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CC Resolution 2014-060 SilverRock PSDARESOLUTION NO. 2014 - 060 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, APPROVING THE PURCHASE, SALE, AND DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF LA QUINTA AND SILVERROCK DEVELOPMENT COMPANY, LLC, RELATING TO THE DISPOSITION AND USE OF CERTAIN REAL PROPERTY FOR THE SILVERROCK RESORT, AND AUTHORIZING IMPLEMENTATION ACTIONS RELATED THERETO WHEREAS, the City of La Quinta ("City") -and SilverRock Development Company, LLC, a Delaware limited, liability company ("Developer"), have negotiated that certain Purchase, .Sale, and Development Agreement with attachments thereto (the "Agreement" or "PSDA"); and, WHEREAS, the City owns fee title to that certain real property located at the southwest intersection of Jefferson Street and Avenue 52 in the City of La Quinta, California 92253, as more particularly depicted in the PSDA (the "Property"); and, WHEREAS, among other terms and conditions, the PSDA sets forth the terms and conditions, rights and obligations, for the purchase and sale of the Property, and subsequent development and use thereof; and, WHEREAS, City and Developer desire, through the PSDA, for Developer to purchase the Property from City and to thereafter construct, complete, and operate thereon a commercial project containing a luxury resort hotel and spa and associated branded luxury residential units, a lifestyle hotel and associated lifestyle branded residential units, a conference and shared service facility, a permanent clubhouse for the SilverRock Resort's Arnold Palmer Classic Course, a mixed use village, a resort residential village, and associated amenities, all as further described in the PSDA; and, WHEREAS, the proposed disposition and use of the Property has been approved by the California Department of Finance to the extent that the redevelopment dissolution law (Part 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code) applies, in that: (i) The proposed property disposition is consistent with the City of La Quinta Successor Agency's Long Range Property Management Plan ("LRPMP"), which was approved by the California Department of Finance, (ii) The proposed property disposition is consistent with the 2011 transfer of 86 acres of land designated for private development, also as approved by the California Department of Finance, and (iii) All Resolution No.2014-060 Purchase, Sale, and Development Agreement City of La Quinta — SilverRock Development Company, LLC. Adopted: November 4, 2014 Page 2 of 4 of the Property is vested in the name of the City to further the proposed future development; and, WHEREAS, pursuant to the requirements of Part 4 (commencing with Section 52200) of Division 1 of Title 5, and Section 53083 of the Government Code, the City prepared and made available to the public the Summary Report representing the economic opportunity and development subsidy report associated with the PSDA, which Summary Report is a public document and available for review on the City's Internet Web site and at City Hall during business hours ("Summary Report"); and, WHEREAS,- as more fully documented in the Summary Report and LRPMP, the Property evaluated two valuations for the Property: Estimated Current Value and Encumbered Value. -The Estimated Current Value of the approximately 59 acres is $295,000, as determined by appraisal which assumes that there are no covenants or conditions limiting development of the 59 acres. In contrast, the Encumbered Value of the property is $0, due in part to the restrictions on property development as aresult of the funding source, tax exempt bond proceeds, originally utilized to purchase the 59 acres in 2002, as more fully described in the Summary Report, which is incorporated herein by this reference to this Resolution; and, WHEREAS, the City Council of the City of La Quinta, California ("City Council"), did hold on the 41h day of November, 2014, a duly noticed public hearing -to consider the PSDA; and, WHEREAS, at said City Council Public Hearing, upon hearing and considering all testimony and arguments, if any, of all interested persons wanting to be heard, said City Council did make the following findings to justify approving the PSDA: 1. The PSDA is consistent with the La Quinta General Plan, Municipal Code and the SilverRock Resort Specific Plan. The development proposal as represented in the PSDA will not be developed in any manner inconsistent with the General Plan land use designations of Tourist Commercial and Recreational Open Space. 2. The PSDA is compatible with the uses and regulations as stipulated for the Tourist Commercial and Golf Course zoning districts. 3. The PSDA furthers the intent of the Legislature in fulfilling economic, opportunity, as set forth in Part 4 (commencing with Section 52200) of Division 1 of Title 5 of the Government Code because the development proposal will promote economic development on a local level to increase Resolution No.2014-060 Purchase, Sale, and Development Agreement City of La Quinta — SilverRock Development Company, LLC. Adopted: November 4, 2014 Page 3 of 4 jobs, create economic opportunity, and generate tax revenue for all levels of government. 4. The consideration that the City will receive for the Property is not less than the fair reuse value at the use and with the covenants and conditions and development costs authorized by the disposition pursuant to the PSDA. As more fully explained in the Summary Report, the Encumbered Value of the Property is $0, due in part to the restrictions on property development as a result of the funding source, tax exempt bond proceeds, originally utilized to purchase the 59 acres in 2002; and, WHEREAS, City's disposition of the Property to Developer, and Developer's subsequent construction, completion and operation thereon, pursuant to the terms of the PSDA, are in the vital and best interest of the City and the health, safety and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws, and requirements. NOW THEREFORE, BE IT RESOLVED, by the City Council of the City of La Quinta, as follows: SECTION 1. RECITALS. The above recitals are true and correct and incorporated here by this reference, and shall constitute findings of the City Council. SECTION 2. APPROVAL. The City Council hereby approves and adopts the PSDA attached as Exhibit "A" substantially in the form presented to the City Council concurrent with the approval and adoption of this Resolution, authorizes and directs the City Manager to sign the PSDA on behalf of the City, authorizes and directs the City Manager to make any modifications to the PSDA, before or -after its execution, that do not substantively amend the PSDA and still effectuate the intent of the City and Developer as presented to and approved by the City Council concurrent with the approval and adoption of this Resolution, and directs the City Clerk to retain the executed PSDA as a public record available for public inspection pursuant to law. SECTION 3. ENVIRONMENTAL. An Addendum to a previously adopted Mitigated Negative Declaration (EA 2002-453), and subsequent Addendum (EA 2006-568) was prepared pursuant to the California Environmental Quality Act, was confirmed and adopted by the City Council, on November 4, 2014. Said determination, extends to include PSDA, based on its incorporation as part of the overall project, as defined under CEQA. SECTION 4. REPORTS. The City Manager is authorized and directed to prepare Resolution No.2014-060 Purchase, Sale, and Development Agreement City of La Quinta — SilverRock Development Company, LLC. Adopted: November 4, 2014 Page 4 of 4 and submit for City Council and public review any reports required by law for the implementation of the PSDA. PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of La Quinta held this 4t' day of November, 2014, by the following vote: AYES: Council Members Evans, Franklin, Osborne, Mayor Adolph NOES: Council Member Henderson ABSENT: None ABSTAIN: None DON ADOI H, Ma r City of La Quinta, C lifornia ATTEST: SUSAN MAYSELS, City Jerk City of La Quinta, California (CITY SEAL) APPROVED AS TO FORM: WILLIAM H. IHRKE, City Attorney City of La Quinta, California EXHIBIT "A" PURCHASE, SALE, AND DEVELOPMENT AGREEMENT By and Between the CITY OF LA QUINTA, a California municipal corporation and charter city, and SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company 882/015610-0065 6895841.10 a10/30/14 PURCHASE, SALE, AND DEVELOPMENT AGREEMENT This PURCHASE, SALE, AND DEVELOPMENT AGREEMENT (this "Agreement") is entered into as of 2014 ("Effective Date"), by and between the CITY OF LA QUINTA, a California municipal corporation and charter city (the "City"), and SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company (the "Developer"). City and Developer are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS The following recitals are a substantive part of this Agreement: A. City is a California municipal corporation and charter city organized and existing under the Constitution of the State of California. B. Developer is a Delaware limited liability company, the members of which specialize in the development and management of luxury hotel and luxury residential developments. C. City owns fee title to that certain real property located at the southwest intersection of Jefferson Street and Avenue 52 in the City of La Quinta, California 92253 (the "Property"). D. City and Developer desire by this Agreement for Developer to purchase the Property from City and to thereafter construct, complete, and operate thereon a commercial project containing a luxury resort hotel and spa and associated branded luxury residential units, a lifestyle hotel and associated lifestyle branded residential units, a conference and shared service facility, a permanent clubhouse for the SilverRock Resort's Arnold Palmer Classic Course, a mixed use village, a resort residential village, and associated amenities, all as further described herein. E. City's disposition of the Property to Developer, and Developer's subsequent construction, completion and operation of the "Project" (as that term is defined in Section 100 below) thereon, pursuant to the terms of this Agreement, are in the vital and best interest of the City of La Quinta and the health, safety and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws and requirements. NOW, THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged, City and Developer hereby agree as follows: 100. DEFINITIONS In addition to the terms that may be defined elsewhere in this Agreement, the following terms when used in this Agreement shall be defined as follows: 882/015610-0065 6895841.10 a10/30/14 "Adverse Economic Event' means either of the following: (i) as of any date following the Phase 1 Closing, that the average RevPAR for the Competitive Coachella Valley Hotels over the course of the immediately preceding twelve (12) month period has declined by ten percent (10%) or more from the levels reported by Smith Travel Research for the 2014 calendar year, or (ii) Developer's inability, despite its use of commercially reasonable efforts for one (1) year following the Phase 1 Closing, to obtain a commitment for a construction loan for the development of the Luxury Hotel from an institutional lender on the following terms: (a) an annual interest rate of no more than seven percent (7%) (subject to such maximum rate being increased to the extent of any increase in the Prime Rate published by the Wall Street Journal between the Effective Date and the Phase 1 Closing Date, (b) a loan to "cost" ratio of no less than sixty-five percent (65%), and (c) such loan being non -recourse to Developer and its principals save and except for a limited guarantee to pay for up to ten percent (10%) of the cost of construction in addition to Developer providing the lender with a completion bond for one hundred percent (100%) of the budgeted costs of construction. As used in subdivision (b) above, the term "cost" shall have the same meaning as the term "Aggregate Preopening Expenses", as defined in the TOT Covenant Agreement. "Agreement' means this Purchase, Sale, and Development Agreement between City and Developer. "Ahmanson Ranch House Component' means the Project Component that consists of Developer's rehabilitation of the existing Ahmanson Ranch House, as further described in Section 319 hereof, and in the Scope of Development and Specific Plan. "Assignment and Assumption Agreement' is defined in Section 603.3 hereof. "Available Rooms" means, with respect to any consecutive twelve (12) month period, the total number of hotel guest rooms in such period, less those hotel guest rooms removed from saleable inventory for any period of time during such period. "Average Room Rate" means, with respect to any consecutive twelve (12) month period, the total revenue generated from hotel guest room rentals, divided by the number of paid hotel rooms occupied during such period. "Best Knowledge" or "Actual Knowledge" means, for purposes of a representation or warranty given hereunder, that such Party has conducted a reasonable review of its files and has made reasonable inquiry of its employees and agents responsible for the acquisition, development and disposition of the Property. "Bulk Sale" is defined in Section 305.3(d) hereof. "Business DaY' means any day on which the City of La Quinta is open for business. Unless otherwise specified as "Business Days," all days hereunder are calendar days. "City' means the City of La Quinta, a California municipal corporation and charter city. 882/015610-0065 6895841.10 a10/30/14 -2- "City Manage" means the individual duly appointed to the position of City Manager of City, or his or her authorized designee. "City's Conditions Precedent to the Closing" means the conditions precedent to the Closing to the benefit of City, as set forth in Section 205.1 hereof. "Competitive Coachella Valley Hotels" means, collectively, those certain hotels located in the Coachella Valley and currently known as Hyatt Regency Indian Wells, Marriott Desert Springs, Miramonte, Waldorf Astoria La Quinta, Viceroy Palm Springs, and Ritz Carlton Rancho Mirage. "Completion of Construction Date" is defined in Section 306 hereof. "Condition of Property Title" is defined in Section 203 hereof. "Conference and Shared Service Facility' means the Project Component that consists of Developer's development and subsequent operation of a conference and shared service facility containing space designed and designated for conferences and banquets, back -of -house support services, and management function space shared by the Lifestyle Hotel and Luxury Hotel, and a surface parking lot, all as further described in the Scope of Development and Specific Plan; provided, however, that if Developer elects to construct the Lifestyle Hotel subsequent to constructing the Luxury Hotel, then Developer shall have the option to submit to City, for City's review and approval, which approval shall not be unreasonably withheld, a phasing plan for the construction of the Conference and Shared Service Facility to complement the construction of the Luxury Hotel and Lifestyle Hotel (including any approved phasing plan for the construction of the Lifestyle Hotel). "Contractor Bonds" means payment and performance bonds ensuring the completion of a contractor or subcontractor's work on the Phase 1 Master Site Infrastructure Improvements, the Phase 2 Master Site Infrastructure Improvements, or one or more Project Components. "CVWD" means Coachella Valley Water District, a public agency of the State of California. "Default' means the failure of a Party to perform any action or covenant required by this Agreement within the time periods provided herein following notice and opportunity to cure, as set forth in Section 501 hereof. "Developer" means SilverRock Development Company, LLC, a Delaware limited liability company, and any permitted successors and assigns. "Developer CC&Rs" is defined in Section 312 hereof. "Developer Representatives" means, collectively, Developer's managers, directors, officers, engineers, analysts, officials, employees, agents, contractors, representatives, attorneys, advisers, and consultants, including an Environmental Consultant. 882/015610-0065 6895841.10 a10/30/14 -3- "Developer's Conditions Precedent to the Closing" means the conditions precedent to the Closing to the benefit of Developer, as set forth in Section 205.2. "Development Agreement' means a Development Agreement entered into or to be entered into between City and Developer pursuant to Government Code section 65864 et seg. "Dust Control Program" means a program compliant with the City's dust control ordinance and with applicable South Coast Air Quality Management District requirements. "Effective Date" means the date inserted into the Preamble hereof, which is the date this Agreement becomes effective. "Environmental Consultant' means a consultant engaged by Developer, at Developer's sole cost and expense, which conducts the environmental investigations of the Property pursuant to Section 207.2 hereof. "Environmental Review Period' is defined in Section 206.1. "Escrow Agent' is defined in Section 202 hereof. "Evidence of Financial Capability' means evidence reasonably satisfactory to the City Manager that Developer has the financial resources necessary for the development of each respective Development Component, as further described in , r. inn 311 "Expert' means an independent, neutral and impartial individual from the firms of PKF Consulting or HVS Consulting, having not less than ten (10) years hospitality industry experience in the area of expertise on which the dispute is based (e.g. with respect to operational matters, experience in the management and operation of luxury, boutique, lifestyle or similar First -Class Hotels or, with respect to financial matters, experience in the financial or economic evaluation or appraisal of such luxury boutique, lifestyle or similar First -Class Hotels). "Fee Transfer Release Date" is defined in Section 603.1 hereof. "Final Project Budget' means the final Project development budget, which shall consist of the Preliminary Project Budget with any modifications necessary to reflect Developer's final development cost estimates. "FIRPTA" means the Foreign Investment in Real Property Transfer Act. "Force Majeure" is defined in Section 602 hereof. "GC Permit' is defined in Section 318 hereof. "Golf Course" means SilverRock Resort's Arnold Palmer Classic Course. 882/015610-0065 6895841.10 a10/30/14 -4- "Golf Course Realignment' means the Project Component that consists of Developer's realignment of certain portions of the Golf Course, as further described in Section 316 hereof and in the Scope of Development. "Good Funds" means a confirmed wire transfer of immediately available funds, cashier's or certified check drawn on or issued by the office of a financial institution located in Riverside County, or cash. "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the State of California, the County of Riverside, the City, or any other political subdivision in which the Property, or any portion thereof, is located, and of any other political subdivision, agency or instrumentality exercising jurisdiction over Developer, and/or the Property, or any portion thereof. "Grant Deed' means a grant deed, substantially in the form attached hereto and incorporated herein by this reference as Attachment No. 4, pursuant to which City shall convey title to the Phase 1 Property and the Phase 2 Property to Developer. "Hazardous Materials" means any substance, material, or waste which is, or becomes, regulated by any local or regional governmental authority, the State of California, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste", "extremely hazardous waste", or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter - Presley -Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) friable asbestos, (vii) polychlorinated biphenyls, (viii) methyl tertiary butyl ether, (ix) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (x) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. §1317), (xi) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq. (42 U.S.C. §6903) or (xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601 et seq. "Hotel Management Agreement' is defined in Section 304.10 hereof. "Hotel Management Agreement Letter of Intent' means a letter of intent or term sheet prepared by a Hotel Operator with respect to the Luxury Hotel or Lifestyle Hotel (as applicable), as set forth in Section 205.1(m) hereof. 882/015610-0065 6895841.10 a10/30/14 -5- "Hotel Operator' is defined in Section 205.1(m) hereof. "Indemnitee" and "Indemnitees" are defined in Section 206.2 hereof "Independent Contract Consideration" is defined in Section 202.2 hereof. "Lifestyle Branded Residential Development' means the Project Component that consists of Developer's construction of approximately sixty (60) one and/or two- story luxury, condominium -style Resort Residential Dwelling Units, as further described in the Scope of Development and Specific Plan. "Lifestyle Hotel" means the Project Component that consists of Developer's construction and subsequent operation of a modern, two- and three-story hotel (a) containing not less than a sufficient number of hotel guest rooms that, when added to the number of hotel guest rooms at the Luxury Hotel, will result in the Project having an aggregate of at least three hundred (340) total hotel guest rooms, which rooms may be constructed pursuant to a phasing plan that has been submitted to and approved by City in City's reasonable discretion, and (ii) providing food and beverage services, a pool, a surface parking lot, and other related amenities, all as further described in the Scope of Development and Specific Plan. Notwithstanding anything to the contrary in this Agreement, if Developer elects to construct the Lifestyle Hotel in phases, then Developer shall have the option to submit to City, for City's review and approval, which approval shall not be unreasonably withheld, a phasing plan for the construction of the Lifestyle Hotel. "Lifestyle Hotel Operator" is defined in Section 401 hereof. "Luxury Branded Residential Development' means the Project Component that consists of Developer's construction of approximately thirty-five (35) luxury single- family detached Resort Residential Dwelling Units, as further described in the Scope of Development and Specific Plan. "Luxury Hotel" means the Project Component that consists of Developer's construction and subsequent operation of an upscale, luxury, full -service single -story hotel containing not less than one hundred twenty (120) luxury hotel rooms, that offers luxury amenities, full service accommodations, a full -service sit-down restaurant, a first- class spa and fitness facility, and pools, all as further described in the Scope of Development and Specific Plan. "Luxury Hotel Fence" means a fence (or the functional equivalent, as determined by City) that meets the applicable specifications and standards of the Coachella Valley Conservation Commission acting as authorized agent for the requirements and obligations of the Multiple Species Habitat Conservation Plan. "Luxury Hotel Operator is defined in Section 401 hereof. "Management Transfer"is defined in Section 603.2 hereof. 882/015610-0065 6895841.10 a10/30/14 -6- "Master Site Infrastructure Improvements" means the Project Component consisting of Developer's construction and installation of all of the backbone infrastructure improvements required to serve the Property, consistent with the Specific Plan and Scope of Development. "Master Site Infrastructure Improvements Design/Construction Development Drawings" means those applications, plans and drawings to be submitted to City with respect to the development of each of the Phase 1 Master Site Infrastructure Improvements and the Phase 2 Master Site Infrastructure Improvements, as set forth in Section 210 hereof. "Master Site Infrastructure Improvements Land Use Approvals" is defined in Section 209 hereof. "Master Site Infrastructure Improvements Phasing Plan" means a plan that provides for Developer's completion of the Master Site Infrastructure Improvements in separate phases, with specified times for commencement and completion of each phase. "Memorandum of PSDX means the Memorandum of Purchase, Sale, and Development Agreement substantially in the form attached hereto and incorporated herein as Attachment No. 10. "Meriwethet" means Meriwether Companies LLC, a Delaware limited liability company. "Municipal Code" means the La Quinta Municipal Code. "Notice" means a notice in the form prescribed by Section 601 hereof. "Occupancy Percentage" means, with respect to any consecutive twelve (12) month period, the number of paid hotel rooms occupied in such period divided by the Available Rooms in such period. "Official Records" means the Official Records of the County of Riverside. "Option Agreement' means the Option Agreement substantially in the form attached hereto and incorporated herein as Attachment No. 7. The Option Agreement shall be recorded against the Phase 1 Property at the Phase 1 Closing, and against the Phase 2 Property at the Phase 2 Closing. "Outside Date for Phase 1 Closing" means the date that is five hundred forty (540) days following the Effective Date. "Outside Date for Phase 2 Closing" means the date that is the earlier of (a) three (3) years following the Phase 1 Closing Date, or (b) four (4) years following the Effective Date. 882/015610-0065 6895841.10 a10/30/14 -7- "PA" or "Planning Area" means a proposed planning area within the SilverRock Resort Area, each of which proposed planning areas is depicted on the Site Map. "Parcel Map" means a parcel map subdividing the Property into multiple parcels, or a lot line adjustment of the existing Property, as necessary to accomplish the development of the Project. The existing parcel map for the Property shall be amended or a new parcel map recorded against the Property prior to or concurrently with the Phase 1 Closing. "Permanent Golf Clubhouse" shall mean the Project Component that consists of Developer's development of a permanent public clubhouse to serve the Golf Course, all as further described in the Scope of Development and Specific Plan. "Phase" is defined in Section 201 hereof. "Phase 1 Closing" means the close of the Phase 1 Escrow for the conveyance from City to Developer of the Phase 1 Property as set forth in Section 202.5 hereof. "Phase 1 Closing Date" means the date the Phase 1 Escrow closes for the conveyance of the Phase 1 Property from City to Developer as set forth in Section 202.5 hereof. "Phase 1 EscroW is defined in Section 202 hereof. "Phase 1 Master Site Infrastructure Improvements" means the portion of the Master Site Infrastructure Improvements to be installed and/or constructed to serve the Phase 1 Property. "Phase 1 Property' means the portion of the Property consisting of approximately one hundred twenty-five (125) acres, which is comprised of the proposed Planning Areas identified on the Site Map as "PA 2," "PA 3," "PA 4," "PA7," "PA 8," "PA 9," and a portion of "PA 10A." "Phase 2 EscroW' is defined in Section 202 hereof. "Phase 2 Property' means the portion of the Property consisting of approximately twenty (20) acres, which is comprised of the proposed Planning Areas identified on the Site Map as "PA 5" and "PA 6." "Phase 2 Closing" means the close of the Phase 2 Escrow for the conveyance from City to Developer of the Phase 2 Property as set forth in Section 202.5 hereof. "Phase 2 Closing Date" means the date the Phase 2 Escrow closes for the conveyance of the Phase 2 Property from City to Developer as set forth in Section 202.5 hereof. "Phase 2 Master Site Infrastructure Improvements" means the portion of the Master Site Infrastructure Improvements to be installed and/or constructed to serve the Phase 2 Property. 882/015610-0065 6895841.10 a10/30/14 -8- "Preliminary Budget' means that certain preliminary Project development budget prepared by Developer, which is attached hereto and incorporated herein as Attachment No. 6. "Preliminary Title Report' means the preliminary title report issued by the Title Company that covers the Property, as described in Section 203 hereof. "Project' means the commercial development to be constructed on the Property that consists of the Ahmanson Ranch House Component, Conference and Shared Service Facility, Lifestyle Branded Residential Development, Lifestyle Hotel, Luxury Branded Residential Development, Luxury Hotel, Permanent Golf Clubhouse, Promenade Mixed -Use Village, and Resort Residential Village, as further described in the Scope of Development and Specific Plan. "Project Component' means any of the following components of the Project: Ahmanson Ranch House Component, Conference and Shared Service Facility, Golf Course Realignment, Lifestyle Branded Residential Development, Lifestyle Hotel, Luxury Branded Residential Development, Luxury Hotel, Permanent Golf Clubhouse, Promenade Mixed -Use Village, and Resort Residential Village. "Project Component Design/Construction Development Drawings" means those applications, plans and drawings to be submitted to City with respect to the development of each Project Component, as set forth in Section 302 hereof. "Project Component Land Use Approvals" is defined in Section 304.5 hereof. "Promenade Mixed -Use Village" means the Project Component consisting of Developer's development of up to two hundred twenty-five thousand (225,000) salable square feet of residential space containing between one hundred ten (110) and two hundred twenty-five (225) Resort Residential Dwelling Units, together with commercial space comprising between twelve thousand nine hundred (12,900) and forty thousand (40,000) square feet of mixed -use space comprised of permanent retail and seasonable stand-alone "pop-up" space, all as further described in the Scope of Development and Specific Plan. "Property' means that approximately one hundred forty-five (145) acres of real property located at the southwest intersection of Jefferson Street and Avenue 52 in the City of La Quinta, California 92253. The Property is legally described in the Property Legal Description and depicted in the Site Map. "Property Environmental Reports" means the collective environmental investigations of the Property conducted pursuant to Section 207.2 hereof. "Property Exceptions" is defined in Section 203. "Property Legal Description" means the legal description of the Property. At such time as the Parcel Map is recorded, the Parties shall insert the legal description of the Property into Attachment No. 1, which is attached hereto and incorporated herein by this reference. 882/015610-0065 6895841.10 a10/30/14 -9- "Purchase Price" means the price to be paid by Developer to City in consideration of City's conveyance to Developer of fee title to the Property. The Purchase Price is referenced in Section 202.2 hereof. "Redevelopment Plan" is defined in Section 203 hereof. "SWRCB" means the State Water Resources Control Board. "Release of Construction Covenants" means the document which evidences Developer's satisfactory completion of a Project Component, as set forth in Section 310 hereof, substantially in the form of Attachment No. 8 hereto which is incorporated herein by this reference. "Resort Residential Dwelling Unit' means a for -sale, residential dwelling unit located within the Luxury Branded Residential Development, Lifestyle Branded Residential Development, Promenade Mixed -Use Village, or Resort Residential Village. "Resort Residential Village" means the Project Component that consists of Developer's development and subsequent operation of approximately one hundred sixty (160) Resort Residential Dwelling Units, an on -site amenity center consisting of a clubhouse, and a reception and concierge desk, all as further described in the Scope of Development and Specific Plan. "RevPAR" means, with respect to any consecutive twelve (12) month period, the Average Room Rate multiplied by the Occupancy Percentage for such period. "RGC" means The Robert Green Company, a California corporation. "Schedule of Performance" means the Schedule of Performance attached hereto and incorporated herein as Attachment No. 3, setting out the dates and/or time periods by which certain obligations set forth in this Agreement must be accomplished, as same may be amended from time to time upon written approval of City, which approval shall not be unreasonably withheld. "Scope of Development' means the Scope of Development attached hereto and incorporated herein as Attachment No. 5, which describes the scope, amount and quality of development of the Project to be constructed by Developer pursuant to the terms and conditions of this Agreement. "SilverRock Resort Area" means the real property included in and covered by the Specific Plan. "Site Map" means the map of the Property and adjacent real property owned by City, which is attached hereto as Attachment No. 2 and incorporated herein by this reference. The Site Map depicts twelve (12) proposed Planning Areas within the SilverRock Resort Area, numbered 1, 2, 3, 4, 5, 6, 7, 8, 9, 10A,10B, 11, and 12. "Specific Plan" means the SilverRock Resort Specific Plan, which was approved by the City Council of City on July 18, 2006. Developer's development and operation of 882/015610-0065 6895841.10 a10/30/14 -1 0- the Project shall be in substantial conformance with the Specific Plan, as it may be amended from time to time in accordance with its provisions. In the event this Agreement is inconsistent with the Specific Plan, the terms of the Specific Plan shall prevail. "Title Company' is defined in Section 203 hereof. "Title Policy' is defined in Section 204 hereof. "TOT Covenant Agreement' means an Agreement Containing Covenants, Conditions, and Restrictions Affecting Real Property substantially in the form attached to the TOT Sharing Agreement as Exhibit "B". Concurrently with the execution of this Agreement, Developer and City will be required to execute a TOT Covenant Agreement for each of the Luxury Hotel and Lifestyle Hotel. At the Phase 1 Closing, Developer and City shall record against the real property to be developed with the Luxury Hotel the TOT Covenant Agreement for the Luxury Hotel, and at the Phase 2 Closing, Developer and City shall record against the real property to be developed with the Lifestyle Hotel the TOT Covenant Agreement for the Lifestyle Hotel. The TOT Covenant Agreements (i) require Developer to operate and maintain the Luxury Hotel and Lifestyle Hotel as first class hotels in accordance with the terms thereof, and (ii) provide for City to make certain payments to Developer based on the Transient Occupancy Tax generated by Developer's operation of the Luxury Hotel or Lifestyle Hotel (as applicable) if Developer's annual net revenue from operating the Luxury Hotel or Lifestyle Hotel (as applicable) is less than the target amount, as specified therein. "TOT Sharing Agreement' means an Agreement to Share Transient Occupancy Tax Revenue substantially in the form attached hereto and incorporated herein as Attachment No. 11. Concurrently with the execution of this Agreement, Developer and City will be required to execute a TOT Sharing Agreement for each of the Lifestyle Hotel and Luxury Hotel. "Transfer" is defined in Section 603.1 hereof. "Transient Occupancy Tax" means the tax imposed on the occupancy of a hotel or group hotel pursuant to Chapter 3.24 of the Municipal Code. "Water Agreement' is defined in Section 205.1(n) hereof. 200. CONVEYANCE OF THE PROPERTY 201. Disposition of the Property. Developer agrees to purchase the Property from City, and City agrees to sell the Property to Developer, in accordance with and subject to all of the terms, covenants, and conditions of this Agreement. The Purchase Price for each Planning Area to be conveyed to Developer is One Dollar ($1.00). The Property will be conveyed in two phases (each, a "Phase"). 202. Escrow. Within the times set forth in the Schedule of Performance, Developer and City shall open (i) an escrow for Phase 1 (the "Phase 1 Escrow") with Brenna Ryan, at First American Escrow, at 18500 Von Karman Avenue, Suite 600, 882/015610-0065 6895841.10 a10/30/14 -1 1 - Irvine, California 92612, or another escrow company mutually satisfactory to both Parties (the "Escrow Agent"), for City's conveyance of the Phase 1 Property to Developer, and (ii) an escrow for Phase 2 (the "Phase 2 Escrow") with Escrow Agent for City's conveyance of the Phase 2 Property to Developer. 202.1 Costs of Escrow. Developer shall pay all of the costs of each of the Phase 1 Escrow and the Phase 2 Escrow, including, without limitation, (i) all costs and charges attributable to the ALTA (or CLTA, as elected by Developer in its sole discretion) policy of title insurance for the Phase 1 Property and all costs and charges attributable to the ALTA (or CLTA, as elected by Developer in its sole discretion) policy of title insurance for the Phase 2 Property, as set forth in Section 204 hereof, (ii) the documentary transfer taxes, if any, due with respect to the conveyance of the Phase 1 Property and the conveyance of the Phase 2 Property, and (iii) all other fees, charges, and costs which arise from the Phase 1 Escrow and Phase 2 Escrow. Due to City's status as a public entity, the Parties do not anticipate that any recording fees will be charged in connection with either of the Phase 1 Escrow or Phase 2 Escrow. Notwithstanding the foregoing, however, to the extent recording fees are charged or imposed, Developer shall pay all of such fees. 202.2 Payment of Independent Contract Consideration and Purchase Price. (a) Concurrent with the execution of this Agreement, Developer has paid to City the sum of One Dollar ($1) (the "Independent Contract Consideration"), which sum is non-refundable to Developer under any circumstances and City hereby acknowledges having received as consideration for City's execution and delivery of this Agreement and Developer's right to approve or disapprove any of Developer's Conditions Precedent to the Closing. In the event the Phase 1 Escrow closes, the Independent Consideration shall be applied towards payment of the Purchase Price for the Planning Areas to be conveyed to Developer at the Phase 1 Closing. (b) On or before 5:00 p.m. on the Business Day preceding each of the Phase 1 Closing Date and Phase 2 Closing Date (or such earlier time as required by Escrow Agent), Developer shall deposit with Escrow Agent such funds as may be required to meet the closing costs as hereinafter provided. 202.3 Escrow Instructions. This Agreement constitutes the joint escrow instructions of Developer and City for each of the Phase 1 Escrow and Phase 2 Escrow, and the Escrow Agent to whom instructions are delivered is hereby empowered to act under this Agreement. All funds received in the Phase 1 Escrow and Phase 2 Escrow shall be deposited with other escrow funds in a general escrow account(s) and may be transferred to any other such escrow trust account in any State or National Bank doing business in the State of California. All disbursements shall be made by check from such account. If in the opinion of either Party or Escrow Agent it is necessary or convenient in order to accomplish the Phase 1 Closing or Phase 2 Closing, such Party may require that the Parties sign supplemental escrow instructions; provided that if 882/015610-0065 6895841.10 a10/30/14 -1 2- there is any inconsistency between this Agreement and the supplemental escrow instructions, then the provisions of this Agreement shall control. The Parties agree to execute such other and further documents as may be reasonably necessary, helpful or appropriate to effectuate the provisions of this Agreement. Escrow Agent is instructed to release City's and Developer's escrow closing statements to the respective Parties. 202.4 Authority of Escrow Agent. At each of the Phase 1 Closing and Phase 2 Closing, Escrow Agent is authorized to, and shall: (a) Pay and charge Developer for the costs for the applicable Title Policy, as set forth in Section 204 including all endorsements required by Developer. (b) Pay and charge Developer for all escrow fees, charges, and costs payable under Section 202.1 of this Agreement. (c) At each of the Phase 1 Closing and Phase 2 Closing, disburse funds and record the applicable Grant Deed, Option Agreement, TOT Covenant Agreement, and Water Agreement, and at the Phase 1 Closing only, record the Memorandum of PSDA, when both Developer's Conditions Precedent to the Closing and City's Conditions Precedent to the Closing have been fulfilled, or waived by Developer and City (as applicable). (d) Do such other actions as necessary, including obtaining the applicable Title Policy, to fulfill its obligations under this Agreement. (e) Within the discretion of Escrow Agent, direct City and Developer to execute and deliver any instrument, affidavit and statement, and to perform any act reasonably necessary to comply with the provisions of the Foreign Investment in Real Property Transactions Act ("FIRPTA") and any similar state act and regulation promulgated thereunder. City agrees to execute a Certificate of Non -Foreign Status by individual transferor and/or a Certification of Compliance with Real Estate Reporting Requirement of the 1986 Tax Reform Act as may be required by Escrow Agent, on the form to be supplied by Escrow Agent. (f) Prepare and file with all appropriate governmental or taxing authorities a uniform settlement statement, closing statement, tax withholding forms including an IRS 1099-S form, and be responsible for withholding taxes, if any such forms are provided for or required by law. (g) Deliver the applicable recorded Option Agreement, TOT Covenant Agreement, and Water Agreement, and at the Phase 1 Closing only, the Memorandum of PSDA to City, and deliver copies of the aforementioned recorded documents together with the applicable recorded Grant Deed to Developer. 202.5 Closing. Each of the Phase 1 Escrow and Phase 2 Escrow shall close (the "Phase 1 Closing" or "Phase 2 Closing," as applicable) within thirty (30) days after the Parties' satisfaction of all of City's Conditions Precedent to the Closing and all of Developer's Conditions Precedent to the Closing as set forth in Section 205 hereof, 882/015610-0065 6895841.10 a10/30/14 -1 3- but in no event shall the Phase 1 Closing occur later than the Outside Date for Phase 1 Closing, and in no event shall the Phase 2 Closing occur later than the Outside Date for Phase 2 Closing. Subject to the provisions in this Section 202.5, each of the Phase 1 Closing and Phase 2 Closing shall occur at a time reasonably agreed on by the Parties. The "Phase 1 Closing" shall mean the time and day the Grant Deed for the Phase 1 Property is recorded in the Official Records. The "Phase 1 Closing Date" shall mean the day on which the Phase 1 Closing occurs. The "Phase 2 Closing" shall mean the time and day the Grant Deed for the Phase 2 Property is recorded in the Official Records. The "Phase 2 Closing Date" shall mean the day on which the Phase 2 Closing occurs. Notwithstanding anything herein to the contrary, the Outside Date for Phase 1 Closing and the Outside Date for Phase 2 Closing shall not be subject to Force Majeure. 202.6 Termination. If the Phase 1 Escrow is not in condition to close by the Outside Date for Phase 1 Closing, or the Phase 2 Escrow is not in condition to close by the Outside Date for Phase 2 Closing, then either Party which is not then in default of any of its obligations under this Agreement may, in writing, demand the return of money, documents, or property and terminate the Phase 1 Escrow or Phase 2 Escrow (as applicable). If either Party makes a written demand for return of money, documents or property, the Phase 1 Escrow or Phase 2 Escrow (as applicable) shall not terminate until ten (10) Business Days after Escrow Agent shall have delivered copies of such demand to the other Party at the respective addresses shown in this Agreement. If any objections are raised within said ten (10) Business Day period, Escrow Agent is authorized to hold all monies, papers and documents until instructed by a court of competent jurisdiction or by mutual written instructions of the Parties. Termination of the Phase 1 Escrow or Phase 2 Escrow (as applicable) shall be without prejudice as to whatever legal rights either Party may have against the other arising from this Agreement. If no demands are made, Escrow Agent shall proceed with the Phase 1 Closing or Phase 2 Closing (as applicable) as soon as possible. 202.7 Closing Procedure. Escrow Agent shall close each of the Phase 1 Escrow and Phase 2 Escrow as follows: (a) (i) Record, in the following order, the applicable Grant Deed, Option Agreement, TOT Covenant Agreement, Water Agreement, and Memorandum of PSDA (at the Phase 1 Escrow only), and deeds of trust and other security instruments securing Developer's financing for completion of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), and (ii) deliver conformed copies of each of the documents listed in clauses (i) above, showing recording information to City and Developer; (b) Provide for the delivery of (i) the applicable original recorded Option Agreement, Water Agreement, TOT Covenant Agreement, and Memorandum of PSDA (at the Phase 1 Escrow only), to City, together with a copy of the applicable Grant Deed, and (ii) the applicable original recorded Grant Deed to Developer, together with copies of the Option Agreement, Water Agreement, TOT Covenant Agreement, and Memorandum of PSDA (at the Phase 1 Escrow only) to Developer; 882/015610-0065 6895841.10 a10/30/14 -1 4- (c) Deliver the applicable Title Policy and Grant Deed to Developer, (d) File any informational reports required by Internal Revenue Code Section 6045(e), as amended and any other applicable requirements; and (e) Deliver the applicable FIRPTA Certificate, if any, to Developer; and (f) Forward to both Developer and City a separate accounting of all funds received and disbursed for each Party and copies of all executed and recorded or filed documents deposited into the Phase 1 Escrow or Phase 2 Escrow (as applicable), with such recording and filing date and information endorsed thereon. 