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HomeMy WebLinkAboutRes 06-44 and 523 C25080 A and B Conveyance and Exchange AgreementCITY OF PALM DESERT/PALM DESERT REDEVELOPMENT AGENCY REQUEST: SUBMITTED BY: DEVELOPER: DATE: CONTENTS: Recommendation: STAFF REPORT ADOPTION OF CITY COUNCIL RESOLUTION NO. 06-44 APPROVING AS TO FORM, AND AUTHORIZING THE EXECUTION AND DELIVERY OF A CONVEYANCE AND EXCHANGE AGREEMENT ADOPTION OF AGENCY RESOLUTION NO. 523 APPROVING AS TO FORM AND AUTHORIZING THE EXECUTION AND DELIVERY OF A CONVEYANCE AGREEMENT DAVE YRIGOYEN, DIRECTOR OF REDEVELOPMENT/HOUSING SANDERSON J. RAY DESERT SPRINGS PARTNERS, L.P. 2699 WHITE ROAD, SUITE 150 IRVINE, CA 92614 APRIL 13, 2006 CITY RESOLUTION NO. 06-44 AGENCY RESOLUTION NO. 523 CONVEYANCE AGREEMENT- CONTRACT NO. C25080A EXCHANGE AGREEMENT- CONTRACT NO. C25080B 1. That the City Council adopt Resolution No. 06-44 , a resolution of the City Council of the City of Palm Desert approving as to form, and authorizing the execution and delivery of, a Conveyance Agreement and an Exchange Agreement. 2. That the Agency Board adopt Resolution No. 523 , a resolution of the Palm Desert Redevelopment Agency approving as to form and authorizing the execution and delivery of a Conveyance Agreement. Executive Summary: Approval of the Conveyance Agreement and Exchange Agreement will provide for the exchange of 11.24 acres owned by Sanderson J. Ray Development for the Agency's 9.34 acres, both adjacent to Desert Willow. Discussion: Staff has negotiated the exchange of the 11.24 acres of land that is adjacent to the Desert Springs Market Place for the Agency's 9.34 acres adjacent to Manor Care. Essentially, the process will break down into three separate agreements: Staff Report Approval of Sanderson J. Ray Desert Springs Partners L.P. Exchange Agreement Page 2 of 4 April 13, 2006 1. The Conveyance Agreement, transferring the land between the Agency and the City; 2. The Exchange Agreement, transferring the land between Sanderson J. Ray and the City; and 3. The Development Agreement (exhibit to Exchange Agreement) will ultimately provide certain entitlements to Sanderson J. Ray (Developer) on the 9.34 acres. The Development Agreement will proceed through its own process by planning, however, it must be deposited into escrow prior to closing. Conveyance Agreement The City will acquire the Agency's 9.34 acre -parcel from Agency in order to exchange the same with Sanderson J. Ray Desert Springs Partners, L.P., pursuant to the Exchange Agreement and Joint Escrow Instructions. The Agency has agreed to convey such property to City on an as -is, where -is basis by grant deed prior to City's execution of such Exchange Agreement for $3,269,000, with the payment of such amount to be evidenced by an unsecured, but fully recourse promissory note made by the City and payable to the Agency. The purchase money loan evidenced by such note shall be repayable from the proceeds of the sale by the City of the 11.24 acres it acquired pursuant to such Exchange Agreement, or by the transfer of such property by City to Agency. Exchanae Aareement The City and Developer have agreed to exchange properties; provided, however, that the City shall pay Developer $3,000,000 in connection therewith because Developer's property has a value that exceeds the value of City's property with entitlement by $3,000,000. These entitlements will be created if the Development Agreement is approved. The City and Developer have two weeks following execution of the Agreement to review and approve/disapprove title to the property to be acquired thereby; provided, however, that City may not disapprove certain CC&R's affecting title to Developer's property. The City and Developer have 30 days following execution of the Agreement to review and approve/disapprove the condition of the property to be acquired thereby. G.\RDA\Mana Hunt \WPDATA\YRIGOYEN\STFRPTS\041306SJRpropexchange.doc Staff Report Approval of Sanderson J. Ray Desert Springs Partners L.P. Exchange Agreement Page 3 of 4 April 13, 2006 The closing of the exchange is scheduled to occur on or before December 31, 2006; provided, however, that the closing cannot occur sooner than 90 days after the satisfaction of all conditions precedent (including the execution and effectiveness of the Development Agreement) and cannot occur after June 30, 2007. Closing costs will be allocated between City and Developer as is customary for arms - length commercial real estate transactions in Palm Desert. The City and Developer have agreed to indemnify each other for any breaches for their representations and warranties. The closing will include the recordation of a restriction on the development of property (Ralph's remainder parcel) located adjacent to the property to be acquired by City. SJR will not process an application for improvement of the parcel for 36 months following the Close of Escrow, allowing the City to plan the development of the acquired land. The parcel will be used in connection with the expansion of a grocery store or such compatible uses as reasonably approved by the City. Form of Development Agreement The Developer of the proposed project has requested that the City Council approve a statutory development agreement with the Developer as part of the approval of the project entitlements. The basic purpose of the Development Agreement is to vest the Developer's right to construct the project as approved in the entitlements over the course of the ten (10) year term of the Agreement. If the Development Agreement is approved, the City agrees not to change the approved density of the project or the applicable codes, development fees and development standards, or to impose any moratorium on development of the site. In exchange for the significant vested rights granted to the Developer by the Development Agreement, however, the Developer agrees to construct the project as approved in the entitlements, to provide fencing between the proposed homes and the adjacent golf course, to construct on and off -site improvements that will be imposed as conditions of approval, and to indemnify the City from any damages caused by the proximity of new houses to the golf course. G.\RDA\Maria Hunt\WPDATA\YRIGOYEMSTFRPTS\041306SJRpropexchange doc Staff Report Approval of Sanderson J. Ray Desert Springs Partners L.P. Exchange Agreement Page 4 of 4 April 13, 2006 The Development Agreement will go through its normal approval process, and ultimately return to Council for final approval. The form of the Development Agreement is attached to the Exchange Agreement. The City Council has the authority to enter into a development agreement under State law and the Palm Desert Municipal Code. Pursuant to the requirements of the Code, the City's staff will review the Developer's compliance with the terms of the Development Agreement every six months. Submitted by: Dave Yrigoy Director of Re j€velopment/Housing mh Approval: Carlos L. Ortega, Approval: sti ACM i/ ..,/L McCarthy edevelopmen cutive Director `Paul S. Gibson, Director of Finance G:\RDA\Maria Hunt \W PDATA\YRIGOYEMSTFRPTS\041306SJRpropexchange doc RESOLUTION NO. 06-44 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT APPROVING AS TO FORM, AND AUTHORIZING THE EXECUTION AND DELIVERY OF, A CONVEYANCE AGREEMENT AND AN EXCHANGE AGREEMENT THE CITY COUNCIL OF THE CITY OF PALM DESERT DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. As presented to this meeting and on file with the City Clerk of the City of Palm Desert, the form of Conveyance Agreement by and between the Palm Desert Redevelopment Agency and the City of Palm Desert, is hereby approved and the Mayor is hereby authorized and directed, for and in the name and on behalf of the City of Palm Desert, to execute such Conveyance Agreement in substantially the form hereby approved, with such changes therein as the Mayor may approve, such approval to be conclusively evidenced by his execution and delivery thereof. Section 2. As presented to this meeting and on file with the City Clerk of the City of Palm Desert, the form of the Exchange Agreement by and between Sanderson J. Ray Desert Springs Partners, L.P. and the City of Palm Desert, is hereby approved and the Mayor is hereby authorized and directed, for and in the name and on behalf of the City of Palm Desert, to execute such Conveyance Agreement in substantially the form hereby approved, with such changes therein as the Mayor may approve, such approval to be conclusively evidenced by his execution and delivery thereof. Section 3. The staff and officers of the City of Palm Desert are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents (including the exhibits to such Conveyance Agreement and such Exchange Agreement) that they may deem necessary or advisable in order to effectuate the purposes of this Resolution, such Conveyance Agreement and such Exchange Agreement, and any such actions previously taken by such staff and officers are hereby ratified and confirmed. 8821 17.2 wit: Section 4. This Resolution shall take effect immediately upon adoption. APPROVED and ADOPTED this 13th day of April, 2006 by the following vote, to AYES: NOES: ABSENTS: ABSTAINS: Jim Ferguson, Mayor ATTEST: Rachelle D. Klassen, City Clerk 8821 17.2 2 RESOLUTION NO. 523 A RESOLUTION OF THE PALM DESERT REDEVELOPMENT AGENCY APPROVING AS TO FORM, AND AUTHORIZING THE EXECUTION AND DELIVERY OF, A CONVEYANCE AGREEMENT THE PALM DESERT REDEVELOPMENT AGENCY DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. As presented to this meeting and on file with the Secretary of the Palm Desert Redevelopment Agency, the form of Conveyance Agreement by and between the City of Palm Desert and the Palm Desert Redevelopment Agency, is hereby approved and the Chairman is hereby authorized and directed, for and in the name and on behalf of the Palm Desert Redevelopment Agency, to execute such Conveyance Agreement in substantially the form hereby approved, with such changes therein as the Chairman may approve, such approval to be conclusively evidenced by his execution and delivery thereof. Section 2. The staff and officers of the Palm Desert Redevelopment Agency are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents (including the exhibits to such Conveyance Agreement) that they may deem necessary or advisable in order to effectuate the purposes of this Resolution and such Conveyance Agreement, and any such actions previously taken by such staff and officers are hereby ratified and confirmed. Section 3. This Resolution shall take effect immediately upon adoption. APPROVED and ADOPTED this 13th day of April, 2006 by the following vote to wit: AYES: NOES: ABSENTS: ABSTAINS: Jim Ferguson, Chairman ATTEST: Rachelle D. Klassen, Secretary 8821 19.2 CONVEYANCE AGREEMENT THIS CONVEYANCE AGREEMENT (this "Agreement") is made and entered into as of March , 2006, by and between the CITY OF PALM DESERT, a California municipal corporation ("Buyer"), and the PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic ("Seller"), with respect to the following: RECITALS: A. Seller is the owner of certain unimproved real property located in the City of Palm Desert, County of Riverside, State of California, more particularly described in Exhibit A attached hereto (the "Property"). B. By this Agreement, Seller is agreeing to sell the Property to Buyer and Buyer is agreeing to buy the Property from Seller in accordance with the terms hereof. AGREEMENT: NOW, THEREFORE, the parties hereto do hereby agree as follows: 1. Conveyance. The transfer of the Property contemplated hereby (the "Closing") shall occur on or before April , 2006 (the "Closing Date"). 2. Price. The price is Three Million Two Hundred Sixty -Nine Thousand Dollars ($3,269,000) (the "Price"). The Price shall be paid by Buyer to Seller in the form of the promissory note attached hereto as Exhibit C (the "Note"). 3. Delivery of Documents. On or prior to the Closing Date, Seller agrees to deliver to Buyer a duly executed and acknowledged grant deed in the form attached hereto as Exhibit B (the "Grant Deed"). On or prior to the Closing Date, Buyer agrees to deliver to Seller the Note duly executed by Buyer. 