience in developing and operating developments comparable
in all material respects to the Hotel, and the financial capability to develop and operate the Hotel,
as determined pursuant to the factors set forth in Section 311.1 of the PSDA
Notwithstanding the foregoing, City approval of a Transfer prior to the Fee Transfer
Release Date shall not be required in connection with any of the following:
(a) The conveyance or dedication of any portion of the Site to an
appropriate governmental agency, or the granting of easements or permits to facilitate
construction of the Hotel.
(b) Any assignment for financing purposes (subject to such financing
being permitted pursuant to Section 311 of the PSDA), including the grant of a deed of
trust to secure the funds necessary for land acquisition, construction, and permanent
financing of the Hotel.
(c) The Transfer to a lender who has provided financing to Owner
(subject to such financing being permitted pursuant to Section 311 of the PSDA) as a
result of the exercise by such lender of its rights or remedies pursuant to the
documents evidencing or securing the financing for land acquisition, construction, and
permanent financing of the Hotel.
(d) The Transfer by Owner to an entity provided the entity owning the
Hotel after the Transfer is an entity (i) whose managing member, manager, or managing
general partner is RGC or is directly or indirectly controlled by RGC, and (ii) which
engages as the project/development manager for the Hotel an entity which is at least fifty-
one percent (51 %) owned and controlled by RGC.
6.1.2 Transfers of Operational Obligations. RGC La Quinta LLC and Montage
Hotels & Resorts, LLC, a Nevada limited liability company ("Montage") have entered into a Resort
Management Agreement ("RMA") dated March 1, 2017 with respect to the Hotel. Montage has
been approved by the City as the Hotel Operator for Hotel and the RMA has been approved as
the Hotel Management Agreement. Notwithstanding anything in Section 6.1.1 to the contrary,
until the earlier of (a) the date this Covenant Agreement expires or (b) this Covenant Agreement
is earlier terminated by the Parties pursuant to the terms hereof, if Montage is to be replaced
(such as in the case of a termination or cancellation of the RMA) or, to the extent Owner has a
right under the RMA to approve or consent to the same, an assignment by the Hotel Operator of
the Hotel Management Agreement or a change in ownership of the Hotel Operator is proposed
(a "Management Transfer"), Owner will not consent to such change unless City has provided to
Owner the City's consent to such change, such City consent not to be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, such City approval or consent shall not
be required with respect to the Hotel if the transfer or change in ownership is to any of the entities
approved by City to act as Luxury Hotel Operator, as set forth in n 1 of the PSDA
(any of the foregoing, an "Approved Luxury Hotel Operator"). In connection with any required
City approval with respect to a change in operator of the Hotel to any entity that is not designated
as an Approved Luxury Hotel Operator, Owner or Owner's successor -in -interest shall
demonstrate that the proposed operator has the experience and reputation in operating luxury
hotels that is equivalent to the experience and reputation of an Approved Luxury Hotel Operator
(an "Experience Equivalent Luxury Hotel Operator").
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6.1.3 Assignment and Assumption of Obligations. Any Transfer (including
Transfers not requiring prior City approval) by Owner of any interest in the Site or of any interest
in this Covenant Agreement and all Management Transfers shall require the execution of an
assignment and assumption of obligations substantially in the form attached to the PSDA as
Attachment No. 9 (an "Assignment and Assumption Agreement"). Transfers of Owner's rights
and/or obligations under this Covenant Agreement made without an executed Assignment and
Assumption Agreement are null and void. The requirement forthe provision to City of an executed
Assignment and Assumption Agreement shall apply regardless of whether City approval is
required for the Transfer. Owner agrees that (a) at least thirty (30) days prior to any Transfer it
shall give written notice to City of such proposed Transfer; and (b) within five (5) days after any
Transfer it shall provide City with a copy of the fully executed Assignment and Assumption
Agreement evidencing that the assignee has assumed in writing all applicable obligations under
this Agreement. A Party proposing to assign its obligations under this Agreement (i) shall remain
liable for the obligations until and unless City has received a fully executed Assignment and
Assumption Agreement, and (ii) shall remain liable for any default hereunder that occurred prior
to the effective date of the assignment. Owner or Owner's successor in interest shall reimburse
City for any costs (other than staff time) City incurs in reviewing any Assignment and Assumption
Agreement required hereunder.
6.2 Bindinq _Effect. This Covenant Agreement shall run with the land and shall be
binding on, and inure to the benefit of the Parties hereto and their respective successors and
assigns, as limited by this Section 6. In the event of any assignment that is consented to in writing
by City, the references in this Covenant Agreement to "Owner" shall be deemed to refer to the
assignee.
7. MORTGAGEE PROTECTIONS,
7.1 No Termination. No action by Owner or City to cancel or surrender this Covenant
Agreement or to materially modify the terms of this Covenant Agreement shall be binding upon a
Mortgagee without its prior written consent, which such Mortgagee shall not unreasonably
withhold, condition or delay, unless (solely with respect to cancelling or surrendering this
Covenant Agreement) such Mortgagee shall have failed to cure a default within the time frames
set forth in this Article 7:
7.2 Notices. If City shall give any notice of default to Owner hereunder, City shall
simultaneously give a copy of such notice of default to any Mortgagee that has filed or recorded
a request for such notice, at the address theretofore designated by it. No notice of default given
by City to Owner shall be binding upon or affect said Mortgagee unless a copy of said notice of
default shall be given to Mortgagee pursuant to this Article 7. In the case of an assignment of
such Mortgage or change in address of such Mortgagee, said assignee or Mortgagee, by written
notice to City, may change the address to which such copies of notices of default are to .be sent.
City shall not be bound to recognize any assignment of such Mortgage unless and until City shall
be given written notice thereof, a copy of the executed assignment, and the name and address of
the assignee. Thereafter, such assignee shall be deemed to be the Mortgagee hereunder with
respect to the Mortgage being assigned. If such Mortgage is held by more than one person,
corporation or other entity, no provision of this Covenant Agreement requiring City to give notices
of default or copies thereof to said Mortgagee shall be binding upon City unless and until all of
said holders shall designate in writing one of their number to receive all such notices of default
and copies thereof and shall have given to City an original executed counterpart of such
designation.
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4852-4696-1781.2
7.3 Performance of Covenants. Mortgagee shall have the right (but not the obligation)
to perform any term, covenant or condition and to remedy any default by Owner hereunder within
the time periods specified herein, and City shall accept such performance with the same force
and effect as if furnished by Owner; provided, however, that said Mortgagee shall not thereby or
hereby be subrogated to the rights of City. Notwithstanding the foregoing, nothing herein shall be
deemed to permit or authorize such Mortgagee (or its designee) to undertake or continue the
construction or completion of the Improvements without first having expressly assumed Owner's
obligations hereunder, under the PSDA, and under any other agreements between City and
Owner that relate to the Hotel, to City or its designee by written agreement satisfactory to City.
7.4 Default by Owner. In the event of a default by Owner, City agrees not to terminate
this Covenant Agreement (1) unless and until Owner's and Mortgagee's notice and cure periods
have expired, and (2) as long as:
7.4.1 In the case of a default which cannot practicably be cured by a Mortgagee
without taking possession of the Improvements, said Mortgagee shall proceed diligently to obtain
possession of the Improvements as Mortgagee (including possession by receiver) and, upon
obtaining such possession, shall proceed diligently to cure such default; or
7.4.2 In the case of a default which is not susceptible to being cured by a
Mortgagee, said Mortgagee shall institute foreclosure proceedings and diligently prosecute the
same to completion (unless in the meantime it shall acquire Owner's right, title and interest
hereunder, either in its own name or through a nominee, by assignment. in lieu of foreclosure)
and upon such completion of acquisition or foreclosure such default shall be deemed to have
been cured.
7.5 No Obligation to Cure. Mortgagee shall not have any obligation or duty pursuant
to the terms set forth in this Covenant Agreement to perform the obligations of Owner or other
affirmative covenants of Owner hereunder, or to guarantee such performance and nothing herein
contained shall require any Mortgagee to cure any default of Owner referred to above. However,
in the event that Mortgagee elects not to cure any default susceptible of being cured, City's
obligation to further fund any Covenant Payments shall be suspended until such time as the
default is cured (or such earlier time that Mortgagee cures the default).
7.6 Separate Agreement. City may, upon request, execute, acknowledge and deliver
to each Mortgagee, an agreement prepared at the sole cost and expense of Owner, in form
satisfactory to each Mortgagee, between City, Owner and the Mortgagees, agreeing to all of the
provisions hereof.
7.7 Form of Notice. Any Mortgagee shall be entitled to receive the notices required to
be delivered to it hereunder provided that such Mortgagee shall have delivered to City a notice
substantially in the following form:
"The undersigned, whose address is does hereby certify that
it is the Mortgagee (as such term is defined in that certain Agreement to Share
Transient Occupancy Tax Revenue ("TOT Agreement") dated as of
, 20_ between [XXXX] and the City of La Quinta, of the parcel of
land described on Exhibit A attached hereto. In the event that any notice shall be
given of a default of Owner under the TOT Agreement, a copy thereof shall be
delivered to the undersigned who shall have the rights of a Mortgagee to cure the
same, as specified in the TOT Agreement. Failure to deliver a copy of such notice
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4852-4696-17812
shall in no way affect the validity of the notice to Owner, but no such notice shall
be effective as it relates to the rights of the undersigned under the TOT Agreement
with respect to the Mortgage, including the commencement of any cure periods
applicable to the undersigned, until actually received by the undersigned."
All notices to be provided by Mortgagee to City shall be provided in accordance
with Section 8.8 below.
7.8 Further Assurances. City and Owner agree to cooperate in including in this
Covenant Agreement, by suitable amendment, any provision which may be reasonably requested
by any Mortgagee or any proposed Mortgagee for the purpose of (i) more fully or particularly
implementing the mortgagee protection provisions contained herein, (ii) adding mortgagee
protections consistent with those contained herein and which are otherwise commercially
reasonable, (iii) allowing such Mortgagee reasonable means to protect or preserve the security
interest of such mortgagee in the collateral, including its lien on the Site and the collateral
assignment of this Covenant Agreement, and/or (iv) clarifying terms or restructuring elements of
the transactions contemplated hereby; provided, however, in no event shall City be obligated to
materially and adversely modify any of Owner's obligations or City's rights under this Covenant
Agreement in any manner not already contemplated in this Article 7.
8. GENERAL PROVISIONS.
8.1 Integration and Amendment. This Covenant Agreement, the PSDA, and the
Agreement constitute the entire agreement by and between the Parties pertaining to the subject
matter hereof, and supersede all prior agreements and understandings of the Parties with respect
thereto. This Covenant Agreement may not be modified, amended, supplemented, or otherwise
changed except by a writing executed by both Parties.
8.2 Captions. Section headings used in this Covenant Agreement are for convenience
of reference only and shall not affect the construction of any provisions of this Covenant
Agreement.
8.3 Counterparts. This Covenant Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be deemed an original and all
of which, when taken together, shall constitute one and the same instrument.
8.4 Legal Actions. This Covenant Agreement shall be governed by and construed in
accordance with the internal laws of the State of California without regard to conflict of law
principles.
8.5 Attorney's Fees. If either Party to this Covenant Agreement is required to initiate
or defend, or is made a party to, any action or proceeding in any way connected with this Covenant
Agreement, the Party prevailing in the final judgment in such action or proceeding, in addition to
any other relief which may be granted, shall be entitled to reasonable attorney's fees. Attorney's
fees shall include reasonable costs for investigating such action, conducting discovery, retaining
expert witnesses, and all other necessary costs the court allows which are incurred in such
litigation.
8.6 Effect of Violation of the Terms and Provisions of this Covenant Agreement. The
covenants established in this Covenant Agreement shall, without regard to technical classification
and designation, be binding for the benefit and in favor of City, its successors and assigns, as to
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4852-4696-1781.2
those covenants which are for its benefit. The covenants contained in this Covenant Agreement
shall remain in effect for the periods of time specified therein. City is deemed the beneficiary of
the terms and provisions of this Covenant Agreement and of the covenants running with the land,
for and in its- awn rights and for the purposes of protecting the interests of the community and
other parties, public or private, in whose favor and for whose. benefit this Covenant Agreement
and the covenants running with the land have been provided. This Covenant Agreement and the
covenants shall run in favor of City, without regard to whether City has been, remains, or is an
owner of any land or interest in the Site. City shall have the right, if the Covenant Agreement or
covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits
at law or in equity or other proper proceedings to enforce the curing of such breaches to which it
or any other beneficiaries of this Covenant Agreement and covenants may be entitled.
8.7 Force Maieure. Notwithstanding any other provision set forth in this Covenant
Agreement to the contrary, in no event shall a Party be deemed to be in Default of its obligations
set forth herein where delays or failures to perform are caused by circumstances without the fault
and beyond the reasonable control of such Party, which circumstances shall include, without
limitation, fire/casualty losses; strikes; litigation; unusually severe weather; inability to secure
necessary labor, materials, or tools; delays of any contractor, subcontractor, or supplier;
unjustified acts or failure to act by City or other governmental agency; litigation by third parties
challenging the validity or enforceability of the Agreement or this Covenant Agreement; and acts
of God (collectively, "force majeure"). Adverse market conditions or Owner's inability to obtain
financing or approvals to operate the Hotel shall not constitute events of force majeure. In the
event of a force majeure, the Party so delayed shall notify the other Party of the circumstances
and cause of the delay within a reasonable time period after commencement of the delay, it shall
keep the other Party informed at reasonable intervals upon request regarding the status of its
efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform
as soon as practicable thereafter.
8.8 Notices. Notices to be given by City or Owner hereunder may be delivered
personally or may be delivered by certified or registered mail, postage prepaid, or by reputable
overnight delivery service providing a delivery confirmation receipt with time and date of delivery;
with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such
other address(es) that a Party may hereafter designate by written notice. If served by overnight
delivery service or certified mail, service will be considered completed and binding on the Party
served on the date set forth in the confirmation or certification receipt. If delivered personally,
service will be considered completed and binding on the Party served on the date of such personal
delivery.
If notice is to City: City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attention: Frank J. Spevacek, City Manager
with a copy to: Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, CA 92626
Attention: William H. Ihrke, City Attorney
If notice is to Owner: SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
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4852-4696-1781.2
Encinitas, CA 92024
Attention: Robert S. Green, Jr.
8.9 City Approvals and Actions. City shall maintain authority of this Covenant
Agreement and the authority to implement this Covenant Agreement through the City Manager.
The City Manager shall have the authority to make approvals, issue interpretations, waive
provisions, negotiate and enter into amendments to this Covenant Agreement and/or negotiate
and enter into implementing agreements or documents on behalf of City so long as such actions
do not materially or substantially change the business terms of this Covenant Agreement, or
materially or substantially add to the costs incurred or to be incurred by City as specified herein.
Such approvals, interpretations, waivers, amendments, and/or implementing agreements or
documents may include extensions of time to perform. All other material and/or substantial
interpretations, waivers, or amendments shall require the consideration, action and written
consent of the City Council.
8.10 Further Acts. Each Party agrees to take such further actions and to execute such
other documents as may be reasonable and necessary in the performance of its obligations
hereunder; reserving to City, however, its lawful discretionary and police power authority. Without
limiting the generality of the foregoing, upon the expiration or termination of the Operating Period,
City will execute and deliver such instruments as may be prepared by Owner at Owner's expense
to release the cloud upon title to the Site created by this Covenant Agreement; provided, however,
that any such document shall be in a form reasonably acceptable to the City Attorney of City.
8.11 Third Party Beneficiaries. With the exception of the specific provisions set forth in
this Covenant Agreement for the benefit of Mortgagees, there are no intended third party
beneficiaries under this Covenant Agreement and no such other third parties shall have any rights
or obligations hereunder.
8.12 Estoppel Certificates. Either Party to this Covenant Agreement shall, promptly (but
under all circumstances within ten (10) days) following the request of the other Party, execute,
acknowledge and deliver to or for the benefit of such other Party, a certificate certifying: (i) that
this Covenant Agreement is unmodified and in full force and effect (or, if there have been
modifications, that this Covenant Agreement is in full force and effect, as modified, and stating
the -modifications), (ii) whether there are then existing any defaults on the part of the party
requesting the certificate known to the Party delivering the certificate in the performance or
observance of any agreement, covenant or condition hereof to be performed or observed and
whether any notice has • been given of any default which has not been cured (and, if so, specifying
the same), and (iii) such other matters as may be reasonably requested. In the event City is
requested to provide more than one such certificate in any twelve (12) month period, Owner shall
reimburse City for all reasonable fees and costs City incurs from attorneys and consultants in the
preparation of the same.
- 8.13 Inspection of Books and Records. Not more than once per calendar quarter, City
has the right at all reasonable times during normal business hours and following at least ten
(10) Business Days prior written notice to Owner to inspect, on a confidential basis, the books,
records and all other documentation of Owner pertaining to its obligations under this Covenant
Agreement Not more than once per year, Owner also has the right at all reasonable times during
normal business hours and upon ten (10) Business Days prior written notice to inspect the books,
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4852-4696-1781.2
records and all other documentation of City pertaining to its obligations under this Covenant
Agreement.
8.14 Severability. If any term, provision, covenant or condition of this Covenant
Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall continue in full force and effect unless the rights
and obligations of the Parties have been materially altered or abridged by such invalidation,
voiding or unenforceability.
8.15 Standard of Approval. Any consents or approvals required or permitted under this
Covenant Agreement shall not be unreasonably delayed, conditioned or withheld, except where
it is specifically provided that a sole discretion standard applies.
8.16 Time of the Essence. Time is of the essence for each provision of this Covenant
Agreement of which time is an element.
[End - Signature page follows]
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4852-4696-1781.2
IN WITNESS WHEREOF, the Parties have executed this Covenant Agreement to be
effective as of the Covenant Agreement Effective Date.
"CITY'
CITY OF LA QUINTA, a California municipal
corporation and charter city
Date , 2018 By
Frank J. Spevacek, City Manager
ATTEST:
By:
Susan Maysels, City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
William H. Ihrke, City Attorney
[Signature page continues next page]
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4852-4696-1781.2
"Owner"
SILVERROCK DEVELOPMENT COMPANY, LLC,
Date- 2018 Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
By
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
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4852-4696-1781.2
A notary public or other officer completing this certificate verifies only the i=ofthedualwho signed the documentto which this certificate is attached, and not the tr, or
-validity of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On , before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On
, before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
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4852-4696-1781 2
EXHIBIT NO. 1
LEGAL DESCRIPTION OF SITE
Those portions of Sections 5, 6 and 8 Township 6 South, Range 7 East, San Bernardino Meridian,
in the City of La Quinta, County of Riverside, State of California, described as follows:
Parcels 3 and 4 of Parcel Map 37207 per map filed in Book 242, Pages 72 through 87 inclusive,
of Parcel Maps, in the office of the County Recorder of Riverside County, State of California.
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4852-4696-1781.2
EXHIBIT "K"
AMENDMENT TO MEMORANDUM OF PURCHASE SALE AN❑ DEVELOPMENT
AGREEMENT (PHASE 1A)
[See following page]
EXHIBIT "K"
-1-
12711468.4
481972019-1097.4
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Manager
(Space Above For Recorder's Use)
This Amendment to Memorandum of Purchase,
Sale, and Development Agreement is recorded
at the request and for the benefit of the City of La
Quinta and is exempt from the payment of a
recording fee pursuant to Government
Code § 27383.
AMENDMENT TO MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT
AGREEMENT
(Phase 1A Property — PSDA Amendment No. 2)
This AMENDMENT TO MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT
AGREEMENT ("Amendment") is entered into this day of , 2018, by and
between the CITY OF LA QUINTA, a California municipal corporation and charter city ("City"),
and SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company
("Developer").
This Amendment is made with reference to the following:
1. City and Developer entered into that certain Purchase, Sale, and Development
Agreement dated November 19, 2014 ("Original PSDA"), as amended by Amendment No. 1 to
Purchase, Sale, and Development Agreement dated October 29, 2015 ("Amendment No. 1")
and by Amendment No. 2 to Purchase, Sale, and Development Agreement dated on or about
April 18, 2017 ("Amendment No. 2") and by Amendment No. 3 to Purchase, Sale, and
Development Agreement dated on or about October _, 2018 ("Amendment No. 3")
(collectively, and as may be further amended, the "PSDA"), which provides for (i) City to sell to
Developer that certain real property located in the City of La Quinta, County of Riverside, State of
California, more particularly described in the legal description attached hereto as Exhibit "A" and
incorporated herein by this reference (the "Phase 1A Property" as defined in Amendment No.
2), and (ii) Developer to develop and operate on the Phase 1A Property a commercial
development with one luxury hotel with associated branded luxury residential units, a conference
and shared service facility, and related amenities as more particularly described in the PSDA.
The definitions of all terms contained in the PSDA shall apply to this Memorandum.
2. Pursuant to Amendment No. 2, City conveyed the Phase 1A Property to Developer
by Grant Deed (Phase — 1A Property — PSDA Amendment No. 2), dated May 3, 2017 and
recorded November 6, 2017 as Document #2017-0463950 in Official Records of the County of
Riverside, California (the "Grant Deed"), subject to the existing easements, restrictions,
covenants of record described in the Grant Deed
4847-1485-7333.2
3. Pursuant to the PSDA, on or about the date of the Grant Deed, City and Developer
entered into that certain Memorandum of Purchase, Sale, and Development Agreement (Phase
1A Property — PSDA Amendment No. 2) ( the "Memorandum"), recorded November 6, 2017 as
Document #2017-0463953 in the Official Records of the County of Riverside to provide notice to
all persons of the existence of PSDA with respect to the Phase 1A Property and to cause the
PSDA to run with the Phase 1A Property and be binding on Developer and Developer's
successors -in -interest as to the Phase 1A Property.
4. In connection with Amendment No. 3, Developer and City desire to amend the
Memorandum
5. Notwithstanding anything to the contrary contained in the PSDA, with respect to
any portion of the Phase 1A Property as to which the City has recorded a Release of Construction
Covenant, the Memorandum shall automatically terminate as to the released property only and
there shall be no requirement to amend or modify the Memorandum. However, at the request of
Developer, City shall record a quitclaim or termination document sufficient to remove the
Memorandum from the released property.
6. This Amendment may be executed in several counterparts, and all so executed
shall constitute one agreement binding on both parties hereto, notwithstanding that both parties
are not signatories to the original or the same counterpart.
[signatures on next page]
-2-
4847-1485-7333.2
IN WITNESS WHEREOF, City and Developer hereby execute this Amendment as set
forth herein.
Date:
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
William H. Ihrke
City Attorney
CITY:
CITY OF LA QUINTA, a California municipal
corporation and charter city
20_. By:
City Manager
[signatures continue on next page]
-3-
4847-1485-7333.2
"DEVELOPER"
SILVERROCK DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
BY:
Name: Robert S. Green, Jr,
Its: President and Chief
Executive Officer
-4-
4847-1485-7333.2
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF
On before me, Notary
Public, personally appeared , who 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.
I certify UNDER PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Name:
Notary Public
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF
On before me, Notary
Public, personally appeared , who 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.
I certify UNDER PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Name:
Notary Public
-5-
4847-1485-7333 2
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PHASE 1A PROPERTY
PHASE 1A PROPERTY.
Those portions of Sections 5, 6 and 8 Township 6 South, Range 7 East, San Bernardino
Meridian, in the City of La Quinta, County of Riverside, State of California, described as
follows:
Parcels 1, 3, 4, 5, and 6 of Parcel Map No. 37207 in the City of La Quinta, County of
Riverside, State of California, per map filed May 3, 2017 in Book 242, Pages 72
through 87, inclusive, of Parcel Maps, in the office of the County Recorder of Riverside
County, State of California.
EXHIBIT "A"
-1-
4847-1485-7333.2
EXHIBIT "L"
TOT COVENANT (LIFESTYUE
[See following page]
EXHIBIT "L"
-1-
127114684
4
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Clerk
[SPACE ABOVE FOR RECORDER.]
EXEMPT FROM RECORDER's FEE PER GOV CODE §27383
AGREEMENT CONTAINING COVENANTS CONDITIONS AND RESTRICTIONS
AFFECTING REAL PROPERTY
(Lifestyle Hotel)
This AGREEMENT CONTAINING COVENANTS, CONDITIONS, AND RESTRICTIONS
AFFECTING REAL PROPERTY (the "Covenant Agreement") is entered into as of this day
of 20— ("Covenant Agreement Effective Date"), by and between the CITY OF
LA QUINTA, a California municipal corporation and charter city ("City"), and SILVERROCK
DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Owner") (individually a
"Party" and collectively the "Parties").
RECITALS
A. City is the owner of that certain real property located in the City of La Quinta,
County of Riverside, State of California, which is more particularly described in the legal
description attached hereto as Exhibit No. 1 and incorporated herein by this reference (the "Site").
B. City has agreed to sell to Owner the Site pursuant to that certain Purchase, Sale,
and Development Agreement dated November 19, 2014 ("Original PSDA"), as amended by
Amendment No. 1 to Purchase, Sale, and Development Agreement dated October 29, 2015
("Amendment No.1"), Amendment No. 2 to Purchase, Sale, and Development Agreement dated
April 18, 2017 ("Amendment No. 2"), and Amendment No. 3 to Purchase, Sale, and Development
Agreement dated , 2018 ("Amendment No. 3") (collectively and as may be
further amended, the "PSDA"). The PSDA sets forth the terms and conditions for City to sell to
Owner the Site and certain adjacent real property (collectively, the "Development Property"),
and for Owner to thereafter develop and operate on the Development Property a commercial
project containing hotels and associated amenities, branded residential units, a mixed use village,
and a resort residential village (the "Development Project").
C. Pursuant to the PSDA, Owner has agreed to develop on the Site a portion of the
Development Project consisting of the hotel defined in the PSDA as the Lifestyle Hotel (the
"Hotel").
D. Pursuant to the PSDA, Participant is required to enter into a hotel management
agreement and all ancillary agreements, including, without limitation, a technical services
agreement, hotel brand licensing agreement, and use and access development agreement
(collectively, a "Hotel Management Agreement"), with a City -approved hotel operator (the "Hotel
Operator"), who shall be responsible for the management and operation of the Hotel pursuant to
the terms of the Hotel Management Agreement.
4818-1654-4885.3
E. Concurrently herewith, City and Owner have entered into that certain unrecorded
Agreement to Share Transient Occupancy Tax Revenue (the "Agreement") which provides for
the recordation of this Covenant Agreement against the Site.
F. In consideration for Owner's rights and obligations set forth in the Agreement and
within this Covenant Agreement, City has agreed to make certain payments to Owner, the amount
of which are measured by the "Transient Occupancy Tax" (as that term is defined below)
generated by the operation of the Hotel on the Site. City and Owner have agreed that the portion
of Transient Occupancy Tax required to be paid by City to Owner hereunder during each
"Payment Period" of the "Operating Period" (as those terms are defined below) provided for herein
is a fair exchange for the consideration to be furnished by Owner to City in that Payment Period.
COVENANTS
Based upon the foregoing Recitals, which are incorporated herein by this reference, and
for other good and valuable consideration, the receipt and sufficiency of which is acknowledged
by both Parties, City and Owner hereby agree as follows:
❑EFINE❑ TERMS.
In addition to the terms that may be defined elsewhere in this Covenant, Agreement, the
following terms when used in this Covenant Agreement shall have the meanings set forth below:
The term "Affiliate" shall mean any corporation, partnership, limited liability company or
other organization or entity which is Controlled by, Controlling or under common Control with
(directly or indirectly) Owner.
The term "Aggregate Preopening Expenses" shall mean all hard and soft costs actually
incurred by Owner in connection with the Hotel prior to the Commencement Date including,
without limitation, (i) permit fees and other entitlement costs, (ii) professional fees and costs paid
to architects, engineers, lawyers and accountants, (iii) all horizontal and vertical construction
costs including grading, excavation, demolition, construction and landscaping, (iv) general and
administrative development expenses, (v) development fees, (vi) insurance premiums,
(vi) property taxes, (vii) costs associated with procuring construction financing and interest paid
in connection with such construction financing, (viii) the cost to purchase and install all furniture,
fixtures and equipment including, without limitation, all information systems hardware and
software, (ix) license fees, (x) costs to install and use utilities including electricity, water, gas,
telephone, internet and cable or satellite television, (xi) wages and other costs associated with
hiring and training employees prior to the opening of the Hotel to the public, and (xii) the cost of
all movable personal property and inventory required to open the Hotel for business on the
Commencement Date including, without limitation, linen, bathroom supplies, food and beverages.
The term "Agreement" shall have the meaning ascribed to it in Recital E of this Covenant
Agreement.
The term "Auditor" shall have the meaning ascribed to it in Section 4. 1.3 of this Covenant
Agreement.
The term "Budgeted Preopening Expenses" shall mean all hard and soft costs estimated
to be incurred by Owner in connection with the Hotel prior to the Commencement Date, as set
forth in the Hotel Budget.
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4818-1654-4885 3
The term "Business Day" shall mean a calendar day which is not a weekend day or a
Federal or State holiday, and a day upon which the City is open for business.
The term "Commencement Date" shall mean the first day of the first full calendar month
following the date upon which the Hotel opens for business and accepts its first paying overnight
guest.
The term "Control", "Controlled" or "Controlling" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of an entity
or person, whether through the ability to exercise voting power, by contract or otherwise.
The term "Covenant Agreement" shall mean this Agreement Containing Covenants,
Conditions, and Restrictions Affecting Real Property.
The term "Covenant Payments" shall mean the amounts to be paid by City to Owner with
respect to each Payment Period during the Operating Period.
The term "Default" shall have the meaning ascribed to it in Section 5.1 of this Covenant
Agreement.
The term "Default Notice" shall have the meaning ascribed to it in Section 2 of this
Covenant Agreement.
The term "Estimated NOI Notice" shall have the meaning ascribed to it in Section 4.1.2(a]
of this Covenant Agreement.
The term "Gross Revenue" shall mean, for each Payment Period or Operating Year (as
applicable) during the Operating Period, all revenue generated by the Hotel from all sources
during such Payment Period or Operating Year (as applicable) including, without limitation, room
rentals, food and beverage sales, parking charges, television charges, telephone charges and
sundry services.
The term "Hotel' shall have the meaning ascribed to it in Recital C of this Covenant
Agreement.
The term "Hotel Budget" shall mean the budget of all hard and soft costs to be incurred
by Owner in connection with the development and opening of the Hotel (including costs of the
type included within the definition of Aggregate Preopening Expenses), which budget shall be
prepared by Owner and delivered to City for review and approval, which approval shall not be
unreasonably withheld, prior to the commencement of construction of the Hotel and which budget
may be revised from time to time subject to the reasonable approval of City.
The term "Hotel Management Agreement" shall have the meaning ascribed to it in
Recital Q of this Covenant Agreement.
The term "Hotel Operator" shall have the meaning ascribed to it in Recital Q of this
Covenant Agreement.
The term 'Improvements" shall mean and include all buildings, structures, fixtures,
parking, sidewalks, pedestrian lighting, landscaping, irrigation of landscaping, and other
improvements of whatsoever character to be constructed or performed by Owner on the Site.
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The term "Mortgage" shall mean any mortgage, deed of trust, pledge (including a pledge
of equity interests in Owner), hypothecation, charge, encumbrance or other security interest
granted to a lender, made in good faith and for fair value, encumbering all or any part of Owner's
interest in (i) this Covenant Agreement, (ii) the Site, (iii) the Improvements, or (iv) any equity
interest in Owner.
The term "Mortgagee" shall mean any mortgagee or beneficiary under any Mortgage.
The term "Municipal Code" shall mean the La Quinta Municipal Code.
The term "Net Operating Income" shall mean, for each Payment Period or Operating
Year (as applicable) during the Operating Period, the Gross Revenue generated by the Hotel
during such Payment Period or Operating Year (as applicable), less the Operating Expenses
incurred in connection with the Hotel during such Payment Period or Operating Year (as
applicable).
The term "Operating Expenses" shall mean, for each Payment Period or Operating Year
(as applicable) during the Term, all ordinary expenses actually incurred by Owner during such
Payment Period or Operating Year (as applicable) and relating to the operation and/or
maintenance of all the facilities of the Hotel determined in accordance with generally accepted
accounting principles, including, without limitation, (a) centralized sales and marketing expenses,
(b) charges related to programs implemented by the Hotel Operator and chargeable to the Owner,
whether such programs are optional or required under the Hotel Management Agreement (e.g., a
loyalty rewards program), (c) expenses incurred by the Hotel Operator and reimbursable by the
Owner pursuant to the Hotel Management Agreement, (d) hotel personnel expenses including,
without limitation, salaries, benefits and severance payments, (e) repair costs, (f) maintenance
costs, (g) utility charges, (h) administrative expenses, (i) costs of advertising, marketing and
business promotion, 0) all amounts payable to the Hotel Operator pursuant to the Hotel
Management Agreement including, without limitation, the management fee, (k) taxes,
(1) insurance premiLims and deductibles, (m) capital expenditures, (n) expenditures on furniture,
fixtures and equipment, (o) funding of reserves required under the Hotel Management Agreement,
(p) "asset management" costs and expenses incurred by Owner's personnel in relation to the
Hotel, provided such costs and expenses do not exceed one percent (1 %) of Gross Revenue for
the applicable Payment Period or Operating Year (as applicable), (q) professional fees and costs
including fees paid to attorneys, accountants, auditors and appraisers, provided that the types
and amounts of such fees and costs shall be reasonable and consistent with the industry standard
for such fees and costs, (r) capital and equipment leases expenses, (s) costs of all goods and
services provided to guests and patrons in the normal course of business for all departments of
the Hotel (t) permit and license fees; provided, however, "Operating Expenses" expressly
excludes (i) principal and interest on any third party debt, (ii) capital expenditures, and (iii)
depreciation.
The term "Operating Period" refers to the period commencing upon the
Commencement Date and ending upon the Termination Date.
The term "Operating Year" shall mean a period of twelve (12) consecutive months,
the first of which shall commence upon the Commencement Date, with each subsequent
Operating Year commencing upon the day immediately following the expiration of the
preceding Operating Year.
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4818-1654-4885.3
The term "Payment Date" shall mean the date that is thirty (30) days after the later to
occur of (i) City's receipt of an Estimated NOI Notice, or (ii) if applicable, the Auditor's final
determination of the Net Operating Income for the applicable Payment Period pursuant to
Section 4.1.3 below.
The term "Payment Period" shall mean a period of three (3) consecutive calendar
months during the Operating Period, with the first Payment Period commencing upon the
Commencement Date and each successive -Payment Period commencing upon the first day
immediately following the expiration of the immediately preceding Payment Period.
The term "PSDA" shall have the meaning ascribed to it in Recital B of this Covenant
Agreement.
The term "Required Annual Return" means, for each Operating Year during the
Term, an amount equal to eleven percent (11 %) of the lesser of (i) the Aggregate Preopening
Expenses, or (ii) the Budgeted Preopening Expenses.
The term "RGC" means The Robert Green Company, a California corporation.
The term "Site" shall have the meaning ascribed to it in Recital A of this Covenant
Agreement.
The term "Term" shall mean the term of this Covenant Agreement, which shall be the
period commencing on the Commencement Date and ending on the Termination Date.
The term "Termination Date" shall mean the date that is the earlier of (i) the fifteenth
(15th) anniversary of the Commencement Date; or (ii) the date upon which this Covenant
Agreement is terminated pursuant to Section 5.2 or Section 5.3.
The term "Transient Occupancy Tax" means, for each Payment Period, or part thereof,
during the Operating Period, that portion of transient occupancy taxes remitted by Owner or the
Hotel Operator to City pursuant to Chapter 3.24 of the Municipal Code (and any amendments or
replacements to the Municipal Code) and are generated from the use and occupancy of hotel
guest rooms in the Hotel. If said Municipal Code Section is amended or repealed during the
Operating Period such that Transient Occupancy Taxes are no longer payable to City, then, for
the purposes of this Agreement, the term "Transient Occupancy Tax" shall include any substitute
tax imposed upon occupants of hotel guest rooms and payable to the City of La Quinta.
Notwithstanding anything hgrein to the contrary, Transient Occupancy Tax shall not
include any interest or penalty that has been paid by Owner or the Hotel Operator pursuant to
Chapter 3.24 of the Municipal Code, and any costs City incurs during a particular Payment Period
in enforcing Chapter 3.24 of the Municipal Code or any provision of this Covenant Agreement
shall be deducted from the amount of the Covenant Payment payable by City to Owner for such
Payment Period.
2. CONDITION TO OWNER'S RIGHT TO RECEIVE COVENANT PAYMENTS.
City's obligation to make the Covenant Payments pursuant to Section 4.1 of this Covenant
Agreement for any Payment Period (or portion thereof) during the Operating Period shall be
contingent and conditional upon Owner's performance of its obligations set forth in Section 3 of
this Covenant Agreement during such Payment Period. If Owner is in Default under this Covenant
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Agreement and City has provided written notice of the commencement of the Default to Owner (a
"Default Notice"), then the amount of the Covenant Payment(s) due to Owner shall be reduced
in accordance with Section 4.1.2(d) below, but City shall remain obligated to pay all Covenant
Payments due to Owner pursuant to Section 4.1.2 for those periods prior to Owner's receipt of a
Default Notice and for those periods subsequent to Owner's cure of such Default.
3. OWNER'S OBLIGATIONS.
3.1 Continuous Operation. During the Operating Period, Owner covenants and agrees
to cause the Hotel to be continuously operated on the Site, subject to temporary and reasonable
interruptions for casualty losses, repairs, labor unrest, "acts of God", and the like, or "seasonality"
which shall be confined to a temporary closure when one of the following conditions are present:
(a) one or more Approved Luxury Hotel Operator (as defined in Section 6.1.2 below and the
PSDA) in the Coachella Valley temporarily closes; or (b) industry standard for hotels similar to the
Luxury Hotel and located in the Coachella Valley allows for temporary closures based on
seasonality; provided, however such temporary closure only occurs for no more than sixty (60)
days and any temporary closure does not occur between the Friday immediately before Labor
Day in the United States (or the Friday before the first weekend in September) and the next
Monday immediately after the Fourth of July (each, a "Permitted Closure").
3.2 Use Restriction. During the Operating Period, the Site shall not be put to any use
other than the operation of the Hotel and uses ancillary thereto, and such use shall qualify as a
transient occupancy use under Chapter 3.24 of the Municipal Code.
3.3 Maintenance and Repair of Site and Hotel: La_ndscapinq.
(a) During the Operating Period, Owner, at its sole cost and expense, shall
keep and maintain the Site and the Improvements thereon and all facilities appurtenant thereto in
good condition and repair, in accordance with the "Maintenance Standards" (as that term is
hereinafter defined).
(b) To comply with the maintenance obligations set forth in this Section 3.3,
Owner shall cause the Hotel Operator to either staff or contract with and hire licensed and qualified
personnel to perform the maintenance work, including the provision of labor, equipment,
materials, support facilities, and any and all other items necessary to comply with the
requirements of this Covenant Agreement.