203. Review of Title of Property. City shall cause First American Title, attention Wendy Hagen, at 250 East Palm Canyon Drive, Palm Springs, California 92262 (the "Title Company"), or another title company mutually satisfactory to both Parties, to deliver to Developer a standard preliminary title report dated no earlier than the Effective Date (the "Preliminary Title Report") with respect to the title to the Property, together with legible copies of the documents underlying the exceptions ("Property Exceptions") set forth in the Preliminary Title Report, within thirty (30) days after the Effective Date. Developer shall have the right to approve or disapprove the Property Exceptions and any proposed encumbrances to the Property in the exercise of its sole discretion; provided, however, that Developer hereby approves the following Property Exceptions: (a) The Redevelopment Plan for the La Quinta Project Area No. 1, adopted on November 29, 1983, by Ordinance No. 43 of the City Council of the City of La Quinta (the "Redevelopment Plan"). (b) The lien of any non -delinquent property taxes and assessments (to be prorated at close of the Escrow). (c) All documents to be recorded pursuant to this Agreement at the Phase 1 Closing or the Phase 2 Closing (as applicable). Developer shall have thirty (30) days after the later of (i) the date of its receipt of the Preliminary Title Report, or (ii) the date Developer receives the documents underlying the Property Exceptions to give written notice to City and Escrow Holder of Developer's approval or disapproval of any of such Property Exceptions. Developer's failure to give written approval or disapproval of the Preliminary Title Report within such time limit shall be deemed Developer's approval of the Preliminary Title Report; provided, however, under no circumstances shall any monetary liens or encumbrances existing as of the Effective Date or any "City Caused Exceptions" (as that term is defined below) be deemed approved by Developer without Developer's express written approval thereof. If Developer notifies City of its disapproval of any Property Exceptions in the Preliminary Title Report, City shall have the right, but not the obligation, to remove any disapproved Property Exceptions within thirty (30) days after receiving written notice of Developer's disapproval or provide assurances satisfactory to Developer that such Property 882/015610-0065 6895841.10 a 10/30/14 -1 5- Exception(s) will be removed on or before the Phase 1 Closing. If City cannot or does not agree to remove any of the disapproved Property Exceptions before the Phase 1 Closing, Developer shall have fifteen (15) days after the expiration of such thirty (30) day period to either give City written notice that Developer elects to proceed with the purchase of the Property subject to the disapproved Property Exceptions or to give City written notice that Developer elects to terminate this Agreement. Developer's failure to give written notice of its election within such fifteen (15) day period shall be deemed to be an election to proceed with the purchase of the Property. Anything herein to the contrary notwithstanding, City shall, at or prior to the Phase 1 Closing, remove from title to the Property (i) all monetary encumbrances other than the lien referred to in (b) above in this Section 203, and (ii) any and all matters recorded on title to the Property after the Effective Date without the prior approval of Developer (collectively, "City Caused Exceptions"). The condition of title, including all of the Property Exceptions to title approved by Developer as provided herein shall hereinafter be referred to as the "Condition of Property Title". From and after the Effective Date hereof, and continuing until the earlier of (i) the Phase 2 Closing, or (ii) termination of this Agreement, City shall not further encumber the Property with additional Property Exceptions without Developer's prior written consent. Developer shall have the right to approve or disapprove any further Property Exceptions (which are not created by Developer) reported by the Title Company after Developer has approved the Condition of Property Title. Developer and the City Manager, on behalf of City, shall have the authority to extend the foregoing fifteen (15) day period by written agreement for an additional fifteen (15) days. 204. Title Insurance. Concurrently with recordation of each Grant Deed, there shall be issued to Developer an ALTA (or CLTA, as elected by Developer in its sole discretion) standard owner's policy of title insurance (the "Title Policy"), together with such endorsements as are requested by Developer, issued by the Title Company insuring that the title to the Phase 1 Property or Phase 2 Property (as applicable) is vested in Developer in the Condition of Property Title approved by Developer pursuant to Section 203 of this Agreement. Developer shall pay all costs and charges for the title insurance, and the costs for preparation of a current survey of the Property, if requested by Developer. The Title Company shall provide City with a copy of the applicable Title Policy. 205. Conditions of Closing. Each of the Phase 1 Closing and Phase 2 Closing is conditioned upon the satisfaction of the following terms and conditions within the times designated below: 205.1 City's Conditions of Closing. City's obligation to proceed with the Phase 1 Closing or Phase 2 Closing (as applicable) is subject to the fulfillment, or waiver by City, of each and all of the conditions precedent (a) through (w), inclusive, described below ("City's Conditions Precedent to the Closing"), which are solely for the benefit of City, and which shall be fulfilled or waived by the time periods provided for herein: (a) No Default. As of the close of each of the Phase 1 Escrow and the Phase 2 Escrow, neither Developer nor any entity that has assumed 882/015610-0065 6895841.10 a10/30/14 -1 6- Developer's obligations hereunder with respect to the development and/or operation of one or more Project Components shall be in default of any of its obligations under the terms of this Agreement and all representations and warranties of Developer contained herein shall be true and correct in all material respects. (b) Execution of Documents. Developer shall have executed and delivered into the Phase 1 Escrow or Phase 2 Escrow (as applicable) the applicable Grant Deed, Option Agreement, TOT Covenant Agreement, and Water Agreement, and any other documents required hereunder, and, at the Phase 1 Escrow only, the TOT Covenant Agreement and Memorandum of PSDA. The Development Agreement shall have been fully executed and recorded in the Official Records. (c) Payment of Funds. Prior to each of the Phase 1 Closing and Phase 2 Closing, Developer shall have paid all of its required costs thereof into the Phase 1 Escrow or Phase 2 Escrow (as applicable) in accordance with Section 202 hereof. (d) Design Approvals. Developer shall have obtained approval by City, acting in its governmental capacity, of the Master Site Infrastructure Improvements Design/Construction Development Drawings for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), as set forth in Section 210 hereof. (e) TOT Sharing Agreement. Developer shall have entered into with City, concurrently with the execution of this Agreement, the applicable TOT Sharing Agreement. (f) Master Site Infrastructure Improvements Land Use Approvals. Developer shall have received all Master Site Infrastructure Improvements Land Use Approvals required for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), pursuant to Section 209 hereof. (g) Insurance. Developer shall have provided proof of insurance as required by Section 304 hereof and City shall have approved of the same, provided such approval shall not be unreasonably withheld, conditioned or delayed. (h) Financing. (i) City shall have approved Developer's financing for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), pursuant to Section 211 hereof, and such financing shall close concurrently with the Phase 1 Closing or Phase 2 Closing (as applicable) and be available to Developer upon the Phase 1 Closing or Phase 2 Closing (as applicable), and (ii) Developer shall have (or Developer's affiliates shall collectively have) the "Required Equity" (as that term is defined below), or Developer shall have entered into a joint venture agreement with a capital partner who has the Required Equity and significant experience developing projects of the type, size and scope contemplated by this Agreement. As used in this paragraph (h), the term "Required Equity" means sufficient equity capital to pay for one hundred percent (100%) of the 882/015610-0065 6895841.10 a10/30/14 -1 7- difference between (a) the expected cost to complete construction of all of the Project Components in the applicable Phase (as set forth in the Final Project Budget), and (b) the amount of construction financing available to Developer for the construction of all of such Project Components. Notwithstanding anything in this paragraph to the contrary, any proposed capital partner shall be subject to approval by the City Manager, which approval shall be based upon a review by a representative of City of the financial records and qualifications of said proposed capital partner; provided, however, that such representative of City shall not be permitted to make and/or retain copies of any such financial records without the prior approval of such proposed capital partner. (i) Environmental. Developer shall have approved the environmental condition of the Property and shall not have elected to terminate this Agreement with respect to the Property pursuant to Section 207.2 hereof. 0) Grading Plans and Permits. Developer shall have obtained approval by City, acting in its governmental capacity, of Developer's mass grading plans for the Phase 1 Property or Phase 2 Property (as applicable), and grading permits shall be ready to be issued (on payment of necessary fees, posting of required security, and similar items). (k) Construction Costs and Contract(§). Developer shall have provided City with a copy of the proposed contract(s), certified by Developer to be a true and correct copy thereof, between Developer and one or more duly licensed general contractors reasonably acceptable to City for the construction and/or installation of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable). No material changes shall thereafter be made to such proposed contract(s) without the prior approval of the City Manager (such approval not to be unreasonably withheld, conditioned or delayed) that (i) increase the time for completion of the work (unless caused by Force Majeure), or (ii) are inconsistent with City's prior approvals or permits for the Master Site Infrastructure Improvements. (1) Contractor Bonds. Developer shall have obtained from the general contractor who will install and construct the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), and delivered to City evidence, in a form and amount as required pursuant to City's subdivision ordinance and in accordance with all performance standards as implemented through its standard subdivision improvement agreement, that said contractor has obtained Contractor Bonds for the completion of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable). Said Contractor Bonds shall be issued to, and shall be enforceable by, City. (m) Hotel Management Agreement Letter of Intent. Developer shall have submitted to City and City shall have approved, an executed letter of intent from a hotel operator (a "Hotel Operator") that sets forth all of the terms and conditions pursuant to which the Hotel Operator will operate and manage the Luxury Hotel and/or Lifestyle Hotel in the event Developer closes on financing acceptable to said Hotel Operator (each, a "Hotel Management Agreement Letter of Intent"), provided that City's 882/015610-0065 6895841.10 a10/30/14 -1 8- approval of the Hotel Management Agreement Letter of Intent shall not be unreasonably withheld, conditioned or delayed. With respect to the Luxury Hotel, City hereby approves each of Four Seasons Hotels and Resorts, Ritz Carlton Hotels, Rosewood Hotels and Resorts, Montage Hotels, and St. Regis Hotels by Starwood, to act as Hotel Operator. With respect to the Lifestyle Hotel, City hereby approves each of W Hotels by Starwood, Andaz Hotel by Hyatt, a lifestyle hotel brand owned by the Montage Hotels, Thompson Hotels, and Kimpton, to act as Hotel Operator. Any Hotel Operator not listed above shall be subject to prior written approval by City, which may be granted or withheld in City's sole and absolute discretion. (n) Water Agreement. Developer shall have entered into a standard Domestic Water and/or Sanitation Installation Agreement with the Coachella Valley Water District ("CVWD"), substantially in the form attached as Exhibit C to that certain Domestic Water and Sanitation System Installation and Irrigation Service Agreement entered into by and between City and CVWD on or about June 11, 2005, and recorded in the Official Records, as Instrument No. 2005-0852063, on June 14, 2005, as same may be amended from time to time by Developer, City and CVWD. (o) Completion Guaranty. In the event Developer's lender is requiring a completion guaranty for the lien -free completion of construction of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), Developer shall cause the guarantor under such guaranty to execute a completion guaranty in substantially the same form and substance of the completion guaranty provided to Developer's lender, in favor of City, for the lien -free completion of construction of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), provided that such guaranty in favor of City shall be at no additional cost to Developer; provided further that if there is a cost for such guaranty, City shall have the election of paying such costs in order to obtain such guaranty. (p) Signage Agreement. Developer shall have entered into with City a signage agreement. Notwithstanding other signage locations to be determined during the site development permit process, the signage agreement shall provide for perimeter signage along Avenue 52, at SilverRock Way; on Jefferson Street, at SilverRock Way; at the corner of Avenue 52 and Jefferson Street; and at the corner of Avenue 54 and Jefferson Street. (q) Security for Luxury Hotel Fence. Developer shall have delivered to City evidence, in a form satisfactory to City, in City's reasonable discretion, that Developer has obtained Contractor Bonds or other security acceptable to City, for the completion of the Luxury Hotel Fence. Said Contractor Bonds shall be issued to, and shall be enforceable by, City. (r) Dust Control Program. Developer shall have submitted to City and City shall have approved a Dust Control Program for the Phase 1 Property or Phase 2 Property (as applicable), which approval shall not be unreasonably withheld, conditioned or delayed. 882/015610-0065 6895841.10 a10/30/14 -1 9- (s) Parcel Map. Developer shall have processed for recordation concurrently with the Phase 1 Closing the Parcel Map in the Official Records. (t) Master Site Infrastructure Improvements Phasing Plan. Developer shall have submitted to City and City shall have approved, in its reasonable discretion, a Master Site Infrastructure Improvements Phasing Plan. (u) Final Project Budget. Developer shall have submitted to City and City shall have approved, in its reasonable discretion, the Final Project Budget. (v) Notice of Intent. Developer shall have filed a Notice of Intent and/or any other documentation required by SWRCB that notifies the SWRCB that Developer is the legally responsible party for complying with the GC Permit with respect to the Phase 1 Property or Phase 2 Property (as applicable). (w) Temporary Clubhouse Design. City and Developer shall have agreed upon the design and specifications for the temporary clubhouse to be constructed by Developer pursuant to Section 315 hereof. 205.2 Developer's Conditions of Closing. Developer's obligation to proceed with the purchase of the Phase 1 Property or Phase 2 Property (as applicable) is subject to the fulfillment, or waiver by Developer, of each and all of the conditions precedent (a) through (o), inclusive, described below ("Developer's Conditions Precedent to the Closing"), which are solely for the benefit of Developer, and which shall be fulfilled or waived by the time periods provided for herein: (a) No Default. As of the Phase 1 Closing Date and the Phase 2 Closing Date (as applicable), City shall not be in default of any of its obligations under the terms of this Agreement and all representations and warranties of City contained herein shall be true and correct in all material respects. (b) Execution of Documents. City shall have executed and delivered into the Phase 1 Escrow or Phase 2 Escrow (as applicable), the applicable Grant Deed, Option Agreement, TOT Covenant Agreement, and Water Agreement, and any other documents required hereunder, and, at the Phase 1 Escrow only, the Memorandum of PSDA. The Development Agreement and the applicable TOT Sharing Agreement shall have been fully executed and, if applicable, and recorded in the Official Records. (c) Review and Approval of Title. Developer shall have reviewed and approved the condition of the title to the Property, as provided in Section 203 hereof. (d) Title Policy. The Title Company shall be irrevocably committed to issue to Developer, upon receipt of payment of Title Company's regularly scheduled premium, a Title Policy for the Phase 1 Property at the Phase 1 Closing and for the Phase 2 Property at the Phase 2 Closing, in accordance with Section 204 hereof. 882/015610-0065 6895841.10 a10/30/14 -20- (e) Environmental. Developer shall have approved the environmental condition of the Property and shall not have elected to terminate this Agreement with respect to the Property pursuant to Section 207.2 hereof. (f) Design Approvals. Developer shall have obtained approval by City, acting in its governmental capacity, of the Master Site Infrastructure Improvements Design/Construction Development Drawings for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), as set forth in Section 210 hereof. (g) Master Site Infrastructure Improvements Land Use Approvals. Developer shall have received all Master Site Infrastructure Improvements Land Use Approvals required for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), pursuant to Section 209 hereof. (h) Grading and Building Permits. All grading and building permits required for the installation and construction of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), and building permits shall be available for issuance upon the payment of applicable permit fees, posting of required security, and similar items. (i) Financing. As provided in Section 211 hereof, Developer shall have obtained and City shall have approved, in City's reasonable discretion, Developer's financing for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), and such financing shall close and be available to Developer upon the Phase 1 Closing or Phase 2 Closing (as applicable). (j) Parcel Map. City shall have approved the Parcel Map, and the Parcel Map shall be recorded at or prior to the Phase 1 Closing in the Official Records. (k) Golf Course Realignment. City shall have approved Developer's plans and schedule for the realignment of the Golf Course pursuant to Section 316 below. (1) Final Project Budget. City shall have approved the Final Project Budget. (m) Hotel Management Agreement Letter of Intent. City shall have approved a Hotel Management Agreement Letter of Intent executed by a Hotel Operator that sets forth all of the terms and conditions pursuant to which the Hotel Operator will operate and manage the Luxury Hotel (for the Phase 1 Closing) and Lifestyle Hotel (for the Phase 2 Closing) in the event Developer closes on financing acceptable to said Hotel Operator. 882/015610-0065 6895841.10 a10/30/14 -21 (n) Master Site Infrastructure Improvements Phasing Plan. City shall have approved, in its reasonable discretion, the Master Site Infrastructure Improvements Phasing Plan. (o) Temporary Clubhouse Design. City and Developer shall have agreed upon the design and specifications for the temporary clubhouse to be constructed by Developer pursuant to Section 315 hereof. 206. Studies and Reports. 206.1 Access to Property. For a period of ninety (90) days commencing on the Effective Date (the "Environmental Review Period"), City shall provide representatives of Developer the right of access to all portions of the Property for the purpose of obtaining data and making surveys and tests necessary to carry out this Agreement, including without limitation the investigation of the geotechnical and environmental condition of the Property pursuant to Section 207 hereof. Any work undertaken on the Property by Developer prior to the Phase 1 Closing shall be done at the sole expense of Developer. In no event shall Developer conduct any intrusive testing procedures on the Property without the prior written consent of City, which consent shall not be unreasonably withheld. Developer shall also have the right to investigate all matters relating to the zoning, use and compliance with other applicable laws, codes, and ordinances which relate to the use and occupancy of the Property. City shall cooperate to assist Developer in completing such inspections and special investigations at no cost or expense to City other than the time of City's personnel and incidental photocopying and like costs. Such inspections and investigations shall be conducted only (a) upon no less than two (2) Business Days' notice to City, and (b) between the hours of 8:00 a.m. and 5:00 p.m., Monday through Friday. City shall have the right, but not the obligation, to accompany Developer during such investigations and/or inspections. As a condition to any such entry, Developer shall (i) conduct all work or studies in a diligent, expeditious and safe manner and not allow any dangerous or hazardous conditions to occur on the Property during or after such investigation; (ii) comply with all applicable laws and governmental regulations; (iii) keep the Property free and clear of all materialmen's liens, lis pendens and other liens arising out of the entry and work performed under this paragraph; (iv) maintain or assure maintenance of workers' compensation insurance (or state approved self-insurance) on all persons entering the property in the amounts required by the State of California; (v) provide to City prior to initial entry a certificate of insurance evidencing that Developer and/or the persons entering the Property have procured and have in effect the insurance required by Section 306; (vi) conduct all work or studies at such times and in a manner that minimizes interference with the operation of the Golf Course; (vii) coordinate all work or studies that will interfere with the operation of the Golf Course with the City's Public Works Director; and (viii) repair any damage it causes to the Property during the course of such investigations and/or inspections promptly upon completion of the investigations and/or inspections that caused such damage, and restore the Property to the condition existing prior to the investigations and/or inspections, including, without limitation, restabilizing any portions of the Property on which Developer's work removed or caused the removal of the soil stabilizer present on the Property, to the satisfaction of City's Public Works Director. Any work undertaken pursuant to this Section 206 shall be 882/015610-0065 6895841.10 a10/30/14 -22- undertaken only after securing any necessary permits from the appropriate governmental agencies. Developer's approval of the environmental and soils condition of the Property shall be a Developer's Condition Precedent to the Closing, as set forth in Section 205.2 hereof. If Developer, based upon the above tests, reports, and review, disapproves the environmental or soils condition of the Property, in its sole and absolute discretion, then Developer may (x) at its sole cost and with prior written approval of City of any remediation proposal, remediate the Property, or any specific contaminated portion thereof, to an acceptable condition, or (y) terminate this Agreement by written Notice to City pursuant to Section 503 hereof. From and after the Effective Date hereof, and continuing until the earlier of (1) the Phase 2 Closing, or (2) termination of this Agreement, City shall not take any affirmative action to affect the condition of the Property without Developer's prior written consent. City may revoke the foregoing right of access upon five (5) days written notice to Developer delivered in accordance with Section 601 below in the event: (1) in the reasonable judgment of City, such revocation is necessary to protect the public health, safety, or welfare pursuant to the exercise of City's police powers; or (11) Developer is in violation of the terms of this Agreement or any applicable law, statute, ordinance, rule, or regulation pertaining to the preliminary work permitted hereunder or Developer's or Developer Representative's entry upon the Property pursuant to this Agreement, and Developer has failed to cure such violation within five (5) days following Developer's receipt of written notice of such violation from City; provided, however, that for the first two (2) such violations, Developer's right of access shall be reinstated once the alleged violation is cured to City's reasonable satisfaction, and that for any subsequent violation, Developer may request that such right of access be reinstated once the alleged violation is cured to City's reasonable satisfaction. From the Effective Date through the Phase 1 Closing and Phase 2 Closing, as applicable, City shall continue to maintain the Phase 1 Property and Phase 2 Property, respectively, in substantially the same condition as same are in as of the Effective Date. 206.2 Indemnification. Developer shall protect, defend, indemnify and hold harmless City and City's officers, officials, members, employees, volunteers, agents, representatives, analysts, advisers, attorneys, and consultants (any of the foregoing shall be known individually as "Indemnitee" and collectively as "Indemnitees"), and each of them, jointly and severally, against and from any and all claims, demands, causes of action, damages, costs, expenses, losses and liabilities, at law or in equity, of every kind or nature whatsoever, including reasonable attorneys' fees and expert witness fees, except to the extent caused or resulting from the gross negligence or willful misconduct of any Indemnitee, and excluding those resulting from environmental contamination of the Property or other defects on the Property existing prior to Developer's entry thereon or not otherwise caused by Developer or any of the Developer Representatives, but including, without limitation, injury to or death of any person or persons and damage to or destruction of any property, threatened, brought or instituted ("Claims"), arising out of or in any manner directly or indirectly connected with the entry upon the Property by Developer or any of the Developer Representatives pursuant to this Section or Section 207, below, including without limitation: (a) any damage to the Property and any liability to any third party incurred by reason of any acts or omission of, including, but not limited to, any 882/015610-0065 6895841.10 a10/30/14 -23- commission of any negligent or tortious acts, by Developer or the Developer Representatives, or any of them; (b) any mechanics' or materialmen's liens, claims, demands, actions or suits arising (directly or indirectly) from (i) any work performed or materials supplied to or for Developer, or (ii) any activities of Developer or any of the Developer Representatives, or any of them, on or relating to the Property (including, without limitation, any claims by any of such Developer Representatives); and (c) any costs of removing Developer or the Developer Representatives from the Property after the expiration of the term hereof unless Developer is otherwise entitled to possession of the Property at such time. 207. Condition of the Property (a) Disclosure. Within ten (10) days after the Effective Date, City shall provide to Developer, at no cost to Developer, copies of all environmental studies and reports with respect to the Property of which it has actual knowledge, without any duty of investigation or inquiry. Developer acknowledges and agrees that City has provided to Developer a copy of (i) that certain Phase I Environmental Site Assessment covering some or all of the Property, prepared on or about November 7, 1995, by SSCI Environmental and Consulting Services, and (ii) that certain Phase I Environmental Site Assessment covering some or all of the Property, prepared on or about February 28, 2001, by Ninyo & Moore Geotechnical and Environmental Sciences Consultants. 207.2 Investigation of Property. Pursuant to Section 206 hereof, Developer may engage an Environmental Consultant to make such investigations as Developer deems necessary, including any "Phase I" and/or "Phase 2" investigations of the Property, and City shall promptly be provided a copy of all final reports and test results provided by the Environmental Consultant (the "Property Environmental Reports"). Developer shall be permitted to make such inspections of the Property pursuant to the requirements of Section 206. Developer shall approve or disapprove of the environmental condition of the Property in Developer's sole discretion, not later than the expiration of the Environmental Review Period. If Developer, based upon the Property Environmental Reports, timely disapproves the environmental condition of the Property for any reason, in Developer's sole discretion, then Developer may (i) at its sole cost and with prior written approval of City of any remediation proposal, remediate the Property, or any specific contaminated portion thereof, to an acceptable condition, or (ii) terminate this Agreement by written Notice to City pursuant to Section 503 hereof. 207.3 No Further Warranties As To Property; Release of City; Waiver. The physical condition, possession, and title of the Property is and shall be delivered from City to Developer in an "AS -IS" "WHERE IS" "WITH ALL FAULTS" condition and, with the exception of the limited warranties set forth in Section 207.6 below, with no warranty expressed or implied by City, including without limitation, the presence of Hazardous Materials or the condition of the soil, its geology, the presence of known or 882/015610-0065 6895841.10 a10/30/14 -24- unknown seismic faults, or the suitability of the Property for the development purposes intended hereunder. Upon City's conveyance of fee title to the Phase 1 Property to Developer, Developer shall be deemed to have waived, released and discharged forever the Indemnitees from all present and future claims, demands, suits, legal and administrative proceedings and from all liability for damages, losses, costs, liabilities, fees and expenses, present and future, arising out of or in any way connected with the condition of the Phase 1 Property, any Hazardous Materials on the Phase 1 Property, or the existence of Hazardous Materials contamination due to the generation of Hazardous Materials from the Phase 1 Property or any other real property, however they came to be placed there, except that arising out of (i) the active negligence or intentional misconduct of any of the Indemnitees, or (ii) the material inaccuracy of any representation set forth in Section 207.6 below. Upon City's conveyance of fee title to the Phase 2 Property to Developer, Developer shall be deemed to have waived, released and discharged forever the Indemnitees from all present and future claims, demands, suits, legal and administrative proceedings and from all liability for damages, losses, costs, liabilities, fees and expenses, present and future, arising out of or in any way connected with the condition of the Phase 2 Property, any Hazardous Materials on the Phase 2 Property, or the existence of Hazardous Materials contamination due to the generation of Hazardous Materials from the Phase 2 Property or any other real property, however they came to be placed there, except to the extent arising out of (i) the active negligence or intentional misconduct of any of the Indemnitees, or (ii) the material inaccuracy of any representation set forth in Section 207.6 below. Developer acknowledges that it is aware of and familiar with the provisions of Section 1542 of the California Civil Code which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." With respect to the condition of the Property as set forth in this Section 207.3, Developer hereby waives and relinquishes all rights and benefits which it may have under Section 1542 of the California Civil Code. Developer's Initials Notwithstanding anything herein to the contrary, the release set forth in this Section 207.3 shall become effective as to the Phase 1 Property on the Phase 1 Closing Date and as to the Phase 2 Property on the Phase 2 Closing Date. Developer acknowledges that "natural hazards" described in the following California Code sections (the "Natural Hazard Laws") may affect the Property: Government Code sections 8589.4; 8589.3; Government Code sections 51183.4, 882/015610-0065 6895841.10 a10/30/14 -25- 51183.5 (fire hazard severity zone); Public Resource Code section 2621.9 (earthquake fault zone); Public Resource Code section 2694 (seismic hazard zone); and Public Resource Code section 4136 (wildland area). Developer acknowledges and agrees that as of the Phase 1 Closing Developer will have had the opportunity to independently evaluate and investigate whether any or all of such natural hazards affect the Phase 1 Property and as of the Phase 2 Closing Developer will have had the opportunity to independently evaluate and investigate whether any or all of such natural hazards affect the Phase 2 Property, and City shall have no liabilities or obligations with respect thereto. Without limiting the foregoing, Developer acknowledges and agrees that Developer knowingly and intentionally waives any disclosures, obligations or requirements of City with respect to natural hazards, including, without limitation, any disclosure obligations or requirements under the aforementioned code sections or under California Civil Code section 1102(c). Developer represents that Developer has experience acquiring and conducting due diligence, and that this waiver has been negotiated and is an essential aspect of the bargain between the Parties. 207.4 Developer Precautions After the Closi (a) Upon the Phase 1 Closing, Developer shall take all necessary precautions to prevent the release into the environment of any Hazardous Materials which are located in, on or under the Phase 1 Property, or placed in, on, or under the Phase 1 Property after the Phase 1 Closing. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. (b) Upon the Phase 2 Closing, Developer shall take all necessary precautions to prevent the release into the environment of any Hazardous Materials which are located in, on or under the Phase 2 Property, or placed in, on, or under the Phase 2 Property after the Phase 2 Closing. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. 207.5 Developer Indemn (a) Upon the Phase 1 Closing, Developer agrees to indemnify, defend and hold City harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), resulting from, arising out of, or based upon (i) the presence, release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in, or about, or the transportation of any such Hazardous Materials to or from, the Phase 1 Property which first occurs after the Phase 1 Closing, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in, or 882/015610-0065 6895841.10 a10/30/14 -26- about, or to or from, the Phase 1 Property by Developer or by Developer's contractors, subcontractors, agents, consultants, or representatives which occurs after the Phase 1 Closing. This indemnity shall include, without limitation, any damage, liability, fine, penalty, cost or expense arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. At the request of Developer, City shall cooperate with and assist Developer in its defense of any such claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense; provided that City shall not be obligated to incur any expense in connection with such cooperation or assistance. (b) Upon the Phase 2 Closing, Developer agrees to indemnify, defend and hold City harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), resulting from, arising out of, or based upon (i) the presence, release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in, or about, or the transportation of any such Hazardous Materials to or from, the Phase 2 Property which first occurs after the Phase 2 Closing, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in, or about, or to or from, the Phase 2 Property by Developer or by Developer's contractors, subcontractors, agents, consultants, or representatives which occurs after the Phase 2 Closing. This indemnity shall include, without limitation, any damage, liability, fine, penalty, cost or expense arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. At the request of Developer, City shall cooperate with and assist Developer in its defense of any such claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense; provided that City shall not be obligated to incur any expense in connection with such cooperation or assistance. 207.6 City Representations. City hereby makes the following limited representations and warranties and covenants to Developer with respect to the Property, each of which is true in all respects as of the date hereof and shall be true in all respects as of the Phase 1 Closing Date, with respect to the Phase 1 Property, and as of the Phase 2 Closing Date, with respect to the Phase 2 Property: (a) There are no pending or, to City's knowledge, threatened lawsuits or claims which would affect the Property, or City's right to transfer the Property to Developer pursuant to this Agreement. (b) To City's knowledge, (i) the Property is not in violation of any federal, state or local law, ordinance or regulation, and (ii) there are no underground 882/015610-0065 6895841.10 a10/30/14 -27- storage tanks on the property, no Hazardous Materials being stored on or underneath the Property, and no environmental, health or safety hazards on or under the Property, including but not limited to soil and groundwater conditions. (c) City has received no written notice from any third parties, prior owners of the Property, or any federal, state or local governmental agency indicating that any hazardous waste remedial or clean-up work will be required on the Property. (d) There are not presently pending any eminent domain or condemnation actions against the Property or any part thereof; and City has not received any notice of any eminent domain or condemnation actions being threatened or contemplated that would affect the Property or any part thereof. (e) To City's knowledge, there are no contracts, leases, claims or rights affecting the development or use of Property and no agreements entered into by or under City that shall survive the Phase 1 Closing, with respect to the Phase 1 Property or the Phase 2 Closing, with respect to the Phase 2 Property, that would adversely affect Developer's rights with respect to the Property. Until the Phase 1 Closing, if City learns of any fact or condition which would cause any of the warranties and representations in this Section not to be true with respect to the Phase 1 Property as of the Phase 1 Closing, City shall immediately give written notice of such fact or condition to Developer. Until the Phase 2 Closing, if City learns of any fact or condition which would cause any of the warranties and representations in this Section not to be true with respect to the Phase 2 Property as of the Phase 2 Closing, City shall immediately give written notice of such fact or condition to Developer. From the Effective Date through and until the Phase 1 Closing or the Phase 2 Closing, as applicable, City shall maintain the Phase 1 Property and the Phase 2 Property in substantially the same condition that they are in as of the Effective Date. Throughout this Agreement, terms such as "to City's knowledge," "City has no knowledge," or like phrases mean the actual present and conscious awareness or knowledge, without a duty to inquire or investigate, of the City Manager of the City of La Quinta. 208. Installation of Luxury Hotel Fence; Implementation of Dust Control Program. (a) Within the time set forth in the Schedule of Performance, and prior to the time Developer commences any grading activities on the Phase 1 Property, Developer shall install the Luxury Hotel Fence. Developer shall defend, with counsel approved by City in City's sole and absolute discretion, indemnify, assume all responsibility for, and hold the Indemnitees harmless from all claims, demands, damages, defense costs or liability of any kind arising from Developer's failure to strictly comply with the Mitigation Measures related to the protection of Bighorn Sheep set forth 882/015610-0065 6895841.10 a10/30/14 -28- in that certain Mitigated Negative Declaration of Environmental Impact for Environmental Assessment 2002-435 (State Clearinghouse No. 1999081020). (b) Upon the Phase 1 Closing, Developer shall implement the Dust Control Program with respect to the Phase 1 Property. Such implementation shall continue until such time as all Project Components within the Phase 1 Property have been completed, as evidenced by City's issuance of a Release of Construction Covenants for the final Project Component for the Phase 1 Property. (c) Upon the Phase 2 Closing, Developer shall implement the Dust Control Program with respect to the Phase 2 Property. Such implementation shall continue until such time as all Project Components within the Phase 2 Property have been completed, as evidenced by City's issuance of a Release of Construction Covenants for the final Project Component for the Phase 2 Property. 209. Master Site Infrastructure Improvements Land Use Approvals. As one of City's Conditions Precedent to the Closing as set forth in Section 205.1(f) hereof, Developer shall, at its own expense, secure or cause to be secured any and all land use and other entitlements, permits and approvals which are required for the Master Site Infrastructure Improvements to be installed or constructed within the Phase 1 Property or Phase 2 Property (as applicable) by City or any other governmental agency affected by such construction or work, including but not limited to, any environmental studies and documents required pursuant to the California Environmental Quality Act (collectively, the "Master Site Infrastructure Improvements Land Use Approvals"); provided, however, that the condition precedent in this Section 209 shall not apply to permits or approvals required to be obtained from CVWD or the Imperial Irrigation District if such permits and approvals are not otherwise required by applicable law for the commencement or completion of construction of the Master Site Infrastructure Improvements. 210. Master Site Infrastructure Improvements Design Approvals. As one of City's Conditions Precedent to the Closing pursuant to Section 205.1(d), at or prior to the time set forth in the Schedule of Performance, Developer shall submit to City any plans and drawings (collectively, the "Master Site Infrastructure Improvements Design/Construction Development Drawings") which may be required by City acting in its governmental capacity with respect to any permits and entitlements which are required to be obtained to install or construct the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), and such plans for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable) as required by City acting in its governmental capacity in order for Developer to obtain building and grading permits for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable). Within thirty (30) days after City's disapproval or conditional approval of such plans, Developer shall revise the portions of such plans identified by City as requiring revisions and resubmit the revised plans to City. 210.1 City Review and Approval. City, acting in its governmental capacity, shall have all rights to review and approve or disapprove all Master Site 882/015610-0065 6895841.10 a10/30/14 -29- Infrastructure Improvements Design/Construction Development Drawings and other required submittals in accordance with the Municipal Code, and nothing set forth in this Agreement shall be construed as City's approval of any or all of the Master Site Infrastructure Improvements Design/Construction Development Drawings or other required submittals. City retains all rights to exercise its discretion with respect to the review and approval of any of said submittals. 210.2 Revisions. Any and all change orders or revisions required by City and its inspectors which are required under the Municipal Code and all other applicable Uniform Codes (e.g. Building, Plumbing, Fire, Electrical, etc.) and under other applicable laws and regulations shall be included by Developer in its Master Site Infrastructure Improvements Design/Construction Development Drawings and other required submittals and shall be completed during the installation or construction of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable). 210.3 Defects in Plans. City shall not be responsible either to Developer or to third parties in any way for any defects in any of the Master Site Infrastructure Improvements Design/Construction Development Drawings, nor for any structural or other defects in any work done according to the approved Master Site Infrastructure Improvements Design/Construction Development Drawings, nor for any delays reasonably caused by the review and approval processes established by this Section 210 211. Approval of Financing (Master Site Infrastructure Improvements). Within the time set forth in the Schedule of Performance, and as one of City's Conditions Precedent to the Closing as set forth in Section 205.1(h) hereof, Developer shall submit to City evidence that Developer (i) has obtained or will have obtained as of the Phase 1 Closing or Phase 2 Closing (as applicable), financing from a commercial lender necessary to undertake the installation and construction of the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable), in accordance with this Agreement which may be in the form of a commitment, a term letter, or such other form, with all such forms to be approved by City, provided that such approval may not be unreasonably withheld, conditioned or delayed (an "Infrastructure Loan"); (ii) if desired by Developer, has obtained "mezzanine" financing in a form acceptable to City; and (iii) has obtained sufficient equity capital to cover the difference between (a) the sum of the Infrastructure Loan and the mezzanine financing and (b) the total cost of developing the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable) ("Developer's Master Site Infrastructure Improvements Equity Contribution"). City shall approve or disapprove such evidence of financing within thirty (30) days after receipt of a complete submission for the Phase 1 Master Site Infrastructure Improvements or Phase 2 Master Site Infrastructure Improvements (as applicable). If City shall disapprove any such evidence of financing, City shall do so by Notice to Developer stating with reasonable specificity the reasons for such disapproval and Developer shall promptly obtain and submit to City new evidence of financing. City shall approve or disapprove such new evidence of financing in the same manner and within the same times established in this Section 211 for the approval or disapproval of the 882/015610-0065 6895841.10 a10/30/14 -30- evidence of financing as initially submitted to City, provided, that such approval shall not be unreasonably withheld, conditioned or delayed. Developer shall close each approved Infrastructure Loan prior to or concurrently with the Phase 1 Closing or Phase 2 Closing (as applicable). Such evidence of financing shall include the following: (a) a copy of a loan commitment(s) or term letter(s), obtained by Developer from one or more financial institutions for the Infrastructure Loan, subject to such lenders' reasonable, customary and normal conditions and terms, and (b) documentation satisfactory to City as evidence of the "mezzanine" financing and Developer's Equity Contribution. 212. Access to Property for Planning, Entitlement, Design, and Financing Purposes. 