KSL & CNL/Settlement Agr re: Termination of CC&Rs - 2006U.
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SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement (the "Settlement Agreement') is entered into by
and between La Quinta Redevelopment Agency (the "Agency "), on the one hand, and CNL
Desert Resort, LP, fka KSL Desert Resorts, Inc. ( "Desert Resorts ") and KSL Land Holdings,
LLC, fka KSL Land Holdings, Inc. ( "Land Holdings "), on the other hand. The Agency, Desert
Resorts and Land Holdings are sometimes individually referred to as a "Party" and collectively
referred to as the "Parties" at various times throughout this Settlement Agreement.
RECITALS
A. WHEREAS, on May 22, 2002, the Agency purchased approximately 526 acres of
land then known as "The Ranch," and since renamed "SilverRock," from Land Holdings. In
connection with that purchase, Land Holdings sought to impose certain "use" restrictions on this
property ( "SilverRock" or the "SilverRock Property ") for the benefit of its then affiliate
company Desert Resorts. At the time, Desert Resorts owned and controlled (in conjunction with
other KSL - related entities) the La Quinta Resort & Club (the "KSL Hotel Property ").
B. WHEREAS, on June 18, 2002, Land Holdings, Desert Resorts and the Agency
entered into that certain "Agreement Containing Covenants Effecting Real Property, Recorded in
the Official Records of the County of Riverside as Instrument No. 2002 - 352578 (the "Restrictive
Use Agreement'). Under the Restrictive Use Agreement, Land Holdings and Desert Resorts
sought to limit competition with the KSL Hotel Property by restricting the extent of certain
"Hotel- Related" uses to which the SilverRock Property could be put and imposing certain "price
restrictions" on hotel rental rates (the "Anti- Competition Restrictions ").
C. WHEREAS, the Restrictive Use Agreement and its Anti- Competition Restrictions
terminate on the earlier of seven (7) years from recordation of the Restrictive Use Agreement
(i.e., by no later than June 27, 2009) or upon any sale or transfer to an "unrelated party" of:
(1) the KSL Hotel Property or (2) a "controlling interest' in Desert Resorts as defined in the
Restrictive Use Agreement.
D. WHEREAS, on April 2, 2004, CNL Hotels & Resorts, Inc, fka CNL Hospitality
Properties, Inc. ( "CNL ") acquired all of the capital stock of KSL Recreation Corporation ( "KSL
Recreation ") and in turn, all the capital stock of Desert Resorts, a subsidiary of KSL Recreation,
and in connection therewith Desert Resorts was converted into a limited partnership and a CNL
affiliated entity was installed as the sole general partner. (the "CNL Acquisition ").
E. WHEREAS, the Restrictive Use Agreement at section (1) provides that upon
transfer of a "controlling interest' in Desert Resorts, or other event resulting in expiration of the
"Term" of the agreement, the Anti- Competition Restrictions "automatically terminate without
any further action of Land Holdings, Agency, or any owner of the [KSL Hotel Property]." The
Restrictive Use Agreement goes on to require that upon such expiration Desert Resorts "shall ...
upon written request, promptly sign and deliver to Agency ... a quitclaim deed or other form of
recordable instrument as may be required ... in order to remove the [Restrictive Use Agreement]
as a cloud on title...."
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F. WHEREAS, the Agency, Land Holdings and Desert Resorts were also parties to
that certain Additional Agreement, entered into on April 29, 2002 (the "Additional Agreement ").
The Additional Agreement also contains certain restrictions affecting the SilverRock Property,
including potential rights of access and use by Desert Resorts as owner of the KSL Hotel
Property and its invitees. The Additional Agreement contains termination provisions
substantially similar to the Restrictive Use Agreement. Section 3.3 of the Additional Agreement
likewise mandates in the event of termination, upon written request, that Land Holdings and/or
Desert Resorts deliver a quitclaim deed `releasing all rights and interest in and to" the Additional
Agreement.
G. WHEREAS, the Agency contends that as a result of the CNL Acquisition, an
"unrelated third party" has acquired a "controlling interest" in KSL Recreation and, more
specifically, in Desert Resorts such that CNL or its affiliates now have an "ownership interest" in
Desert Resorts, sufficient to afford CNL or its affiliates the "right to control the management and
policies" of Desert Resorts. As such, the Agency contends that both the Restrictive Use
Agreement and the Additional Agreement (and all restrictions or obligations affecting the
SilverRock Property) are terminated and that Land Holdings and/or Desert Resorts are obligated
to affirm this termination by, among other things, transmitting the required quitclaim deeds.
H. WHEREAS Land Holdings and Desert Resorts disagree with the Agency's
contentions concerning the termination of the Restrictive Use Agreement and the Additional
Agreement and, in fact, contend that those agreements remain in full force and effect
notwithstanding the CNL Acquisition.