(c) Owner shall, or shall cause the Hotel Operator and its/their maintenance
staff, contractors or subcontractors to comply with the following standards ("Maintenance
Standards"):
1. Landscape maintenance shall include, but not be limited to:
watering/irrigation; fertilization; mowing; edging-; trimming of grass; tree and shrub pruning;
trimming and shaping of trees and shrubs to maintain a healthy, natural appearance, safe
road conditions, including visibility, and irrigation coverage; replacement, as needed, of all
plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other
planted areas; and staking for support of trees.
2. Clean-up maintenance shall include, but not be limited to:
maintenance of all sidewalks, paths and other paved areas in clean and weed- free
condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter
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which is unsafe or unsightly; removal of all trash, litter and other debris from improvements
and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to
the end of the day on which the maintenance operations are performed to ensure that all
cuttings, weeds, leaves and other debris are properly disposed of by maintenance
workers.
3. All maintenance work shall conform to all applicable federal and
state Occupational Safety and Health Act standards and regulations for the performance
of maintenance.
4. Any and all chemicals, unhealthful substances, and pesticides used
in and during maintenance shall be applied in strict accordance with all governing
regulations. Precautionary measures shall be employed recognizing that all areas are
open to public access.
5. The Site and Hotel shall be maintained in conformance and in
compliance with the approved Site construction and architectural plans and design
scheme, and reasonable commercial development maintenance standards for similar
projects, including but not limited to: painting and cleaning of all exterior surfaces and
other exterior facades comprising all private improvements and public improvements to
the curbline.
6. The Site shall be maintained as required by this Section in good
condition.
(d) During the Operating Period, Owner shall not abandon any portion of the
Site or leave the Site unguarded or unprotected, and shall not otherwise act or fail to act in such
a way as to unreasonably increase the risk of any damage to the Site or of any other impairment
of City's interest set forth in this Covenant Agreement.
3.4 Failure to Maintain Site and Hotel. In the event Owner does not maintain the Site
or the Hotel, or otherwise cause the Site or the Hotel to be maintained. in the manner set forth
herein and in accordance with the Maintenance Standards, City shall have the right, but not the
obligation, to maintain such private and/or public improvements, or to contract for the correction
of such deficiencies, in accordance with the provisions of this Section 3.4. City shall notify Owner
in writing if the condition of said improvements do not meet with the Maintenance Standards and
to specify the deficiencies and the actions required to be taken by Owner to cure the deficiencies.
Subject to the following sentence, upon notification of any maintenance deficiency, Owner shall
have thirty (30) days within which to correct, remedy or cure the deficiency, provided that if the
deficiency cannot reasonably be cured within thirty (30) days and Owner provides written
notification to City of the time reasonably required by Owner to correct, remedy or cure the
deficiency, then Owner shall have up to but not exceeding ninety (90) days within which to correct,
remedy or cure the deficiency so long as Owner commences to correct, remedy or cure the
deficiency within said thirty (30) day period and diligently prosecutes the correction, remedy or
cure to completion. If the written notification states the problem is urgent relating to the public
health and safety of City, then Owner shall have forty-eight (48) hours to correct, remedy, or cure
the problem.
In the event Owner or any person or entity acting on behalf of Owner fails to correct,
remedy, or cure after notification and after the period of correction has lapsed (or, for deficiencies
that cannot reasonably be corrected, remedied, or cured within such period, if Owner or any
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person or entity acting on behalf of Owner has not commenced correcting, remedying or curing
such maintenance deficiency within such period and diligently pursued such correction, remedy
or cure to completion), then City shall have the right to maintain such improvements. Owner
agrees to reimburse City for its actual costs reasonably incurred in connection with such
maintenance performed by City pursuant to this Section. Until so paid, City shall have a lien on
the Site for the amount of such unpaid reimbursement, which lien shall be perfected by the
recordation of a "Notice of Claim of Lien" against the Site. Upon recordation of a Notice of a Claim
of Lien against the Site, such lien shall constitute a lien on the fee estate in and to the Site prior
and superior to all other monetary liens except: (i) all taxes, bonds, assessments, and other levies
which, by law, would be superior thereto; (ii) the lien or charge of any mortgage, deed of trust, or
other security interest then of record made in good faith and for value, it being understood that
the priority of any such lien for costs incurred to comply with this Covenant Agreement shall date
from the date of the recordation of the Notice of Claim of Lien. Any lien in favor of City created or
claimed hereunder is expressly made subject and subordinate to the lien of any mortgage or deed
of trust made in good faith and for value, recorded as of the date of the recordation of the Notice
of Claim of Lien describing such lien as aforesaid, and no such lien shall in any way defeat,
invalidate, or impair the obligation or priority of any such mortgage or deed of trust, unless the
mortgage or beneficiary thereunder expressly subordinates his interest, of record, to such lien.
Upon foreclosure of any mortgage or deed of trust made in good faith and for value and recorded
prior to the recordation of any unsatisfied Notice of Claim of Lien, the foreclosure -purchaser shall
take title to the Site free of any lien imposed by City that has accrued up to the time of the
foreclosure sale, and upon taking title to the Site, such foreclosure -purchaser shall only be
obligated to pay costs associated with this Covenant Agreement accruing after the foreclosure -
purchaser acquires title to the Site. Owner acknowledges and agrees City may also pursue any
and all other remedies available in law or equity as a result of a maintenance deficiency by Owner
hereunder. Owner shall be liable for any and all reasonable attorneys' fees, and other legal costs
or fees incurred in collecting said maintenance costs.
3.5 Level of Service. During the Term, Owner shall cause the Hotel to be operated as
a "lifestyle hotel" operated by Hotel Operator or such other hotel operator approved by City
pursuant to the terms of the PSDA, and in accordance with the terms of the Hotel Management
Agreement. Subject to Owner's and the Hotel Operator's right to use their commercially
reasonable business judgment in the day-to-day operation of the Hotel, Owner shall use its best
efforts to cause the Hotel to be operated in a manner that maximizes the generation of Transient
Occupancy Tax to be remitted to City.
3.6 Compliance with Laws. During the Operating Period, Owner shall cause the Hotel
to be operated on the Site (i) in conformity with all valid and applicable federal, state (including
without limitation the California Civil Code, the California Government Code, the California Health
& Safety Code, the California Labor Code, the California Public Resources Code, and the
California Revenue & Taxation Code), and local laws, ordinances, and regulations, provided that
Owner does not waive its right to challenge the validity or applicability thereof to Owner or the
Site, and (ii) in compliance with all of the requirements of the PSDA and any discretionary permits
issued by City for the Hotel, including, without limitation, all of the conditions of approval issued
in connection therewith, if any.
Nothing herein constitutes a representation or warranty by City that the construction of the
Hotel is not or will not be a "public work" or otherwise subject to California Health and Safety Code
Sections 33423 through 33426, or Chapter 1 of Part 7 of the California Labor Code (commencing
with section 1720), and all applicable statutory and regulatory provisions related thereto, and
Owner expressly waives any right of reimbursement for any "increased costs" under California
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Labor Code Section 1781 or otherwise with respect to the Hotel or Owner's development thereof.
Owner shall indemnify, defend, and hold City and City's representatives, volunteers, officers,
officials, member, employees, and agents harmless, including, but not limited to, litigation costs,
expert witness fees, and reasonable attorneys' fees, from and against any and all claims
pertaining to the payment of wages in connection with Owner's development of the Hotel on the
Site or failure to comply with federal or state labor laws, regulations, or standards.
3.7 Compliance with Hotel Management Agreement. Owner shall comply with all of
Owner's obligations under the Hotel Management Agreement. Owner shall promptly provide City
with copies of any notices of default received by Owner from the Hotel Operator with respect to
Owner's obligations under the Hotel Management Agreement.
3.8 Non -Discrimination. Owner shall cause the Hotel Operator to open and operate
the Hotel in a manner that does not violate applicable laws that prohibit discrimination against any
person or class of person by reason of gender, marital status, sexual orientation, race, color,
creed, mental or physical disability, religion, age, ancestry, or national origin.
3.9 Indemnification of Citv. Owner shall defend, indemnify, assume all responsibility
for, and hold City, and City's representatives, volunteers, officers, officials, members, employees
and agents, harmless from- any and all claims, demands, damages, defense costs or liability of
any kind (including reasonable attorneys' fees and costs), that arise from Owner's operation of
the Hotel on the Site or which may be caused by any acts or omissions of the Owner under this
Covenant Agreement whether such activities or performance thereof be by Owner or by anyone
directly or indirectly employed or contracted with by Owner and whether such damage shall
accrue or be discovered before or after termination of this Covenant Agreement.
3.10 Insurance Requirements.
3.10.1 Owner shall procure and maintain, at its sole cost and expense, in a form
and content reasonably satisfactory to the City Manager (as that term is described in Section 100
of the PSDA), the following policies of insurance:
(a) Commencing with the Covenant Agreement Effective Date and ending
on the earlier of the date this Covenant Agreement expires or is earlier terminated by the Parties
pursuant to the terms hereof, a policy of commercial general liability insurance written on a per
occurrence basis in an amount not less than Five Million Dollars ($5,000,000.00) per occurrence
and Five Million Dollars ($5,000,000.00) in the aggregate.
(b) Commencing on the date City issues a Release of Construction
Covenants for the Lifestyle Hotel and ending on the earlier of the date this Covenant Agreement
expires or is earlier terminated by the Parties pursuant to the terms hereof, an "All Risks" property
insurance policy on a replacement cost basis in an amount equal to the full replacement cost of
the Lifestyle Hotel and Conference and Shared Service Facility, as the same may change from
time to time and which shall not contain a coinsurance provision.
3.10.2 The following additional requirements shall apply to the insurance policies
required under subsection 3.10.1 above:
(a) Such policies shall be primary insurance and the commercial general
liability insurance shall name City and City's officers, officials, members, employees, agents and
representatives as additional insureds, using a pre-2004 additional insured endorsement (or
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equivalent). To the extent allowable by applicable law, the insurer shall waive all rights of
subrogation and contribution it may have against City and City's officers, officials, members,
employees, agents and representatives, and their respective insurers. All of said policies of
insurance shall provide that said insurance may not be materially amended or cancelled without
providing thirty (30) days' prior written notice to City, In the event any of said policy of insurance
are cancelled, Owner shall, prior to the cancellation date, submit new evidence of insurance in
conformance with this Section 3.10 to the City Manager. Owner shall provide City Manager with
Certificates of Insurance or appropriate insurance binders evidencing the above insurance
coverages and said Certificates of Insurance or binders shall be subject to the reasonable
approval of the City Manager.
(b) The policies of insurance required by this Covenant Agreement shall be
satisfactory only is issued by companies (i) licensed and admitted to do business in California,
rated "A" or better in the most recent edition of Best Rating Guide, The Key Rating Guide or in
the Federal Register, and only if they are of a financial category Class VII or better, or (ii)
authorized to do business in California, rated "A+" or better in the most recent edition of best
Rating Guide, The Key Rating Guide or in the Federal Register and only if they are of a financing
category Class XV. Notwithstanding the foregoing, in the event that the policies required
hereunder are not available from such insurers at commercially reasonable rates, the City
Manager shall have the authority, in his or her sole and absolute discretion, to waive one or more
of such requirements provided the proposed policies will adequately protect City's interests
hereunder.
(c) City may reasonably require coverage increases, provided that the
percentage increase in coverage shall not be required to exceed the percentage increase in the
Consumer Price Index published by the United States Department of Labor, Bureau of Labor
Statistics, for Urban Wage Earners and Clerical Workers, Los Angeles — Riverside — Orange
County Average, All Items (1984 = 100) or, if applicable to the Coachella Valley in Riverside
County, the Riverside -San Bernardino -Ontario are average (the "Index") from and after the date
of this Covenant Agreement, or, if said Index is discounted, such official index as may then be in
existence and which is most nearly equivalent to said Index (the "CPI Adjustment"). Unless
otherwise approved in advance by City Manager, the insurance to be provided by Owner may
provide for a deductible or self -insured retention of not more than Fifty Thousand Dollars
($50,000); provided, however, that the deductible or self -insured retention for the earthquake
coverage may be up to, but not exceed, ten percent (10%) of the replacement cost of the Lifestyle
Hotel and/or Conference and Shared Service Facility (as applicable).
4. OBLIGATIONS OF CITY.
4.1 Covenant Payments to Owner.
4.1.1 Determination of Required Annual Return. As soon as reasonably possible
following the Commencement Date, Owner shall deliver to City written notice (the "Annual Return
Notice") of Owner's determination of the Aggregate Preopening Expenses and the Required
Annual Return, together with a line item summary of each category of costs included in the
Aggregate Preopening Expenses and reasonable backup to substantiate that all such costs were
actually incurred. Within thirty (30) days following City's receipt of the Annual Return Notice, City
shall have the right to either accept or reject Owner's determination of the Required Annual
Return; provided, however, if City rejects such determination, then it shall provide Owner with a
reasonably detailed explanation for its rejection (the "City's Rejection Notice"). If the Parties are
not able to reach agreement on the amount of the Required Annual Return within thirty (30) days
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following Owner's receipt of City's Rejection Notice, then the Parties shall jointly engage a certified
public accountant (the "Auditor") to review Owner's books and records and determine the amount
of the Required Annual Return. If the Parties cannot agree upon a choice of the Auditor within
forty-five (45) days following Owner's receipt of City's Rejection Notice, then (i) each Party shall
engage, at its sole cost, an auditor, provided each such auditor must be a certified public
accountant with a nationally recognized firm and with at least ten (10) years of experience auditing
hotel developers and operators. If said auditors' determinations of Required Annual Return differ
by less than ten percent (10%), then the final determination of Required Annual Return shall be
the average of amounts determined by said two auditors. If said auditors' determinations of
Required Annual Return differ by ten percent (10%) or more, then the Parties shall instruct said
auditors to engage a third auditor with the qualifications described above and the final
determination of Required Annual Return shall be the average of the two auditors' determinations
that are closest in value. The fees of such third auditor, if required, shall be paid by the Parties
in equal fifty percent (50%) shares. The determination of the Required Annual Return pursuant
to this Section shall be final and binding on the Parties for all purposes under this Covenant
Agreement.
4.1.2 Amount of Covenant Payments. In consideration for Owner's undertakings
pursuant to this Covenant Agreement, City shall make payments (each, a "Covenant Payment")
to Owner on each Payment Date during the Operating Period The amount of each Covenant
Payment shall be calculated as follows:
(a) As soon as reasonably possible following the end of each Payment
Period, Owner shall deliver to City (1) a summary of profit and loss reports for the Hotel
for the Payment Period, and (2) a written notice in the form of the sample attached hereto
as Exhibit No. 2 (each, an "Estimated NOI Notice") that includes all of the following
information:
(i) The actual Net Operating Income for such Payment Period
and for all previous Payment Periods during the applicable Operating Year, and in
the Estimated NOI Notice for the fourth (4th) Payment Period during the applicable
Operating Year, the actual Net Operating Income for such Operating Year;
(ii) In the Estimated NOI Notice for the first three (3) Payment
Periods during the applicable Operating Year, Owner's reasonable estimate of (1)
the Net Operating Income for each of the Payment Periods remaining in such
Operating Year, and (II) the annual Net Operating Income for such Operating Year;
(iii) In the Estimated NOI Notice for the first three (3) Payment
Periods during the applicable Operating Year, the percentage of the estimated
annual Net Operating Income for the applicable Operating Year that is represented
by the actual or estimated (as applicable) Net Operating Income for each Payment
Period, which percentages are referred to on Exhibit No. 2 as the "Percentage of
estimated annual NOI". In the Estimated NOI Notice for the fourth (4th) Payment
Period during the applicable Operating Year, the percentage of the actual annual
Net Operating Income for the applicable Operating Year that is represented by the
actual Net Operating Income for each Payment Period, which percentages are
referred to on Exhibit No. 2 as the "Percentage of actual annual NOI;
(iv) the estimated or actual (as applicable) amount of revenue
that Owner needs to receive during the applicable Operating Year that, when
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added to the estimated or actual (as applicable) Net Operating Income for the
applicable Operating Year, will achieve the Required Annual Return for such
Operating Year, which amount shall be (1) the difference between the Required
Annual Return and the estimated or actual (as applicable) Net Operating Income
for such Operating Year, and (II) apportioned and attributed to each of the
Payment Periods in the amount of the "Percentage of estimated annual NOI" or
"Percentage of actual annual NOI" (as applicable) attributed to such Payment
Periods as of the applicable Payment Date. Such amounts are referred to on
Exhibit No. 2 as the "Amount needed to achieve Required Annual Return";
(v) the amount of Transient Occupancy Taxes actually paid to
City for the applicable ,Payment Period. Such amount is referred to on
Exhibit No. 2 as the "TOT paid to City"; and
(vi) the amount available for rebate by City for the applicable
Payment Period, which shall be the amount of the Transient Occupancy Taxes
actually paid to City for such Payment Period, multiplied by (1) ninety-five percent
(95%) if such Payment Period is within the first ten (10) years of the Operating
Period, or (II) seventy-five percent (75%) if such Payment Period is within the last
five (5) years of the Operating Period, which amounts are referred to on
Exhibit No. 2 as the "Amount available for rebate".
(b) On each Payment Date, City shall pay to Owner the difference
between (1) the amount that is the lesser of (1) the aggregate of the "Amount needed to
achieve Required Annual Return" attributable to the applicable Payment Period and all
prior Payment Periods during that Operating Year, (2) the aggregate of the "Amount
available for rebate" attributable to the applicable Payment Period and all prior Payment
Periods during that Operating Year, and (3) the "Amount needed to achieve Required
Annual Return," and (II) the aggregate of the Covenant Payments previously paid to
Owner for such Operating Year. Notwithstanding anything to the contrary in this Covenant
Agreement, if upon the fourth Payment Date for any Operating Year, the calculation of the
difference between clause (1) and (II) in this subparagraph (b) results in a negative
number, then on such Payment Date Owner shall pay the amount of such difference to
City.
(c) The Parties hereby acknowledge and agree that the above
calculations will rely on estimates that will be updated by Owner following the end of each
Payment Period; accordingly, any estimated amounts included in a previously submitted
Estimated NOI Notice may be adjusted as reasonably necessary to provide for the Hotel's
actual performance in prior Payment Periods and for the Owner's reasonable expectations
that the Hotel's future performance may be negatively or positively impacted by factors
that would warrant an adjustment in the estimated Net Operating Income for the Hotel
during the applicable Operating Year.
(d) Notwithstanding anything to the contrary in this Covenant
Agreement, if Owner is in Default, then upon Owner's receipt of a Default Notice from City,
all Transient Occupancy Taxes paid to City for the period of time commencing upon the
date that Owner receives the Default Notice from City and continuing through and until the
date that Owner cures such Default (each, a "Default Period"), shall be excluded from
the amounts included in the Estimated NOI Notice as "TOT paid to City" and "Amount
available for rebate" pursuant to Subsections 4.1.2 a v and Dill above, and shall not be
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considered for purposes of calculating the amount of a Payment Period. For example, if
Owner pays to City Transient Occupancy Taxes in the amount of $300,000 for a particular
Payment Period, but $50,000 of such Transient Occupancy Taxes were generated during
a Default Period, the amount included in the Estimated NOI Notice for such Payment
Period as'TOT paid to City" shall be $250,000, and the amount included in the Estimated
NOI Notice for such Payment Period as "Amount available for rebate" (during the first ten
years of the Operating Period) shall be $237,500.
4.1.3 Determination of Net OperatingOperattqg Income. Within thirty (30) days following
City's receipt of an Estimated NOI Notice, City shall have the right to review the books and records
of the Hotel to determine the accuracy of the Estimated NOI Notice and to either accept or reject
Owner's determination of the estimated and/or actual (as applicable) Net Operating Income in
such Estimated NOI Notice; provided, however, if City rejects any of such determinations, then it
shall provide Owner with a reasonably detailed explanation for its rejection (a "City's NOI
Rejection Notice"). If the Parties are not able to reach agreement on the amount of the estimated
and/or actual (as applicable) Net Operating Income in dispute within thirty (30) days following
Owner's receipt of a City's NOI Rejection Notice, then the Parties shall jointly engage a certified
public accountant (the "Auditor") to review Owner's books and records and determine the amount
of the estimated and/or actual (as applicable) Net Operating Income in dispute. If the Parties
cannot agree upon a choice of the Auditor within forty- five (45) days following Owner's receipt of
City's NOI Rejection Notice, then (i) each Party shall engage, at its sole cost, an auditor, provided
each such Auditor must be a certified public accountant with a nationally recognized firm and with
at least ten (10) years of experience auditing hotel operators. If said auditors' determinations of
the estimated and/or actual (as applicable) Net Operating Income in dispute differ by less than
ten percent (10%), then the final determination of estimated and/or actual (as applicable) Net
Operating Income in dispute shall be the average of the two amounts determined by said two
auditors. If said auditors' determinations of the estimated and/or actual (as applicable) Net
Operating Income in dispute differ by ten percent (10%) or more, then the Parties shall instruct
said auditors to engage a third auditor with the qualifications described above and the final
determination of the estimated and/or actual (as applicable) Net Operating Income in dispute shall
be the average of the two auditors' determinations that are closest in value. The fees of such
third auditor, if required, shall be paid by the Parties in equal fifty percent (50%) shares.
4.2 Source of Payments. The Covenant Payments shall be payable from any source
of funds legally available to City. In this regard, it is understood and agreed that the Transient
Occupancy Tax is being used merely as a measure of the amount of the Covenant Payments that
are periodically owing by City to Owner, and that City is not pledging any portion of the actual
Transient Occupancy Tax generated from the Site to Owner.
4.3 Books and Records. Upon the written request of either Party, the other Party shall
make available for inspection (at City Hall in the event of a review of City records and at Owner's
place of business in La Quinta in the event of a review of Owner's records) such of its books and
records as the requesting Party may reasonably determine must be reviewed in order to
determine whether the correct amount of Covenant Payments have been made or are being made
hereunder. Notwithstanding the foregoing, City shall not be required to produce any books or
records that it is prohibited from producing by law and Owner shall not be required to produce
information that violates the statutorily prescribed privacy rights of individual customers.
4.4 No Acceleration. It is acknowledged by the Parties that any payments by City
provided for in this Covenant Agreement are in consideration for the performance by Owner
during the time period(s) for which payments are due. Therefore, City's failure to timely make any
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payments or City's failure to perform any of its other obligations hereunder shall not cause the
acceleration of any anticipated future Covenant Payments by City to Owner.
5. DEFAULTS AND REMEDIES.
5.1 Defaults. Subject to Section 8.7 of this Covenant Agreement, the occurrence of
any of the following shall constitute a "Default":
(a) the failure by either Party to perform any obligation of such Party for the
payment of money under this Covenant Agreement if such failure is not cured within ten
(10) calendar days following receipt of written notice of default; or
(b) the failure by either Party to perform any of its obligations (other than
obligations described in clause (a) of this Section 5.1) set forth in this Covenant Agreement, if
such failure is not cured within thirty (30) days following receipt of written notice of default, or, if
such failure is of a nature that cannot reasonably be cured within thirty (30) days and the non-
performing Party provides written notification to the other Party thereof, the failure by the non-
performing Party to commence such cure within such thirty (30) days and thereafter diligently
prosecute such cure to completion; or
(c) any representation or warranty by a Party set forth in this Covenant
Agreement proves to have been incorrect in any material respect when made; or
(d) Owner closes the Hotel, except for a Permitted Closure; or
(e) Owner defaults under the Hotel Management Agreement or the PSDA and
has not cured the default within the applicable cure period (if any); or
(f) the Hotel is materially damaged or destroyed by fire or other casualty
during the Operating Period and Owner fails to commence restoration of the improvements within
a reasonable time or thereafter fails to diligently proceed to complete such restoration in
accordance with this Covenant Agreement; or
(g) Owner concludes a "Transfer" (as defined below) without the prior written
approval of City, except for a "Permitted Transfer" (as defined below); or
(h) Owner, or any constituent member of Owner (1) is the subject of an order
for relief for a bankruptcy court, or is unable or admits its inability to pay its debts as they mature,
or makes an assignment for the benefit of creditors; (2) applies for or consents to the appointment
of any receiver, trustee, custodian; conservator, liquidator, rehabilitator or similar officer for it or
any part of its property; or (3) institutes or consents to any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation,
rehabilitation or similar proceeding relating to it or any part of its property, or any similar
proceeding is instituted without the consent of Owner and continues undismissed or unstayed for
ninety (90) days; or
(i) any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed without the application or consent of Owner, and the appointment
continues undischarged or unstayed for ninety (90) days; or any judgment, writ, warrant of
attachment or execution, or similar process is issued or levied against the Site and is not released,
vacated, or fully bonded within ninety (90) days after its issue or levy; or
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0) Owner is enjoined or otherwise prohibited by any governmental agency
from occupying the Site at any time during the Operating Period and such injunction or prohibition
continues unstayed for ninety (90) days or more for any reason.
5.2 City's Remedies Upon Default by Owner. Upon the occurrence of any Default by
Owner, and after Owner's receipt of a Default Notice, City may, at its option:
(a) Deduct the amount of Transient Occupancy Tax generated during any
Default Period from the "TOT paid to City" and the "Amount available for rebate" for purposes of
determining the amount of any Covenant Payment. Notwithstanding anything in this Covenant
Agreement to the contrary, any Transient Occupancy Tax generated during a Default Period shall
never be considered in determining the amount of a Covenant Payment, regardless of whether
Owner subsequently cures the Default.
(b) if the Default continues uninterrupted for a period of six (6) months
following Owner's receipt of written notice thereof, City may terminate this Covenant Agreement,
in which case City's obligation to make payments to Owner for any period of time after the
occurrence of the Default shall be finally terminated and discharged.
5.3 Owner's Remedies Upon Default by City. Upon the occurrence of any Default by
City, Owner may terminate this Covenant Agreement by written notice to City and/or seek
whatever legal or equitable remedies may be available to Owner, subject to the provisions of this
Section 5.3, Section 4.4 (No Acceleration) and Section 8.4 (Legal Actions). Notwithstanding the
foregoing, in no event shall Owner be entitled to recover damages of any kind from City, except
for damages up to, but not exceeding, the amount that Owner would have received under this
Covenant Agreement but for City's default of its covenants under this Covenant Agreement, but
excluding damages for economic loss, lost profits, or any other economic or consequential
damages of any kind.
5.4 Cumulative Remedies: No Waiver. Except as expressly provided herein, the
nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights
and remedies provided by law from time to time and the exercise by the nondefaulting Party of
any right or remedy shall not prejudice such Party in the exercise of any other right or remedy.
None of the provisions of this Covenant Agreement shall be considered waived by either Party
except when such waiver is delivered in writing. No waiver of any Default shall be implied from
any omission by City to take action on account of such Default if such Default persists or is
repeated. No waiver of any Default shall affect any Default other than the Default expressly
waived, and any such waiver shall be operative only for the time and to the extent stated. No
waiver of any provision of this Covenant Agreement shall be construed as a waiver of any
subsequent breach of the same provision. A Party's consent to or approval of any act by the
other Party requiring further consent or approval shall not be deemed to waive or render
unnecessary the consenting Party's consent to or approval of any subsequent act. A Party's
acceptance of the late performance of any obligation shall not constitute a waiver by such Party
of the right to require prompt performance of all further obligations. A Party's acceptance of any
performance following the sending or filing of any notice of Default shall not constitute a waiver of
that Party's right to proceed with the exercise of its remedies for any unfulfilled obligations. A
Party's acceptance of any partial performance shall not constitute a waiver by that Party of any
rights relating to the unfulfilled portion of the applicable obligation.
5.5 Limitations on City's Liability. Owner acknowledges and agrees that: (i) this
Covenant Agreement shall not be deemed or construed as creating a partnership, joint venture,
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or similar association between Owner and City, the relationship between Owner and City pursuant
to this Covenant Agreement is and shall remain solely that of contracting Parties, that the
operation of the Hotel is a private undertaking, and City neither undertakes nor assumes any
responsibility pursuant to this Covenant Agreement with respect to the operation of the Hotel on
the Site other than as expressly provided for herein, and Owner shall rely entirely on its own
judgment with respect to such matters; provided, that nothing herein is intended to release City
from whatever obligations it may have pursuant to applicable laws independent of this Covenant
Agreement; (ii) by virtue of this Covenant Agreement, City shall not be directly or indirectly liable
or responsible for any loss or injury of any kind to any person or property resulting from any
occupancy or use of the Site, whether arising from: (a) any defect in any building, grading,
landscaping, or other onsite or offsite improvement; any act or omission of Owner or any of
Owner's agents, employees, independent contractors, licensees, lessees, or invitees; or (c) any
accident on the Site or any fire or other casualty or hazard thereon, and (iii) by accepting or
approving anything required to be performed or given to City under this Covenant Agreement,
including any certificate, NOI Notice, or insurance policy, City shall not be deemed to have
warranted or represented the sufficiency or legal effect of the same, and no such acceptance or
approval shall constitute a warranty or representation by City to anyone.
6. ASSIGNMENT AND TRANSFER.
6.1 Transfers of Interest in Site or Covenant Agreement. The qualifications and
identity of Owner as the developer and operator of high quality commercial resort developments
are of particular concern to City. Furthermore, the Parties acknowledge that City has negotiated
the terms of this Covenant Agreement in contemplation of the development and operation of the
Hotel on the Site and the property tax and Transient Occupancy Tax revenues to be generated
by the operation of the Hotel on the Site.
6.1.1 Transfers of Interest in Site or Covenant Agreement Prior to City's Issuance
of a Release of Construction Covenants. Except as provided in this Section 6,1.1, until the date
City issues a Release of Construction Covenants for the Hotel (the "Fee Transfer Release Date"),
(1) no voluntary successor in interest of Owner shall acquire any rights or powers under this
Covenant Agreement with respect to the Hotel; (2) Owner shall not make any total or partial sale,
transfer, conveyance, assignment, or lease of the whole or any part of the Hotel or Site: and (3) no
changes shall occur with respect to the ownership and/or control of Owner, including, without
limitation, stock transfers, sales of issuances, or transfers, sales or issuances of membership or
ownership interests, or statutory conversions (any of the above, a "Transfer"). Prior to the Fee
Transfer Release Date, City may approve or disapprove a proposed Transfer in its sole and
absolute discretion; provided, however, City agrees to reasonably consider a Transfer to a
transferee that has substantial experience in developing and operating developments comparable
in all material respects to the Hotel, and the financial capability to develop and operate the Hotel,
as determined pursuant to the factors set forth in Section 311.1 of the PSDA
Notwithstanding the foregoing, City approval of a Transfer prior to the Fee Transfer
Release Date shall not be required in connection with any of the following:
(a) The conveyance or dedication of any portion of the Site to an
appropriate governmental agency, or the granting of easements or permits to facilitate
construction of the Hotel.
(b) Any assignment for financing purposes (subject to such financing
being permitted pursuant to Section 311 of the PSDA), including the grant of a deed of
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trust to secure the funds necessary for land acquisition, construction, and permanent
financing of the Hotel.
(c) The Transfer to a lender who has provided financing to Owner
(subject to such financing being permitted pursuant to Section 311 of the PSDA) as a
result of the exercise by such lender of its rights or remedies pursuant to the documents
evidencing or securing the financing for land acquisition, construction, and permanent
financing of the Hotel.
(d) The Transfer by Owner to an entity provided the entity owning the
Hotel after the Transfer is an entity (i) whose managing member, manager, or managing
general partner is RGC or is directly or indirectly controlled by RGC, and (ii) which
engages as the project/development manager for the Hotel an entity which is at least fifty-
one percent (51 %) owned and controlled by RGC.
6.1.2 Transfers of Operational Obligations. RGC La Quinta LLC and Montage
Hotels & Resorts, LLC, a Nevada limited liability company ("Montage") have entered into a Resort
Management Agreement ("RMA") dated March 1, 2017 with respect to the Hotel. Montage has
been approved by the City as the Hotel Operator for Hotel and the RMA has been approved as
the Hotel Management Agreement. Notwithstanding anything in Section 6.1.1 to the contrary,
until the earlier of (a) the date this Covenant Agreement expires or (b) this Covenant Agreement
is earlier terminated by the Parties pursuant to the terms hereof, if Montage is to be replaced
(such as in the case of a termination or cancellation of the RMA) or, to the extent Owner has a
right under the RMA to approve or consent to the same, an assignment by the Hotel Operator of
the Hotel Management Agreement or a change in ownership of the Hotel Operator is proposed
(a "Management Transfer"), Owner will not consent to such change unless City has provided to
Owner the City's consent to such change, such City consent not to be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, such City approval or consent shall not
be required with respect to the Hotel if the transfer or change in ownership is to any of the entities
approved by City to act as Lifestyle Hotel Operator, as set forth in Section 205_,1(M) of the PSDA
(any of the foregoing, an "Approved Lifestyle Hotel Operator"). In connection with any required
City approval with respect to a change in operator of the Hotel to any entity that is not designated
as an Approved Lifestyle Hotel Operator, Owner or Owner's successor -in -interest shall
demonstrate that the proposed operator has the experience and reputation in operating lifestyle
hotels that is equivalent to the experience and reputation of an Approved Lifestyle Hotel Operator
(an "Experience Equivalent Lifestyle Hotel Operator"). .
6.1.3 Assignment and Assumption of Obligation . Any Transfer (including
Transfers not requiring prior City approval) by Owner of any interest in the Site or of any interest
in this Covenant Agreement and all Management Transfers shall require the, execution of an
assignment and assumption of obligations substantially in the form attached to the PSDA as
Attachment No. 9 (an "Assignment and Assumption Agreement"). Transfers of Owner's rights
and/or obligations under this Covenant Agreement made without an executed Assignment and
Assumption Agreement are null and void. The requirement for the provision to City of an executed
Assignment and Assumption Agreement shall apply regardless of whether City approval is
required for the Transfer. Owner agrees that (a) at least thirty (30) days prior to any Transfer it
shall give written notice to City of such proposed Transfer; and (b) within five (5) days after any
Transfer it shall provide City with a copy of the fully executed Assignment and Assumption
Agreement evidencing that the assignee has assumed in writing all applicable obligations under
this Agreement. A Party proposing to assign its obligations under this Agreement (i) shall remain
liable for the obligations until and unless City has received a fully executed Assignment and
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Assumption Agreement, and (ii) shall remain liable for any default hereunder that occurred prior
to the effective date of the assignment. Owner or Owner's successor in interest shall reimburse
City for any costs (other than staff time) City incurs in reviewing any Assignment and Assumption
Agreement required hereunder.
6.2 Binding Effect. This Covenant Agreement shall run with the land and shall be
binding on, and inure to the benefit of the Parties hereto and their respective successors and
assigns, as limited by this Section 6. In the event of any assignment that is consented to in writing
by City, the references in this Covenant Agreement to "Owner" shall be deemed to refer to the
assignee.
7. MORTGAGEE PROTECTIONS
7.1 No Termination. No action by Owner or City to cancel or surrender this Covenant
Agreement or to materially modify the terms of this Covenant Agreement shall be binding upon a
Mortgagee without its prior written consent, which such Mortgagee shall not unreasonably
withhold, condition or delay, unless (solely with respect to cancelling or surrendering this
Covenant Agreement) such Mortgagee shall have failed to cure a default within the time frames
set forth in this Article 7:
7.2 Notices. If City shall give any notice of default to Owner hereunder, City shall
simultaneously give a copy of such notice of default to any Mortgagee that has filed or recorded
a request for such notice, at the address theretofore designated by it. No notice of default given
by City to Owner shall be binding upon or affect said Mortgagee unless a copy of said notice of
default shall be given to Mortgagee pursuant to this Article 7. In the case of an assignment of
such Mortgage or change in address of such Mortgagee, said assignee or Mortgagee, by written
notice to City, may change the address to which such copies of notices of default are to .be sent.
City shall not be bound to recognize any assignment of such Mortgage unless and until City shall
be given written notice thereof, a copy of the executed assignment, and the name and address of
the assignee. Thereafter, such assignee shall be deemed to be the Mortgagee hereunder with
respect to the Mortgage being assigned. If such Mortgage is held by more than one person,
corporation or other entity, no provision of this Covenant Agreement requiring City to give notices
of default or copies thereof to said Mortgagee shall be binding upon City unless and until all of
said holders shall designate in writing one of their number to receive all such notices of default
and copies thereof and shall have given to City an original executed counterpart of such
designation.
7.3 Performance of Covenants. Mortgagee shall have the right (but not the obligation)
to perform any term, covenant or condition and to remedy any default by Owner hereunder within
the time periods specified herein, and City shall accept such performance with the same force
and effect as if furnished by Owner; provided, however, that said Mortgagee shall not thereby or
hereby be subrogated to the rights of City. Notwithstanding the foregoing, nothing herein shall be
deemed to permit or authorize such Mortgagee (or its designee) to undertake or continue the
construction or completion of the Improvements without first having expressly assumed Owner's
obligations hereunder, under the PSDA, and under any other agreements between City and
Owner that relate to the Hotel, to City or its designee by written agreement satisfactory to City.
7.4 Default by Owner. In the event of a default by Owner, City agrees not to terminate
this Covenant Agreement (1) unless and until Owner's and Mortgagee's notice and cure periods
have expired, and (2) as long as:
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7.4.1 In the case of a default which cannot practicably be cured by a Mortgagee
without taking possession of the Improvements, said Mortgagee shall proceed diligently to obtain
possession of the Improvements as Mortgagee (including possession by receiver) and, upon
obtaining such possession, shall proceed diligently to cure such default; or
7.4.2 In the case of a default which is not susceptible to being cured by a
Mortgagee, said Mortgagee shall institute foreclosure proceedings and diligently prosecute the
same to completion (unless in the meantime it shall acquire Owner's right, title and interest
hereunder, either in its own name or through a nominee, by assignment. in lieu of foreclosure)
and upon such completion of acquisition or foreclosure such default shall be deemed to have
been cured.
7.5 No Obligation to Cure. Mortgagee shall not have any obligation or duty pursuant
to the terms set forth in this Covenant Agreement to perform the obligations of Owner or other
affirmative covenants of Owner hereunder, or to guarantee such performance and nothing herein
contained shall require any Mortgagee to cure any default of Owner referred to above. However,
in the event that Mortgagee elects not to cure any default susceptible of being cured, City's
obligation to further fund any Covenant Payments shall be suspended until such time as the
default is cured (or such earlier time that Mortgagee cures the default).
7.6 Separate Agreement. City may, upon request, execute, acknowledge and deliver
to each Mortgagee, an agreement prepared at the sole cost and expense of Owner, in form
satisfactory to each Mortgagee, between City, Owner and the Mortgagees, agreeing to all of the
provisions hereof.