212.1 Access to Property. Commencing on the Effective Date and continuing until the Phase 2 Closing Date, City shall provide representatives of Developer the right of access to all portions of the Property for the purpose of facilitating the planning, entitlement, design, and finance of the Project. Such access shall be conducted only (a) upon no less than two (2) Business Days' notice to City, and (b) between the hours of 8:00 a.m. and 5:00 p.m., Monday through Friday. City shall have the right, but not the obligation, to accompany Developer during such entries. As a condition to any such entry, Developer shall (i) conduct all activities during such access in a diligent, expeditious and safe manner and not allow any dangerous or hazardous conditions to occur on the Property during or after such entries; (ii) comply with all applicable laws and governmental regulations; (iii) keep the Property free and clear of all materialmen's liens, lis pendens and other liens arising out of the entry under this paragraph; (iv) maintain or assure maintenance of workers' compensation insurance (or state approved self-insurance) on all persons entering the property in the amounts required by the State of California; (v) provide to City prior to initial entry a certificate of insurance evidencing that Developer and/or the persons entering the Property have procured and have in effect the insurance required by Section 306; (vi) conduct all entries at such times and in a manner that minimizes interference with the operation of the Golf Course; and (vii) repair any damage it causes to the Property during the course of such entries promptly upon completion of the entries that caused such damage, and restore the Property to the condition existing prior to the entries. City may revoke the foregoing right of access upon two (2) days written notice to Developer delivered in accordance with Section 601 below in the event: (1) in the reasonable judgment of City, such revocation is necessary to protect the public health, safety, or welfare pursuant to the exercise of City's police powers; or (11) Developer is in violation of the terms of this Agreement or any applicable law, statute, ordinance, rule, or regulation pertaining to the entries permitted hereunder or Developer's or Developer Representative's entry upon the Property pursuant to this Agreement, and Developer has failed to cure such violation within five (5) days following Developer's receipt of written notice of such violation from City; provided, however, that for the first two (2) such violations, Developer's right of access shall be reinstated once the alleged violation is cured to City's reasonable satisfaction, and that for any subsequent violation Developer may request that such right of access be reinstated once the alleged violation is cured to City's reasonable satisfaction. 882/015610-0065 6895841.10 a10/30/14 -31 - 212.2 Indemnification. Developer shall protect, defend, indemnify and hold harmless the Indemnitees and each of them, jointly and severally, against and from any and all claims, demands, causes of action, damages, costs, expenses, losses and liabilities, at law or in equity, of every kind or nature whatsoever, including reasonable attorneys' fees and expert witness fees, except to the extent caused or resulting from the gross negligence or willful misconduct of any Indemnitee, and excluding those resulting from environmental contamination of the Property or other defects on the Property existing prior to Developer's entry thereon or not otherwise caused by Developer or any of Developer's representatives, but including, without limitation, injury to or death of any person or persons and damage to or destruction of any property, threatened, brought or instituted, arising out of or in any manner directly or indirectly connected with the entry upon the Property by Developer or any of the Developer's representatives pursuant to Section 212.1 above, including without limitation: (a) any damage to the Property and any liability to any third party incurred by reason of any acts or omission of, including, but not limited to, any commission of any negligent or tortious acts, by Developer or Developer's representatives, or any of them; (b) any mechanics' or materialmen's liens, claims, demands, actions or suits arising (directly or indirectly) from (i) any work performed or materials supplied to or for Developer, or (ii) any activities of Developer or any of Developer's representatives, or any of them, on or relating to the Property (including, without limitation, any claims by any of such representatives); and (c) any costs of removing Developer or Developer's representatives from the Property unless Developer is otherwise entitled to possession of the Property at such time 300. DEVELOPMENT OF THE PROJECT 301. Scope of Development. Developer shall develop or cause the development of the Project in accordance with the Scope of Development, the Specific Plan, the Municipal Code, Governmental Requirements, Project Component Land Use Approvals, and the plans, drawings and documents submitted by Developer and approved by City as set forth herein. Prior to commencement of construction of any Project Component, Developer shall obtain and deliver to City evidence of Contractor Bonds covering the applicable Project Component, and which provide that City is authorized to enforce such Contractor Bonds as a third party beneficiary; provided, however, that Developer shall only be required to obtain Contractor Bonds for any of the Ahmanson Ranch House Component, Golf Course Realignment, Lifestyle Branded Residential Development, Luxury Branded Residential Development, Promenade Mixed -Use Village, or Resort Residential Village, for which Developer's lender requires Developer to obtain Contractor Bonds. 882/015610-0065 6895841.10 a10/30/14 -32- 302. Desian Review. 302.1 Developer Submissions. At or prior to the time set forth in the Schedule of Performance, Developer shall submit to City any plans and drawings (collectively, the "Project Component Design/Construction Development Drawings") which may be required by City with respect to any permits and entitlements which are required to be obtained to develop each of the Project Components, and such plans for the Project Components as required by City in order for Developer to obtain building and grading permits for the Project Components. City shall review such plans and drawings pursuant to the requirements of the Municipal Code. Within thirty (30) days after the disapproval or conditional approval of any of such plans by City, acting in its governmental capacity, Developer shall revise the portions of such plans identified by City as requiring revisions and resubmit the revised plans to City. 302.2 City Review and Approval. City shall have all rights to review and approve or disapprove all Project Component Design/Construction Development Drawings and other required submittals in accordance with the Municipal Code, and nothing set forth in this Agreement shall be construed as City's approval of any or all of the Project Component Design/Construction Development Drawings or other required submittals. City retains all rights to exercise its discretion with respect to the review and approval of any of said submittals when acting in its governmental capacity. 302.3 Revisions. Any and all change orders or revisions required by City and its inspectors which are required under the Municipal Code and all other applicable Uniform Codes (e.g. Building, Plumbing, Fire, Electrical, etc.) and under other applicable laws and regulations shall be included by Developer in its Project Component Design/Construction Development Drawings and other required submittals and shall be completed during the installation or construction of the Project Components. 302.4 Defects in Plans. City shall not be responsible either to Developer or to third parties in any way for any defects in any of the Project Component Design/Construction Development Drawings, nor for any structural or other defects in any work done according to the approved Project Component Design/Construction Development Drawings, nor for any delays reasonably caused by the review and approval processes established by this Section 302. 303. Schedule of Performance. Developer shall submit all Project Component Design/Construction Development Drawings, commence and complete all construction of the Project, and satisfy all other obligations and conditions of this Agreement, within the times established therefor in the Schedule of Performance. 304. Conditions to Develop. Developer may not obtain building permits for any Project Component until such time as Developer has satisfied all of the following conditions with respect to such Project Component: 304.1 City's Conditions Precedent to the Closing. Developer shall have satisfied all of City's Conditions Precedent to the Closing, as set forth in Section 205.1, 882/015610-0065 6895841.10 a10/30/14 -33- for the Phase in which the property to be developed with the Project Component is located, and Developer shall have acquired fee title to said property from City. 304.2 Completion of Master Site Infrastructure Improvements. Developer shall have completed each phase of the installation and construction of the Master Site Infrastructure Improvements in accordance with the Master Site Infrastructure Improvements Phasing Plan. 304.3 No Default. Neither Developer nor any entity that has assumed Developer's obligations hereunder with respect to the development and/or operation of one or more Project Components shall be in default of any of its obligations under the terms of this Agreement and all representations and warranties of Developer contained herein shall be true and correct in all material respects. 304.4 Financing. City shall have approved Developer's financing for the Project Component, pursuant to Section 311.1 hereof, and such financing shall have closed and shall be available to Developer. 304.5 Project Component Land Use Approvals. Developer shall, at its own expense, secure or cause to be secured any and all land use and other entitlements, permits and approvals which are required for the Project Component by City or any other governmental agency affected by such construction or work, including but not limited to, site development permits, conditional use permits, temporary use permits, minor use permits, and any environmental studies and documents required pursuant to the California Environmental Quality Act (collectively, the "Project Component Land Use Approvals"); provided, however, that the condition precedent in this Section 304.5 shall not apply to permits or approvals required to be obtained from CVWD or the Imperial Irrigation District if such permits and approvals are not otherwise required by applicable law for the commencement or completion of construction of the Luxury Hotel, Lifestyle Hotel, or Conference and Shared Service Facility. 304.6 Building Plans and Permits. Developer shall have obtained approval by City, acting in its governmental capacity, of Developer's building plans for the Project Component, and building permits shall be ready to be issued (on payment of necessary fees, posting of required security, and similar items). 304.7 Construction Costs and Contract(s). Developer shall have provided City with a copy of the proposed contract(s), certified by Developer to be a true and correct copy thereof, between Developer and one or more duly licensed general contractors reasonably acceptable to City for the construction of the Project Component. No material changes that (i) increase the time for completion of the work (unless caused by Force Majeure), (ii) are inconsistent with the City approvals or permits shall thereafter be made to such proposed contract(s) without the prior approval of the City Manager. 304.8 Performance Bond. With respect to the construction of the Luxury Hotel, Lifestyle Hotel, and Conference and Shared Service Facility, Developer shall have obtained from Developer's general contractor and delivered to City evidence, in a 882/015610-0065 6895841.10 a10/30/14 -34- form reasonably satisfactory to City, that said general contractor has obtained lien and completion Contractor Bonds for the completion of said Project Component. Said Contractor Bonds shall provide that City is authorized to enforce the same as a third party beneficiary; provided, however, that with respect to the aforementioned Project Components (e.g., the Luxury Hotel, Lifestyle Hotel, and Conference and Shared Facility), if Developer's construction lender requires Contractor Bonds that satisfy the foregoing requirements of this Section 304.8, as reasonably determined by the City Manager, then Developer may satisfy the foregoing requirements of this Section 304.8 by listing City as an additional obligee on said Contractor Bonds obtained by Developer's lender. Notwithstanding the foregoing, (i) Developer shall have the right to elect to obtain, in lieu of the performance bond component of any of the foregoing Contractor Bonds, a subguard insurance policy that insures Developer's obligation to complete construction of the applicable Project Component, and (ii) if Developer's construction lender requires Contractor Bonds for any other Project Component (e.g., any Project Component other than the Luxury Hotel, Lifestyle Hotel, or Conference and Shared Service Facility), whether or not said Contractor Bonds satisfy the requirements of this Section 304.8, Developer shall list City as an additional obligee on the Contractor Bonds for said other Project Component(s) obtained by Developer's lender. 304.9 Completion Guaranty. Developer shall cause the guarantor under any completion guaranty given to Developer's lender guaranteeing the lien -free completion of construction of the applicable Project Component to execute a completion guaranty in favor of City and in substantially the same form and substance as the completion guaranty provided to Developer's lender. 304.10 Hotel Management Agreement. Developer shall have submitted to City and City shall have approved, a fully executed hotel management agreement from a Hotel Operator to operate and manage the Luxury Hotel or Lifestyle Hotel (as applicable) in accordance with all applicable requirements set forth herein, including all ancillary agreements including, without limitation, a technical services agreement, hotel brand licensing agreement, and use and access development agreement (each such agreement collectively with all ancillary agreements, a "Hotel Management Agreement"), provided that City's approval of the Hotel Management Agreement shall not be unreasonably withheld, conditioned or delayed. 305. Phasing of Development. Notwithstanding Developer's fee ownership of the Phase 1 Property, the Phase 2 Property, or the entirety of the Property, or anything herein to the contrary, Developer shall not be entitled to develop all portions of the Project simultaneously. Developer's development of the Project shall, subject to Section 305.3 below, be subject to the following phasing limitations: 305.1 Luxury Hotel. (a) Developer may not obtain building permits for any Project Component until such time as Developer has obtained a building permit for the Luxury Hotel. 882/015610-0065 6895841.10 a10/30/14 -35- (b) At such time as Developer has obtained a building permit for the Luxury Hotel, Developer may obtain building permits for the Luxury Branded Residential Development, Conference and Shared Service Facility, Promenade Mixed - Use Village, and Resort Residential Village. (c) Developer may not close escrow on the sale of any Resort Residential Dwelling Unit within the Luxury Branded Residential Development until such time as Developer has expended fifty percent (50%) of the construction costs set forth in the construction contract for the Luxury Hotel that was approved by City pursuant to Section 304.7 hereof on construction of the Luxury Hotel, as reasonably determined by the City Manager. 305.2 Lifestyle Hotel. (a) Developer may not obtain building permits for the Lifestyle Branded Residential Development until such time as Developer has obtained a building permit for the Lifestyle Hotel. (b) Developer may not close escrow on the sale of any Resort Residential Dwelling Unit within the Lifestyle Branded Residential Development until such time as Developer has expended fifty percent (50%) of the construction costs set forth in the construction contract for the Lifestyle Hotel that was approved by City pursuant to Section 304.7 hereof on construction of the Lifestyle Hotel, as reasonably determined by the City Manager. 305.3 Alternate Develooment Phasin (a) If an Adverse Economic Event occurs, then Developer may, at its election, provide written notice thereof to City, along with documentary evidence establishing the Adverse Economic Event. Upon City's concurrence that an Adverse Economic Event has occurred, which determination shall be made in City's reasonable discretion, Developer and City shall meet and confer for up to a maximum of fifteen (15) days to determine if they can mutually agree on a course of action to address the Adverse Economic Event, including, without limitation, an alternate schedule for developing the Project. If the Parties are able to agree on a course of action to address the Adverse Economic Event, then the Parties shall prepare an amendment hereto or other documentation mutually satisfactory to the Parties that documents said agreement. If the Parties are unable to agree on a course of action to address the Adverse Economic Event, then City shall have a period of sixty (60) days, commencing on the final date of the meet and confer, to notify Developer, in writing, of City's election to exercise, or assign, its right to purchase the Property or portions thereof pursuant to the terms of the Option Agreement recorded at the Phase 1 Closing (the "Phase 1 Option Agreement") and, if the Phase 2 Closing shall have occurred, the Option Agreement recorded at the Phase 2 Closing (the "Phase 2 Option Agreement"). If City notifies Developer of its election to exercise, or assign, its right to purchase the Property or portions thereof pursuant to the terms of the Phase 1 Option Agreement and/or, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement, City or its assignee shall have a period of one hundred eighty 882/015610-0065 6895841.10 a10/30/14 -36- (180) days, commencing on the final date of the meet and confer, to conclude the purchase and acquire fee title to the Property or portions thereof pursuant to the terms of the Phase 1 Option Agreement and/or, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement. Notwithstanding the foregoing, and subject to the terms of a subordination or other agreement entered into with Developer's construction lender pursuant to Section 7(g) of the Phase 1 Option Agreement and/or, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement, if applicable, City may extend such one hundred eighty (180) day period for one or more additional periods of thirty (30) days each (each, an "Option Extension Period") by depositing into the escrow opened by the Parties pursuant to the terms of the Phase 1 Option Agreement and/or, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement (the "Option Agreement Escrow") funds in the amount of five percent (5%) of the applicable purchase price to be paid by City or its assignee pursuant to the Phase 1 Option Agreement and/or, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement (the "Option Agreement Deposit"). In the event the Option Agreement Escrow closes prior to the expiration of the applicable Extension Period, the Option Agreement Deposit shall be applied to the purchase price to be paid by City or its assignee pursuant to the Phase 1 Option Agreement and/or, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement. In the event the Option Agreement Escrow fails to close prior to the expiration of the applicable Extension Period, Developer shall retain the Option Agreement Deposit and the dates applicable to Developer's performance under the Phase 1 Option Agreement and, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement, shall each be extended by the length of time between the final date of the meet and confer and the date that the Option Agreement Escrow is cancelled. If City notifies Developer of its election not to exercise, or assign, its right to purchase the Property or portions thereof pursuant to the Phase 1 Option Agreement and/or, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement, or notifies Developer of its election to exercise, or assign, its right to purchase the Property or portions thereof pursuant to the Phase 1 Option Agreement and, if the Phase 2 Closing shall have occurred, the Phase 2 Option Agreement, but City or its assignee (as applicable) fails to conclude such purchase prior to the expiration of (1) the one hundred eighty (180) day period described above, or (II) any applicable Extension Period (either of the foregoing, an "Alternate Development Phasing Trigger"), then the phasing requirements set forth in Section 305.1 and Section 305.2 above shall be amended such that Developer may commence and complete construction of the Project in the following phases: (i) Phase 1: the portion of the Property identified on the Site Map as "PA 7" and "PA 8", which shall collectively be referred to herein as the "Alternate Development Phase 1 Property" following the occurrence of an Alternative Development Phasing Trigger, together with those certain Master Site Infrastructure Improvements to be installed and/or constructed to serve such Alternate Development Phase 1 Property, which shall collectively be referred to herein as the "Alternate Development Phase 1 Master Site Infrastructure Improvements" following the occurrence of an Alternative Development Phasing Trigger; and 882/015610-0065 6895841.10 a10/30/14 -37- (ii) Phase 2: the portion of the Property identified on the Site Map as "PA 2", "PA 3", "PA 4", "PA 5" and "PA 6", which shall collectively be referred to herein as the "Alternate Development Phase 2 Property" following the occurrence of an Alternative Development Phasing Trigger, together with those certain Master Site Infrastructure Improvements to be installed and/or constructed to serve such Alternate Development Phase 2 Property, which shall collectively be referred to herein as the "Alternate Development Phase 2 Master Site Infrastructure Improvements" following the occurrence of an Alternative Development Phasing Trigger. (b) As soon as reasonably possible following the occurrence of an Alternative Development Phasing Trigger, (1) the Parties shall discuss in good faith and agree upon appropriate changes to the Schedule of Performance to accommodate the amended development phasing described above, (II) the Parties shall amend the Option Agreement to reflect the changes in the description of the Phase 1 Master Site Infrastructure Improvements and the Phase 2 Master Site Infrastructure Improvements and other changes necessary to reflect the amended development phasing described above, (III) Developer shall prepare and submit to City for City's reasonable approval a new budget (the "Alternate Development Phasing Budget") that reflects the alternate development phasing described above, and (IV) all revenue generated by Developer from the sale of Resort Residential Dwelling Units located within the Promenade Mixed -Use Village and the Resort Residential Village shall be distributed as follows by Developer: (i) first, to the Developer, an amount equal to the lesser of (x) the development costs set forth in the Alternate Development Phasing Budget, and (y) all third party hard and soft costs actually incurred in connection with the design and construction of Master Site Infrastructure Improvements, provided that Developer has provided invoices to City documenting the expenditure of all of said costs; and (ii) all remaining funds to be deposited into an escrow account opened in Developer's name (the "Alternative Development Phase 2 Holding Escrow") with a nationally recognized escrow agent reasonably acceptable to both Parties (the "Alternate Development Phase 2 Escrow Agent"). (c) Developer shall irrevocably instruct the Alternate Development Phase 2 Escrow Agent to release the funds in the Alternative Development Phase 2 Holding Escrow to the ultimate developer of the Alternate Development Phase 2 Property upon receipt of invoices for hard and soft costs actually incurred in connection with the design and construction of improvements on the Alternate Development Phase 2 Property that are consistent with the Alternate Development Phasing Budget, as it may be amended with the approval of City, which approval shall not be unreasonably withheld, conditioned or delayed, with any funds remaining in the Alternate Development Phase 2 Holding Escrow following completion of construction of the Alternate Development Phase 2 improvements to be released to 882/015610-0065 6895841.10 a10/30/14 -38- such ultimate developer of the Alternate Development Phase 2 Property as its sole property. (d) On the occurrence of an Alternate Development Phasing Trigger, Developer shall have the right, exercisable upon written notice to the City, to sell the property designated to be developed with the Resort Residential Village in a bulk sale to an unrelated third party developer (the "Bulk Sale"). If Developer elects to proceed with the Bulk Sale, then, notwithstanding anything to the contrary in Section 305.3 b above, (i) Developer shall retain the proceeds from the Bulk Sale, and (ii) Developer shall distribute all revenue generated from the sale of Resort Residential Dwelling Units located within the Resort Residential Village in accordance with Sections 305.3(b) and 305.3 c above. (e) During the meet and confer described in Section 305.3(a) above, City shall direct Developer regarding the completion of the following: (i) the completion of the Golf Course Realignment, if any of such work has been commenced by Developer pursuant to the terms of Section 316 below; (ii) the completion of the Ahmanson Ranch House Component, if any work on such component has been commenced by Developer; (iii) the completion of the Permanent Golf Clubhouse, if any work on such component has been commenced by Developer; (iv) the completion of the Phase 1 Master Site Infrastructure Improvements; and (v) the completion of the Phase 2 Master Site Infrastructure Improvements, if any work on said improvements has been commenced by Developer. City's direction pursuant to the terms of this Section 305.3(e) shall be made in City's sole and absolute discretion, and shall become obligations of Developer regardless of whether the Parties are able to agree on a course of action pursuant to the meet and confer process. 306. Insurance Requirements. 306.1 Commencing with the Effective Date hereof and ending on the latest of (a) the date the Development Agreement expires or is earlier terminated by the Parties pursuant to the terms thereof; (b) the date the TOT Covenant Agreement for the Luxury Hotel expires or is earlier terminated by the Parties pursuant to the terms thereof, or (c) the date the TOT Covenant Agreement for the Lifestyle Hotel expires or is earlier terminated by the Parties pursuant to the terms thereof, Developer shall procure and maintain, at its sole cost and expense, in a form and content reasonably satisfactory to the City Manager, the following policies of insurance: (a) A policy of commercial general liability insurance written on a per occurrence basis in an amount not less than Five Million Dollars ($5,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00) in the aggregate. (b) A policy of workers' compensation insurance in such amount as will fully comply with the laws of the State of California against any loss, claim or damage arising from any injuries or occupational diseases occurring to any worker employed by Developer in the course of carrying out the work or services contemplated in this Agreement. 882/015610-0065 6895841.10 a10/30/14 -39- (c) A policy of commercial automobile liability insurance written on a per occurrence basis in an amount not less than Three Million Dollars ($3,000,000.00). Said policy shall include coverage for owned, non -owned, leased, and hired cars. (d) "All Risks" Builder's Risk (course of construction) insurance coverage on a replacement cost basis in an amount equal to the full cost of the hard construction costs of the Project. Such insurance shall contain no coinsurance provision, and cover, at a minimum: all work, materials, and equipment to be incorporated into the Project; the Project during construction; the completed Project until such time as City issues the final certificate of occupancy for the Project, and storage, transportation, and equipment breakdown risks. Such insurance shall include coverage for earthquake (for the Luxury Hotel, Lifestyle Hotel, and Conference and Shared Service Facility only), flood, ordinance or law, temporary offsite storage, debris removal, pollutant cleanup and removal, preservation of property, landscaping, shrubs and plants and full collapse during construction. Such insurance shall protect/insure the interests of Developer/owner and all of Developer's contractor(s), and subcontractors, as each of their interests may appear. If such insurance includes an exclusion for "design error," such exclusion shall only be for the object or portion which failed. Notwithstanding the foregoing, such insurance shall only be required for a particular Project Component at such time as construction commences on such Project Component. 306.2 Commencing on the date City issues a Release of Construction Covenants for a Project Component and ending on the latest of (a) the date the Development Agreement expires or is earlier terminated by the Parties pursuant to the terms thereof; (b) the date the TOT Covenant Agreement for the Luxury Hotel expires or is earlier terminated by the Parties pursuant to the terms thereof, or (c) the date the TOT Covenant Agreement for the Lifestyle Hotel expires or is earlier terminated by the Parties pursuant to the terms thereof, Developer shall procure and maintain, at its sole cost and expense, in a form and content reasonably satisfactory to City Manager, "All Risks" property insurance on a replacement cost basis in an amount equal to full replacement cost of the Project Component, as the same may change from time to time. The above insurance policy or policies shall contain no coinsurance provision. 306.3 The following additional requirements shall apply to all of the above policies of insurance: All of the above policies of insurance shall be primary insurance and, except the Worker's Compensation and All Risks insurance, shall name City and City's officers, officials, members, employees, agents, and representatives as additional insureds, using a pre-2004 additional insured endorsement (or equivalent). To the extent allowable by applicable law, the insurer shall waive all rights of subrogation and contribution it may have against City and City's officers, officials, members, employees, agents, and representatives, and their respective insurers. All of said policies of insurance shall provide that said insurance may not be materially amended or cancelled without providing thirty (30) days' prior written notice to City. In the event any of said policies of insurance are cancelled, Developer shall, prior to the cancellation date, submit new evidence of insurance in conformance with this Section to the City Manager. 882/015610-0065 6895841.10 a10/30/14 -40- Not later than the Effective Date of this Agreement, Developer shall provide the City Manager with Certificates of Insurance or appropriate insurance binders evidencing the above insurance coverages and said Certificates of Insurance or binders shall be subject to the reasonable approval of the City Manager. Upon the request of the City Manager, Developer shall provide City with complete copies of each policy of insurance required by this Agreement. The policies of insurance required by this Agreement shall be satisfactory only if issued by companies (i) licensed and admitted to do business in California, rated "A" or better in the most recent edition of Best Rating Guide, The Key Rating Guide or in the Federal Register, and only if they are of a financial category Class VII or better, or (ii) authorized to do business in California, rated "A+" or better in the most recent edition of Best Rating Guide, The Key Rating Guide, or in the Federal Registry and only if they are of a financial category Class XV. Notwithstanding the foregoing, in the event that the policies required hereunder are not available from such insurers at commercially reasonable rates, the City Manager shall have the authority, in his or her sole and absolute discretion, to waive one or more of such requirements provided the proposed policies will adequately protect City's interests hereunder. City may reasonably require coverage increases, provided that the percentage increase in coverage shall not be required to exceed the percentage increase in the Consumer Price Index published by the United States Department of Labor, Bureau of Labor Statistics, for Urban Wage Earners and Clerical Workers, Los Angeles -Riverside -Orange County Average, All Items (1984 = 100) (the "Index"), from and after the date of this Agreement, or, if said Index is discontinued, such official index as may then be in existence and which is most nearly equivalent to said Index (the "CPI Adjustment"). Unless otherwise approved in advance by the City Manager, the insurance to be provided by Developer may provide for a deductible or self -insured retention of not more than Fifty Thousand Dollars ($50,000); provided, however, that the deductible or self -insured retention for the earthquake coverage may be up to, but not exceed, ten percent (10%) of the replacement cost of the damaged Luxury Hotel, Lifestyle Hotel, and/or Conference and Shared Service Facility (as applicable). Developer agrees that the provisions of this Section shall not be construed as limiting in any way the extent to which Developer may be held responsible for the payment of damages to any persons or property resulting from Developer's activities or the activities of any person or persons for which Developer is otherwise responsible. 307. Indemnity. Commencing on the Effective Date, Developer shall defend, with counsel approved by City in City's sole and absolute discretion, indemnify, assume all responsibility for, and hold the Indemnitees harmless from all claims, demands, damages, defense costs or liability of any kind for damage to property or injuries to persons, including accidental death (including reasonable attorneys' fees and costs), which may be caused by any acts or omissions of Developer under this Agreement, whether such activities or performance thereof be by Developer or by anyone directly or indirectly employed or contracted with by Developer and whether such damage shall accrue or be discovered before or after termination of this Agreement including, but not limited to, Developer's failure to pay, if required, prevailing wages on the construction 882/015610-0065 6895841.10 a10/30/14 -41 - and development of any Project Component. Developer shall not be liable for any damages to the extent occasioned by the gross negligence or willful misconduct of City or City's agents, employees or consultants. 308. Rights of Access During Construction. Prior to the Completion of Construction Date, for purposes of assuring compliance with this Agreement, representatives of City shall have the right of access to the Property, without charges or fees, at normal construction hours during the period of construction for the purposes of this Agreement, including but not limited to, the inspection of the work being performed in constructing the Project so long as City representatives comply with all safety rules and do not interfere with construction. City (or its representatives) shall, except in emergency situations, notify Developer prior to exercising its rights pursuant to this Section 308. City shall indemnify, defend, and hold Developer harmless from and against all costs, claims, demands, damages, defense costs, or liability arising from City's exercise of its right of access hereunder, including without limitation reasonable attorneys' fees and costs. 309. Compliance With Laws; Payment of Taxes. 309.1 Compliance with Laws. Developer shall carry out the design, construction and operation of the Project and each Project Component in conformity with all applicable laws, regulations, and rules of the governmental agencies having jurisdiction, including without limitation City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., the Unruh Civil Rights Act, Civil Code Section 51, et seq., and the California Building Standards Code, Health and Safety Code Section 18900, et seq., and all federal, state, and local labor laws and regulations, including, without limitation, if applicable, the requirements to pay prevailing wages under federal law (the Davis Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis Bacon")) and California law (Labor Code Section 1720, et seq.). The Parties acknowledge that a financing structure utilizing certain federal and/or state funding sources and financing scenarios may trigger compliance with applicable state and federal prevailing wage laws and regulations. Developer shall be solely responsible, expressly or impliedly, and legally and financially, for determining and effectuating compliance with all applicable federal, state and local public works requirements, prevailing wage laws, and labor laws and standards, and City makes no representation, either legally and/or financially, as to the applicability or non -applicability of any federal, state and local laws to the Project or any Project Component, either onsite or offsite. Developer expressly, knowingly and voluntarily acknowledges and agrees that City has not previously represented to Developer or to any representative, agent or affiliate of Developer, or its contractor or any subcontractor(s) for the construction or development of the Project or any Project Component, in writing or otherwise, in a call for bids or otherwise, that the work and 882/015610-0065 6895841.10 a10/30/14 -42- construction undertaken pursuant to this Agreement is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis Bacon. Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications as required by Labor Code Section 1781 and/or by Davis Bacon, as the same may be amended from time to time, or any other similar law or regulation. In addition to any other Developer indemnifications of City set forth in this Agreement, Developer shall indemnify, protect, pay for, defend (with legal counsel reasonably acceptable to City) and hold harmless City from and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs" (including reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, or any Project Component, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the Parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non-payment of prevailing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. "Increased costs," as used in this Section 309.1, shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the construction and development of the Project by Developer. 309.2 Taxes and Assessments. Developer shall pay prior to delinquency all ad valorem real estate taxes and assessments on the Property (after such time that Developer acquires fee title to the Property), subject to Developer's right to contest in good faith any such taxes. Developer agrees on behalf of itself, and on behalf of all persons or entities that may own an interest in the portions of the Property developed with the Luxury Hotel, Lifestyle Hotel, or Conference and Shared Service Facility in the future, that during the term of any applicable TOT Covenant Agreement, neither Developer nor any such person or entity shall (i) apply for or receive any exemption from the payment of property taxes or assessments on any interest in or to the Project or any portion thereof, or (ii) take action, including any assessment appeal, to decrease the assessed value of any of the Luxury Hotel, the Lifestyle Hotel, or the Conference and Shared Service Facility below the aggregate third -party costs incurred by Developer to construct each of said Project Components. 882/015610-0065 6895841.10 a10/30/14 -43- 310. Release of Construction Covenants. Upon City's issuance of the last and final certificate of occupancy for a Project Component, Developer shall be entitled to a Release of Construction Covenants for the applicable Project Component. City shall not unreasonably withhold any such Release of Construction Covenants, and if Developer is entitled thereto pursuant to the foregoing sentence, City shall furnish to Developer a recordable Release of Construction Covenants for the applicable Project Component within fifteen (15) days after Developer's request thereof. The Release of Construction Covenants shall be a conclusive determination of satisfactory completion of the applicable Project Component and the Release of Construction Covenants shall so state. Any party then owning or thereafter purchasing, leasing or otherwise acquiring any interest in the real property for which a Release of Construction Covenants has been issued shall not (because of such ownership, purchase, lease or acquisition) incur any obligation or liability under this Agreement except for those continuing covenants as described in Article 500 of this Agreement. If City refuses or fails to furnish a Release of Construction Covenants after written request from Developer, City shall, within fifteen (15) days after written request therefor, provide Developer with a written statement of the reasons City refused or failed to furnish a Release of Construction Covenants. The statement shall also contain City's opinion of the actions Developer must take to obtain a Release of Construction Covenants for the applicable Project Component. A Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Developer to any holder of any mortgage, or any insurer of a mortgage securing money loaned to finance the applicable Project Component, or any part thereof. The Release of Construction Covenants is not a notice of completion as referred to in Section 309.3 of the California Civil Code. 311. Financing of the Project. 311.1 Approval of Financing. As a condition to obtaining a building permit for a Project Component, Developer shall submit to City evidence that Developer (i) has obtained construction financing from a commercial lender necessary to undertake the construction of the applicable Project Component, in accordance with this Agreement (a "Construction Loan"); (ii) if desired by Developer, has obtained "mezzanine" financing in a form reasonably acceptable to City; and (iii) has obtained sufficient equity capital to cover the difference between (a) the sum of the Construction Loan and the mezzanine financing, and (b) the total cost of developing the applicable Project Component ("Developer's Equity Contribution"). City shall, in its reasonable discretion, approve or disapprove such evidence of financing within thirty (30) days after receipt of a complete submission for the applicable Project Component. If City shall disapprove any such evidence of financing, City shall do so by Notice to Developer stating with reasonable specificity the reasons for such disapproval and Developer shall promptly obtain and submit to City new evidence of financing. City shall approve or disapprove such new evidence of financing in the same manner and within the same times established in this Section 311.1 for the approval or disapproval of the evidence of financing as initially submitted to City. Such evidence of financing shall include the following: (1) a copy of a loan agreement entered into between Developer and one or more financial institutions for the Construction Loan, and (II) documentation satisfactory to City as evidence of the 882/015610-0065 6895841.10 a10/30/14 -44- "Mezzanine" financing and Developer's Equity Contribution. Notwithstanding anything to the contrary in this Section 311.1, with respect to the Promenade Mixed Use Village, the Resort Residential Village, the Luxury Branded Residential Development, and the Lifestyle Branded Residential Development, Developer's sole obligation under this Section shall be to provide City, as a condition to obtaining a building permit for the construction of any Resort Residential Dwelling Unit located with such Project Components, with evidence of sufficient financing and equity to pay for the budgeted cost to complete construction of such Resort Residential Dwelling Unit. 311.2 Changes Requested by Lenders. In the event that a lender which has been approved pursuant to Section 311.1 hereof requires one or more amendments to this Agreement, or any of the attachments hereto, which amendments are acceptable to the City Manager and do not materially affect City's interest hereunder, the City Manager is hereby authorized to make such amendments without further authorization from the City Council; provided, however, that the foregoing is not intended to restrict or limit City's legislative discretion. 311.3 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 any breach or default by Developer in completion of construction of the Project or any Project Component, 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, 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. 311.4 Failure of Holder to Complete Project. In any case where, sixty (60) days after the holder of any mortgage or deed of trust creating a lien or encumbrance upon the Property or any part thereof receives a notice from City of a default by Developer in completion of construction of the Project, or any Project Component under this Agreement, and such holder has not elected to commence a cure of such default as set forth in this Section 311, or if it has elected to commence such a cure but thereafter defaults hereunder and failed to timely cure such default, City may purchase the mortgage or deed of trust by payment to the holder of the amount of the unpaid mortgage or deed of trust debt, including principal and interest and all other sums secured by the mortgage or deed of trust, including without limitation, any prepayment fees and costs. If the ownership of the Property or any part thereof has vested in the holder, City, if it so desires, shall be entitled to a conveyance from the 882/015610-0065 6895841.10 a10/30/14 -45- holder to City upon payment to the holder of an amount equal to the sum of the following: (a) The unpaid mortgage or deed of trust debt at the time title became vested in the holder (less all appropriate credits, including those resulting from collection and application of rentals and other income received during foreclosure proceedings); (b) All expenses with respect to foreclosure including reasonable attorneys' fees; (c) The net expense, if any (exclusive of general overhead), incurred by the holder as a direct result of the subsequent management of the Property or part thereof; (d) The costs of any improvements or expenditures made by such holder; (e) An amount equivalent to the interest that would have accrued on the aggregate of the amounts set forth in (a) through (d) above had all such amounts become part of the mortgage or deed of trust debt and such debt had continued in existence to the date of payment by City; and (f) Any customary prepayment charges imposed by the lender pursuant to its loan documents and agreed to by Developer. City shall exercise its rights hereunder to a conveyance of the Property from the holder, if at all, within sixty (60) days after the sixty (60) day period referenced above has lapsed. 311.5 Right of City to Cure Mortgage or Deed of Trust Default. In the event of a mortgage or deed of trust default or breach by Developer under its loan documents prior to the completion of the construction of the Project or any Project Component, Developer shall immediately deliver to City a copy of any mortgage holder's notice of default. If the holder of any mortgage or deed of trust has not elected to cure any default by Developer under this Agreement, City shall have the right but no obligation to cure the default, following at least thirty (30) days prior written notice to Developer. In such event, City shall be entitled to reimbursement from Developer of all reasonable costs and expenses incurred by City in curing such default. City shall also be entitled to a lien upon the Property, or portion of the Property against which the mortgage or deed of trust is recorded, to the extent of such costs and disbursements actually made by City. 311.E Holder Not Obligated to Construct Project. The holder of any mortgage or deed of trust encumbering the Property shall not be obligated by the provisions of this Agreement to construct or complete the Project, or any portion thereof, or to guarantee such construction or completion; nor shall any such covenant or any other provision in this Agreement be construed so to obligate such holder. 