4. Authorization to Record. After delivery of the Note to Seller and Buyer's receipt of the Grant Deed from Seller, Buyer shall cause the Grant Deed to be recorded in the Official Records of Riverside County, California. 5. Costs and Prorations. Each party will pay its own fees, costs and expenses incurred in connection with this Agreement and the Closing. Any non -delinquent real estate taxes and other assessments or impositions against the Property shall be pro -rated as of the Closing on the basis of a 365-day year. 6. AS -IS, WHERE -IS. Prior to the Closing, Buyer shall conduct all tests, studies and/or investigations with respect to the Property as Buyer deems appropriate. Buyer shall rely solely upon its own tests, studies and/or investigations of the Property in purchasing the same and shall not rely in any way upon any representations, statements, agreements, warranties, studies, reports, descriptions, guidelines or other information or material furnished by Seller or its R56385.3 representatives, whether oral or written, express or implied, of any nature whatsoever regarding any of the foregoing matters. Buyer represents and warrants that it is acquiring the Property "AS IS, WHERE IS" without representation by Seller, and that no patent or latent condition affecting the Property in any way, whether or not known or discoverable or hereafter discovered, shall affect Buyer's obligations contained in this Agreement, nor shall any such condition give rise to any right of damages, rescission or otherwise against Seller. 7. Default. In the event of a breach or default under this Agreement by either party, the non -defaulting party shall have the right to terminate this Agreement by delivering notice thereof to the defaulting party. Such termination by a non -defaulting party shall be without prejudice to the non -defaulting party's rights and remedies against the defaulting party at law or equity. 8. Notices. Except as otherwise required by law, any notice, request, direction, demand, consent, waiver, approval or other communication required or permitted to be given hereunder shall not be effective unless it is given in writing and shall be delivered (a) in person, (b) by certified mail, postage prepaid, return receipt requested, or (c) by a commercial overnight courier that guarantees next day delivery and provides a receipt, and addressed to the parties at the addresses stated below, or at such other address as either party may hereafter notify the other in writing as aforementioned If to Buyer: If to Seller: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, California 92260 Attention.: City Manager Palm Desert Redevelopment Agency 73-510 Fred Waring Drive Palm Desert, California 92260 Attention.: Mr. David Yrigoyen Service of any such notice or other communications so made shall be deemed effective on the day of actual delivery (whether accepted or refused) as shown by the addressee's return receipt if by certified mail, and as confirmed by the courier service if by courier; provided, however, that if such actual delivery occurs after 5:00 p.m. (local time where received) or on a non business day, then such notice or demand so made shall be deemed effective on the first business day following the day of actual delivery. No communications via facsimile or electronic mail shall be effective to give any notice, request, direction, demand, consent, waiver, approval or other communications hereunder. 9. Amendments. Any amendments to this Agreement shall be effective only when duly executed by Seller and Buyer. 10. Counterparts. This Agreement may be executed in counterparts, each of which, when taken together, shall constitute one original of this Agreement. 856385.3 2 11. Time is of the Essence. The parties agree that time is of the essence with respect to each provision hereof. 12. Entire Agreement. This Agreement, including all exhibits attached hereto, integrates all of the terms and conditions pertaining to the Closing, and supersedes all negotiations or previous agreements between the parties with respect thereto. 13. Severabilitv. Invalidation of any of the provisions hereof by judgment or court order shall in no way affect any of the other provisions hereof, and the latter shall remain in full force and effect. 14. No Third Party Beneficiary Rights. This Agreement is entered into for the sole benefit of Seller and Buyer and no other parties are intended to be direct or incidental beneficiaries of this Agreement, and no third party shall have any right in, under or to this Agreement. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 16. Further Documents. Each party will, as often as it shall be requested by the other party, execute, acknowledge and deliver such other documents and perform such other acts as may reasonably be necessary in order to consummate the Closing and otherwise carry out the intent and purpose of this Agreement. 856385.3 [This Space Intentionally Left Blank; Signature On The Next Page] 3 IN WITNESS WHEREOF, the parties have caused this Conveyance Agreement to be executed as of the date first above written. BUYER: CITY OF PALM DESERT, a California municipal corporation ATTEST: City Clerk SELLER: ATTEST: Secretary 856385.3 By: Name: Its: PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic By: Name: Its: 4 EXHIBIT A LEGAL DESCRIPTION PARCEL 1: THE EAST HALF OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MARCH 31, 1958 AS INSTRUMENT NO. 23183, OFFICIAL RECORDS. PARCEL 2: THE WEST HALF OF THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MAY 20, 1958 IN BOOK 2273, PAGE 480, OFFICIAL RECORDS. 856385.3 A-1 EXHIBIT B FORM OF GRANT DEED RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Palm Desert Redevelopment Agency 73-510 Fred Waring Drive Palm Desert, California 92260 Attention.: Mr. David Yrigoyen APN: Recording Fee: [Space Above For Recorder's Use Only] Exempt pursuant to California Government Code Section 27383 Documentary Transfer Tax: Exempt pursuant to California Revenue & Taxation Code Section 11922 GRANT DEED FOR VALUE RECEIVED, the PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic, hereby GRANTS to the CITY OF PALM DESERT, a California municipal corporation, all of its right, title and interest in and to that certain real property situated in the City of Palm Desert, County of Riverside, State of California, more particularly described on Exhibit A attached hereto; SUBJECT TO all easements, covenants, conditions, restrictions, rights of way, reservations and all other matters of record. [This Space Intentionally Left Blank; Signature On The Next Page] 856385.3 B-1 IN WITNESS WHEREOF, the undersigned has executed this Grant Deed as of , 2006. PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic By: Name: Its: ATTEST: Secretary • STATE OF CALIFORNIA COUNTY OF RIVERSIDE On , 2006, before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. (SEAL) 856385.3 Notary Public in and for the State of California B-2 CERTIFICATE OF ACCEPTANCE (California Government Code Section 27281) This is to certify that the interest in real property conveyed by that certain Grant Deed dated as of , 2006, from the Palm Desert Redevelopment Agency, a public body, corporate and politic, to the City Of Palm Desert, a California municipal corporation, is hereby accepted by the undersigned officer on behalf of the City Of Palm Desert pursuant to the authority conferred by Resolution No. of the City Council of the City Of Palm Desert adopted on , 2006, and the grantee consents to the recordation thereof by its duly authorized officer. Dated as of: , 2006. ATTEST: , City Clerk STATE OF CALIFORNIA COUNTY OF RIVERSIDE , City Manager ) ) ) On , 2006, before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. (SEAL) 856385.3 Notary Public in and for the State of California B-3 EXHIBIT A TO GRANT DEED LEGAL DESCRIPTION PARCEL 1: THE EAST HALF OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MARCH 31, 1958 AS INSTRUMENT NO. 23183, OFFICIAL RECORDS. PARCEL 2: THE WEST HALF OF THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MAY 20, 1958 IN BOOK 2273, PAGE 480, OFFICIAL RECORDS. 856385.3 B-4 EXHIBIT C FORM OF PROMISSORY NOTE $3,269,000 April , 2006 Palm Desert, California PROMISSORY NOTE FOR VALUE RECEIVED, the CITY OF PALM DESERT, a California municipal corporation ("Borrower"), hereby unconditionally promises to pay to the order of PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic ("Lender"), at 73-510 Fred Waring Drive, Palm Desert, California 92260, or at such other place as the holder hereof may from time to time designate in writing, the principal sum of THREE MILLION TWO HUNDRED SIXTY NINE THOUSAND DOLLARS ($3,269,000) (the "Principal"), with interest thereon at the rate of percent ( %) per annum (the "Interest"). This Promissory Note (this "Note") is made by Borrower pursuant to that certain Conveyance Agreement dated as of March , 2006, executed by Borrower, as Buyer, and Lender, as Seller (the "Agreement"), and evidences the price paid by Borrower to Lender for certain unimproved real property located in the City of Palm Desert, County of Riverside, State of California (the "Initial Property"). Notwithstanding anything to the contrary contained in this Note or the Agreement, this Note is NOT secured by the Property or any other property of Borrower; provided, however, that Lender shall have full recourse to and against Borrower with respect to all payments required to be made by Borrower to Lender hereunder. Upon Borrower's transfer of the "Replacement Property" (as defined below) to a person or entity other than Lender (the "Maturity Date"), the Principal and the Interest shall be due and payable by Borrower to Lender from, but only to the extent of, the net proceeds otherwise due to Borrower in connection with such transfer as Borrower's payment in full of the Principal and the Interest; provided, however, that this Note may be prepaid, in whole or in part, at any time without penalty. Borrower shall make all payments due hereunder in lawful money of the United States via immediately available funds; provided, however, that Lender shall accept Borrower's transfer (by grant deed in substantially the same form as attached to the Agreement) of that certain unimproved real property located in the City of Palm Desert, County of Riverside, State of California, more particularly described in Exhibit A attached hereto (the "Replacement Property"), as Borrower's payment in full of the Principal and the Interest. All computations of the Interest shall be based upon a 365 day year, and, in the case of any partial month, on the actual number of days elapsed in such month. 856385.3 C-1 Should the indebtedness evidenced by this Note, or any part thereof, be collected at law or in equity or in bankruptcy, receivership or other court proceeding, or should this Note be given to an attorney for collection, Borrower agrees to pay, in addition to the Interest and the outstanding principal balance of this Note, all costs of collecting, or attempting to collect, this Note, including, without limitation, the reasonable fees and expenses of such attorney (including, without limitation, those incurred in connection with any appeal). Borrower waives presentment, demand, notice, protest, stay of execution, and all other defenses to payment generally, including, without limitation, the right to plead any and all statutes of limitation, and assents to the terms hereof, and agrees that any renewal, extension or postponement of the time for payment or any other indulgence, may be affected without notice to and without releasing Borrower from any liability hereunder. This Note is not subject to any valid right of rescission, set-off, abatement, diminution, counterclaim or defense as against Lender, including, without limitation, the defense of usury and the operation of any of the terms of this Note. This Note shall not require the payment, or permit the collection, of interest in excess of the maximum rate allowed under applicable law. If any interest in excess of the maximum rate allowed under applicable law is provided for, or shall be adjudicated to be so provided for, Borrower shall not be obligated to pay such interest in excess of the maximum rate allowed under applicable law, and the right to demand the payment of any such excess shall be, and hereby is, waived, and this paragraph shall control any other provision of this Note. Upon notice from Lender to Borrower of the loss, theft, destruction or mutilation of this Note, Borrower shall make and deliver to Lender a new note of like tenor in lieu of this Note. This Note shall be governed by, and construed in accordance with, the laws of the State of California, without reference to conflicts of law rules. 