7.7 Form of Notice. Any Mortgagee shall be entitled to receive the notices required to
be delivered to it hereunder provided that such Mortgagee shall have delivered to City a notice
substantially in the following form:
"The undersigned, whose address is does hereby certify that
it is the Mortgagee (as such term is defined in that certain Agreement to Share
Transient Occupancy Tax Revenue ("TOT Agreement") dated as of
, 20 between [XXXX] and the City of La Quinta, of the parcel of
land described on Exhibit A attached hereto. In the event that any notice shall be
given of a default of Owner under the TOT Agreement, a copy thereof shall be
delivered to the undersigned who shall have the rights of a Mortgagee to cure the
same, as specified in the TOT Agreement. Failure to deliver a copy of such notice
shall in no way affect the validity of the notice to Owner, but no such notice shall
be effective as it relates to the rights of the undersigned under the TOT Agreement
with respect to the Mortgage, including the commencement of any cure periods
applicable to the undersigned, until actually received by the undersigned."
All notices to be provided by Mortgagee to City shall be provided in accordance
with Section 8.8 below.
7.8 Further Assurances. City and Owner agree to cooperate in including in this
Covenant Agreement, by suitable amendment, any provision which may be reasonably requested
by any Mortgagee or any proposed Mortgagee for the purpose of (i) more fully or particularly
implementing the mortgagee protection provisions contained herein, (ii) adding mortgagee
protections consistent with those contained herein and which are otherwise commercially
reasonable, (iii) allowing such Mortgagee reasonable means to protect or preserve the security
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interest of such mortgagee in the collateral, including its lien on the Site and the collateral
assignment of this Covenant Agreement, and/or (iv) clarifying terms or restructuring elements of
the transactions contemplated hereby; provided, however, in no event shall City be obligated to
materially and adversely modify any of Owner's obligations or City's rights under this Covenant
Agreement in any manner not already contemplated in this Article 7.
B. GENERAL PROVISIONS.
8.1 Integration and Amendment. This Covenant Agreement, the PSDA, and the
Agreement constitute the entire agreement by and between the Parties pertaining to the subject
matter hereof, and supersede all prior agreements and understandings of the Parties with respect
thereto. This Covenant Agreement may not be modified, amended, supplemented, or otherwise
changed except by a writing executed by both Parties.
8.2 Captions. Section headings used in this Covenant Agreement are for convenience
of reference only and shall not affect the construction of any provisions of this Covenant
Agreement.
8.3 Counterparts. This Covenant Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be deemed an original and all
of which, when taken together, shall constitute one and the same instrument.
8.4 Legal Actions. This Covenant Agreement shall be governed by and construed in
accordance with the internal laws of the State of California without regard to conflict of law
principles.
8.5 Attorney's Fees. If either Party to this Covenant Agreement is required to initiate
or defend, or is made a party to, any action or proceeding in any way connected with this Covenant
Agreement, the Party prevailing in the final judgment in such action or proceeding, in addition to
any other relief which may be granted, shall be entitled to reasonable attorney's fees. Attorney's
fees shall include reasonable costs for investigating such action, conducting discovery, retaining
expert witnesses, and all other necessary costs the court allows which are incurred in such
litigation.
8.6 Effect of Violation of the Terms and Provisions of this Covenant Agreement. The
covenants established in this Covenant Agreement shall, without regard to technical classification
and designation, be binding for the benefit and in favor of City, its successors and assigns, as to
those covenants which are for its benefit. The covenants contained in this Covenant Agreement
shall remain in effect for the periods of time specified therein. City is deemed the beneficiary of
the terms and provisions of this Covenant Agreement and of the covenants running with the land,
for and in its. awn rights and for the purposes of protecting the interests of the community and
other parties, public or private, in whose favor and for whose. benefit this Covenant Agreement
and the covenants running with the land have been provided. This Covenant Agreement and the
covenants shall run in favor of City, without regard to whether City has been, remains, or is an
owner of any land or interest in the Site. City shall have the right, if the Covenant Agreement or
covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits
at law or in equity or other proper proceedings to enforce the curing of such breaches to which it
or any other beneficiaries of this Covenant Agreement and covenants may be entitled.
8.7 Force Maieure. Notwithstanding any other provision set forth in this Covenant
Agreement to the contrary, in no event shall a Party be deemed to be in Default of its obligations
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set forth herein where delays or failures to perform are caused by circumstances without the fault
and beyond the reasonable control of such Party, which circumstances shall include, without
limitation, fire/casualty losses; strikes; litigation; unusually severe weather; inability to secure
necessary labor, materials, or tools; delays of any contractor, subcontractor, or supplier;
unjustified acts or failure to act by City or other governmental agency; litigation by third parties
challenging the validity or enforceability of the Agreement or this Covenant Agreement; and acts
of God (collectively, "force majeure"). Adverse market conditions or Owner's inability to obtain
financing or approvals to operate the Hotel shall not constitute events of force majeure. In the
event of a force majeure, the Party so delayed shall notify the other Party of the circumstances
and cause of the delay within a reasonable time period after commencement of the delay, it shall
keep the other Party informed at reasonable intervals upon request regarding the status of its
efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform
as soon as practicable thereafter.
8.8 Notices. Notices to be given by City or Owner hereunder may be delivered
personally or may be delivered by certified or registered mail, postage prepaid, or by reputable
overnight delivery service providing a delivery confirmation receipt with time and date of delivery;
with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such
other address(es) that a Party may hereafter designate by written notice. If served by overnight
delivery service or certified mail, service will be considered completed and binding on the Party
served on the date set forth in the confirmation or certification receipt. If delivered personally,
service will be considered completed and binding on the Party served on the date of such personal
delivery.
If notice is to City: City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attention: Frank J. Spevacek, City Manager
with a copy to: Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, CA 92626
Attention: William H. Ihrke, City Attorney
If notice is to Owner: SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas, CA 92024
Attention: Robert S. Green, Jr.
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4818-1654-4885.3
8.9 City Approvals and Actions. City shall maintain authority of this Covenant
Agreement and the authority to implement this Covenant Agreement through the City Manager.
The City Manager shall have the authority to make approvals, issue interpretations, waive
provisions, negotiate and enter into amendments to this Covenant Agreement and/or negotiate
and enter into implementing agreements or documents on behalf of City so long as such actions
do not materially or substantially change the business terms of this Covenant Agreement, or
materially or substantially add to the costs incurred or to be incurred by City as specified herein.
Such approvals, interpretations, waivers, amendments, and/or implementing agreements or
documents may include extensions of time to perform. All other material and/or substantial
interpretations, waivers, or amendments shall require the consideration, action and written
consent of the City Council.
8.10 Further Acts. Each Party agrees to take such further actions and to execute such
other documents as may be reasonable and necessary in the performance of its obligations
hereunder; reserving to City, however, its lawful discretionary and police power authority. Without
limiting the generality of the foregoing, upon the expiration or termination of the Operating Period,
City will execute and deliver such instruments as may be prepared by Owner at Owner's expense
to release the cloud upon title to the Site created by this Covenant Agreement; provided, however,
that any such document shall be in a form reasonably acceptable to the City Attorney of City.
8.11 Third Party Beneficiaries. With the exception of the specific provisions set forth in
this Covenant Agreement for the benefit of Mortgagees, there are no intended third party
beneficiaries under this Covenant Agreement and no such other third parties shall have any rights
or obligations hereunder.
8.12 Estoppel Certificates. Either Party to this Covenant Agreement shall, promptly (but
under all circumstances within ten (10) days) following the request of the other Party, execute,
acknowledge and deliver to or for the benefit of such other Party, a certificate certifying: (i) that
this Covenant Agreement is unmodified and in full force and effect (or, if there have been
modifications, that this Covenant Agreement is in full force and effect, as modified, and stating
the -modifications), (ii) whether there are then existing any defaults on the part of the party
requesting the certificate known to the Party delivering the certificate in the performance or
observance of any agreement, covenant or condition hereof to be performed or observed and
whether any notice has • been given of any default which has not been cured (and, if so, specifying
the same), and (iii) such other matters as may be reasonably requested. In the event City is
requested to provide more than one such certificate in any twelve (12) month period, Owner shall
reimburse City for all reasonable fees and costs City incurs from attorneys and consultants in the
preparation of the same.
8.13 Inspection of Books and Records. Not more than once per calendar quarter, City
has the right at all reasonable times during normal business hours and following at least ten
(10) Business Days prior written notice to Owner to inspect, on a confidential basis, the books,
records and all other documentation of Owner pertaining to its obligations under this Covenant
Agreement Not more than once per year, Owner also has the right at all reasonable times during
normal business hours and upon ten (10) Business Days prior written notice to inspect the books,
records and all other documentation of City pertaining to its obligations under this Covenant
Agreement.
8.14 Severabily. If any term, provision, covenant or condition of this Covenant
Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall continue in full force and effect unless the rights
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4818-1654-4885.3
and obligations of the Parties have been materially altered or abridged by such invalidation,
voiding or unenforceability.
8.15 Standard of Approval. Any consents or approvals required or permitted under this
Covenant Agreement shall not be unreasonably delayed, conditioned or withheld, except where
it is specifically provided that a sole discretion standard applies.
8.16 Time of the Essence. Time is of the essence for each provision of this Covenant
Agreement of which time is an element.
[End - Signature page follows]
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4818-1654-4885.3
IN WITNESS WHEREOF, the Parties have executed this Covenant Agreement to be
effective as of the Covenant Agreement Effective Date.
"CITY"
CITY OF LA QUINTA, a California municipal
corporation and charter city
Date: , 20_ By:
Frank J. Spevacek, City Manager
ATTEST:
By:
Susan Maysels, City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
William H. Ihrke, City Attorney
[Signature page continues next page]
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4818-1654-4885.3
"Owner"
SILVERROCK DEVELOPMENT COMPANY, LLC,
a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
Date .20 By:
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
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4818-1654-4885.3
A notary public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On , before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On , before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
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4818-1654-4885.3
EXHIBIT NO. 1
LEGAL DESCRIPTION OF SITE
Those portions of Sections 5, 6 and 8 Township 6 South, Range 7 East, San Bernardino Meridian,
in the City of La Quinta, County of Riverside, State of California, described as follows:
Parcel 7 of Parcel Map 37207 per map filed in Book 242, Pages 72 through 87 inclusive, of Parcel
Maps, in the office of the County Recorder of Riverside County, State of California.
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4818-1654-4885.3
EXHIBIT "M"
OPTION AGREEMENT JPHASE 1 EXCLUDING PA 7 8 AND 9 AND
TERMINATION OF PHASE 1A OPTION AGREEMENT
[See following page]
EXHIBIT "M"
-1-
12711468.4
4819-2019-1097.4
184
FREE RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Manager
Space Above This Line for Recorder's Use
(Exempt from Recording Fee per Gov't Code § 6103 and 27383)
� � � _ 1.1 ►
- ;Akl
THIS OPTION AGREEMENT (PHASE 1 E&CLUDING PA 7. 8 AND 9) AND
TERMINATION OF PHASE 1A OPTION AGREEMENT ("Option Agreement") is made this _
day of November, 2018 (the "Option Agreement Effective Date"), by and between
SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company
("Developer"), and the CITY OF LA QUINTA, a California municipal corporation and charter city
("City"). City and Developer are hereinafter sometimes referred to individually as a "Party" and
collectively as the "Parties."
A. Developer has entered into a Purchase, Sale, and Development Agreement dated
November 19, 2014 ("Original PSDA"), as amended by Amendment No. 1 to Purchase, Sale,
and Development Agreement dated October 29, 2015 ("Amendment No. 1") and by Amendment
No. 2 to Purchase, Sale, and Development Agreement dated on or about April 18, 2017
("Amendment No. 2") and by Amendment No. 3 to Purchase, Sale, and Development Agreement
dated on or about November , 2018 ("Amendment No. 3") (collectively, and as may be further
amended, the "PSDA"), pursuant to which City agreed to convey to Developer approximately
301.71 acres of real property located at the southwest intersection of Avenue 52 and Jefferson
Street in the City of La Quinta, County of Riverside, State of California, described in the Original
PSDA as "Phase 1" or "Phase 1 Property" and "Phase 2" or the "Phase 2 Property", and as
modified and described in Amendment No. 2 as "Phase 1A" and "Phase 1A Property" and
"Phase 1 B" and "Phase 1 B Property" and Phase IC" and "Phase IC Property" and
"Phase 1 D" and "Phase 1 D Property." The term "PSDA Property" for purposes of this Option
Agreement consists collectively of the "Phase 1A Property" and "Phase I Property" excluding,
however, that portion of the Phase 1B Property consisting of Parcels 10, 11, and 12 of Parcel
Map 37207 per map filed in Book 242, pages 72 through 87 inclusive, of Parcel Maps, in the
official records of the Recorder's Office of the County Recorder ("Recorder's Office") of Riverside
County, State of California, and collectively referred to herein as "PA 7, 8 and 9") and excluding
the "Phase 1 C Property" and "Phase 1 D Property," each as defined in Amendment No. 2. The
PSDA Property is legally described in Exhibit "A", which is attached hereto and incorporated
herein by this reference. Unless otherwise expressly defined in this Option Agreement,
capitalized terms used in this Option Agreement shall have the meanings ascribed thereto in the
PSDA.
B. Pursuant to the PSDA, Developer has agreed to construct on the PSDA Property
a commercial development that consists of a luxury resort hotel and spa and associated branded
4828-2978-5209 3
luxury residential units, a lifestyle hotel and associated lifestyle branded residential units, a
permanent clubhouse for the SilverRock Resort's Arnold Palmer Classic Course, and associated
amenities, all as more particularly described in the PSDA (collectively, the "Project").
C. The Project shall be constructed on the PSDA Property in accordance with all of
the requirements set forth in the PSDA.
D. Pursuant to Amendment No. 2, in connection with City's conveyance of the Phase
1A Property to Developer, City and Developer entered into that certain Phase 1A Option
Agreement dated May 3, 2017 and recorded November 6, 2017 as Document #2017-0463951 in
the Official Records of the Recorder's Office ("Phase 1A Option Agreement").
E. Pursuant to Section 4(e) of the Phase 1A Option Agreement, City agreed to
execute a termination of the Phase 1A Option Agreement at such time as (i) Developer has
satisfied all of City's conditions precedent to the Phase 1 B Closing, (ii) Developer has acquired
fee title to the Phase 1 B Property, and (iii) City and Developer have executed and recorded this
Option Agreement against the PSDA Property (i.e., both the Phase 1A Property and Phase 18
Property) substantially in the Form of Option Agreement attached to the Original PSDA.
Notwithstanding the foregoing to the contrary, City and Developer agree that the execution and
recording of this Option Agreement shall serve the following purposes; (A) to terminate the Phase
1A Option Agreement, and (B) govern as the "Option Agreement" required pursuant to the Original
PSDA and covering all Parcels and Planning Areas constituting the Phase 1A Property and Phase
1 B Property, excepting PA 7, 8, and 9 (and corresponding Parcels thereto) from the Phase 1 B
Property. Planning Areas 7, 8, and 9 (and corresponding Parcels thereto) will be governed by,
and subject to, a separate option agreement recorded on or about even date as this Option
Agreement.
F. As a condition to City's conveyance of the Phase 1 B Property to Developer,
Developer was required to grant to City (i) an option to repurchase the PSDA Property, or certain
portions thereof, from Developer if Developer (a) fails to commence, continuously proceed with,
or complete construction of the Master Site Infrastructure Improvements, subject to the Master
Site Infrastructure Improvements Phasing Plan (defined in Amendment No. 3) (the "MSI Phasing
Plan"), pursuant to the PSDA within certain specified time frames, (b) fails to commence,
continuously proceed with, or complete construction of a Project Component pursuant to the
PSDA within certain specified time frames, (c) transfers the PSDA Property, or any portion
thereof, in violation of the terms of the PSDA; and (ii) a right of first offer to purchase the PSDA
Property, or any portion thereof, if (1) City's option under (i)(a), (i)(b), or (i)(c) above has been
triggered, (11) City did not timely exercise the applicable option, (III) the default which gave rise to
City's option has not been cured, and (IV) Developer has determined to sell or otherwise transfer
the PSDA Property, all as further described herein. In further explanation of Options I, 11, 111, IV
and V, and corresponding Rights of First Offer herein contained, once a phase of the Master Site
Infrastructure Improvements has been completed in accordance with the MSI Phasing Plan and
accepted by the City (and, if applicable, any other governmental agency) in accordance with the
Master Site Infrastructure Improvements Land Use Approvals issued to Developer pursuant to
Section 209 of the Original PSDA, then the Parcels upon which such Master Site Infrastructure
Improvements have been completed will no longer be subject to Options I and II (and
corresponding Rights of First Offer) of this Option Agreement except with respect to the
commencement, continuation and completion of Project Components on said Parcels; and then,
and once the Project Components have been completed in accordance with the Schedule of
Performance attached to Amendment No. 3 and accepted by the City by the recording of a
Release of Construction Covenants in accordance with Section 310 of the Original PSDA as
4258-2978-5209/3 -2-
amended by Amendment No. 3 and the form attached thereto, the Parcels upon which such
Project Components are located will no longer be subject to Options III, IV, and V (and
corresponding Rights of First Offer) in this Option Agreement.
G. Unless otherwise expressly defined in this Option Agreement, capitalized terms
used in this Option Agreement, including in the foregoing Recitals, shall have the meanings
ascribed thereto in the PSDA.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and incorporating the above Recitals and all of the terms and
conditions contained in the PSDA, Developer hereby grants to City the following repurchase
options:
Option_ I -_Failure to Commence Construction of One or More Phases of the Master
Site Infrastructure Improvements
Subject to Section 7(f) hereof, Developer hereby grants to City an exclusive option
("Option I") to repurchase any or all of the Parcels of the PSDA Property that remain subject to
this Option Agreement as of the date Option I is exercised (the "Option I Property"), if Developer
fails to commence construction of any phase of the Master Site Infrastructure Improvements in
accordance with the MSI Phasing Plan. For the purposes of this Section 1, the term "commence
construction" shall mean the start date in accordance with the MSI Phasing Plan; provided,
however, if any portion of Master Site Infrastructure Improvements is to be performed by or on
behalf of the City, the start date in the MSI Phasing Plan shall be contingent upon the City timely
commencing, continuing and completing such portion of the Master Site Infrastructure
Improvements for which the City is responsible, and any delay in commencement, continuation
or completion not caused by Developer and caused by the City shall serve to reasonably extend
the applicable start date under the MSI Phasing Plan.
In the event of Developer's failure to commence construction of the Master Site
Infrastructure Improvements within the time period described above, and such failure is not cured
within the cure period provided for under Sections 7(b) and 7(c) below, then City shall be entitled
to exercise, but is not obligated to exercise, the foregoing option for a period of sixty (60) days
following the expiration of such cure period (the "Option I Period").
(a) Exercise of Option I
City shall exercise Option I by giving written notice to Developer ("City's Notice of Option
Exercise"), in accordance with Section 8 of this Option Agreement, prior to the expiration of the
Option I Period. Failure of City to exercise Option I shall constitute a waiver of City's right to
exercise Option I only with respect to Developer's failure to commence construction of a phase of
Master Site Infrastructure Improvements by the identified start date in the MSI Phasing Plan, but
no other phase, and shall not constitute a waiver by City of Developer's breach of its obligation to
commence construction of any other phase of the Master Site Infrastructure Improvements for
which the start date has not yet occurred as of the date of expiration of the Option 1 Period for
the phase of Master Site Infrastructure Improvements deemed waived, nor shall such failure
constitute a waiver by City of any remedies City may have under the terms of the PSDA or under
any other agreement for Developer's failure to timely commence construction of the Master Site
Infrastructure Improvements pursuant to the start dates identified in the MSI Phasing Plan.
4258-2978-5209/3 -3-
(b) Repurchase Price - Option I
City's repurchase price for the PSDA Property ("Option I Repurchase Price"), shall be
the sum of (i) one hundred percent (100%) of Developer's Golf Course Realignment Construction
Costs, (ii) one hundred percent (100%) of Developer's Phased MSI Construction Costs incurred
on or after this Option Agreement Effective Date, and (iii) the cost of any Plans City elects to
purchase pursuant to Section 7(I) below with respect to (a) the Master Site Infrastructure
Improvements, and/or (b) the Project Components comprising the Project.
For purposes of this Section 1, the term "Developer's Golf Course Realignment
Construction Costs" shall mean the construction costs actually incurred by Developer for
construction of the Golf Course Realignment and related on -site and off -site work, but excluding
any unpaid amount payable or claimed to be payable to any contractor or subcontractor incurred
prior to the recording of this Option Agreement. The term "Developer's Phased MSI
Construction Costs" shall mean the construction costs actually incurred by Developer for
construction of the Master Site Infrastructure Improvements on or after this Option Agreement
Effective Date to the date of the Developer's receipt of City's Notice of Option I Exercise.
Developer's Golf Course Realignment Construction Costs and Developer's Phased MSI
Construction Costs shall be as determined by an independent audit (the "Golf Course
Realignment Construction Cost and Phased MSI Construction Cost Audit"), performed by
an independent auditor who shall be selected by City and be a partner at a nationally recognized
firm of accountants with experience in auditing large-scale, mixed use construction projects (the
"Auditor"), which costs shall consist only of: (1) the amount(s) actually paid by Developer and
received by the contractor or contractors performing the construction, (II) reasonable inspection,
supervision, and testing costs paid by Developer to independent third party engineers, architects,
or consultants in conjunction with said construction, (III) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer), and (IV) if the Golf Course Realignment work and/or certain phases of
the Master Site Infrastructure Improvements work is completed and accepted by City, then
amounts that include design plans (such as architectural renderings and drawings) used by
Developer to complete the construction of the Golf Course Realignment and/or such phases of
the Master Site Infrastructure Improvements work, as applicable. In explanation of clause (IV) in
the preceding sentence, neither Developer's Golf Course Realignment Construction Costs nor
Developer's Phased MSI Construction Costs shall include any design plans Developer may have
contracted for or obtained if the Golf Course Realignment or such phases of the Master Site
Infrastructure Improvements, as applicable, which are not completed as evidenced by the City
accepting all work for the Golf Course Realignment and/or applicable phases of the Master Site
Infrastructure Improvements. Developer shall promptly provide City and the Auditor with all
records and documentation necessary for the Auditor to perform the Golf Course Realignment
Construction Cost and Phased MSI Construction Cost Audit.
2. Option II - Failure to Continuously Proceed With Construction of the PSDA
Property Master Site Infrastructure Improvements or to Complete Construction of
the Master Site Infrastructure Im rovements
Developer hereby grants to City an exclusive option ("Option II") to repurchase any or all
of the Parcels of the PSDA Property that remain subject to this Option Agreement as of the date
that Option II is exercised (the "Option II Property") if, after commencement of construction of a
phase of the Master Site Infrastructure Improvements, Developer fails to continuously proceed
4258-2978-5209/3 -4-
with construction of such subject phase of the Master Site Infrastructure Improvements in
accordance with the MSI Phasing Plan, or to complete such subject phase of the Master Site
Infrastructure Improvements, in accordance with the MSI Phasing Plan, as evidenced by
acceptance of such subject phase of the Master Site Infrastructure Improvements by the La
Quinta City Council, within the applicable time period(s) set forth in the MSI Phasing Plan to finish
such phase of Master Site Infrastructure Improvements (each, as applicable, a "Master Site
Infrastructure Improvements Phase Completion Deadline"). For purposes of this Section 2,
the term "continuously proceed with construction" shall mean construction that is interrupted, if at
all, for periods of no longer than thirty (30) days; provided, however, if any portion of Master Site
Infrastructure Improvements is to be performed by or on behalf of the City, such continuous
construction by Developer and any such Master Site Infrastructure Improvements Phase
Completion Date shall be contingent upon the City timely commencing, continuing and completing
such portion of the Master Site Infrastructure Improvements for which the City is responsible, and
any delay in continuation or completion not caused by Developer and caused by the City shall
serve to reasonably extend the 30-day interruption period and/or the Master Site Infrastructure
Improvements Phase Completion Date as applicable under the MSI Phasing Plan.
In the event of Developer's failure to continuously proceed with construction of the subject
phase of the Master Site Infrastructure Improvements, or to complete construction of the Master
Site Infrastructure Improvements by the applicable Master Site Infrastructure Improvements
Phase Completion Deadline, and such failure is not cured within the cure period provided for
under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not obligated to
exercise, the foregoing option for a period of sixty (60) days following the completion of the
"Master Site Infrastructure Improvements Cost Audit" (as that term is defined in Section 2(b)
below) and after expiration of such cure period ("Option II Period").
Notwithstanding anything to the contrary in this Section 2, Option II shall not apply to, and
the Option II Property shall not include, those portions of the PSDA Property for which construction
of the Project Component(s) designated pursuant to the PSDA to be constructed thereon has
commenced. Such portions are addressed in Section 4 below.
(a) Exercise of Option Ij
City shall exercise Option II by giving written notice to Developer ("City's Notice of
Option II Exercise"), in accordance with Section 8 of this Option Agreement, prior to the
expiration of the Option II Period. Failure of City to exercise Option II shall constitute a waiver by
City of City's right to exercise Option II only with respect to Developer's specific incidence of failure
to continuously proceed with construction of the applicable subject phase of the Master Site
Infrastructure Improvements that gave rise to Option II or of Developer's failure to complete
construction of the applicable subject phase of the Master Site Infrastructure Improvements by
the Master Site Infrastructure Improvements Phase Completion Deadline (as applicable), but shall
not constitute a waiver by City of Developer's breach of its obligation to continuously proceed with
construction of the Master Site Infrastructure Improvements or to complete construction of the
Master Site Infrastructure Improvements by the Master Site Infrastructure Improvements Phase
Completion Deadline (as applicable) or of any remedies City may have under the terms of the
PSDA or under any other agreement for Developer's failure to continuously proceed with
construction of the Master Site Infrastructure Improvements or to complete construction of the
Master Site Infrastructure Improvements by the Master Site Infrastructure Improvements Phase
Completion Deadline (as applicable).
4258-2978-5209/3 -5-
(b) Repurchase Price - Option II
City's repurchase price for the Option II Property ("Option II Repurchase Price"), shall
be the sum of (i) one hundred percent (100%) of "Developer's Phased MSI Construction
Costs", and (ii) the cost of any Plans City elects to purchase pursuant to Section 7(I) below with
respect to (a) the Master Site Infrastructure Improvements designated pursuant to the PSDA to
be constructed on the Option II Property, and/or (b) the Project Component(s) designated
pursuant to the PSDA to be constructed on the Option II Property.
For purposes of this Section 2, the term "Developer's Phased MSI Construction Costs"
shall mean the construction costs actually incurred by Developer for construction of the Master
Site Infrastructure Improvements on the PSDA Property on or after the Option Agreement
Effective Date to the date of the Developer's receipt of City's Notice of Option II Exercise, as
determined by an independent audit (the "Option II Phased MSI Construction Cost Audit"),
performed by an independent auditor who shall be selected by City and be a partner at a nationally
recognized firm of accountants with experience in auditing large-scale, mixed use construction
projects (the "Auditor"), which costs shall consist only of: (1) the amount(s) paid by Developer to
the contractor or contractors performing the construction, (II) reasonable inspection, supervision,
and testing costs paid by Developer to independent third party engineers, architects, or
consultants in conjunction with said construction, (III) any amounts paid by Developer to material
suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so-called "soft costs" incurred in the
planning, environmental review, or design of the Master Site Infrastructure Improvements
constructed on the Option II Property, or any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer) and (IV) if the Golf Course Realignment work and/or certain phases of
the Master Site Infrastructure Improvements work is completed and accepted by City, then
amounts that include design plans (such as architectural renderings and drawings) used by
Developer to complete the construction of the Golf Course Realignment and/or such phases of
the Master Site Infrastructure Improvements work, as applicable. In explanation of clause (IV) in
the preceding sentence, neither Developer's Golf Course Realignment Construction Costs nor
Developer's Phased MSI Construction Costs shall include any design plans Developer may have
contracted for or obtained if the Golf Course Realignment or such phases of the Master Site
Infrastructure Improvements, as applicable, are not completed as evidenced by the City accepting
all work for the Golf Course Realignment and/or applicable phases of the Master Site
Infrastructure Improvements. Developer shall promptly provide City and the Auditor with all
records and documentation necessary for the Auditor to perform the Option II MSI Construction
Cost Audit. In the event that there are any outstanding mortgages or deeds of trust that have
been approved by City pursuant to Section 311.1 of the PSDA (any of the foregoing, a "Valid
Lien") and that are recorded against the Option II Property at the time that Option II is exercised,
Developer and City agree that the Option II Repurchase Price shall be paid to the lender on any
such Valid Lien (any such lender with a Valid Lien, a "Lender"), up to the then outstanding balance
due under same including, without limitation, the outstanding principal balance, all accrued and
unpaid interest, and any prepayment fees and costs (collectively, the "Outstanding Balance").
Any portion of the Option [I Repurchase Price not so needed to extinguish a Valid Lien shall be
paid to Developer.
4258-2978-5209/3 -6-
3. _Option III - Failure: to Commence Construction of One or More Protect
Components. — --
Developer hereby grants to City an exclusive option ("Option III") to repurchase any or all
of the Parcels of the PSDA Property that remain subject to this Option Agreement as of the date
that Option III is exercised (the "Option III Property") if Developer fails to commence construction
of any of the Project Components designated pursuant to the PSDA to be constructed on a portion
of the Option III Property on or prior to the start date for commencement of such Project
Component set forth in the Schedule of Performance attached to Amendment No. 3. For
purposes of this Section 3, the term "commence construction" shall mean Developer's
commencement of precise grading for all of the real property underlying such Project
Component(s).
In the event of Developer's failure to commence construction of any of the Project
Components designated pursuant to the PSDA to be constructed on a portion of the Option III
Property within the time period described above, and such failure is not cured within the cure
period provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but
is not obligated to exercise, the foregoing option for a period of sixty (60) days following the
expiration of such cure period (the "Option III Period").
Notwithstanding anything to the contrary in this Section 3, Option III shall not apply to, and
the Option III Property shall not include, those portions of the PSDA Property for which
construction of the Project Component(s) designated pursuant to the PSDA to be constructed
thereon has commenced. Such portions are addressed in Section 4 below.
(a) Exercise of Option III
City shall exercise Option III by giving written notice to Developer ("City's Notice of
Option III Exercise"), in accordance with Section 8 of this Option Agreement, prior to the
expiration of the Option III Period. Failure of City to exercise Option III shall constitute a waiver
by City of City's right to exercise Option III only with respect to Developer's specific incidence of
failure to commence construction of one or more Project Component(s) designated pursuant to
the PSDA to be constructed on a portion of the Option III Property within the time period described
above in this Section 3, but shall not constitute a waiver by City of Developer's breach of its
obligation to commence construction of said Project Component(s) or of any remedies City may
have under the terms of the PSDA or under any other agreement for Developer's failure to
commence construction of said Project Component(s) within the time period described above in
this Section 3.
(b) Repurchase Price - Option III
City's repurchase price for the Option III Property ("Option III Repurchase Price"), shall
be the sum of (i) one hundred percent (100%) of "Developer's Phased MSI Construction
Costs", and (ii) the cost of any Plans City elects to purchase pursuant to Section 7(l) below with
respect to all or any portion of (a) the Master Site Infrastructure Improvements designated
pursuant to the PSDA to be constructed on the Option Ili Property, and/or (b) the Project
Components designated pursuant to the PSDA to be constructed on the Option III Property.
For purposes of this Section 3, the term "Developer's Phased MSI Construction Costs"
shall mean the construction costs actually incurred by Developer for construction of the Master
Site Infrastructure Improvements on the Option III Property on or after this Option Agreement
4258-2978-5209/3 -7-
Effective Date to the date of Developer's receipt of City's Notice of Option III Exercise, as
determined by an independent audit (the "Option III MSI Construction Cost Audit"), performed
by the Auditor, which costs shall consist only of (1) the amount(s) paid by Developer to the
contractor or contractors performing the construction, (11) reasonable inspection, supervision, and
testing costs paid by Developer to independent third party engineers, architects, or consultants in
conjunction with said construction, and (III) any amounts paid by Developer to material suppliers
and equipment suppliers in connection with the construction (but, subject to the immediately
preceding paragraph, not including any so-called "soft costs" incurred in the planning,
environmental review, or design of the Master Site Infrastructure Improvements constructed on
the Option III Property, or any costs, fees, charges, or profits allocated to Developer's own internal
administrative, payroll, or overhead expenses or to any person or entity affiliated with Developer).
Developer shall promptly provide City and the Auditor with all records and documentation
necessary for the Auditor to perform the Option III MSI Construction Cost Audit. In the event that
there are any Valid Liens recorded against the Option III Property at the time that Option III is
exercised, Developer and City agree that the Option III Repurchase Price shall be paid to the
Lender on any such Valid Lien, up to the then Outstanding Balance due under same. Any portion
of the Option III Repurchase Price not so needed to extinguish a Valid Lien shall be paid to
Developer.
4. Option 1V - Failure to Continuously Proceed With Construction of one or more
Project Components or to Complete Construction of one or more Project
Components
Developer hereby grants to City an exclusive option ("Option IV") to repurchase any or all
of the Parcels of the PSDA Property that remain subject to this Option Agreement as of the date
that Option IV is exercised (the "Option IV Property") if, after commencement of construction of
any Project Component(s) designated pursuant to the PSDA to be constructed on a portion of the
Option IV Property, Developer fails to continuously proceed with construction of said Project
Component(s), or, subject to the last sentence of this paragraph, to complete construction of said
Project Component(s) within the time period for completion of such Project Component(s) set
forth in the Schedule of Performance attached to Amendment No. 3 as evidenced by City's
issuance of a certificate of occupancy for such Project Component(s) (the "Option IV Project
Component(s) Completion Deadline"). For purposes of this Section 4, the term "continuously
proceed with construction" shall mean construction that is interrupted, if at all, for periods of no
longer than thirty (30) days. Notwithstanding anything in this paragraph to the contrary: (i) with
respect to the Luxury Branded Residential Development, City shall not be entitled to exercise
Option IV, and the Option IV Property shall not include the real property to be developed with the
Luxury Branded Residential Development, unless Developer fails to complete construction of at
least seventy percent (70%) of the Resort Residential Dwelling Units to be constructed within the
Luxury Branded Residential Development within the time period for completion of the Luxury
Branded Residential Development set forth in the Schedule of Performance attached to
Amendment No. 3 and (ii) with respect to the Lifestyle Branded Residential Development, City
shall not be entitled to exercise Option IV, and the Option IV Property shall not include the real
property to be developed with the Lifestyle Branded Residential Development, unless Developer
fails to complete construction of at least seventy percent (70%) of the Resort Residential Dwelling
Units to be constructed within the Lifestyle Branded Residential Development within the time
period for completion of the Luxury Branded Residential Development set forth in the Schedule
of Performance attached to Amendment No. 3".
In the event of Developer's failure to continuously proceed with construction of any Project
Component(s) designated pursuant to the PSDA to be constructed on a portion of the Option IV
4258-2978-5209/3 -8-
Property, or, subject to the last sentence of the immediately preceding paragraph, Developer's
failure to complete construction of any of said Project Component(s) by the applicable Option IV
Project Component(s) Completion Deadline, and such failure is not cured within the cure period
provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not
obligated to exercise, the foregoing option for a period of sixty (60) days following the completion
of the "Option IV Project Component(s) Cost Audit" (as that term is defined in Section 4(b)
below) and after expiration of such cure period ("Option IV Period").
Notwithstanding anything in this Option Agreement to the contrary, but subject to
Section 7(e) below, (i) City shall not be obligated to purchase any portions of the Option IV
Property on which construction of the Project Component designated pursuant to the PSDA to be
constructed thereon has commenced; provided, however, that if City exercises Option IV to
purchase the Luxury Hotel, City shall be obligated to purchase the Luxury Branded Residential
Development if the Luxury Branded Residential Development remains subject to this Option
Agreement at the time of City's exercise of Option IV, and if City exercises Option IV to purchase
the Luxury Branded Residential Development, City shall be obligated to purchase the Luxury
Hotel, if the Luxury Hotel remains subject to this Option Agreement at the time of City's exercise
of Option IV and if City exercises Option IV to purchase the Lifestyle Hotel, City shall be obligated
to purchase the Lifestyle Branded Residential Development if the Lifestyle Branded Residential
Development remains subject to this Option Agreement at the time of City's exercise of Option
IV, and if City exercises Option IV to purchase the Lifestyle Branded Residential Development,
City shall be obligated to purchase the Lifestyle Hotel, if the Lifestyle Hotel remains subject to this
Option Agreement at the time of City's exercise of Option IV.
(a) Exercise of Option IV
City shall exercise Option IV by giving written notice to Developer ("City's Notice of
Option IV Exercise"), in accordance with Section 8 of this Option Agreement, prior to the
expiration of the Option IV Period, which notice shall set forth with specificity the portion of the
Option IV Property City is authorized and desires and/or is required to acquire (the "Option IV
City Acquisition Property"). Failure of City to exercise Option IV shall constitute a waiver by
City of City's right to exercise Option IV only with respect to Developer's specific incidence of
failure to continuously proceed with construction of the Project Component(s) designated
pursuant to the PSDA to be constructed on a portion of the Option IV Property that gave rise to
Option IV, or failure to complete construction of said Project Component(s) by the applicable
Option IV Project Component(s) Completion Deadline that gave rise to Option IV, subject to the
last sentence of the first paragraph of this Section 4 (as applicable), but shall not constitute a
waiver by City of Developer's breach of its obligation to continuously proceed with construction of
said Project Component(s), or to complete construction of said Project Component(s) by the
applicable Option IV Project Component(s) Completion Deadline (as applicable) or of any
remedies City may have under the terms of the PSDA or under any other agreement for
Developer's failure to continuously proceed with construction of said Project Component(s), or to
complete construction of said Project Components by the Option IV Project Component(s)
Completion Deadline (as applicable).
(b) Determination of Repurchase Price - Option IV
City's repurchase price for the Option IV City Acquisition Property ("Option IV
Repurchase Price"), shall be the sum of (i) one hundred percent (100%) of "Developer's Option
IV Project Component(s) Construction Costs", and (ii) the cost of any Plans City elects to
purchase pursuant to Section 7(I) below with respect to all or any portion of (a) the Master Site
4258-2978-5209/3 -9-
Infrastructure Improvements designated pursuant to the PSDA to be constructed on the Option
IV City Acquisition Property, and/or (b) the Project Components designated pursuant to the PSDA
to be constructed on the Option IV City Acquisition Property.