882/015610-0065 6895841.10 a10/30/14 -46- 312. Developer CC&Rs. Prior to City's issuance of a final certificate of occupancy for any of individual Resort Residential Dwelling Units in the Luxury Branded Residential Development, Lifestyle Branded Residential Development, Resort Residential Village, or Promenade Mixed -Use Village, Developer shall have submitted to City, obtained City's approval of (such approval not to be unreasonably withheld, conditioned or delayed), and recorded against the underlying real property a declaration of covenants, conditions, and restrictions that (i) establishes a homeowners' association, (ii) is necessary to create a condominium regime for the condominiums described on the condominium plan to be recorded in accordance with all applicable laws (for the Lifestyle Branded Residential Development and portions of the Resort Residential Village developed with condominium -style units); (iii) clearly sets forth the maintenance obligations of the owners of the Resort Residential Dwelling Units; and (iv) includes a disclosure regarding the public ownership and control of the Golf Course and a statement that Developer does not and cannot guarantee (a) that City will not make changes to the Golf Course(s) or to the underlying real property, or (b) the timing of or actual development or use of the remaining undeveloped real property located within the SilverRock Resort Area (the "Developer CC&Rs"). The Developer CC&Rs shall provide that the City is a third party beneficiary thereof with the right, but not the obligation, to enforce the terms thereof which are required by this Section 312, and shall require the written approval of the City prior to any amendments thereto to any of the provisions which are required hereby. 313. Interference with Golf Course. Developer shall carry out the construction of the Project so as to minimize interference with the Golf Course, including, without limitation, taking all necessary actions to ensure that dust (i) does not blow off or leave any portion of the Property under development and enter onto any portion of the Golf Course; or (ii) is not tracked from any portion of the Property under development onto any of the roadways within the SiverRock Resort Area. Developer shall screen any portion of the Property under development to minimize the visual impacts of such development on persons using the Golf Course. Developer acknowledges that City has previously, and may in the future, enter into a Use Agreement with the Desert Classic Charities or successor charitable entity, pursuant to which the Golf Course may be utilized an annual golf tournament. In any year when said tournament is held at the Golf Course, no construction activities shall take place during the televised portion of the tournament unless authorized, in writing, by the City Manager, and Developer and Developer's contractors and subcontractors shall ensure that during the tournament all construction sites are left in a neat and orderly condition. Developer additionally agrees to coordinate with the tournament officials to ensure that construction activities do not interfere with the tournament. 314. Pipeline Across Luxury Branded Residential Development. City has installed a pipeline across the portion of the Property to be developed with the Luxury Branded Residential Development (the "City Pipeline"). Developer hereby acknowledges that City's conveyance of the Phase 1 Property shall be subject to an easement reserved by City for purposes of accessing, maintaining, and repairing the City Pipeline (the "City Pipeline Easement"), which easement shall be in form and substance reasonably acceptable to Developer. Developer shall use commercially reasonable efforts to design the Luxury Branded Residential Development in a manner 882/015610-0065 6895841.10 a10/30/14 -47- as to not interfere with the City Pipeline Easement; provided, however, that if Developer is unable to do so, Developer may, at its sole cost and at no cost to City, relocate the City Pipeline to a location and in a manner acceptable to the City Engineer and Community Development Director, in each of their reasonable discretion, in accordance with all City standards and requirements for such relocation. Any such relocation shall be fully performed (i) during the summer or late spring, when play at the Golf Course is at a minimum, or (ii) during other times of the year pursuant to the terms of a written work plan and schedule approved by the Director of Public Works designed to minimize interference to the operation of the Golf Course. Once Developer has completed the relocation of the City Pipeline, as determined by the City Engineer and Community Development Director, Developer shall convey to City an easement to access, maintain, and repair the relocated City Pipeline, and City shall quitclaim any portions of the City Pipeline Easement which are no longer necessary for the exercise of its rights under the terms thereof. 315. Temporary Clubhouse. In the event that prior to the time Developer completes development of the Permanent Golf Clubhouse Developer's construction activities hereunder will (i) result in the removal of the existing temporary golf clubhouse, or (ii) render the location of the existing temporary golf clubhouse impractical, as determined by City, then Developer shall erect or install a new temporary golf clubhouse to serve the Golf Course until such time as the Permanent Golf Clubhouse has been completed and opened to the public. Said new temporary golf clubhouse shall be constructed according to minimum standards reasonably required by City and the current operator of the Golf Course, and may be a modular or similar facility, but shall provide the same or equivalent services, and operate during the same hours, as the existing temporary golf clubhouse. City shall have the right to review and approve Developer's proposals for any such new temporary golf clubhouse. 316. Golf Course Realignment. Developer intends for the Luxury Hotel to be constructed in a location which will require the displacement of one hole and the realignment of several other holes at the Golf Course. Developer shall work with Arnold Palmer Golf Design to develop a work plan and schedule for the Golf Course Realignment, which shall consist of the relocation and redesign of the displaced hole and realignment of the other affected holes, which work plan and schedule shall be subject to the approval of the City, provided such approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, however, the schedule shall provide that all of such Golf Course Realignment work will occur during the Summer or late Spring, when play at the Golf Course is at a minimum. Developer shall bear all costs and expenses related to the Golf Course Realignment. 317. Permanent Clubhouse Lease. Upon completion of construction of the Permanent Clubhouse, the Parties contemplate entering into a lease agreement pursuant to which Developer will lease the Permanent Clubhouse to City. The Parties agree to negotiate diligently to reach agreement on the terms of such lease agreement. 318. Compliance with State Construction General Permit. Developer acknowledges and agrees that pursuant to Application No. 205291, City has obtained Construction General Permit No. 7 33C325084 under the General Permit for Discharge 882/015610-0065 6895841.10 a10/30/14 -48- of Storm Water Associated with Construction Activity (Construction General Permit Order 2009-0009-DWQ) with respect to the Property (the "GC Permit"). In connection with any entry by Developer of any Developer Representatives onto any portion of the Property for any reason, including, but not limited to, for site inspections, testing, evaluation, or construction of the Project or any portion thereof, Developer shall comply with all applicable requirements of the GC Permit. Developer shall indemnify, assume all responsibility for, and hold City and City's representatives, volunteers, officers, officials, members, employees and agents, harmless from all claims, demands, damages, defense costs or liability of any kind arising from Developer's failure to strictly comply with all applicable requirements of the GC Permit. As one of City's Conditions Precedent to the Closing, Developer shall file a Notice of Intent with the SWRCB that notifies the SWRCB that Developer is the legally responsible party for complying with the GC Permit with respect to the Phase 1 Property or Phase 2 Property (as applicable). 319. City Payment for Ahmanson Ranch House. The Ahmanson Ranch House shall remain owned in fee by City. In addition to satisfying all of the conditions to develop set forth in Section 304 hereof, prior to commencing construction of the Ahmanson Ranch House Component, (i) Developer shall prepare and submit to City for review and approval a detailed development budget for the same, (ii) Developer shall obtain a right of entry and/or any other permits or approvals required by City to enter upon the real property underlying the Ahmanson Ranch House and construct the Ahmanson Ranch House component, and (iii) City and Developer shall diligently negotiate the terms on which City will repay Developer for the costs Developer incurs in developing the Ahmanson Ranch House, with such costs not to exceed the amount set forth in said City -approved development budget; provided, however, that City shall complete said repayment within a reasonable time, not to exceed thirty (30) years, and shall be required to pay interest on the outstanding sum, on commercially reasonable terms. 400. USE AND OPERATION OF THE PROPERTY 401. Operation of the Project. The Hotel Operator for the Luxury Hotel (the "Luxury Hotel Operator") shall retain full management and operational control over all components of the Luxury Hotel, including the rental of Resort Residential Dwelling Units in the Luxury Branded Residential Development on behalf of owners of such Resort Residential Dwelling Units wishing to rent their units through the front desk of the Luxury Hotel. The Hotel Operator for the Lifestyle Hotel (the "Lifestyle Hotel Operator") shall retain full management and operational control over all components of the Lifestyle Hotel, including the rental of Resort Residential Dwelling Units in the Lifestyle Branded Residential Development on behalf of owners of such Resort Residential Dwelling Units wishing to rent their units through the front desk of the Lifestyle Hotel. 402. Use in Accordance with Redevelopment Plan. 402.1 Developer covenants and agrees for itself, its successors, assigns, and every successor in interest to the Property or any part thereof, that upon Developer's acquisition of the Property and during construction and operation of the Project, Developer shall devote the Property to the uses specified in the Redevelopment 882/015610-0065 6895841.10 a10/30/14 -49- Plan and this Agreement for the term of the land use controls of the Redevelopment Plan. 402.2 All uses conducted on the Property, including, without limitation, all activities undertaken by Developer pursuant to this Agreement, shall conform to the Redevelopment Plan and all applicable provisions of the Municipal Code. The foregoing covenants with respect to the Redevelopment Plan shall run with the land until the expiration of the land use controls of the Redevelopment Plan. 403. Maintenance Covenants. Developer shall maintain the Phase 1 Property and the Phase 2 Property from and after the Phase 1 Closing and the Phase 2 Closing, respectively, and all improvements thereon, including all landscaping, in a first class condition, and in compliance with the terms of the Redevelopment Plan, and all applicable provisions of the Municipal Code. 404. Obligation to Refrain from Discrimination. Developer covenants and agrees for itself, its successors, its assigns and all persons claiming under or through them to the Property or any part thereof, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Developer itself, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, or sublessees of the Property. The foregoing covenants shall run with the land and shall remain in effect in perpetuity. 405. Covenants Regarding Nondiscrimination. Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Property, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property, or any part thereof. The foregoing covenants shall run with the land. Developer agrees for itself and any successor in interest that Developer shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person. All such deeds, leases, or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 405.1 In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons 882/015610-0065 6895841.10 a10/30/14 -50- claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." 405.2 In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." 405.3 In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." The foregoing covenants against discrimination shall remain in effect in perpetuity. 406. Effect of Violation of the Terms and Provisions of this Agreement After Completion of Construction. City is deemed the beneficiary of the terms and provisions of this Agreement and of the covenants running with the land, for and in its own right, without regard to whether City has been, remains or is an owner of any land or interest therein in the Property. City shall have the right, if this Agreement or the covenants herein are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such 882/015610-0065 6895841.10 a10/30/14 -51 - breaches and to avail itself of the rights granted herein to which it may be entitled, except as may be otherwise set forth in this Agreement. The covenants contained in this Agreement shall not benefit or be enforceable by any owner of any other real property, or any person or entity having an interest in such other real property. The covenants contained in this Agreement shall remain in effect for the periods described herein, specifically including, without limitation, the following: (a) The covenants in Section 401 shall remain in effect until the expiration or earlier termination of both of the TOT Covenant Agreements; provided, however, that an earlier termination of either or both of the TOT Covenant Agreements by City as the result of a Developer default thereunder shall not terminate the covenants in this Section 401, which, in such event, shall not terminate until the date they would have terminated pursuant to the later to expire of the TOT Covenant Agreements had the TOT Covenant Agreement(s) not been terminated early by City. (b) The environmental covenants set forth in Sections 207.3, 207.4, and 207.5 shall remain in effect in perpetuity. (c) The covenants pertaining to use of the Property which are set forth in Section 402 shall remain in effect (i) with respect to the Redevelopment Plan, until the expiration of the land use controls of the Redevelopment Plan, and (ii) with respect to the Municipal Code, in perpetuity; provided, however, Developer shall not be held responsible for the lack of compliance by any individual Resort Residential Dwelling Unit with the foregoing covenants. (d) The covenants pertaining to maintenance of the Property, and all improvements thereon, as set forth in Section 403, shall remain in effect (i) with respect to the Redevelopment Plan, until the expiration of the land use controls of the Redevelopment Plan, and (ii) with respect to the Municipal Code, in perpetuity; provided, however, Developer shall not be held responsible for the lack of compliance by any individual Resort Residential Dwelling Unit with the foregoing covenants. (e) The covenants against discrimination, as set forth in Section 404, shall remain in effect in perpetuity. (f) The indemnity obligations, as set forth in Section 207.5 and in Section 307 hereof, shall remain in effect in perpetuity. 407. Representations and Warranties. 407.1 City Representations. City represents and warrants to Developer as follows as of the Effective, the Phase 1 Closing Date, and the Phase 2 Closing Date: (a) Authority. City is a California municipal corporation and charter city, organized and existing under the Constitution of the State of California. City has full right, power and lawful authority to acquire, grant, sell and convey the Property as provided herein, and the execution, performance and delivery of this Agreement by City has been fully authorized by all requisite actions on the part of City. 882/015610-0065 6895841.10 a10/30/14 -52- (b) FIRPTA. City is not a "foreign person" within the parameters of FIRPTA or any similar state statute, or is exempt from the provisions of FIRPTA or any similar state statute, or has complied and will comply with all the requirements under FIRPTA or any similar state statute. (c) No Conflict. To City's actual knowledge, City's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which City is a party or by which it is bound. (d) Conformance with Redevelopment Plan. The development and use of the Project as required hereunder is in conformance with the Redevelopment Plan and City's Long Range Property Management Plan. (e) No City Bankruptcy. City has not (a) made a general assignment for the benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (c) suffered the appointment of a receiver to take possession of all, or substantially all, of its assets which remains pending; (d) admitted in writing its inability to pay its debts as they come due; or (e) made an offer of settlement, extension or composition to its creditors generally. Until the Phase 2 Closing, City shall, upon learning of any fact or condition which would cause any of the warranties and representations in this Section 407.1 or in Section 207.6 not to be true as of the Phase 1 Closing Date or the Phase 2 Closing Date, immediately give written notice of such fact or condition to Developer. Upon receipt of such notice, Developer shall have a right, exercisable within ten (10) Business Days thereafter (and the Phase 1 Closing or Phase 2 Closing, as applicable, shall be delayed accordingly, if necessary to accommodate such ten (10) Business Days) to proceed with the transaction, or to terminate this Agreement. If Developer elects to close the Phase 1 Escrow or Phase 2 Escrow (as applicable) following disclosure of such information, City's representations and warranties contained herein shall be deemed to have been made as of the Phase 1 Closing or Phase 2 Closing (as applicable), subject to such exception(s). If, following the disclosure of such information, Developer elects to not close the Phase 1 Escrow or Phase 2 Escrow (as applicable), then this Agreement as to the Phase 1 Escrow or Phase 2 Escrow (as applicable) shall automatically terminate, Developer shall be reimbursed the theretofore undisbursed balance of any deposits made into said Phase 1 Escrow or Phase 2 Escrow (as applicable), and neither Party shall have any further rights, obligations or liabilities hereunder; except for the indemnity obligations of Developer under this Agreement and any other obligations that expressly survive the termination of this Agreement; provided, however, that in the event the Phase 1 Escrow closes, a failure to close the Phase 2 Escrow shall not terminate this Agreement. In the event the Phase 1 Escrow fails to close, this Agreement shall automatically terminate and neither Party shall have any further rights or obligations hereunder, except for the indemnity obligations of Developer under this Agreement and any other obligations that expressly survive the termination of this Agreement and except that both Parties agree to take whatever actions are reasonably necessary to terminate any other agreements that may 882/015610-0065 6895841.10 a10/30/14 -53- have been executed in furtherance hereof. The representations and warranties set forth in this Section 407.1 shall survive each of the Phase 1 Closing and Phase 2 Closing. 407.2 Developer's Representations. Developer represents and warrants to City as follows, as of the Effective Date, the Phase 1 Closing Date and the Phase 2 Closing Date: (a) Authority. Developer is a duly organized limited liability company formed within and in good standing under the laws of the State of Delaware, and is authorized to conduct business in the State of California. Developer has full right, power and lawful authority to purchase and accept the conveyance of the Property, and to undertake all obligations as provided herein and the execution, performance and delivery of this Agreement by Developer has been fully authorized by all requisite actions on the part of Developer. (b) Experience. Developer is experienced in the development of the type of commercial projects which would satisfy the development requirements set forth herein. (c) No Conflict. To the best of Developer's knowledge, Developer's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Developer is a party or by which it is bound. (d) No Developer Bankruptcy. Developer has not (a) made a general assignment for the benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (c) suffered the appointment of a receiver to take possession of all, or substantially all, of its assets which remains pending; (d) admitted in writing its inability to pay its debts as they come due; or (e) made an offer of settlement, extension or composition to its creditors generally. Until the Phase 2 Closing, Developer shall, upon learning of any fact or condition which would cause any of the warranties and representations in this Section 407.2 not to be true as of the Phase 1 Closing Date or the Phase 2 Closing Date, immediately give written notice of such fact or condition to City. Upon receipt of such notice, City shall have a right, exercisable within ten (10) Business Days thereafter (and the Phase 1 Closing or Phase 2 Closing, as applicable, shall be delayed accordingly, if necessary to accommodate such ten (10) Business Days) to proceed with the transaction, or to terminate this Agreement. If City elects to close the Phase 1 Escrow or Phase 2 Escrow (as applicable) following disclosure of such information, Developer's representations and warranties contained herein shall be deemed to have been made as of the Phase 1 Closing or Phase 2 Closing (as applicable), subject to such exception(s). If, following the disclosure of such information, City elects to not close the Phase 1 Escrow or Phase 2 Escrow (as applicable), then this Agreement as to the Phase 1 Escrow or Phase 2 Escrow (as applicable) shall automatically terminate, City shall be reimbursed the theretofore undisbursed balance of any deposits made into said Phase 1 Escrow or Phase 2 Escrow (as applicable), and neither Party shall have any 882/015610-0065 6895841.10 a10/30/14 -54- further rights, obligations or liabilities hereunder except for the indemnity obligations of Developer under this Agreement and any other obligations that expressly survive the termination of this Agreement; provided, however, that in the event the Phase 1 Escrow closes, a failure to close the Phase 2 Escrow shall not terminate this Agreement. In the event the Phase 1 Escrow fails to close, this Agreement shall automatically terminate and neither Party shall have any further rights or obligations hereunder, except for the indemnity obligations of Developer under this Agreement and any other obligations that expressly survive the termination of this Agreement, and except that both Parties agree to take whatever actions are reasonably necessary to terminate any other agreements that may have been executed in furtherance hereof. The representations and warranties set forth in this Section 407.1 shall survive each of the Phase 1 Closing and Phase 2 Closing. 408. Rights of Access During Operation. During the term of this Agreement, for purposes of assuring compliance with this Agreement, representatives of City shall have the right of access to the Property, without charges or fees, during business hours (e.g., Monday -Friday, 8:00 a.m. to 5:30 p.m.) for the purposes of this Agreement, so long as City representatives comply with all safety rules and do not interfere with the operation of the applicable Project Component(s). City (or its representatives) shall, except in emergency situations, notify Developer prior to exercising its rights pursuant to this Section 408. City shall indemnify, defend, and hold Developer harmless from and against all costs (including, without limitation, reasonable attorneys' fees), claims, damages, liability and judgments arising from City's exercise of its right of access hereunder. 500. DEFAULTS AND REMEDIES 501. Default Remedies. Subject to the extensions of time set forth in Section 602 of this Agreement, failure by either Party to perform any action or covenant required by this Agreement within the time periods provided herein following notice and failure to cure as described hereafter, constitutes a "Default" under this Agreement. A Party claiming a Default shall give written notice of Default to the other Party specifying the Default complained of. Except as otherwise expressly provided in this Agreement, the claimant shall not institute any proceeding against the other Party, and the other Party shall not be in Default if such Party cures such default within thirty (30) days from receipt of such notice, or if the nature of such default is that it cannot reasonably be expected to be cured within such thirty (30) day period, if such Party, with due diligence, commences to cure, correct or remedy such failure or delay within thirty (30) days from receipt of such notice, and completes such cure, correction or remedy with diligence. 502. Institution of Legal Actions. In addition to any other rights or remedies and subject to the restrictions otherwise set forth in this Agreement, either Party may institute an action at law or equity to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any Default, or to obtain any other remedy consistent with the purpose of this Agreement. City shall also have the right to pursue damages for Developer's defaults, but in no event shall Developer be entitled to damages of any kind from City, except for damages for actual out-of-pocket costs incurred by Developer and paid or payable to attorneys, third party consultants, 882/015610-0065 6895841.10 a10/30/14 -55- contractors, and similar parties resulting from a material misrepresentation of City's express representations in Section 207.6 or in Section 407.1, or nonperformance by City of its covenants under this Agreement, but excluding damages for economic loss, lost profits, or any other economic or consequential damages of any kind. Any such out-of-pocket costs shall be set forth in the Final Project Budget (or Alternate Development Phasing Budget if an Alternate Development Phasing Trigger has occurred pursuant to Section 305.3 hereof) and documented by invoices submitted to City. Such legal actions must be instituted in the Superior Court of the County of Riverside, State of California, or in the District of the United States District Court in which such county is located. 503. Termination Prior to the Close of the Phase 1 Escrow. 503.1 Termination by Developer. In the event that prior to the close of the Phase 1 Escrow (a) one or more of Developer's Conditions Precedent to the Closing for the Phase 1 Escrow is not fulfilled on or before the time set forth herein or in the Schedule of Performance and such failure is not caused by Developer, or (b) any default of City under this Agreement prior to the close of the Phase 1 Escrow is not cured within the time set forth in Section 501 hereof, after written demand by Developer, then this Agreement may, at the option of Developer, be terminated by written Notice thereof to City. From the date of the written Notice of termination of this Agreement by Developer to City and thereafter this Agreement shall be deemed terminated and there shall be no further rights or obligations between the Parties with respect to the Property, or any portion thereof, by virtue of or with respect to this Agreement, except for Developer's limited right to recover from City its out-of-pocket costs pursuant and subject to Section 502 hereof. 503.2 Termination by City. In the event that prior to the close of the Phase 1 Escrow (a) Developer (or any successor in interest) assigns this Agreement or any rights herein or in any portion of the Property or Project Component in violation of this Agreement, or assigns the Development Agreement or any rights therein; or (b) one or more of City's Conditions Precedent to the Closing is not fulfilled on or before the Outside Date for Phase 1 Closing (as it may be extended) and such failure is not caused by City; or (c) Developer is otherwise in default of this Agreement and fails to cure such default within the time set forth in Section 501 hereof, after written demand by City; or (d) Developer is the subject of a bankruptcy proceeding, whether voluntarily or involuntarily commenced, then this Agreement shall, at the option of City, be terminated by City by written Notice thereof to Developer. From the date of the written Notice of termination of this Agreement by City to Developer and thereafter this Agreement shall be deemed terminated and there shall be no further rights or obligations between the Parties, except for City's right to recover from Developer damages pursuant to Section 502 hereof, and except further that City shall have any and all rights available to City as set forth in Section 505 and Section 506 hereof. 504. Termination Prior to Phase 2 Closi 504.1 Termination by Developer. In the event that, after the close of the Phase 1 Escrow but prior to the Phase 2 Closing (a) one or more of Developer's 882/015610-0065 6895841.10 a10/30/14 -56- Conditions Precedent to the Closing for the Phase 2 Escrow is not fulfilled on or before the time set forth in the Schedule of Performance and such failure is not caused by Developer, or (b) any default of City under this Agreement prior to the Phase 2 Closing is not cured within the time set forth in Section 501 hereof, after written demand by Developer, then this Agreement with respect to the Phase 2 Escrow may, at the option of Developer, be terminated by written Notice thereof to City. From the date of the written Notice of termination of this Agreement by Developer to City, this Agreement shall be deemed terminated with respect to the Phase 2 Escrow and there shall be no further rights or obligations between the Parties with respect to the Phase 2 Property by virtue of or with respect to this Agreement, except for Developer's limited right to recover from City its out-of-pocket costs pursuant and subject to Section 502 hereof. 504.2 Termination by City. In the event that, after the close of the Phase 1 Escrow but prior to the close of the Phase 2 Escrow (a) Developer (or any successor in interest) assigns this Agreement or any rights herein or in any portion of the Property or a Project Component in violation of this Agreement, or assigns the Development Agreement or any rights therein; or (b) one or more of City's Conditions Precedent to the Closing for the Phase 2 Escrow is not fulfilled on or before the Outside Date for Phase 2 Closing (as it may be extended) and such failure is not caused by City; or (c) Developer is otherwise in default of this Agreement and fails to cure such default within the time set forth in Section 501 hereof, after written demand by City; or (d) Developer is the subject of a bankruptcy proceeding, whether voluntarily or involuntarily commenced, then this Agreement with respect to the Phase 2 Escrow shall, at the option of City, be terminated by City by written Notice thereof to Developer. From the date of the written Notice of termination of this Agreement by City to Developer, this Agreement with respect to the Phase 2 Escrow shall be deemed terminated and there shall be no further rights or obligations between the Parties with respect to the Phase 2 Property by virtue of or with respect to this Agreement, except for City's right to recover from Developer damages pursuant to Section 502 hereof, and except further that City shall have any and all rights available to City as set forth in Section 505 and Section 506 hereof. 505. City Option to Acquire Plans. If this Agreement is terminated by City as a result of a Default by Developer, at the option of City and without any additional consideration, which option may be exercised in City's sole and absolute discretion, Developer shall deliver to City an executed assignment in a form reasonably acceptable to City of Developer's right to use all 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 relating to the construction of the Project on the Property (the "Plans"), together with copies of all of the Plans, as have been prepared for the development of the Project to date of the termination. Notwithstanding the foregoing, however, Developer does not covenant to convey to City the copyright or other ownership rights of third parties. City understands and agrees that the assignment to City under this Section 505 is subject and subordinate to any assignment which Developer may make to a lender providing financing for the Project, and City agrees to execute any documents required by such lender acknowledging and effectuating such subordination of City's rights in and to the assignment. City's acquisition or use of the Plans or any of 882/015610-0065 6895841.10 a10/30/14 -57- 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. 506. Option Agreement. In addition to any other rights and remedies available to City hereunder, City shall be entitled, in its sole and absolute discretion, to repurchase the Property, or applicable portion thereof, with all of the improvements thereon, from Developer in the event that, (i) Developer fails to commence construction of the Master Site Infrastructure Improvements or a Project Component within the time periods set forth in the Schedule of Performance, (ii) after commencement of construction, Developer fails to continuously proceed with, and complete, construction of the Master Site Infrastructure Improvements or the Project Component within the time periods set forth in the Schedule of Performance, or (iii) Developer transfers or suffers an involuntary transfer of the Property, or a portion thereof, in violation of the terms hereof. Said repurchase rights shall be as set forth in an option agreement to be recorded against the Phase 1 Property at the Phase 1 Closing and against the Phase 2 Property at the Phase 2 Closing. The Option Agreement is substantially in the form attached hereto and incorporated herein as Attachment No. 7 ("Option Agreement"). If requested by Developer's construction lender, City agrees to enter into a subordination or similar agreement in accordance with the terms and conditions set forth in Section 7(g) of the Option Agreement. 507. Acceptance of Service of Process. In the event that any legal action is commenced by Developer against City, service of process on City shall be made by personal service upon the City Manager or in such other manner as may be provided by law. In the event that any legal action is commenced by City against Developer, service of process on Developer shall be made by personal service upon any officer of Developer, whether made within or outside the State of California, or in such other manner as may be provided by law. 508. Rights and Remedies Are Cumulative. Except as otherwise expressly stated in this Agreement, 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. 509. Inaction Not a Waiver of Default. Any failures or delays by either Party in asserting any of its rights and remedies as to any Default shall not operate as a waiver of any Default or of any such rights or remedies, or deprive either such Party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. 510. Applicable Law. The internal laws of the State of California shall govern the interpretation and enforcement of this Agreement, without regard to conflict of law principles. 511. Non -Liability of Officials and Employees of City. No member, official or employee of City shall be personally liable to Developer, or any successor in interest, in 882/015610-0065 6895841.10 a10/30/14 -58- the event of any Default or breach by City or for any amount which may become due to Developer or its successors, or on any obligations under the terms of this Agreement. 512. Attorneys' Fees. In any action between the Parties to interpret, enforce, reform, modify, rescind, or otherwise in connection with any of the terms or provisions of this Agreement, the prevailing Party in the action shall be entitled, in addition to damages, injunctive relief, or any other relief to which it might be entitled, reasonable costs and expenses including, without limitation, litigation costs, reasonable attorneys' fees and expert witness fees. 600. GENERAL PROVISIONS 601. Notices, Demands and Communications Between the Parties. Any approval, disapproval, demand, document or other notice ("Notice") which either Party may desire to give to the other Party under this Agreement must be in writing and shall be sufficiently given if (i) delivered by hand, (ii) delivered by reputable same -day or overnight messenger service that provides a receipt showing date and time of delivery, or (iii) dispatched by registered or certified mail, postage prepaid, return receipt requested, to the principal offices of City and Developer at the addresses specified below, or at any other address as that Party may later designate by Notice. To City: City of La Quinta 78-495 Calle Tampico La Quinta, California 92253 Phone No.: 760-777-7031 Attention: City Manager With a copy to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 P.O. Box 1950 Costa Mesa, California 92628 Phone No.: 714-641-5100 Attention: William S. Ihrke, Esq. To Developer: SilverRock Development Company, LLC c/o Meriwether Companies 11999 San Vicente Boulevard, Suite 220 Los Angeles, California 90049 Phone: 424-272-0470 Attention: Graham Culp With a copy to: Glaser Weil Fink Howard Avchen & Shapiro, LLP 10250 Constellation Boulevard, 19th Floor Los Angeles, California 90067 Phone: 310-556-7844 Attention: Saul Breskal, Esq. 882/015610-0065 6895841.10 a10/30/14 -59- and to: The Robert Green Company 3551 Fortuna Ranch Road Encinitas, California 92024 Attention: Robert Green Any written notice, demand or communication shall be deemed received upon delivery if delivered by hand, including by reputable delivery service, and shall be deemed received on the third day from the date it is postmarked if delivered by registered or certified mail. 602. Enforced Delay; Extension of Times of Performance. In addition to specific provisions of this Agreement, performance by either Party hereunder shall not be deemed to be in Default, and all performance and other dates specified in this Agreement shall be extended, where delays or Defaults are due to causes beyond the control or without the fault of the Party claiming an extension of time to perform, which may include the following (each, a "Force Majeure"): war; insurrection; acts of terrorism; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplier; acts or omissions of the other Party; acts or failures to act of any public or governmental agency or entity (other than the acts or failures to act of City which shall not excuse performance by City) or an Adverse Economic Event. Notwithstanding anything to the contrary in this Agreement, an extension of time for any such cause shall only be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the Party claiming such extension is sent to the other Party within thirty (30) days of the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the mutual agreement of City and Developer. Notwithstanding any provision of this Agreement to the contrary, with the exception of an Adverse Economic Event, Developer is not entitled pursuant to this Section 602 to an extension of time to perform because of past, present or future difficulty in obtaining suitable construction or permanent financing to commence or complete the Project or any Project Component or because of economic or market conditions. To the extent that City has an obligation to act within a certain time period under this Agreement including, without limitation in connection with City's review and approval of submittals received from Developer, and City fails to respond appropriately to Developer within such time Period, then any deadline for Developer's performance impacted by such delay by City shall be extended by one day for each and every day that City's response is delayed. 603. Transfers of Interest in Property or Agreement. The qualifications and identity of Developer as the developer and operator of high quality commercial resort developments are of particular concern to City. Furthermore, the Parties acknowledge that City has negotiated the terms of this Agreement in contemplation of the development and operation of the Project on the Property and the property tax, resort payments, and Transient Occupancy Tax revenues to be generated by the operation of the Project on the Property. 882/015610-0065 6895841.10 a10/30/14 -60- 603.1 Transfers of Interest in Property or Agreement Prior to City's Issuance of a Release of Construction Covenants. Except as provided in this Section 603.1, until the date City issues a Release of Construction Covenants for a particular Project Component (the "Fee Transfer Release Date"), (1) no voluntary successor in interest of Developer shall acquire any rights or powers under this Agreement with respect to said Project Component; (2) Developer shall not make any total or partial sale, transfer, conveyance, assignment, or lease of the whole or any part of the Project Component or underlying real property; and (3) no changes shall occur with respect to the ownership and/or control of Developer, including, without limitation, stock transfers, sales of issuances, or transfers, sales or issuances of membership or ownership interests, or statutory conversions (any of the above, a "Transfer"). Prior to the Fee Transfer Release Date for a particular Project Component, City may approve or disapprove a proposed Transfer in its sole and absolute discretion; provided, however, City agrees to reasonably consider a Transfer to a transferee that has substantial experience in developing and operating developments comparable in all material respects to the Project or Project Component (as applicable), and the financial capability to develop and operate the Project or Project Component (as applicable), as determined pursuant to the factors set forth in Section 311.1 of this Agreement. Notwithstanding the foregoing, City approval of a Transfer prior to the Fee Transfer Release Date for a particular Project Component shall not be required in connection with any of the following: (a) The conveyance or dedication of any portion of the Property to an appropriate governmental agency, or the granting of easements or permits to facilitate construction of the Project. (b) Any assignment for financing purposes (subject to such financing being permitted pursuant to Section 311 of this Agreement), including the grant of a deed of trust to secure the funds necessary for land acquisition, construction and permanent financing of the Project or of a Project Component. (c) The Transfer to a lender who has provided financing to Developer (subject to such financing being permitted pursuant to Section 311 of this Agreement) as a result of foreclosure by such lender of the deed of trust securing funds necessary for land acquisition, construction, and permanent financing of the Project or of a Project Component. (d) The Transfer by Developer to an entity (i) whose managing member, manager, or managing general partner is (A) Developer, or (B) an entity which is at least fifty-one percent (51 %) owned and controlled by Developer, Meriwether, or RGC, and (ii) which engages as the project/development manager for the Project Component an entity which is at least fifty-one percent (51 %) owned and controlled by Developer, Meriwether or RGC. (e) The sale by Developer of Resort Residential Dwelling Units to third party buyers. 882/015610-0065 6895841.10 a10/30/14 -61 - 603.2 Transfers of Operational Obligations. Notwithstanding anything in Section 603.1 to the contrary, (i) none of Developer, the Luxury Hotel Operator or the Lifestyle Hotel Operator (or any permitted successor in interest) shall make any Transfer of the operational and/or managerial control, including, but not limited to, financial and managerial decision -making, of the Luxury Hotel or Lifestyle Hotel; and (ii) no changes shall occur with respect to the ownership and/or control of Developer, RGC, or of Meriwether, including, without limitation, stock transfers, sales of issuances, or transfers, sales or issuances of membership or ownership interests, or statutory conversions (either of the above, a "Management Transfer") without the prior written approval of City, in City's sole and absolute discretion; provided, however, that transfers of the stock, ownership and/or membership interests of Developer, RGC or Meriwether may be made so long as such transfers do not result in the transfer, on a cumulative basis, of more than forty-nine percent (49%) of the outstanding and voting stock, ownership, and/or membership interests of Developer, RGC, or Meriwether. Notwithstanding the foregoing, City approval shall not be required for a Management Transfer of the Luxury Hotel to any of the entities approved by City to act as Luxury Hotel Operator, or for a Management Transfer of the Lifestyle Hotel to any of the entities approved by City to act as Lifestyle Hotel Operator, as set forth in Section 100 hereof (any of the foregoing, an "Approved Operator"). To the extent that the operating character or quality of any Approved Operator substantially changes between the Effective Date and the date of the proposed Management Transfer, Developer or Developer's successor in interest shall demonstrate that the Approved Operator satisfies the requirements for transferee entities not designed as Approved Operators, as outlined below in this Section 603.2. Any proposed Management Transfer to an entity that is not designated as an Approved Operator shall be approved by the City Council of City, in its sole and absolute discretion. In connection with any proposed Management Transfer of the Luxury Hotel to any entity that is not designated as an Approved Operator for the Luxury Hotel, Developer or Developer's successor in interest shall demonstrate that the proposed operator has experience and reputation for operating luxury hotels that is equivalent to the experience and reputation of an Approved Operator. In connection with any proposed Management Transfer of the Lifestyle Hotel to any entity that is not designated as an Approved Operator, Developer or Developer's successor -in -interest shall demonstrate that the proposed operator has the experience and reputation in operating lifestyle hotels that is equivalent to the experience and reputation of an Approved Operator. Developer or Developer's successor in interest shall provide such information as may be reasonably requested by City to enable City to review and approve (or disapprove) any proposed operator, and shall reimburse City for City's costs incurred in considering any such request. 