856385.3 [This Space Intentionally Left Blank; Signature On The Next Page] C-2 IN WITNESS WHEREOF, the undersigned has executed and delivered this Promissory Note as of the date and year first above written. BORROWER: CITY OF PALM DESERT, a California municipal corporation ATTEST: City Clerk 856385.3 By: Name: Its: C-3 EXHIBIT A TO PROMISSORY NOTE LEGAL DESCRIPTION PARCELS 1 THROUGH 6, INCLUSIVE, AND 16 THROUGH 19, INCLUSIVE, AS SHOWN BY PARCEL MAP 24700, ON FILE IN BOOK 183 PAGES 38 THROUGH 42, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA. EXCLUDING THEREFROM THOSE PORTIONS OF PARCELS 1, 5, 6, 16 AND 19 SHOWN ON EXHIBIT B ATTACHED TO THIS PROMISSORY NOTE AS LYING BETWEEN THE LINE DESIGNATED "NEW PROPERTY LINE" AND THE LINE DESIGNATED "EXISTING PROPERTY LINE." 856385.3 C-4 EXHIBIT B TO PROMISSORY NOTE DEPICTION (See Attached) 856385.3 C-5 EXCHANGE AGREEMENT AND JOINT ESCROW INSTRUCTIONS BETWEEN CITY OF PALM DESERT, a California municipal corporation "City" AND SANDERSON J. RAY -DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership "SJR" DATED: April , 2006 856634.10 DEFINED TERMS Execution Date: April , 2006 City: City of Palm Desert, a California municipal corporation City's Address: 73510 Fred Waring Drive Palm Desert, CA 92260 Attention: City Manager SJR: Sanderson J. Ray Desert Springs Partners, L.P., a Texas limited partnership SJR's Address: City's Counsel: SJR's Counsel: City Property: SJR Property: Desert Springs Commercial Center: 856634.10 2699 White Road, Suite 150 Irvine, California 92614 Attention: Martin Hannigan, Partner Richards, Watson & Gershon 355 South Grand Avenue, 40th Floor Los Angeles, California 90071-3101 Attn: Owen P. Gross, Esq. Phone No.: (213) 253-0239 Fax No.: (213) 626-0078 Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attn: Thomas J. Clark, Esq. Phone No.: (949) 725-4140 Fax No.: (949) 823-5140 That certain real property located in the City of Palm Desert, County of Riverside, State of California as described on Exhibit A attached hereto. That certain real property located in the City of Palm Desert, County of Riverside, State of California as described on Exhibit B attached hereto and shown as the "Exchange Property" on the SJR Property Site Plan attached hereto as Exhibit I. That certain real property owned by SJR and located in the City of Palm Desert, County of Riverside, State of California, bordered on the west by the "Exchange Property," on the east by Cook Street, on the north by Market Place and on the south by Country Club Drive, including the Ralph's Remainder Parcel, as shown on the SJR Property Site Plan attached hereto as Exhibit I. Ralph's Remainder Parcel: That certain real property located within the Desert Springs Commercial Center and identified as the "Ralph's Remainder Parcel" on the SJR Property Site Plan attached hereto as Exhibit I Value of the SJR Property and the City Property: The Value of the SJR Property exceeds the Value of the City Property by Three Million Dollars ($3,000,000). Closing Date: On or before December 31, 2006. Title Company: Escrow Holder: First American Title Insurance Company 114 East Fifth Street Santa Ana, CA 92701 Phone No.: (714) 558-3211 Fax No.: (714) 285-0329 First American Title Insurance Company 114 East Fifth Street Santa Ana, CA 92701 Phone No.: (714) 558-3211 Fax No.: (714) 285-0329 Brokers: None. Development Agreement: Is attached hereto as Exhibit H and incorporated herein by reference. Entitlements: Is defined in the Development Agreement. Hazardous Material: 856634.10 Means any substance, material or waste which is or becomes, regulated by any local 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," "acutely 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 byphenyls, (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20, (ix) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317), (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901, et seg.), (xi) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Sections 9601, et seq.), (xii) Methyl -Tertiary Butyl Ether, or (xiii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any Governmental Requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as "hazardous" or harmful to the environment. 856634.10 EXCHANGE AGREEMENT AND JOINT ESCROW INSTRUCTIONS THIS EXCHANGE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this "Agreement") is made and entered into as of the Execution Date by and between City and SJR. In consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, City and SJR agree as follows: 1. Obligations of City and SJR Prior to Closing. (a) The City and SJR recognize and agree that the goal of the parties with respect to the City Property is to design and entitle a residential project of not less than twelve (12) dwelling units per acre which reflects the quality of the Desert Willow Resort Area while maintaining the density necessary to make the exchange pursuant to this Agreement economically feasible for SJR (the "Project"). (b) The City and SJR agree to design ingress and egress to and from the Project that will allow for the maximum turning movements on to Country Club Drive. (c) The City agrees to assign one staff member to be the point of contact to manage, control, coordinate and expedite the process of entitling the Project. (d) The City will expeditiously process a lot line adjustment with respect to the SJR Property as generally shown on the SJR Site Plan attached hereto as Exhibit I (the "Lot Line Adjustment"). 2. Exchange. City hereby agrees to convey the City Property to SJR and, in exchange SJR hereby agrees to convey the SJR Property to City, on the terms and conditions set forth in this Agreement. 3. Consideration. (a) Consideration for City Property. As the consideration to the City in return for City's conveyance to SJR of the City Property, SJR or its nominee shall, at the "Closing" (as defined below), convey the SJR Property to the City or its nominee. (b) Consideration for SJR Property. As the consideration to SJR, in return for SJR's conveyance to City of the SJR Property, City shall, at the Closing, (i) convey the City Property to SJR or its nominee, and (ii) pay to SJR Three Million Dollars ($3,000,000) payable by wire transfer or other immediately available funds (the "Cash Payment"). 4. Title Review of City Property. SJR has been furnished with and hereby acknowledges receipt of a preliminary commitment for the City Property ("City Property Title Commitment"), together with complete and legible copies of all documents referred to as 856634.10 exceptions identified in Schedule B thereof. SJR shall conduct its review of the City Property Title Commitment in accordance with the following procedures: (a) SJR's Notice. SJR shall have ten (10) business days after the Execution Date to notify the City in writing of its approval and/or disapproval of each exception in Schedule B of the City Property Title Commitment ("City Title Matters"). Exceptions not disapproved by SJR within this time period shall automatically be deemed "Permitted Exceptions." Notwithstanding the foregoing, exceptions that evidence the delinquent obligation to pay money ("Monetary Exceptions") shall be automatically deemed disapproved. (b) The Citv's Notice. The City shall have ten (10) business days after receipt of SJR's notification in which to notify SJR whether or not it elects to cure or remove any of the disapproved exceptions identified in SJR's notice given pursuant to Section 4(a). The City's failure to so notify SJR within this time period shall constitute the City's election to not remove any such exceptions. The City shall remove all exceptions it elects to remove on or before Closing. Notwithstanding the foregoing, the City agrees to remove all Monetary Exceptions at or prior to Closing. (c) SJR's Election. If the City does not elect to, or is deemed to have elected not to, remove all exceptions disapproved by SJR, SJR may, no later than ten (10) business days after expiration of the ten (10) business day period described in Section 4(b), elect by written notice to the City to either (a) continue this Agreement and proceed with Closing, in which event the disapproved exceptions that the City has not elected to remove shall become Permitted Exceptions, or (b) terminate this Agreement without liability to either party, in which case all of the parties' rights and obligations hereunder (other than those which are intended to survive such termination by the express terms hereof) shall terminate as well. Upon such termination, each party shall promptly take any and all actions necessary to cancel "Escrow" (as defined below) and to return any documents provided to it by the other party. (d) New Exceptions. The notice and response procedure of this Section 4 shall be repeated for any additional title exceptions of which SJR is notified by the Title Company after the Execution Date, except that if the time period for delivery of any notice extends beyond the Closing Date, then the Closing shall be extended for whatever period of time is necessary to accommodate such notice period(s). Notwithstanding any other provision of this Agreement, the City shall not record or authorize for recording any lien or encumbrance against the City Property that would extend beyond the Closing Date without the prior written approval of SJR. 5. Title Review of SJR Property. The City has been furnished with and hereby acknowledges receipt of a preliminary commitment for the SJR Property ("SJR Property Title Commitment"), together with complete and legible copies of all documents referred to as exceptions identified in Schedule B thereof. The City shall conduct its review of the Title Commitment in accordance with the following procedures: (a) The Citv's Notice. The City shall have ten (10) business days after the Execution Date to notify SJR in writing of its approval and/or disapproval of each exception in Schedule B of SJR Property Title Commitment ("SJR Title Matters"). Exceptions not 856634.10 2 disapproved by the City within this time period shall automatically be deemed Permitted Exceptions. Notwithstanding the foregoing, Monetary Exceptions shall be automatically deemed disapproved. (b) SJR's Notice. SJR shall have ten (10) business days after receipt of the City's notification in which to notify the City whether or not it elects to cure or remove any of the disapproved exceptions identified in City's notice pursuant to Section 5(a). SJR's failure to so notify the City within this time period shall constitute the SJR's election to not remove any such exceptions. SJR shall remove all exceptions it elects to remove on or before Closing. Notwithstanding the foregoing, SJR agrees to remove all Monetary Exceptions at or prior to Closing. (c) The City's Election. If SJR does not elect to, or is deemed to have elected not to, remove all exceptions disapproved by the City, the City may, no later than ten (10) business days after expiration of the ten (10) business day period described in Section 5(b), elect by written notice to SJR to either (a) continue this Agreement and proceed with the Closing, in which event the disapproved exceptions that SJR has not elected to remove shall become Permitted Exceptions, or (b) terminate this Agreement without liability to either party, in which case all of the parties' rights and obligations hereunder (other than those which are intended to survive such termination by the express terms hereof) shall terminate as well. Upon such termination, each party shall promptly take any and all actions necessary to cancel Escrow and to return any documents provided to it by the other party. (d) New Exceptions. The notice and response procedure of this Section 5 shall be repeated for any additional title exceptions of which the City is notified by the Title Company after the Execution Date, except that if the time period for delivery of any notice extends beyond the Closing Date, then the Closing shall be extended for whatever period of time is necessary to accommodate such notice period(s). Notwithstanding any other provision of this Agreement, SJR shall not record or authorize for recording any lien or encumbrance against SJR Property that would extend beyond the Closing Date without the prior written approval of the City. (e) Specific Permitted Exceptions. City hereby agrees to accept title subject to the items described in Exhibit G (collectively, the "CC&R's"). 