For purposes of this Section 4, the term "Developer's Option IV Project Component(s)
Construction Costs" shall mean the construction costs actually incurred by Developer for
construction of (1) the portion of the Master Site Infrastructure Improvements constructed on the
Option IV City Acquisition Property on or after this Option Agreement Effective Date to the date
of Developer's receipt of City's Notice of Option IV Exercise, and (II) the portion of the Project
Component(s) designated pursuant to the PSDA to be constructed on the Option IV City
Acquisition Property to the date of Developer's receipt of City's Notice of Option IV Exercise, all
as determined by an independent audit (the "Option IV Project Component(s) Cost Audit"),
performed by the Auditor, which costs shall consist only of (i) the amount(s) paid by Developer to
the contractor or contractors performing the construction, (ii) reasonable inspection, supervision,
and testing costs paid by Developer to independent third party engineers, architects, or
consultants in conjunction with said construction, and (iii) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so- called "soft costs" incurred in the
planning, environmental review, or design of the Master Site Infrastructure Improvements
constructed on the Option IV Property or the Project Component(s) designated pursuant to the
PSDA to be constructed on the Option IV Property, or any costs, fees, charges, or profits allocated
to Developer's own internal administrative, payroll, or overhead expenses or to any person or
entity affiliated with Developer). Developer shall promptly provide City and the Auditor with all
records and documentation necessary for the Auditor to perform the Option IV Project
Component(s) Cost Audit. In the event that there are any Valid Liens recorded against the Option
IV City Acquisition Property at the time that Option IV is exercised, Developer and City agree that
the Option IV Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then
outstanding balance due under same. Any portion of the Option IV Repurchase Price not so
needed to extinguish a Valid Lien shall be paid to Developer.
5. Option V - Transfer of the PSDA Property, or Portion Thereof Prior to Completion
of Project
Developer hereby grants to City an exclusive option ("Option V") to repurchase any or all
of the Parcels of the PSDA Property that remain subject to this Option Agreement as of the date
that Option V is exercised (the "Option V Property"), if, prior to the time Developer completes
the Project, Developer transfers or suffers an involuntary transfer of the PSDA Property or portion
thereof in violation of the terms of the PSDA.
In the event of Developer's transfer of the PSDA Property or any portion thereof in violation
of the PSDA (an "Unauthorized Transfer") and such Unauthorized Transfer is not cured within
the cure period provided under Sections 7(b) and 7(c) below, then, City shall be entitled to
exercise, but is not obligated to exercise, the foregoing ,option for sixty (60) days following the
later of (i) the date of the Unauthorized Transfer that gives rise to City's option under this
Section 5, or (ii) City's discovery of the Unauthorized Transfer that gives rise to Option V ("Option
V Period"). Notwithstanding anything to the contrary in this Section 5, (a) Option V shall not apply
to, and the Option V Property shall not include, those portions of the PSDA Property that were
not the subject of an Unauthorized Transfer, and (b) City shall not be obligated to purchase any
portion of the Option V Property on which construction of the Project Component designated
pursuant to the PSDA to be constructed thereon has commenced; provided, however, if City
exercises Option V to purchase the Luxury Hotel, City shall be obligated to purchase the Luxury
4258-2978-5209/3 -10-
Branded Residential Development if the Luxury Branded Residential Development remains
subject to this Option Agreement at the time of City's exercise of Option V, and if City exercises
Option V to purchase the Luxury Branded Residential Development, City shall be obligated to
purchase the Luxury Hotel, if the Luxury Hotel remains subject to this Option Agreement at the
time of City's exercise of Option V; and if City exercises Option V to purchase the Lifestyle Hotel,
City shall be obligated to purchase the Lifestyle Branded Residential Development if the Lifestyle
Branded Residential Development remains subject to this Option Agreement at the time of City's
exercise of Option V, and if City exercises Option V to purchase the Lifestyle Branded Residential
Development, City shall be obligated to purchase the Lifestyle Hotel, if the Lifestyle Hotel remains
subject to this Option Agreement at the time of City's exercise of Option V.
(a) Exercise of Option V
City shall exercise Option V by giving written notice to Developer ("City's Notice of
Option V Exercise"), in accordance with Section 8 of this Option Agreement, prior to the
expiration of the Option V Period, which notice shall set forth with specificity the portion of the
PSDA Property City is authorized and desires and/or is obligated to acquire (the "Option V City
Acquisition Property"). Failure of City to exercise Option V shall constitute a waiver by City of
City's right to exercise Option V only with respect to the specific Unauthorized Transfer that gave
rise to Option V, but shall not constitute a waiver by City of Developer's breach of the transfer
provisions in the PSDA or pursuant to this Option Agreement, or of any remedies City may have
under the terms of the PSDA or under any other agreement for Developer's transfer or sufferance
of an involuntary transfer of the PSDA Property or portion thereof.
(b) Repurchase Price - Option V
City's repurchase price for the Option V City Acquisition Property ("Option V Repurchase
Price") shall be as follows:
(i) In the event Developer has not yet commenced construction of the
Master Site Infrastructure Improvements to be constructed on the Option V City Acquisition
Property at the time City exercises Option V, City's Option I Price shall be the sum of (i) one
hundred percent (100%) of Developer's Golf Course Realignment Construction Costs and (ii) the
cost of any Plans City elects to purchase pursuant to Section 7(I) below with respect to all or any
portion of (1) the Master Site Infrastructure Improvements, and/or (II) the Project Components
comprising the Project.
(ii) In the event Developer has commenced construction of the Master
Site Infrastructure Improvements on the Option V City Acquisition Property at the time City
exercises Option V, then (1) if City is authorized to and elects to purchase all of the Option V
Property, the Option V Repurchase Price shall be the sum of (a) ninety percent (90%) of the
purchase price paid to Developer in connection with the Unauthorized Transfer that triggered
City's right to exercise Option V, and (b) the cost of any Plans City elects to purchase pursuant to
Section 7(l) below with respect to all or any portion of the Master Site Infrastructure
Improvements, and/or the Project Components comprising the Project; and (2) if City is authorized
hereunder and elects to purchase only a portion of the Option V Property, then City's Option V
Repurchase Price shall be the amount that would have been payable under this Option
Agreement by City to Developer if such portion of the Option V Property would have been
purchased by City pursuant to Option I, Option II, Option III, or Option IV as applicable depending
upon the status of construction upon such portion of the Option V Property as of the date that
Option V is exercised by City.
4258-2978-5209/3 -1 1-
In the event that there are any Valid Liens recorded against the Option V City Acquisition
Property at the time that Option V is exercised, Developer and City agree that the Option V
Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then Outstanding
Balance due under same. Any portion of the Option V Repurchase Price not so needed to
extinguish a Valid Lien shall be paid to Developer.
6. City's Right of First Offer
Developer hereby grants to City a right of first offer ("City's Right of First Offer") to
purchase any or all of the Parcels of the PSDA Property that remain subject to this Option
Agreement as of the date that City exercised the Right of First Offer (the "Right of First Offer
Property"), in accordance with the terms and conditions in this Section 6, in the event that (i) City
has had the right to exercise any of Option I, Option II, Option III, Option IV, or Option V and has
failed to exercise or has elected not to exercise Option I, Option II, Option III, Option IV, or Option
V (as applicable) in accordance with the terms of this Option Agreement and Developer's default
that gave rise to Option I, Option II, Option III, Option IV, or Option V (as applicable) has not been
cured, and (ii) Developer has determined to sell or otherwise transfer the PSDA Property or
portion thereof. Notwithstanding anything to the contrary in this Section 6, (a) the Right of First
Offer Property shall not include any portion of the PSDA Property that is not included in
"Developer's Sale Notice" (as that term is defined in Section 6(a) below), (b) in the event City
elects to exercise City's Right of First Offer, City may elect to purchase only those portions of the
Right of First Offer Property that City was authorized and desires (or is otherwise obligated) to
purchase pursuant to the terms of Option I, Option ll, Option III, Option IV, or Option V (as
applicable), and (c) if City exercises City's Right of First Offer with respect to the Luxury Hotel,
City shall be obligated to purchase the Luxury Branded Residential Development if the Luxury
Branded Residential Development remains subject to this Option Agreement at the time of City's
exercise of City's Right of First Offer, and if City exercises City's Right of First Offer to purchase
the Luxury Branded Residential Development, City shall be obligated to purchase the Luxury
Hotel, if the Luxury Hotel remains subject to this Option Agreement at the time of City's exercise
of City's Right of First Offer; and, if City exercises City's Right of First Offer with respect to the
Lifestyle Hotel, City shall be obligated to purchase the Lifestyle Branded Residential Development
if the Lifestyle Branded Residential Development remains subject to this Option Agreement at the
time of City's exercise of City's Right of First Offer, and if City exercises City's Right of First Offer
to purchase the Lifestyle Branded Residential Development, City shall be obligated to purchase
the Lifestyle Hotel if the Lifestyle Hotel remains subject to this Option Agreement at the time of
City's exercise of City's Right of First Offer. The portions of the Right of First Offer Property City
acquires hereunder shall be hereinafter referred to as the "Right of First Offer City Acquisition
Property".
(a) Developer's Notice to City; City's Election
In the event that the circumstances described in clauses (i) and (ii) of the immediately
preceding paragraph exist, then prior to entering into any transaction with a third party concerning
the sale of any of the Right of First Offer Property, Developer shall provide City with written notice
of Developer's intent to sell such Right of First Offer Property, and Developer's proposed sale
price for the same ("Developer's Sale Notice"). City shall have sixty (60) days after receiving
Developer's Sale Notice to notify Developer, in writing, of City's election to exercise City's Right
of First Offer to acquire the Right of First Offer City Acquisition Property, at the price noted in
Developer's Sale Notice ("City's Election to Exercise"); provided, however, that if the Right of
First Offer City Acquisition Property does not comprise all of the Right of First Offer Property, then
City's acquisition price shall be the amount that would have been payable under this Option
4258-2978-5209/3 -12-
Agreement by City to Developer if such portion of the Right of First Offer City Acquisition Property
would have been purchased by City pursuant to Option I, Option II, Option III, or Option IV as
applicable depending upon the status of construction upon such portion of the Right of First Offer
City Acquisition Property as of the date that the Right of First Offer is exercised by City.
(b) City's Failure to Exercise
City's failure to deliver to Developer City's Election to Exercise within such sixty (60) day
period shall be deemed City's election not to exercise City's Right of First Offer and, except as
provided below, City's Right of First Offer with respect to the Right of First Offer Property shall
then terminate and City shall have no further right of first offer with respect to the Right of First
Offer Property. If City elects not to exercise (or is deemed to have elected not to exercise) City's
Right of First Offer then Developer may sell the Right of First Offer Property to a third party
purchaser; provided, however, that in the event Developer determines to sell the Right of First
Offer Property at a price that is less than the price set forth in Developer's Sale Notice, Developer
shall provide City with a written notice of Developer's intent to sell the Right of First Offer Property,
with Developer's new proposed sale price for the same ("Developer's Second Sale Notice"),
and City's Right of First Offer shall again apply with respect to the Right of First Offer Property, in
accordance with the process outlined in subparagraph (a) above and this subparagraph (b).
(c) Transfer Restrictions of PSDA
Notwithstanding any of the provisions in Option V (Section 5 above) or this Section 6 to
the contrary, nothing in this Option Agreement is intended to or shall have the effect of waiving
the transfer restrictions set forth in the PSDA, any of City's rights related thereto in the PSDA or
any other agreements between City and Developer relating to the PSDA Property, and any
proposed sale or transfer by Developer shall be effected in accordance with the same.
7. Additional Terms Applicable to the Repurchase Options
The following additional terms shall apply to Option I, Option 11, Option III, Option IV, Option
V, and City's Right of First Offer:
(a) Successors and Assigns. Option I, Option II, Option III, Option IV, Option
V, and City's Right of First Offer created hereby shall be irrevocable by Developer and shall be
binding upon the successors and assigns of Developer and on the PSDA Property.
(b) Developer's Right to Cure Certain Defaults. Notwithstanding anything in
this Option Agreement to the contrary (A) City shall not be entitled to exercise Option I, Option II,
Option III, or Option IV until City has provided a written notice to Developer regarding Developer's
failure to commence construction, continuously proceed with construction, or to complete
construction, as applicable (with any of the above failures referred to hereinafter as an "Option
Triggering Event"), and Developer has not, within sixty (60) days after receipt of such notice,
cured, corrected, or remedied such Option Triggering Event or, for those Option Triggering Events
that cannot reasonably be cured, corrected, or remedied within sixty (60) days, commenced to
cure, correct or remedy such Option Triggering Event within said sixty (60) day period, and
diligently prosecute the same to completion and (B) City shall not be entitled to exercise Option
V until City has provided a written notice to Developer regarding an Unauthorized Transfer (an
"Option V Triggering Event") and Developer has not, within thirty (30) days after receipt of such
notice, cured, corrected or remedied such Option V Triggering Event. If the Option Triggering
Event relates to the exercise of Option III or Option IV with respect to construction of the Luxury
4258-2978-5209/3 -1 3-
Hotel or Lifestyle Hotel, then the aforementioned cure periods provided to Developer under this
paragraph shall be one hundred twenty (120) days.
(c) Notice of Default to Mortgagee or Deed of Trust Holders; Right to Cure.
With respect to any mortgage or deed of trust granted by Developer, whenever City may deliver
any notice or demand to Developer with respect to an Option Triggering Event (including, but not
limited to, an Option V Triggering Event), City shall at the same time deliver a copy of such notice
or demand to each holder of record of any mortgage or deed of trust which has previously
requested such notice in writing. Each such holder shall (insofar as the rights granted by City are
concerned) have the right, at its option, within sixty (60) days after the receipt of the notice (except
in the event of an Option V Triggering Event, in which case the cure period shall be thirty (30)
days), to cure or remedy or commence to cure or remedy and thereafter to pursue with due
diligence the cure or remedy of any such default and to add the cost thereof to the mortgage debt
and the lien of its mortgage. It is understood that a holder shall be deemed to have satisfied the
sixty (60) day time limit set forth above for commencing to cure or remedy a Developer default
which requires title and/or possession of the Property (or portion thereof) if and to the extent any
such holder has within such sixty (60) day period commenced proceedings to obtain title and/or
possession and thereafter the holder diligently pursues such proceedings to completion and cures
or remedies the default.
(d) No -City Obligation: Purchase of Whole Protect Components.
W Notwithstanding any covenant, term, or provision in this Option
Agreement to the contrary, City shall not be obligated to exercise Option I, Option II, Option III,
Option IV, Option V, or City's Right of First Offer.
(ii) Notwithstanding anything to the contrary in this Option Agreement,
if City elects to purchase any part of a Project Component pursuant to Option IV, Option V, or
City's Right of First Offer, then City shall be obligated to purchase all of such Project Component
that remains subject to this Option Agreement as of date of such election.
(e) Partial Termination of Option Agreement: Bifurcation Following
Completion of Luxury Hotel.
(i) In the event Developer commences and completes construction of
a Project Component, as evidenced by City's issuance of a Release of Construction Covenants
for such Project Component and City has not exercised Option I, Option II, Option III, Option IV,
Option V or City's Right of First Offer with respect to such Project Component or the real property
on which such Project Component is designated pursuant to the PSDA to be constructed City's
issuance of a Release of Construction Covenants for such Project Component shall act to
automatically release this Option Agreement with respect to said Project Component and the real
property on which such Project Component is designated pursuant to the PSDA to be constructed
with no further action required by City or Developer; provided, however, upon request of
Developer, City shall execute and record a termination and release of this Option Agreement.
Notwithstanding the foregoing to the contrary, City shall, at or prior to the close of escrow for the
sale of each Residential Dwelling Unit at the Project to a third party buyer, cause this Option
Agreement to be terminated with respect to such Residential Dwelling Unit. Within ten (10) days
following City's receipt of written notice from Developer of a pending escrow for the sale of any
such Residential Dwelling Unit, City shall (i) execute and have notarized a Quitclaim Deed and/or
such other document(s) required by the applicable escrow holder to evidence the termination of
4258-2978-520913 -14-
this Option Agreement with respect to the Residential Dwelling Unit being sold, and (ii) deposit
the original of such executed and notarized document(s) into such escrow.
(ii) Notwithstanding anything to the contrary in this Option Agreement,
from and after the date City issues a Release of Construction Covenants for the Luxury Hotel,
City shall only have the right to exercise Option III, Option IV, or Option V with respect to the
particular Project Component to which an Option Triggering Event relates. For example, if City
has issued a Release of Construction Covenants for the Luxury Hotel and Developer has
completed construction of seventy percent (70%) or more of the Resort Residential Dwelling Units
to be constructed within the Promenade Mixed -Use Village within the required period set forth in
the Schedule of Performance attached to Amendment No. 3, but has failed to complete
construction of seventy percent (70%) or more of the Resort Residential Dwelling Units to be
constructed within the Resort Residential Village within the required period set forth in the
Schedule of Performance attached to Amendment No. 3, then City's rights under this Option
Agreement with respect to the occurrence of an Option Triggering Event entitling City to exercise
Option IV shall be limited to the Resort Residential Village only, and City shall have no option to
purchase the Promenade Mixed -Use Village, as a result of such Option Triggering Event.
(f) Enforced Delay Pursuant to PSDA. Notwithstanding anything to the
contrary herein, in the event performance by Developer under the PSDA is extended pursuant to
Section 602 of the PSDA, such that the time by which Developer is required thereunder to -
commence construction of the Master Site Infrastructure Improvements, complete construction of
the Master Site Infrastructure Improvements, commence construction of one or more Project
Components designated pursuant to the PSDA to be constructed on a portion of the PSDA
Property, or complete construction of one or more Project Components designated pursuant to
the PSDA to be constructed on a portion of the PSDA Property, is extended, such extensions
shall automatically apply hereto to (as applicable) extend the time by which Developer is required
to commence construction of the Master Site Infrastructure Improvements, complete construction
of the Master Site Infrastructure Improvements, commence construction of one or more Project
Components designated pursuant to the PSDA to be constructed on a portion � of the PSDA
Property, or complete construction of one or more Project Components designated pursuant to
the PSDA to be constructed on a portion of the PSDA Property, by the same time as extended
under the PSDA.
(g) Subordination. City and Developer shall enter into with the Lender a
subordination or similar agreement that provides for all of the following: (i) the Lender to notify
City, in writing, of any default by Developer under the Lender's loan documents concurrently with
its notification to Developer of such default, (ii) the Lender to provide City with a copy of any Notice
of Default (each, a "Notice of Default") recorded against the title to the PSDA Property in the
Official Records of the County of Riverside, State of California (the "Official Records")
concurrently with its delivery of such Notice of Default to Developer; (iii) the right of City to cure
the default at any time prior to the foreclosure (or recording of a deed in lieu thereof) on the
Lender's deed of trust, (iv) the right of City to negotiate with the Lender regarding the default at
any time prior to the foreclosure (or recording of a deed in lieu) on the Lender's deed of trust, and
(v) the Lender's agreement that Lender shall not conduct a foreclosure sale (or exercise a power
of sale or record a deed in lieu of foreclosure or any similar action that would result in the
ownership and vesting of title in the name of Lender or its assignee or designee) prior to the date
that is at least six (6) months after the Lender delivers written notice of the default to City and
Developer pursuant to clause (i) above. The foregoing provisions in clauses (i)-(v), and any other
additional terms and conditions that City, Developer, and Lender may deem necessary or
appropriate, shall be in any subordination or other agreement as may be requested or required
4258-2978-5209/3 -15-
by either the Lender or Developer, which agreement would result in this Option Agreement having
lower priority from any other instrument or encumbrance (including but not limited to a mortgage,
deed of trust, regulatory agreement, temporary or permanent easement, reciprocal servitude, and
any covenants, codes, and restrictions or restrictive use covenant) that is executed on behalf of
and for the benefit of either the Lender or Developer, or both, and to be recorded in the Official
Records.
(h) City's and City's Assignee's Investigation of PSDA Proper#v.
0) City shall have a period of forty-five (45) days, commencing on the
date of an event that triggers City's ability to exercise any of Option I, Option II, Option III, Option
IV, Option V, or City's Right of First Offer, to enter upon the PSDA Property (or applicable portion
thereof) to conduct any tests, inspections, investigations, or studies of the condition of the PSDA
Property (or applicable portion thereof) (the "Option Agreement Tests and Investigations").
Developer shall permit City access to the PSDA Property (or applicable portion thereof) for such
purposes. City's obligation to close "Escrow" (as that term is defined in Section 7(i) below) shall
be subject to City's approval of any environmental and other site testing conducted by City in
City's discretion. City shall indemnify, defend, and hold harmless Developer and its officers,
directors, shareholders, employees, agents, and representatives from and against all claims,
liabilities, or damages, and including expert witness fees and reasonable attorney's fees and
costs, arising out of any such testing, inspection, or investigatory activity on the PSDA Property
(or applicable portion thereof).
(ii) In the event City assigns its rights under this Option Agreement
City's assignee shall have the right to enter upon the PSDA Property (or applicable portion
thereof) during the period commencing on the date of City's assignment of this Option Agreement
to said assignee and ending on the "Closing Date" (as that term is defined in Section 7(i) below)
to conduct any Option Agreement Tests and Investigations elected by the assignee, Developer
shall permit City's assignee access to the PSDA Property (or applicable portion thereof) for such
purposes, provided that, prior to any entry upon the PSDA Property by such assignee or its
employees, agents, representatives or consultants, City shall cause such assignee to provide
Developer with evidence that it has a liability insurance policy that names Developer as an
additional insured, which policy shall have limits of coverage and be on terms reasonably
acceptable to Developer. City's obligation to close "Escrow" (as defined in Section 7(i) below)
shall be subject to City's assignee's approval of any environmental and other site testing
conducted by said assignee in said assignee's discretion. City shall cause said assignee to
indemnify, defend, and hold harmless Developer and its officers, directors, shareholders,
employees, agents, and representatives from and against all claims, liabilities, or damages, and
including expert witness fees and reasonable attorney's fees and costs, arising out of any such
testing, inspection, or investigatory activity on the PSDA Property (or applicable portion thereof).
(i) Escrow Provisions,
0) Within five (5) business days after City has exercised Option I,
Option 11, Option III, Option IV, Option V, or City's Right of First Offer (as applicable), or as soon
thereafter as reasonably practicable, an escrow shall be opened ("Escrow") with an escrow
company selected by City ("Escrow Holder") for the reconveyance to City of the portions of the
PSDA Property to be acquired by City pursuant to this Option Agreement. Escrow shall be
deemed opened on the date that a fully executed copy of this Option Agreement and a notice of
exercise of option prepared by City are delivered to Escrow Holder ("Opening of Escrow").
4258-2978-5209/3 -1 6-
Escrow Holder shall notify Developer and City in writing of the date of the Opening of Escrow
promptly following the opening of the Escrow.
(ii) Escrow shall close on or before the date that is six (6) months after
occurrence of the event giving rise to City's exercise of Option I, Option II, Option III, Option IV,
Option V, or City's Right of First Offer ("Close of Escrow" or "Closing Date"). The terms "Close
of Escrow" and "Closing Date" shall mean the date the grant deed conveying fee title to City ("City
Grant Deed") is recorded in the Official Records. Possession of the portions of the PSDA
Property conveyed to the City pursuant to this Option Agreement shall be delivered to City at the
Close of Escrow.
(iii) This Option Agreement, together with any standard instructions of
Escrow Holder, shall constitute the joint escrow instructions of Developer and City to Escrow
Holder as well as an agreement between Developer and City. In the event of any conflict between
the provisions of this Option Agreement and Escrow Holder's standard instructions, this Option
Agreement shall prevail.
(iv) The Escrow shall be subject to City's approval of a then -current
preliminary title report. Any monetary lien(s) or encumbrance(s) shown on such preliminary title
report that is (are) created concurrent with or after the close of escrow that conveyed the Phase
1A Property or Phase 1B Property from City. to Developer shall be removed by Developer at its
sole expense prior to the Close of Escrow pursuant to this Section 7(i) unless such exception(s)
is (are) accepted by City in its sole discretion; provided, however, that City shall accept the
following exceptions to title: (i) current taxes not yet delinquent, (ii) matters affecting title existing
on the date of recordation of the Grant Deed to the Phase 1A Property or Phase 1 B Property (in
the form of Attachment No. 4 to the PSDA), and (iii) matters shown as printed exceptions in the
standard form ALTA policy of title insurance. In the event the PSDA Property (or applicable
portion thereof subject to the Escrow) is encumbered by a Valid Lien, City shall be permitted to
unilaterally instruct Escrow Holder to satisfy the indebtedness secured thereby out of the
proceeds payable to Developer through the foregoing Escrow. Any additional amount necessary
to satisfy such Valid Lien, including, without limitation, (1) the amount of the unpaid indebtedness
secured by such Valid Lien, including principal and interest and all other sums secured by the
Valid Lien, including, without limitation, any prepayment fees and costs, shall be paid by City at
the Closing.
(v) On or before 1:00 p.m. on the last business day preceding the
scheduled Closing Date, City shall deposit in Escrow (i) the applicable of the Option I Repurchase
Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase
Price; the Option V Repurchase Price, or the price noted in Developer's Sale Notice or
Developer's Second Sale Notice (the last two are referred to herein as the "Right of First Offer
Repurchase Price"); ; (ii) one-half (1/2) of the escrow fees; (iii) the portion of the title insurance
premium attributable to any extra or extended coverages, or any additional charge resulting from
City's request that the amount of insurance be higher than the applicable of the Option
Repurchase Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option
IV Repurchase Price, the Option V Repurchase Price, or the Right of First Offer Repurchase
Price; and (iv) any and all additional instruments or other documents required from City (executed
and acknowledged if appropriate) as may be necessary in order to effect the transfer of the PSDA
Property, or applicable portion thereof, to City. On or before 1:00 p.m. on the last business day
preceding the scheduled Closing Date, Developer shall deposit in Escrow (i) the City Grant Deed,
executed and acknowledged; (ii) one-half (1/2) of the escrow fees; and (iii) any and all additional
instruments or other documents required from Developer (executed and acknowledged if
4258-2978-5209/3 -17-
appropriate) as may be necessary in order to effect the transfer of the PSDA Property, or
applicable portion thereof, to City. Developer shall also be required to pay for documentary tax
stamps and recording fees, if any, and for an ALTA standard form owner's policy of title insurance
in the amount of the Option I Repurchase Price, the Option II Repurchase Price, the Option III
Repurchase Price, the Option IV Repurchase Price, the Option V Repurchase Price, or the Right
of First Offer Repurchase Price (as applicable), showing title vested in City free and clear of all
liens and encumbrances except those permitted by subparagraph (iv) above (the "Title Policy").
City's receipt of the Title Policy shall be a condition to the Close of Escrow. Any other costs and
expenses shall be allocated between the Parties in the manner customary for a commercial
property conveyance in Riverside County.
(vi) If, on or before the Closing Date, Escrow Holder has received all of
the documents and funds listed in subparagraph (v) above, and Escrow Holder is in a position to
cause the Title Policy to be issued to City, and provided City has approved of the condition of the
PSDA Property, or applicable portion thereof, Escrow Holder shall close the Escrow by taking the
following actions: (a) recording the City Grant Deed in the Official Records, and delivering the
recorded City Grant Deed to City; (b) causing the Title Policy to be issued to City; and (c)
delivering the portion of the applicable of the Option I Repurchase Price, the Option II Repurchase
Price, the Option III Repurchase Price, the Option IV Repurchase Price, the Option V Repurchase
Price, or the Right of First Offer Repurchase Price remaining after payment of all Valid Liens, if
any, to Developer.
0) City's Right to Ac uire the PSDA Pro rt . Notwithstanding anything
herein to the contrary, upon City's exercise of Option I, Option II, Option III, Option IV, Option V,
or City's Right of First Offer, Developer's commencement to cure the default that led to City's
exercise shall not affect City's right to close the Escrow and acquire the PSDA Property (or
applicable portion thereof).
(k) City's Repurchase of Uncompleted Portions of the Property.
Notwithstanding anything herein to the contrary, in the event that as a result of City exercising
Option III, Option IV or Option V City acquires the PSDA Property, or portion thereof, if Developer
has obtained from City a certificate of occupancy and has sold to third parties one or more of the
Residential Dwelling Units developed thereon, the provisions of this Option Agreement shall apply
only to those portions of the PSDA Property which have not been sold to third parties
("Uncompleted Portion of the Repurchase Property") and any calculations for determining the
Option III Repurchase Price, the Option IV Repurchase Price or the Option V Repurchase Price
(as applicable) shall be based solely upon the Uncompleted Portion of the Repurchase Property.
(1) City's Right to Purchase Plans. At the time City exercises any of Option I,
Option 11, Option III, Option IV, Option V, or City's Right of First Offer, City shall also have the right,
which City may exercise in its sole and absolute discretion, to purchase from Developer for the
actual cost Developer incurred in preparing the same, all (but not less than all) of the plans,
blueprints, drawings, sketches, specifications, tentative or final subdivision maps, landscape
plans, utilities plans, soils reports, noise studies, environmental assessment reports, grading
plans and any other materials (collectively, the "Plans") relating to (i) all of the Master Site
Infrastructure Improvements designated pursuant to the PSDA to be constructed on the portions
of the Property to be acquired by City, and/or (b) all or any of the Project Components designated
pursuant to the PSDA to be constructed on the portions of the Property to be acquired by City,
together with copies of all of the Plans, as have been prepared for the development of the PSDA
Property to date of City's exercise of Option I, Option II, Option III, Option IV, or City's Right of
First Offer (as applicable). Notwithstanding the foregoing, however, Developer does not covenant
4258-2978-5209/3 -1 8-
to convey to City the copyright or other ownership rights of third parties. City's acquisition or use
of the Plans or any of them shall be without any representation or warranty by Developer as to
the accuracy or completeness of any such Plans, and City shall assume all risks in the use of the
Plans.
(m) City's Repurchase Price Reflects Reasonable Approximation of Damages.
City and Developer agree that City has the right to either proceed with its remedies under the
PSDA or to exercise Option I, Option II, Option III, Option IV, or Option V. Notwithstanding
anything to the contrary herein or in the PSDA, in the event City exercises any of Option I, Option
ll, Option III, Option IV, or Option V (as applicable) to acquire the PSDA Property, or a portion
thereof, City shall be deemed to have elected to waive the remedies to which it would otherwise
be entitled under the PSDA. City and Developer agree that City will incur damages by reason of
the default that gave rise to City's ability to exercise Option I, Option II, Option III, Option IV, or
Option V (as applicable), which damages shall be impractical and extremely difficult, if not
impossible, to ascertain. City and Developer, in a reasonable effort to ascertain what City's
damages would be in the event of such default by Developer, have agreed that considering all of
the circumstances existing on the date of this Option Agreement, including the relationship of the
sum to the range of harm to City that reasonably could be anticipated, including without limitation
the potential loss of tax revenue to the City of La Quinta, and the anticipation that proof of actual
damages would be costly or inconvenient, the exercise by City of Option I, Option II, Option III,
Option IV, or Option V (as applicable), and the payment by City of the Option I Repurchase Price,
the Option II Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase Price,
or the Option V Repurchase Price (as applicable) and the conveyance of the PSDA Property, or
applicable portion thereof, by Developer to City, is fair and reasonable. City and Developer agree
that the (discounted) Option I Repurchase Price, Option II Repurchase Price, Option III
Repurchase Price, Option IV Repurchase Price, or Option V Repurchase Price (as applicable)
reflect a reasonable estimate of City's damages under the provisions of Section 1671 of the
California Code of Civil Procedure and shall operate as liquidated damages to City if City
exercises Option I, Option II, Option III, Option IV, or Option V (as applicable). If City does not
exercise Option I, Option il, Option ill, Option IV, or Option V, then City shall retain and may
exercise all of its rights and remedies as set forth in any other agreement, including, but not limited
to, the PSDA.
8. Notices Demands and Communications Between the Parties.
Formal notices, demands, and communications between City and Developer shall be
given either by (i) personal service, (ii) delivery by reputable document delivery service such as
Federal Express that provides a receipt showing date and time of delivery, or (iii) mailing in the
United States mail, certified mail, postage prepaid, return receipt requested, addressed to:
To City: City of La Quinta
78-495 Calle Tampico
La Quinta, California 92253
Attn: City Manager
With a copy to: Rutan & Tucker, LLP
611 Anton Boulevard., Suite 1400
Costa Mesa, California 92626
Attn: William H. Ihrke, Esq.
4258-2978-5209.3 -19-
To Developer: SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas, California 92024
Attn: Robert S. Green, Jr.
Notices personally delivered or delivered by document delivery service shall be deemed
effective upon receipt. Notices mailed in the manner provided above shall be deemed received
and effective on the second business day following deposit in the United States mail. Such written
notices, demands, and communications shall be sent in the same manner to such other
addresses as either Party may from time to time designate by mail.
9. Applicable Law and Forum Attorne 's Fees
The Superior Court of the State of California in the County of Riverside shall have the
exclusive jurisdiction of any litigation between the Parties arising out of this Option Agreement.
This Option Agreement shall be governed by, and construed under, the internal laws of the State
of California, without regard to conflict of law principles. In addition to any other rights or remedies
and subject to the restrictions otherwise set forth in this Option Agreement, including without
limitation in this Section 9, either Party may take legal action, in law or in equity, to cure, correct,
or remedy any default, to recover damages for any default, to compel specific performance of this
Option Agreement, to obtain declaratory or injunctive relief, or to obtain any other remedy
consistent with the purposes of this Option Agreement. City shall also have the right to pursue
damages for Developer's defaults but in no event shall Developer be entitled to recover damages
of any kind from City, including damages for economic loss, lost profits, or any other economic or
consequential damages of any kind. The rights and remedies of the Parties are cumulative and
the exercise by either Party of one or more of such rights or remedies shall not preclude the
exercise by it, at the same or different times, of any other rights or remedies for the same default
or any other default by the other Party. Service of process on City shall be made in the manner
required by law for service on a public entity. Service of process on Developer shall be made in
any manner permitted by law and shall be effective whether served within or outside of California.
If either Party to this Option Agreement is required to initiate or defend, or is made a party
to, any action or proceeding in any way connected with this Option Agreement, the Party
prevailing in the final judgment in such action or proceeding, in addition to any other relief which
may be granted, shall be entitled to reasonable attorney's fees. Attorney's fees shall include
reasonable costs for investigating such action, conducting discovery, retaining expert witnesses,
and all other necessary costs the court allows which are incurred in such litigation.
10. City Right to Assign
In the event City has the right to exercise any of Option I, Option II, Option III, Option IV,
Option V, or City's Right of First Offer, City shall have the right to assign its rights hereunder upon
providing prior written notice to Developer pursuant to Section 8 of this Option Agreement, and
thereafter entering into an assignment and assumption agreement with such assignee.
4258-2978-5209.3 -20-
11. City Approvals and Actions
City shall maintain authority of this Option Agreement and the authority to implement this
Option Agreement through the City Manager. The City Manager shall have the authority to make
approvals, issue interpretations, waive provisions, negotiate and enter into amendments to this
Option Agreement and/or negotiate and enter into implementing agreements or documents on
behalf of City so long as such actions do not materially or substantially change the business terms
of this Option Agreement, or materially or substantially add to the costs incurred or to be incurred
by City as specified herein. Such approvals, interpretations, waivers, amendments, and/or
implementing agreements or documents may include extensions of time to perform. All other
material and/or substantial interpretations, waivers, or amendments shall require the
consideration, action and written consent of the City Council.
12. Nonliabillty of City Officials and Employees
No officer, official, employee, agent, or representative of City shall be personally liable to
Developer or any successor in interest, in the event of any default or breach by City, or for any
amount which may become due to Developer or its successor, or for breach of any obligation of
the terms of this Option Agreement.
13. Nondiscrimination
Developer covenants for itself, its heirs, executors, assigns, and all persons claiming
under or through them, that there shall be no discrimination against any person on account of
race, color, creed, religion, sex, marital status, national origin, ancestry, or any other protected
class under the laws of the United States, California, and any applicable local jurisdiction with
respect to this Option Agreement or use of the PSDA Property.
14. Interpretation
The terms of this Option 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 Option Agreement or any other rule of construction which might otherwise apply.
The Section headings are for purposes of convenience only, and shall not be construed to limit
or extend the meaning of this Option Agreement.
15. Entire Agreement
This Option Agreement integrates all of the terms and conditions mentioned herein, or
incidental hereto, and, with the exception of the PSDA, supersedes all negotiations or previous
agreements between the Parties with respect to all or any part of the subject matter hereof.
All waivers of the provisions of this Option Agreement must be in writing and signed by
the appropriate authorities of the Party to be charged, and all amendments and modifications
hereto must be in writing and signed by the appropriate authorities of City and Developer.
16. Counteparts
This Option Agreement may be executed in counterparts, each of which, after all the
Parties hereto have signed this Option Agreement, shall be deemed to be an original, and such
counterparts shall constitute one and the same instrument.
4258-2978-5209.3 -21-
17. Severability
In the event any section or portion of this Option Agreement shall be held, found, or
determined to be unenforceable or invalid for any reason whatsoever, the remaining provisions
shall remain in effect, and the Parties hereto shall take further actions as may be reasonably
necessary and available to them to effectuate the intent of the Parties as to all provisions set forth
in this Option Agreement.
18. Termination of Phase 1 A Option Agreement
Recording this Option Agreement in the Official Records of the Recorder's Office shall
serve to automatically terminate the Phase 1A Option Agreement and shall release the Phase 1A
Property from the covenants contained in the Phase 1A Option Agreement. Upon request of
Developer, City shall execute and record a termination and release of the Phase 1A Option
Agreement.
[ Signature page follows ]
4258-2978-5209.3 -22-
IN WITNESS WHEREOF, the Parties have executed this Option Agreement as of the date
first above written.
"DEVELOPER"
SILVERROCK DEVELOPMENT COMPANY, LLC,
a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
Date 20_ By:
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
[Signature page continues next page]
4258-2978-5209.3 -23-
"CITY"
CITY OF LA QUINTA, a California municipal
Corporation and charter city
By]
Its:
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
City Attorney
City Manager
4258-2978-5209.3 -24-
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On , before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
AIT
before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
4258-2978-5209.3 -25-
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PSDA PROPERTY
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE -CITY OF LA QUINTA IN
THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
Phase 1 A Property:
PARCELS 1, 3, 4, 5, and 6 OF PARCEL MAP NO.37207, IN THE CITY OF LA QUINTA, COUNTY
OF RIVERSIDE, STATE OF CALIFORNIA, FILED IN BOOK 242, PAGES 72 THROUGH 87 OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
Phase 1 B Property:
PARCELS 7, 8, 9, D, E, F, & G OF PARCEL MAP NO. 37207, IN THE CITY OF LA QUINTA,
COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, FILED IN BOOK 242, PAGES 72
THROUGH 87 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
-1-
4828-2978-5209.3
EXHIBIT "N"
OPTION AGREEMENT PA 7 8 AND 9
[See following page]
EXHIBIT "N"
-1-
12711468 4
4819-2019-1097 4
FREE RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Manager
Space Above This Line for Recorder's Use
(Exempt from Recording Fee per Gov't Code § 6103 and 27383)
THIS OPTION AGREEMENT (PHASE 1 B PROPERTY — PA 7, 8 & 9 ) ("PA 7, 8 & 9
Option Agreement") is made this _ day of November, 2018 (the "Option Agreement Effective
Date"), by and between SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited
liability company ("Developer"), and the CITY OF LA QUINTA, a California municipal corporation
and charter city ("City"). City and Developer are hereinafter sometimes referred to individually as
a "Party" and collectively as the "Parties."