603.3 Assignment and Assumption of Obligations. Except for the sale of individual Resort Residential Dwelling Units, any Transfer (including Transfers not requiring prior City approval) by Developer of any interest in the Property or of any interest in this Agreement and all Management Transfers shall require the execution of an assignment and assumption of obligations substantially in the form attached hereto and incorporated herein as Attachment No. 9 (an "Assignment and Assumption Agreement"). Transfers of Developer's rights and/or obligations under this Agreement made without an executed Assignment and Assumption Agreement are null and void. The requirement for the provision to City of an executed Assignment and Assumption 882/015610-0065 6895841.10 a10/30/14 -62- Agreement shall apply regardless of whether City approval is required for the Transfer. Developer agrees that (a) at least thirty (30) days prior to any Transfer it shall give written notice to City of such proposed Transfer; and (b) within five (5) days after any Transfer it shall provide City with a copy of the fully executed Assignment and Assumption Agreement evidencing that the assignee has assumed in writing all applicable obligations under this Agreement. A Party proposing to assign its obligations under this Agreement (i) shall remain liable for the obligations until and unless City has received a fully executed Assignment and Assumption Agreement, and (ii) shall remain liable for any default hereunder that occurred prior to the effective date of the assignment. Developer or Developer's successor in interest shall reimburse City for any costs (other than staff time) City incurs in reviewing any Assignment and Assumption Agreement required hereunder. 603.4 Successors and Assigns. All of the terms, covenants and conditions of this Agreement shall be binding upon Developer and its permitted successors and assigns. Whenever the term "Developer" is used in this Agreement, such term shall include any other permitted successors and assigns as herein provided, and the term "Developer" shall only mean the owner of a Project Component from time to time during the period of such entity's ownership, provided that the procedures set forth in this Agreement for that entity's acquisition and or disposition. 603.5 Assignment by City. City may assign or transfer any of its rights or obligations under this Agreement with the approval of Developer, which approval shall not be unreasonably withheld; provided, however, that City may assign or transfer any of its interests hereunder to a joint powers authority in which City is a member at any time without the consent of Developer. 604. Relationship Between City and Developer. It is hereby acknowledged that the relationship between City and Developer is not that of a partnership or joint venture and that City and Developer shall not be deemed or construed for any purpose to be the agent of the other. Accordingly, except as expressly provided herein or in the Attachments hereto, City shall have no rights, powers, duties or obligations with respect to the development, operation, maintenance or management of the Project. 605. City Approvals and Actions. City shall maintain authority of this Agreement and the authority to implement this Agreement through the City Manager. The City Manager shall have the authority to make approvals, issue interpretations, waive provisions, and/or enter into amendments of this Agreement on behalf of City so long as such actions do not materially or substantially change the business terms of this Agreement or the uses or development permitted on the Property, or materially or substantially add to the costs incurred or to be incurred by City as specified herein, and such approvals, interpretations, waivers and/or amendments may include extensions of time to perform as specified in the Schedule of Performance. All other material and/or substantial interpretations, waivers, or amendments shall require the consideration, action and written consent of the City Council. Wherever the approval of the City is required under this Agreement, other than approvals required of the City acting in its governmental capacity, such approval shall not be unreasonably withheld, conditioned or delayed, unless expressly stated to the contrary in this Agreement. 882/015610-0065 6895841.10 a10/30/14 -63- 606. Counterparts. This Agreement may be signed in multiple counterparts which, when signed by all Parties, shall constitute a binding agreement. This Agreement is executed in two (2) originals, each of which is deemed to be an original. 607. Integration. This Agreement contains the entire understanding between the Parties relating to the transaction contemplated by this Agreement, notwithstanding any previous negotiations or agreements between the Parties or their predecessors in interest with respect to all or any part of the subject matter hereof. All prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged in this Agreement and shall be of no further force or effect. Each Party is entering this Agreement based solely upon the representations set forth herein and upon each Party's own independent investigation of any and all facts such Party deems material. This Agreement includes Attachment Nos. 1 through 11, which are incorporated herein. 608. Real Estate Brokerage Commission. City and Developer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with Developer's acquisition of the Property from City. The Parties agree to defend and hold harmless the other Party from any claim to any such commission or fee from any other broker, agent or finder with respect to this Agreement which is payable by such Party as a result of the actions of the indemnifying Party. 609. Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms. Reference to section numbers are to sections in this Agreement, unless expressly stated otherwise. 610. Interpretation. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others where and when the context so dictates. The word "including" shall be construed as if followed by the words "without limitation". This Agreement shall be interpreted as though prepared jointly by both Parties. 611. No Waiver. A waiver by either Party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by the other Party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement. 612. Modifications. Any alteration, change or modification of or to this Agreement, in order to become effective, shall be made in writing and in each instance signed on behalf of each Party. Developer shall be required to reimburse City for all costs City incurs in negotiating, preparing, and processing any such alterations, changes, or modifications requested by Developer or any lender or investor. In connection with any request for an alteration, change or modification, Developer shall deposit with City the sum of Ten Thousand Dollars ($10,000). Notwithstanding the foregoing, the City Manager shall have the discretion to authorize a lesser deposit, in the event he or she determines the proposed alteration, change or modification is minor. In the event the funds on deposit are depleted, City shall notify Developer of the same, 882/015610-0065 6895841.10 a10/30/14 -64- and Developer shall deposit with City an additional Five Thousand Dollars ($5,000) to complete processing of the requested alteration, change or modification. Developer shall make additional deposits to City, as needed, pursuant to the foregoing process, until the requested alteration, change, or modification is finalized. Within sixty (60) days after such alteration, change or modification is finalized, City shall reimburse Developer any unused sums. 613. Severability. If any term, provision, condition or covenant of this Agreement or its application to any Party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 614. Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day (such as the day escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during the day, that time shall be Pacific Time Zone time. 615. Legal Advice. Each Party represents and warrants to the other the following: they have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely signed this Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other Party, or their respective agents, employees, or attorneys, except as specifically set forth in this Agreement, and without duress or coercion, whether economic or otherwise. 616. Time of Essence. Time is expressly made of the essence with respect to the performance by City and Developer of each and every obligation and condition of this Agreement. 617. Cooperation. Each Party agrees to cooperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements. 618. Conflicts of Interest. No member, official or employee of City shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is directly or indirectly interested. 882/015610-0065 6895841.10 a10/30/14 -65- 619. Time for Acceptance of Agreement by City. This Agreement, when executed by Developer and delivered to City, must be authorized, executed and delivered by City on or before forty-five (45) days after signing and delivery of this Agreement by Developer or this Agreement shall be void, except to the extent that Developer shall consent in writing to a further extension of time for the authorization, execution and delivery of this Agreement. 620. Attachments. 620.1 Incorporation by Reference; Definitions. Attachment Nos. 1-10 are attached to this Agreement and made a part hereof by this reference. All capitalized terms used in the Site Map, Schedule of Performance, Scope of Development, and Preliminary Budget shall have the meanings ascribed to such terms in this Agreement. 620.2 Completion of Attachments. Each of the forms of Grant Deed, Option Agreement, TOT Sharing Agreement, TOT Covenant Agreement, and Release of Construction Covenants is designed for execution and recordation (if applicable) in connection with each Phase, and with respect to the Release of Construction Covenants, in connection with the completion of each Project Component. To accommodate such multiple uses, the forms contain certain blanks that must be completed and/or certain bracketed information that must be selected (with the inapplicable bracketed information deleted) prior to execution. [signatures on next page] 882/015610-0065 6895841.10 a10/30/14 -66- IN WITNESS WHEREOF, City and Developer have executed this Purchase, Sale, and Development Agreement as of the date set forth above. ATTEST: City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP William S. Ihrke City Attorney CITY: CITY OF LA QUINTA, a California municipal corporation and charter city City Manager DEVELOPER: SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company go Its: 882/015610-0065 6895841.10 a10/30/14 -67- ATTACHMENT NO. 1 PROPERTY LEGAL DESCRIPTION [The Property Legal Description will be inserted by the Parties upon the recordation of the Parcel Map] 882/015610-0065 6895841.10 a10/30/14 ATTACHMENT NO. 2 SITE MAP LUXURYBRANDED RESIDENTIAL PA 2 DEVELOPMENT LUXURY HOTEL PARKING _ i FNL17 i 1 PA -- �117 CONFERENCE AND sHAREQSERVICE FACILITY PA5 LIFESTYLE HOTEL. PORTION OF PA10A 1 u II JJJ GOLF CLUBHOUSE PA 10 A _ PA 6 `ry \ `tPOIENTIALFUTUREGOLDCOLRSB \1y LIFESTYLEBRAND£D \.�,. RESERVEJPL'BI.IC USE PARC - LS - RESIDENTIAL �r`` DEVELOPMEM' PA 11 4 '��� � PUBLIC PARK •'1 �'?�— t FRAC IICI'P1 NG PARKINGQ. VI PA g °/G f °la �a GOLF COURSE PA LUXURY HOTEL SPA ,•� i\ `-._ - .._° @ii FuluFUITNathcIIAL al.rrnuRVE 6f Pt16l.IC L PA 2 L CRY HOTEL h PA7 _ e �• � ti �. I n ' `� PROMENADE MIXED -USE VILLAGE \ I a \ ��'4---�J:I I.All AREA - ti--''d '" IL�f_.�.-��il I:llt PA 9 l` I PROMENADE nEDus 2 J� VILLAGE-AREAII '�SLYf 1(E.ilGR .»� PAS � RE96RTRESIDE\T1AL y I ii �ylo••� VILLAGE LAND USE SUMMARY 1RNSWp � 1 GOLFC011RSE (E%ISTINS;1 iP3:A 1:0 ! yy, w✓kll'- llt 2 L[7XURY HOTEL 17:0 7A0 I ill J ,.I 3 LUXURY RRANDELIRLSIDENHALDEVELOI'MENT 13,0 a (;UN FLRELY 1ENCE AND SHARED SERVICE FACIL10 5 LIF.SS"LEHOTEL 10.0 700 F IT IMTYI.E BRANDED RFSIDENTGILDEVELOPMENT lao 6c, - �! T PROMENADE MIMED 115E VILLACEAREAI 10.5 I5fl � � PAID R RESORT RESIDENTIAL VILLAGE 329 f POTEEV7"IALFUTU RE- 9 I'RCIMENADE MIXED lSSE VILIAGF.ARCAO IStl tl0' / 14A GOLFCLPHO'SEANDrOTENTIALNCA(:OLFHOLUTA 469 Z5 - f ' �� GOLF COURSE L.'$ /lr.Cll-r i RESERVL/PUBLIC 11U PUBLIC PARK i;OLP HO[.ES 1W-78 RT.O ;,.IAINI?NA1 CE �+ 17 FUBI.IC N 350 ./' L=3F. PARCELS 1: TRASLk UNAL45TATAL 6u.S "� TDTAL AVENVEM MASTER PLAN SILVERROCK RESORT LA QUINTA, CALIFORNIA 882/015610-0065 6895841.10 a10/30/14 ATTACHMENT NO. 3 SCHEDULE OF PERFORMANCE [See following document] 882/015610-0065 6895841.10 a10/30/14 SCHEDULE OF PERFORMANCE Item of Performance Start Completion* TRANSACTIONAL AGREEMENTS Execution of PSDA, TOT Sharing Agreements, and TOT Covenant Agreements N/A 10 business days following the date of approval by the La Quinta City Council Open Phase 1 Escrow and Phase 2 Escrow N/A Within 5 Business Days following Effective Date PRE -DEVELOPMENT Land & Site Planning - Prepare, submit to City for approval, and obtain City's approval of, plans for Golf Course Realignment 1 month following Effective Date 6 months following Effective Date - Master site design 1 month following Effective Date 8 months following Effective Date Planning & Entitlements - Preliminary Engineering & Mapping 1 month following Effective Date 8 months following Effective Date - Site development plans 4 months following Effective Date 12 months following Effective Date - Prepare, submit to City for approval, and obtain City's approval of, Master Site Infrastructure Improvements Design/Construction Development Drawings 8 months following Effective Date 12 months following Effective Date Conditions to Closing 882/015610-0065 6895841.10 a10/30/14 Item of Performance Start Completion* - Submit to City for approval and obtain 3 months prior to 15 Business Days City's approval of, evidence of financing anticipated Phase prior to anticipated for Phase 1 Master Site Infrastructure 1 Closing or Phase 1 Closing or Improvements or Phase 2 Master Site Phase 2 Closing Phase 2 Closing Infrastructure Improvements - All of Developer's Conditions Precedent N/A 15 Business Days to the Closing and City's Conditions prior to anticipated Precedent to the Closing have been Phase 1 Closing or satisfied, or waived by the appropriate Phase 2 Closing part CONSTRUCTION AND INSTALLATION OF MASTER SITE IMPROVEMENTS PHASE 1 Phase 1 Closing (PA 2, PA 3, PA 4, PA 7, PA 8, On or before PA 9, and portion of PA 10A for Permanent Golf Outside Date for Clubhouse, parking, and hiking, biking, and/or Phase 1 Closing walking trails Install construction fencing around Luxury Hotel 1 month following 1 month after start, site. Phase 1 Closing and prior to Date commencement of mass grading Mass grading — Mass grade Phase 1 Property to 3 months 6 months after start construct Project per SilverRock Specific Plan, following Phase 1 including earthwork balance areas Closing Date Construct Golf Course Realignment 3 months 7 months after start following Phase 1 Closing Date Street C1 - Access from public road to Planning 12 months 14 months after Area 2 and Planning Area 3, estimated 1,060 following Phase 1 start linear feet with grading, street, storm drain, Closing Date water, sewer, dry utility, and landscape improvements. Street C2 - Access from Street C1 to Luxury 12 months 14 months after Hotel site, estimated 870 linear feet with following Phase 1 start grading, street, storm drain, water, sewer, dry Closing Date utility, and landscape improvements. Street C3 - Access from Street C1 to Luxury 12 months 14 months after Hotel spa site, estimated 540 linear feet with following Phase 1 start grading, street, storm drain, water, sewer, dry Closing Date utility, and landscape improvements. 882/015610-0065 6895841.10 a10/30/14 -2- Item of Performance Start Completion* Emergency Vehicle Access (EVA) 1 (golf 3 months 7 months after start crossing) — EVA crossing through Golf Course following Phase 1 to connect Planning Area 3 to 52"d Avenue Closing Date Emergency Vehicle Access (EVA) 2 (golf 3 months 7 months after start crossing) - EVA crossing to connect Luxury following Phase 1 Hotel Planning Area 2 site with Permanent Golf Closing Date Clubhouse site in Planning Area 10A Improvement D3 — Access from public road to 12 months 14 months after perimeter of Planning Area 7, Planning Area 8, following Phase 1 start and Planning Area 9, estimated 1,000 lineal feet Closing Date with grading, street, storm drain, water, sewer, dry utility, and landscape improvements. Jefferson Project Entry Features — Construct 16 months 10 months after private development entry features at Jefferson following Phase 1 start Street and SilverRock Way Closing Date PHASE 2 Phase 2 Closing (PA 5 and PA 6) 12 months following Phase 1 Closing Date, but not later than Outside Date for Phase 2 Closing L4 Lift Station & Laterals — Remove existing 12 months 24 months after CVWD irrigation water lift station and construct following Phase 1 start new irrigation pump station; remove estimated Closing Date 1,432 linear feet of 16" RCP irrigation line, remove 1,415 linear feet of 54" PVD irrigation line, install 3,660 linear feet of 30" PVC irrigation line. Street D1 - — Access from public road to center 24 months 14 months after of Planning Area 7 and Planning Area 9, following Phase 1 start estimated 450 linear feet with grading, street, Closing Date storm drain, water, sewer, dry utility, and landscape improvements. Improvement D2 (RiverWalk Canal) — Construct 24 months 14 months after approximately 900 lineal foot water canal following Phase 1 start connecting existing golf irrigation lake at two Closing Date locations, with grading, street, storm drain, water, sewer, dry utility, and landscape improvements. 882/015610-0065 6895841.10 a10/30/14 -3- Item of Performance Start Completion* Improvement D4 (Promenade Walkway) - 24 months 14 months after Access from public road to center of Planning following Phase 1 start Area 7 and Planning Area 9, estimated 900 Closing Date linear feet with grading, street, landscape, storm drain, sewer and water improvements. CVWD Improvements - Per requirement of 12 months 48 months after Water Agreement, as may be amended: following Phase 1 start complete (i) water booster station / pressure Closing Date reducing system, (ii) payment for domestic water well and pumping plants, (iii) 2 domestic water wells and pumping plants, abandon 14" sewer force main and lift station. CONSTRUCTION OF PROJECT COMPONENTS Prepare, submit to City for approval, and obtain 6 months prior to Prior to start of City's approval of, Project Component anticipated start of construction of Design/Construction Development Drawings construction of applicable Project applicable Project Component Component Developer satisfies all conditions to develop set N/A Prior to start of forth in Section 304 of Agreement construction of applicable Project Component Luxury Hotel 1 year following 2 years after start (PA 2) Phase 1 Closing Date Luxury Branded Residential Development 18 months 7 years after start. (PA 3) following start of Project Luxury Hotel Component considered complete when 70% of units are complete. Conference and Shared Services Facility N/A 1 year after (PA 4) completion of Luxury Hotel (If phased, phases to be completed pursuant to City - approved phasing plan) 882/015610-0065 6895841.10 a10/30/14 -4- Item of Performance Start Completion* Lifestyle Hotel 3 years following 2 years after start. (PA 5) completion of Luxury Hotel Lifestyle Hotel (phased option) Subject to City Subject to City (PA 5) approval of approval of Phasing to be approved by City phasing plan phasing plan Lifestyle Branded Residential Development 18 months 7 years after start. (PA 6) following start of Project Lifestyle Hotel Component considered complete when 70% of units are com lete. Promenade Mixed -Use Village 2 years following 8 years after start. (PA 7) completion of Project Luxury Hotel. Component considered complete when 70% of units are com lete. Resort Residential Village 2 years following 8 years after start. (PA 8) completion of Project Luxury Hotel. Component considered complete when 70% of units are com lete. Permanent Golf Clubhouse N/A Concurrent with (PA 10A) the opening of the Luxury Hotel. *Completion dates or timeframes listed in this table are the absolute outside dates permissible under this Agreement. 882/015610-0065 6895841.10 a10/30/14 -5- ATTACHMENT NO. 4 FORM OF GRANT DEED [See following document] 882/015610-0065 6895841.10 a10/30/14 RECORDING REQUESTED BY, MAIL TAX STATEMENTS TO AND WHEN RECORDED MAIL TO: SilverRock Development Company, LLC C/o Meriwether Companies 11999 San Vicente Boulevard, Suite 220 Los Anqeles, California 90049 This document is exempt from payment of a recording fee pursuant to Government Code Section 27383 GRANT DEED (Phase _) For valuable consideration, receipt of which is hereby acknowledged, The CITY OF LA QUINTA, a California municipal corporation and charter city (the "City"), hereby grants to SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Developer"), the real property hereinafter referred to as the "Phase _ Property," described in Exhibit A attached hereto and incorporated herein, subject to the existing easements, restrictions and covenants of record described there. 1. Reservation of Mineral Rights. City excepts and reserves from the conveyance herein described all interest of City in oil, gas, hydrocarbon substances and minerals of every kind and character lying more than five hundred (500) feet below the surface, together with the right to drill into, through, and to use and occupy all parts of the Phase _ Property lying more than five hundred (500) feet below the surface thereof for any and all purposes incidental to the exploration for and production of oil, gas, hydrocarbon substances or minerals from said Phase _ Property or other lands, but without, however, any right to use either the surface of the Phase _ Property or any portion thereof within five hundred (500) feet of the surface for any purpose or purposes whatsoever, or to use the Phase _ Property in such a manner as to create a disturbance to the use or enjoyment of the Phase _ Property. 2. Property Conveyance in Accordance With Redevelopment Plan, Purchase, Sale, and Development Agreement. The Phase _ Property is conveyed in accordance with and subject to the Redevelopment Plan for the La Quinta Redevelopment Project Area No. 1 ("Redevelopment Plan") which was approved and adopted by Ordinance No. 43, on November 29, 1983, of the City Council of the City of La Quinta, and a Purchase, Sale, and Development Agreement entered into between City and Developer dated (the "PSDA"), a copy of which is on file with City at its offices as a public record and which is incorporated herein by reference. The PSDA generally requires Developer to construct and operate on the Phase _ Property a [Insert Project Description] (the "Phase _ Project"), and other requirements as set forth therein. Except as otherwise defined herein, all terms used herein shall have the same meaning as those used in the PSDA. 882/015610-0065 6895841.10 a10/30/14 3. Permitted Uses. Developer covenants and agrees for itself, its successors, its assigns, and every successor in interest to the Phase _ Property or any part thereof, that upon the date of this Grant Deed ("Grant Deed") and during construction through completion of development and thereafter, Developer shall devote the Phase Property to the uses specified in the Redevelopment Plan for the periods of time specified therein. All uses conducted on the Phase _ Property, including, without limitation, all activities undertaken by Developer pursuant to the PSDA, shall conform to the PSDA, the Redevelopment Plan, and all applicable provisions of the La Quinta Municipal Code. The foregoing covenants shall run with the land. 4. Restrictions on Transfer. Developer further agrees that, except as permitted or approved by City pursuant to Section 603 of the PSDA, (i) No voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under the PSDA or this Grant Deed, nor shall Developer make any total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Phase _ Property or the Phase _ Project thereon, and (ii) Developer shall retain full managerial and operational control of the Phase _ Project. The restrictions set forth in this Section 4 shall automatically terminate as to any individual residential dwelling unit that has been sold and transferred to a buyer pursuant to the terms of the PSDA. 5. Binding on Successors. All of the terms, covenants and conditions of this Grant Deed shall be binding upon Developer and the permitted successors and assigns of Developer. Whenever the term "Developer" is used in this Grant Deed, such term shall include any other successors and assigns as herein provided. 6. Covenants Regarding Nondiscrimination. Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Phase _ Property, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Phase _ Property, or any part thereof. The foregoing covenants shall run with the land. Developer agrees for itself and any successor in interest that Developer shall refrain from restricting the rental, sale, or lease of any portion of the Phase _ Property, or contracts relating to the Phase _ Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person. All such deeds, leases, or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: A. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons 882/015610-0065 6895841.10 a10/30/14 -2- claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." B. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." C. In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." The foregoing covenants against discrimination shall remain in effect in perpetuity. 7. Violations Do Not Impair Liens. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Grant Deed shall defeat or render invalid or in any way impair the lien or charge of any mortgage or deed of trust or security interest permitted by Section 603 of the PSDA. 8. Covenants Run With Land. All covenants contained in this Grant Deed shall be covenants running with the land. All of Developer's obligations hereunder, 882/015610-0065 6895841.10 a10/30/14 -3- except as otherwise provided hereunder, shall terminate and shall become null and void upon the expiration of the effectiveness of the Redevelopment Plan. Every covenant contained in this Grant Deed against discrimination contained in paragraph 6 of this Grant Deed shall remain in effect in perpetuity. 9. Covenants For Benefit of City. All covenants without regard to technical classification or designation shall be binding for the benefit of City, and such covenants shall run in favor of City for the entire period during which such covenants shall be in force and effect, without regard to whether City is or remains an owner of any land or interest therein to which such covenants relate. City, in the event of any breach of any such covenants, shall have the right to exercise all the rights and remedies and to maintain any actions at law or suits in equity or other proper proceedings to enforce the curing of such breach. The covenants contained in this Grant Deed, without regard to technical classification, shall not benefit or be enforceable by any owner of any other real property, or any person or entity having any interest in any other such realty. Date: ATTEST: City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP William S. Ihrke City Attorney Date: CITY: CITY OF LA QUINTA, a California municipal corporation and charter city City Manager DEVELOPER: SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company go Its: 882/015610-0065 6895841.10 a10/30/14 -4- STATE OF CALIFORNIA COUNTY OF RIVERSIDE On personally appeared , before me, ( insert name and title of the officer) 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 STATE OF CALIFORNIA COUNTY OF RIVERSIDE On , before me, ( insert name and title of the officer) (Seal) 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) 882/015610-0065 6895841.10 a10/30/14 -5- EXHIBIT A LEGAL DESCRIPTION [TO BE INSERTED] 882/015610-0065 6895841.10 a10/30/14 ATTACHMENT NO. 5 SCOPE OF DEVELOPMENT I. GENERAL SUMMARY This document outlines the general requirements for the improvements to be constructed on the Property. Specific details are addressed in the SilverRock Specific Plan 2006-080, as amended by Resolution No. 2006-083, which was duly adopted by the City Council on July 18, 2006 ("Specific Plan"), as conformed by a finding of Substantial Conformance on November 4, 2014, and in the construction plans that will be prepared for the development. The Property is located at the southwest intersection of Jefferson Street and Avenue 52 in the City of La Quinta, and is approximately 145 acres in size. The Specific Plan provides for the development of a commercial development project that contains all of the following: a Luxury Hotel, associated Luxury Branded Luxury Development, and related amenities, a Lifestyle Hotel, Lifestyle Branded Residential Development, and related amenities, a Conference and Shared Service Facility, a Promenade Mixed -Use Village, a Resort Residential Village, and associated amenities, renovation of the existing Ahmanson Ranch House, the Golf Course Realignment, and construction of a Permanent Golf Clubhouse. Development of the Project requires the installation and construction of Master Site Infrastructure Improvements. A depiction of the Master Site Infrastructure Improvements is attached hereto and incorporated herein as Exhibit "A". PROJECT COMPONENTS A. Arnold Palmer Classic Golf Course — Planning Area 1 Planning Area 1 consists of approximately 173 acres, which consists primarily of the existing Arnold Palmer Classic Golf Course. This Planning Area also contains the existing Ahmanson Ranch House, which sits on a 1.5-acre parcel, and the 3-acre golf course maintenance facility site located at the southern boundary of the SilverRock Resort Area adjacent to 54t" Avenue. As currently contemplated by the project, the Golf Course will be modified to allow for the development of the Luxury Hotel. This work will be performed by the Developer in concert with City and Arnold Palmer Design Group. B. Luxury Hotel - Planning Area 2 Planning Area 2 consists of approximately 17 acres planned for a 140-room (but not less than a 120-room) Luxury Hotel in an intimate setting, with a high level of service and a unique architectural theme designed to blend with natural site attributes and close proximity to the mountains. In total, the Luxury Hotel will consist of approximately 170,000 square feet of air- conditioned and exterior spaces, comprising front -and -back -of -house functions. Table 2 below contains a preliminary summary of the Project design program for the Luxury Hotel. 882/015610-0065 6895841.10 a10/30/14 TABLE 3 PLANNING AREA 2 Silver Rock Resort Specific Plan Luxury Hotel Planning Area LUXURY HOTEL PROJECT DESIGN PROGRAM Space) Total Description Interior Area Total Exterior Area Hotel Units 87,600 sf 16,700 sf Food & Beverage 4,500 sf 2,300 sf Back-of-House/Admin 13,000 sf 3,000 sf Spa & Fitness 11,000 sf 6,500 sf Recreation 1,300 sf 9,000 sf Public Spaces 4,000 sf 6,000 sf Retail 1,500 sf 0 sf 122,900 sf 43,500 sf In addition to the Luxury Branded Residential Development, the Luxury Hotel will feature a day spa & fitness center, conference, and back -of -house facilities shared with a Lifestyle Hotel planned for construction in Planning Area 5. The Luxury Hotel will be serviced by a Conference and Shared Service Facility, which houses common back -of -house functions such as housekeeping, food & beverage, reservations, and executive management offices shared with the Lifestyle Hotel described in Planning Area 5. In addition, it will offer a variety of meeting spaces to appeal to group business and conferences, with ballroom and boardroom programming. This facility is more fully described in Planning Area 4. Detailed information, including refinement of programming, site design, architecture, landscape architecture, and other details will be presented to City for approval per the Site Development Plan requirements of the Specific Plan. TABLE 4 PLANNING AREA 2 - LAND USE Silver Rock Resort Specific Plan Luxury Hotel Planning Area GENERAL PLAN/LAND USE ZONE ACRES MINIMUM UNITS/DENSITY Luxury Hotel 120 rooms/120 keys • -®i120 ..keys C. Luxury Branded Residential Development- Planning Area 3 Planning Area 3 will be developed into an enclave of exclusive for -sale single family detached residences on fee simple lots. The residences will be sold with an amenity agreement, affording owners and their guests with a host of privileges and access rights at the Luxury Hotel. 882/015610-0065 6895841.10 a10/30/14 -2- The Luxury Branded Residential Development will consist of approximately 35 Resort Residential Dwelling Units. Homes are expected to range from 2,800 — 4,500 square feet in size, and some of the homes may have lock -offs. The architecture is anticipated to be stylistically consistent with the theme of the Luxury Hotel. The product is expected to feature generous interior volumes with some appropriately massed two-story elements possible. TABLE 5 PLANNING AREA 3 - LAND USE Silver Rock Resort Specific Plan Luxury Branded Residential Development Planning Area PLAN/LANDGENERAL USE ZONEAPPROXIMATE UNITS/DENSITY CT Luxury Branded CT 14.0 35 DU SFD/2.5 DU/AC Residential Development TOTAL 14.0 35 DU SFD/2.5 DU/AC D. — Conference and Shared Service Facility Planning Area 4 consists of a Conference and Shared Service Facility and associated parking. As explained previously, this facility will be shared by the Luxury Hotel and Lifestyle Hotel. By combining services and amenities required by, and desirable to, both properties, advantageous efficiencies can be achieved that enhance the economics of operations. The Conference and Shared Service Facility will consist of one or more buildings containing ballroom, meeting space and food service areas, as well as back -of -house functions including executive and administrative offices, reservations, human resources, accounting, laundry and valet, security, receiving and purchasing, and engineering and maintenance. These functions may occur in one or a series of "pavilion -style" buildings, subject to final planning and design. The total anticipated square footage is expected to be approximately 71,000 square feet, predominantly interior air-conditioned space, but with some public and back -of -house exterior areas as well. Table 4 below contains a summary of the Project design program for the Conference and Shared Service Facility. TABLE 6 PLANNING AREA 4 Silver Rock Resort Specific Plan Conference and Shared Service Facility Building Planning Area CONFERENCE■ SHARED SERVICE BUILDING PROJECT DESIGN PROGRAM (Net Interior FACILITY Space) Description Total Interior Area Total Exterior Area Meeting/Banquet 36,375 sf 5,000 sf Food Services Areas 3,100 sf 0 sf Back -of -House 11,600 sf 3,000 sf Offices & Administrative 4,650 sf 0 sf Public Spaces 2,075 sf 5,000 sf 882/015610-0065 6895841.10 a10/30/14 -3- 57,800 sf 13,000 sf Site planning for the Conference and Shared Service Facility includes parking sufficient to accommodate functions and events at the Conference and Shared Service Facility managed by the hotel administration. . TABLE 7 PLANNING AREA 4 - LAND USE Silver Rock Resort Specific Plan Conference and Shared Service Facility Planning Area C Conference and Shared CT 12.0 Approx. 71,000 sf of T Service Facility front/back-of house services and functions TOTAL 12.0 E. Lifestyle Hotel - Planning Area 5 Planning Area 5 consists of approximately 10 acres planned for a Lifestyle Hotel. The Lifestyle Hotel will take advantage of the natural site attributes and setting within the SilverRock Resort Specific Plan. It is anticipated that the buildings will be two -and three-story design, with a single -loaded exterior access corridor. All of the rooms will have views oriented towards the adjacent Coral Reef Mountains. The Lifestyle Hotel will consist of approximately 170,000 square feet of air-conditioned and exterior space, comprising front -and -back -of -house functions. Table 8 below contains a preliminary summary of the Project design program for the Lifestyle Hotel. The Lifestyle Hotel will have an associated Lifestyle Branded Residential Development consisting of approximately 60 single family attached residences in Planning Area 6, more fully described below. As mentioned previously, the Lifestyle Hotel will share some common facilities with the Luxury Hotel described in Planning Area 2. Shared facilities include the Conference and Shared Service Facility, which has been described in Planning Area 4. TABLE 8 PLANNING AREA 5 Silver Rock Resort Specific Plan Lifestyle Hotel Planning Area 882/015610-0065 6895841.10 a10/30/14 -4- Food & Beverage/Ent 12,200 sf 3,900 sf Back-of-House/Admin 16,700 sf 2,800 sf Fitness 4,800 sf 0 sf Recreation 200 sf 10,000 sf Public Spaces 4,800 sf 5,000 sf Retail 1,300 sf 0 sf 126,000 sf 43,700 sf TABLE 9 PLANNING AREA 5 - LAND USE Silver Rock Resort Specific Plan Lifestyle Hotel Planning Area GENERAL PLAN/LAND USE ZONE ACRES 10.0 MINIMUM UNITS/DENSITY A minimum number of hotel CT Lifestyle Hotel CT guest rooms such that when combined with the hotel guest rooms in the Luxury Hotel, the combined total is not less than 340 hotel guest rooms TOTAL 10.0 A minimum number of hotel guest rooms such that when combined with the hotel guest rooms in the Luxury Hotel, the combined total is not less than 340 hotel guest rooms F. Lifestyle Branded Residential Development - Planning Area 6 This Planning Area contains the Lifestyle Branded Residential Development associated with the Lifestyle Hotel described in Planning Area 5. Approximately 60 Resort Residential Dwelling Units may be developed on 10 acres. Homes are expected to range from 2,100 — 3,500 square feet in size. Each Resort Residential Dwelling Unit will be designed with a lock -off unit, adding a potential total key capacity of approximately 120 keys to the Lifestyle Hotel. Architecture is expected to complement the style of the Lifestyle Hotel. The product is envisioned to be expressed similarly as well, in two -and -three-story volumes. Programming will emphasize active lifestyles, and embrace the site ambiance of the SilverRock Specific Plan with its other amenities and strong view orientation to the Coral Reef Mountains. TABLE 10 PLANNING AREA 6 - LAND USE Silver Rock Resort Specific Plan Lifestyle Branded Residential Development Planning Area 882/015610-0065 6895841.10 a10/30/14 -5- CT Lifestyle Branded CT 10.0 60 DU SFA/6.0 DU/AC Residential Development 60 lock -offs 120 keys) TOTAL 10.0 60 DU SFA/6.0 DU/AC G. Promenade Mixed -Use Village — Planning Areas 7 & 9 These Planning Areas are collectively referred to as the Promenade MU Village, featuring residential, mixed -use, stand-alone, and pop-up retail/commercial uses, all as described in Table 2 below. TABLE 2 PLANNING AREAS 7 & 9 - LAND USE Silver Rock Resort Specific Plan Promenade MU Village Areas I & II GENERAL USE Pla ning Area 7 — Promenade MU Villa S e Area I C River Walk Lofts CT Avg 1,000 SF MFR units; studio- 2 BR T mix C Bungalows CT Avg 1,500 SF SFD units; 1-2 BR mix, T C Commercial/Retail CT Mixed -Use Comm'l: 16,000 SF T Stand -Alone Comm'l: 6,500 SF Pop-up Comm'l: 2,500 SF 10.5 150,000 SF livable res./up to 25,000 SF Comm'[ Planning Area 9 — Promenade MU Villa e Area 11 C Public & Private Park CT 15.0 Private & Public park & recreation T Residential improvements, including water play Commercial/Retail facilities and ancillary entertainment, dining, and retail; Community gardens/heritage farm/agri- tourism; Branded/non-branded Glamping product; Branded/non-branded residential product; Mixed -use, Stand-alone, Pop-up Comm'l 15.0 75,000 SF livable res./15,000 SF comm'l TOTAL 25.5 225,000 SF livable res./up to 40,000 SF comm'I H. Resort Residential Village — Planning Area 8 882/015610-0065 6895841.10 a10/30/14 -6- Planning Area 8 is planned as a Resort Residential Village featuring 160 residences on 32.5 acres located in the south part of the site. Homes are expected to range from 2,200 — 4,000 SF in size, and may be developed in a combination of single family detached and attached product of varying densities, each with access to a central amenity and community management facility. I. Permanent Golf Clubhouse— Planning Area 10 Planning Area 10 consists of approximately 131.0 acres, divided into two sub -areas, Planning Areas 10A and 1013. The uses within Planning Areas 10A and 10B consist of the Golf Course, the location for the Permanent Golf Clubhouse, and a reservation of land area for possible future golf improvements, as more fully described in Table 3 below. TABLE 3 PLANNING AREA 10- LAND USE Silver Rock Resort Specific Plan Golf Course & Public Use Area GENERAL Planning Area 10a G Permanent Golf GC 6.0 Pro Shop/Starter C Clubhouse (Developer Bar/Grill owned and leased to City) Kitchen & Prep (breakfast/lunch) Changing Room & Restrooms Administrative/Office Foyer/Circ/Storage/Common Area Total Conditioned Space: 5,000 - 5,500 SF Cart Storage Building Outdoor Patio Seating Event Lawn Twenty five 800 — 1,000 SF Golf Cabins Total Unconditioned Space: 11,500 SF G Driving Range (city GC 12.5 - C owned) G Public Use Area (city GC 46 Potential future golf course/land reserve C owned) area Planning Area 10b G Public Use Area (city GC 86.5 Potential future golf course/land reserve C owned) area TOTAL 151.0 25 Golf Cabins/16,500 SF (clubhouse only) 1 'Final clubhouse space allocations subject to adjustment during site development permit process. All space references are approximate. III. DEVELOPMENT CONCEPT 882/015610-0065 6895841.10 a10/30/14 -7- The Property shall be improved by the Developer in accordance with the provisions of this Agreement, the Specific Plan, and all applicable codes, ordinances, and statutes including requirements and procedures set forth in the La Quinta Municipal Code adopted in conjunction with or subsequent to execution of this Agreement. IV. ON -SITE DEVELOPMENT AND IMPROVEMENTS Developer shall prepare such plans, reports, and studies, and obtain such permits and approvals as required, including, but not limited to, grading plans for construction of the Project. Plans shall be prepared by a licensed civil engineer in good standing and subject to the approval of the Director of Public Works. Developer shall grant and permit all necessary and appropriate utility easements and rights for the development of the Project, including but not limited to sanitary sewers, storm drains, water, electrical power, telecommunications, natural gas, cable television, etc. V. LANDSCAPING Developer shall be responsible to landscape the Project in accordance with the Specific Plan and landscape plans approved by the City. VI. ON -SITE AND OFF -SITE INFRASTRUCTURE IMPROVEMENTS Developer shall be responsible for the construction of (i) Master Site Infrastructure Improvements per this Agreement, and (ii), all on -site and off -site infrastructure improvements that may be identified per the Specific Plan, including, but not limited to, all required internal utilities. All such construction shall be done to City standards. Additionally, Developer shall be responsible for obtaining and delivering to the City such bonds or other improvement security as City may require in accordance with applicable law, including payment and performance bonds per the terms of this Agreement. VII. DEVELOPMENT STANDARDS All development on the Property shall conform to the development standards set forth in the Specific Plan, and other applicable City codes and development standards per this Agreement. 882/015610-0065 6895841.10 a10/30/14 -$- pp I EXHIBIT "A" DEPICTION OF MASTER SITE INFRASTRUCTURE IMPROVEMENTS Th � � rW �-d�6i I•/E?e 9 rF•'+1F1"Y ppM�FRY B1� �P�:F��.- 14 o •4 GtNi90 SNFa ri°�CAtlMiE1F� LG 6 Ux4TSY� ^FFF9• IaP I,IPwmg W—PeD W,� lkm- 1Rn s ♦ix+ro-aF�./,wxea 12¢g'n:tJVna iR5 8 sneFv �s�cr+rw �►ulee _ �r.R Wnl4G u`d r.14�t 4 is eSl"{MsMit^�44HR1@kTjFKS CiF. I�G �A rFri9E t N9++d:-at Lusi ip�'+ ;''I ;pa Apo- s sow �.rt � esa IE r -' .w•. .xieex3b ILA 5wrro=ns. s�sa i'h'SPVR' i'951JF}a.'{H� r STREET C1 C2 C3 RipTf'�R' EVA7 EVA2 D1 D2 Lh C�l}1NTA , G nc i Fp 7 hi H 114 =OF�n prvfsS°f9EYf{i• RF'V• k�'f1q�L;5R.•'"[Nfd.^L•..FCLLY i• M&F141SY{i�F. tA!'4'RkISS STREET EXHIBIT {'SIV6l,E 16VRA sTJL^X�G 14R'•?: � . �7 f D3In mb- b AslCtre/wain ', l7Rtt+t®V WIDTH 36' 20' 20' 20' 20' 36' 36' • 36' 20' 34 x•}gC�.4R{ Aa'.'F 882/015610-0065 6895841.10 a10/30/14 f�6 a POC l+ �y--t( CSr-�Y r�F2?6'4C.L.f Off•_ ` 1 It / "�• � •. � i+ ra-8.'f�"r"�"�t 1CL".�s ,r_ ^r. .. ..�?+ ,C+-' J 61FF�sYr..e txaFc. Phre a� :>!, -1 - ±'swop; it +� �-..%a:.`-'� �� •tee" `;mot P.�.� � �rxwV LE 1 [mil f.LW�'s C�•^f,+e+6+ k13o �rh1Ss 1�klbPMf�!C-PdPG_�T`e Y � �xv�o su@d•�.Sf GNTf6NC�t b I.IIB'aTl@ 1'N1&'6if Cp+�:1Uk. �G.L 17d1F�".FI I^M�2�'J`AV 4M�.udH' s'S �i B M5�0` xEEPBN'K-V81J48 - C�Ci ry,v�[crp,t, pa.a � .;,. YtAFHf6ib4NNCM1.'S��C%R w R R� 1 1!�« •ar LU44 i N*.� .-1 '1da ftw t j' ' b lb min 'S�G:hI- iG4a �pE, S25G � i/ryyTI h { lk Lh If,4,'I e 4 +U F'fi7✓ CfsNitE:Lr - e r'.' . / .. e �C y 51 LV�� �'OG4C_ 1�r�o'RT Lh QQU-ITA, GAIUtFflP.ii�R ! pm'k +n9•rS14.EHi••'r• NTu - sm . 4i fahZra!>:• x'nw^T S;Ri&Y :. mwE 00H5w, GaK'PANtu-' WATER LINE EXHIBIT ph JM. 'M+eViki4� - �%reeerww.L F%4 PPRi54�+ ;, 44 70BC'Mf eV e- ,• 882/015610-0065 6895841.10 a10/30/14 -2- —RL2 Mo Wxm V.rg 4 sj—,lS6 wev9wLft- [A In 4 Owe" Mbj'Z"tC4-M'VMKCV 9.1; 6. wmsr�u f4m wo w6gyLe W4&VD WAOMIAL, Mm MA u50-j-� loq IC Tiv =7Z q WOE" d.0 wR Muc I i�v 6" C" 4 epl&� -I ift wa P" = ftw ftj�', bAb min ts&. Lh OQU-IT-4- , GAI U t FO - Nyv . el^ l lk"Ne- SEWER LINE EXHIBIT FA Pgr, CZP4M-- Fr z —XVRT—,ko fc,� rl& 4- _--AT. tlre4 B lra.vp"Ww FA a 44 Ag Ft-64r- 14 TftkMf Ve- 882/015610-0065 6895841.10 a10/30/14 FA 3 � ik'£i'OEtViI'AL FRZ ,fi �CF �1 s�hiCiciHS Qh 1 fa x.P C47U&5E RANQ 059 "tAk.f'Y a --Awx" _ PmN.c_157_Ti _ IyxJRY :4MaiU44srrn 42 LV L, .•._ 4 '.d-7Po e@W'.ei5P GN.SR6�C4P $-D o- urrc�'Yt>c u ID xm e>µ, — Reiff iuL. rac PFotlh�� f 1w%9U asO w�-J.w4P b5 Fct L.L• cE A% `t1AysFN17�4MNEh4EIA9•Ta0R tic IOa PAA`d� S aRP �"� Vr'I! II YAM Poo [d SIG LSH�I�I"F, pRM.�'i1�PE'P5 t iA'K:SI& _ 94.E §4�fashk iGd:a bN1�,wair�«Y 6 pem, Comm-- tpg ` JIIA.{+�F•. L+ �iV4ii�A, GA4iFGP.Mtf :.O[�n. •n{:Sil`.FH{'�• M1YL+ 6+�-nF1 �lN.a:e:. 4M11N. T,.��CLG� n 1+{ER�W6iH�R. LA�PANIB`3 IRRIGATION LINE EXHIBIT PROTECT EX. IRRIGATION LINES FA.g -tlrew1+� mez, NEW IRRIGATION LINE Ca.o&tl .F't3 ��xas�tTv�� 882/015610-0065 6895841.10 a10/30/14 -4- ATTACHMENT NO. 6 PRELIMINARY BUDGET MASTER SITE INFRASTRUCTURE IMPROVEMENTS $42,000,000 Mass grading, infrastructure and utilities LUXURY HOTEL $60,000,000 Planned for 140 roams & spa LUXURY BRANDED RESIDENTIAL DEVELOPMENT $40,000,000 Approximately 35 Units (3, 000-4, 500 sq) CONFERENCE AND SHARED SERVICE FACILITY $25,000,000 �l 71, 000 sq' LIFESTYLE HOTEL $54,000,000 Total combined rooms (with Luxury Hotel) = 340 LIFESTYLE BRANDED RESIDENTIAL DEVELOPMENT $48,000,000 Approximately 60 units (, ,100-3, b00 sq) PROMENADE MIXED -USE VILLAGE $33,000,000 120 units (1, 000-2, 000 sq) & 4Q 000 sq' retail RESORT RESIDENTIAL VILLAGE $56,000,000 160 units (2, 00-4,000 sq) 'TOTAL BUDGET 1 $361,500,000 1 882/015610-0065 6895841.10 a10/30/14 ATTACHMENT NO. 7 FORM OF OPTION AGREEMENT [See following document] 882/015610-0065 6949630.3 a10/30/14 FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attn: City Manager Space Above This Line for Recorder's Use (Exempt from Recording Fee per Gov't Code § 6103 and 27383) OPTION AGREEMENT THIS OPTION AGREEMENT ("Option Agreement") is made this day of (the "Effective Date"), by and between SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Developer"), and the CITY OF LA QUINTA, a California municipal corporation and charter city ("City"). City and Developer are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS A. Developer has entered into a Purchase, Sale, and Development Agreement dated , 2014 (the "PSDA"), pursuant to which City conveyed to Developer that certain 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 (the "[Phase 1 or Phase 2] Property"). The [Phase 1 or Phase 2] Property is legally described in Exhibit 'A" which is attached hereto and incorporated herein by this reference. B. Pursuant to the PSDA, Developer has agreed to construct on the [Phase 1 or Phase 2] Property and on adjacent real property (the "[Phase 1 or Phase 2] Property" and, collectively with the [Phase 1 or Phase 2] Property, the "Property") a commercial development that consists of a luxury resort hotel and spa and associated branded luxury residential units, a lifestyle hotel and associated lifestyle branded residential units, a permanent clubhouse for the SilverRock Resort's Arnold Palmer Classic Course, a mixed use village, a resort residential village, and associated amenities (collectively, the "Project"). C. The Project shall be constructed on the Property in accordance with all of the requirements set forth in the PSDA. D. As a condition to City's conveyance of the [Phase 1 or Phase 21 Property to Developer, Developer was required to grant to City (i) an option to repurchase the [Phase 1 or Phase 21 Property, or certain portions thereof, from Developer if Developer (a) fails to commence, continuously proceed with, or complete construction of the 882/015610-0065 6949630.3 a10/30/14 -3- [Phase 1 or Phase 21 Master Site Infrastructure Improvements pursuant to the PSDA within certain specified time frames, (b) fails to commence, continuously proceed with, or complete construction of a Project Component pursuant to the PSDA within certain specified time frames, (c) transfers the [Phase 1 or Phase 2] Property, or any portion thereof, in violation of the terms of the PSDA; and (ii) a right of first offer to purchase the [Phase 1 or Phase 21 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, (111) the default which gave rise to City's option has not been cured, and (IV) Developer has determined to sell or otherwise transfer the [Phase 1 or Phase 21 Property, all as further described herein. E. Unless otherwise expressly defined in this Option Agreement, capitalized terms used in this Option Agreement, including in the foregoing Recitals, shall have the meanings ascribed thereto in the PSDA. