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2002 US Bank & IRS - Tax Allocation BondsCLOSING AGREEMENT ON FINAL DETERMINATION COVERING SPECIFIC MATTERS Under section 7121 of the Internal Revenue Code of 1986, as amended (the "Code"), La Quinta Redevelopment Agency (the "Issuer"), U.S. Bank National Association, survivor by merger of U.S. Bank Trust National Association (the "Escrow Agent"), and the Commissioner of Internal Revenue (the "Commissioner" or "IRS") make this closing agreement (the "Agreement"). WHEREAS, the parties have determined the following facts and made the following legal conclusions and representations: A. This Agreement is in settlement of issues raised by certain trans- actions involving the Issuer in a request for a closing agreement pertaining to La Quinta Redevelopment Agency La Quinta Redevelop- ment Project Tax Allocation Refunding Bonds, Series 1994 (Project Area No. 1) (the "Bonds") issued by the Issuer in the principal amount of $26,665,000 on June 21, 1994 (the "Issue Date"). B. This Agreement is not based upon an examination of the Bonds by the IRS and does not preclude or impede an examination of the Issuer, any holders of the Bonds, or the Bonds by the IRS with respect to matters not addressed in this Agreement. C. The IRS has not formally asserted any claims against the Issuer, or sought to tax any holders of the Bonds on interest income on the Bonds. D. The terms of this Agreement were reached following negotiations and may differ from the terms of settlement of other bond issues examined or to be examined by the IRS. E. This Agreement is for the benefit of the past, present, and future registered and beneficial owners of the Bonds (collectively, the "Bondholders"). F. The Escrow Agent failed, contrary to the requirements of the Escrow Agreement dated as of May 1, 1994 by and between the Issuer and the Escrow Agent (the "Escrow Agreement"), to reinvest proceeds of the Bonds deposited into the escrow account (the "Escrow Fund") created with respect to the Bonds in certain U.S. Treasury Obligations - State and Local Government Series. Proceeds of the Bonds were, 2 Closing Agreement with La Quinta Redevelopment Agency and U.S. Bank National Association during certain periods of time, left uninvested. As a result, the proceeds of the Bonds may have been invested in the Escrow Fund at yields in excess of the permissible yields under section 1.148-2(d)(2)(ii) of the Income Tax Regulations. The Escrow Agent has agreed to pay to the U.S. Treasury on behalf of the Issuer the excess earnings resulting from such failure, in the amount stated below. The Escrow Agent has computed the excess earnings on the Bonds to be $212,833.28 for the period beginning on the Issue Date and ending on February 11, 2000. NOW IT IS HEREBY DETERMINED AND AGREED PURSUANT TO THIS AGREEMENT EXECUTED BY THE PARTIES HERETO UNDER SECTION 7121 OF THE CODE THAT FOR FEDERAL INCOME TAX PURPOSES. 1. The Escrow Agent shall, simultaneously with mutual execution and delivery of this Agreement by the parties hereto, pay $212,833.28 to the U.S. Treasury (the "Settlement Amount") on behalf of the Issuer. Payment of this amount shall be transferred electronically to the U.S. Treasury or its designees pursuant to instructions previously provided, in writing, to counsel for the Escrow Agent by the IRS. Delivery of this Agreement shall be accomplished, and the Agreement shall be entered into, upon, but not before, both (1) receipt by each party, confirmed by telephone or e-mail, of an original or facsimile fully -executed copy of this Agreement, and (2) completion of the wire transfer contemplated by this Agreement. The date on which this Agreement so takes effect shall be inserted as the date of the Agreement on each counterpart. 2. In executing this Agreement the IRS does not expressly or impliedly accept the assumptions, allocations, or methodology used by the Escrow Agent in computing the excess earnings stated in Paragraph F. 3. The Bondholders are not required to include in their gross income any interest on the Bonds because of the violations set forth herein. 4. Notwithstanding anything to the contrary contained herein, the IRS may take any appropriate action with respect to the Bonds, including taxing the Bondholders on interest earned on the Bonds for violations other than those set forth herein; provided, however, for all purposes of sections 103 and 141 through 150 of the Code, (a) the amounts the Escrow Agent, prior to the date of this Agreement, failed to reinvest in U.S. Treasury Obligations -State and Local Government Series ("SLGS") as specified in the Escrow Agreement shall be treated as having been invested in zero coupon SLGS as specified in the Escrow 3 Closing Agreement with La Quinta Redevelopment Agency and U.S. Bank National Association Agreement, and (b) the Settlement Amount paid by the Escrow Agent to the U.S. Treasury shall not be treated as an amount earned by the Issuer on investments. 5. No income shall be recognized by any Bondholder as a result of this Agreement or any payments made pursuant to this Agreement. 6. The amount paid on behalf of the Issuer pursuant to this Agreement is not refundable, or subject to credit or offset under any circumstances. 7. No party to this Agreement shall endeavor by litigation or other means to attack the validity of this Agreement. 8. This Agreement shall not be cited or relied upon by any person or entity whatsoever as precedent in the disposition of any other case. 9. The Issuer hereby consents to disclosure by the IRS of information concerning the existence and subject matter of this Agreement to Members of Congress, the press and the general public: a. in the event of a default by the Issuer on any term in the Agreement; or b. to the extent the IRS deems necessary to correct any material misstatement with respect to this Agreement in response to a public statement by the Issuer or an agent of the Issuer. 10. This Agreement is final and conclusive except that --- a. The matter it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of a material fact. b. It is subject to the sections of the Code that expressly provide that effect be given to their provisions (including any stated exceptions for section 7122) notwithstanding any other law or rule of law; and c. If it relates to tax periods ending after the effective date of this Agreement, it is subject to any law, enacted after this Agreement date, that applies to that tax period. By signing, the above parties certify that they have read and agreed to the terms of this Agreement. 4 Closing Agreement with La Quinta Redevelopment Agency and U.S. Bank National Association Dated: April , 2002 LA QUINTA R DEVELOPMENT ENCY Title: TIN#: Date: April , 2002 U.S. BANK NATIONAL ASSOCIATION By: Title: Date Senior Vice President April , 2002 COMMISSIONER OF INTERNAL REVENUE By: Title: Date: April , 2002