A. Developer has entered into a Purchase, Sale, and Development Agreement dated
November 19, 2014 ("Original PSDA"), as amended by Amendment No. 1 to Purchase, Sale,
and Development Agreement dated October 29, 2015 ("Amendment No. 1 ") and by Amendment
No. 2 to Purchase, Sale, and Development Agreement dated on or about April 18, 2017
("Amendment No. 2") and by Amendment No. 3 to Purchase, Sale, and Development Agreement
dated on or about November _, 2018 ("Amendment No. 3") (collectively, and as may be further
amended, the "PSDA"), pursuant to which City agreed to convey to Developer approximately
301.71 acres of real property located at the southwest intersection of Avenue 52 and Jefferson
Street in the City of La Quinta, County of Riverside, State of California, described in the Original
PSDA as "Phase 1" or "Phase 1 Property" and "Phase 2" or the "Phase 2 Property", and as
modified and described in Amendment No. 2 as "Phase 1A" and "Phase 1A Property" and
"Phase 1 B" and "Phase 1113 Property" and Phase IC" and "Phase 1 C Property" and
"Phase 1 D" and "Phase 1 D Property." The term "PA 7, 8 $ 9 Property" for purposes of this PA
7, 8 & 9 Option Agreement consists collectively of only that portion of the "Phase 1 B Property"
consisting of Parcels 10, 11, and 12 of Parcel Map 37207 per map filed in Book 242, pages 72
through 87 inclusive, of Parcel Maps, in the official records in the recorder's office of the County
Recorder ("Recorder's Office") of Riverside County, State of California, and sometimes
collectively referred to herein as "PA 7, 8 and 9". The PA 7, 8 & 9 Property is legally described in
Exhibit "A", which is attached hereto and incorporated herein by this reference. Unless otherwise
expressly defined in this PA 7, 8 & 9 Option Agreement, capitalized terms used in this PA 7, 8 &
9 Option Agreement shall have the meanings ascribed thereto in the PSDA.
B. Pursuant to the PSDA, Developer has agreed to construct on the PA 7, 8 & 9
Property a mixed use village and a resort residential village and associated amenities, as more
particularly described in the PSDA (collectively, the "Project").
C. The Project shall be constructed on the PA 7, 8 & 9 Property in accordance with
all of the requirements set forth in the PSDA.
4839-5818-8153.3
D. As a condition to City's conveyance of the Phase 1 B Property to Developer,
Developer was required to grant to City (i) an option to repurchase the PA 7, 8 & 9 Property, or
certain portions thereof, from Developer if Developer (a) fails to commence, continuously proceed
with, or complete construction of the Master Site Infrastructure Improvements, subject to the
Master Site Infrastructure Improvements Phasing Plan (defined in Amendment No. 3) (the "MSI
Phasing Plan"), pursuant to the PSDA within certain specified time frames, (b) fails to commence,
continuously proceed with, or complete construction of a Project Component pursuant to the
PSDA within certain specified time frames, (c) transfers the PA 7, 8 & 9 Property, or any portion
thereof, in violation of the terms of the PSDA; and (ii) a right of first offer to purchase the PA 7, 8
& 9 Property, or any portion thereof, if (1) City's option under (i)(a), (i)(b), or (i)(c) above has been
triggered, (II) City did not timely exercise the applicable option, (III) the default which gave rise to
City's option has not been cured, and (IV) Developer has determined to sell or otherwise transfer
the PA 7, 8 & 9 Property, all as further described herein. In further explanation of Options I, II, III,
IV and V, and corresponding Rights of First Offer herein contained, once a phase of the Master
Site Infrastructure Improvements has been completed in accordance with the MSI Phasing Plan
and accepted by the City (and, if applicable, any other governmental agency) in accordance with
the Master Site Infrastructure Improvements Land Use Approvals issued to Developer pursuant
to Section 209 of the Original PSDA, then the Parcels upon which such Master Site Infrastructure
Improvements have been completed will no longer be subject to Options 1 and II (and
corresponding Rights of First Offer) of this Option Agreement except with respect to the
commencement, continuation and completion of Project Components on said Parcels; and then,
and once the Project Components have been completed in accordance with the Schedule of
Performance attached to Amendment No. 3 and accepted by the City by the recording of a
Release of Construction Covenants in accordance with Section 310 of the Original PSDA as
amended by Amendment No. 3 and the form attached thereto, the Parcels upon which such
Project Components are located will no longer be subject to Options III, IV, and V (and
corresponding Rights of First Offer) in this Option Agreement.
E. Unless otherwise expressly defined in this PA 7, 8 & 9 Option Agreement,
capitalized terms used in this PA 7, 8 & 9 Option Agreement, including in the foregoing Recitals,
shall have the meanings ascribed thereto in the PSDA.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and incorporating the above Recitals and all of the terms and
conditions contained in the PSDA, Developer hereby grants to City the following repurchase
options:
Option I - Failure to Commence Construction of PA 7, 8 & 9 Master Site
Infrastructure Improvements
Subject to Section 7(f) hereof, Developer hereby grants to City an exclusive option
("Option I") to repurchase any or all of the Parcels of the PA 7, 8 & 9 Property that remain subject
to this Option Agreement as of date the Option I is exercised (the "Option I Property"), if
Developer fails to commence construction of the PA 7, 8 & 9 Master Site Infrastructure
Improvements in accordance with the MSI Phasing Plan. For the purposes of this Section 1, the
term "commence construction" shall mean the start date in accordance with the MSI Phasing
Plan; provided, however, if any portion of Master Site Infrastructure Improvements is to be
performed by or on behalf of the City, the start date in the MSI Phasing Plan shall be contingent
upon the City timely commencing, continuing and completing such portion of the Master Site
Infrastructure Improvements for which the City is responsible, and any delay in commencement,
4839-5818-8153.3 -2-
continuation or completion not caused by Developer and caused by the City shall serve to
reasonably extend the applicable start date under the MSI Phasing Plan.
In the event of Developer's failure to commence construction of the PA 7, 8 & 9 Master
Site Infrastructure Improvements within the time period described above, and such failure is not
cured within the cure period provided for under Sections 7(b) and 7(c) below, then City shall be
entitled to exercise, but is not obligated to exercise, the foregoing option for a period of sixty
(60) days following the expiration of such cure period (the "Option I Period").
(a) Exercise of Option I
City shall exercise Option I by giving written notice to Developer ("City's Notice of Option
Exercise"), in accordance with Section 8 of this PA 7, 8 & 9 Option Agreement, prior to the
expiration of the Option I Period. Failure of City to exercise Option I shall constitute a waiver of
City's right to exercise Option I only with respect to Developer's failure to commence construction
of a phase of Master Site Infrastructure Improvements by the identified start date in the MSI
Phasing Plan, but no other phase, and shall not constitute a waiver by City of Developer's breach
of its obligation to commence construction of any other phase of the Master Site Infrastructure
Improvements for which the start date has not yet occurred as of the date of expiration of the
Option 1 Period for the phase of Master Site Infrastructure Improvements deemed waived, nor
shall such failure constitute a waiver by City of any remedies City may have under the terms of
the PSDA or under any other agreement for Developer's failure to timely commence construction
of the Master Site Infrastructure Improvements pursuant to the start dates identified in the MSI
Phasing Plan.
(b) Repurchase Price - Option I
City's repurchase price for the PA 7, 8 & 9 Property ("Option I Repurchase Price"), shall
be the sum of (i) One Dollar ($1.00), (ii) one hundred percent (100%) of Developer's PA 7, 8 & 9
MSI Construction Costs incurred on or after this Option Agreement Effective Date, and (iii) the
cost of any Plans City elects to purchase pursuant to Section 7(l) below with respect to (a) the PA
7, 8 & 9 Master Site Infrastructure Improvements, and/or (b) the Project Components comprising
the Project.
For purposes of this Section 1, the term "Developer's PA 7, 8, & 9 MSI Construction
Costs" shall mean the construction costs actually incurred by Developer for construction of the
Master Site'lnfrastructure Improvements on the PA 7, 8 & 9 Property on or after this Option
Agreement Effective Date to the date of the Developer's receipt of City's Notice of Option I
Exercise, as determined by an independent audit (the "PA 7, 8 & 9 MSI Construction Cost
Audit"), performed by an independent auditor who shall be selected by City and be a partner at
a nationally recognized firm of accountants with experience in auditing large-scale, mixed use
construction projects (the "Auditor"), which costs shall consist only of: (1) the amount(s) paid by
Developer to the contractor or contractors performing the construction, (II) reasonable inspection,
supervision, and testing costs paid by Developer to independent third party engineers, architects,
or consultants in conjunction with said construction, (III) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer), and (IV) if the PA 7, 8 & 9 Master Site Infrastructure Improvements work
is completed and accepted by City, then amounts that include design plans (such as architectural
renderings and drawings) used by Developer to complete the construction of the PA 7, 8 & 9
4839-5818-8153.3 -3-
Master Site Infrastructure Improvements work, as applicable. In explanation of clause (IV) in the
preceding sentence, Developer's PA 7, 8, & 9 MSI Construction Costs shall not include any design
plans Developer may have contracted for or obtained if the PA 7, 8 & 9 Master Site Infrastructure
Improvements, as applicable, which are not completed as evidenced by the City accepting all
work for the PA 7, 8 & 9 Master Site Infrastructure Improvements. Developer shall promptly
provide City and the Auditor with all records and documentation necessary for the Auditor to
perform the PA 7, 8 & 9 MSI Construction Cost Audit,
2. Option II - Failure to Continuously Proceed With Construction of the PA 7 $ & 9
Master Site Infrastructure Im rovements or to Complete Construction of the Master
Site Infrastructure Improvements
Developer hereby grants to City an exclusive option ("Option II") to repurchase any or all
of the Parcels of the PA 7, 8 & 9 Property that remain subject to this PA 7, 8 & 9 Option Agreement
as of the date that Option II is exercised (the "Option II Property") if, after commencement of
construction of the PA 7, 8, & 9 Master Site Infrastructure Improvements, Developer fails to
continuously proceed with construction of the PA 7, 8, & 9 Master Site Infrastructure
Improvements in accordance with the MSI Phasing Plan, or to complete the PA 7, 8 & 9 Master
Site Infrastructure Improvements in accordance with the MSI Phasing Plan, as evidenced by
acceptance of such PA 7, 8 & 9 Master Site Infrastructure Improvements by the La Quinta City
Council, within the applicable time period(s) set forth in the MSI Phasing Plan to finish such phase
of Master Site Infrastructure Improvements (each, as applicable, a "Master Site Infrastructure
Improvements Phase Completion Deadline"). For purposes of this Section 2, the term
"continuously proceed with construction" shall mean construction that is interrupted, if at all, for
periods of no longer than thirty (30) days; provided, however, if any portion of Master Site
Infrastructure Improvements is to be performed by or on behalf of the City, such continuous
construction by Developer and any such Master Site Infrastructure Improvements Phase
Completion Date shall be contingent upon the City timely commencing, continuing and completing
such portion of the Master Site Infrastructure Improvements for which the City is responsible, and
any delay in continuation or completion not caused by Developer and caused by the City shall
serve to reasonably extend the 30-day interruption period and/or the Master Site Infrastructure
Improvements Phase Completion Date as applicable under the MSI Phasing Plan.
In the event of Developer's failure to continuously proceed with construction of the PA 7,
8 & 9 Master Site Infrastructure Improvements, or to complete construction of the Master Site
Infrastructure Improvements by the applicable Master Site Infrastructure Improvements Phase
Completion Deadline, and such failure is not cured within the cure period provided for under
Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not obligated to
exercise, the foregoing option for a period of sixty (60) days following the completion of the
"Master Site Infrastructure Improvements Cost Audit" (as that term is defined in Section 2(b)
below) and after expiration of such cure period ("Option II Period").
Notwithstanding anything to the contrary in this Section 2, Option II shall not apply to, and
the Option II Property shall not include, those portions of the PA 7, 8 & 9 Property for which
construction of the Project Component(s) designated pursuant to the PSDA to be constructed
thereon has commenced. Such portions are addressed in Section 4 below.
(a) Exercise of Option 11
City shall exercise Option If by giving written notice to Developer ("City's Notice of
Option II Exercise"), in accordance with Section 8 of this PA 7, 8 & 9 Option Agreement, prior to
4839-5818-8153.3 -4-
the expiration of the Option If Period. Failure of City to exercise Option II shall constitute a waiver
by City of City's right to exercise Option II only with respect to Developer's specific incidence of
failure to continuously proceed with construction of the PA 7, 8 & 9 Master Site Infrastructure
Improvements that gave rise to Option II or of Developer's failure to complete construction of the
PA 7, 8 & 9 Master Site Infrastructure Improvements by the Master Site Infrastructure
Improvements Phase Completion Deadline (as applicable), but shall not constitute a waiver by
City of Developer's breach of its obligation to continuously proceed with construction of the Master
Site Infrastructure Improvements or to complete construction of the Master Site Infrastructure
Improvements by the Master Site Infrastructure Improvements Phase Completion Deadline (as
applicable) or of any remedies City may have under the terms of the PSDA or under any other
agreement for Developer's failure to continuously proceed with construction of the Master Site
Infrastructure Improvements or to complete construction of the Master Site Infrastructure
Improvements by the Master Site Infrastructure Improvements Phase Completion Deadline (as
applicable).
(b) Repurchase Price - Option II
City's repurchase price for the Option II Property ("Option II Repurchase Price"), shall
be the sum of (i) one hundred percent (100%) of "Developer's PA 7, & & 9 MSI Construction
Costs", and (ii) the cost of any Plans City elects to purchase pursuant to Section 7(I) below with
respect to (a) the Master Site Infrastructure Improvements designated pursuant to the PSDA to
be constructed on the Option II Property, and/or (b) the Project Component(s) designated
pursuant to the PSDA to be constructed on the Option II Property.
For purposes of this Section 2, the term "Developer's PA 7, 8 & 9 MSI Construction
Costs" shall mean the construction costs actually incurred by Developer for construction of the
Master Site Infrastructure Improvements on the Option II Property on or after this Option
Agreement Effective Date to the date of the Developer's receipt of City's Notice of Option II
Exercise, as determined by an independent audit (the "Option II PA 7, 8 & 9 MSI Construction
Cost Audit"), performed by an independent auditor who shall be selected by City and be a partner
at a nationally recognized firm of accountants with experience in auditing large-scale, mixed use
construction projects (the "Auditor"), which costs shall consist only of: (1) the amount(s) paid by
Developer to the contractor or contractors performing the construction, (11) reasonable inspection,
supervision, and testing costs paid by Developer to independent third party engineers, architects,
or consultants in conjunction with said construction, and (III) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so-called "soft costs" incurred in the
planning, environmental review, or design of the Master Site Infrastructure Improvements
constructed on the Option II Property, or any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer). Developer shall promptly provide City and the Auditor with all records
and documentation necessary for the Auditor to perform the Option II MSI Construction Cost
Audit. In the event that there are any outstanding mortgages or deeds of trust that have been
approved by City pursuant to Section 311.1 of the PSDA (any of the foregoing, a "Valid Lien")
and that are recorded against the Option II Property at the time that Option II is exercised,
Developer and City agree that the Option II Repurchase Price shall be paid to the lender on any
such Valid Lien (any such lender with a Valid Lien, a "Lender"), up to the then outstanding balance
due under same including, without limitation, the outstanding principal balance, all accrued and
unpaid interest, and any prepayment fees and costs (collectively, the "Outstanding Balance").
Any portion of the Option II Repurchase Price not so needed to extinguish a Valid Lien shall be
paid to Developer.
4839-5818-8153.3 -5-
3. Option III Failure to Commence Construction of One or More Proiect
Components.
Developer hereby grants to City an exclusive option ("Option III") to repurchase any or all
of the Parcels of the PA 7, 8 & 9 Property that remain subject to this PA 7, 8 & 9 Option Agreement
as of the date that Option III is exercised (the "Option III Property") if Developer fails to
commence construction of any of the Project Components designated pursuant to the PSDA to
be constructed on a portion of the Option III Property on or prior to the start date for
commencement of such Project Component set forth in the Schedule of Performance attached to
Amendment No. 3. For purposes of this Section 3, the term "commence construction" shall mean
Developer's commencement of precise grading for all of the real property underlying such Project
Component(s).
In the event of Developer's failure to commence construction of any of the Project
Components designated pursuant to the PSDA to be constructed on a portion of the Option III
Property within the time period described above, and such failure is not cured within the cure
period provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but
is not obligated to exercise, the foregoing option for a period of sixty (60) days following the
expiration of such cure period (the "Option III Period").
Notwithstanding anything to the contrary in this Section 3, Option III shall not apply to, and
the Option III Property shall not include, those portions of the PA 7, 8 & 9 Property for which
construction of the Project Component(s) designated pursuant to ,the PSDA to be constructed
thereon has commenced. Such portions are addressed in Section 4 below.
(a) Exercise of Option III
City shall exercise Option III by giving written notice to Developer ("City's Notice of
Option III Exercise"), in accordance with Section 8 of this PA 7, 8 & 9 Option Agreement, prior
to the expiration of the Option III Period. Failure of City to exercise Option III shall constitute a
waiver by City of City's right to exercise Option III only with respect to Developer's specific
incidence of failure to commence construction of one or more Project Component(s) designated
pursuant to the PSDA to be constructed on a portion of the Option III Property within the time
period described above in this Section 3, but shall not constitute a waiver by City of Developer's
breach of its obligation to commence construction of said Project Component(s) -or of any
remedies City may have under the terms of the PSDA or under any other agreement for
Developer's failure to commence construction of said Project Component(s) within the time period
described above in this Section 3.
(b) Repurchase Price - Op
Lion III
City's repurchase price for the Option III Property ("Option III Repurchase Price"), shall
be the sum of (i) one hundred percent (100%) of "Developer's PA 7, 8 & 9 MSI Construction
Costs", and (ii) the cost of any Plans City elects to purchase pursuant to Section 7(1) below with
respect to all or any portion of (a) the Master Site Infrastructure Improvements designated
pursuant to the PSDA to be constructed on the Option III Property, and/or (b) the Project
Components designated pursuant to the PSDA to be constructed on the Option III Property.
For purposes of this Section 3, the term "Developer's PA 7, 8, & 9 MSI Construction
Costs" shall mean the construction costs actually incurred by Developer for construction of the
Master Site Infrastructure Improvements on the Option III Property on or after this Option
4839-5818-8153.3 -6-
Agreement Effective Date to the date of Developer's receipt of City's Notice of Option III Exercise,
as determined by an independent audit (the "Option III MSI Construction Cost Audit"),
performed by the Auditor, which costs shall consist only of (1) the amount(s) paid by Developer to
the contractor or contractors performing the construction, (II) reasonable inspection, supervision,
and testing costs paid by Developer to independent third party engineers, architects, or
consultants in conjunction with said construction, and (III) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so-called "soft costs" incurred in the
planning, environmental review, or design of the Master Site Infrastructure Improvements
constructed on the Option III Property, or any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer). Developer shall promptly provide City and the Auditor with all records
and documentation necessary for the Auditor to perform the Option III MSI Construction Cost
Audit. In the event that there are any Valid Liens recorded against the Option III Property at the
time that Option III is exercised, Developer and City agree that the Option III Repurchase Price
shall be paid to the Lender on any such Valid Lien, up to the then Outstanding Balance due under
same. Any portion of the Option III Repurchase Price not so needed to extinguish a Valid Lien
shall be paid to Developer.
4. Option IV - Failure to Continuously Proceed With Construction of one or more
Project Components or to Complete Construction of one or more Project
Components
Developer hereby grants to City an exclusive option ("Option IV") to repurchase any or all
of the Parcels of the PA 7, 8 & 9 Property that remain subject to this PA 7, 8 & 9 Option Agreement
as of the date that Option IV is exercised (the "Option IV Property") if, after commencement of
construction of any Project Component(s) designated pursuant to the PSDA to be constructed on
a portion of the Option IV Property, Developer fails to continuously proceed with construction of
said Project Component(s), or, subject to the last sentence of this paragraph, to complete
construction of said Project Component(s) within the time period for completion of such Project
Component(s) set forth in the Schedule of Performance attached to Amendment No. 3 as
evidenced by City's issuance of a certificate of occupancy for such Project Component(s) (the
"Option IV Project Component(s) Completion Deadline"). For purposes of this Section 4, the
term "continuously proceed with construction" shall mean construction that is interrupted, if at all,
for periods of no longer than thirty (30) days. Notwithstanding anything in this paragraph to the
contrary: (i) with respect to each of the Resort Residential Village and the Promenade Mixed -Use
Village, City shall not be entitled to exercise Option IV, and the Option IV Property shall not include
the real property to be developed with either of said Project Components, unless Developer fails
to complete construction of at least seventy percent (70%) of the Resort Residential Dwelling
Units to be constructed within such Project Components, and in addition, with respect to the
Promenade Mixed -Use Village, seventy percent (70%) of the commercial space to be constructed
therein, within the time period for completion of such Project Component set forth in the Schedule
of Performance attached to Amendment No. 3 for a Resort Residential Dwelling Unit within the
Resort Residential Village or Promenade Mixed -Use Village, as applicable.
In the event of Developer's failure to continuously proceed with construction of any Project
Component(s) designated pursuant to the PSDA to be constructed on a portion of the Option IV
Property, or, subject to the last sentence of the immediately preceding paragraph, Developer's
failure to complete construction of any of said Project Component(s) by the applicable Option IV
Project Component(s) Completion Deadline, and such failure is not cured within the cure period
provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not
4839-5818-8153.3 -7-
obligated to exercise, the foregoing option for a period of sixty (60) days following the completion
of the "Option IV Project Component(s) Cost Audit" (as that term is defined in Section 4(b)
below) and after expiration of such cure period ("Option IV Period").
Notwithstanding anything in this PA 7, 8 & 9 Option Agreement to the contrary, but subject
to Section 7(e) below, (i) City shall not be obligated to purchase any portions of the Option IV
Property on which construction of the Project Component designated pursuant to the PSDA to be
constructed thereon has commenced.
(a) Exercise of Option IV
City shall exercise Option IV by giving written notice to Developer ("City's Notice of
Option IV Exercise"), in accordance with Section 8 of this PA 7, 8 & 9 Option Agreement, prior
to the expiration of the Option IV Period, which notice shall set forth with specificity the portion of
the Option IV Property City is authorized and desires and/or is required to acquire (the "Option
IV City Acquisition Property"). Failure of City to exercise Option IV shall constitute a waiver by
City of City's right to exercise Option IV only with respect to Developer's specific incidence of
failure to continuously proceed with construction of the Project Component(s) designated
pursuant to the PSDA to be constructed on a portion of the Option IV Property that gave rise to
Option IV, or failure to complete construction of said Project Component(s) by the applicable
Option IV Project Component(s) Completion Deadline that gave rise to Option IV, subject to the
last sentence of the first paragraph of this Section 4 (as applicable), but shall not constitute a
waiver by City of Developer's breach of its obligation to continuously proceed with construction of
said Project Component(s), or to complete construction of said Project Component(s) by the
applicable Option IV Project Component(s) Completion Deadline (as applicable) or of any
remedies City may have under the terms of the PSDA or under any other agreement for
Developer's failure to continuously proceed with construction of said Project Component(s), or to
complete construction of said Project Components by the Option IV Project Component(s)
Completion Deadline (as applicable).
(b) Determination of Repurchase Price - Option IV
City's repurchase price for the Option IV City Acquisition Property ("Option IV
Repurchase Price"), shall be the sum of (i) one hundred percent (100%) of "Developer's Option
IV Project Component(s) Construction Costs", and (ii) the cost of any Plans City elects to
purchase pursuant to Section 7(I) below with respect to all or any portion of (a) the Master Site
Infrastructure Improvements designated pursuant to the PSDA to be constructed on the Option
IV City Acquisition Property, and/or (b) the Project Components designated pursuant to the PSDA
to be constructed on the Option IV City Acquisition Property.
For purposes of this Section 4, the term "Developer's Option IV Project Component(s)
Construction Costs" shall mean the construction costs actually incurred by Developer for
construction of (1) the portion of the Master Site Infrastructure Improvements constructed on the
Option IV City Acquisition Property on or after this Option Agreement Effective Date to the date
of Developer's receipt of City's Notice of Option IV Exercise, and (11) the portion of the Project
Component(s) designated pursuant to the PSDA to be constructed on the Option IV City
Acquisition Property to the date of Developer's receipt of City's Notice of Option IV Exercise, all
as determined by an independent audit (the "Option IV Project Component(s) Cost Audit"),
performed by the Auditor, which costs shall consist only of (i) the amount(s) paid by Developer to
the contractor or contractors performing the construction, (ii) reasonable inspection, supervision,
and testing costs paid by Developer to independent third party engineers, architects, or
4839-5818-8153.3 -8-
consultants in conjunction with said construction, and (iii) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so-called "soft costs" incurred in the
planning, environmental review, or design of the Master Site Infrastructure Improvements
constructed on the Option IV Property or the Project Component(s) designated pursuant to the
PSDA to be constructed on the Option IV Property, or any costs, fees, charges, or profits allocated
to Developer's own internal administrative, payroll, or overhead expenses or to any person or
entity affiliated with Developer). Developer shall promptly provide City and the Auditor with all
records and documentation necessary for the Auditor to perform the Option IV Project
Component(s) Cost Audit. In the event that there are any Valid Liens recorded against the Option
IV City Acquisition Property at the time that Option IV is exercised, Developer and City agree that
the Option IV Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then
outstanding balance due under same. Any portion of the Option IV Repurchase Price not so
needed to extinguish a Valid Lien shall be paid to Developer.
5. O tion V - Transfer of the PA 7 8 & 9 Property, or Portion Thereof Prior to
Completion of Project
Developer hereby grants to City an exclusive option ("Option V") to repurchase any or all
of the Parcels of the PA 7, 8 & 9 Property that remain subject to this PA 7, 8 & 9 Option Agreement
as of the date that Option V is exercised (the "Option V Property"), if, prior to the time Developer
completes the Project, Developer transfers or suffers an involuntary transfer of the PA 7, 8 & 9
Property or portion thereof in violation of the terms of the PSDA.
In the event of Developer's transfer of the PA 7, 8 & 9 Property or any portion thereof in
violation of the PSDA (an "Unauthorized Transfer") and such Unauthorized Transfer is not cured
within the cure period provided under Sections 7(b) and 7(c) below, then, City shall be entitled to
exercise, but is not obligated to exercise, the foregoing ,option for sixty (60) days following the
later of (i) the date of the Unauthorized Transfer that gives rise to City's option under this
Section 5, or (ii) City's discovery of the Unauthorized Transfer that gives rise to Option V ("Option
V Period"). Notwithstanding anything to the contrary in this Section 5, (a) Option V shall not apply
to, and the Option V Property shall not include, those portions of the PA 7, 8 & 9 Property that
were not the subject of an Unauthorized Transfer, and (b) City shall not be obligated to purchase
any portion of the Option V Property on which construction of the Project Component designated
pursuant to the PSDA to be constructed thereon has commenced.
(a) Exercise of Option V
City shall exercise Option V by giving written notice to Developer ("City's Notice of
Option V Exercise"), in accordance with Section 8 of this PA 7, 8 & 9 Option Agreement, prior to
the expiration of the Option V Period, which notice shall set forth with specificity the portion of the
PA 7, 8 & 9 Property City is authorized and desires and/or is obligated to acquire (the "Option V
City Acquisition Property"). Failure of City to exercise Option V shall constitute a waiver by City
of City's right to exercise Option V only with respect to the specific Unauthorized Transfer that
gave rise to Option V, but shall not constitute a waiver by City of Developer's breach of the transfer
provisions in the PSDA or pursuant to this PA 7, 8 & 9 Option Agreement, or of any remedies City
may have under the terms of the PSDA or under any other agreement for Developer's transfer or
sufferance of an involuntary transfer of the PA 7, 8 & 9 Property or portion thereof.
(b) Repurchase Price - Option V
4839-5818-8153.3 -9-
City's repurchase price for the Option V City Acquisition Property ("Option V Repurchase
Price") shall be as follows:
(i) In the event Developer has not yet commenced construction of the
Master Site Infrastructure Improvements to be constructed on the Option V City Acquisition
Property at the time City exercises Option V, City's Option I Price shall be the sum of (a) One
Dollar ($1.00), and (b) the cost of any Plans City elects to purchase pursuant to Section 7(I) below
with respect to all or any portion of (1) the Master Site Infrastructure Improvements, and/or (II) the
Project Components comprising the Project.
(ii) In the event Developer has commenced construction of the Master
Site Infrastructure Improvements on the Option V City Acquisition Property at the time City
exercises Option V, then (1) if City is authorized to and elects to purchase all of the Option V
Property, the Option V Repurchase Price shall be the sum of (a) ninety percent (90%) of the
purchase price paid to Developer in connection with the Unauthorized Transfer that triggered
City's right to exercise Option V, and (b) the cost of any Plans City elects to purchase pursuant to
Section 7(I) below with respect to all or any portion of the Master Site Infrastructure
Improvements, and/or the Project Components comprising the Project; and (2) if City is authorized
hereunder and elects to purchase only a portion of the Option V Property, then City's Option V
Repurchase Price shall be the amount that would have been payable under this PA 7, 8 & 9
Option Agreement by City to Developer if such portion of the Option V Property would have been
purchased by City pursuant to Option I, Option II, Option III, or Option IV as applicable depending
upon the status of construction upon such portion of the Option V Property as of the date that
Option V is exercised by City.
In the event that there are any Valid Liens recorded against the Option V City Acquisition
Property at the time that Option V is exercised, Developer and City agree that the Option V
Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then Outstanding
Balance due under same. Any portion of the Option V Repurchase Price not so needed to
extinguish a Valid Lien shall be paid to Developer.
6. City's Right of First Offer
Developer hereby grants to City a right of first offer ("City's Right of First Offer") to
purchase any or all of the Parcels of the PA 7, 8 & 9 Property, that remain subject to this PA 7, 8
& 9 Option Agreement as of the date that City exercised the Right of First Offer (the "Right of
First Offer Property"), in accordance with the terms and conditions in this Section 6, in the event
that (i) City has had the right to exercise any of Option I, Option II, Option III, Option IV, or Option
V and has failed to exercise or has elected not to exercise Option I, Option II, Option III, Option
IV, or Option V (as applicable) in accordance with the terms of this PA 7, 8 & 9 Option Agreement
and Developer's default that gave rise to Option I, Option II, Option III, Option IV, or Option V (as
applicable) has not been cured, and (ii) Developer has determined to sell or otherwise transfer
the PA 7, 8 & 9 Property or portion thereof. Notwithstanding anything to the contrary in this
Section 6, (a) the Right of First Offer Property shall not include any portion of the PA 7, 8 & 9
Property that is not included in "Developer's Sale Notice" (as that term is defined in Section 6(a)
below, and (b) in the event City elects to exercise City's Right of First Offer, City may elect to
purchase only those portions of the Right of First Offer Property that City was authorized and
desires (or is otherwise obligated) to purchase pursuant to the terms of Option I, Option 11, Option
III, Option IV, or Option V (as applicable). The portions of the Right of First Offer Property City
acquires hereunder shall be hereinafter referred to as the "Right of First Offer City Acquisition
Property".
4839-5818-8153.3 -10-
(a) Developer's Notice to City, City's Election
In the event that the circumstances described in clauses (i) and (ii) of the immediately
preceding paragraph exist, then prior to entering into any transaction with a third party concerning
the sale of any of the Right of First Offer Property, Developer shall provide City with written notice
of Developer's intent to sell such Right of First Offer Property, and Developer's proposed sale
price for the same ("Developer's Sale Notice"). City shall have sixty (60) days after receiving
Developer's Sale Notice to notify Developer, in writing, of City's election to exercise City's Right
of First Offer to acquire the Right of First Offer City Acquisition Property, at the price noted in
Developer's Sale Notice ("City's Election to Exercise"); provided, however, that if the Right of
First Offer City Acquisition Property does not comprise all of the Right of First Offer Property, then
City's acquisition price shall be the amount that would have been payable under this PA 7, 8 & 9
Option Agreement by City to Developer if such portion of the Right of First Offer City Acquisition
Property would have been purchased by City pursuant to Option I, Option II, Option III, or Option
IV as applicable depending upon the status of construction upon such portion of the Right of First
Offer City Acquisition Property as of the date that the Right of First Offer is exercised by City.
(b) City's Failure to Exercise
City's failure to deliver to Developer City's Election to Exercise within such sixty (60) day
period shall be deemed City's election not to exercise City's Right of First Offer and, except as
provided below, City's Right of First Offer with respect to the Right of First Offer Property shall
then terminate and City shall have no further right of first offer with respect to the Right of First
Offer Property. If City elects not to exercise (or is deemed to have elected not to exercise) City's
Right of First Offer then Developer may sell the Right of First Offer Property to a third party
purchaser; provided, however, that in the event Developer determines to sell the Right of First
Offer Property at a price that is less than the price set forth in Developer's Sale Notice, Developer
shall provide City with a written notice of Developer's intent to sell the Right of First Offer Property,
with Developer's new proposed sale price for the same ("Developer's Second Sale Notice"),
and City's Right of First Offer shall again apply with respect to the Right of First Offer Property, in
accordance with the process outlined in subparagraph (a) above and this subparagraph (b).
(c) Transfer Restrictions of PSDA
Notwithstanding any of the provisions in Option V (Section 5 above) or this Section 6 to
the contrary, nothing in this Option Agreement is intended to or shall have the effect of waiving
the transfer restrictions set forth in the PSDA, any of City's rights related thereto in the PSDA or
any other agreements between City and Developer relating to the PSDA Property, and any
proposed sale or transfer by Developer shall be effected in accordance with the same.
7. Additional Terms Applicable to the Repurchase Option
The following additional terms shall apply to Option I, Option II, Option III, Option IV, Option
V, and City's Right of First Offer:
(a) Successors and Assign . Option I, Option II, Option III, Option IV, Option
V, and City's Right of First Offer created hereby shall be irrevocable by Developer and shall be
binding upon the successors and assigns of Developer and on the PSDA Property.
(b) Developer's Right to Cure Certain Defaults. Notwithstanding anything in
this PA 7, 8 & 9 Option Agreement to the contrary (A) City shall not be entitled to exercise Option
4839-5818-8153.3 -11-
I, Option II, Option III, or Option IV until City has provided a written notice to Developer regarding
Developer's failure to commence construction, continuously proceed with construction, or to
complete construction, as applicable (with any of the above failures referred to hereinafter as an
"Option Triggering Event"), and Developer has not, within sixty (60) days after receipt of such
notice, cured, corrected, or remedied such Option Triggering Event or, for those Option Triggering
Events that cannot reasonably be cured, corrected, or remedied within sixty (60) days,
commenced to cure, correct or remedy such Option Triggering Event within said sixty (60) day
period, and diligently prosecute the same to completion and (6) City shall not be entitled to
exercise Option V until City has provided a written notice to Developer regarding an Unauthorized
Transfer (an "Option V Triggering Event") and Developer has not, within thirty (30) days after
receipt of such notice, cured, corrected or remedied such Option V Triggering Event.
(c) Notice of Default to Mortgagee or Deed of Trust Holders; Right to Cure.
With respect to any mortgage or deed of trust granted by Developer, whenever City may deliver
any notice or demand to Developer with respect to an Option Triggering Event (including, but not
limited to, an Option V Triggering Event), City shall at the same time deliver a copy of such notice
or demand to each holder of record of any mortgage or deed of trust which has previously
requested such notice in writing. Each such holder shall (insofar as the rights granted by City are
concerned) have the right, at its option, within sixty (60) days after the receipt of the notice (except
in the event of an Option V Triggering Event, in which case the cure period shall be thirty (30)
days), to cure or remedy or commence to cure or remedy and thereafter to pursue with due
diligence the cure or remedy of any such default and to add the cost thereof to the mortgage debt
and the lien of its mortgage. It is understood that a holder shall be deemed to have satisfied the
sixty (60) day time limit set forth above for commencing to cure or remedy a Developer default
which requires title and/or possession of the Property (or portion thereof) if and to the extent any
such holder has within such sixty (60) day period commenced proceedings to obtain title and/or
possession and thereafter the holder diligently pursues such proceedings to completion and cures
or remedies the default.
(d) No City Obligation: Purchase of Whole Project Components.
(i) Notwithstanding any covenant, term, or provision in this Option
Agreement to the contrary, City shall not be obligated to exercise Option 1, Option 11, Option III,
Option IV, Option V, or City's Right of First Offer.
(ii) Notwithstanding anything to the contrary in this PA 7, 8 & 9 Option
Agreement, if City elects to purchase any part of a Project Component pursuant to Option IV,
Option V, or City's Right of First Offer, then City shall be obligated to purchase all of such Project
Component that remains subject to this PA 7, 8 & 9 Option Agreement as of date of such election.
(e) Release of PA 7. 8 & 9 Option Agreement Upon Completion of Pro'ect
Component. In the event Developer commences and completes construction of a Project
Component, as evidenced by City's issuance of a Release of Construction Covenants for such
Project Component and City has not exercised Option I, Option II, Option III, Option IV, Option V
or City's Right of First Offer with respect to such Project Component or the real property on which
such Project Component is designated pursuant to the PSDA to be constructed City's issuance
of a Release of Construction Covenants for such Project Component shall act to automatically
release this PA 7, 8 & 9 Option Agreement with respect to said Project Component and the real
property on which such Project Component is designated pursuant to the PSDA to be constructed
with no further action required by City or Developer; provided, however, upon request of
Developer, City shall execute and record a termination and release of this PA 7, 8 & 9 Option
4839-5818-8153.3 -12-
Agreement. Notwithstanding the foregoing to the contrary, City shall, at or prior to the close of
escrow for the sale of each Residential Dwelling Unit at the Project to a third party buyer, cause
this PA 7, 8 & 9 Option Agreement to be terminated with respect to such Residential Dwelling
Unit. Within ten (10) days following City's receipt of written notice from Developer of a pending
escrow for the sale of any such Residential Dwelling Unit, City shall (i) execute and have notarized
a Quitclaim Deed and/or such other document(s) required by the applicable escrow holder to
evidence the termination of this PA 7, 8 & 9 Option Agreement with respect to the Residential
Dwelling Unit being sold, and (ii) deposit the original of such executed and notarized document(s)
into such escrow.
(f) Enforced Delay Pursuant to PSDA. Notwithstanding anything to the
contrary herein, in the event performance by Developer under the PSDA is extended pursuant to
Section 602 of the PSDA, such that the time by which Developer is required thereunder to
commence construction of the Master Site Infrastructure Improvements, complete construction of
the Master Site Infrastructure Improvements, commence construction of one or more Project
Components designated pursuant to the PSDA to be constructed on a portion of the PA 7, 8 & 9
Property, or complete construction of one or more Project Components designated pursuant to
the PSDA to be constructed on a portion of the PA 7, 8 & 9 Property, is extended, such extensions
shall automatically apply hereto to (as applicable) extend the time by which Developer is required
to commence construction of the Master Site Infrastructure Improvements, complete construction
of the Master Site Infrastructure Improvements, commence construction of one or more Project
Components designated pursuant to the PSDA to be constructed on a portion of the PA 7, 8 & 9
Property, or complete construction of one or more Project Components designated pursuant to
the PSDA to be constructed on a portion of the PA 7, 8 & 9 Property, by the same time as extended
under the PSDA.
