2018-11-28 (09) SRR Option Agrmt Phases 1A & 1B (excluding PL Areas 7, 8, & 9) DOC # 2018-0464676rr...,
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DOC # 2018-0464676
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Recorded in Official Records
County of Riverside
Peter Aldana
Assessor -County Clerk -Recorder
City of La Quinta "This document was electronically submitted
78-495 Calle Tampico to the County of Riverside for recording —
La Quinta, CA 92253 Receipted by: TERESA #134
Attn: City Manager
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THIS OPTION AGREEMENT (PHASE 1 EXCLUDING 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 PHASE I, 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 Arpendment No. 3 to Purchase, Sale, and Development Agreement
dated on or about November 7, 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 1113" and "Phase 16 Property" and Phase 1C" and "Phase 1C 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 1 B Property" excluding,
however, 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 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 1C Property" and "Phase 1D 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
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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 1B
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
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DOC #2018-0464676 Page 3 of 27
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.
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(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, (11) 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 11 - Failure to Continuously Proceed With Construction of the PSDA
Property 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 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
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DOC #2018-0464676 Page 5 of 27
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 II
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).
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DOC #2018-0464676 Page 6 of 27
(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, (11) 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 II Repurchase Price not so needed to extinguish a Valid Lien shall be
paid to Developer.
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DOC #2018-0464676 Page 7 of 27
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 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(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 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 Ill Property on or after this Option Agreement
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DOC #2018-0464676 Page 8 of 27
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 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
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DOC #2018-0464676 Page 9 of 27
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-
DOC #2018-0464676 Pagel 0 of 27
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
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.
Option V - Transfer of the PSDA Property, or Portion Thereof, Prior to Completion
of Project
Developer hereby grants to City an exclusive option ("Option W) 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
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DOC #2018-0464676 Page 11 of 27
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(l) 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 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 111, 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.
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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 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"
(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-
DOC #2018-0464676 Page 13 of 27
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 11, Option ill, 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 Ili, 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-
DOC #2018-0464676 Page 14 of 27
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 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 Following
Completion of Luxury Hotel.
0) 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
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DOC #2018-0464676 Page 15 of 27
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
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DOC #2018-0464676 Page 16 of 27
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 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 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.
(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
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").
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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 1 A 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 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 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
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DOC #2018-0464676 Page 18 of 27
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 Acquire the PSDA 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 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 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,
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 -18-
DOC #2018-0464676 Page 19 of 27
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 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 1, 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 11, Option 111, 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-
DOC #2018-0464676 Page 20 of 27
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: 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
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-
DOC #2018-0464676 Page 21 of 27
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. Counterparts
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-
DOC #2018-0464676 Page 22 of 27
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 1A 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-
DOC #2018-0464676 Page 23 of 27
IN WITNESS WHEREOF, the Parties have executed this Option Agreement as of the date
first above written.
"DEVELOPER"
SILVERROCK PHASE I, LLC,
a Delaware limited liability company
By: The Robert Green Company,
a California corporation
c Its: M
Date: n(dy • Z 2015 By:
Name: Robert S. Gr n, Jr.
Its: President and Chief Executive Officer
[Signature page continues next page]
4258-2978-5209.3 -23-
DOC #2018-0464676 Page 24 of 27
"CITY"
CITY OF LA QUINTA, a Calaprnia municipal
Comorbtion and cha
4; + IL S. 5-PQw'�
ATTEST:
V90
City Clerk
APPROVED AS TO FORM:
(,v
RUTTUCKER, LLP
-( �
City Attorney
4258-2978-5209.3 -24-
DOC #2018-0464676 Page 25 of 27
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 R_iyEft rFRF SRN -DIE60
On t�nye m ber S 2019, before me':U1 GiYIA �--. i .P& k6" 1 ajoit
(insert name arieHitle of the officeW
personally appeared Robep + a, (�p ree,cl;-, , 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 m hand and official l. . •; .y DIANA L, LYTLE
y seaNotary Public -California
San Diego County >
= Commission # 2160643
"° "�� My Comm. Expires Aug 19, 202D
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)
4258-2978-5209.3 -25-
DOC #2018-0464676 Page 26 of 27
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 �"W- } before me a� VA 4lWa- 1 '^ !��%
(insert name and title of the officer)
personally appeared r--*Prt a0, 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 hefshe- executed the same in hisAK", authorized
capacity, and that by his/.he 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 a official seal.
Signature
MONIKA RADEVA
Notary Public - California
z Riverside County i
z Commission # 2168979 D
My Comm. Expires Oct 22, 2020
(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)
4258-2978-5209.3 -25-
DOC #2018-0464676 Page 27 of 27
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 1A 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