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and incorporating the above Recitals and all of the terms and conditions contained in the PSDA, Developer hereby grants to City the following repurchase options: 1. Option I - Failure to Commence Construction of [Phase 1 or Phase 2] Master Site Infrastructure Improvements Subject to Section 7(f) hereof, Developer hereby grants to City an exclusive option to repurchase all, but not less than all, of the [Phase 1 or Phase 2] Property ("Option I"), if Developer fails to commence construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements within ninety (90) days after the Effective Date. For the purposes of this Section 1, the term "commence construction" shall mean Developer's commencement of mass grading for the entire [Phase 1 or Phase 21 Property. In the event of Developer's failure to commence construction of the [Phase 1 or Phase 2] 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 City shall exercise Option I by giving written notice to Developer ("City's Notice of Option 1 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, but shall not constitute a waiver by City of Developer's breach of its obligation to timely commence construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements or of any remedies City may have under the terms of the PSDA or under any other agreement for Developer's failure to 882/015610-0065 6949630.3 a10/30/14 -4- timely commence construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements. (b) Repurchase Price - Option I City's repurchase price for the [Phase 1 or Phase 2] Property, or portion thereof ("Option I Repurchase Price"), shall be the sum of (i) One Dollar ($1.00) 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements, and/or (b) the Project Components comprising the Project. 2. Option II - Failure to Continuously Proceed With Construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements or to Complete Construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements Developer hereby grants to City an exclusive option ("Option II") to repurchase those portions of the [Phase 1 or Phase 2] 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 the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, Developer fails to continuously proceed with construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, or to complete the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, as evidenced by acceptance of such [Phase 1 or Phase 2] Master Site Infrastructure Improvements by the La Quinta City Council, within the applicable time period(s) set forth in the Master Site Infrastructure Improvements Phasing Plan (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. In the event of Developer's failure to continuously proceed with construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, or to complete construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements by the applicable Master Site Infrastructure Improvements Phase Completion Deadline, and such failure is not cured within the cure period provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not obligated to exercise, the foregoing option for a period of sixty (60) days following the completion of the "Master Site Infrastructure Improvements Cost Audit" (as that term is defined in Section 2(b) below) and after expiration of such cure period ("Option II Period"). Notwithstanding anything to the contrary in this Section 2, Option II shall not apply to, and the Option II Property shall not include, those portions of the [Phase 1 or Phase 2] Property for which construction of the Project Component designated pursuant to the PSDA to be constructed thereon has commenced. Such portions are addressed in Section 4 below. (a) Exercise of Option 882/015610-0065 6949630.3 a10/30/14 -5- City shall exercise Option II by giving written notice to Developer, 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 [Phase 1 or Phase 21 Master Site Infrastructure Improvements that gave rise to Option II or of Developer's failure to complete construction of the [Phase 1 or Phase 2] 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements or to complete construction of the [Phase 1 or Phase 2] 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 [Phase 1 or Phase 21 Master Site Infrastructure Improvements or to complete construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements by the Master Site Infrastructure Improvements Phase Completion Deadline (as applicable). (b) Determination of 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 Phase II Master Site Infrastructure Improvements 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements designated pursuant to the PSDA to be constructed on the Option II Property, and/or (b) the Project Components designated pursuant to the PSDA to be constructed on the Option II Property. For purposes of this Section 2, the term "Developer's Phase II Master Site Infrastructure Improvements Construction Costs" shall mean the construction costs actually incurred by Developer for construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements on the Option II Property from the Effective Date to the date City exercises this Option 11, as determined by an independent audit (the "Phase II Master Site Infrastructure Improvements Cost Audit"), performed by [insert before the Phase 1 Closing the name of a third party, independent auditor who shall be selected by City and be a partner at a nationally recognized firm of accountants with experience in auditing large-scale, mixed use construction projects (the "Auditor"), which costs shall consist only of: (1) the amount(s) paid by Developer to the contractor or contractors performing the construction, (II) reasonable inspection, supervision, and testing costs paid by Developer to independent third party engineers, architects, or consultants in conjunction with said construction, and (111) any amounts paid by Developer to material suppliers and equipment suppliers in connection with the construction (but, subject to the immediately preceding paragraph, not including any so-called "soft costs" incurred in the planning, environmental review, or design of the [Phase 1 or Phase 2] Master Site Infrastructure 882/015610-0065 6949630.3 a10/30/14 -6- Improvements constructed on the Option II Property, or any costs, fees, charges, or profits allocated to Developer's own internal administrative, payroll, or overhead expenses or to any person or entity affiliated with Developer). Developer shall promptly provide City and the Auditor with all records and documentation necessary for the Auditor to perform the Phase II Master Site Infrastructure Improvements Cost Audit. In the event that there are any outstanding mortgages or deeds of trust that have been approved by City pursuant to Section 309.1 of the PSDA (any of the foregoing, a "Valid Lien") and that are recorded against the Option II Property at the time that Option II is exercised, Developer and City agree that the Option II Repurchase Price shall be paid to the lender on any such Valid Lien (any such lender with a Valid Lien, a "Lender"), up to the then outstanding balance due under same including, without limitation, the outstanding principal balance, all accrued and unpaid interest, and any prepayment fees and costs (collectively, the "Outstanding Balance"). Any portion of the Option II Repurchase Price not so needed to extinguish a Valid Lien shall be paid to Developer. 3. Option III - Failure to Commence Construction of one or more Project Components. Developer hereby grants to City an exclusive option ("Option III") to repurchase all, but not less than all, of those portions of the [Phase 1 or Phase 2] 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 within ninety (90) days after City's issuance of a building permit for such Project Component(s). For purposes of this Section 3, the term "commence construction" shall mean Developer's commencement of precise grading for all of the real property underlying such Project Component(s). In the event of Developer's failure to commence construction of any of the Project Components designated pursuant to the PSDA to be constructed on a portion of the Option III Property within the time period described above, and such failure is not cured within the cure period provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not obligated to exercise, the foregoing option for a period of sixty (60) days following the expiration of such cure period (the "Option III Period"). Notwithstanding anything to the contrary in this Section 3, Option III shall not apply to, and the Option III Property shall not include, those portions of the [Phase 1 or Phase 21 Property for which construction of the Project Component designated pursuant to the PSDA to be constructed thereon has commenced. Such portions are addressed in Section 4 below. (a) Exercise of Option City shall exercise Option III by giving written notice to Developer, 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 882/015610-0065 6949630.3 a10/30/14 -7- 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) Determination of 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 Phase III Master Site Infrastructure Improvements 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements designated pursuant to the PSDA to be constructed on the Option III Property, and/or (b) the Project Components designated pursuant to the PSDA to be constructed on the Option III Property. For purposes of this Section 3, the term "Developer's Phase III Master Site Infrastructure Improvements Construction Costs" shall mean the construction costs actually incurred by Developer for construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements on the Option III Property from the Effective Date to the date City exercises this Option III, as determined by an independent audit (the "Phase III Master Site Infrastructure Improvements Cost Audit"), performed by the Auditor, which costs shall consist only of (1) the amount(s) paid by Developer to the contractor or contractors performing the construction, (II) reasonable inspection, supervision, and testing costs paid by Developer to independent third party engineers, architects, or consultants in conjunction with said construction, and (III) any amounts paid by Developer to material suppliers and equipment suppliers in connection with the construction (but, subject to the immediately preceding paragraph, not including any so- called "soft costs" incurred in the planning, environmental review, or design of the [Phase 1 or Phase 2] 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 Phase III Master Site Infrastructure Improvements 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. 882/015610-0065 6949630.3 a10/30/14 -8- 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 those portions of the [Phase 1 or Phase 2] 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 twenty-four (24) months after Developer commences construction of said Project Component(s) as evidenced by City's issuance of a certificate of occupancy for the 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, [Phase 1 only: (i) with respect to each of the Resort Residential Village and the Promenade Mixed -Use Village, City shall not be entitled to exercise Option IV, and the Option IV Property shall not include the real property to be developed with either of said Project Components, unless Developer fails to complete construction of at least seventy percent (70%) of the Resort Residential Dwelling Units to be constructed within such Project Components, and in addition, with respect to the Promenade Mixed -Use Village, seventy percent (70%) of the commercial space to be constructed therein, within ten (10) years following the issuance of the first building permit for a Resort Residential Dwelling Unit within the Resort Residential Village or Promenade Mixed -Use Village, as applicable; (ii) 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 ten (10) years following the issuance of the first building permit for the Luxury Hotel] [Phase 2 only: 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 ten (10) years following the issuance of the first building permit for the Lifestyle Hotel]. In the event of Developer's failure to continuously proceed with construction of any Project Component(s) designated pursuant to the PSDA to be constructed on a portion of the Option IV Property, or, subject to the last sentence of the immediately preceding paragraph, Developer's failure to complete construction of any of said Project Component(s) by the applicable Option IV Project Component(s) Completion Deadline, and such failure is not cured within the cure period provided for under Sections 7(b) and 7(c) below, then City shall be entitled to exercise, but is not obligated to exercise, the 882/015610-0065 6949630.3 a10/30/14 -9- 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, (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 [Phase 1 only: 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] [Phase 2 only: 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 City shall exercise Option IV by giving written notice to Developer, 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 882/015610-0065 6949630.3 a10/30/14 -1 0- 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements designated pursuant to the PSDA to be constructed on the Option IV City Acquisition Property, and/or (b) the Project Components designated pursuant to the PSDA to be constructed on the Option IV City Acquisition Property. For purposes of this Section 4, the term "Developer's Option IV Project Component(s) Construction Costs" shall mean the construction costs actually incurred by Developer for construction of (1) the portion of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements constructed on the Option IV City Acquisition Property from the Effective Date to the date City exercises this Option IV, and (11) the portion of the Project Component(s) designated pursuant to the PSDA to be constructed on the Option IV City Acquisition Property from the Effective Date to the date City exercises this Option IV, 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements constructed on the Option IV Property or the Project Component(s) designated pursuant to the PSDA to be constructed on the Option IV Property, or any costs, fees, charges, or profits allocated to Developer's own internal administrative, payroll, or overhead expenses or to any person or entity affiliated with Developer). Developer shall promptly provide City and the Auditor with all records and documentation necessary for the Auditor to perform the Option IV Project Component(s) Cost Audit. In the event that there are any Valid Liens recorded against the Option IV City Acquisition Property at the time that Option IV is exercised, Developer and City agree that the Option IV Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then outstanding balance due under same. Any portion of the Option IV Repurchase Price not so needed to extinguish a Valid Lien shall be paid to Developer. 5. Option V - Transfer of the [Phase 1 or Phase 2] Property, or Portion Thereof, Prior to Completion of Project Developer hereby grants to City an exclusive option ("Option W) to repurchase all, but not less than all, of the [Phase 1 or Phase 2] Property that remains subject to this Option Agreement as of the date that Option V is exercised (the "Option V Property"), if, prior to the time Developer completes the Project, Developer transfers or suffers an involuntary transfer of the [Phase 1 or Phase 2] Property or portion thereof in violation of the terms of the PSDA ("Option V"). 882/015610-0065 6949630.3 a10/30/14 -11 - In the event of Developer's transfer of the [Phase 1 or Phase 2] Property or portion thereof in violation of the PSDA (an "Unauthorized Transfer"), City shall be entitled to exercise, but is not obligated to exercise, the foregoing option for sixty (60) days following the later of (i) the date of the Unauthorized Transfer that gives rise to City's option under this Section 5, or (ii) City's discovery of the Unauthorized Transfer that gives rise to Option V ("Option IV Period"). Notwithstanding anything to the contrary in this Section 5, (a) Option V shall not apply to, and the Option V Property shall not include, those portions of the [Phase 1 or Phase 2] 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 [Phase 1 only: Luxury Hotel, City shall be obligated to purchase the Luxury Branded Residential Development if the Luxury Branded Residential Development remains subject to this Option Agreement at the time of City's exercise of Option V, and if City exercises Option V to purchase the Luxury Branded Residential Development, City shall be obligated to purchase the Luxury Hotel, if the Luxury Hotel remains subject to this Option Agreement at the time of City's exercise of Option V] [Phase 2 only: 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 City shall exercise Option V by giving written notice to Developer ("City's Notice of Option IV Exercise"), in accordance with Section 8 of this Option Agreement, prior to the expiration of the Option V Period, which notice shall set forth with specificity the portion of the [Phase 1 or Phase 2] Property City is authorized and desires and/or is obligated to acquire (the "Option V City Acquisition Property"). Failure of City to exercise Option V shall constitute a waiver by City of City's right to exercise Option V only with respect to the specific Unauthorized Transfer that gave rise to Option V, but shall not constitute a waiver by City of Developer's breach of the transfer provisions in the PSDA or pursuant to this Option Agreement, or of any remedies City may have under the terms of the PSDA or under any other agreement for Developer's transfer or sufferance of an involuntary transfer of the [Phase 1 or Phase 21 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements to be constructed 882/015610-0065 6949630.3 a10/30/14 -1 2- on the Option V City Acquisition Property at the time City exercises Option V, City's Option I Price shall be the sum of (a) One Dollar ($1.00) and (b) the cost of any Plans City elects to purchase pursuant to Section 7(I) below with respect to all or any portion of (1) the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, and/or (II) the Project Components comprising the Project. U) In the event Developer has commenced construction of the [Phase 1 or Phase 2] 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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements, and/or the Project Components comprising the Project; and (2) if City is authorized hereunder and/or 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, or Option III, as applicable depending upon the status of construction upon such portion of the Option V Property as of the date that Option V is exercised by City. In the event that there are any Valid Liens recorded against the Option V City Acquisition Property at the time that Option V is exercised, Developer and City agree that the Option V Repurchase Price shall be paid to the Lender on any such Valid Lien, up to the then Outstanding Balance due under same. Any portion of the Option V Repurchase Price not so needed to extinguish a Valid Lien shall be paid to Developer. 6. City's Right of First Offer Developer hereby grants to City a right of first offer ("City's Right of First Offer") to purchase all, but not less than all, of the [Phase 1 or Phase 2] Property, that remains 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 11, Option III, Option IV, or Option V and has failed to exercise or has elected not to exercise Option I, Option II, Option III, Option IV, or Option V (as applicable) in accordance with the terms of this Option Agreement and Developer's default that gave rise to Option I, Option II, Option III, Option IV, or Option V (as applicable) has not been cured, and (ii) Developer has determined to sell or otherwise transfer the [Phase 1 or Phase 2] Property or portion thereof. Notwithstanding anything to the contrary in this Section 6, (a) the Right of First Offer Property shall not include any portion of the [Phase 1 or Phase 2] 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) 882/015610-0065 6949630.3 a10/30/14 -1 3- [Phase 1 only: 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 [Phase 2 only: 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 Agreement by City to Developer if such portion of the Right of First Offer City Acquisition Property would have been purchased by City pursuant to Option I, Option II, or Option III, as applicable depending upon the status of construction upon such portion of the Right of First Offer City Acquisition Property as of the date that the Right of First Offer is exercised by City. (b) City's Failure to Exercise City's failure to deliver to Developer City's Election to Exercise within such sixty (60) day period shall be deemed City's election not to exercise City's Right of First Offer and, except as provided below, City's Right of First Offer with respect to the Right of First Offer Property shall then terminate and City shall have no further right of first offer with respect to the Right of First Offer Property. If City elects not to exercise (or is deemed to have elected not to exercise) City's Right of First Offer then Developer may sell the Right of First Offer Property to a third party purchaser; provided, however, that in the event Developer determines to sell the Right of First Offer Property at a price that is less than the price set forth in Developer's Sale Notice, Developer shall provide City with a written notice of Developer's intent to sell the Right of First Offer Property, with Developer's new proposed sale price for the same ("Developer's Second Sale Notice"), and City's Right of First Offer shall again apply with respect to the Right of First 882/015610-0065 6949630.3 a10/30/14 -1 4- Offer Property, in accordance with the process outlined in subparagraph (a) above and this subparagraph (b). (c) Transfer Restrictions of PSDA Notwithstanding the foregoing, nothing herein is intended to or shall have the effect of waiving the transfer restrictions set forth in the PSDA, 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 II, Option III, Option IV, Option V, and City's Right of First Offer: (a) Successors and Assigns. Option I, Option II, Option III, Option IV, Option V, and City's Right of First Offer created hereby shall be irrevocable by Developer and shall be binding upon the successors and assigns of Developer and on the [Phase 1 or Phase 2] Property. (b) Developer's Right to Cure Certain Defaults. Notwithstanding anything herein to the contrary, but subject to the immediately following sentence, 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. If the Option Triggering Event relates to the exercise of Option III or Option IV with respect to construction of the [Luxury Hotel or Lifestyle Hotel], then the aforementioned cure periods provided to Developer under this paragraph shall be one hundred twenty (120) days. (c) Notice of 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, 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, 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 882/015610-0065 6949630.3 a10/30/14 -1 5- 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. Notwithstanding any covenant, term, or provision in this Section 7 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. (e) Termination of Option Agreement. 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 shall execute and record a termination of this Option Agreement with respect to said real property within fifteen (15) business days after City's issuance of a Release of Construction Covenants for the Project Component. City shall, at or prior to the close of escrow for the sale of each Residential Dwelling Unit at the Project to a third party buyer, cause this Option Agreement to be terminated with respect to such Residential Dwelling Unit. Within ten (10) days following City's receipt of written notice from Developer of a pending escrow for the sale of any such Residential Dwelling Unit, City shall (i) execute and have notarized a Quitclaim Deed and/or such other document(s) required by the applicable escrow holder to evidence the termination of this Option Agreement with respect to the Residential Dwelling Unit being sold, and (ii) deposit the original of such executed and notarized document(s) into such escrow. (0 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 702 of the PSDA, such that the time by which Developer is required thereunder to commence construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, complete construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, commence construction of one or more Project Components designated pursuant to the PSDA to be constructed on a portion of the Property, or complete construction of one or more Project Components designated pursuant to the PSDA to be constructed on a portion of the Property, is extended, such extensions shall automatically apply hereto to (as applicable) extend the time by which Developer is required to commence construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, complete construction of the [Phase 1 or Phase 2] Master Site Infrastructure Improvements, commence construction of one or more Project Components designated pursuant to the PSDA to be constructed on a portion of the Property, or complete construction of one or more Project Components designated pursuant to the PSDA to be constructed on a portion of the Property, by the same time as extended under the PSDA. (g) Subordination. City and Developer shall enter into with the Lender a subordination or similar agreement that provides for all of the following: (i) the Lender 882/015610-0065 6949630.3 a10/30/14 -1 6- 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 notify City, in writing, of the Lender's intention to record a notice of default (a "Notice of Default") in the Official Records of the County of Riverside, State of California (the "Official Records") not less than two (2) weeks prior to any such recordation; (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, (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 records a Notice of Default, and (vi) the Lender's agreement to allow City to extend the six (6) month period referenced in clause (v) for at least six (6) months by paying to the Lender the regular monthly loan payments due during such extension period. The foregoing provisions in clauses (i)-(v), and any other additional terms and conditions that City, Developer, and Lender may deem necessary or appropriate, shall be in any subordination or other agreement as may be requested or required by either the Lender or Developer, which agreement would result in this Option Agreement having lower priority from any other instrument or encumbrance (including but not limited to a mortgage, deed of trust, regulatory agreement, temporary or permanent easement, reciprocal servitude, and any covenants, codes, and restrictions or restrictive use covenant) that is executed on behalf of and for the benefit of either the Lender or Developer, or both, and to be recorded in the Official Records. (h) City's Investigation of [Phase 1 or Phase 21 Property. City shall have forty-five (45) days after the occurrence of an event that triggers City's ability to exercise any of Option I, Option II, Option III, Option IV, Option V, or City's Right of First Offer, to enter upon the [Phase 1 or Phase 2] Property (or applicable portion thereof) to conduct any tests, inspections, investigations, or studies of the condition of the [Phase 1 or Phase 21 Property (or applicable portion thereof). Developer shall permit City access to the [Phase 1 or Phase 2] Property (or applicable portion thereof) for such purposes. City's obligation to close "Escrow" (as defined below) shall be subject to City's approval of any environmental and other site testing conducted by City in City's discretion. City shall indemnify, defend, and hold harmless Developer and its officers, directors, shareholders, employees, agents, and representatives from and against all claims, liabilities, or damages, and including expert witness fees and reasonable attorney's fees and costs, arising out of any such testing, inspection, or investigatory activity on the [Phase 1 or Phase 2] 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 [Phase 1 or Phase 2] Property to be acquired by City pursuant 882/015610-0065 6949630.3 a10/30/14 -1 7- to this Option Agreement. Escrow shall be deemed opened on the date that a fully executed copy of this Option Agreement and a notice of exercise of option prepared by City are delivered to Escrow Holder ("Opening of Escrow"). Escrow Holder shall notify Developer and City in writing of the date of the Opening of Escrow promptly following the opening of the Escrow. ii) Escrow shall close on or before the date that is six (6) months after occurrence of the event giving rise to City's exercise of Option I, Option II, Option III, Option IV, Option V, or City's Right of First Offer ("Close of Escrow" or "Closing Date"). The terms "Close of Escrow" and "Closing Date" shall mean the date the grant deed conveying fee title to City ("City Grant Deed") is recorded in the Official Records. Possession of the portions of the [Phase 1 or Phase 2] Property conveyed to the City pursuant to this Option Agreement shall be delivered to City at the Close of Escrow. 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 1 or Phase 2] 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 or Phase 2] Property (in the form of Attachment No. 4 to the PSDA), and (iii) matters shown as printed exceptions in the standard form ALTA policy of title insurance. In the event the [Phase 1 or Phase 2] Property 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 (as applicable, and as may be adjusted pursuant to Section 7(a) above) (the "Right of First Offer Repurchase Price"); (ii) one-half (1/2) of the escrow fees; (iii) the portion of the title insurance 882/015610-0065 6949630.3 a10/30/14 -1 8- 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 [Phase 1 or Phase 2] Property, or applicable portion thereof, to City. On or before 1:00 p.m. on the last business day preceding the scheduled Closing Date, Developer shall deposit in Escrow (i) the City Grant Deed, executed and acknowledged; (ii) one-half (1/2) of the escrow fees; and (iii) any and all additional instruments or other documents required from Developer (executed and acknowledged if appropriate) as may be necessary in order to effect the transfer of the [Phase 1 or Phase 21 Property, or applicable portion thereof, to City. Developer shall also be required to pay for documentary tax stamps and recording fees, if any, and for an ALTA standard form owner's policy of title insurance in the amount of the Option I Repurchase Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase Price, the Option V Repurchase Price, or the Right of First Offer Repurchase Price (as applicable), showing title vested in City free and clear of all liens and encumbrances except those permitted by subparagraph iv) above (the "Title Policy"). City's receipt of the Title Policy shall be a condition to the Close of Escrow. Any other costs and expenses shall be allocated between the Parties in the manner customary for a commercial property conveyance in Riverside County. vi) If, on or before the Closing Date, Escrow Holder has received all of the documents and funds listed in subparagraph (v) above, and Escrow Holder is in a position to cause the Title Policy to be issued to City, and provided City has approved of the condition of the [Phase 1 or Phase 2] 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 [Phase 1 or Phase 21 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 [Phase 1 or Phase 2] 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 or Option IV City acquires the [Phase 1 or Phase 2] 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, 882/015610-0065 6949630.3 a10/30/14 _19- the provisions of this Option Agreement shall apply only to those portions of the [Phase 1 or Phase 21 Property which have not been sold to third parties ("Uncompleted Portion of the Repurchase Property") and any calculations for determining the Option III Repurchase Price or the Option IV Repurchase Price (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 [Phase 1 or Phase 2] Master Site Infrastructure Improvements designated pursuant to the PSDA to be constructed on the portions of the Property to be acquired by City, and/or (b) all or any of the Project Components designated pursuant to the PSDA to be constructed on the portions of the Property to be acquired by City, together with copies of all of the Plans, as have been prepared for the development of the [Phase 1 or Phase 21 Property to date of City's exercise of Option I, Option II, Option III, Option IV, or City's Right of First Offer (as applicable). Notwithstanding the foregoing, however, Developer does not covenant to convey to City the copyright or other ownership rights of third parties. City's acquisition or use of the Plans or any of them shall be without any representation or warranty by Developer as to the accuracy or completeness of any such Plans, and City shall assume all risks in the use of the Plans. (m) City's Repurchase Price Reflects Reasonable Approximation of Damages. City and Developer agree that City has the right to either proceed with its remedies under the PSDA or to exercise Option I, Option II, Option III, Option IV, or Option V. Notwithstanding anything to the contrary herein or in the PSDA, in the event City exercises any of Option I, Option II, Option III, Option IV, or Option V (as applicable) to acquire the [Phase 1 or Phase 2] Property, or a portion thereof, City shall be deemed to have elected to waive the remedies to which it would otherwise be entitled under the PSDA. City and Developer agree that City will incur damages by reason of the default that gave rise to City's ability to exercise Option I, Option II, Option III, Option IV, or Option V (as applicable), which damages shall be impractical and extremely difficult, if not impossible, to ascertain. City and Developer, in a reasonable effort to ascertain what City's damages would be in the event of such default by Developer, have agreed that considering all of the circumstances existing on the date of this Option Agreement, including the relationship of the sum to the range of harm to City that reasonably could be anticipated, including without limitation the potential loss of tax revenue to the City of La Quinta, and the anticipation that proof of actual damages would be costly or inconvenient, the exercise by City of Option I, Option II, Option III, Option IV, or Option V (as applicable), and the payment by City of the Option I Repurchase Price, the Option II Repurchase Price, the Option III Repurchase Price, the Option IV Repurchase Price, or the Option V Repurchase Price (as applicable) and the conveyance of the [Phase 1 or Phase 2] Property, or applicable portion thereof, by 882/015610-0065 6949630.3 a10/30/14 -20- 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 II, Option III, Option IV, or Option V, then City shall retain and may exercise all of its rights and remedies as set forth in any other agreement, including, but not limited to, the PSDA. 8. Notices, Demands and Communications Between the Parties Formal notices, demands, and communications between City and Developer shall be given either by (i) personal service, (ii) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, or (iii) mailing in the United States mail, certified mail, postage prepaid, return receipt requested, addressed to: To City: City of La Quinta 78-495 Calle Tampico La Quinta, California 92253 Attn: City Manager With a copy to: Rutan & Tucker, LLP 611 Anton Boulevard., Suite 1400 Costa Mesa, California 92626 Attn: William H. Ihrke, Esq. To Developer: c/o Meriwether Companies 11999 San Vicente Boulevard, Suite 220 Los Angeles, California 90040 Attn: Graham Culp With a copy to: Glaser Weil Fink Howard Avchen & Shapiro, LLP 10250 Constellation Boulevard, 19t" Floor Los Angeles, California 90067 Attn: Saul Breskal, Esq. and to: The Robert Green Company Attn: Robert Green Notices personally delivered or delivered by document delivery service shall be deemed effective upon receipt. Notices mailed in the manner provided above shall be 882/015610-0065 6949630.3 a10/30/14 -21 - deemed 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, 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. 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. 11. Nonliability of City Officials and Employees No officer, official, employee, agent, or representative of City shall be personally liable to Developer or any successor in interest, in the event of any default or breach by City, or for any amount which may become due to Developer or its successor, or for breach of any obligation of the terms of this Option Agreement. 12. Nondiscrimination 882/015610-0065 6949630.3 a10/30/14 -22- 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, or ancestry with respect to this Option Agreement or use of the [Phase 1 or Phase 2] Property. 13. 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. 14. 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. 15. 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. 16. 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. 882/015610-0065 6949630.3 a10/30/14 -23- IN WITNESS WHEREOF, the Parties have executed this Option Agreement as of the date first above written. "DEVELOPER" SILVERROCK DEVELOPMENT COMPANY, LLC, a California limited liability company Its: "CITY" CITY OF LA QUINTA a California municipal corporation and charter city By: Its: City Manager ATTEST: City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP City Attorney 882/015610-0065 6949630.3 a10/30/14 -24- State of California ) County of Riverside ) On , before me, (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature State of California ) County of Riverside ) On , before me, (Seal) (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) 882/015610-0065 6949630.3 a10/30/14 -25- EXHIBIT "A" LEGAL DESCRIPTION OF THE (PHASE 1 OR PHASE 21 PROPERTY [To be inserted] 882/015610-0065 6949630.3 a10/30/14 ATTACHMENT NO. 8 RELEASE OF CONSTRUCTION COVENANTS [See following document] 882/015610-0065 6895841.10 a10/30/14 RECORDING REQUESTED BY, AND WHEN RECORDED MAIL TO: SilverRock Development Company, LLC C/o Meriwether Companies 11999 San Vicente Boulevard, Suite 220 Los Angeles, California 90049 This document is exempt from the payment of a recording fee pursuant to Government Code Section 27383 RELEASE OF CONSTRUCTION COVENANTS THIS RELEASE OF CONSTRUCTION COVENANTS (the "Release") is made by the CITY OF LA QUINTA, a California municipal corporation and charter city (the "City"), in favor of SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company (the "Developer"), as of RECITALS A. City and Developer have entered into that certain Purchase, Sale, and Development Agreement (the "PSDA") dated concerning the development of certain real property situated in the City of La Quinta, California, a portion of which is more fully described in Exhibit "A" attached hereto and made a part hereof (the "Property"). B. As referenced in Section 310 of the PSDA, City is required to furnish Developer or its successors with a Release of Construction Covenants upon Developer's completion of construction of the [Insert applicable Project Component, as that term is described in Section 100 of the PSDA] (as defined in Section 100 of the PDA), which Release is required to be in such form as to permit it to be recorded in the Recorder's office of Riverside County. This Release is conclusive determination of satisfactory completion of the construction and development required by the PSDA. C. City has conclusively determined that such construction and development has been satisfactorily completed. NOW, THEREFORE, City hereby certifies as follows: 1. The [Insert applicable Project Component, as that term is described in Section 100 of the PSDA] to be constructed by Developer has been fully and satisfactorily completed in conformance with the PSDA. Any operating requirements and all use, maintenance or nondiscrimination covenants contained in the PSDA and other documents executed and recorded pursuant to the PSDA shall remain in effect and enforceable according to their terms. 882/015610-0065 6895841.10 a10/30/14 2. This Release of Construction Covenants does not constitute evidence of compliance with or satisfaction of any obligation of Developer to any holder of a mortgage or any insurer of a mortgage security money loaned to finance the work of construction if improvements and development of the Property, or any part hereof. 3. This Release of Construction Covenants does not denote completion of any work required to be completed, other than on the Property. 4. This Release of Construction Covenants is not a notice of completion as referred to in Section 3093 of the California Civil Code. 5. Nothing contained in this instrument shall modify in any other way any other provisions of the PSDA. 882/015610-0065 6895841.10 a10/30/14 -2- IN WITNESS WHEREOF, City has executed this Release as of the date set forth above. CITY OF LA QUINTA, a California municipal corporation and charter city Its: ATTEST: City Clerk APPROVED BY DEVELOPER: SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company Its: 882/015610-0065 6895841.10 a10/30/14 -3- STATE OF CALIFORNIA COUNTY OF RIVERSIDE On personally appeared , before me, ( insert name and title of the officer) 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 STATE OF CALIFORNIA COUNTY OF RIVERSIDE On personally appeared , before me, ( insert name and title of the officer) (Seal) 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) 882/015610-0065 6895841.10 a10/30/14 -4- EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY [TO BE ATTACHED] 882/015610-0065 6895841.10 a10/30/14 -5- ATTACHMENT NO. 9 FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT [See following document] REQUESTED BY AND WHEN RECORDED MAIL TO: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attn: Citv Manaaer Exempt From Recording Fee Pursuant to Government Code § 27383 ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption Agreement ("Assignment") is entered into this day of by and between SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Assignor") and a ("Assignee") with reference to the following: RECITALS A. Assignor is the owner in fee simple of certain real property located at the southwest intersection of Jefferson Street and Avenue 52 in the City of La Quinta, California (the "Site"). The Site is more particularly described on Exhibit "A", which is attached hereto and incorporated herein by this reference. B. Assignor acquired the Site and certain other adjacent real property (collectively with the Site, the "Development Property") from the City of La Quinta, a California municipal corporation and charter city ("City") pursuant to the terms of that certain Purchase, Sale, and Development Agreement dated on or about , 2014 (the "PSDA"). A Memorandum of Purchase, Sale, and Development Agreement was recorded in the Official Records of the County of Riverside on as Instrument No. to provide notice of the PSDA. C. On or about the same date as the City and Assignor executed the PSDA, the City and Assignor entered into that certain Development Agreement, which was recorded against the Development Property in the Official Records of the County of Riverside on 2014, as Instrument No. (the "Development Agreement"). D. Pursuant to the terms of the PSDA and the Development Agreement, the Property was to be used for a (the ["Project" or "Project Component"]). E. Pursuant to the terms of the PSDA the City and Assignor entered into that certain [insert other applicable documents encumbering the Property, such as Option Agreement, Agreement to Share Transient Occupancy Tax Revenue, and/or Agreement Containing Covenants, Conditions, and Restrictions Affecting Real Property]. IIT Agreements") PSDA, Development Agreement, and are collectively referred to hereinafter as the ("Project G. Assignor now desires to transfer the Site to Assignee, and concurrently therewith, to transfer to Assignee all of Assignor's rights and responsibilities under the Project Agreements to the extent that such rights and responsibilities relate to the Site. NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: Assignor hereby assigns to Assignee all of Assignor's rights and responsibilities under the terms of the Project Agreements, [but only to the extent that such rights and responsibilities arise from the ownership of the Project Component and/or Site] from and after the "Effective Date" (as that term is defined in Section 4 below) of this Assignment (collectively, the "Assigned Rights and Obligations"). 2. Assignee hereby accepts the foregoing assignment of the Assigned Rights and Obligations, and agrees to be bound by the terms of the Project Agreements [to the extent that such terms affect or are affected by ownership of the Site]. 3. The parties hereto acknowledge and agree that Assignee shall not be responsible for any of the obligations of the Project Agreements which arise from ownership of any portion of the Site and which arise prior to the Effective Date hereof, [or which arise from any portion of the Development Property other than the Site after the Effective Date hereof]. As such, a default by Assignor under any of the Project Agreements prior to the Effective Date hereof, [or with respect to any portion of the Development Property other than the Site] after the Effective Date hereof ("Assignor's Default") shall not be deemed a default by Assignee, and Assignor shall indemnify, defend and hold harmless Assignee from any and all losses, claims or liability, including without limitation reasonable attorneys' fees and costs, arising from an Assignor's Default. A default by Assignee under any of the Project Agreements with respect to the Site after the Effective Date hereof ("Assignee's Default") shall not be deemed a default by Assignor, and Assignee shall indemnify, defend and hold harmless Assignor from any and all losses, claims or liability, including without limitation reasonable attorneys' fees and costs, arising from an Assignee's Default. 