(9) Subordination. City and Developer shall enter into with the Lender a
subordination or similar agreement that provides for all of the following: (i) the Lender to notify
City, in writing, of any default by Developer under the Lender's loan documents concurrently with
its notification to Developer of such default, (ii) the Lender to provide City with a copy of any Notice
of Default (each, a "Notice of Default") recorded against the title to the PA 7, 8 & 9 Property in
the Official Records of the County of Riverside, State of California (the "Official Records")
concurrently with its delivery of such Notice of Default to Developer; (iii) the right of City to cure
the default at any time prior to the foreclosure (or recording of a deed in lieu thereof) on the
Lender's deed of trust, (iv) the right of City to negotiate with the Lender regarding the default at
any time prior to the foreclosure (or recording of a deed in lieu) on the Lender's deed of trust, and
(v) the Lender's agreement that Lender shall not conduct a foreclosure sale (or exercise a power
of sale or record a deed in lieu of foreclosure or any similar action that would result in the
ownership and vesting of title in the name of Lender or its assignee or designee) prior to the date
that is at least six (6) months after the Lender delivers written notice of the default to City and
Developer pursuant to clause (i) above. The foregoing provisions in clauses (i)-(v), and any other
additional terms and conditions that City, Developer, and Lender may deem necessary or
appropriate, shall be in any subordination or other agreement as may be requested or required
by either the Lender or Developer, which agreement would result in this PA 7, 8 & 9 Option
Agreement having lower priority from any other instrument or encumbrance (including but not
limited to a mortgage, deed of trust, regulatory agreement, temporary or permanent easement,
reciprocal servitude, and any covenants, codes, and restrictions or restrictive use covenant) that
is executed on behalf of and for the benefit of either the Lender or Developer, or both, and to be
recorded in the Official Records.
4839-5818-8153.3 -13-
(h) City's and City's Assignee's Investigation of PA 7, 8 & 9 Property.
(i) City shall have a period of forty-five (45) days, commencing on the
date of an event that triggers City's ability to exercise any of Option I, Option II, Option III, Option
IV, Option V, or City's Right of First Offer, to enter upon the PA 7, 8 & 9 Property (or applicable
portion thereof) to conduct any tests, inspections, investigations, or studies of the condition of the
PA 7, 8 & 9 Property (or applicable portion thereof) (the "Option Agreement Tests and
Investigations"). Developer shall permit City access to the PA 7, 8 & 9 Property (or applicable
portion thereof) for such purposes. City's obligation to close "Escrow" (as that term is defined in
Section 7(i) below) shall be subject to City's approval of any environmental and other site testing
conducted by City in City's discretion. City shall indemnify, defend, and hold harmless Developer
and its officers, directors, shareholders, employees, agents, and representatives from and against
all claims, liabilities, or damages, and including expert witness fees and reasonable attorney's
fees and costs, arising out of any such testing, inspection, or investigatory activity on the PA 7, 8
& 9 Property (or applicable portion thereof).
(ii) In the event City assigns its rights under this PA 7, 8 & 9 Option
Agreement City's assignee shall have the right to enter upon the PA 7, 8 & 9 Property (or
applicable portion thereof) during the period commencing on the date of City's assignment of this
PA 7, 8 & 9 Option Agreement to said assignee and ending on the "Closing Date" (as that term
is defined in Section 7(i) below) to conduct any PA 7, 8 & 9 Option Agreement Tests and
Investigations elected by the assignee. Developer shall permit City's assignee access to the PA
7, 8 & 9 Property (or applicable portion thereof) for such purposes, provided that, prior to any
entry upon the PA 7, 8 & 9 Property by such assignee or its employees, agents, representatives
or consultants, City shall cause such assignee to provide Developer with evidence that it has a
liability insurance policy that names Developer as an additional insured, which policy shall have
limits of coverage and be on terms reasonably acceptable to Developer. City's obligation to close
"Escrow" (as defined in Section 7(i) below) shall be subject to City's assignee's approval of any
environmental and other site testing conducted by said assignee in said assignee's discretion.
City shall cause said assignee to indemnify, defend, and hold harmless Developer and its officers,
directors, shareholders, employees, agents, and representatives from and against all claims,
liabilities, or damages, and including expert witness fees and reasonable attorney's fees and
costs, arising out of any such testing, inspection, or investigatory activity on the PA 7, 8 & 9
Property (or applicable portion thereof).
(i} Escrow Provisions.
(i) Within five (5) business days after City has exercised Option I,
Option II, Option III, Option IV, Option V, or City's Right of First Offer (as applicable), or as soon
thereafter as reasonably practicable, an escrow shall be opened ("Escrow") with an escrow
company selected by City ("Escrow Holder") for the reconveyance to City of the portions of the
PA 7, 8 & 9 Property to be acquired by City pursuant to this PA 7, 8 & 9 Option Agreement.
Escrow shall be deemed opened on the date that a fully executed copy of this PA 7, 8 & 9 Option
Agreement and a notice of exercise of option prepared by City are delivered to Escrow Holder
("Opening of Escrow"). Escrow Holder shall notify Developer and City in writing of the date of
the Opening of Escrow promptly following the opening of the Escrow.
(ii) Escrow shall close on or before the date that is six (6) months after
occurrence of the event giving rise to City's exercise of Option I, Option II, Option III, Option IV,
Option V, or City's Right of First Offer ("Close of Escrow" or "Closing Date"). The terms "Close
of Escrow" and "Closing Date" shall mean the date the grant deed conveying fee title to City ("City
4839-5818-8153 3 -14-
Grant Deed") is recorded in the Official Records. Possession of the portions of the PSDA
Property conveyed to the City pursuant to this PA 7, 8 & 9 Option Agreement shall be delivered
to City at the Close of Escrow.
(iii) This PA 7, 8 & 9 Option Agreement, together with any standard
instructions of Escrow Holder, shall constitute the joint escrow instructions of Developer and City
to Escrow Holder as well as an agreement between Developer and City. In the event of any
conflict between the provisions of this PA 7, 8 & 9 Option Agreement and Escrow Holder's
standard instructions, this PA 7, 8 & 9 Option Agreement shall prevail.
(iv) The Escrow shall be subject to City's approval of a then -current
preliminary title report. Any monetary lien(s) or encumbrance(s) shown on such preliminary title
report that is (are) created concurrent with or after the close of escrow that conveyed the Phase
1A Property or Phase 1B Property from City to Developer shall be removed by Developer at its
sole expense prior to the Close of Escrow pursuant to, this Section 7(i) unless such exception(s)
is (are) accepted by City in its sole discretion; provided, however, that City shall accept the
following exceptions to title: (i) current taxes not yet delinquent, (ii) matters affecting title existing
on the date of recordation of the Grant Deed to the Phase 1A Property or Phase 1 B Property (in
the form of Attachment No. 4 to the PSDA), and (iii) matters shown as printed exceptions in the
standard form ALTA policy of title insurance. In the event the PA 7, 8 & 9 Property (or applicable
portion thereof subject to the Escrow) is encumbered by a Valid Lien, City shall be permitted to
unilaterally instruct Escrow Holder to satisfy the indebtedness secured thereby out of the
proceeds payable to Developer through the foregoing Escrow. Any additional amount necessary
to satisfy such Valid Lien, including, without limitation, (1) the amount of the unpaid indebtedness
secured by such Valid Lien, including principal and interest and all other sums secured by the
Valid Lien, including, without limitation, any prepayment fees and costs, shall be paid by City at
the Closing.
(v) On or before 1:00 p.m. on the last business day preceding the
scheduled Closing Date, City shall deposit in Escrow (i) the applicable of the Option I Repurchase
Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase
Price; the Option V Repurchase Price, or the price noted in Developer's Sale Notice or
Developer's Second Sale Notice (the last two are referred to herein as the "Right of First Offer
Repurchase Price"); (ii) one-half (1/2) of the escrow fees; (iii) the portion of the title insurance
premium attributable to any extra or extended coverages, or any additional charge resulting from
City's request that the amount of insurance be higher than the applicable of the Option I
Repurchase Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option
IV Repurchase Price, the Option V Repurchase Price, or the Right of First Offer Repurchase
Price; and (iv) any and all additional instruments or other documents required from City (executed
and acknowledged if appropriate) as may be necessary in order to effect the transfer of the PA
7, 8 & 9 Property, or applicable portion thereof, to City. On or before 1:00 p.m. on the last business
day preceding the scheduled Closing Date, Developer shall deposit in Escrow (i) the City Grant
Deed, executed and acknowledged; (ii) one-half (1/2) of the escrow fees; and (iii) any and all
additional instruments or other documents required from Developer (executed and acknowledged
if appropriate) as may be necessary in order to effect the transfer of the PA 7, 8 & 9 Property, or
applicable portion thereof, to City. Developer shall also be required to pay for documentary tax
stamps and recording fees, if any, and for an ALTA standard form owner's policy of title insurance
in the amount of the Option I Repurchase Price, the Option II Repurchase Price, the Option III
Repurchase Price, the Option IV Repurchase Price, the Option V Repurchase Price, or the Right
of First Offer Repurchase Price (as applicable), showing title vested in City free and clear of all
liens and encumbrances except those permitted by subparagraph (iv) above (the "Title Policy").
4839-5818-8153.3 -15-
City's receipt of the Title Policy shall be a condition to the Close of Escrow. Any other costs and
expenses shall be allocated between the Parties in the manner customary for a commercial
property conveyance in Riverside County.
(vi) If, on or before the Closing Date, Escrow Holder has received all of
the documents and funds listed in subparagraph (v) above, and Escrow Holder is in a position to
cause the Title Policy to be issued to City, and provided City has approved of the condition of the
PA 7, 8 & 9 Property, or applicable portion thereof, Escrow Holder shall close the Escrow by
taking the following actions: (a) recording the City Grant Deed in the Official Records, and
delivering the recorded City Grant Deed to City; (b) causing the Title Policy to be issued to City;
and (c) delivering the portion of the applicable of the Option I Repurchase Price, the Option II
Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase Price, the Option
V Repurchase Price, or the Right of First Offer Repurchase Price remaining after payment of all
Valid Liens, if any, to Developer.
Q) City's Right to Acquire the PA 7, 8 & 9 Property. Notwithstanding anything
herein to the contrary, upon City's exercise of Option I, Option II, Option III, Option IV, Option V,
or City's Right of First Offer, Developer's commencement to cure the default that led to City's
exercise shall not affect City's right to close the Escrow and acquire the PA 7, 8 & 9 Property (or
applicable portion thereof).
(k) City's Repurchase of Uncompleted Portions_ of the Property.
Notwithstanding anything herein to the contrary, in the event that as a result of City exercising
Option III, Option IV or Option V City acquires the PA 7, 8 & 9 Property, or portion thereof, if
Developer has obtained from City a certificate of occupancy and has sold to third parties one or
more of the Residential Dwelling Units developed thereon, the provisions of this PA 7, 8 & 9
Option Agreement shall apply only to those portions of the PA 7, 8 & 9 Property which have not
been sold to third parties ("Uncompleted Portion of the Repurchase Property") and any
calculations for determining the Option III Repurchase Price, the Option IV Repurchase Price or
the Option V Repurchase Price (as applicable) shall be based solely upon the Uncompleted
Portion of the Repurchase Property.
(1) City's Ri_clht to Purchase Plans. At the time City exercises any of Option I,
Option 11, Option III, Option IV, Option V, or City's Right of First Offer, City shall also have the right,
which City may exercise in its sole and absolute discretion, to purchase from Developer for the
actual cost Developer incurred in preparing the same, all (but not less than all) of the plans,
blueprints, drawings, sketches, specifications, tentative or final subdivision maps, landscape
plans, utilities plans, soils reports, noise studies, environmental assessment reports, grading
plans and any other materials (collectively, the "Plans") relating to (i) all of the Master Site
Infrastructure Improvements designated pursuant to the PSDA to be constructed on the portions
of the Property to be acquired by City, and/or (b) all or any of the Project Components designated
pursuant to the PSDA to be constructed on the portions of the Property to be acquired by City,
together with copies of all of the Plans, as have been prepared for the development of the PA 7,
8 & 9 Property to date of City's exercise of Option I, Option II, Option III, Option IV, or City's Right
of First Offer (as applicable). Notwithstanding the foregoing, however, Developer does not
covenant to convey to City the copyright or other ownership rights of third parties. City's
acquisition or use of the Plans or any of them shall be without any representation or warranty by
Developer as to the accuracy or completeness of any such Plans, and City shall assume all risks
in the use of the Plans.
4839-5818-8153.3 -1 6-
(m) City's Repurchase Price Reflects Reasonable Approximation of Damages.
City and Developer agree that City has the right to either proceed with its remedies under the
PSDA or to exercise Option I, Option II, Option III, Option IV, or Option V. Notwithstanding
anything to the contrary herein or in the PSDA, in the event City exercises any of Option I, Option
II, Option III, Option IV, or Option V (as applicable) to acquire the PA 7, 8 & 9 Property, or a portion
thereof, City shall be deemed to have elected to waive the remedies to which it would otherwise
be entitled under the PSDA. City and Developer agree that City will incur damages by reason of
the default that gave rise to City's ability to exercise Option I, Option II, Option III, Option IV, or
Option V (as applicable), which damages shall be impractical and extremely difficult, if not
impossible, to ascertain. City and Developer, in a reasonable effort to ascertain what City's
damages would be in the event of such default by Developer, have agreed that considering all of
the circumstances existing on the date of this PA 7, 8 & 9 Option Agreement, including the
relationship of the sum to the range of harm to City that reasonably could be anticipated, including
without limitation the potential loss of tax revenue to the City of La Quinta, and the anticipation
that proof of actual damages would be costly or inconvenient, the exercise by City of Option I,
Option II, Option III, Option IV, or Option V (as applicable), and the payment by City of the Option
I Repurchase Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option
IV Repurchase Price, or the Option V Repurchase Price (as applicable) and the conveyance of
the PA 7, 8 & 9 Property, or applicable portion thereof, by Developer to City, is fair and reasonable.
City and Developer agree that the (discounted) Option I Repurchase Price, Option II Repurchase
Price, Option III Repurchase Price, Option IV Repurchase Price, or Option V Repurchase Price
(as applicable) reflect a reasonable estimate of City's damages under the provisions of
Section 1671 of the California Code of Civil Procedure and shall operate as liquidated damages
to City if City exercises Option I, Option 11, Option III, Option IV, or Option V (as applicable). If
City does not exercise Option 1, Option II, Option III, Option IV, or Option V, then City shall retain
and may exercise all of its rights and remedies as set forth in any other agreement, including, but
not limited to, the PSDA.
8. Notices Demands and Communications Between the Parties.
Formal notices, demands, and communications between City and Developer shall be
given either by (i) personal service, (ii) delivery by reputable document delivery service such as
Federal Express that provides a receipt showing date and time of delivery, or (iii) mailing in the
United States mail, certified mail, postage prepaid, return receipt requested, addressed to:
To City: City of La Quinta
78-495 Calle Tampico
La Quinta, California 92253
Attn: City Manager
With a copy to: Rutan & Tucker, LLP
611 Anton Boulevard., Suite 1400
Costa Mesa, California 92626
Attn: William H. Ihrke, Esq.
To Developer: SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas, California 92024
Attn: Robert S. Green, Jr.
4839-5818-8153.3 -17-
Notices personally delivered or delivered by document delivery service shall be deemed
effective upon receipt. Notices mailed in the manner provided above shall be deemed received
and effective on the second business day following deposit in the United States mail. Such written
notices, demands, and communications shall be sent in the same manner to such other
addresses as either Party may from time to time designate by mail.
9. Applicable Law and Forum, Attome 's Fees
The Superior Court of the State of California in the County of Riverside shall have the
exclusive jurisdiction of any litigation between the Parties arising out of this PA 7, 8 & 9 Option
Agreement. This PA 7, 8 & 9 Option Agreement shall be governed by, and construed under, the
internal laws of the State of California, without regard to conflict of law principles. In addition to
any other rights or remedies and subject to the restrictions otherwise set forth in this PA 7, 8 & 9
Option Agreement, including without limitation in this Section 9, either Party may take legal action,
in law or in equity, to cure, correct, or remedy any default, to recover damages for any default, to
compel specific performance of this PA 7, 8 & 9 Option Agreement, to obtain declaratory or
injunctive relief, or to obtain any other remedy consistent with the purposes of this PA 7, 8 & 9
Option Agreement. City shall also have the right to pursue damages for Developer's defaults but
in no event shall Developer be entitled to recover damages of any kind from City, including
damages for economic loss, lost profits, or any other economic or consequential damages of any
kind. The rights and remedies of the Parties are cumulative and the exercise by either Party of
one or more of such rights or remedies shall not preclude the exercise by it, at the same or
different times, of any other rights or remedies for the same default or any other default by the
other Party. Service of process on City shall be made in the manner required by law for service
on a public entity. Service of process on Developer shall be made in any manner permitted by
law and shall be effective whether served within or outside of California.
If either Party to this PA 7, 8 & 9 Option Agreement is required to initiate or defend, or is
made a party to, any action or proceeding in any way connected with this PA 7, 8 & 9 Option
Agreement, the Party prevailing in the final judgment in such action or proceeding, in addition to
any other relief which may be granted, shall be entitled to reasonable attorney's fees. Attorney's
fees shall include reasonable costs for investigating such action, conducting discovery, retaining
expert witnesses, and all other necessary costs the court allows which are incurred in such
litigation.
10. City Right to Assign
In the event City has the right to exercise any of Option I, Option II, Option III, Option IV,
Option V, or City's Right of First Offer, City shall have the right to assign its rights hereunder upon
providing prior written notice to Developer pursuant to Section 8 of this PA 7, 8 & 9 Option
Agreement, and thereafter entering into an assignment and assumption agreement with such
assignee.
11. City ApArovals and Actions
City shall maintain authority of this PA 7, 8 & 9 Option Agreement and the authority to
implement this PA 7, 8 & 9 Option Agreement through the City Manager. The City Manager shall
have the authority to make approvals, issue - interpretations, waive provisions, negotiate and
enter into amendments to this PA 7, 8 & 9 Option Agreement and/or negotiate and enter into
implementing agreements or documents on behalf of City so long as such actions. do not
materially or substantially change the business terms of this PA 7, 8 & 9 Option Agreement, or
4839-5818-8153.3 -18-
materially or substantially add to the costs incurred or to be incurred by City as specified herein.
Such approvals, interpretations, waivers, amendments, and/or implementing agreements or
documents may include extensions of time to perform. All other material and/or substantial
interpretations, waivers, or amendments shall require the consideration, action and written
consent of the City Council.
12. Nonliabillty of City Officials and Employees
No officer, official, employee, agent, or representative of City shall be personally liable to
Developer or any successor in interest, in the event of any default or breach by City, or for any
amount which may become due to Developer or its successor, or for breach of any obligation of
the terms of this PA 7, 8 & 9 Option Agreement.
13. Nondiscrimination
Developer covenants for itself, its heirs, executors, assigns, and all persons claiming
under or through them, that there shall be no discrimination against any person on account of
race, color, creed, religion, sex, marital status, national origin, ancestry, or any other protected
class under the laws of the United States, California, and any applicable local jurisdiction with
respect to this PA 7, 8 & 9 Option Agreement or use of the PA 7, 8 & 9 Property.
14. Interpretation
The terms of this PA 7, 8 & 9 Option 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 PA 7, 8 & 9 Option Agreement or any other rule of construction which might
otherwise apply. The Section headings are for purposes of convenience only, and shall not be
construed to limit or extend the meaning of this PA 7, 8 & 9 Option Agreement.
15. Entire Agreement
This PA 7, 8 & 9 Option Agreement integrates all of the terms and conditions mentioned
herein, or incidental hereto, and, with the exception of the PSDA, supersedes all negotiations or
previous agreements between the Parties with respect to all or any part of the subject matter
hereof.
All waivers of the provisions of this PA 7, 8 & 9 Option Agreement must be in writing and
signed by the appropriate authorities of the Party to be charged, and all amendments and
modifications hereto must be in writing and signed by the appropriate authorities of City and
Developer.
16. Counterparts
This PA 7, 8 & 9 Option Agreement may be executed in counterparts, each of which, after
all the Parties hereto have signed this PA 7, 8 & 9 Option Agreement, shall be deemed to be an
original, and such counterparts shall constitute one and the same instrument.
17. Severability
In the event any section or portion of this PA 7, 8 & 9 Option Agreement shall be held,
found, or determined to be unenforceable or invalid for any reason whatsoever, the remaining
4839-5818-8153 3 -19-
provisions shall remain in effect, and the Parties hereto shall take further actions as may be
reasonably necessary and available to them to effectuate the intent of the Parties as to all
provisions set forth in this PA 7, 8 & 9 Option Agreement.
[ Signature page follows ]
4839-5818-8153.3 -20-
IN WITNESS WHEREOF, the Parties have executed this PA 7, 8 & 9 Option Agreement
as of the date first above written.
Date:
20
"DEVELOPER"
SILVERROCK DEVELOPMENT COMPANY, LLC,
a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
By:
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
[Signature page continues next page]
4839-5818-8153.3 -21-
"CITY"
CITY OF LA QUINTA, a California municipal
Corporation and charter city
By:
Its:
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
City Attorney
City Manager
4839-5818-8153.3 -22-
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On
, before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On
, before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
4839-5818-8153.3 -23-
EXHIBIT "A"
LEGAL ❑ESCRIPTION OF THE PA 7 8 & 9 PROPERTY
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF LA QUINTA IN
THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PA 7, 8, & 9 Property:
PARCELS 10, 11, AND 12 OF PARCEL MAP NO. 37207, IN THE CITY OF LA QUINTA,
COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, FILED IN BOOK 242, PAGES 72
THROUGH 87 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
4639-5818-8153.3 -1-
EXHIBIT "O"
FORM OF GRANT DEED
[See following page]
EXHIBIT "O"
-1-
127114684
4819-2019-1097 4
ATTACHMENT NO. 4
FORM OF GRANT DEED
[See following document]
4836-3161-9188 3
RECORDING REQUESTED BY,
MAIL TAX STATEMENTS TO
AND WHEN RECORDED MAIL TO:
SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas. California 92024
This document is exempt from payment of a recording fee
pursuant to Government Code Section 27383
GRANT DEED
(Phase _ )
For valuable consideration, receipt of which is hereby acknowledged, The CITY OF LA
QUINTA, a California municipal corporation and charter city (the "City"), hereby grants to
SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company
("Developer"), the real property hereinafter referred to as the "Phase _ Property," described in
Exhibit A attached hereto and incorporated herein, subject to the existing easements, restrictions
and covenants of record described there.
1, Reservation of Mineral Rights. City excepts and reserves from the conveyance
herein described all interest of City in oil, gas, hydrocarbon substances and minerals of every kind
and character lying more than five hundred (500) feet below the surface, together with the right
to drill into, through, and to use and occupy all parts of the Phase _ Property lying more than five
hundred (500) feet below the surface thereof for any and all purposes incidental to the exploration
for and production of oil, gas, hydrocarbon substances or minerals from said Phase _ Property or
other lands, but without, however, any right to use either the surface of the Phase_ Property or
any portion thereof within five hundred (500) feet of the surface for any purpose or purposes
whatsoever, or to use the Phase _ Property in such a manner as to create a disturbance to the
use or enjoyment of the Phase_ Property.
2. Property Conveyance in Accordance With Redevelopment Plan, Purchase,
Sale, and Development Agreement. The Phase _ Property is conveyed in accordance with and
subject to the Redevelopment Plan for the La Quinta Redevelopment Project Area No. 1
("Redevelopment Plan") which was approved and adopted by Ordinance No: 43, on
November 29, 1983, of the City Council of the City of La Quinta, and a Purchase, Sale, and
Development Agreement entered into between City and Developer dated November 19, 2014
("Original PSDA"), as amended by Amendment No. 1 to Purchase, Sale and Development
Agreement dated October 29, 2015 ("Amendment No. 1 ") and by Amendment No. 2 to Purchase,
Sale and Development Agreement dated on or about April 18, 2017 ("Amendment No. 2") and by
Amendment No. 3 to Purchase, Sale and Development Agreement dated on or about October
_, 2018 ("Amendment No. 3") (collectively and as may be further amended, the "PSDA"). Copies
of all documents are on file with City at its offices as a public record and which is incorporated
herein by reference. The PSDA generally requires Developer to construct and operate on the
Phase_ Property a [Insert Project Description] (the "Phase _ Project"), and other requirements
as set forth in the PSDA. Except as otherwise defined herein, all terms used herein shall have
the same meaning as those used in the PSDA.
3. Permitted Uses. Developer covenants and agrees for itself, its successors, its
assigns, and every successor in interest to the Phase_ Property or any part thereof, that upon the
date of this Grant Deed ("Grant Deed") and during construction through completion of
4836-3161-9188.3
development and thereafter, Developer shall devote the Phase _ Property to the uses specified
in the Redevelopment Plan for the periods of time specified therein. All uses conducted on the
Phase _ Property, including, without limitation, all activities undertaken by Developer pursuant to
the PSDA, shall conform to the PSDA, the Redevelopment Plan, and all applicable provisions of
the La Quinta Municipal Code. The foregoing covenants shall run with the land.
4. Restrictions on Transfer. Developer further agrees that, except as permitted or
approved by City pursuant to Section 603 of the PSDA, (i) No voluntary or involuntary successor
in interest of Developer shall acquire any rights or powers under the PSDA or this Grant Deed,
nor shall Developer make any total or partial sale, transfer, conveyance, assignment, subdivision,
refinancing or lease of the whole or any part of the Phase_ Property or the Phase_ Project
thereon, and (ii) Developer shall retain full managerial and operational control of the Phase _
Project. The restrictions set forth in this Section 4 shall automatically terminate (1) as to any
individual residential dwelling unit that has been sold and transferred to a buyer pursuant to the
terms of the PSDA, and (11) as to any Project Component (as that term is described in Section
100 of the Original PSDA) for which City has recorded a Release of Construction Covenants (as
that term is described in Section 100 of the Original PSDA), substantially in the form of Attachment
No. 8 to the PSDA, with no further action required of City or Developer.
5. Binding on Successors. All of the terms, covenants and conditions of this Grant
Deed shall be binding upon Developer and the permitted successors and assigns of Developer.
Whenever the term "Developer" is used in this Grant Deed, such term shall include any other
successors and assigns as herein provided.
6. Covenants Regarding Nondiscrimination. Developer covenants by and for
itself and any successors in interest that there shall be no discrimination against or segregation
of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955
of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision
(m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the
Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment
of the Phase_ Property, or any part thereof, nor shall Developer, or any person claiming under or
through him or her, establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use, or occupancy of tenants,
lessees, subtenants, sublessees or vendees of the Phase _ Property, or any part thereof. The
foregoing covenants shall run with the land.
Developer agrees for itself and any successor in interest that Developer shall refrain from
restricting the rental, sale, or lease of any portion of the Phase _ Property, or contracts relating to
the Phase _ Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or
national origin of any person. All such deeds, leases, or contracts shall contain or be subject to
substantially the following nondiscrimination or nonsegregation clauses:
A. In deeds: "The grantee herein covenants by and for himself or herself, his
or her heirs, executors, administrators, and assigns, and all persons claiming under or through
them, that there shall be no discrimination against or segregation of, any person or group of
persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the
Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and
paragraph (1) of subdivision (p)of Section 12955, and Section 12955.2 of the Government Code,
in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein
conveyed, nor shall the grantee or any person claiming under or through him or her, establish or
permit any practice or practices of discrimination or segregation with reference to the selection,
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4836-3161-9188.3
location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in
the premises herein conveyed. The foregoing covenants shall run with the land."
B. In leases: "The lessee herein covenants by and for himself or herself, his
or her heirs, executors, administrators, and assigns, and all persons claiming under or through
him or her, and this lease is made and accepted upon and subject to the following conditions:
"That there shall be no discrimination against or segregation of any person or group of persons,
on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code,
as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of
subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing,
subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor
shall the lessee himself .or herself, or any person claiming under or through him or her, establish
or permit any such practice or practices of discrimination or segregation with reference to the
selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or
vendees in the premises herein leased."
C. In contracts: "There shall be no discrimination against or segregation of,
any person or group of persons on account of any basis listed in subdivision (a) or (d) of
Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926. 1,
subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of
the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or
enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any
person claiming under or through him or her, establish or permit any practice or practices of
discrimination or segregation with reference to the selection, location, number, use, or occupancy
of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The
foregoing covenants shall run with the land."
The foregoing covenants against discrimination shall remain in effect in perpetuity.
7. Violations Do Not Impair Liens. No violation or breach of the covenants,
conditions, restrictions, provisions or limitations contained in this Grant Deed shall defeat or
render invalid or in any way impair the lien or charge of any mortgage or deed of trust or security
interest permitted by Section 663 of the PSDA.
8. Covenants Run With Land. All covenants contained in this Grant Deed shall be
covenants running with the land. All of Developer's obligations hereunder, except as otherwise
provided hereunder, shall terminate and shall become null and void upon the expiration of the
effectiveness of the Redevelopment Plan. Every covenant contained in this Grant Deed against
discrimination contained in paragraph 6 of this Grant Deed shall remain in effect in perpetuity.
9. Covenants For Benefit of City. All covenants without regard to technical
classification or designation shall be binding for the benefit of City, and such covenants shall run
in favor of City for the entire period during which such covenants shall be in force and effect,
without regard to whether City is or remains an owner of any land or interest therein to which such
covenants relate. City, in the event of any breach of any such covenants, shall have the right to
exercise all the rights and remedies and to maintain any actions at law or suits in equity or other
proper proceedings to enforce the curing of such breach. The covenants contained in this Grant
Deed, without regard to technical classification, shall not benefit or be enforceable by any owner
of any other real property, or any person or entity having any interest in any other such realty.
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4836-3161-9188.3
CITY:
CITY OF LA QUINTA, a California municipal
corporation and charter city
Date: , 20_ By:
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
William H. Ihrke
City Attorney
City Manager
[Signature page continues next page]
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4836-3161-9188.3
DEVELOPER:
SILVERROCK DEVELOPMENT COMPANY, LLC,
a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
Date. 20— By:
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
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4836-3161-9188.3
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On. before me
(insert name and title of the officer)
personally appeared . who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her
signature on the instrument the person, or the entity upon behalf of which the person acted, executed the
instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
valtdi iv of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On , before me
(insert name and title of the officer)
personally appeared . who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her
signature on the instrument the person, or the entity upon behalf of which the person acted, executed the
instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
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4836-3161-9188.3
EXHIBIT A
LEGAL DESCRIPTION
[TO BE INSERTED]
EXHIBIT A
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4836-3161-9188 3
EXHIBIT "P"
FORM OF OPTION AGREEMENT
[See following page]
EXHIBIT P
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127114684
4819-2019-1097 4
ATTACHMENT NO. 7
FORM OF OPTION AGREEMENT
[See following document]
4842-8370-5465.3
FREE RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Manager
Space Above This Line for Recorder's Use
(Exempt from Recording Fee per Gov't Code § 6103 and 27383)
OPTION AGREEMENT
[insert Phase or Parcels of Property]
THIS OPTION AGREEMENT ("Option Agreement") is made this _ day of ,
20_ (the "Option Agreement Effective Date"), by and between SILVERROCK DEVELOPMENT
COMPANY, LLC, a Delaware limited liability company ("Developer"), and the CITY OF LA
QUINTA, a California municipal corporation and charter city ("City"). City and Developer are
hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties."
A. Developer has entered into a Purchase, Sale, and Development Agreement dated
November 19, 2014 ("Original PSDA"), as amended by Amendment No. 1 to Purchase, Sale,
and Development Agreement dated October 29, 2015 ("Amendment No. 1 ") and by Amendment
No. 2 to Purchase, Sale, and Development Agreement dated on or about April 18, 2017
("Amendment No. 2") and by Amendment No. 3 to Purchase, Sale, and Development Agreement
dated on or about _; 20_ ("Amendment No. 3") (collectively, and as may be
further amended, the "PSDA"), pursuant to which City agreed to convey to Developer
approximately 301.71 acres of real property located at the southwest intersection of Avenue 52
and Jefferson Street in the City of La Quinta, County of Riverside, State of California, described
in the Original PSDA as "Phase 1" or "Phase 1 Property" and "Phase 2" or the "Phase 2 Property",
and as modified and described in Amendment No. 2 as "Phase 1A" and "Phase 1A Property"
and "Phase 113" and "Phase I Property" and Phase 1C" and "Phase I Property" and
"Phase 1 D" and "Phase ID Property". For purposes of this Option Agreement, the ["Phase 1_
Property"] means [insert PAS or Parcel Numbers as applicable]. Unless
otherwise expressly defined in this Option Agreement, capitalized terms used in this Option
Agreement shall have the meanings ascribed thereto in the PSDA.
B. Pursuant to the PSDA, Developer has agreed to construct on the [Phase 1—]
Property and on adjacent real property (the "[Phase 1_J Property" and, collectively with the
[Phase 1_, and Phase 1_j Property, the "Property") a commercial development that consists of
a luxury resort hotel and spa and associated branded luxury residential units, a lifestyle hotel and
associated lifestyle branded residential units, a permanent clubhouse for the SilverRock Resort's
Arnold Palmer Classic Course, a mixed use village, a resort residential village, and associated
amenities, all as more particularly described in the PSDA (collectively, the "Project").
C. The Project shall be constructed on the Property in accordance with all of the
requirements set forth in the PSDA.
D. As a condition to City's conveyance of the [Phase 1_J Property to Developer,
Developer was required to grant to City (i) an option to repurchase the [Phase 1_j Property, or
certain portions thereof, from Developer if Developer (a) fails to commence, continuously proceed
with, or complete construction of the Master Site Infrastructure Improvements, subject to the
4842-8370-5465.3
Master Site Infrastructure Improvements Phasing Plan (defined in Amendment No. 3) (the "MSI
Phasing Plan"), pursuant to the PSDA within certain specified time frames, (b) fails to commence,
continuously proceed with, or complete construction of a Project Component pursuant to the
PSDA within certain specified time frames, (c) transfers the [Phase 1_] Property, or any portion
thereof, in violation of the terms of the PSDA; and (ii) a right of first offer to purchase the [Phase
1_J Property, or any portion thereof, if (1) City's option under (i)(a), (i)(b), or (i)(c) above has been
triggered, (II) City did not timely exercise the applicable option, (111) the default which gave rise to
City's option has not been cured, and (IV) Developer has determined to sell or otherwise transfer
the [Phase 1_] Property, all as further described herein. In further explanation of Options I, II,
III, IV and V, and corresponding Rights of First Offer herein contained, once a phase of the Master
Site Infrastructure Improvements has been completed in accordance with the MSI Phasing Plan
and accepted by the City (and, if applicable, any other governmental agency) in accordance with
the Master Site Infrastructure Improvements Land Use Approvals issued to Developer pursuant
to Section 209 of the Original PSDA, then the Parcels upon which such Master Site Infrastructure
Improvements have been completed will no longer be subject to Options I and II (and
corresponding Rights of First Offer) of this Option Agreement except with respect to the
commencement, continuation and completion of Project Components on said Parcels; and then,
once the Project Components have been completed in accordance with the Schedule of
Performance attached to Amendment No. 3 and accepted by the City by the recording of a
Release of Construction Covenants in accordance with Section 310 of the Original PSDA as
amended by Amendment No. 3 and the form attached thereto, the Parcels upon which such
Project Components are located will no longer be subject to Options III, IV, and V (and
corresponding Rights of First Offer) in this Option Agreement.
E. Unless otherwise expressly defined in this Option Agreement, capitalized terms
used in this Option- Agreement, including in the foregoing Recitals, shall have the meanings
ascribed thereto in the PSDA.
NOW, THEREFORE, for good and valuable consideration, .the receipt and sufficiency of
which are hereby acknowledged, and incorporating the above Recitals and all of the terms and
conditions contained in the PSDA, Developer hereby grants to City the following repurchase
options:
Option I - Failure to Commence Construction of [Phase 1 j Master Site
Infrastructure _Improvements
Subject to Section 7(f) hereof, Developer hereby grants to City an exclusive option
("Option I") to repurchase any or all of the Parcels of the [Phase 1 Property] that remain subject
to this Option Agreement as of the date Option I is exercised (the "Option I Property"), if
Developer fails to commence construction of any phase of the Master Site Infrastructure
Improvements in accordance with the MSI Phasing Plan. For the purposes of this Section 1, the
term "commence construction" shall mean the start date in accordance with the MSI Phasing
Plan; provided, however, if any portion of Master Site Infrastructure Improvements is to be
performed by or on behalf of the City, the start date in the MSI Phasing Plan shall be contingent
upon the City timely commencing, continuing and completing such portion of the Master Site
Infrastructure Improvements for which the City is responsible, and any delay in commencement,
continuation or completion not caused by Developer and caused by the City shall serve to
reasonably extend the applicable start date under the MSI Phasing Plan.
In the event of Developer's failure to commence construction of the [Phase 1_ Property]
Master Site Infrastructure Improvements within the time period described above, and such failure
4842-8370-5456.3 -2-
is not cured within the cure period provided for under Sections 7(b) and 7(c) below, then City shall
be entitled to exercise, but is not obligated to exercise, the foregoing option for a period of sixty
(60) days following the expiration of such cure period (the "Option I Period").
(a) Exercise of Option
City shall exercise Option I by giving written notice to Developer ("City's Notice of Option
Exercise"), in accordance with Section 8 of this Option Agreement, prior to the expiration of the
Option I Period. Failure of City to exercise Option I shall constitute a waiver of City's right to
exercise Option I only with respect to Developer's failure to commence construction of a phase of
Master Site Infrastructure Improvements by the identified start date in the MSI Phasing Plan, but
no other phase, and shall not constitute a waiver by City of Developer's breach of its obligation to
commence construction of any other phase of the Master Site Infrastructure Improvements for
which the start date has not yet occurred as of the date of expiration of the Option 1 Period for
the phase of Master Site Infrastructure Improvements deemed waived, nor shall such failure
constitute a waiver by City of any remedies City may have under the terms of the PSDA or under
any other agreement for Developer's failure to timely commence construction of the Master Site
Infrastructure Improvements pursuant to the start dates identified in the MSI Phasing Plan.
(b) Repurchase Price - Option
City's repurchase price for the PSDA Property ("Option I Repurchase Price"), shall be
the sum of (i) one hundred percent (100%) of Developer's Golf Course Realignment Construction
Costs, (ii) one hundred percent (100%) of Developer's MSI Phased Construction Costs incurred
on or after this Option Agreement Effective Date, and (iii) the cost of any Plans City elects to
purchase pursuant to Section 7(I) below with respect to (a) the Master Site Infrastructure
Improvements, and/or (b) the Project Components comprising the Project.