L WHEREAS in or around July 28, 2004, the Agency filed a complaint against KSL
Land Holdings, Inc. and KSL Desert Resorts, Inc. entitled La Quinta Redevelopment Agency v.
KSL Desert Resorts, Inc., et al., Riverside Superior Court, Indio Case No. INC044676. In or
around June 30, 2005, KSL Land Holdings, LLC and CNL Desert Resorts, L.P. answered the
Complaint as successors in interest to the original defendants by statutory conversion.
J. WHEREAS to avoid the expense and uncertainty of the aforementioned litigation
(collectively, the "Action "), and with no admission or concession as to the validity of the
respective claims and defenses asserted in the Action, the Parties hereto on behalf of themselves
and their predecessors, successors and assigns agree to settle the Action on the terms and
conditions set forth herein.
NOW, THEREFORE, it is hereby agreed by and between the Parties as follows:
1. Acknowledgement of Termination and Quitclaim. Desert Resorts and Land
Holdings, jointly and severally, acknowledge and agree that the Restrictive Use Agreement and
the Additional Agreement, attached hereto as Exhibits A and B respectively, (collectively the
"CC &Rs ") are now terminated and/or expired and are of no further force and effect such that the
SilverRock Property (and the Agency) is now free from any and all covenants, conditions,
restrictions, obligations, and use limitations contained in the CC &Rs. Desert Resorts and Land
Holdings, jointly and severally, agree to: (1) execute and deliver to the Agency quitclaim deeds
or other form of recordable instruments (the "Quitclaims ") in a form reasonably required by a
reputable title company releasing all rights and interests in and to the CC &Rs so as to wholly
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remove the CC &Rs and the restrictions contained therein as a cloud on title to the SilverRock
Property; and (2) execute and deliver to the Agency any other form of written acknowledgement
or certification reasonably required by any interested third party (e.g. prospective purchasers,
joint venture partners, lessees, licensees, lenders and the like) confirming the termination and/or
expiration of the CC &Rs as reflected herein. Desert Resorts and Land Holdings, jointly and
severally, represent and warrant on behalf of themselves and their respective predecessors,
successors, assigns and all persons acting by and through or under any of them as follows: (1)
that they have full authority and power to execute and deliver the Quitclaims and to otherwise
acknowledge and/or effect the termination, release and expiration of the CC &Rs and to release
and discharge any and all obligations related to or arising therefrom; and (2) that Desert Resorts
remains the fee title owner of the KSL Hotel Property and that it has not either sold, transferred
or assigned such fee title (in whole or in part) to any other person or entity.
2. Indemnity, Defense and Hold Harmless Regarding CC &Rs. Desert Resorts and
Land Holdings, jointly and severally, agree to indemnify, defend and hold harmless the Agency,
including its officers, directors, members, shareholders, agents, representatives, attorneys,
employees, insurers, successors and assigns, and all persons acting by, through, under or in
concert with them, or any of them, from and against any and all Claims (as defined in
Subsection 3b), now or in the future, related to or arising out of the CC &Rs, that are brought by
any person or entity claiming by, through, or on behalf of, Desert Resorts or Land Holdings, as a
predecessor, successor, or assign (including any subsequent purchasers of the KSL Hotel
Property), to the effect that the CC &Rs remain effective or in any way limit, restrict, or impact
the use, development, transfer, sale and/or enjoyment of the SilverRock Property.
3. Mutual Limited Release.
a. The Parties, for themselves and for and on behalf of their successors and
assigns, and all persons acting by, through, or under any of them, hereby irrevocably and
unconditionally release and forever discharge one another and their parents, affiliates,
subsidiaries, officers, directors, members, shareholders, agents, representatives, attorneys,
employees, insurers, successors and assigns, and all persons acting by, through, under or in
concert with them, or any of them, of and from any and all Claims, as defined in subsection 3b
below, which were asserted in the Action and/or which may have arisen as a consequence of the
Action.
b. Subject to subsection 3c below, Claims shall be defined as follows: Any
and all causes of action, in law or equity, suits, liabilities, demands, damages, losses, costs or
expenses of any nature whatsoever, including but not limited to attorneys' fees, whether now
known or unknown, vested or contingent, suspected or unsuspected.
C. This release shall not include Claims for any breach of contract, covenant,
obligation, representation or warranty contained in the Settlement Agreement.
d. Each Party to this Settlement Agreement represents and warrants that no
Claim that would have been released under this Settlement Agreement, if held by that Party on
the Effective Date, has been transferred, hypothecated, assigned or given away by that Party
prior to the Effective Date of this Settlement Agreement to any person or entity that would not be
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bound hereby. Each Party shall indemnify, defend and hold harmless every other person or
entity then entitled to a release hereunder from and against any and all Claims (including,
without limitation attorneys' fees) resulting from its own actual breach of this representation and
warranty.