6. The City's Due Diligence Contingency. (a) Due Diligence. The City's obligation to acquire SJR Property and SJR's obligations to convey SJR Property to the City are contingent upon the City determining, in the exercise of its sole and absolute discretion, that it is satisfied with its due diligence of all aspects of SJR Property ("City Due Diligence Contingency"). (b) Property Documents. Within ten (10) business days after the Execution Date, SJR shall provide to the City copies of any and all information regarding SJR Property in SJR's possession or control, including but not limited to the following: soil reports, environmental or hazardous waste studies, engineering studies or any other studies or reports relating to the physical condition of the property or any agreements relating to the physical 856634.10 3 condition or use and development the of SJR Property, if any ("SJR Property Documents"); provided, however, that City may not terminate based on the CC&R's. (c) Rieht of Access. The City and its agents, employees and designees shall be afforded reasonable access and entry onto the SJR Property during the Due Diligence Period to conduct such studies, tests, inspections and other investigations as determined by the City in its sole and absolute discretion in order to fully investigate the SJR Property. All such studies, tests, inspections and other investigations shall occur at the City's sole cost and expense. The City shall provide SJR with at least two (2) business days' advance written notice prior to entering upon the SJR Property. The City shall indemnify, defend and hold SJR harmless from any claim, liability, loss or expense asserted against SJR or SJR Property in connection with the City's or its agents', employees' and designees' entry on the SJR Property, and, so long as this Agreement has not been terminated by the City due to SJR's nonperformance, the City shall provide SJR, at no cost to SJR, with copies of all reports issued in connection with the tests, studies, inspections and/or other investigations conducted by the City on the SJR Property. (d) Due Diligence Period. The City shall have thirty (30) days from the Execution Date ("City Due Diligence Period") within which to determine the City's satisfaction in its sole and absolute discretion with the City Due Diligence Contingency. If the City is not satisfied with the City Due Diligence Contingency within the City Due Diligence Period, the City may terminate this Agreement by delivering written notice of such termination to SJR on or before the expiration of the City Due Diligence Period, in which case all of the parties' rights and obligations hereunder (other than those which are intended to survive such termination by the express terms hereof) shall terminate as well. Upon such termination, each party shall promptly take any and all actions necessary to cancel Escrow and to return any documents provided to it by the other party. If the City does not provide written notice of termination of this Agreement within the City Due Diligence Period, the City Due Diligence Contingency shall be deemed to have been satisfied and waived, and this Agreement shall continue in full force and effect. (e) Condition of the SJR Property. The waiver or satisfaction of the City Due Diligence Contingency shall constitute the City's determination that it is satisfied with its investigation of the condition of the SJR Property and all material facts bearing on its purchase of the SJR Property. Except for SJR's express representations and warranties under this Agreement, the City will acquire SJR Property "AS IS", with any and all faults and defects. 7. SJR's Due Diligence Contingencv. (a) Due Diligence. SJR's obligation to acquire the City Property and the City's obligations to convey the City Property to SJR are contingent upon SJR determining, in the exercise of its sole and absolute discretion, that it is satisfied with its due diligence of all aspects of the City Property ("SJR Due Diligence Contingency"). (b) Property Documents. Within ten (10) business days after the Execution Date, the City shall provide to SJR copies of any and all information regarding City Property in the City's possession or control, including but not limited to the following: soil reports, environmental or hazardous waste studies, engineering studies or any other studies or reports 856634.10 4 relating to the physical condition of the property or any agreements relating to the physical condition or use and development of the City Property, if any ("City Property Documents"). (c) Right of Access. SJR and its agents, employees and designees shall be afforded reasonable access and entry onto the City Property during the Due Diligence Period to conduct such studies, tests, inspections and other investigations as determined by SJR in its sole and absolute discretion in order to fully investigate the City Property. All such studies, tests, inspections and other investigations shall occur at SJR's sole cost and expense. SJR shall provide the City with at least two (2) business days' advance written notice prior to entering upon the City Property. SJR shall indemnify, defend and hold the City harmless from any claim, liability, loss or expense asserted against the City or the City Property in connection with SJR's or its agents', employees' and designees' entry on the City Property, and, so long as this Agreement has not been terminated by SJR due to the City's nonperformance, SJR shall provide the City, at no cost to the City, with copies of all reports issued in connection with such studies, tests, inspections and/or other investigations conducted by SJR on the City Property. (d) Due Diligence Period. SJR shall have thirty (30) days from the Execution Date ("SJR Due Diligence Period") within which to determine SJR's satisfaction with the SJR Due Diligence Contingency. If SJR is not satisfied with the SJR Due Diligence Contingency within the SJR Due Diligence Period, SJR may terminate this Agreement by delivering written notice of such termination to the City on or before the expiration of the SJR Due Diligence Period, in which case all of the parties' rights and obligations hereunder (other than those which are intended to survive such termination by the express terms hereof) shall terminate as well. Upon such termination, each party shall promptly take any and all actions necessary to cancel Escrow and to return any documents provided to it by the other party. If SJR does not provide written notice of termination of this Agreement within the SJR Due Diligence Period, the SJR Due Diligence Contingency shall be deemed to have been satisfied and waived, and this Agreement shall continue in full force and effect. (e) Condition of the City Property. The waiver or satisfaction of the SJR Due Diligence Contingency shall constitute SJR's determination that it is satisfied with its investigation of the condition of the City Property and all material facts bearing on its acquisition of the City Property. Except for the City's express representations and warranties under this Agreement, SJR will acquire the City Property "AS IS", with any and all faults and defects. 8. Escrow and Closing. (a) Opening of Escrow. For the purposes of this Agreement, the escrow ("Escrow") shall be deemed opened (the "Opening of Escrow") on the date that Escrow Holder receives a copy of this Agreement fully executed by City and SJR. Escrow Holder shall promptly notify City and SJR in writing of the date of the Opening of Escrow. City and SJR agree to execute, deliver and be bound by any reasonable or customary supplemental escrow instructions or other instruments reasonably required by Escrow Holder to consummate the transaction contemplated by this Agreement; provided, however, that no such instruments shall be inconsistent or in conflict with, amend or supersede any portion of this Agreement. If there is any conflict or inconsistency between the terms of such instruments and the terms of this Agreement, then the terms of this Agreement shall control. 856634.10 5 (b) Closing. For purposes of this Agreement, the "Closing" shall be the date that both the "City Deed" and the "SJR Deed" (as those terms are defined below) are recorded pursuant to applicable law in the Official Records of the County of Riverside, California. Unless changed in writing by City and SJR, and provided all of City's Contingencies and SJR's Contingencies have been satisfied or waived in writing by City and SJR, respectively, the Closing shall occur on the Closing Date; provided, however, that if either City or SJR is not prepared for the Closing, the Closing Date shall automatically be extended by three (3) business days. In no event shall the Closing occur sooner than the ninetieth (90th) day following approval or waiver of the last of the City's Contingencies and SJR's Contingencies, unless a sooner date is mutually approved. In no event shall the Closing occur after, and this Agreement shall automatically terminate if the Closing has not occurred on or before, June 30, 2007. 9. City's Conditions Precedent and Termination Right. (a) City's Conditions Precedent. The Closing and City's obligation to consummate the transaction contemplated by this Agreement are subject to the timely satisfaction or written waiver of the following conditions precedent (collectively, "City's Contingencies"), which are for City's benefit only. (i) Due Diligence Contingency. The City's Due Diligence Contingency has been satisfied or waived. (ii) Title Policy. On or before the Closing, the Title Company shall, upon payment of the Title Company's regularly scheduled premium, have agreed to issue to City an ALTA extended coverage owner's policy of title insurance naming City as the insured (such policy being referred to herein as the "City's Title Policy") in the amount of the Value of the SJR Property showing fee title to the SJR Property vested solely in the City and subject only to (i) the standard, preprinted exceptions to the City's Title Policy (but not including any arbitration, co- insurance, creditors' rights or regional exceptions); (ii) a lien (or liens) to secure payment of real estate taxes or assessments not yet delinquent; (iii) matters affecting the SJR Property created by or approved by the City; and (iv) those matters specifically set forth on Exhibit G. (iii) No Changes. As of the Closing, the physical condition of the SJR Property shall be substantially the same as the condition existing as of the expiration of the City Due Diligence Period. (iv) Development Agreement. On or before the Closing, SJR and City shall have entered into the Development Agreement and the ordinance adopting the Development Agreement has become effective; provided, however, that nothing in this Agreement shall be deemed to obligate or require City to approve, execute or otherwise enter into the Development Agreement. (v) Representations and Warranties. All representations and warranties of SJR contained in this Agreement shall be materially true and correct as of the date made and as of the Closing with the same effect as if those representations and warranties were made at and as of the Closing. (vi) No Default. As of the Closing, SJR shall not be in Default. 