4. This Assignment shall be deemed effective upon the last of the following events to occur: (a) conveyance of the Site to Assignee as evidenced by the recording of the grant deed therefor in the Official Records of the County of Riverside, California, and (b) the written consent to this Assignment by the City with respect to the Assigned Obligations arising under the Project Agreement (herein referred to as the "Effective Date"). 5. Except as otherwise described in paragraph 4 above, the parties hereto each warrant and represent that they have taken all necessary corporate action to authorize the execution and performance of this Assignment and that the individuals executing this document on behalf of the parties are authorized to do so, and by doing so, create binding obligations as described herein of the party represented. 6. This Assignment shall be governed by the internal laws of the State of California, without regard to conflict of law principles. [End — Signature page follows] WHEREFOR, the parties hereto have executed this Assignment on the date first written above. "Assignor" SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company in It: "Assignee" in Its: CONSENT By execution below, the City hereby consent to the foregoing assignment. CITY OF LA QUINTA, a California municipal corporation and charter city By: Its: City Manager ATTEST: City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP City Attorney EXHIBIT "A" LEGAL DESCRIPTION OF THE PROPERTY EXHIBIT "B" LEGAL DESCRIPTION OF HOTEL PROPERTY [To be provided.] ATTACHMENT NO. 10 MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT AGREEMENT [See following document] 882/015610-0065 6895841.10 a10/30/14 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attn: City Manager (Space Above For Recorder's Use) This Memorandum of Purchase, Sale, and Development Agreement is recorded at the request and for the benefit of the City of La Quinta and is exempt from the payment of a recording fee pursuant to Government Code § 27383. MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT AGREEMENT This MEMORANDUM OF PURCHASE, SALE, AND DEVELOPMENT AGREEMENT ("Memorandum") is entered into this day of , by and between the CITY OF LA QUINTA, a California municipal corporation and charter city ("City"), and SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Developer"). This Memorandum is made with reference to the following: 1. On or about , City and Developer entered into that certain Purchase, Sale, and Development Agreement (the "Agreement") which provides for (i) City to sell to Developer that certain real property located in the City of La Quinta, County of Riverside, State of California, more particularly described in the legal description attached hereto as Exhibit "A" and incorporated herein by this reference (the "Property"), and (ii) Developer to develop and operate on the Property a commercial development with one luxury hotel with associated branded luxury residential units, one lifestyle hotel with associated lifestyle branded residential units, a conference and shared service facility, a resort residential village, a mixed -use village, and related amenities. The definitions of all terms contained in the Agreement shall apply to this Memorandum. 2. On or about the date of this Memorandum, Developer acquired from City fee title to a portion of the Property. 3. The Agreement provides for City and Developer to enter into this Memorandum and to record the same in the Official Records of the County of Riverside to provide notice to all persons of the existence of said Agreement and to cause the Agreement to run with the Property and be binding on Developer and Developer's successors -in -interest as to the Property. 882/015610-0065 6895841.10 a10/30/14 4. This Memorandum may be executed in several counterparts, and all so executed shall constitute one agreement binding on both parties hereto, notwithstanding that both parties are not signatories to the original or the same counterpart. 882/015610-0065 6895841.10 a10/30/14 -2- IN WITNESS WHEREOF, City and Developer have entered into this Memorandum as of the date first set forth above. ATTEST: City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP Attorneys for the City of La Quinta "City" CITY OF LA QUINTA, a California municipal corporation and charter city Its: City Manager "Developer" SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company go Its: 882/015610-0065 6895841.10 a10/30/14 -3- STATE OF CALIFORNIA COUNTY OF RIVERSIDE On personally appeared , before me, ( insert name and title of the officer) 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 STATE OF CALIFORNIA COUNTY OF RIVERSIDE On , before me, ( insert name and title of the officer) (Seal) 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) 882/015610-0065 6895841.10 a10/30/14 -4- EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY 882/015610-0065 6895841.10 a10/30/14 -5- ATTACHMENT NO. 11 FORM OF TOT SHARING AGREEMENT [See following document] 926586.5 AGREEMENT TO SHARE TRANSIENT OCCUPANCY TAX REVENUE This AGREEMENT TO SHARE TRANSIENT OCCUPANCY TAX REVENUE (the "Agreement") is entered into this day of , 2014, by and between the CITY OF LA QUINTA, a California municipal corporation and charter city ("City"), and SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Participant") (individually a "Party" and collectively the "Parties"). RECITALS A. City and Participant are parties to that certain Purchase, Sale, and Development Agreement (the "PSDA"), pursuant to which City has agreed to sell to Participant certain real property in the City of La Quinta, County of Riverside, State of California (the "Development Property"), and Participant has agreed to develop and cause to be operated thereon a commercial project containing hotels and associated amenities, branded residential units, a mixed use village, and a resort residential village (the "Development Project"). B. Pursuant to the PSDA, (i) City has agreed to convey to Participant fee title to a portion of the Development Property designated in the PSDA and in the site map attached hereto and incorporated herein as Exhibit "A" as PA [_](the "Site"), and (ii) Participant has agreed to develop on the Site the hotel defined in the PSDA as the [Luxury Hotel or Lifestyle Hotel] (the "Hotel"). C. Pursuant to the PSDA, Participant is required to enter into a hotel management agreement and all ancillary agreements, including, without limitation, a technical services agreement, hotel brand licensing agreement, and use and access development agreement (collectively, a "Hotel Management Agreement"), with a City -approved hotel operator (the "Hotel Manager"), who shall be responsible for the management and operation of the Hotel pursuant to the terms of the Hotel Management Agreement. D. In consideration for Participant's execution of an Agreement Containing Covenants, Conditions, and Restrictions Affecting Real Property substantially in the form attached hereto and incorporated herein as Exhibit `B" (the "Covenant Agreement"), City has agreed to make certain periodic payments to Participant to assist Participant in the continued operation of the Hotel, in an amount equal to a portion of the transient occupancy tax generated by the Hotel (the "Transient Occupancy Tax"), subject to and in accordance with the other terms and conditions set forth in this Agreement and the Covenant Agreement. E. By its approval of this Agreement, the City Council of City has found and determined as follows: (i) that the value to City of Participant's performance of its obligations set forth in the Covenant Agreement in each fiscal year during which City payments are to be made (in terms of economic revitalization, generation of additional local tax revenues that will help to fund vital public services, provision of expanded and more accessible hotel guest rooms and related amenities for persons wishing to visit the City of La Quinta for business or pleasure, and job growth and retention) will be not less than the amount of such payments; and (ii) that the 7 926586.5 imposition of the covenants and use restrictions upon the Site pursuant to the Covenant Agreement in exchange for the payments to be made by City constitutes a valid public purpose. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Participant hereby agree as follows: 1. Defined Terms. Any capitalized terms contained in this Agreement, which are not defined in this Agreement, shall have the meanings ascribed to such terms in the Covenant Agreement. 2. Execution and Recordation of Covenant Agreement. Concurrently with City's and Participant's execution of this Agreement, Participant shall fill in the blanks, date, and execute, with signatures notarized, the Covenant Agreement. At the ["Phase 1 Closing" or "Phase 2 Closing"] (as that term is defined in the PSDA), Participant shall record the Covenant Agreement against the Site and provide a copy of the recorded Covenant Agreement to City. City agrees to cooperate in the recordation of the Covenant Agreement against the Site, at no cost to City, and the City Manager or his designee is hereby authorized on behalf of City to execute all documents and take all actions necessary or appropriate to implement this Agreement. 3. Termination of Agreement. This Agreement shall automatically terminate and be of no further force or effect upon termination of the Covenant Agreement, in accordance with the terms thereof. City shall, within ten (10) days following the termination of this Agreement, cause the Covenant Agreement to be released from record title to the Site by recording in the Official Records of Riverside County such documents as a nationally recognized title company shall reasonably require for such purpose. 4. Assignment. Except as otherwise set forth in the Covenant Agreement or otherwise in connection with a transfer or transfers of interests in the Development Property and/or the Development Project allowable pursuant to Section 603 of the PSDA, Participant shall not assign, hypothecate, encumber, or otherwise transfer any of its rights and/or obligations set forth in this Agreement and/or the Covenant Agreement to any other person or entity without City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion. 5. Cooperation in the Event of Legal Challenge; Validation Action. In the event any third party files an action seeking to invalidate this Agreement or the Covenant Agreement or seeking any equitable remedy that would prevent the full performance hereof or thereof, City and Participant agree to cooperate in the defense of such action. Such cooperation shall include, without limitation: (i) an agreement by each Party to not default or allow a compromise of said action without the prior written consent of the other Party; (ii) an agreement by each Party to make available to the other Party all non -privileged information necessary or appropriate to conduct the defense of the action; and (iii) an agreement by each Party to make available to the other Party, without charge, any witnesses within the control of the first Party upon reasonable 8 926586.5 notice who may be called upon to execute declarations or testify in said action. Participant shall pay all of City's costs and expenses (including reasonable attorney's fees) and City shall have the sole right to select its legal counsel; provided however, Participant shall have the right, exercisable upon written notice to City, to retain counsel of Participant's choice, but subject to City's reasonable approval, to defend City against any such third party action, in which event Participant shall not be responsible for any costs incurred by City in connection with the defense of such third party action. In addition to the foregoing, if Participant delivers a written request for such action to City (c/o the City Manager) not later than thirty (30) days after the date the City Council of City approves this Agreement at a public meeting, City shall file an action in Riverside County Superior Court pursuant to California Code of Civil Procedure Section 860 et seq. to validate this Agreement and the Covenant Agreement and each and every one of its and their provisions. In such event, City and Participant shall reasonably cooperate in drafting the complaint, briefs, the proposed judgment of validation, and such other pleadings, documents, and filings as may be required or desirable in connection with the validation action. City and its legal counsel shall file and prosecute the validation action, but shall reasonably coordinate and cooperate with Participant concerning the drafting of pleadings and other documents and with regard to the litigation strategy to be employed. Participant shall reimburse City within fifteen (15) days after written demand therefor for all reasonable costs ("Costs") of the validation action actually incurred by City. Costs include without limitation, reasonable attorney's fees, filing fees and court reporter fees (if any), costs of publication and to effectuate service of process, reasonable photocopying and other reproduction charges, travel time and mileage expenses, and other costs and expenses reasonably incurred by City. In the event of an appeal of such action, the Parties shall cooperate with respect to the appeal to the same extent as at the Superior Court level of the proceedings. Upon the entry of a final non -appealable judgment of any court with jurisdiction invalidating or enjoining the performance of any material covenant set forth in this Agreement or the Covenant Agreement, this Agreement and the Covenant Agreement shall automatically terminate without the need of further action by either Parry, except that any reimbursement obligations of either Party shall survive such termination. 6. Compliance with Laws. During the entire Operating Period, Participant shall cause the Hotel to be operated on the Site in conformity with all applicable federal, state, and local laws, ordinances, and regulations, the requirements of the PSDA, and any other discretionary permits issued by City for the Hotel, including, without limitation, all of the conditions of approval issued in connection therewith. Nothing herein constitutes a representation or warranty by City that the construction of the Hotel was not a "public work" or otherwise subject to California Health and Safety Code Sections 33423 through 33426, or Chapter I of Part 7 of the California Labor Code (commencing with section 1720), and all applicable statutory and regulatory provisions related thereto, and Participant expressly waives any right of reimbursement for any "increased costs" under California Labor Code Section 1781 or otherwise with respect to the Hotel or Participant's development thereof. Participant shall indemnify, defend, and hold City and City's representatives, volunteers, officers, officials, members, employees, and agents harmless, 7 926586.5 including, but not limited to, litigation costs, expert witness fees, and reasonable attorneys' fees, from and against any and all claims pertaining to the payment of wages in connection with Participant's development of the Hotel on the Site or failure to comply with federal or state labor laws, regulations, or standards. 7. Compliance with Hotel Management Agreement. During the entire Operating Period, Participant shall cause the Hotel to be operated on the Site in conformity with all of the requirements set forth in the Hotel Management Agreement. 8. Representation and Warranty Regarding Hotel. As of the Commencement Date, Participant represents and warrants to City that (i) the Hotel Management Agreement is in full force and effect, (ii) Participant is not in material default of any of its obligations under the Hotel Management Agreement, and (iii) there are no existing conditions or occurrences that, with the passage of time, would constitute a material default under the Hotel Management Agreement. 9. Integration and Amendment. This Agreement and the Covenant Agreement attached hereto constitute the entire agreement by and between the Parties pertaining to the specific subject matter hereof, and supersede all prior agreements and understandings of the Parties with respect thereto. This Agreement may not be modified, amended, or otherwise changed except by a writing executed by both Parties. 10. Notices. Notices to be given by City or Participant hereunder may be delivered personally or may be delivered by certified mail or by reputable overnight delivery service providing a delivery confirmation receipt, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es) that a Parry may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If delivered personally, service will be considered completed and binding on the Parry served on the date of such personal delivery. If notice is to City: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attention: Frank J. Spevacek, City Manager with a copy to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, CA 92626 Attention: William H. Ihrke, City Attorney 10 926586.5 If notice is to Participant: SilverRock Development Company, LLC c/o The Robert Green Company 3551 Fortuna Ranch Road Encinitas, CA 92024 Attention: Robert S. Green, Jr. SilverRock Development Company, LLC c/o Meriwether Companies 11999 San Vicente Blvd., Suite 220 Los Angeles, CA 90049 Attention: Graham Culp with a copy to: Glaser Weil LLP 10250 Constellation Blvd., 19th Floor Los Angeles, CA 90067 Attention: Saul Breskal 11. Authority to Execute. The person(s) executing this Agreement on behalf of each of the Parties hereto represent and warrant that (i) such Party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Agreement on behalf of said Party, (iii) by so executing this Agreement such Party is formally bound to the provisions of this Agreement, and (iv) the entering into this Agreement does not violate any provision of any other agreement to which such Party is bound. 12. Counterparts. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. 13. Legal Actions. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles. In addition to any other rights or remedies and subject to the restrictions in this Agreement, including without limitation in Section 5 and in this Section 13, either Party may institute legal action to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any default, or to obtain any other legal or equitable remedy consistent with the purpose of this Agreement. City shall also have the right to pursue damages for Participant's defaults but in no event shall Participant be entitled to recover damages of any kind from City, except for damages up to, but not exceeding, the amount that Participant would have received under this Agreement but for City's default of its covenants under this Agreement, but excluding damages for economic loss, lost profits, or any other economic or consequential damages of any kind. Such legal actions must be instituted in the Superior Court of the County of Riverside, State of California, or in the Federal District Court in the Central District of California. In the event of any litigation between the Parties hereto, the prevailing Party shall be entitled to receive, in addition to the relief granted, its reasonable attorney's fees and costs and such other costs incurred in investigating the action and prosecuting the same, including costs for expert witnesses, costs on appeal, and for discovery. 11 926586.5 14. Nonliability of City Officials. No member, official or employee of City shall be personally liable to Participant, or any successor in interest, in the event of any Default or breach by City or for any amount which may become due to Participant or its successors, or on any obligations under the terms of this Agreement or the Covenant Agreement. [End — Signature page follows] 12 926586.5 IN WITNESS WHEREOF, City and Participant have executed this Agreement to be effective as of the date first set forth above. "City" CITY OF LA QUINTA, a California municipal corporation and charter city By: Date: 12014 Frank J. Spevacek, City Manager ATTEST: Susan Maysels, City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP William H. Ihrke, City Attorney "Participant" SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company Date: 92014 By: Its: 13 926586.5 EXHIBIT "A" SITE MAP LUXURY BRANDED PA RESIDENTIAL DEVELOPMENT LUXURY HOTEL PARKING — PA 4 CONFERENCE AND .. S14AREDSERV ICE FACILfI'Y PORTION OF 6 PAS LIFESTYLE HOTEL PA 10A \� \ GOLF CLUBHOUSE PA10A PA ,O `POI EN I IAL FUTURE GOLI CO R5E - t' \ \ LIFESTYLEI3RANDED \, RESERVE17UBLIC USE PARC. 1 L$ RESIDENTIAL DEVELOPMENT PA 11 PUBLIC PARK rah C(` r 1 I� j PRAc 1Ij j to i 3' , 1•_ � J'. �.. �� `. Ul'F.aFlotib Y riRKING PAl - jT GOLF COURSE —j �_.`.. vLUXU HO ELSPA Y r —� -, C"Tz i� - IPTFNIIAL r yr I _�1., Ls Kt'Fr�uRue iq b 1r LSE PARCE , i LUXURY HOTEL \ �I a PA 7 � j' PROMENADE MIXED -USE VILLAGE \\.\\ I '.S _ =—�L\TIlAli AREA] PAR PROMENADE MIXED -USE VILLAGE-AREAII .r Jul h ILViExRQCK - r �'/- PAA RESpRT RE53DE\TIAL c aiul>tl�i , wc111;nrmnnl . z VILLAGE LAND USE SUMMARY 4�uun. r d _— ] GOIFCOLIR.SE IE%ISTLNG) ITll1 � LnKE ,�I lINI1v 1 — 2 LUXURY HOTEL 1F.0 14U 3 LUXURY RRANUEP RESIDENTIAL DEVFLDPMENT I4,D 3S 1 J/ I 4 CON FERFNCE AND SHARED SERVICE FACILITY 1?P 5 LIFESI'YI E HOTEL IO.0 zw i 6 LIFFSTYIT ERANUEDRMDENTfALDEV [A3F1iENT IO.0 60' PROMENADF4IIXED LSE VILLAGEAREAI I" M / �_ PA, 141E R RFpRT RF11OPMAL VTLLA(.E no 260 � POTENTIAL FLTURE ° 9 PROMENADE MIXED USE VILLAGE AR EA R I5A W2 ! J p �_// �`� COLTCODUT - j IM WUCLUBHOU5EAND[VU,%IALNEW4OLFHOLF5IA 4RO Zi b T,Jf �'GOI-F' IIM 1c .. nALNWGOUHOLUWS Rao rS�� I RFSFR% PUBLIC llia22 j.t,alh.N A'vcE j USE PARCELS — { 1, PUBLIC PARK .Ki.O i J{ >: TRXL&,CANAL&5TREM 65-5 TOTAL SY5.0 M _ - .1VEti UE sk MASTER PLAN SILVERROCK RESORT LA QUINTA, CALIFORNIA ✓�E B;PW E aH ER ROSE4-(GR.EEN I •, L1 �C ... . EXHIBIT "A" 926586.5 EXHIBIT `B" AGREEMENT CONTAINING COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING REAL PROPERTY [See following document] EXHIBIT "B" 926586.5 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attn: City Clerk [SPACE ABOVE FOR RECORDER.] EXEMPT FROM RECORDER's FEE PER GOV. CODE §27383 AGREEMENT CONTAINING COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING REAL PROPERTY This AGREEMENT CONTAINING COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING REAL PROPERTY (the "Covenant Agreement") is entered into as of this day of , 2014 ("Covenant Agreement Effective Date"), by and between the CITY OF LA QUINTA, a California municipal corporation and charter city ("City"), and SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company ("Owner") (individually a "Party" and collectively the "Parties"). RECITALS A. City is the owner of that certain real property located in the City of La Quinta, County of Riverside, State of California, which is more particularly described in the legal description attached hereto as Exhibit No. 1 and incorporated herein by this reference (the "Site"). B. City has agreed to sell to Owner the Site pursuant to that certain Purchase, Sale, and Development Agreement entered into by and between City and Owner on or about the same date hereof (the "PSDA"). The PSDA sets forth the terms and conditions for City to sell to Owner the Site and certain adjacent real property (collectively, the "Development Property"), and for Owner to thereafter develop and operate on the Development Property a commercial project containing hotels and associated amenities, branded residential units, a mixed use village, and a resort residential village (the "Development Project"). C. Pursuant to the PSDA, Owner has agreed to develop on the Site a portion of the Development Project consisting of the hotel defined in the PSDA as the [Luxury Hotel or Lifestyle Hotel] (the "Hotel"). D. Pursuant to the PSDA, Participant is required to enter into a hotel management agreement and all ancillary agreements, including, without limitation, a technical services agreement, hotel brand licensing agreement, and use and access development agreement (collectively, a "Hotel Management Agreement"), with a City -approved hotel operator (the "Hotel Manager"), who shall be responsible for the management and operation of the Hotel pursuant to the terms of the Hotel Management Agreement. 882/015610-0065 1 6895841.10 a10/30/14 E. Concurrently herewith, City and Owner have entered into that certain unrecorded Agreement to Share Transient Occupancy Tax Revenue (the "Agreement") which provides for the recordation of this Covenant Agreement against the Site. F. In consideration for Owner's rights and obligations set forth in the Agreement and within this Covenant Agreement, City has agreed to make certain payments to Owner, the amount of which are measured by the "Transient Occupancy Tax" (as that term is defined below) generated by the operation of the Hotel on the Site. City and Owner have agreed that the portion of Transient Occupancy Tax required to be paid by City to Owner hereunder during each "Payment Period" of the "Operating Period" (as those terms are defined below) provided for herein is a fair exchange for the consideration to be furnished by Owner to City in that Payment Period. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Owner hereby agree as follows: DEFINED TERMS. The following terms when used in this Covenant Agreement shall have the meanings set forth below: The term "Affiliate" shall mean any corporation, partnership, limited liability company or other organization or entity which is Controlled by, Controlling or under common Control with (directly or indirectly) Owner. The term "Aggregate Preopening Expenses" shall mean all hard and soft costs actually incurred by Owner in connection with the Hotel prior to the Commencement Date including, without limitation, (i) permit fees and other entitlement costs, (ii) professional fees and costs paid to architects, engineers, lawyers and accountants, (iii) all horizontal and vertical construction costs including grading, excavation, demolition, construction and landscaping, (iv) general and administrative development expenses, (v) development fees, (vi) insurance premiums, (vi) property taxes, (vii) costs associated with procuring construction financing and interest paid in connection with such construction financing, (viii) the cost to purchase and install all furniture, fixtures and equipment including, without limitation, all information systems hardware and software, (ix) license fees, (x) costs to install and use utilities including electricity, water, gas, telephone, internet and cable or satellite television, (xi) wages and other costs associated with hiring and training employees prior to the opening of the Hotel to the public, and (xii) the cost of all movable personal property and inventory required to open the Hotel for business on the Commencement Date including, without limitation, linen, bathroom supplies, food and beverages. The term "Agreement" shall have the meaning ascribed to it in Recital E of this Covenant Agreement. 882/015610-0065 2 6895841.10 a10/30/14 The term "Budgeted Preopening Expenses" shall mean all hard and soft costs estimated to be incurred by Owner in connection with the Hotel prior to the Commencement Date, as set forth in the Hotel Budget. The term "Business Day" shall mean a calendar day which is not a weekend day or a Federal or State holiday, and a day upon which the City is open for business. The term "Commencement Date" shall mean the first day of the first full calendar month following the date upon which the Hotel opens for business and accepts its first paying overnight guest. The term "Control", "Controlled" or "Controlling" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity or person, whether through the ability to exercise voting power, by contract or otherwise. The term "Covenant Agreement" shall mean this Agreement Containing Covenants, Conditions, and Restrictions Affecting Real Property. The term "Covenant Payments" shall mean the amounts to be paid by City to Owner with respect to each Payment Period during the Operating Period. The term "Default" shall have the meaning ascribed to it in Section 5.1 of this Covenant Agreement. The term "Gross Revenue" shall mean, for each Payment Period or Operating Year (as applicable) during the Operating Period, all revenue generated by the Hotel from all sources during such Payment Period or Operating Year (as applicable) including, without limitation, room rentals, food and beverage sales, parking charges, television charges, telephone charges and sundry services. The term "Hotel" shall have the meaning ascribed to it in Recital C of this Covenant Agreement. The term "Hotel Budget" shall mean the budget of all hard and soft costs to be incurred by Owner in connection with the development and opening of the Hotel (including costs of the type included within the definition of Aggregate Preopening Expenses), which budget shall be prepared by Owner and delivered to City for review and approval, which approval shall not be unreasonably withheld, prior to the commencement of construction of the Hotel and which budget may be revised from time to time subject to the reasonable approval of City. The term "Hotel Management Agreement" shall have the meaning ascribed to it in Recital D of this Covenant Agreement. The term "Hotel Manager" shall have the meaning ascribed to it in Recital D of this Covenant Agreement. 882/015610-0065 3 6895841.10 a10/30/14 The term "Improvements" shall mean and include all buildings, structures, fixtures, parking, sidewalks, pedestrian lighting, landscaping, irrigation of landscaping, and other improvements of whatsoever character to be constructed or performed by Owner on the Site. The term "Mortgage" shall mean any mortgage, deed of trust, pledge (including a pledge of equity interests in Owner), hypothecation, charge, encumbrance or other security interest granted to a lender, made in good faith and for fair value, encumbering all or any part of Owner's interest in (i) this Covenant Agreement, (ii) the Site, (iii) the Improvements, or (iv) any equity interest in Owner. The term "Mortgagee" shall mean any mortgagee or beneficiary under any Mortgage. The term "Municipal Code" shall mean the La Quinta Municipal Code. The term "Net Operating Income" shall mean, for each Payment Period or Operating Year (as applicable) during the Operating Period, the Gross Revenue generated by the Hotel during such Payment Period or Operating Year (as applicable), less the Operating Expenses incurred in connection with the Hotel during such Payment Period or Operating Year (as applicable). The term "Operating Expenses" shall mean, for each Payment Period or Operating Year (as applicable) during the Term, all ordinary expenses actually incurred by Owner during such Payment Period or Operating Year (as applicable) and relating to the operation and/or maintenance of all the facilities of the Hotel determined in accordance with generally accepted accounting principles, including, without limitation, (a) centralized sales and marketing expenses, (b) charges related to programs implemented by the Hotel Manager and chargeable to the Owner, whether such programs are optional or required under the Hotel Management Agreement (e.g., a loyalty rewards program), (c) expenses incurred by the Hotel Manager and reimbursable by the Owner pursuant to the Hotel Management Agreement, (d) hotel personnel expenses including, without limitation, salaries, benefits and severance payments, (e) repair costs, (f) maintenance costs, (g) utility charges, (h) administrative expenses, (i) costs of advertising, marketing and business promotion, 0) all amounts payable to the Hotel Manager pursuant to the Hotel Management Agreement including, without limitation, the management fee, (k) taxes, (1) insurance premiums and deductibles, (m) capital expenditures, (n) expenditures on furniture, fixtures and equipment, (o) funding of reserves required under the Hotel Management Agreement, (p) "asset management" costs and expenses incurred by Owner's personnel in relation to the Hotel, provided such costs and expenses do not exceed one percent (1%) of Gross Revenue for the applicable Payment Period or Operating Year (as applicable), (q) professional fees and costs including fees paid to attorneys, accountants, auditors and appraisers, provided that the types and amounts of such fees and costs shall be reasonable and consistent with the industry standard for such fees and costs, (r) capital and equipment leases expenses, (s) costs of all goods and services provided to guests and patrons in the normal course of business for all departments of the Hotel (t) permit and license fees; provided, however, "Operating Expenses" expressly excludes (i) principal and interest on any third party debt, (ii) capital expenditures, and (iii) depreciation. 882/015610-0065 4 6895841.10 a10/30/14 The term "Operating Period" refers to the period commencing upon the Commencement Date and ending upon the Termination Date. The term "Operating Year" shall mean a period of twelve (12) consecutive months, the first of which shall commence upon the Commencement Date, with each subsequent Operating Year commencing upon the day immediately following the expiration of the preceding Operating Year. The term "Payment Date" shall mean the date that is ten (10) days after City's receipt of (i) an Estimated Annual NOI Notice, with respect to the first three (3) quarters of each Operating Year, or (ii) an NOI Notice, with respect to last quarter of each Operating Period. The term "Payment Period" shall mean a period of three (3) consecutive calendar months during the Operating Period, with the first such period commencing upon the Commencement Date and each successive such period commencing upon the first day immediately following the expiration of the immediately preceding period. The term "PSDA" shall have the meaning ascribed to it in Recital B of this Covenant Agreement. The term "Required Annual Return" means, for each Operating Year during the Term, an amount equal to the lesser of (i) the Aggregate Preopening Expenses, or (ii) the Budgeted Preopening Expenses, multiplied by eleven percent (11%). The term "Site" shall have the meaning ascribed to it in Recital A of this Covenant Agreement. The term "Term" shall mean the term of this Covenant Agreement, which shall be the period commencing on the Commencement Date and ending on the Termination Date. The term "Termination Date" shall mean the date that is the earlier of (i) the fifteenth (15th) anniversary of the Commencement Date; or (ii) the date upon which this Covenant Agreement is terminated pursuant to Section 5.2 or Section 5.3. The term "Transient Occupancy Tax" means, for each Payment Period, or part thereof, during the Operating Period, that portion of transient occupancy taxes remitted by Owner or the Hotel Manager to City pursuant to Chapter 3.24 of the Municipal Code (and any amendments or replacements to the Municipal Code) and are generated from the use and occupancy of hotel guest rooms in the Hotel. If said Municipal Code Section is amended or repealed during the Operating Period such that Transient Occupancy Taxes are no longer payable to City, then, for the purposes of this Agreement, the term "Transient Occupancy Tax" shall include any substitute tax imposed upon occupants of hotel guest rooms and payable to the City of La Quinta. Notwithstanding anything herein to the contrary, Transient Occupancy Tax shall not include any interest or penalty that has been paid by Owner or the Hotel Manager pursuant to Chapter 3.24 of the Municipal Code, and any costs City incurs during a particular Payment Period in enforcing Chapter 3.24 of the Municipal Code or any provision of this Covenant 882/015610-0065 CJ 6895841.10 a10/30/14 Agreement shall be deducted from the amount of the Covenant Payment payable by City to Owner for such Payment Period. CONDITION TO OWNER'S RIGHT TO RECEIVE COVENANT PAYMENTS. City's obligation to make the Covenant Payments pursuant to Section 4.1 of this Covenant Agreement for any Payment Period (or portion thereof) during the Operating Period shall be contingent and conditional upon Owner's performance of its obligations set forth in Section 3 of this Covenant Agreement during such Payment Period. OWNER'S OBLIGATIONS. Continuous Operation. During the Operating Period, Owner covenants and agrees to cause the Hotel to be continuously operated on the Site, subject to temporary and reasonable interruptions for casualty losses, repairs, labor unrest, "acts of God", and the like (each, a "Permitted Closure"). Use Restriction. During the Operating Period, the Site shall not be put to any use other than the operation of the Hotel and uses ancillary thereto, and such use shall qualify as a transient occupancy use under Chapter 3.24 of the Municipal Code. 1.1 Maintenance and Repair of Site and Hotel; Landscaping. (a) During the Operating Period, Owner, at its sole cost and expense, shall keep and maintain the Site and the Improvements thereon and all facilities appurtenant thereto in first class condition and repair, in accordance with the "Maintenance Standards" (as that term is hereinafter defined). (b) To comply with the maintenance obligations set forth in this Section 3.3, Owner shall cause the Hotel Manager to either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Covenant Agreement. (c) Owner shall, or shall cause the Hotel Manager and its/their maintenance staff, contractors or subcontractors to comply with the following standards ("Maintenance Standards"): 1. Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance, safe road conditions, including visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. 2. Clean-up maintenance shall include, but not be limited to: maintenance of all sidewalks, paths and other paved areas in clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter 882/015610-0065 6 6895841.10 a10/30/14 which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. 3. All maintenance work shall conform to all applicable federal and state Occupational Safety and Health Act standards and regulations for the performance of maintenance. 4. Any and all chemicals, unhealthful substances, and pesticides used in and during maintenance shall be applied in strict accordance with all governing regulations. Precautionary measures shall be employed recognizing that all areas are open to public access. 5. The Site and Hotel shall be maintained in conformance and in compliance with the approved Site construction and architectural plans and design scheme, and reasonable commercial development maintenance standards for similar projects, including but not limited to: painting and cleaning of all exterior surfaces and other exterior facades comprising all private improvements and public improvements to the curbline. 6. The Site shall be maintained as required by this Section in good condition. During the Operating Period, Owner shall not abandon any portion of the Site or leave the Site unguarded or unprotected, and shall not otherwise act or fail to act in such a way as to unreasonably increase the risk of any damage to the Site or of any other impairment of City's interest set forth in this Covenant Agreement. 1.2 Failure to Maintain Site and Hotel. In the event Owner does not maintain the Site or the Hotel, or otherwise cause the Site or the Hotel to be maintained, in the manner set forth herein and in accordance with the Maintenance Standards, City shall have the right, but not the obligation, to maintain such private and/or public improvements, or to contract for the correction of such deficiencies, in accordance with the provisions of this Section 3.4. City shall notify Owner in writing if the condition of said improvements do not meet with the Maintenance Standards and to specify the deficiencies and the actions required to be taken by Owner to cure the deficiencies. Subject to the following sentence, upon notification of any maintenance deficiency, Owner shall have thirty (30) days within which to correct, remedy or cure the deficiency, provided that if the deficiency cannot reasonably be cured within thirty (30) days, then Owner shall have up to but not exceeding sixty (60) days within which to correct, remedy or cure the deficiency so long as Owner commences to correct, remedy or cure the deficiency within said thirty (30) period and diligently prosecutes the correction, remedy or cure to completion. If the written notification states the problem is urgent relating to the public health and safety of City, then Owner shall have forty-eight (48) hours to correct, remedy, or cure the problem. 