4. Dismissal of Action and Judicial Enforcement. Within ten (10) days after
recordation of the Quitclaims, the Agency shall file a dismissal of the Action. The Parties
acknowledge that this Settlement Agreement shall be enforceable by motion pursuant to Code of
Civil Procedure § 664.6. The Court shall retain jurisdiction over the Parties to enforce the
Settlement Agreement until its terms are fully performed, including but not limited to, the
execution and delivery of the Quitclaims. To the extent necessary to effectuate judicial
enforcement of this Settlement Agreement, the Parties agree to execute a stipulation requesting
that the Court retain jurisdiction for such purposes notwithstanding any dismissal of the Action.
5. Cost of Litigation. Each Party agrees to bear its own attorneys' fees and costs
incurred in connection with the prosecution and/or defense of the Action.
6. Counterparts. This Settlement Agreement may be executed in one or more
counterparts, with the same force and effect as if executed in one complete document.
7. Facsimile Signature Deemed Original. This Settlement Agreement may be signed
and delivered by facsimile transmission, and such facsimile documents shall be deemed originals
and binding upon the signatories upon receipt by the Party to whom the facsimile transmission is
sent. The hard copies of such document bearing the original signatures of such signatories shall
be sent via first class mail on the same day as the facsimile transmission to the other Party.
8. Authority. Each individual signing this Settlement Agreement warrants and
represents that she/he has full capacity and authority to execute the Settlement Agreement on
whose behalf she/he so signed.
9. Governing Law. This Settlement Agreement is made and entered into in the State
of California and shall, in all respects, be interpreted, enforced and governed by and under the
laws of the State of California.
10. Amendments and/or Modifications. This Settlement Agreement may be amended
or modified only by a writing signed by all Parties to this Settlement Agreement.
11. Headings. Paragraph headings are for reference only and shall not affect the
interpretation of any paragraph thereto.
12. Warranty. Each of the Parties to this Settlement Agreement warrants that no
promise or inducement has been made or offered by any of the Parties, except as set forth herein,
and that this Settlement Agreement is not executed in reliance upon any statement or
representation of any of the Parties or their representatives, not otherwise reflected herein.
13. Successors and Assigns. This Settlement Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective, successors and assigns.
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14. Further Assurances. The Parties hereto expressly agree to execute such other
documents and to take such other action as may be reasonably necessary to further the purpose of
this Settlement Agreement.
15. Voluntary Settlement Agreement. The Parties hereto, and each of them, further
represent and declare that they have carefully read this Settlement Agreement and know the
contents hereof and that they sign the same freely and voluntarily.
16. Interpretation of Settlement Agreement. In the event that any provision of the
Settlement Agreement requires interpretation, it is agreed by the Parties that the person
interpreting or construing this Settlement Agreement shall not apply a presumption that the terms
of this Settlement Agreement shall be more strictly construed against one Party, by reason of the
rule of construction that a document is to be construed more strictly against the Party who (by
itself or through its agent) prepared the document, it being agreed among the Parties that all
Parties have participated in the preparation of this Settlement Agreement.
17. Entire Settlement Agreement. This Settlement Agreement constitutes the full and
entire Settlement Agreement between the Parties and each Party acknowledges that there are no
representations, warranties, agreements, arrangements or undertakings, oral or written, between
the Parties relating to the subject matter of this Settlement Agreement, which were not fully
expressed herein.
18. Litigation: Attorneys' Fees. In the event that any legal action is brought related
to or arising out of this Settlement Agreement (or any documentation delivered pursuant thereto
or in connection therewith), by way of motion or otherwise, the prevailing party shall recover its
costs and reasonable attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have entered into and executed this
Agreement as indicated herein below.
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Dated: July//,/, 2006 La 7developruent 4genc r/
By
Thomas P. Genovese
Its: Executive Director
Dated: July_, 2006 CNL Desert Resort, LP,
fka KSL Desert Resorts, Inc.
By:
Its:
Dated: July_, 2006
APPROVED AS TO FORM:
Dated: July =i, 2006
KSL Land Holdings, LLC,
fka KSL Land Holdings, Inc.
By: _
Its:
M
Melzer
for La Quinta Redevelopment
Dated: July_, 2006 ALLEN, MATKINS, LECK, GAMBLE &
MALLORY, LLP
By:
Charles D. Jarrell
Attorneys for CNL Desert Resort, LP, fka KSL
Desert Resorts, Inc. and KSL Land Holdings,
LLC, fka KSL Land Holdings, Inc.
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