856634.10 6 (vii) Lot Line Adiustment. On or before the Closing, the Lot Line Adjustment has been recorded in the Official Records of Riverside County, California. (b) Termination Right. Should any of City's Contingencies not be met, City may, by written notice to SJR, terminate this Agreement. In the event that this Agreement is so terminated, any escrow, title or other cancellation fees shall be shared equally by City and SJR unless SJR is in default hereunder, in which case SJR shall pay all such fees. (c) Waiver. The City may waive any of City's Contingencies. 10, SJR's Conditions Precedent and Termination Right. (a) SJR's Conditions Precedent. The Closing and SJR's obligation to consummate the transaction contemplated by this Agreement are subject to the timely satisfaction or written waiver of the following conditions precedent (collectively, "SJR's Contingencies"), which are for SJR's benefit only. (i) Due Diligence Contingency . SJR's Due Diligence Contingency has been satisfied or waived. (ii) Title Policy. On or before the Closing, the Title Company shall, upon payment of the Title Company's regularly scheduled premium, have agreed to issue to SJR an ALTA extended coverage owner's policy of title insurance naming SJR as the insured (such policy being referred to herein as "SJR's Title Policy") in the amount of the Value of the City Property showing fee title to the City Property vested solely in SJR and subject only to (i) the standard, preprinted exceptions to SJR's Title Policy (but not including any arbitration, co- insurance, creditors' rights or regional exceptions); (ii) a lien (or liens) to secure payment of real estate taxes or assessments not yet delinquent; and (iii) matters affecting the City Property created by or approved by SJR. (iii) No Changes. As of the Closing, the physical condition of the City Property shall be substantially the same as the condition existing as of the expiration of the SJR Due Diligence Period. (iv) Development Agreement. On or before the Closing, SJR and City shall have entered into the Development Agreement and the ordinance adopting the Development Agreement has become effective; provided, however, that nothing in this Agreement shall be deemed to obligate or require SJR to approve, execute or otherwise enter into the Development Agreement. (v) Representations and Warranties. All representations and warranties of City contained in this Agreement shall be materially true and correct as of the date made and as of the Closing with the same effect as if those representations and warranties were made at and as of the Closing. (vi) No Default. As of the Closing, City shall not be in Default. 856634.10 7 (vii) Lot Line Adiustment. On or before the Closing, the Lot Line Adjustment has been recorded in the Official Records of Riverside County, California. (b) Termination Rieht. Should any of SJR's Contingencies not be met, SJR may, by written notice to City, terminate this Agreement. In the event that this Agreement is so terminated, any escrow, title or other cancellation fees shall be shared equally by City and SJR unless City is in default hereunder, in which case City shall pay all such fees. (c) Waiver. SJR may waive any of the SJR's Contingencies. 11. Citv's Deliveries to Escrow Holder. On or before the Closing, City shall deposit, or cause to be deposited, with Escrow Holder the following items, duly executed and, where appropriate, acknowledged ("City's Delivered Items"): Deed"). (a) Payments. The Cash Payment. (b) Deed. The grant deed in the form attached hereto as Exhibit C (the "City (c) Development Agreement. The Development Agreement. (d) Memorandum. The memorandum in the form attached hereto as Exhibit L (the "Memorandum"). (e) FIRPTA. The certification of non -foreign status in the form attached hereto as Exhibit D (the "City FIRPTA Certificate"). (0 Authority. Such evidence of City's authority and authorization to enter into this Agreement and to consummate the Closing as may be reasonably requested by SJR and/or the Title Company. (g) Further Documents, Funds or Items. Any other documents, funds or items, including, but not limited to, funds sufficient to pay for "City's Costs" (as defined below), reasonably required for the Closing. 12. SJR's Deliveries to Escrow Holder. On or before the Closing, SJR shall deposit, or cause to be deposited, with Escrow Holder the following items, duly executed and, where appropriate, acknowledged ("SJR's Delivered Items"): Deed"). (a) Deed. The grant deed in the form attached hereto as Exhibit E (the "SJR (b) Development Agreement. The Development Agreement. (c) Declaration. The declaration of use restrictions in the form attached hereto as Exhibit K (the "Declaration"). (d) Memorandum. The Memorandum. 856634.10 8 (e) FIRPTA. The certification of non -foreign status in the form attached hereto as Exhibit F (the "SJR FIRPTA Certificate"). (f) Authority. Such evidence of SJR's authority and authorization to enter into this Agreement and to consummate the Closing as may be reasonably requested by City and/or the Title Company. (g) Further Documents. Funds or Items. Any other documents, funds or items, including, but not limited to, funds sufficient to pay for "SJR's Costs" (as defined below), reasonably required for the Closing. 13. Costs and Expenses. (a) City Costs. If the Closing is consummated, then City shall bear the following costs and expenses: (i) one-half (1/2) of the Escrow Holder's fee; (ii) the cost of SJR's Title Policy; (iii) one-half (1/2) of all document recording fees; and (iv) one-half (1/2) of all documentary transfer taxes (collectively, "City's Costs"). (b) SJR Costs. If the Closing is consummated, then SJR shall bear the following costs and expenses: (i) one-half (1/2) of the Escrow Holder's fee; (ii) the cost of City's Title Policy; (iii) one-half (1/2) of all document recording fees; and (iv) one-half (1/2) of all documentary transfer taxes (collectively, "SJR's Costs"). (c) Generally. If, through no fault of either City or SJR, the Closing fails to take place, City and SJR shall share equally all of Escrow Holder's fees and charges; provided, however, that if the Closing fails to occur as the result of the Default of either party, then such defaulting party shall bear all Escrow Holder's fees and expenses. Each party shall bear the costs of its own attorneys and consultants in connection with the negotiation and preparation of this Agreement and the consummation of the Closing. All other costs and expenses (except as set forth in this Section 13) shall be allocated between City and SJR in accordance with the customary practice of the County of Riverside, California. The items provided in this Section 13(c) are hereinafter referred to as "General Expenses." 14. Prorations. Property taxes and assessments will be prorated as of the Closing based on a 30 day month and 360 day year. 15. Closing Procedure. When the Title Company is ready to issue City's Title Policy and SJR's Title Policy and all required documents and funds have been deposited with Escrow Holder, Escrow Holder shall immediately close Escrow in the manner and order provided below. (a) Recording. Escrow Holder shall cause the Declaration, the City Deed, the SJR Deed, the Memorandum, the Development Agreement and any other documents that the parties may mutually direct, to be recorded pursuant to applicable law in the Official Records of the County of Riverside, California, and obtain conformed copies thereof for distribution to City and SJR. 856634.10 9 (b) Disburse Funds. Escrow Holder shall debit or credit (as provided herein) all City's Costs, SJR's Costs and General Expenses, disburse the Cash Payment to SJR and disburse the remaining funds, if any, to the party entitled thereto. (c) Documents to City. Escrow Holder shall deliver to City the original SJR FIRPTA Certificate and a conformed copy of the Declaration, the Memorandum, the SJR Deed and the Development Agreement. (d) Documents to SJR. Escrow Holder shall deliver to SJR the original City FIRPTA Certificate and a conformed copy of the Declaration, the Memorandum, the City Deed and the Development Agreement. (e) Title Policy. Escrow Holder shall cause the Title Company to issue City's Title Policy to City and SJR's Title Policy to SJR. (f) Closing Statement. Escrow Holder shall forward to both City and SJR a separate accounting of all funds received and disbursed for each party in connection with the Closing. (g) Informational Reports. Escrow Holder shall file any information reports required by Intemal Revenue Code Section 6045(e), as amended. 16. Representations and Warranties. (a) Citv's Representations and Warranties. In consideration of SJR entering into this Agreement and as an inducement to SJR to acquire the City Property, City makes the following representations and warranties as of the Execution Date and at and as of the Closing, each of which is material and is being relied upon by SJR. (i) Power. City has the legal power, right and authority to enter into this Agreement and the instruments attached hereto and referenced herein, and to consummate the transaction contemplated hereby. (ii) Requisite Action. All requisite action has been taken by City in connection with entering into this Agreement and the instruments referenced herein; and, by the Closing, all such necessary action will have been taken to authorize the consummation of the transaction contemplated hereby. By the Closing no additional consent of any administrative body, governmental authority or other party shall be required for City to consummate the transaction contemplated by this Agreement. (iii) Individual Authority. The individuals executing this Agreement and the instruments referenced herein on behalf of City have the legal power, right and actual authority to bind City to the terms and conditions hereof and thereof. (iv) No Conflict. Neither the execution or delivery of this Agreement or the documents or instruments referenced herein, nor incurring the obligations set forth herein, nor the consummation of the transaction contemplated herein, nor compliance with the terms of this Agreement or the documents or instruments referenced herein or therein conflict with or 856634.10 10 result in the material breach of any terms, conditions or provisions of, or constitute a default under, any bond, note or other evidence of indebtedness or any contract, indenture, mortgage, deed of trust, loan, lease or other agreement or instrument to which any of the City is a party or that affect the City Property. (v) No Bankruptcy. No bankruptcy or other insolvency proceeding has been filed or threatened by or against the City. (vi) Property Documents. All of the copies of the City Property Documents delivered to SJR are true and complete copies of their respective originals. (vii) Compliance with Laws and Codes. City has not received any written notice of any current alleged violations of any law, statute or regulation at or about the City Property. (viii) Condemnation. City has received no written notice of any pending or threatened condemnation, eminent domain or similar proceeding affecting the City Property or any portion thereof. (ix) Environmental. To City's actual knowledge, there are no toxic or otherwise hazardous substances or materials located on or under the City Property and City has received no notice of any Hazardous Materials located on or under the City Property. (x) No Defaults. City has received no written notice of default under any of the City Property Documents or City Title Matters, nor has City received written notice of any event that with notice or the passage of time, or both, would constitute a default thereunder. (xi) Other Aereements. To City's knowledge, after reasonable investigation and inquiry, there are no contracts, instruments, insurance policies and other agreements affecting or relating to the City Property. (xii) No Liens or Prior Transfers. City has not previously assigned, transferred, conveyed or encumbered (or entered into any agreement to do any of the foregoing) any or all of its right, title or interest in or to the City Property. (xiii) No Commitments. City has not become obligated to any third party with respect to the City Property. (xiv) No Tax or Economic Advice. City has not received or relied on any tax or economic advice from SJR or SJR's Counsel with respect to the transaction contemplated by this Agreement or to the economic advisability or feasibility of such transactions or the project to be developed on the SJR Property. (xv) No Leeal Advice. City has not received or relied on any legal or other advice from SJR or SJR's Counsel in connection with the transaction contemplated by this Agreement. 