882/015610-0065 7 6895841.10 a10/30/14 In the event Owner or any person or entity acting on behalf of Owner fails to correct, remedy, or cure after notification and after the period of correction has lapsed [or, for deficiencies that cannot reasonably be corrected, remedied, or cured within such period, if Owner or any person or entity acting on behalf of Owner has not commenced correcting, remedying or curing such maintenance deficiency within such period and diligently pursued such correction, remedy or cure to completion], then City shall have the right to maintain such improvements. Owner agrees to reimburse City for its actual costs reasonably incurred in connection with such maintenance performed by City pursuant to this Section. Until so paid, City shall have a lien on the Site for the amount of such unpaid reimbursement, which lien shall be perfected by the recordation of a "Notice of Claim of Lien" against the Site. Upon recordation of a Notice of a Claim of Lien against the Site, such lien shall constitute a lien on the fee estate in and to the Site prior and superior to all other monetary liens except: (i) all taxes, bonds, assessments, and other levies which, by law, would be superior thereto; (ii) the lien or charge of any mortgage, deed of trust, or other security interest then of record made in good faith and for value, it being understood that the priority of any such lien for costs incurred to comply with this Covenant Agreement shall date from the date of the recordation of the Notice of Claim of Lien. Any lien in favor of City created or claimed hereunder is expressly made subject and subordinate to the lien of any mortgage or deed of trust made in good faith and for value, recorded as of the date of the recordation of the Notice of Claim of Lien describing such lien as aforesaid, and no such lien shall in any way defeat, invalidate, or impair the obligation or priority of any such mortgage or deed of trust, unless the mortgage or beneficiary thereunder expressly subordinates his interest, of record, to such lien. Upon foreclosure of any mortgage or deed of trust made in good faith and for value and recorded prior to the recordation of any unsatisfied Notice of Claim of Lien, the foreclosure -purchaser shall take title to the Site free of any lien imposed by City that has accrued up to the time of the foreclosure sale, and upon taking title to the Site, such foreclosure - purchaser shall only be obligated to pay costs associated with this Covenant Agreement accruing after the foreclosure -purchaser acquires title to the Site. Owner acknowledges and agrees City may also pursue any and all other remedies available in law or equity. Owner shall be liable for any and all reasonable attorneys' fees, and other legal costs or fees incurred in collecting said maintenance costs. Level of Service. During the Term, Owner shall cause the Hotel to be operated as [a first class hotel offering luxury amenities, full service accommodations, on -site full service restaurants and a level of personalized and professional service by Hotel Manager or such other hotel operator approved by City pursuant to the terms of the PSDA] [a first class "lifestyle hotel" operated by Hotel Manager or such other hotel operator approved by City pursuant to the terms of the PSDA], and in accordance with the terms of the Hotel Management Agreement. Owner shall cause the Hotel to be operated in a manner that maximizes the generation of Transient Occupancy Tax to be remitted to City. Compliance with Laws. During the Operating Period, Owner shall cause the Hotel to be operated on the Site (i) in conformity with all valid and applicable federal, state (including without limitation the California Civil Code, the California Government Code, the California Health & Safety Code, the California Labor Code, the California Public Resources Code, and the California Revenue & Taxation Code), and local laws, ordinances, and regulations, provided that 882/015610-0065 8 6895841.10 a10/30/14 Owner does not waive its right to challenge the validity or applicability thereof to Owner or the Site, and (ii) in compliance with all of the requirements of the PSDA and any discretionary permits issued by City for the Hotel, including, without limitation, all of the conditions of approval issued in connection therewith, if any. Nothing herein constitutes a representation or warranty by City that the construction of the Hotel is not or will not be a "public work" or otherwise subject to California Health and Safety Code Sections 33423 through 33426, or Chapter 1 of Part 7 of the California Labor Code (commencing with section 1720), and all applicable statutory and regulatory provisions related thereto, and Owner expressly waives any right of reimbursement for any "increased costs" under California Labor Code Section 1781 or otherwise with respect to the Hotel or Owner's development thereof. Owner shall indemnify, defend, and hold City and City's representatives, volunteers, officers, officials, members, employees, and agents harmless, including, but not limited to, litigation costs, expert witness fees, and reasonable attorneys' fees, from and against any and all claims pertaining to the payment of wages in connection with Owner's development of the Hotel on the Site or failure to comply with federal or state labor laws, regulations, or standards. Compliance with Hotel Management Agreement. Owner shall comply with all of Owner's obligations under the Hotel Management Agreement. Owner shall promptly provide City with copies of any notices of default received by Owner from the Hotel Manager with respect to Owner's obligations under the Hotel Management Agreement. Non -Discrimination. Owner shall cause the Hotel Manager to open and operate the Hotel in a manner that does not violate applicable laws that prohibit discrimination against any person or class of person by reason of gender, marital status, sexual orientation, race, color, creed, mental or physical disability, religion, age, ancestry, or national origin. Indemnification of City. Owner shall defend, indemnify, assume all responsibility for, and hold City, and City's representatives, volunteers, officers, officials, members, employees and agents, harmless from any and all claims, demands, damages, defense costs or liability of any kind (including reasonable attorneys' fees and costs), that arise from Owner's operation of the Hotel on the Site or which may be caused by any acts or omissions of the Owner under this Covenant Agreement, whether such activities or performance thereof be by Owner or by anyone directly or indirectly employed or contracted with by Owner and whether such damage shall accrue or be discovered before or after termination of this Covenant Agreement. OBLIGATIONS OF CITY. Covenant Payments to Owner. Amount of Covenant Payments. In consideration for Owner's undertakings pursuant to this Covenant Agreement, City shall make the following payments (each, a "Covenant Payment") to Owner on each Payment Date during the Operating Period: During the first ten (10) years of the Operating Period, the Covenant Payments due and payable by City on each Payment Date shall be an amount equal to ninety-five percent 882/015610-0065 9 6895841.10 a10/30/14 (95%) of the Transient Occupancy Taxes paid to City during the immediately preceding Payment Period. During the last five (5) years of the Operating Period, the Covenant Payments due and payable by City on each Payment Date shall be an amount equal to seventy-five percent (75%) of the Transient Occupancy Taxes paid to City during the immediately preceding Payment Period. It is understood and agreed that the Covenant Payments are in consideration of Owner's performance during each Payment Period, or portion thereof, and are not repayments of a loan. Cap on Annual Covenant Pam. Notwithstanding Section 4.1.1 above, City's obligation to make Covenant Payments is subject to (i) the amount of the Covenant Payment payable on any Payment Date not exceeding the Maximum Quarterly Payment for the applicable Payment Period, and (ii) the aggregate of all Covenant Payments payable for any Operating Year not exceeding the Maximum Annual Payment for such Operating Year. For the purposes of this Section 4.1.2, the following capitalized terms shall have the following meanings: "Maximum Annual Payment" means, for each Operating Year, the difference between (i) the Required Annual Return, and (ii) the Net Operating Income generated by the Hotel during such Operating Year. "Maximum Quarterly Payment" means, (i) for each of the first three (3) Payment Dates with respect to a particular Operating Year, the difference between (I) twenty- five percent (25%) of the Estimated Annual NOI as of such Payment Date, and (II) the Net Operating Income generated by the Hotel during the immediately preceding Payment Period, and (ii) for the final Payment Date with respect to a particular Operating Year, if applicable, a Fourth Quarter Covenant Payment, pursuant to Section 4.1.3 below. "Estimated Annual NOV means Owner's reasonable estimate of the projected annual Net Operating Income for the Operating Year in which an Estimated Annual NOI Notice is delivered. "Estimated Annual NOI Notice" means a written notice to be prepared by Owner and delivered to City following the end of each of the first three (3) quarters of each Operating Year and which shall include (i) operating statements showing the Net Operating Income during the immediately preceding Payment Period, and (ii) Owner's reasonable projections for the aggregate Net Operating Income over the entire applicable Operating Year. Annual Reconciliation. Following the end of each Operating Year, Owner shall deliver to City written notice (each, a "NOI Notice") of the actual Net Operating Income during such Operating Year. If the actual Net Operating Income during such Operating Year exceeds the amount of the Maximum Annual Payment, then Owner shall pay to City, concurrent with its delivery of the NOI Notice to City, the amount of such excess less the difference between the Maximum Annual Payment and the collective amount of the Covenant Payments paid by City for the first three (3) Payment Periods of the Operating Year. If the amount of the Maximum Annual Payment exceeds the actual Net Operating Income during such Operating Year, then, subject to Section 4.1.5 below, City shall pay to Owner the sum of (a) the amount of such excess, 882/015610-0065 1 O 6895841.10 a10/30/14 and (b) the difference between the collective amount of the Covenant Payments paid by City for the first three (3) Payment Periods of the Operating Year, and the Maximum Annual Payment (any such payment, a "Fourth Quarter Covenant Payment") within the later of (i) thirty (30) days following City's receipt of the Reconciliation Notice, or (ii) thirty (30) days following the final determination of an Auditor pursuant to Section 4.1.5 below. Determination of Required Annual Return. As soon as reasonably possible following the Commencement Date, Owner shall deliver to City written notice (the "Annual Return Notice") of Owner's determination of the Aggregate Preopening Expenses and the Required Annual Return, together with a line item summary of each category of costs included in the Aggregate Preopening Expenses and reasonable backup to substantiate that all such costs were actually incurred. Within thirty (30) days following City's receipt of the Annual Return Notice, City shall have the right to either accept or reject Owner's determination of the Required Annual Return; provided, however, if City rejects such determination, then it shall provide Owner with a reasonably detailed explanation for its rejection (the "City's Rejection Notice"). If the Parties are not able to reach agreement on the amount of the Required Annual Return within thirty (30) days following Owner's receipt of City's Rejection Notice, then the Parties shall jointly engage a certified public accountant (the "Auditor") to review Owner's books and records and determine the amount of the Required Annual Return. If the Parties cannot agree upon a choice of the Auditor within forty-five (45) days following Owner's receipt of City's Rejection Notice, then (i) each Party shall engage, at its sole cost, an auditor, provided each such auditor must be a certified public accountant with a nationally recognized firm and with at least ten (10) years of experience auditing hotel developers and operators. If said auditors' determinations of Required Annual Return differ by less than ten percent (10%), then the final determination of Required Annual Return shall be the average of amounts determined by said two auditors. If said auditors' determinations of Required Annual Return differ by ten percent (10%) or more, then the Parties shall instruct said auditors to engage a third auditor with the qualifications described above and the final determination of Required Annual Return shall be the average of the two auditors' determinations that are closest in value. The fees of such third auditor, if required, shall be paid by the Parties in equal fifty percent (50%) shares. The determination of the Required Annual Return pursuant to this Section shall be final and binding on the Parties for all purposes under this Covenant Agreement. Determination of Net Operating Income. Within folly -five (45) dqys following City's receipt of an NOI Notice, City shall have the right to review the books and records of the Hotel to determine the accuracy of the NOI Notice and to either accept or reject Owner's determination of Net Operating Income in such NOI Notice; provided, however, if City rejects such determination, then it shall provide Owner with a reasonably detailed explanation for its rejection (a "City's NOI Rejection Notice"). If the Parties are not able to reach agreement on the amount of the Net Operating Income within thirty (30) days following Owner's receipt of a City's NOI Rejection Notice, then the Parties shall jointly engage a certified public accountant (the "Auditor") to review Owner's books and records and determine the amount of the Net Operating Income. If the Parties cannot agree upon a choice of the Auditor within forty-five (45) days following Owner's receipt of City's NOI Rejection Notice, then (i) each Party shall engage, at its sole cost, an auditor, provided each such Auditor must be a certified public accountant with a nationally recognized firm and with at least ten (10) years of experience auditing hotel operators. If said auditors' determinations of Net Operating Income differ by less 882/015610-0065 11 6895841.10 a10/30/14 than ten percent (10%), then the final determination of Net Operating Income shall be the average of the two amounts determined by said two auditors. If said auditors' determinations of Net Operating Income differ by ten percent (10%) or more, then the Parties shall instruct said auditors to engage a third auditor with the qualifications described above and the final determination of Net Operating Income shall be the average of the two auditors' determinations that are closest in value. The fees of such third auditor, if required, shall be paid by the Parties in equal fifty percent (50%) shares. Source of Payments. The Covenant Payments shall be payable from any source of funds legally available to City. In this regard, it is understood and agreed that the Transient Occupancy Tax is being used merely as a measure of the amount of the Covenant Payments that are periodically owing by City to Owner, and that City is not pledging any portion of the actual Transient Occupancy Tax generated from the Site to Owner. Books and Records. Upon the written request of either Party, the other Party shall make available for inspection (at City Hall in the event of a review of City records and at Owner's place of business in La Quinta in the event of a review of Owner's records) such of its books and records as the requesting Party may reasonably determine must be reviewed in order to determine whether the correct amount of Covenant Payments have been made or are being made hereunder. Notwithstanding the foregoing, City shall not be required to produce any books or records that it is prohibited from producing by law and Owner shall not be required to produce information that violates the statutorily prescribed privacy rights of individual customers. No Acceleration. It is acknowledged by the Parties that any payments by City provided for in this Covenant Agreement are in consideration for the performance by Owner during the time period(s) for which payments are due. Therefore, City's failure to timely make any payments or City's failure to perform any of its other obligations hereunder shall not cause the acceleration of any anticipated future Covenant Payments by City to Owner. DEFAULTS AND REMEDIES. Defaults. Subject to Section 8.7 of this Covenant Agreement, the occurrence of any of the following shall constitute a "Default": the failure by either Party to perform any obligation of such Party for the payment of money under this Covenant Agreement if such failure is not cured within ten (10) calendar days following receipt of written notice of default; or the failure by either Party to perform any of its obligations (other than obligations described in clause (a) of this Section 5.1) set forth in this Covenant Agreement, if such failure is not cured within thirty (30) days following receipt of written notice of default, or, if such failure is of a nature that cannot reasonably be cured within thirty (30) days, the failure by such Party to commence such cure within such thirty (30) days and thereafter diligently prosecute such cure to completion; or any representation or warranty by a Party set forth in this Covenant Agreement proves to have been incorrect in any material respect when made; or 882/015610-0065 12 6895841.10 a10/30/14 Owner closes the Hotel, except for a Permitted Closure; or Owner defaults under the Hotel Management Agreement or the PSDA and has not cured the default within the applicable cure period (if any); or the Hotel is materially damaged or destroyed by fire or other casualty during the Operating Period and Owner fails to commence restoration of the improvements within a reasonable time or thereafter fails to diligently proceed to complete such restoration in accordance with this Covenant Agreement; or Owner concludes a "Transfer" (as defined below) without the prior written approval of City, except for a "Permitted Transfer" (as defined below); or Owner, or any constituent member of Owner (1) is the subject of an order for relief for a bankruptcy court, or is unable or admits its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; (2) applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or any part of its property; or (3) institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, rehabilitation or similar proceeding relating to it or any part of its property, or any similar proceeding is instituted without the consent of Owner and continues undismissed or unstayed for ninety (90) days; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of Owner, and the appointment continues undischarged or unstayed for ninety (90) days; or any judgment, writ, warrant of attachment or execution, or similar process is issued or levied against the Site and is not released, vacated, or fully bonded within ninety (90) days after its issue or levy; or Owner is enjoined or otherwise prohibited by any governmental agency from occupying the Site at any time during the Operating Period and such injunction or prohibition continues unstayed for ninety (90) days or more for any reason. City's Remedies Upon Default by Owner. Upon the occurrence of any Default by Owner, and after Owner's receipt of written notice of default and expiration of the time for Owner to cure such Default as provided in Section 5.1, City may, at its option: suspend the payment of Covenant Payments otherwise due and payable to Owner hereunder for the period that Owner remains in Default. If City has so suspended its payments in accordance with the terms of this clause, then upon Owner's cure of such Default, City shall resume its payment obligations, but shall have no obligation to make payments for any Payment Period during which City's obligation to make payments was so suspended; or if the Default continues uninterrupted for a period of six (6) months following Owner's receipt of written notice thereof, City may terminate this Covenant Agreement, in which case City's obligation to make payments to Owner for any period of time after the occurrence of the Default shall be finally terminated and discharged. 882/015610-0065 13 6895841.10 a10/30/14 Owner's Remedies Upon Default by City. Upon the occurrence of any Default by City, and after City's receipt of written notice of Default from Owner and expiration of the time for City to cure such Default as provided in Section 5.1, Owner may terminate this Covenant Agreement by written notice to City and/or seek whatever legal or equitable remedies may be available to Owner, subject to the provisions of this Section 5.3, Section 4.4 (No Acceleration) and Section 8.4 (Legal Actions). Notwithstanding the foregoing, in no event shall Owner be entitled to recover damages of any kind from City, except for damages up to, but not exceeding, the amount that Owner would have received under this Covenant Agreement but for City's default of its covenants under this Covenant Agreement, but excluding damages for economic loss, lost profits, or any other economic or consequential damages of any kind. Cumulative Remedies; No Waiver. Except as expressly provided herein, the nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights and remedies provided by law from time to time and the exercise by the nondefaulting Party of any right or remedy shall not prejudice such Party in the exercise of any other right or remedy. None of the provisions of this Covenant Agreement shall be considered waived by either Party except when such waiver is delivered in writing. No waiver of any Default shall be implied from any omission by City to take action on account of such Default if such Default persists or is repeated. No waiver of any Default shall affect any Default other than the Default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of this Covenant Agreement shall be construed as a waiver of any subsequent breach of the same provision. A Party's consent to or approval of any act by the other Party requiring further consent or approval shall not be deemed to waive or render unnecessary the consenting Party's consent to or approval of any subsequent act. A Parry's acceptance of the late performance of any obligation shall not constitute a waiver by such Parry of the right to require prompt performance of all further obligations. A Party's acceptance of any performance following the sending or filing of any notice of Default shall not constitute a waiver of that Party's right to proceed with the exercise of its remedies for any unfulfilled obligations. A Parry's acceptance of any partial performance shall not constitute a waiver by that Party of any rights relating to the unfulfilled portion of the applicable obligation. Limitations on City's Liability. Owner acknowledges and agrees that: (i) this Covenant Agreement shall not be deemed or construed as creating a partnership, joint venture, or similar association between Owner and City, the relationship between Owner and City pursuant to this Covenant Agreement is and shall remain solely that of contracting Parties, that the operation of the Hotel is a private undertaking, and City neither undertakes nor assumes any responsibility pursuant to this Covenant Agreement with respect to the operation of the Hotel on the Site other than as expressly provided for herein, and Owner shall rely entirely on its own judgment with respect to such matters; provided, that nothing herein is intended to release City from whatever obligations it may have pursuant to applicable laws independent of this Covenant Agreement; (ii) by virtue of this Covenant Agreement, City shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any occupancy or use of the Site, whether arising from: (a) any defect in any building, grading, landscaping, or other onsite or offsite improvement; (b) any act or omission of Owner or any of Owner's agents, employees, independent contractors, licensees, lessees, or invitees; or (c) any accident on the Site or any fire or other casualty or hazard thereon, and (iii) by accepting or approving anything required to be performed or given to City under this Covenant Agreement, 882/015610-0065 14 6895841.10 a10/30/14 including any certificate, NOI Notice, or insurance policy, City shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by City to anyone. ASSIGNMENT AND TRANSFER. Definitions. As used in this Article 6, the term "Transfer" means: Any total or partial sale, transfer, assignment or conveyance of the Development Project or the Improvements, or any part thereof or any ownership interest therein, or any contract or agreement to do any of the same; or Any total or partial sale, assignment or conveyance, or any transfer in any other mode or form, of or with respect to more than fifty percent (50%) ownership interest in Owner, or any contract or agreement to do any of the same, but only to the extent such transfer results in a change of Control. Purpose of Restrictions on Transfer. This Covenant Agreement is entered into solely for the purpose of development and operation of the Development Project and its subsequent use in accordance with the terms of this Covenant Agreement. The qualifications and identity of Owner are of particular concern to City, in view of` the importance of the development of the Development Project to the general welfare of the community; the financial resources, reputation and experiences of Owner in development of projects; and the fact that a Transfer as defined in Section 5.1 above is for practical purposes a transfer or disposition of the Development Project. It is because of the qualifications and identity of Owner that City is entering into this Covenant Agreement with Owner and that Transfers are permitted only as provided in this Covenant Agreement. Prohibited Transfers. Owner shall not make or create or suffer to be made or created, any Transfer, other than a Permitted Transfer, either voluntarily or by operation of law, without the prior written approval of City which approval shall not be unreasonably withheld, conditioned or delayed. In the event of a proposed Transfer (other than a Permitted Transfer), Owner shall submit to City such documentation as City determines is sufficient to evaluate the relevant experience, financial capability and reputation of the proposed transferee necessary to fulfill the Owner's obligations under this Covenant Agreement. Permitted Transfers. Notwithstanding the provisions of Section 5.3, Owner shall have the right to affect the following Transfers without the prior approval of City (each a "Permitted Transfer"): 882/015610-0065 15 6895841.10 a10/30/14 Any Transfer creating a Mortgage or other security for financing for the Project provided such financing has been approved by City pursuant to the PSDA. Any Transfer directly resulting from the foreclosure of a Mortgage or other security financing interest or the granting of a deed in lieu of foreclosure of a Mortgage (including, without limitation, a conveyance in lieu of foreclosure or a pledge of equity interests) or other security financing interest and the first subsequent transfer to any buyer or successor after such foreclosure or granting of a deed or conveyance in lieu of foreclosure. The leasing or licensing of space within the Improvements. The leasing of a Hotel to a Hotel Manager. The conveyance or dedication of a portion of the Development Property to any public entity, including a public utility, required to allow for the development or operation of the Improvements. The granting of temporary or permanent easements, licenses, rights -of- way, or permits to facilitate development and/or operation of the Development Project. A Transfer which may result from any merger, consolidation or reorganization involving Owner so long as the same shall possess all or substantially all of the business and assets of Owner immediately prior thereto. in Owner. The Transfer of a non -Controlling direct or indirect interest in the equity interests A Transfer to Affiliates of Owner or to Affiliates of Owner's members. All Transfers other than those enumerated in this Section 6.4 shall require the written approval of City, which approval shall not be unreasonably withheld, conditioned, or delayed. Transfers of Interest in Owner. Notwithstanding Section 6.3, City shall not unreasonably withhold its approval of a Transfer of a Controlling direct or indirect equity interest in Owner if the replacement member, partner or shareholder has, together with its affiliates, sufficient financial resources and liquidity to fulfill Owner's obligations under this Covenant Agreement. For purposes hereof an individual or entity shall be considered to have sufficient financial resources and liquidity if it, or its Affiliates, has a net worth or assets under management (whether through a separate account or other investment vehicle), including the Site, equal to or exceeding Twenty Million Dollars ($20,000,000), determined based on financial statements of such transferee, at the time of the Transfer. Binding Effect. This Covenant Agreement shall run with the land and shall be binding on, and inure to the benefit of the Parties hereto and their respective successors and assigns, as limited by this Section 6. In the event of any assignment that is consented to in writing by City, the references in this Covenant Agreement to "Owner" shall be deemed to refer to the assignee. 882/015610-0065 16 6895841.10 a10/30/14 MORTGAGEE PROTECTIONS. No Termination. No action by Owner or City to cancel or surrender this Covenant Agreement or to materially modify the terms of this Covenant Agreement shall be binding upon a Mortgagee without its prior written consent, which such Mortgagee shall not unreasonably withhold, condition or delay, unless (solely with respect to cancelling or surrendering this Covenant Agreement) such Mortgagee shall have failed to cure a default within the time frames set forth in this Article 7. Notices. If City shall give any notice of default to Owner hereunder, City shall simultaneously give a copy of such notice of default to any Mortgagee that has filed or recorded a request for such notice, at the address theretofore designated by it. No notice of default given by City to Owner shall be binding upon or affect said Mortgagee unless a copy of said notice of default shall be given to Mortgagee pursuant to this Article 7. In the case of an assignment of such Mortgage or change in address of such Mortgagee, said assignee or Mortgagee, by written notice to City, may change the address to which such copies of notices of default are to be sent. City shall not be bound to recognize any assignment of such Mortgage unless and until City shall be given written notice thereof, a copy of the executed assignment, and the name and address of the assignee. Thereafter, such assignee shall be deemed to be the Mortgagee hereunder with respect to the Mortgage being assigned. If such Mortgage is held by more than one person, corporation or other entity, no provision of this Covenant Agreement requiring City to give notices of default or copies thereof to said Mortgagee shall be binding upon City unless and until all of said holders shall designate in writing one of their number to receive all such notices of default and copies thereof and shall have given to City an original executed counterpart of such designation. Performance of Covenants. Mortgagee shall have the right (but not the obligation) to perform any term, covenant or condition and to remedy any default by Owner hereunder within the time periods specified herein, and City shall accept such performance with the same force and effect as if furnished by Owner; provided, however, that said Mortgagee shall not thereby or hereby be subrogated to the rights of City. Notwithstanding the foregoing, nothing herein shall be deemed to permit or authorize such Mortgagee (or its designee) to undertake or continue the construction or completion of the Improvements without first having expressly assumed Owner's obligations hereunder, under the PSDA, and under any other agreements between City and Owner that relate to the Hotel, to City or its designee by written agreement satisfactory to City. Default by Owner. In the event of a default by Owner, City agrees not to terminate this Covenant Agreement (1) unless and until Owner's and Mortgagee's notice and cure periods have expired, and (2) as long as: In the case of a default which cannot practicably be cured by a Mortgagee without taking possession of the Improvements, said Mortgagee shall proceed diligently to obtain possession of the Improvements as Mortgagee (including possession by receiver) and, upon obtaining such possession, shall proceed diligently to cure such default; or In the case of a default which is not susceptible to being cured by a Mortgagee, said Mortgagee shall institute foreclosure proceedings and diligently prosecute the same to 882/015610-0065 1 7 6895841.10 a10/30/14 completion (unless in the meantime it shall acquire Owner's right, title and interest hereunder, either in its own name or through a nominee, by assignment in lieu of foreclosure) and upon such completion of acquisition or foreclosure such default shall be deemed to have been cured. No Obligation to Cure. Mortgagee shall not have any obligation or duty pursuant to the terms set forth in this Covenant Agreement to perform the obligations of Owner or other affirmative covenants of Owner hereunder, or to guarantee such performance and nothing herein contained shall require any Mortgagee to cure any default of Owner referred to above. However, in the event that Mortgagee elects not to cure any default susceptible of being cured, City's obligation to further fund any Covenant Payments shall be suspended until such time as the default is cured (or such earlier time that Mortgagee cures the default). Separate Agreement. City may, upon request, execute, acknowledge and deliver to each Mortgagee, an agreement prepared at the sole cost and expense of Owner, in form satisfactory to each Mortgagee, between City, Owner and the Mortgagees, agreeing to all of the provisions hereof. Form of Notice. Any Mortgagee shall be entitled to receive the notices required to be delivered to it hereunder provided that such Mortgagee shall have delivered to City a notice substantially in the following form: "The undersigned, whose address is , does hereby certify that it is the Mortgagee (as such term is defined in that certain Agreement to Share Transient Occupancy Tax Revenue ("TOT Agreement") dated as of , 2014 between [XXXX] and the City of La Quinta, of the parcel of land described on Exhibit A attached hereto. In the event that any notice shall be given of a default of Owner under the TOT Agreement, a copy thereof shall be delivered to the undersigned who shall have the rights of a Mortgagee to cure the same, as specified in the TOT Agreement. Failure to deliver a copy of such notice shall in no way affect the validity of the notice to Owner, but no such notice shall be effective as it relates to the rights of the undersigned under the TOT Agreement with respect to the Mortgage, including the commencement of any cure periods applicable to the undersigned, until actually received by the undersigned." All notices to be provided by Mortgagee to City shall be provided in accordance with Section 8.8 below. Further Assurances. City and Owner agree to cooperate in including in this Covenant Agreement, by suitable amendment, any provision which may be reasonably requested by any Mortgagee or any proposed Mortgagee for the purpose of (i) more fully or particularly implementing the mortgagee protection provisions contained herein, (ii) adding mortgagee protections consistent with those contained herein and which are otherwise commercially reasonable, (iii) allowing such Mortgagee reasonable means to protect or preserve the security interest of such mortgagee in the collateral, including its lien on the Site and the collateral assignment of this Covenant Agreement, and/or (iv) clarifying terms or restructuring elements of the transactions contemplated hereby; provided, however, in no event shall City be obligated to 882/015610-0065 1 6895841.10 a10/30/14 materially and adversely modify any of Owner's obligations or City's rights under this Covenant Agreement in any manner not already contemplated in this Article 7. GENERAL PROVISIONS. Integration and Amendment. This Covenant Agreement, the PSDA, and the Agreement constitute the entire agreement by and between the Parties pertaining to the subject matter hereof, and supersede all prior agreements and understandings of the Parties with respect thereto. This Covenant Agreement may not be modified, amended, supplemented, or otherwise changed except by a writing executed by both Parties. Captions. Section headings used in this Covenant Agreement are for convenience of reference only and shall not affect the construction of any provisions of this Covenant Agreement. Counterparts. This Covenant Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. Legal Actions. This Covenant Agreement shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles. Intentionally Omitted. Effect of Violation of the Terms and Provisions of this Covenant Agreement. The covenants established in this Covenant Agreement shall, without regard to technical classification and designation, be binding for the benefit and in favor of City, its successors and assigns, as to those covenants which are for its benefit. The covenants contained in this Covenant Agreement shall remain in effect for the periods of time specified therein. City is deemed the beneficiary of the terms and provisions of this Covenant Agreement and of the covenants running with the land, for and in its own rights and for the purposes of protecting the interests of the community and other parties, public or private, in whose favor and for whose benefit this Covenant Agreement and the covenants running with the land have been provided. This Covenant Agreement and the covenants shall run in favor of City, without regard to whether City has been, remains, or is an owner of any land or interest in the Site. City shall have the right, if the Covenant Agreement or covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Covenant Agreement and covenants may be entitled. Force Majeure. Notwithstanding any other provision set forth in this Covenant Agreement to the contrary, in no event shall a Party be deemed to be in Default of its obligations set forth herein where delays or failures to perform are caused by circumstances without the fault and beyond the reasonable control of such Party, which circumstances shall include, without limitation, fire/casualty losses; strikes; litigation; unusually severe weather; inability to secure necessary labor, materials, or tools; delays of any contractor, subcontractor, or supplier; unjustified acts or failure to act by City or other governmental agency; litigation by third parties 882/015610-0065 1 9 6895841.10 a10/30/14 challenging the validity or enforceability of the Agreement or this Covenant Agreement; and acts of God (collectively, "force majeure"). Adverse market conditions or Owner's inability to obtain financing or approvals to operate the Hotel shall not constitute events of force majeure. In the event of a force majeure, the Party so delayed shall notify the other Party of the circumstances and cause of the delay within a reasonable time period after commencement of the delay, it shall keep the other Party informed at reasonable intervals upon request regarding the status of its efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform as soon as practicable thereafter. Notices. Notices to be given by City or Owner hereunder may be delivered personally or may be delivered by certified or registered mail, postage prepaid, or by reputable overnight delivery service providing a delivery confirmation receipt with time and date of delivery, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es) that a Party may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If delivered personally, service will be considered completed and binding on the Party served on the date of such personal delivery. If notice is to City: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attention: Frank J. Spevacek, City Manager with a copy to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, CA 92626 Attention: William H. Ihrke, City Attorney If notice is to Owner: SilverRock Development Company, LLC c/o The Robert Green Company 3551 Fortuna Ranch Road Encinitas, CA 92024 Attention: Robert S. Green, Jr. SilverRock Development Company, LLC c/o Meriwether Companies 11999 San Vicente Blvd., Suite 220 Los Angeles, CA 90049 Attention: Graham Culp with a copy to: Glaser Weil LLP 10250 Constellation Blvd., 19th Floor Los Angeles, CA 90067 Attention: Saul Breskal 882/015610-0065 20 6895841.10 a10/30/14 City Approvals and Actions. City shall maintain authority of this Covenant Agreement and the authority to implement this Covenant Agreement through the City Manager. The City Manager shall have the authority to make approvals, issue interpretations, waive provisions, negotiate and enter into amendments to this Covenant Agreement and/or negotiate and enter into implementing agreements or documents on behalf of City so long as such actions do not materially or substantially change the business terms of this Covenant Agreement, or materially or substantially add to the costs incurred or to be incurred by City as specified herein. Such approvals, interpretations, waivers, amendments, and/or implementing agreements or documents may include extensions of time to perform. All other material and/or substantial interpretations, waivers, or amendments shall require the consideration, action and written consent of the City Council. Further Acts. Each Parry agrees to take such further actions and to execute such other documents as may be reasonable and necessary in the performance of its obligations hereunder; reserving to City, however, its lawful discretionary and police power authority. Without limiting the generality of the foregoing, upon the expiration or termination of the Operating Period, City will execute and deliver such instruments as may be prepared by Owner at Owner's expense to release the cloud upon title to the Site created by this Covenant Agreement; provided, however, that any such document shall be in a form reasonably acceptable to the City Attorney of City. Third Party Beneficiaries. With the exception of the specific provisions set forth in this Covenant Agreement for the benefit of Mortgagees, there are no intended third party beneficiaries under this Covenant Agreement and no such other third parties shall have any rights or obligations hereunder. Estoppel Certificates. Either Party to this Covenant Agreement shall, promptly (but under all circumstances within ten (10) days) following the request of the other Party, execute, acknowledge and deliver to or for the benefit of such other Party, a certificate certifying: (i) that this Covenant Agreement is unmodified and in full force and effect (or, if there have been modifications, that this Covenant Agreement is in full force and effect, as modified, and stating the modifications), (ii) whether there are then existing any defaults on the part of the party requesting the certificate known to the Party delivering the certificate in the performance or observance of any agreement, covenant or condition hereof to be performed or observed and whether any notice has been given of any default which has not been cured (and, if so, specifying the same), and (iii) such other matters as may be reasonably requested. In the event City is requested to provide more than one such certificate in any twelve (12) month period, Owner shall reimburse City for all reasonable fees and costs City incurs from attorneys and consultants in the preparation of the same. Inspection of Books and Records. Not more than once per calendar quarter, City has the right at all reasonable times during normal business hours and following at least ten (10) Business Days prior written notice to Owner to inspect, on a confidential basis, the books, records and all other documentation of Owner pertaining to its obligations under this Covenant Agreement. Not more than once per year, Owner also has the right at all reasonable times during normal business hours and upon ten (10) Business Days prior written notice to inspect the books, records and all other documentation of City pertaining to its obligations under this Covenant Agreement. 882/015610-0065 21 6895841.10 a10/30/14 Severability. If any term, provision, covenant or condition of this Covenant Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability. Standard of Approval. Any consents or approvals required or permitted under this Covenant Agreement shall not be unreasonably delayed, conditioned or withheld, except where it is specifically provided that a sole discretion standard applies. Time of the Essence. Time is of the essence for each provision of this Covenant Agreement of which time is an element. [End — Signature page follows] 882/015610-0065 22 6895841.10 a10/30/14 IN WITNESS WHEREOF, the Parties have executed this Covenant Agreement to be effective as of the Covenant Agreement Effective Date. Date: .2014 ATTEST: Susan Maysels, City Clerk APPROVED AS TO FORM: RUTAN & TUCKER, LLP William H. Ihrke, City Attorney Date: 92014 882/015610-0065 23 6895841.10 a10/30/14 "City" CITY OF LA QUINTA, a California municipal corporation and charter city Frank J. Spevacek, City Manager "Owner" SILVERROCK DEVELOPMENT COMPANY, LLC, a Delaware limited liability company By: Its: State of California ) County of Riverside ) On , before me, (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature State of California ) County of Riverside ) On , before me, (Seal) (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature 882/015610-0065 24 6895841.10 a10/30/14 (Seal) EXHIBIT NO. 1 LEGAL DESCRIPTION OF SITE [To be inserted] 882/015610-0065 25 6895841.10 a10/30/14 TABLE OF CONTENTS Page 100. DEFINITIONS.....................................................................................................1 200. CONVEYANCE OF THE PROPERTY..............................................................11 201. Disposition of the Property.....................................................................11 202. Escrow...................................................................................................11 203. Review of Title of Property.....................................................................15 204. Title Insurance.......................................................................................16 205. Conditions of Closing.............................................................................16 206. Studies and Reports..............................................................................22 207. Condition of the Property....................................................................... 24 208. Installation of Luxury Hotel Fence; Implementation of Dust ControlProgram....................................................................................28 209. Master Site Infrastructure Improvements Land Use Approvals..............29 210. Master Site Infrastructure Improvements Design Approvals..................29 211. Approval of Financing (Master Site Infrastructure Improvements) .........30 212. Access to Property for Planning, Entitlement, Design, and FinancingPurposes............................................................................... 31 300. DEVELOPMENT OF THE PROJECT...............................................................32 301. Scope of Development...........................................................................32 302. Design Review.......................................................................................33 303. Schedule of Performance......................................................................33 304. Conditions to Develop............................................................................33 305. Phasing of Development........................................................................35 306. Insurance Requirements........................................................................39 307. Indemnity...............................................................................................41 308. Rights of Access During Construction....................................................42 309. Compliance With Laws; Payment of Taxes............................................42 310. Release of Construction Covenants......................................................44 311. Financing of the Project.........................................................................44 312. Developer CC&Rs.................................................................................47 313. Interference with Golf Course................................................................47 314. Pipeline Across Luxury Branded Residential Development ...................47 315. Temporary Clubhouse...........................................................................48 316. Golf Course Realignment.......................................................................48 317. Permanent Clubhouse Lease................................................................48 318. Compliance with State Construction General Permit .............................48 319. City Payment for Ahmanson Ranch House............................................49 400. USE AND OPERATION OF THE PROPERTY.................................................49 401. Operation of the Project.........................................................................49 402. Use in Accordance with Redevelopment Plan.......................................49 403. Maintenance Covenants........................................................................ 50 404. Obligation to Refrain from Discrimination...............................................50 405. Covenants Regarding Nondiscrimination...............................................50 882/015610-0065 6895841.10 a10/30/14 Page 406. Effect of Violation of the Terms and Provisions of this Agreement After Completion of Construction........................................................... 51 407. Representations and Warranties...........................................................52 408. Rights of Access During Operation........................................................ 55 500. DEFAULTS AND REMEDIES...........................................................................55 501. Default Remedies..................................................................................55 502. Institution of Legal Actions..................................................................... 55 503. Termination Prior to the Close of the Phase 1 Escrow ..........................56 504. Termination Prior to Phase 2 Closing....................................................56 505. City Option to Acquire Plans.................................................................. 57 506. Option Agreement..................................................................................58 507. Acceptance of Service of Process......................................................... 58 508. Rights and Remedies Are Cumulative ................................................... 58 509. Inaction Not a Waiver of Default............................................................ 58 510. Applicable Law.......................................................................................58 511. Non -Liability of Officials and Employees of City.....................................58 512. Attorneys' Fees......................................................................................59 600. GENERAL PROVISIONS................................................................................. 59 601. Notices, Demands and Communications Between the Parties .............. 59 602. Enforced Delay; Extension of Times of Performance ............................60 603. Transfers of Interest in Property or Agreement......................................60 604. Relationship Between City and Developer.............................................63 605. City Approvals and Actions.................................................................... 63 606. Counterparts........................................................................... ........64 607. Integration.............................................................................................. 64 608. Real Estate Brokerage Commission...................................................... 64 609. Titles and Captions................................................................................ 64 610. Interpretation.......................................................................................... 64 611. No Waiver..............................................................................................64 612. Modifications..........................................................................................64 613. Severability............................................................................................65 614. Computation of Time.............................................................................65 615. Legal Advice.......................................................................................... 65 616. Time of Essence.................................................................................... 65 617. Cooperation...........................................................................................65 618. Conflicts of Interest................................................................................65 619. Time for Acceptance of Agreement by City ............................................ 66 620. Attachments...........................................................................................66 ATTACHMENTS Attachment No. 1 - Legal Description of Property Attachment No. 2 - Site Map Attachment No. 3 - Schedule of Performance Attachment No. 4 - Form of Grant Deed Attachment No. 5 - Scope of Development 882/015610-0065 6895841.10 a10/30/14 Page Attachment No. 6 - Preliminary Budget Attachment No. 7 - Form of Option Agreement Attachment No. 8 - Release of Construction Covenants Attachment No. 9 - Form of Assignment and Assumption Agreement Attachment No. 10 - Memorandum of PSDA Attachment No. 11 - Form of TOT Sharing Agreement 882/015610-0065 6895841.10 a10/30/14