For purposes of this Section 1, the term "Developer's Golf Course Realignment
Construction Costs" shall mean the construction costs actually incurred by Developer for
construction of the Golf Course Realignment and related on -site and off -site work, but excluding
any unpaid amount payable or claimed to be payable to any contractor or subcontractor incurred
prior to the recording of this Option Agreement. The term "Developer's Phased MSI
Construction Costs" shall mean the construction costs actually incurred by Developer for
construction of the Master Site Infrastructure Improvements on or after this Option Agreement
Effective Date to the date of the Developer's receipt of City's Notice of Option I Exercise.
Developer's Golf Course Realignment Construction Costs and Developer's Phased MSI
Construction Costs shall be as determined by an independent audit (the "Golf Course
Realignment Construction Cost and Phased MSI Construction Cost Audit"), performed by
an independent auditor who shall be selected by City and be a partner at a nationally recognized
firm of accountants with experience in auditing large-scale, mixed use construction projects (the
"Auditor"), which costs shall consist only of: (1) the amount(s) actually paid by Developer and
received by the contractor or contractors performing the construction, (II) reasonable inspection,
supervision, and testing costs paid by Developer to independent third party engineers, architects,
or consultants in conjunction with said construction, (III) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer), and (IV) if the Golf Course Realignment work and/or certain phases of
the Master Site Infrastructure Improvements work is completed and accepted by City, then
amounts that include design plans (such as architectural renderings and drawings) used by
4842-8370-5456.3 -3-
Developer to complete the construction of the Golf Course Realignment and/or such phases of
the Master Site Infrastructure Improvements work, as applicable. In explanation of clause (IV) in
the preceding sentence, neither Developer's Golf Course Realignment Construction Costs nor
Developer's Phased MSI Construction Costs shall include any design plans Developer may have
contracted for or obtained if the Golf Course Realignment or such phases of the Master Site
Infrastructure Improvements, as applicable, which are not completed as evidenced by the City
accepting all work for the Golf Course Realignment and/or applicable phases of the Master Site
Infrastructure Improvements. Developer shall promptly provide City and the Auditor with all
records and documentation necessary for the Auditor to perform the Golf Course Realignment
Construction Cost and Phased MSI Construction Cost Audit.
2. O tion II - Failure to Continuously Proceed With Construction of the Master Site
Infrastructure Improvements or to Complete Construction of the Master Site
Infrastructure Improvements
Developer hereby grants to City an exclusive option ("Option II") to repurchase any or all
of the Parcels of the [Phase 1_ Property] that remain subject to this Option Agreement as of the
date that Option II is exercised (the "Option II Property") if, after commencement of construction
of a phase of the Master Site Infrastructure Improvements, Developer fails to continuously
proceed with construction of such subject phase of the Master Site Infrastructure Improvements
in accordance with the MSI Phasing Plan, or to complete such subject phase of the Master Site
Infrastructure Improvements, in accordance with the MSI Phasing Plan, as evidenced by
acceptance of such subject phase of the Master Site Infrastructure Improvements by the La
Quinta City Council, within the applicable time period(s) set forth in the MSI Phasing Plan to finish
such phase of Master Site Infrastructure Improvements (each, as applicable, a "Master Site
Infrastructure Improvements Phase Completion Deadline"). For purposes of this Section 2,
the term "continuously proceed with construction" shall mean construction that is interrupted, if at
all, for periods of no longer than thirty (30) days; provided, however, if any portion of Master Site
Infrastructure Improvements is to be performed by or on behalf of the City, such continuous
construction by Developer and any such Master Site Infrastructure Improvements Phase
Completion Date shall be contingent upon the City timely commencing, continuing and completing
such portion of the Master Site Infrastructure Improvements for which the City is responsible, and
any delay in continuation or completion not caused by Developer and caused by the City shall
serve to reasonably extend the 30-day interruption period and/or the Master Site Infrastructure
Improvements Phase Completion Date as applicable under the MSI Phasing Plan.
In the event of Developer's failure to continuously proceed with construction of the subject
phase of the Master Site Infrastructure Improvements, or to complete construction of the Master
Site Infrastructure Improvements by the applicable Master Site Infrastructure Improvements
Phase Completion Deadline, and such failure is not cured within the cure period provided for
under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not obligated to
exercise, the foregoing option for a period of sixty (60) days following the completion of the
"Master Site Infrastructure. Improvements Cost Audit" (as that term is defined in Section 2(b)
below) and after expiration of such cure period ("Option II Period").
Notwithstanding anything to the contrary in this Section 2, Option II shall not apply to, and
the Option II Property shall not include, those portions of the [Phase 11 Property for which
construction of the Project Component designated pursuant to the PSDA to be constructed
thereon has commenced. Such portions are addressed in Section 4 below.
(a) Exercise of Option II
4842-8370-5456.3 -4-
City shall exercise Option II by giving written notice to Developer ("City's Notice of
Option II Exercise"), in accordance with Section 8 of this Option Agreement, prior to the
expiration of the Option II Period. Failure of City to exercise Option II shall constitute a waiver by
City of City's right to exercise Option I I only with respect to Developer's specific incidence of failure
to continuously proceed with construction of the applicable subject phase of the Master Site
Infrastructure Improvements that gave rise to Option II or of Developer's failure to complete
construction of the applicable subject phase of the Master Site Infrastructure Improvements by
the Master Site Infrastructure Improvements Phase Completion Deadline (as applicable), but shall
not constitute a waiver by City of Developer's breach of its obligation to continuously proceed with
construction of the Master Site Infrastructure Improvements or to complete construction of the
Master Site Infrastructure Improvements by the Master Site Infrastructure Improvements Phase
Completion Deadline (as applicable) or of any remedies City may have under the terms of the
PSDA or under any other agreement for Developer's failure to continuously proceed with
construction of the Master Site Infrastructure Improvements or to complete construction of the
Master Site Infrastructure Improvements by the Master Site Infrastructure Improvements Phase
Completion Deadline (as applicable).
(b) Repurchase Price - Option II
City's repurchase price for the Option II Property ("Option II Repurchase Price"), shall
be the sum of (i) one hundred percent (100%) of "Developer's Phased MSI Construction Costs",
and (ii) the cost of any Plans City elects to purchase pursuant to Section 7(I) below with respect
to (a) the Master Site Infrastructure Improvements designated pursuant to 'the PSDA to be
constructed on the Option II Property, and/or (b) the Project Components designated pursuant to
the PSDA to be constructed on the Option II Property.
For purposes of this Section 2, the term "Developer's Phased MSI Construction Costs"
shall mean the construction costs actually incurred by Developer for construction of the Master
Site Infrastructure Improvements on the PSDA Property on or after the Option Agreement
Effective Date to the date of the Developer's .receipt of City's Notice of Option II Exercise, as
determined by an independent audit (the "Option II Phased MSI Construction Cost Audit"),
performed by an independent auditor who shall be selected by City and be a partner at a nationally
recognized firm of accountants with experience in auditing large-scale, mixed use construction
projects (the "Auditor"), which costs shall consist only of: (1) the amount(s) paid by Developer to
the contractor or contractors performing the construction, (II) reasonable inspection, supervision,
and testing costs paid by Developer to independent third party engineers, architects, or
consultants in conjunction with said construction, (III) any amounts paid by Developer to material
suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so-called "soft costs" incurred in the
planning, environmental review, or design of the Master Site Infrastructure Improvements
constructed on the Option II Property, or any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer) and (IV) if the Golf Course Realignment work and/or certain phases of
the Master Site Infrastructure Improvements work is completed and accepted by City, then
amounts that include design plans (such as architectural renderings and drawings) used by
Developer to complete the construction of the Golf Course Realignment and/or such phases of
the Master Site Infrastructure Improvements work, as applicable. In explanation of clause (IV) in
the preceding sentence, neither Developer's Golf Course Realignment Construction Costs nor
Developer's Phased MSI Construction Costs shall include any design plans Developer may have
contracted for or obtained if the Golf Course Realignment or such phases of the Master Site
Infrastructure Improvements, as applicable, are not completed as evidenced by the City accepting
4842-8370-5456.3 -5-
all work for the Golf Course Realignment and/or applicable phases of the Master Site
Infrastructure Improvements. Developer shall promptly provide City and the Auditor with all
records and documentation necessary for the Auditor to perform the Option II MSI Construction
Cost Audit. In the event that there are any outstanding mortgages or deeds of trust that have
been approved by City pursuant to Section 311.1 of the PSDA (any of the foregoing, a "Valid
Lien") and that are recorded against the Option II Property at the time that Option II is exercised,
Developer and City agree that the Option II Repurchase Price shall be paid to the lender on any
such Valid Lien (any such lender with a Valid Lien, a "Lender"), up to the then outstanding balance
due under same including, without limitation, the outstanding principal balance, all accrued and
unpaid interest, and any prepayment fees and costs (collectively, the "Outstanding Balance").
Any portion of the Option II Repurchase Price not so needed to extinguish a Valid Lien shall be
paid to Developer.
3. Option III - Failure to Commence Construction of One or More Project
Components.
Developer hereby grants to City an exclusive option ("Option III") to repurchase any or all
of the Parcels of the [Phase 1_J Property that remain subject to this Option Agreement as of the
date that Option III is exercised (the "Option III Property") if Developer fails to commence
construction of any of the Project Components designated pursuant to the PSDA to be
constructed on a portion of the Option III Property on or prior to the start date for commencement
of such Project Component set forth in the Schedule of Performance attached to Amendment No.
3. For purposes of this Section 3, the term "commence construction" shall mean Developer's
commencement of precise grading for all of the real property underlying such Project
Component(s).
In the event of Developer's failure to commence construction of any of the Project
Components designated pursuant to the PSDA to be constructed on a portion of the Option III
Property within the time period described above, and such failure is not cured within the cure
period provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but
is not obligated to exercise, the foregoing option for a period of sixty (60) days following the
expiration of such cure period (the "Option III Period").
Notwithstanding anything to the contrary in this Section 3, Option III shall not apply to, and
the Option III Property shall not include, those portions of the [Phase 1_j Property for which
construction of the Project Component designated pursuant to the PSDA to be constructed
thereon has commenced. Such portions are addressed in Section 4 below.
(a) Exercise of Op
lion III
City shall exercise Option III by giving written notice to Developer ("City's Notice of
Option III Exercise"), in accordance with Section 8 of this Option Agreement, prior to the
expiration of the Option III Period. Failure of City to exercise Option III shall constitute a waiver
by City of City's right to exercise Option III only with respect to Developer's specific incidence of
failure to commence construction of one or more Project Component(s) designated pursuant to
the PSDA to be constructed on a portion of the Option III Property within the time period described
above in this Section 3, but shall not constitute a waiver by City of Developer's breach of its
obligation to commence construction of said Project Component(s) or of any remedies City may
have under the terms of the PSDA or under any other agreement for Developer's failure to
commence construction of said Project Component(s) within the time period described above in
this Section 3.
4842-8370-5456.3 -6-
(b) Repurchase Price - Option III
City's repurchase price for the Option III Property ("Option III Repurchase Price"), shall be
the sum of (i) one hundred percent (100%) of "Developer's Phased MSI Construction Costs",
and (ii) the cost of any Plans City elects to purchase pursuant to Section 7(1) below with respect
to all or any portion of (a) the [Phase 1 or Phase 2] Master Site Infrastructure Improvements
designated pursuant to the PSDA to be constructed on the Option III Property, and/or (b) the
Project Components designated pursuant to the PSDA to be constructed on the Option III
Property.
For purposes of this Section 3, the term "Developer's Phased MSI Construction Costs"
shall mean the construction costs actually incurred by Developer for construction of the Master
Site Infrastructure Improvements on the Option III Property on or after this Option Agreement
Effective Date from the to the date of Developer's receipt of City's Notice of Option III Exercise,
as determined by an independent audit (the "Option III MSI Construction Cost Audit"),
performed by the Auditor, which costs shall consist only of (1) the amount(s) paid by Developer to
the contractor or contractors performing the construction, (II) reasonable inspection, supervision,
and testing costs paid by Developer to independent third party engineers, architects, or
consultants in conjunction with said construction, and (III) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so-called "soft costs" incurred in the planning,
environmental review, or design of the [Phase 1_] Master Site Infrastructure Improvements
constructed on the Option III Property, or any costs, fees, charges, or profits allocated to
Developer's own internal administrative, payroll, or overhead expenses or to any person or entity
affiliated with Developer). Developer shall promptly provide City and the Auditor with all records
and documentation necessary for the Auditor to perform the Option III MSI Construction Cost
Audit. In the event that there are any Valid Liens recorded against the Option III Property at the
time that Option III is exercised, Developer and City agree that the Option III Repurchase Price
shall be paid to the Lender on any such Valid Lien, up to the then Outstanding Balance due under
same. Any portion of the Option III Repurchase Price not so needed to extinguish a Valid Lien
shall be paid to Developer.
4. O tion IV - Failure to Continuog.LIL Proceed With Construction of one or more
Project Components _ or to Complete Construction of one or more Project
Components
Developer hereby grants to City an exclusive option ("Option IV") to repurchase any or all
of the Parcels of the [Phase 1_J Property that remain subject to this Option Agreement as of the
date that Option IV is exercised (the "Option IV Property") if, after commencement of construction
of any Project Component(s) designated pursuant to the PSDA to be constructed on a portion of
the Option IV Property, Developer fails to continuously proceed with construction of said Project
Component(s), or, subject to the last sentence of this paragraph, to complete construction of said
Project Component(s) the time period for completion of such Project Component(s) set forth in
the Schedule of Performance attached to Amendment No. 3 as evidenced by City's issuance of
a certificate of occupancy for such Project Component(s) (the "Option IV Project Component(s)
Completion Deadline"). For purposes of this Section 4, the term "continuously proceed with
construction" shall mean construction that is interrupted, if at all, for periods of no longer than
thirty (30) days. Notwithstanding anything in this paragraph to the contrary,(i) with respect to the
Luxury Branded Residential Development, City shall not be entitled to exercise Option IV, and the
Option IV Property shall not include the real property to be developed with the Luxury Branded
Residential Development, unless Developer fails to complete construction of at least seventy
4842-8370-5456.3 -7-
percent (70%) of the Resort Residential Dwelling Units to be constructed within the Luxury
Branded Residential Development within the time period for completion of the Luxury Branded
Residential Development set forth in the Schedule of Performance attached to Amendment No.
3 and (ii) with respect to the Lifestyle Branded Residential Development, City shall not be entitled
to exercise Option IV, and the Option IV Property shall not include the real property to be
developed with the Lifestyle Branded Residential Development, unless Developer fails to
complete construction of at least seventy percent (70%) of the Resort Residential Dwelling Units
to be constructed within the Lifestyle Branded Residential Development within the time period for
completion of the Luxury Branded Residential Development set forth in the Schedule of
Performance attached to Amendment No. 3.
In the event of Developer's failure to continuously proceed with construction of any Project
Component(s) designated pursuant to the PSDA to be constructed on a portion of the Option IV
Property, or, subject to the last sentence of the immediately preceding paragraph, Developer's
failure to complete construction of any of said Project Component(s) by the applicable Option IV
Project Component(s) Completion Deadline, and such failure is not cured within the cure period
provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not
obligated to exercise, the foregoing option for a period of sixty (60) days following the completion
of the "Option IV Project Component(s) Cost Audit" (as that term is defined in Section 4(b) below)
and after expiration of such cure period ("Option IV Period").
Notwithstanding anything in this Option Agreement to the contrary, but subject to
Section 7(e) below, (i) City shall not be obligated to purchase any portions of the Option IV
Property on which construction of the Project Component designated pursuant to the PSDA to be
constructed thereon has commenced; provided, however, that if City exercises Option IV to
purchase the Luxury Hotel, City shall be obligated to purchase the Luxury Branded Residential
Development if the Luxury Branded Residential Development remains subject to this Option
Agreement at the time of City's exercise of Option IV, and if City exercises Option IV to purchase
the Luxury Branded Residential Development, City shall be obligated to purchase the Luxury
Hotel, if the Luxury Hotel remains subject to this Option Agreement at the time of City's exercise
of Option IV and if City exercises Option IV to purchase the Lifestyle Hotel, City shall be obligated
to purchase the Lifestyle Branded Residential Development if the Lifestyle Branded Residential
Development remains subject to this Option Agreement at the time of City's exercise of Option
IV, and if City exercises Option IV to purchase the Lifestyle Branded Residential Development,
City shall be obligated to purchase the Lifestyle Hotel, if the Lifestyle Hotel remains subject to this
Option Agreement at the time of City's exercise of Option IV].
(a) Exercise of Option IV
City shall exercise Option IV by giving written notice to Developer ("City's Notice of
Option IV Exercise"), in accordance with Section 8 of this Option Agreement, prior to the
expiration of the Option IV Period, which notice shall set forth with specificity the portion of the
Option IV Property City is authorized and desires and/or is required to acquire (the "Option IV City
Acquisition Property"). Failure of City to exercise Option IV shall constitute a waiver by City of
City's right to exercise Option IV only with respect to Developer's specific incidence of failure to
continuously proceed with construction of the Project Component(s) designated pursuant to the
PSDA to be constructed on a portion of the Option IV Property that gave rise to Option IV, or
failure to complete construction of said Project Component(s) by the applicable Option IV Project
Component(s) Completion Deadline that gave rise to Option IV, subject to the last sentence of
the first paragraph of this Section 4 (as applicable), but shall not constitute a waiver by City of
Developer's breach of its obligation to continuously proceed with construction of said Project
4842-8370-5456.3 -8-
Component(s), or to complete construction of said Project Component(s) by the applicable Option
IV Project Component(s) Completion Deadline (as applicable) or of any remedies City may have
under the terms of the PSDA or under any other agreement for Developer's failure to continuously
proceed with construction of said Project Component(s), or to complete construction of said
Project Components by the Option IV Project Component(s) Completion Deadline (as applicable).
(b) Determination of Repurchase Price - Option IV
City's repurchase price for the Option IV City Acquisition Property ("Option IV Repurchase
Price"), shall be the sum of (i) one hundred percent (100%) of "Developer's Option IV Project
Component(s) Construction Costs", and (ii) the cost of any Plans City elects to purchase pursuant
to Section 7(1) below with respect to all or any portion of (a) the Master Site Infrastructure
Improvements designated pursuant to the PSDA to be constructed on the Option IV City
Acquisition Property, and/or (b) the Project Components designated pursuant to the PSDA to be
constructed on the Option IV City Acquisition Property.
For purposes of this Section 4, the term "Developer's Option IV Project Component(s)
Construction Costs" shall mean the construction costs actually incurred by Developer for
construction of (1) the portion of the Master Site Infrastructure Improvements constructed on the
Option IV City Acquisition Property on or after this Option Agreement Effective Date to the date
of Developer's receipt of City's Notice of Option IV Exercise, and (II) the portion of the Project
Component(s) designated pursuant to the PSDA to be constructed on the Option IV City
Acquisition Property to the date of Developer's receipt of City's Notice of Option IV Exercise, all
as determined by an independent audit (the "Option IV Project Component(s) Cost Audit"),
performed by the Auditor, which costs shall consist only of (i) the amount(s) paid by Developer to
the contractor or contractors performing the construction, (ii) reasonable inspection, supervision,
and testing costs paid by Developer to independent third party engineers, architects, or
consultants in conjunction with said construction, and (iii) any amounts paid by Developer to
material suppliers and equipment suppliers in connection with the construction (but, subject to the
immediately preceding paragraph, not including any so- called "soft costs" incurred in the
planning, environmental review, or design of the Master Site Infrastructure Improvements
constructed on the Option IV Property or the Project Component(s) designated pursuant to the
PSDA to be constructed on the Option IV Property, or any costs, fees, charges, or profits allocated
to Developer's own internal administrative, payroll, or overhead expenses or to any person or
entity affiliated with Developer). Developer shall promptly provide City and the Auditor with all
records and documentation necessary for the Auditor to perform the Option IV Project
Component(s) Cost Audit. In the event that there are any Valid Liens recorded against the Option
IV City Acquisition Property at the time that Option IV is exercised, Developer and City agree that
the Option IV Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then
outstanding balance due under same. Any portion of the Option IV Repurchase Price not so
needed to extinguish a Valid Lien shall be paid to Developer.
5. Option V - Transfer of the [Phase 1 1 Property, or Portion Thereof, Prior to
Completion of Project
Developer hereby grants to City an exclusive option ("Option V") to repurchase any or all
of the Parcels of the [Phase 1_J Property that remains subject to this Option Agreement as of
the date that Option V is exercised (the "Option V Property"), if, prior to the time Developer
completes the Project, Developer transfers or suffers an involuntary transfer of the [Phase 1�
Property or portion thereof in violation of the terms of the PSDA.
4842-8370-5456.3 -9-
In the event of Developer's transfer of the [Phase 1_J Property or any portion thereof in
violation of the PSDA (an "Unauthorized Transfer") and such Unauthorized Transfer is not cured
within the cure period provided under Sections 7(b) and 7(c) below, then, City shall be entitled to
exercise, but is not obligated to exercise, the foregoing ,option for sixty (60) days following the
later of (i) the date of the Unauthorized Transfer that gives rise to City's option under this
Section 5, or (ii) City's discovery of the Unauthorized Transfer that gives rise to Option V ("Option
IV Period"). Notwithstanding anything to the contrary in this Section 5, (a) Option V shall not apply
to, and the Option V Property shall not include, those portions of the [Phase 11 Property that
were not the subject of an Unauthorized Transfer, and (b) City shall not be obligated to purchase
any portion of the Option V Property on which construction of the Project Component designated
pursuant to the PSDA to be constructed thereon has commenced; provided, however, if City
exercises Option V to purchase the Luxury Hotel, City shall be obligated to purchase the Luxury
Branded Residential Development if the Luxury Branded Residential Development remains
subject to this Option Agreement at the time of City's exercise of Option V, and if City exercises
Option V to purchase the Luxury Branded Residential Development, City shall be obligated to
purchase the Luxury Hotel, if the Luxury Hotel remains subject to this Option Agreement at the
time of City's exercise of Option V; and if City exercises Option V to purchase the Lifestyle Hotel,
City shall be obligated to purchase the Lifestyle Branded Residential Development if the Lifestyle
Branded Residential Development remains subject to this Option Agreement at the time of City's
exercise of Option V, and if City exercises Option V to purchase the Lifestyle Branded Residential
Development, City shall be obligated to purchase the Lifestyle Hotel, if the Lifestyle Hotel remains
subject to this Option Agreement at the time of City's exercise of Option V.
(a) Exercise of O tion
City shall exercise Option V by giving written notice to Developer ("City's Notice of Option
IV Exercise"), in accordance with Section 8 of this Option Agreement, prior to the expiration of the
Option V Period, which notice shall set forth with specificity the portion of the [Phase 1_] Property
City is authorized and desires and/or is obligated to acquire (the "Option V City Acquisition
Property"). Failure of City to exercise Option V shall constitute a waiver by City of City's right to
exercise Option V only with respect to the specific Unauthorized Transfer that gave rise to Option
V, but shall not constitute a waiver by City of Developer's breach of the transfer provisions in the
PSDA or pursuant to this Option Agreement, or of any remedies City may have under the terms
of the PSDA or under any other agreement for Developer's transfer or sufferance of an involuntary
transfer of the [Phase 1_J Property or portion thereof.
(b) Repurchase Price - Option V
City's repurchase price for the Option V City Acquisition Property ("Option V Repurchase
Price") shall be as follows:
i) In the event Developer has not yet commenced construction of the
Master Site Infrastructure Improvements to be constructed on the Option V City Acquisition
Property at the time City exercises Option V, City's Option I Price shall be the sum of (a) one
hundred percent (100%) of Developer's Golf Course Realignment Construction Costs and (b) the
cost of any Plans City elects to purchase pursuant to Section 7(1) below with respect to all or any
portion of (1) the Master Site Infrastructure Improvements, and/or (11) the Project Components
comprising the Project.
ii) In the event Developer has commenced construction of the Master
Site Infrastructure Improvements on the Option V City Acquisition Property at the time City
4842-8370-5456 3 -10-
exercises Option V, then (1) if City is authorized to and elects to purchase all of the Option V
Property, the Option V Repurchase Price shall be the sum of (a) ninety percent (90%) of the
purchase price paid to Developer in connection with the Unauthorized Transfer that triggered
City's right to exercise Option V, and (b) the cost of any Plans City elects to purchase pursuant to
Section 7(1) below with respect to all or any portion of the Master Site Infrastructure
Improvements, and/or the Project Components comprising the Project; and (2) if City is authorized
hereunder and elects to purchase only a portion of the Option V Property, then City's Option V
Repurchase Price shall be the amount that would have been payable under this Option
Agreement by City to Developer if such portion of the Option V Property would have been
purchased by City pursuant to Option I, Option II, Option III, or Option IV as applicable depending
upon the status of construction upon such portion of the Option V Property as of the date that
Option V is exercised by City.
In the event that there are any Valid Liens recorded against the Option V City Acquisition
Property at the time that Option V is exercised, Developer and City agree that the Option V
Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then Outstanding
Balance due under same. Any portion of the Option V Repurchase Price not so needed to
extinguish a Valid Lien shall be paid to Developer.
6. City's Right of First Offer
Developer hereby grants to City a right of first offer ("City's Right of First Offer") to
purchase any or all of the Parcels of the [Phase 1_J Property, that remain subject to this Option
Agreement as of the date that City exercised the Right of First Offer (the "Right of First Offer
Property"), in accordance with the terms and conditions in this Section 6, in the event that (i) City
has had the right to exercise any of Option I, Option II, Option III, Option IV, or Option V and has
failed to exercise or has elected not to exercise Option I, Option II, Option III, Option IV, or Option
V (as applicable) in accordance with the terms of this Option Agreement and Developer's default
that gave rise to Option I, Option II, Option III, Option IV, or Option V (as applicable) has not been
cured, and (ii) Developer has determined to sell or otherwise transfer the [Phase 11 Property or
portion thereof. Notwithstanding anything to the contrary in this Section 6, (a) the Right of First
Offer Property shall not include any portion of the [Phase 11 Property that is not included in
"Developer's Sale Notice" (as that term is defined in Section 6(a) below, (b) in the event City elects
to exercise City's Right of First Offer, City may elect to purchase only those portions of the Right
of First Offer Property that City was authorized and desires (or is otherwise obligated) to purchase
pursuant to the terms of Option I, Option II, Option III, Option IV, or Option V (as applicable), and
(c) if City exercises City's Right of First Offer with respect to the Luxury Hotel, City shall be
obligated to purchase the Luxury Branded Residential Development if the Luxury Branded
Residential Development remains subject to this Option Agreement at the time of City's exercise
of City's Right of First Offer, and if City exercises City's Right of First Offer to purchase the Luxury
Branded Residential Development, City shall be obligated to purchase the Luxury Hotel, if the
Luxury Hotel remains subject to this Option Agreement at the time of City's exercise of City's Right
of First Offer and, if City exercises City's Right of First Offer with respect to the Lifestyle Hotel,
City shall be obligated to purchase the Lifestyle Branded Residential Development if the Lifestyle
Branded Residential Development remains subject to this Option Agreement at the time of City's
exercise of City's Right of First Offer; and if City exercises City's Right of First Offer to purchase
the Lifestyle Branded Residential Development, City shall be obligated to purchase the Lifestyle
Hotel. if the Lifestyle Hotel remains subject to this Option Agreement at the time of City's exercise
of City's Right of First Offer. The portions of the Right of First Offer Property City acquires
hereunder shall be hereinafter referred to as the "Right of First Offer City Acquisition Property".
4842-8370-5456.3 -1 1-
(a) Developer's Notice to City, City's Election
In the event that the circumstances described in clauses (i) and (ii) of the immediately
preceding paragraph exist, then prior to entering into any transaction with a third party concerning
the sale of any of the Right of First Offer Property, Developer shall provide City with written notice
of Developer's intent to sell such Right of First Offer Property, and Developer's proposed sale
price for the same ("Developer's Sale Notice"). City shall have sixty (60) days after receiving
Developer's Sale Notice to notify Developer, in writing, of City's election to exercise City's Right
of First Offer to acquire the Right of First Offer City Acquisition Property, at the price noted in
Developer's Sale Notice ("City's Election to Exercise"); provided, however, that if the Right of First
Offer City Acquisition Property does not comprise all of the Right of First Offer Property, then
City's acquisition price shall be the amount that would have been payable under this Option
Agreement by City to Developer if such portion of the Right of First Offer City Acquisition Property
would have been purchased by City pursuant to Option I, Option II, or Option III, as applicable
depending upon the status of construction upon such portion of the Right of First Offer City
Acquisition Property as of the date that the Right of First Offer is exercised by City.
(b) City's Failure to Exercise
City's failure to deliver to Developer City's Election to Exercise within such sixty (60) day
period shall be deemed City's election not to exercise City's Right of First Offer and, except as
provided below, City's Right of First Offer with respect to the Right of First Offer Property shall
then terminate and City shall have no further right of first offer with respect to the Right of First
Offer Property. If City elects not to exercise (or is deemed to have elected not to exercise) City's
Right of First Offer then Developer may sell the Right of First Offer Property to a third party
purchaser; provided, however, that in the event Developer determines to sell the Right of First
Offer Property at a price that is less than the price set forth in Developer's Sale Notice, Developer
shall provide City with a written notice of Developer's intent to sell the Right of First Offer Property,
with Developer's new proposed sale price for the same ("Developer's Second Sale Notice"), and
City's Right of First Offer shall again apply with respect to the Right of First Offer Property, in
accordance with the process outlined in subparagraph (a) above and this subparagraph (b).
(c) Transfer Restrictions of PSDA
Notwithstanding any of the provisions in Option V (Section 5 above) or this Section 6 to
the contrary, nothing in this Option Agreement is intended to or shall have the effect of waiving
the transfer restrictions set forth in the PSDA, any of City's rights related thereto in the PSDA or
any other agreements between City and Developer relating to the PSDA Property, and any
proposed sale or transfer by Developer shall be effected in accordance with the same.
7. Additional Terms Applicable to the Re urchase ❑ tions
The following additional terms shall apply to Option I, Option II, Option III, Option IV, Option
V, and City's Right of First Offer:
(a) Successors and Assigns. Option I, Option 11, Option III, Option IV, Option
V, and City's Right of First Offer created hereby shall be irrevocable by Developer and shall be
binding upon the successors and assigns of Developer and on the [Phase 1 or Phase 2] Property.
(b) Developer's Right to Cure Certain Defaults. Notwithstanding anything in
this Option Agreement to the contrary, (A) City shall not be entitled to exercise Option I, Option II,
4842-8370-5456.3 -12-
Option III, or Option IV until City has provided a written notice to Developer regarding Developer's
failure to commence construction, continuously proceed with construction, or to complete
construction, as applicable (with any of the above failures referred to hereinafter as an "Option
Triggering Event"), and Developer has not, within sixty (60) days after receipt of such notice,
cured, corrected, or remedied such Option Triggering Event or, for those Option Triggering Events
that cannot reasonably be cured, corrected, or remedied within sixty (60) days, commenced to
cure, correct or remedy such Option Triggering Event within said sixty (60) day period, and
diligently prosecute the same to completion and (B) City shall not be entitled to exercise Option
V until City has provided a written notice to Developer regarding an Unauthorized Transfer (an
"Option V Triggering Event") and Developer has not, within thirty (30) days after receipt of such
notice, cured, corrected or remedied such Option V Triggering Event. If the Option Triggering
Event relates to the exercise of Option III or Option IV with respect to construction of the Luxury
Hotel or Lifestyle Hotel, then the aforementioned cure periods provided to Developer under this
paragraph shall be one hundred twenty (120) days.
(c) Notice of ❑efauft to Mort a ee or Deed of Trust Holders Right to Cure.
With respect to any mortgage or deed of trust granted by Developer, whenever City may deliver
any notice or demand to Developer with respect to an Option Triggering Event (including, but not
limited to, an Option V Triggering Event), City shall at the same time deliver a copy of such notice
or demand to each holder of record of any mortgage or deed of trust which has previously
requested such notice in writing, Each such holder shall (insofar as the rights granted by City are
concerned) have the right, at its option, within sixty (60) days after the receipt of the notice (except
in the event of an Option V Triggering Event, in which case the cure period shall be thirty (30)
days), to cure or remedy or commence to cure or remedy and thereafter to pursue with due
diligence the cure or remedy of any such default and to add the cost thereof to the mortgage debt
and the lien of its mortgage. It is understood that a holder shall be deemed to have satisfied the
sixty (60) day time limit set forth above for commencing to cure or remedy a Developer default
which requires title and/or possession of the Property (or portion thereof) if and to the extent any
such holder has within such sixty (60) day period commenced proceedings to obtain title and/or
possession and thereafter the holder diligently pursues such proceedings to completion and cures
or remedies the default.
(d) No City Obligation: Purchase of Whole Project Components.
i) Notwithstanding any covenant, term, or provision in this Option
Agreement to the contrary, City shall not be obligated to exercise Option I, Option II, Option III,
Option IV, Option V, or City's Right of First Offer.
ii) Notwithstanding anything to the contrary in this Option Agreement,
if City elects to purchase any part of a Project Component pursuant to Option IV, Option V, or
City's Right of First Offer, then City shall be obligated to purchase all of such Project Component
that remains subject to this Option Agreement as of date of such election.
(e) Partial Termination of Option Agreement: Bifurcation I=ollowin
Completion _of Luxury Hotel.
i) In the event Developer commences and completes construction of
a Project Component, as evidenced by City's issuance of a Release of Construction Covenants
for such Project Component and City has not exercised Option I, Option II, Option III, Option IV,
Option V or City's Right of First Offer with respect to such Project Component or the real property
on which such Project Component is designated pursuant to the PSDA to be constructed, City's
4842-8370-5456.3 -13-
issuance of a Release of Construction Covenants for the Project Component shall act to
automatically release this Option Agreement with respect to said Project Component and the real
property on which such Project Component is designated pursuant to the ,PSDA to be constructed
with no further action required by City or Developer; provided, however, upon request of
Developer, City shall execute and record a termination and release of this Option Agreement.
Notwithstanding the foregoing to the contrary, City shall, at or prior to the close of escrow for the
sale of each Residential Dwelling Unit at the Project to a third party buyer, cause this Option
Agreement to be terminated with respect to such Residential Dwelling Unit. Within ten (10) days
following City's receipt of written notice from Developer of a pending escrow for the sale of any
such Residential Dwelling Unit, City shall (i) execute and have notarized a Quitclaim Deed and/or
such other. document(s) required by the applicable escrow holder to evidence the termination of
this Option Agreement with respect to the Residential Dwelling Unit being sold, and (ii) deposit
the original of such executed and notarized document(s) into such escrow.
ii) Notwithstanding anything to the contrary in this Option Agreement,
from and after the date City issues a Release of Construction Covenants for the Luxury Hotel,
City shall only have the right to exercise Option III, Option IV, or Option V with respect to the
particular Project Component to which an Option Triggering Event relates. For example, if City
has issued a Release of Construction Covenants for the Luxury Hotel and Developer has
completed construction of seventy percent (70%) or more of the Resort Residential Dwelling Units
to be constructed within the Promenade Mixed -Use Village within the required period set forth in
the Schedule of Performance attached to Amendment No. 3 as Exhibit "E", but has failed to
complete construction of seventy percent (70%) or more of the Resort Residential Dwelling Units
to be constructed within the Resort Residential Village within the required ten period set forth in
the Schedule of Performance attached to Amendment No. 3 as Exhibit "E", then City's rights under
this Option Agreement with respect to the occurrence of an Option Triggering Event entitling City
to exercise Option IV shall be limited to the Resort Residential Village only, and City shall have
no option to purchase the Promenade Mixed -Use Village, as a result of such Option Triggering
Event.
(f) Enforced Delay Pursuant to PSDA. Notwithstanding anything to the
contrary herein, in the event performance by Developer under the PSDA is extended pursuant to
Section 602 of the PSDA, such that the time by which Developer is required thereunder to
commence construction of the Master Site Infrastructure Improvements, complete construction of
the Master Site Infrastructure Improvements, commence construction of one or more Project
Components designated pursuant to the PSDA to be constructed on a portion of the Property, or
complete construction of one or more Project Components designated pursuant to the PSDA to
be constructed on a portion of the Property, is extended, such extensions shall automatically apply
hereto to (as applicable) extend the time by which Developer is required to commence
construction of the Master Site Infrastructure Improvements, complete construction of the Master
Site Infrastructure Improvements, commence construction of one or more Project Components
designated pursuant to the PSDA to be constructed on a portion of the Property, or complete
construction of one or more Project Components designated pursuant to the PSDA to be
constructed on a portion of the Property, by the same time as extended under the PSDA.
(g) Subordination. City and Developer shall enter into with the Lender a
subordination or similar agreement that provides for all of the following: (i) the Lender to notify
City, in writing, of any default by Developer under the Lender's loan documents concurrently with
its notification to Developer of such default, (ii) the Lender to provide City with a copy of any Notice
of Default (each, a "Notice of Default") recorded against the title to the Property in the Official
Records of the County of Riverside, State of California (the "Official Records") concurrently with
4642-8370-5456.3 -14-
its delivery of such Notice of Default to Developer; (iii) the right of City to cure the default at any
time prior to the foreclosure (or recording of a deed in lieu thereof) on the Lender's deed of trust,
(iv) the right of City to negotiate with the Lender regarding the default at any time prior to the
foreclosure (or recording of a deed in lieu) on the Lender's deed of trust, and (v) the Lender's
agreement that Lender shall not conduct a foreclosure sale (or exercise a power of sale or record
a deed in lieu of foreclosure or any similar action that would result in the ownership and vesting
of title in the name of Lender or its assignee or designee) prior to the date that is at least six
(6) months after .the Lender delivers written notice of the default to City and Developer pursuant
to clause (i) above. The foregoing provisions in clauses (i)-(v), and any other additional terms
and conditions that City, Developer, and Lender may deem necessary or appropriate, shall be in
any subordination or other agreement as may be requested or required by either the Lender or
Developer, which agreement would result in this Option Agreement having lower priority from any
other instrument or encumbrance (including but not limited to a mortgage, deed of trust, regulatory
agreement, temporary or permanent easement, reciprocal servitude, and any covenants, codes,
and restrictions or restrictive use covenant) that is executed on behalf of and for the benefit of
either the Lender or Developer, or both, and to be recorded in the Official Records.