856634.10 11 (b) City's Indemnity for Misrepresentations. City shall indemnify, defend (with counsel reasonably acceptable to SJR) and hold harmless SJR and SJR's partners, members, shareholders, officers, directors, managers, employees, contractors, agents, successors and assigns from and against any and all losses, claims, liabilities, damages, costs and expenses, including, but not limited to, attorneys' fees and court costs, resulting from any representation or warranty made by City in this Agreement being incorrect. The foregoing indemnity shall survive the Closing and the acceptance of the SJR Deed, shall not be limited by any provision of this Agreement, and shall be in addition to any other right or remedy SJR may have at law or in equity or pursuant to this Agreement. (c) SJR's Representations and Warranties. In consideration of City entering into this Agreement and as an inducement to City to acquire the SJR Property, SJR makes the following representations and warranties as of the Execution Date and at and as of the Closing, each of which is material and is being relied upon by City. (i) Power. SJR has the legal power, right and authority to enter into this Agreement and the instruments attached hereto and referenced herein, and to consummate the transaction contemplated hereby. (ii) Reauisite Action. All requisite action has been taken by SJR in connection with entering into this Agreement and the instruments referenced herein; and, by the Closing, all such necessary action will have been taken to authorize the consummation of the transaction contemplated hereby. By the Closing no additional consent of any individual, director, shareholder, partner, member, manager, trustee, trustor, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party shall be required for SJR to consummate the transaction contemplated by this Agreement. (iii) Individual Authority. The individuals executing this Agreement and the instruments referenced herein on behalf of SJR have the legal power, right and actual authority to bind SJR to the terms and conditions hereof and thereof (iv) No Conflict. Neither the execution or delivery of this Agreement or the documents or instruments referenced herein, nor incurring the obligations set forth herein, nor the consummation of the transaction contemplated herein, nor compliance with the terms of this Agreement or the documents or instruments referenced herein or therein conflict with or result in the material breach of any terms, conditions or provisions of, or constitute a default under, any bond, note or other evidence of indebtedness or any contract, indenture, mortgage, deed of trust, loan, lease or other agreement or instrument to which SJR is a party or that affect the SJR Property. (v) No Bankruptcy. No bankruptcy or other insolvency proceeding has been filed or threatened by or against SJR. (vi) Property Documents. All of the copies of the SJR Property Documents delivered to City are true and complete copies of their respective originals. 856634.10 12 (vii) Compliance With Laws and Codes. SJR has received any written notice of any current alleged violations of any law, statute or regulation at or about the SJR Property. (viii) Condemnation. SJR has received no written notice of any pending or threatened condemnation, eminent domain or similar proceeding affecting the SJR Property or any portion thereof. (ix) Environmental. To SJR's actual knowledge, there are no toxic or otherwise hazardous substances or materials located on or under the SJR Property and SJR has received no notice of any Hazardous Materials located on or under the SJR Property. (x) No Defaults. SJR has received no written notice of default under any of the SJR Property Documents or SJR Title Matters, nor has SJR received written notice of any event that with notice or the passage of time, or both, would constitute a default thereunder. (xi) Other Agreements. To SJR's knowledge, after reasonable investigation and inquiry, there are no contracts, instruments, insurance policies and other agreements affecting or relating to the SJR Property. (xii) No Liens or Prior Transfers. SJR has not previously assigned, transferred, conveyed or encumbered (or entered into any agreement to do any of the foregoing) any or all of its right, title or interest in or to the SJR Property. (xiii) No Commitments. SJR has not become obligated to any third party with respect to the SJR Property. (xiv) No Tax or Economic Advice. SJR has not received or relied on any tax or economic advice from City or City's Counsel with respect to the transaction contemplated by this Agreement or to the economic advisability or feasibility of such transactions or the project to be developed on the City Property. (xv) No Legal Advice. SJR has not received or relied on any legal or other advice from City or City's Counsel in connection with the transaction contemplated by this Agreement. (d) SJR's Indemnity for Misrepresentations. SJR shall indemnify, defend (with counsel reasonably acceptable to City) and hold harmless City and City's officers, elected officials, employees, contractors, agents, successors and assigns from and against any and all losses, claims, liabilities, damages, costs and expenses, including, but not limited to, attorneys' fees and court costs, resulting from any representation or warranty made by SJR in this Agreement being incorrect. The foregoing indemnity shall survive the Closing and the acceptance of the City Deed, shall not be limited by any provision of this Agreement, and shall be in addition to any other right or remedy City may have at law or in equity or pursuant to this Agreement. 856634.10 13 17. Events of Default and Rights of Termination and Other Remedies. (a) Defaults — General. Subject to the extensions of time set forth in Section 18, failure or delay by either party to perform any term or provision of this Agreement shall constitute a "Default" under this Agreement fifteen (15) days following receipt of written notice specifying the default complained of; provided, however, that if the nature of the default is such that more than ten (10) days is reasonably required for its cure, then the defaulting party shall not be deemed to be in Default if it has commenced a cure within the fifteen (15) day period and thereafter diligently prosecutes such cure to completion within sixty (60) days after receipt of written notice thereof. (b) Institution of Legal Actions. In addition to any other rights or remedies, either party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain specific performance or any other remedy consistent with the purpose of this Agreement, except that there shall be no right to terminate this Agreement except as set forth in Sections 17(c), 17(d) and 17(e). Such legal actions must be instituted in the Superior Court of the County of Riverside, State of California, in any other appropriate court in that County, or in the Federal District Court in the Central District of California. (c) Right of Termination by City Prior to Conveyance. In addition to any other remedies at law or equity available to City, City may terminate this Agreement if (1) any of the events described in (i) or (ii) below occurs, (2) any pertinent cure period applicable thereto has expired and such Default remains uncured, and (3) City delivers a written termination notice to SJR. (i) constitutes a Default; or SJR fails to perform a material obligation hereunder, which failure (ii) Any condition precedent to City's obligation to convey the City Property has not been satisfied as and at the times provided in this Agreement. Upon any such termination by City in accordance with this Section 17(c), (A) any remaining rights of SJR regarding the City Property, or arising from this Agreement, shall be deemed terminated; (B) except in the event of a Default, neither SJR nor City shall have any further rights against or liability to the other under this Agreement regarding the City Property; and (C) all monies or documents deposited by any party into the Escrow shall be returned to the party making such deposit. (d) Right of Termination by SJR Prior to Conveyance. In addition to any other remedies at law or equity available to SJR, SJR may terminate this Agreement if (1) any of the events described in (i) or (ii) below occurs, (2) any pertinent cure period applicable thereto has expired and such Default remains uncured and (3) SJR delivers a written termination notice to City: (i) City fails to perform a material obligation hereunder, which failure constitutes a Default; or 856634.10 14 (ii) Any condition precedent to SJR's obligation to purchase the City Property has not been satisfied as and at the times provided in this Agreement. Upon any such termination by SJR in accordance with this Section 17(d), (A) any remaining rights of City regarding the SJR Property, or arising from this Agreement, shall be deemed terminated; (B) except in the event of a Default, neither SJR nor City shall have any further rights against or Liability to the other under this Agreement regarding the SJR Property; and (C) all monies or documents deposited by any party into the Escrow shall be returned to the party making such deposit. 18. Enforced Delay: Extension of Times of Performance. In addition to specific provisions of the Agreement, performance by any party hereunder shall not be deemed to be in default, where delays or defaults are due to acts of God, or the elements, accident, casualty, unavailability or delays in delivery of any product, labor, fuel, service or materials, failure or breakdown of equipment, strikes, lockouts, or other labor disturbances, acts of the public enemy, orders or inaction of any kind from the government of the United States, the State of California, or any other governmental, military or civil authority (other than City, to the extent that such orders or inaction affect City's obligations, performance or rights under this Agreement), war, insurrections, riots, epidemics, landslides, lightning, droughts, floods, fires, earthquakes, arrests, civil disturbances, explosions, freight embargoes, lack of transportation, breakage or accidents to vehicles, or any other inability of any party hereto, whether similar or dissimilar to those enumerated or otherwise, which are not within the control of the party claiming such inability or disability, which such party could not have avoided by exercising due diligence and care and regarding which such party shall use all reasonable efforts that are practically available to it in order to correct such condition. However, no party hereto shall be entitled to any extension of time pursuant to this Section 18 due to any event or condition caused by a party's inherent financial condition or financial inability to pay its monetary obligations when due. Notwithstanding anything to the contrary in this Agreement, an extension of time for any such cause shall be for the period of time reasonable in light of the enforced delay. The extension of time shall commence to run from the time of the commencement of the cause, so long as the party claiming the extension has notified the other party in writing of the nature of the matter constituting the enforced delay within ten (10) days after the occurrence of the enforced delay. 