(h) City's and City's Assignee's Investigation of [Phase 1 1 Propertv.
i) City shall have a period of forty-five (45) days, commencing on the
date of an event that triggers City's ability to exercise any of Option I, Option II, Option III, Option
IV, Option V, or City's Right of First Offer, to enter upon the [Phase 1_] Property (or applicable
portion thereof) to conduct any tests, inspections, investigations, or studies of the condition of the
[Phase 1_J Property (or applicable portion thereof) (the "Option Agreement Tests and
Investigations"). Developer shall permit City access to the [Phase 1_] Property (or applicable
portion thereof) for such purposes. City's obligation to close "Escrow" (as that term is defined in
Section 7(i) below) shall be subject to City's approval of any environmental and other site testing
conducted by City in City's discretion. City shall indemnify, defend, and hold harmless Developer
and its officers, directors, shareholders, employees, agents, and representatives from and against
all claims, liabilities, or damages, and including expert witness fees and reasonable attorney's
fees and costs, arising out of any such testing, inspection-, or investigatory activity on the [Phase
1_J Property (or applicable portion thereof).
ii) In the event City assigns its rights under this Option Agreement
City's assignee shall have the right to enter upon the [Phase 1_J Property (or applicable portion
thereof) during the period commencing on the date of City's assignment of this Option Agreement
to said assignee and ending on the "Closing Date" (as that term is defined in Section 7(i) below)
to conduct any Option Agreement Tests and Investigations elected by the assignee. Developer
shall permit City's assignee access to the [Phase 1_J Property (or applicable portion thereof) for
such purposes, provided that, prior to any entry upon the [Phase 1_J Property by such assignee
or its employees, agents; representatives or consultants, City shall cause such assignee to
provide Developer with evidence that it has a liability insurance policy that names Developer as
an additional insured, which policy shall have limits of coverage and be on terms reasonably
acceptable to Developer. City's obligation to close "Escrow" (as defined in Section 7(i) below)
shall be subject to City's assignee's. approval of any environmental and other site testing
conducted by said assignee in said assignee's discretion. City shall cause said assignee to
indemnify, defend, and hold harmless Developer and its officers, directors, shareholders,
employees, agents, and representatives from and against all claims, liabilities, or damages, and
including expert witness fees and reasonable attorney's fees and costs, arising out of any such
testing, inspection, or investigatory activity on the [Phase 1_] Property (or applicable portion
thereof).
4842-8370-5456.3 -15-
(i) Escrow Provisions.
i) Within five (5) business days after City has exercised Option I,
Option II, Option III, Option IV, Option V, or City's Right of First Offer (as applicable), or as soon
thereafter as reasonably practicable, an escrow shall be opened ("Escrow") with an escrow
company selected by City ("Escrow Holder") for the reconveyance to City of the portions of the
[Phase 1_1 Property to be acquired by City pursuant to this Option Agreement. Escrow shall be
deemed opened on the date that a fully executed copy of this Option Agreement and a notice of
exercise of option prepared by City are delivered to Escrow Holder ("Opening of Escrow").
Escrow Holder shall notify Developer and City in writing of the date of the Opening of Escrow
promptly following the opening of the Escrow.
ii) Escrow shall close on or before the date that is six (6) months after
occurrence of the event giving rise to City's exercise of Option I, Option II, Option III, Option IV,
Option V, or City's Right of First Offer ("Close of Escrow" or "Closing Date"). The terms "Close of
Escrow" and "Closing Date" shall mean the date the grant deed conveying fee title to City ("City
Grant Deed") is recorded in the Official Records. Possession of the portions of the [Phase 1 1
Property conveyed to the City pursuant to this Option Agreement shall be delivered to City at the
Close of Escrow.
iii) This Option Agreement, together with any standard instructions of
Escrow Holder, shall constitute the joint escrow instructions of Developer and City to Escrow
Holder as well as an agreement between Developer and City. In the event of any conflict between
the provisions of this Option Agreement and Escrow Holder's standard instructions, this Option
Agreement shall prevail.
iv) The Escrow shall be subject to City's approval of a then -current
preliminary title report. Any monetary lien(s) or encumbrance(s) shown on such preliminary title
report that is (are) created concurrent with or after the close of escrow that conveyed the [Phase
11 Property from City to Developer shall be removed by Developer at its sole expense prior to
the Close of Escrow pursuant to this Section 7(i) unless such exception(s) is (are) accepted by
City in its sole discretion; provided, however, that City shall accept the following exceptions to
title: (i) current taxes not yet delinquent, (ii) matters affecting title existing on the date of
recordation of the Grant Deed to the [Phase 11 Property (in the form of Attachment No. 4 to the
PSDA), and (iii) matters shown as printed exceptions in the standard form ALTA policy of title
insurance. In the event the [Phase 1_J Property (or applicable portion thereof subject to the
Escrow) is encumbered by a Valid Lien, City shall be permitted to unilaterally instruct Escrow
Holder to satisfy the indebtedness secured thereby out of the proceeds payable to Developer
through the foregoing Escrow. Any additional amount necessary to satisfy such Valid Lien,
including, without limitation, (1) the amount of the unpaid indebtedness secured by such Valid
Lien, including principal and interest and all other sums secured by the Valid Lien, including,
without limitation, any prepayment fees and costs, shall be paid by City at the Closing.
v) On or before 1:00 p.m. on the last business day preceding the
scheduled Closing Date, City shall deposit in Escrow (i) the applicable of the Option I Repurchase
Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase
Price; the Option V Repurchase Price, or the price noted in Developer's Sale Notice or
Developer's Second Sale Notice (the last two are referred to herein as the "Right of First Offer
Repurchase Price"); (ii) one-half (1/2) of the escrow fees; (iii) the portion of the title insurance
premium attributable to any extra or extended coverages, or any additional charge resulting from
City's request that the amount of insurance be higher than the applicable of the Option I
4842-8370-5456.3 -16-
Repurchase Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option
IV Repurchase Price, the Option V Repurchase Price, or the Right of First Offer Repurchase
Price; and (iv) any and all additional instruments or other documents required from City (executed
and acknowledged if appropriate) as may be necessary in order to effect the transfer of the [Phase
1_j Property, or applicable portion thereof, to City. On or before 1:00 p.m. on the last business
day preceding the scheduled Closing Date, Developer shall deposit in Escrow (i) the City Grant
Deed, executed and acknowledged; (ii) one-half (1/2) of the escrow fees; and (iii) any and all
additional instruments or other documents required from Developer (executed and acknowledged
if appropriate) as may be necessary in order to effect the transfer of the [Phase 1_j Property, or
applicable portion thereof, to City. Developer shall also be required to pay for documentary tax
stamps and recording fees, if any, and for an ALTA standard form owner's policy of title insurance
in the amount of the Option I Repurchase Price, the Option II Repurchase Price, the Option III
Repurchase Price, the Option IV Repurchase Price, the Option V Repurchase Price, or the Right
of First Offer Repurchase Price (as applicable), showing title vested in City free and clear of all
liens and encumbrances except those permitted by subparagraph iv) above (the "Title Policy").
City's receipt of the Title Policy shall be a condition to the Close of Escrow. Any other costs and
expenses shall be allocated between the Parties in the manner customary for a commercial
property conveyance in Riverside County.
vi) If, on or before the Closing Date, Escrow Holder has received all of
the documents and funds listed in subparagraph (v) above, and Escrow Holder is in a position to
cause the Title Policy to ,be issued to City, and provided City has approved of the condition of the
[Phase 1_j Property, or applicable portion thereof, Escrow Holder shall close the Escrow by
taking the following actions: (a) recording the City Grant Deed in the Official Records, and
delivering the recorded City Grant Deed to City; (b) causing the Title Policy to be issued to City;
and (c) delivering the portion of the applicable of the Option I Repurchase Price, the Option II
Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase Price, the Option
V Repurchase Price, or the Right of First Offer Repurchase Price remaining after payment of all
Valid Liens, if any, to Developer.
0) City's Right to Acuuire the [Phase 1 or Phase 21 Property. Notwithstanding
anything herein to the contrary, upon City's exercise of Option I, Option 11, Option III, Option IV,
Option V, or City's Right of First Offer, Developer's commencement to cure the default that led to
City's exercise shall not affect City's right to close the Escrow and acquire the [Phase 1_j
Property (or applicable portion thereof).
(k) City's Repurchase of Uncompleted Portions of the Property.
Notwithstanding anything herein to the contrary, in the event that as a result of City exercising
Option III, Option IV, or Option V City acquires the [Phase 1_j Property, or portion thereof, if
Developer has obtained from City a certificate of occupancy and has sold to third parties one or
more of the Residential Dwelling Units developed thereon, the provisions of this Option
Agreement shall apply only to those portions of the [Phase 1_j Property which have not been
sold to third parties ("Uncompleted Portion of the Repurchase Property") and any calculations for
determining the Option III Repurchase Price or the Option IV Repurchase Price or the Option V
Repurchase Price (as applicable) shall be based solely upon the Uncompleted Portion of the
Repurchase Property.
(1) City's Right to Purchase Plans. At the time City exercises any of Option I,
Option II, Option III, Option IV, Option V, or City's Right of First Offer, City shall also have the right,
which City may exercise in its sole and absolute discretion, to purchase from Developer for the
actual cost Developer incurred in preparing the same, all (but not less than all) of the plans,
4842-8370-5456.3 -17-
blueprints, drawings, sketches, specifications, tentative or final subdivision maps, landscape
plans, utilities plans, soils reports, noise studies, environmental assessment reports, grading
plans and any other materials (collectively, the "Plans") relating to (i) all of the Master Site
Infrastructure Improvements designated pursuant to the PSDA to be constructed on the portions
of the Property to be acquired by City, and/or (b) all or any of the Project Components designated
pursuant to the PSDA to be constructed on the portions of the Property to be acquired by City,
together with copies of all of the Plans, as have been prepared for the development of the [Phase
11 Property to date of City's exercise of Option I, Option II, Option III, Option IV, or City's Right
of First Offer (as applicable). Notwithstanding the foregoing, however, Developer does not
covenant to convey to City the copyright or other ownership rights of third parties. City's
acquisition or use of the Plans or any of them shall be without any representation or warranty by
Developer as to the accuracy or completeness of any such Plans, and City shall assume all risks
in the use of the Plans.
(m) City's Repurchase Price Reflects Reasonable Approximation of Damages.
City and Developer agree that City has the right to either proceed with its remedies under the
PSDA or to exercise Option I, Option II, Option III, Option IV, or Option V. Notwithstanding
anything to the contrary herein or in the PSDA, in the event City exercises any of Option I, Option
II, Option III, Option IV, or Option V (as applicable) to acquire the [Phase 11 Property, or a
portion thereof, City shall be deemed to have elected to waive the remedies to which it would
otherwise be entitled under the PSDA. City and Developer agree that City will incur damages by
reason of the default that gave rise to City's ability to exercise Option I, Option II, Option III, Option
IV, or Option V (as applicable), which damages shall be impractical and extremely difficult, if not
impossible, to ascertain. City and Developer, in a reasonable effort to ascertain what City's
damages would be in the event of such default by Developer, have agreed that considering all of
the circumstances existing on the date of this Option Agreement, including the relationship of the
sum to the range of harm to City that reasonably could be anticipated, including without limitation
the potential loss of tax revenue to the City of La Quinta, and the anticipation that proof of actual
damages would be costly or -inconvenient, the exercise by City of Option I, Option II, Option III,
Option IV, or Option V (as applicable), and the payment by City of the Option I Repurchase Price,
the Option II Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase Price,
or the Option V Repurchase Price (as applicable) -and the conveyance of the [Phase 1_1
Property, or applicable portion thereof, by Developer to City, is fair and reasonable. City and
Developer agree that the (discounted) Option I Repurchase Price, Option II Repurchase Price,
Option III Repurchase Price, Option IV Repurchase Price, or Option V Repurchase Price (as
applicable) reflect a reasonable estimate of City's damages under the provisions of Section 1671
of the California Code of Civil Procedure and shall operate as liquidated damages to City if City
exercises Option I, Option II, Option III, Option IV, or Option V (as applicable). If City does not
exercise Option I, Option Il, Option III, Option IV, or Option V, then City shall retain and may
exercise all of its rights and remedies as set forth in any other agreement, including, but not limited
to, the PSDA.
8. Notices, and Communications Between the Parties.
Formal notices, demands, and communications between City and Developer shall be
given either by (i) personal service, (ii) delivery by reputable document delivery service such as
Federal Express that provides a receipt showing date and time of delivery, or (iii) mailing in the
United States mail, certified mail, postage prepaid, return receipt requested, addressed to:
To City: City of La Quinta
78-495 Calle Tampico
4842-8370-5456.3 -18-
With a copy to:
To Developer:
La Quinta, California 92253
Attn: City Manager
Rutan & Tucker, LLP
611 Anton Boulevard., Suite 1400
Costa Mesa, California 92626
Attn: William H. Ihrke, Esq.
SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas, California 92024
Attn: Robert S. Green Jr.
Notices personally delivered or delivered by document delivery service shall be deemed
effective upon receipt. Notices mailed in the manner provided above shall be deemed received
and effective on the second business day following deposit in the United States mail. Such written
notices, demands, and communications shall be sent in the same manner to such other
addresses as either Party may from time to time designate by mail.
9. Applicable Law and Forum� Attorney's Fees
The Superior Court of the State of California in the County of Riverside shall have the
exclusive jurisdiction of any litigation between the Parties arising out of this Option Agreement.
This Option Agreement shall be governed by, and construed under, the internal laws of the State
of California, without regard to conflict of law principles. In addition to any other rights or remedies
and subject to the restrictions otherwise set forth in this Option Agreement, including without
limitation in this Section 9, either Party may take legal action, in law or in equity, to cure, correct,
or remedy any default, to recover damages for any default, to compel specific performance of this
Option Agreement, to obtain declaratory or injunctive relief, or to obtain any other remedy
consistent with the purposes of this Option Agreement. City shall also have the right to pursue
damages for Developer's defaults but in no event shall Developer be entitled to recover damages
of any kind from City, including damages for economic loss, lost profits, or any other economic or
consequential damages of any kind. The rights and remedies of the Parties are cumulative and
the exercise by either Party of one or more of such rights or remedies shall not preclude the
exercise by it, at the same or different times, of any other rights or remedies for the same default
or any other default by the other Party. Service of process on City shall be made in the manner
required by law for service on a public entity. Service of process on Developer shall be made in
any manner permitted by law and shall be effective whether served within or outside of California.
If either Party to this Option Agreement is required to initiate or defend, or is made a party
to, any action or proceeding in any way connected with this Option Agreement, the Party
prevailing in the final judgment in such action or proceeding, in addition to any other relief which
may be granted, shall be entitled to reasonable attorney's fees. Attorney's fees shall include
reasonable costs for investigating such action, conducting discovery, retaining expert witnesses,
and all other necessary costs the court allows which are incurred in such litigation.
10. City Right to Assign
In the event City has the right to exercise any of Option I, Option II, Option III, Option IV,
Option V, or City's Right of First Offer, City shall have the right to assign its rights hereunder upon
4842-8370-5456.3 -19-
providing prior written notice to Developer pursuant to Section 8 of this Option Agreement, and
thereafter entering into an assignment and assumption agreement with such assignee.
11. City Approvals and Actions
City shall maintain authority of this Option Agreement and the authority to implement this
Option Agreement through the City Manager. The City Manager shall have the authority to make
approvals, issue - interpretations, waive provisions, negotiate and enter into amendments to this
Option Agreement and/or negotiate and enter into implementing agreements or documents on
behalf of City so long as such actions. do not materially or substantially change the business
terms of this Option Agreement, or materially or substantially add to the costs incurred or to be
incurred by City as specified herein. Such approvals, interpretations, waivers, amendments,
and/or implementing agreements or documents may include extensions of time to perform. All
other material and/or substantial interpretations, waivers, or amendments shall require the
consideration, action and written consent of the City Council.
12. Nonliability of City Officials and Employees
No officer, official, employee, agent, or representative of City shall be personally liable to
Developer or any successor in interest, in the event of any default or breach by City, or for any
amount which may become due to Developer or its successor, or for breach of any obligation of
the terms of this Option Agreement.
13. Nondiscrimination
Developer covenants for itself, its heirs, executors, assigns, and all persons claiming
under or through them, that there shall be no discrimination against any person on account of
race, color, creed, religion, sex, marital status, national origin, ancestry, or any other protected
class under the laws of the United States, California, and any applicable local jurisdiction with
respect to this Option Agreement or use of the [Phase 1 or Phase 2] Property.
14. interpretation
The terms of this Option 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 Option Agreement or any other rule of construction which might otherwise apply.
The Section headings are for purposes of convenience only, and shall not be construed to limit
or extend the meaning of this Option Agreement.
15. Entire Agreement
This Option Agreement integrates all of the terms and conditions mentioned herein, or
incidental hereto, and, with the exception of the PSDA, supersedes all negotiations or previous
agreements between the Parties with respect to all or any part of the subject matter hereof.
All waivers of the provisions of this Option Agreement must be in writing and signed by
the appropriate authorities of the Party to be charged, and all amendments and modifications
hereto must be in writing and signed by the appropriate authorities of City and Developer.
16. Counter arts
4842-8370-5456.3 -20-
This Option Agreement may be executed in counterparts, each of which, after all the
Parties hereto have signed this Option Agreement, shall be deemed to be an original, and such
counterparts shall constitute one and the same instrument.
17. Severahility
In the event any section or portion of this Option Agreement shall be held, found, or
determined to be unenforceable or invalid for any reason whatsoever, the remaining provisions
shall remain in effect, and the Parties hereto shall take further actions as may be reasonably
necessary and available to them to effectuate the intent of the Parties as to all provisions set forth
in this Option Agreement.
[ Signature page follows ]
4842-8370-5456.3 -21-
IN WITNESS WHEREOF, the Parties have executed this Option Agreement as of the date
first above written.
Date
, 20
"DEVELOPER"
SILVERROCK DEVELOPMENT COMPANY, LLC,
a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
By;
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
[Signature page continues next page]
4842-8370-5456.3 -22-
"CITY"
CITY OF LA QUINTA, a California municipal
Corporation and charter city
By
Its: City Manager
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
City Attorney
4842-8370-5456.3 -23-
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On , before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On , before me
(insert name and title of the officer)
personally appeared , who proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
4842-8370-5456.3 -24-
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PHASE I I PROPERTY
(To be inserted)
4842-8370-5465 3 -1-
EXHIBIT "Q"
FORM OF RELEASE OF CONSTRUCTION COVENANTS
[See following page]
EXHIBIT "Q"
-1-
127114684
4819-2019.1097.4
ATTACHMENT NO. 8
FORM OF RELEASE OF CONSTRUCTION COVENANTS
[See following document]
4845-26414453 3
RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:
SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas, California 92024
This document is exempt from the payment of a recording
fee pursuant to Government Code Section 27383
RELEASE OF CONSTRUCTION COVENANTS
THIS RELEASE OF CONSTRUCTION COVENANTS (the "Release") is made by the
CITY OF LA QUINTA, a California municipal corporation and charter city (the "City"), in favor of
SILVERROCK DEVELOPMENT COMPANY" LLC, a Delaware limited liability company (the
"Developer"), as of
RECITALS
A. City and Developer have entered into that certain Purchase, Sale, and
Development Agreement dated November 19, 2014 ("Original PSDA"), as amended by
Amendment No. 1 to Purchase, Sale and Development Agreement dated October 29, 2015
("Amendment No. 1"), and by Amendment No. 2 to Purchase, Sale and Development Agreement
dated on or about April 18, 2017 ("Amendment No. 2"), and by Amendment No. 3 to Purchase,
Sale and Development Agreement dated , 2018 ("Amendment No. 3")
(collectively and as may be further amended, the"PSDA") concerning the development of certain
real property situated in the City of La Quinta, California, a portion of which is more fully described
in Exhibit "A" attached hereto and made a part hereof (the "Property") [NOTE: this is to be the
legal description of the applicable Phase — "Subject Property" below is RELEASED PROPERTY].
L
The following Memorandum of PSDA was recorded against the Property:
(the "Memorandum of PSDA")-
C. As referenced in Section 310 of the PSDA, City is required to furnish Developer or
its successors with a Release of Construction Covenants upon Developer's completion of
construction of the [Insert applicable Project
Component, as that term is described in Section 100 of the PSDA] (as defined in Section 100
of the PSDA), which Release is required to be in such form as to permit it to be recorded in the
Recorder's office of Riverside County, California. This Release is conclusive determination of
satisfactory completion of the construction and development of the applicable Project Component
required by the PSDA.
D. City has conclusively determined that such construction and development has
been satisfactorily completed.
-2-
4845-2641-4453 3
NOW, THEREFORE, City hereby certifies as follows:
1. The [insert applicable Project
Component] (as that term is described in Section 100 of the PSDA) to be constructed by
Developer on that portion of the Property described in Exhibit "B" attached hereto and made a
part hereof (the "Subject Property") has been fully and satisfactorily completed in conformance
with the PSDA and, as such; except for any liability which may have accrued under the PSDA
prior to the date of this Release, the PSDA shall have no continuing or ongoing effect relative to
the Subject Property. Any operating requirements and all use, maintenance or nondiscrimination
covenants contained in the PSDA are set forth in other documents executed and recorded
pursuant to the PSDA and the provisions of such recorded documents shall remain in effect and
enforceable according to their terms notwithstanding this Release.
2. The date of this Release shall be the Fee Transfer Release Date (as such term is
described in Section 603.1 of the PSDA) for the Subject Property and shall automatically cause
any such restrictions on Transfers (as that term is described in Section 603.1 of the PSDA) with
respect to such Project Component as the same may appear in (i) the PSDA, (ii) any Option
Agreement (as that term is described in Section 100 of the PSDA), and (iii) any Grant Deed (as
that term is described in Section 100 of t
City or Developer. he PSDA) to terminate with no further action required by
3. Following the recordation of this Reiease, the Memorandum of PSDA affecting the
Subject Property shall be of no further force or effect with respect to the Subject Property.
[Signature page follows]
-3-
4845-2641-4453.3
IN WITNESS WHEREOF, City has executed this Release as of the date set forth above.
Date:
ATTEST:
City Clerk
[Signature page continues next page]
CITY OF LA QUINTA, a California municipal
corporation and charter city
By:
Its:
-4-
4845-2641-4453.3
APPROVED BY DEVELOPER:
SILVERROCK DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
Date
By:
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
-5-
4845-2641-4453.3
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
State of California
County of Riverside
CST
before me,
(insert name and title of the officer)
Notary Public, personally appeared
who 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.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
State of California
County of Riverside
On
before me,
(insert name and title of the officer)
Notary Public, personally appeared
who 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.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
-6-
4845-2641-4453.3
EXHIBIT A
LEGAL DESCRIPTION
[TO BE INSERTED- Legal of applicable Phase]
EXHIBIT A
-1-
4845-2641-4453.3
4845-2641-4453.3
EXHIBIT 8
LEGAL ❑ESCRIPTION OF SUBJECT PRGPERTY
EXHIBIT B
-1-
EXHIBIT "R"
FORM OF MEMORANDHM QF PURCHASE SALE AND
DEVELOPMENT AGREEMENT
[See following page]
EXHIBIT "R"
12711468.4 _ 1
4819-2019-1097.4
ATTACHMENT NO. 10
FORM OF MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT AGREEMENT
[See following document]
4833-9538-2134.3
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Manager
(Space Above For Recorder's Use)
This Memorandum of Purchase, Sale, and Deveiopment
Agreement Is recorded at the request and for the benefit
of the City of La Quinta and is exempt from the payment
of a recording fee pursuant to Government Code § 27383.
MEMORANDUM OF PURCHASE SALE AND DEVELOPMENT AGREEMENT
Phase (INSERT PHASEI Property)
This MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT AGREEMENT
("Memorandum") is entered into this _ day of , 20_ by and between the CITY OF
LA QUINTA, a California municipal corporation and charter city ("City"), and SILVERROCK
DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Developer").
This Memorandum is made with reference to the following:
1. City and Developer entered into that certain Purchase, Sale, and Development
Agreement dated November 19, 2014 ("Original PSDA"), as amended by Amendment No. 1 to
Purchase, Sale, and Development Agreement dated October 29, 2015 ("Amendment No. 1")
and by Amendment No. 2 to Purchase, Sale, and Development Agreement dated on or about
April 18, 2017 ("Amendment No. 2") and by Amendment No. 3 to Purchase, Sale, and
Development Agreement dated on or about 2018 ("Amendment No. 3")
(collectively, and as may be further amended, the "PSDA"), which provides for (i) City to sell to
Developer that certain real property located in the City of La Quinta, County of Riverside, State of
California, more particularly described in the legal description attached hereto as Exhibit "A" and
incorporated herein by this reference (the "Phase_ Property"), and (ii) Developer to develop and
operate on the Phase _ Property a commercial development with one luxury hotel with
associated branded luxury residential units, one lifestyle hotel with associated lifestyle branded
residential units, a conference and shared service facility, a resort residential village, a mixed -use
village, and related amenities, as more particularly described in the PSDA. The definitions of all
terms contained in the PSDA shall apply to this Memorandum.
2. On or about the date of this Memorandum, Developer acquired from City fee title
to a portion of the Phase _ Property.
3. The PSDA provides for City and Developer to enter into this Memorandum and to
record the same in the Official Records of the County of Riverside -to provide notice to all persons
of the existence of said PSDA and to cause the PSDA to run with the Phase _ Property and be
binding on Developer and Developer's successors -in -interest as to the Phase _ Property.
4. Notwithstanding anything to the contrary contained in the PSDA, with respect to
any portion of the Phase_ Property as to which the City has recorded a Release of Construction
Covenant, the Memorandum shall automatically terminate as to the released property only and
4833-9538-2134.3
there shall be no requirement to amend or modify the Memorandum. However, at the request of
Developer, City shall record a quitclaim or termination document sufficient to remove the
Memorandum from the released property.
5. This Memorandum may be executed in several counterparts, and all so executed
shall constitute one agreement binding on both parties hereto, notwithstanding that both parties
are not signatories to the original or the same counterpart.
[signatures on next page]
4833-9538-2134.3 -2-
IN WITNESS WHEREOF, City and Developer have entered into this Memorandum as of
the date first set forth above.
"CITY"
Date
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
City Attorney
CITY OF LA QUINTA, a California municipal
corporation and charter city
20_ By:
Its: City Manager
[Signature page continues next page]
4833-9538-2134.3 _3
"DEVELOPER".
SILVERROCK DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
By
Name: Robert S. Green, Jr.
Its: President and Chief
Executive Officer
-4-
4833-9538-2134.3
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
val irl i l % of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On
before me,
(Insert name and title of the officer)
personally appeared , who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized capacity, and that
by his/her signature on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On
before me,
(insert name and title of the officer)
personally appeared , who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized capacity, and that
by his/her signature on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
4833-9538-2134.3 -5-
EXHIBIT "A"
I liza
EXHIBIT "A"
-1-
4833-9538-2134 3
EXHIBIT "$1)9
PRELIMINARY BUDGET
MASTER SITE INFRASTRUCTURE IMPROVEMENTS
$30.5(1(),Dt]0
Mass grading, infr�astruclure and utilities
LUXURY HOTEL
Planned far 140 rooms & spa
$$4 000 000
LUXURY BRANDED RESIDENTIAL DEVELOPMENT
$57,400,000
A , proximalely 29 units (approx 4,500 sf)
-
CONFERENCE AND SHARED SERVICE FACILITY
—
- $39,000,000
71, 000 tvf - ----
LIFESTYLE HOTEL
Planned jar 200 rooms
$74-0tJ0,00()
LIFESTYLE BRANDED RESIDENTIAL DEVELO_ PMENT
$69,000,000
APPrgximutely 69 units (approx 2, 000 s� f)
GOLF VILLAS
(approx 10 units) approx 2, 000 sf
$11.000,000
GOLF CLUB HOUSE
$7'200,000
TOTAL BUDGET $372,100,1100
NOTE: Does not include Project Finance costs
12711468.4
4819-2019-1097.4
EXHIBIT "S"
- 1 -1111
EXHIBIT "T"
MEMORANDUM OF PURCHASE SALE AND
❑ EVE LGPMENIT AGREEMENT (PHASE 1 B PRQPERTYJ
EXHIBIT "T"
-1-
12711468.4
4819-2019-1097.4
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of La Quinta
78-495 Calle Tampico
La Quinta, CA 92253
Attn: City Manager
(Space Above For Recorder's Use)
This Memorandum of Purchase, Sale, and Development
Agreement Is recorded at the request and for the benefit
of the City of La Quinta and is exempt from the payment
of a recording fee pursuant to Government Code § 27383.
MEMORANDUM OF PURCHASE SALE AND DEVELOPMENT AGREEMENT
(Phase 16 Property — PSDA Amendment No. 3)
This MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT AGREEMENT
("Memorandum") is entered into this _ day of , 2018, by and between the CITY
OF LA QUINTA, a California municipal corporation and charter city ("City"), and SILVERROCK
DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Developer").
This Memorandum is made with reference to the following:
1. City and Developer entered into that certain Purchase, Sale, and Development
Agreement dated November 19, 2014 ("Original PSDA"), as amended by Amendment No. 1 to
Purchase, Sale, and Development Agreement dated October 29, 2015 ("Amendment No. 1 ")
and by Amendment No. 2 to Purchase, Sale, and Development Agreement dated on or about
April 18, 2017 ("Amendment No. 2") and by Amendment No. 3 to Purchase, Sale, and
Development Agreement dated on or about October _, 2018 ("Amendment No. 3") (collectively,
and as may be further amended, the "PSDA"), which provides for (i) City to sell to Developer that
certain real property located in the City of La Quinta, County of Riverside, State of California,
more particularly described in the legal description attached hereto as Exhibit "A" and
incorporated herein by this reference (the "Phase 1 B Property" as defined in Amendment No.
2), and (ii) Developer to develop and operate on the Phase 1 B Property a commercial
development with one lifestyle hotel with associated lifestyle branded residential units, a resort
residential village, a mixed -use village, and related amenities, as more particularly described in
the PSDA. The definitions of all terms contained in the Agreement shall apply to this
Memorandum.
2. On or about the date of this Memorandum, SilverRock Phase I, LLC, a subsidiary
of Developer, acquired from City fee title to a portion of the Phase 1 B Property.
3. The Agreement provides for City and Developer to enter into this Memorandum
and to record the same in the Official Records of the County of Riverside to provide notice to all
persons of the existence of said Agreement and to cause the Agreement to run with the Phase
1 B Property and be binding on Developer and Developer's successors -in -interest as to the Phase
1 B Property.
4. Notwithstanding anything to the contrary contained in the PSDA, with respect to
any portion of the Phase 1 B Property as to which the City has recorded a Release of Construction
4826-6443-3013.3
Covenant, the Memorandum shall automatically terminate as to the released property only and
there shall be no requirement to amend or modify the Memorandum. However, at the request of
Developer, City shall record a quitclaim or termination document sufficient to remove the
Memorandum from the released property.
5. This Memorandum may be executed in several counterparts, and all so executed
shall constitute one agreement binding on both parties hereto, notwithstanding that both parties
are not signatories to the original or the same counterpart.
[signatures on next page]
-2-
4626-6443-3013.3
IN WITNESS WHEREOF, City and Developer have entered into this Memorandum as of
the date first set forth above.
"CITY"
CITY OF LA QUINTA, a California municipal
corporation and charter city
Date: 20_ By
Its:
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
City Attorney
[Signature page continues next page]
City Manager
-3-
4826-6443-3013.3
"DEVELOPER"
SILVERROCK DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
Date: 20
By -
Name: Robert S. Green, Jr.
Its: President and Chief
Executive Officer
-4-
4826-6443-3013.3
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or
validit of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
On
before me,
(Insert name and title of the officer)
personally appeared , who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized capacity, and that
by his/her signature on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A notary public or other officer completing this certificate verifies only the identity of the individual
who signed the document to which this certificate is attached, and not the truthfulness. accuracy. or
validity of that document.
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
.AM
before me,
(Insert name and title of the officer)
personally appeared , who proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized capacity, and that
by his/her. signature on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
-5-
4826-6443-3013.3
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF LA QUINTA IN
THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
Phase 113 Property:
PARCELS 7, 8, 9, 10, 11, 12, D, E, F, & G OF PARCEL MAP NO. 37207, IN THE CITY OF LA
QUINTA, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, FILED IN BOOK 242, PAGES
72 THROUGH 87 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.
EXHIBIT "A"
-1-
4826-6443-3013.3
EXHIBIT "U"
RELEASE OF COVENANT AFFECTING REAL PROPERTY (GOLF COURSE USE)
EXHIBIT "U"
-1-
127114584
4819-2019-1097 4
RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO
SilverRock Development Company, LLC
c/o The Robert Green Company
3551 Fortuna Ranch Road
Encinitas, California 92024
This document is exempt from the payment of a recording
fee pursuant to Government Code Section 27383
RELEASE OF COVENANT AFFECTING REAL PROPERTY
(GOLF COURSE USE)
THIS RELEASE OF COVENANT AFFECTING REAL PROPERTY (GOLF COURSE
USE) (the "Release") by the CITY OF LA QUINTA, a California municipal corporation and charter
city (the "City"), in favor of SILVERROCK DEVELOPMENT COMPANY LLC, a Delaware limited
liability company (the "Developer"), is dated as of day of , 2018.
RECITALS
A. Unless otherwise defined herein, the definitions of all terms contained in the PSDA
shall apply to this Release.
B. City and Developer have entered into that certain Purchase, Sale, and
Development Agreement dated November 19, 2014 ("Original PSDA"), as amended by
Amendment No. 1 to Purchase, Sale and Development Agreement dated October 29, 2015
("Amendment No. 1"), and by Amendment No. 2 to Purchase, Sale and Development Agreement
dated on or about April 18, 2017 ("Amendment No. 2"), and by Amendment No. 3 to Purchase,
Sale and Development Agreement dated the day of , 2018 ("Amendment No. 3")
(collectively and as may be further amended, the "PSDA"), which provides for (i) City to sell to
Developer that certain real property located in the City of La Quinta, County of Riverside, State of
California, more particularly described in the legal description attached as Exhibit "A" to the Grant
Deed (the "Phase 1A Property" as defined in Amendment No. 2), and (ii) Developer to develop
and operate on the Phase 1A Property a commercial development with one luxury hotel with
associated branded luxury residential units, a conference and shared service facility, and related
amenities.
C. Pursuant to Amendment No. 2, City conveyed the Phase 1A Property to Developer
by Grant Deed (Phase — 1A Property — PSDA Amendment No. 2), dated May 3, 2017 and
recorded November 6, 2017 as Document #2017-0463950 in the Official Records of the County
of Riverside, California (the "Grant Deed"), subject to the existing easements, restrictions,
covenants of record described in the Grant Deed.
D. Also pursuant to Amendment No. 2, City and Developer entered into and the City
caused to be recorded that certain Covenant Affecting Real Property (Golf Course Use) dated
May 3, 2017 and recorded November 6, 2017 as Document #2017-0189004 in the Official
Records of the County of Riverside, California (the "Golf Course Covenant"), which is binding
4833-7413-6696.3
upon and runs with the Phase 1A Property for the Planning Areas, Parcels and other real property
identified in the Golf Course Covenant.
E. Pursuant to Section 2.3 of the Golf Course Covenant, the Luxury Hotel Parcels (as
defined in the Golf Course Covenant and legally described on Exhibit "A" attached hereto), are
not required to be used as part of the Golf Course (as defined in the Golf Course Covenant) as
long as the Developer uses the Luxury Hotel Parcel in furtherance of the Golf Course Realignment
and development of the Luxury Hotel thereon pursuant to the PSDA. This Release is conclusive
determination of satisfactory completion of the construction and development of the Golf Course
Realignment required by the PSDA. This Release is requested to confirm the construction of the
Golf Course Realignment has been completed and to enable the development of the Luxury Hotel
Parcels pursuant to Amendment No. 3.
NOW, THEREFORE, City hereby certifies as follows:
1. The construction of the Golf Course Realignment (as that term is defined in the
Golf Course Covenant) by Developer on (i) Parcels 17, 18, 19 and 20 (collectively, the "Golf
Course Parcels" as defined in the Golf Course Covenant), (ii) Parcels A, B, C, D, E, F, and G
(collectively, the "Golf Course Access/Operations Parcels" as defined in the Golf Course
Covenant), (iii) Parcel 8 ("Permanent Golf Clubhouse Parcel' as defined in the Golf Course
Covenant), (iv) portions of Parcels 13, 14, 15, and 16 (collectively, the "Driving Range/Golf
Couse Parcels" as defined in the Golf Course Covenant) and (v) Parcels 3 and 4 (collectively,
the "Luxury Hotel Parcels" as defined in the Golf Course Covenant), as identified on Parcel Map
No. 37207 attached as Exhibit "B" of the Golf Course Covenant (the "Parcel Map"), has been
completed and , is in full conformance with the PSDA. Except for any liability which may have
accrued under the Golf Course Covenant prior to the date of this Release, the Golf Course
Covenant shall have no continuing or ongoing effect relative to the Luxury Hotel Parcels only, but
the Golf Course Covenant shall remain in full force and effect as to the Golf Course Parcels, Golf
Course Access/Operations Parcels, Permanent Golf Clubhouse Parcel and Driving Range/Golf
Couse Parcels. Any and all operating requirements, and all use, maintenance, and
nondiscrimination covenants, set forth in other documents executed and recorded pursuant to the
PSDA, including, but not limited to, the Golf Course Covenant, shall remain in effect and
enforceable according to their terms notwithstanding this Release.
2. Following the date of recordation of this Release, the Golf Course Covenant shall
be of no further force or effect with respect to the Luxury Hotel Parcels only. This Release shall
become affective upon the date of such recording.
3. This Release may be executed in two or more counterparts, each of which when
so executed and delivered shall be deemed an original and all of which, when taken together,
shall constitute one and same instrument.
[signatures on next page]
-2-
4833-7413-6696.3
IN WITNESS WHEREOF, City has executed this Release as of the date set forth above.
CITY:
CITY OF LA QUINTA, a California municipal
corporation and charter city
Date: , 2018 By:
Frank J. Spevacek, City Manager
ATTEST:
Monika Radeva, City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLC
VViIliam H. Ihrke, City Attorney
[signature page continues next page]
-3-
4833-7413-6696.3
APPROVED BY DEVELOPER:
SILVERROCK DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company
By: The Robert Green Company,
a California corporation
Its: Manager
Date: 2018 By:
Name: Robert S. Green, Jr.
Its: President and Chief Executive Officer
-4-
4833-7413-6696.3
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
State of California
County of Riverside
On before me,
(insert name and title of the officer)
Notary Public, personally appeared
who 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.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
A Notary Public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
State of California
County of Riverside
On
before me,
(insert name and title of the officer)
Notary Public, personally appeared
who 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.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
-5-
4833-7413-6696.3
EXHIBIT A
LEGAL DESCRIPTION
LUXURY HOTEL PARCELS:
THOSE PORTIONS OF SECTIONS 5, 6 AND 8 TOWNSHIP 6 SOUTH, RANGE 7 EAST, SAN
BERNARDINO MERIDIAN, IN THE CITY OF LA QUINTA, COUNTY OF RIVERSIDE, STATE OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
PARCELS 3 AND 4 OF PARCEL MAP NO. 37207 PER MAP FILED IN BOOK 242, PAGES 72
THROUGH 87 INCLUSIVE, OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF RIVERSIDE COUNTY, STATE OF CALIFORNIA.
EXHIBIT A
-1-
4833-7413-6696.3