19. General Provisions. (a) Entire Agreement. THE PARTIES HERETO EXPRESSLY AGREE AND CONFIRM THAT THIS AGREEMENT IS EXECUTED WITHOUT RELIANCE ON ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR PROMISES OF ANY KIND WHICH ARE NOT EXPRESSLY CONTAINED IN THIS AGREEMENT. THIS AGREEMENT SUPERSEDES ANY PRIOR AGREEMENTS, NEGOTIATIONS AND COMMUNICATIONS, ORAL OR WRITTEN, AND CONTAINS THE ENTIRE AGREEMENT BETWEEN, AND THE FINAL EXPRESSION OF, CITY AND SJR WITH RESPECT TO THE SUBJECT MATTER HEREOF. NO SUBSEQUENT AGREEMENT, 856634.10 15 REPRESENTATION OR PROMISE MADE BY EITHER PARTY HERETO, OR BY OR TO AN EMPLOYEE, OFFICER, AGENT OR REPRESENTATIVE OF EITHER PARTY HERETO SHALL BE OF ANY EFFECT UNLESS IT IS IN WRITING AND EXECUTED BY THE PARTY TO BE BOUND THEREBY. (b) Damage to City Property. If, prior to the Closing, all or any portion of the City Property is damaged by any earthquake, flood, severe precipitation or other casualty (collectively, for purposes of this Section 19(b) only, "Damage") which materially adversely affects the development of the City Property, then the following procedures shall apply: (i) Less than $50,000. If the estimated aggregate cost of repair and/or replacement of the Damage is Fifty Thousand and No/100 Dollars ($50,000.00) or less, SJR shall: (A) proceed with the Closing and take the City Property subject to such Damage; and (B) be entitled to receive any insurance proceeds for such Damage. (ii) Greater than $50,000. If the estimated aggregate cost of repair and/or replacement is greater than Fifty Thousand and No/100 Dollars ($50,000.00) as reasonably determined by SJR, SJR may elect to either: (A) terminate this Agreement by written notice to City, and neither party shall have any further liability to the other hereunder, except as otherwise provided herein; or (B) proceed with the Closing and take the City Property subject to such Damage by giving written notice to City within thirty (30) days after the date of such Damage, in which case SJR shall be entitled to receive any insurance proceeds for such Damage. (c) Damage to SJR Property. If, prior to Closing, all or any portion of the SJR Property is damaged by earthquake, food, severe precipitation or other casualty (collectively, for purposes of this Section 19(c) only, "Damage") that materially adversely affects the developability of the SJR Property, then the following procedures shall apply: (i) Less than $50,000. If the estimated aggregate cost of repair and/or replacement of the Damage is Fifty Thousand and No/100 Dollars ($50,000.00) or less, City shall: (A) proceed with the Closing and take the SJR Property subject to such Damage; and (B) be entitled to receive any insurance proceeds for such Damage. (ii) Greater than $50.000. If the estimated aggregate cost of repair and/or replacement is greater than Fifty Thousand and No/100 Dollars ($50,000.00) as reasonably determined by City, City may elect to either: (A) terminate this Agreement by written notice to SJR, and neither party shall have any further liability to the other hereunder, except as otherwise provided herein; or (B) proceed with the Closing and take the SJR Property subject to such Damage by giving written notice to SJR within thirty (30) days after the date of such Damage, in which case City shall be entitled to receive any insurance proceeds for such Damage. (d) Condemnation. If any portion of the City Property shall be taken or appropriated by a public or quasi public authority exercising the power of eminent domain, SJR shall have the right, at its option, to (i) terminate this Agreement, or (ii) proceed with the acquisition of the City Property and receive all of the award or payment made in connection with such taking. If any portion of the SJR Property shall be taken or appropriated by a public or 856634.10 16 quasi public authority exercising the power of eminent domain, City shall have the right, at its option, to (1) terminate this Agreement, or (2) proceed with the acquisition of the SJR Property and receive all of the award or payment made in connection with such taking. (e) Notices. Any notice, request, direction, demand, consent, waiver, approval or other communication required or permitted to be given hereunder shall not be effective unless it is given in writing and shall be delivered (i) in person, (ii) by certified mail, postage prepaid, return receipt requested, (iii) by facsimile, or (iv) by a commercial overnight courier that guarantees next day delivery and provides a receipt, and addressed to the parties at the addresses stated in the "Defined Terms" section at the beginning of this Agreement , or at such other address as either party may hereafter notify the other in writing as aforementioned. Service of any such notice or other communications so made shall be deemed effective on the day of actual delivery (whether accepted or refused) as evidenced by confirmed answerback if by facsimile (provided that if any notice or other communication to be delivered by facsimile is unable to be transmitted because of a problem affecting the receiving parry's facsimile machine, the deadline for receiving such notice or other communication shall be extended through the next business day), as shown by the addressee's return receipt if by certified mail, and as confirmed by the courier service if by courier; provided, however, that if such actual delivery occurs after 5:00 p.m. (local time where received) or on a non business day, then such notice or demand so made shall be deemed effective on the first business day following the day of actual delivery. No communications via electronic mail shall be effective to give any notice, request, direction, demand, consent, waiver, approval or other communications hereunder. (f) Brokers. Each party hereto hereby represents and warrants to the other that it has dealt with no broker or finder in connection with this transaction. Each party hereto agrees to indemnify, defend and hold harmless the other party from and against any and all losses, liens, claims, judgments, liabilities, costs, expenses or damages (including reasonable attorneys' fees and court costs) of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to have been made by such party or on its behalf with any broker or finder in connection with this Agreement or the transaction contemplated hereby. The foregoing indemnity shall survive the Closing or the termination of this Agreement and shall not be limited by any provision of this Agreement. (g) Legal Fees. If either City or SJR brings any action or suit against the other for any matter relating to or arising out of this Agreement, or if either party appears in any bankruptcy proceeding relating to the other party, then the prevailing party in such action, suit or proceeding, whether by final judgment or out of court settlement, shall be entitled to recover from the other party all costs and expenses of suit, including actual attorneys' fees. Any judgment or order entered in any final judgment shall contain a specific provision providing for the recovery of all costs and expenses of suit, including actual attomeys' fees incurred in enforcing, perfecting and executing such judgment. For the purposes of this Section 19(g), such costs and expenses shall include, but not be limited to, in-house and outside attorneys' fees, costs and expenses incurred in the following: (i) post judgment motions; (ii) contempt proceedings; (iii) garnishment, levy, and debtor and third party examinations; (iv) discovery; (v) bankruptcy proceedings and appearances; and (vi) appeals. 856634.10 17 (h) Assignment. Neither party may assign, transfer or convey its rights under this Agreement without the consent of the other party, which may be granted or withheld in its sole and absolute discretion. With respect to any assignment, transfer or conveyance permitted pursuant to this Section 19(h), the assignor shall provide the other party with an executed copy of an agreement between the assignor and any such assignee whereby such assignee assumes and agrees to perform the assignor's obligations hereunder with respect to transferring and/or obtaining title to the SJR Property/City Property, as applicable, at least five (5) business days before the Closing. No such permitted assignment, transfer or conveyance shall release City or SJR from their obligations hereunder. Any assignment, transfer or conveyance in violation of this Section 19(h) shall be null and void but shall nonetheless constitute a default/breach by the party attempting to complete any such prohibited assignment, transfer or conveyance. (i) Survival. Except as expressly provided herein to the contrary, none of the covenants, representations, warranties, releases, waivers and indemnities set forth in this Agreement shall survive the Closing or the earlier termination of this Agreement. (j) Cooperation. City and SJR agree to execute such instruments and documents and to diligently undertake such actions as may be reasonably required in order to consummate the Closing and shall use commercially reasonable efforts to accomplish the Closing in accordance with the provisions hereof. (k) Computation of Time Periods. If the Closing or any other date or time period provided for in this Agreement is or ends on a Saturday, Sunday, or federal, state or legal holiday, then such date shall automatically be extended until 5:00 p.m., Pacific Time on the next day that is not a Saturday, Sunday, or federal, state or legal holiday. (1) Counterparts: Facsimile Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute but one and the same instrument. A facsimile signature shall be deemed an original signature. (m) Captions. Any captions to, or headings of, the sections or subsections of this Agreement are solely for the convenience of the parties hereto, are not a part of this Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. (n) No Obligations to Third Parties. The execution and delivery of this Agreement shall not be deemed to confer any rights upon, nor obligate any of the parties to this Agreement to, any person or entity other than the parties hereto. (o) Exhibits. The exhibits attached hereto are incorporated herein by this reference for all purposes. (p) Amendment to this Agreement. The terms of this Agreement may not be modified or amended except by an instrument in writing executed by each of the parties hereto. 856634.10 18 (q) Waiver. The waiver or failure to enforce any provision of this Agreement shall not operate as a waiver of any future breach of any such provision or any other provision hereof. (r) Annlicable Law. This Agreement shall be governed by and construed in accordance with the local law of the State of California. (s) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the permitted successors and assigns of the parties hereto. (t) Construction. The parties hereto hereby acknowledge and agree that (i) each party hereto is of equal bargaining strength; (ii) each party has actively participated in the drafting, preparation and negotiation of this Agreement; (iii) this Agreement has been heavily negotiated and represents an arm's length transaction and the culmination of several months of drafting and negotiation; (iv) each party has consulted with such party's own independent counsel and such other professional advisors as such party has deemed appropriate, relating to any and all matters contemplated under this Agreement; (v) each party and such party's counsel and advisors have reviewed this Agreement; (vi) each party has agreed to enter into this Agreement following such review and the rendering of such advice; and (vii) any rule of construction to the effect that ambiguities are to be resolved against the drafting parties shall not apply in the interpretation of this Agreement, or any portions hereof, or any amendments hereto. (u) Exchange. Notwithstanding anything to the contrary contained herein, either party may elect to seek to structure its purchase or sale, as applicable, of the SJR Property/City Property, as applicable, as a tax -deferred exchange (an "Exchange"), subject to the limitations set forth in this Section 19(u). Each party shall reasonably cooperate with the other, at no material cost to such cooperating party, in connection with the same, including executing and delivering a consent of an assignment to a qualified exchange intermediary of rights (but not obligations) under this Agreement; provided that (a) neither party shall be required to incur any additional liabilities or financial obligations as a consequence of such cooperation, (b) neither party shall not be relieved of its obligations, representations or warranties under this Agreement, and (c) any attempt to structure an acquisition or sale of the SJR Property/City Property, as applicable, as a Exchange shall not be a condition to, and shall not delay or extend, the Closing. Additionally, in connection with any Exchange, neither party shall be required to acquire title to any other property. Any risk that such an exchange or conveyance might not qualify as a tax -deferred transaction shall also be borne solely by the party seeking to effectuate the same, and each party acknowledges that the other has not provided, and will not provide, any tax, accounting, legal or other advice regarding the efficacy of any attempt to structure the transaction as a Exchange. Each party agrees to save, protect, defend, indemnify and hold the other harmless from any and all losses, costs, claims, liabilities, penalties, and expenses, including reasonable attorneys' fees, fees of accountants and other experts, and costs of any judicial or administrative proceeding or alternative dispute resolution to which the other may be exposed, due to any attempt to structure the transaction as a Exchange. (v) Post Closing Obligation re Desert Snrings Commercial Center. SJR agrees that it will (A) not process applications with City (in its capacity as a governmental agency and not in its capacity as the owner of the SJR Property) necessary to facilitate the 856634.10 19 development of the Ralph's Remainder Parcel until the earlier to occur of the following: (i) thirty-six months (36) months following the Closing or (ii) City (in its capacity as the owner of the SJR Property and not in its capacity as a governmental agency) obtaining approvals and/or waivers from the tenants under the leases affecting the Desert Springs Commercial Center and/or the declarant under the CC&R's with respect to the proposed development of the SJR Property by City or its assignee; (B) keep the Ralph's Remainder Parcel landscaped until such time as the Ralph's Remainder Parcel is developed; and (C) use the Ralph's Remainder Parcel in connection with the expansion of the grocery store adjacent thereto or such other use as is compatible (in use, design and architecture) with the development, or proposed development, of the SJR Property, as reasonably approved by City (in its capacity as the owner of the SJR Property and not in its capacity as a governmental agency) or any successor owner of the SJR Property (collectively, the "Covenant"). The Covenant shall not survive the termination of this Agreement prior to the Closing, but shall run with the Desert Springs Commercial Center pursuant to the Memorandum. Upon termination of the Covenant in accordance with the terms hereof, City shall execute such documents as may be reasonably required by the then -owner of the Desert Springs Commercial Center to remove the Memorandum from title thereto. SJR (in its capacity as the declarant under the CC&R's and otherwise) further agrees to cooperate (at no cost or expense to SJR) with City (or its assignee) in connection with, and otherwise to not unreasonably oppose, the proposed development of the SJR Property. [This Space Intentionally Left Blank; Signatures on the Next Page] 856634.10 20 IN WITNESS WHEREOF, the parties hereto have executed this Exchange Agreement and Joint Escrow Instructions as of the Execution Date. CITY: CITY OF PALM DESERT, a California municipal corporation By: Name: Its: ATTEST: City Clerk APPROVED AS TO FORM: City Attorney SJR: SANDERSON J. RAY - DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership By: Sanderson J. Ray DSP, a California general` partnership, General Partner By: Ja s Walker Ray, as Trus W. ; ay Family Trust U 19' ',, General P By: By: 856634.10 21 the James mber 17, on, Jr., General Partner ACCEPTANCE BY ESCROW HOLDER First American Title Insurance Company, a California corporation, hereby acknowledges that it has received a fully executed copy of the foregoing Exchange Agreement and Joint Escrow Instructions by and between SJR, a Texas limited partnership, and City, a California municipal corporation, and agrees to act as Escrow Holder thereunder and to be bound by and strictly perform the terms thereof as such terms apply to Escrow Holder. Dated: , 2006 FIRST AMERICAN TITLE INSURANCE COMPANY By: Name: Its: 856634.10 22 EXHIBIT A LEGAL DESCRIPTION OF CITY PROPERTY PARCEL 1: THE EAST HALF OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MARCH 31, 1958 AS INSTRUMENT NO. 23183, OFFICIAL RECORDS. PARCEL 2: THE WEST HALF OF THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MAY 20, 1958 IN BOOK 2273, PAGE 480, OFFICIAL RECORDS. 856634.10 A-1 EXHIBIT B LEGAL DESCRIPTION OF SJR PROPERTY PARCELS 1 THROUGH 6, INCLUSIVE, AND 16 THROUGH 19, INCLUSIVE, AS SHOWN BY PARCEL MAP 24700, ON FILE IN BOOK 183 PAGES 38 THROUGH 42, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA. EXCLUDING THEREFROM THOSE PORTIONS OF PARCELS 1, 5, 6, 16 AND 19 SHOWN ON EXHIBIT I ATTACHED TO THIS EXCHANGE AGREEMENT AND JOINT ESCROW INSTRUCTIONS AS LYING BETWEEN THE LINE DESIGNATED "NEW PROPERTY LINE" AND THE LINE DESIGNATED "EXISTING PROPERTY LINE." 856634.10 B-1 EXHIBIT C CITY DEED RECORDING REQUESTED BY: First American Title Insurance Company WHEN RECORDED MAIL TO AND MAIL TAX STATEMENTS TO: Sanderson J. Ray Desert Springs Partners, L.P. 2699 White Road, Suite 150 Irvine, California 92614 Attn: Mr. Michael Ray APN: [Space Above for Recorder's Use Only] This Grant Deed is exempt from Recording Fees pursuant to California Government Code Section 27383. The amount of Documentary Transfer Tax is shown on an accompanying statement and is not for public record. GRANT DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, the CITY OF PALM DESERT, a California municipal corporation ("Grantor"), GRANTS to SANDERSON J. RAY DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership ("Grantee"), that certain real property located in the City of Palm Desert, County of Riverside, State of California, more particularly described on Exhibit A attached hereto. SUBJECT TO, general and special real property taxes and assessments and supplemental assessments for the current fiscal year and all matters of record. BY ACCEPTANCE HEREOF, Grantee covenants, for itself and its successors and assigns, to refrain from restricting the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Project on the basis of race, color, creed, religion, ancestry, sex, marital status, national origin or age of any person, nor shall Grantee 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 in the Project. All deeds, leases or contracts entered into with respect to the Project shall contain or be subject to substantially the following nondiscrimination/nonsegregation clauses: 856634.10 C_ 1 IN DEEDS: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, national origin, sex, marital status, age or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee 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, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land." 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 be no discrimination against or segregation of any person or group of persons, on account of age, race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use or occupancy, tenure or enjoyment of the land 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 land herein leased." IN CONTRACTS: "There shall be no discrimination against or segregation of, any person, or group of persons on account of race, color, creed, religion, age, national origin, sex, marital status or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee 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, subtenants, sublessees or vendees of the land." All covenants contained in this Grant Deed shall run with the land for the benefit of, and shall only be enforceable by, Grantor and its successors and assigns, without regard to whether Grantor is or remains an owner of any land or interest therein to which such covenants relate. In the event of a breach of any covenant contained in this Grant Deed, Grantor shall have the right to exercise any right or remedy available at law or in equity to enforce the curing of such breach. [This Space Intentionally Left Blank; Signature on the Next Page] 856634.10 C-2 IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of 2006. GRANTOR: CITY OF PALM DESERT, a California municipal corporation By: Name: Its: ATTEST: City Clerk 856634.10 C-3 EXHIBIT A TO CITY DEED CITY PROPERTY LEGAL DESCRIPTION PARCEL 1: THE EAST HALF OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MARCH 31, 1958 AS INSTRUMENT NO. 23183, OFFICIAL RECORDS. PARCEL 2: THE WEST HALF OF THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MAY 20, 1958 IN BOOK 2273, PAGE 480, OFFICIAL RECORDS. 856634.10 C-4 STATE OF CALIFORNIA COUNTY OF RIVERSIDE ) ) ss. On , , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. (SEAL) STATE OF CALIFORNIA ) ss. COUNTY OF RIVERSIDE Notary Public in and for the State of California On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. (SEAL) 856634.10 Notary Public in and for the State of California C-5 EXHIBIT D CITY FIRPTA CERTIFICATE CERTIFICATE OF NON -FOREIGN STATUS Section 1445 of the Internal Revenue Code provides that a transferee (buyer) of a U.S. real property interest must withhold tax if the transferor (seller) is a foreign person. To inform the transferee (buyer) that withholding of tax is not required upon the disposition of a U.S. real property interest by the City of Palm Desert, a California municipal corporation ("Seller"), the undersigned hereby certifies the following on behalf of Seller: 1. Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations). 2. Seller's U. S. employer identification number is 3. Seller's office address is: 73510 Fred Waring Drive Palm Desert, CA 92260 4. Seller understands that this certification may be disclosed to the Internal Revenue Service by the transferee (buyer) and that any false statement contained herein could be punished by fine, imprisonment or both. Under penalties of perjury, the undersigned declares that he has examined this certification and to the best of his knowledge and belief it is true, correct and complete, and he further declares that he has the authority to sign this document on behalf of Seller. Executed as of , 2006, at Palm Desert, California. SELLER: CITY OF PALM DESERT, a California municipal corporation By: Name: Its: ATTEST: City Clerk 856634.10 D-1 EXHIBIT E SJR DEED RECORDING REQUESTED BY: First American Title Insurance Company WHEN RECORDED MAIL TO AND MAIL TAX STATEMENTS TO: City of Palm Desert 73510 Fred Waring Drive Palm Desert, CA 92260 Attention: City Clerk APN: [Space Above for Recorder's Use Only] This Grant Deed is exempt from Recording Fees pursuant to California Government Code Section 27383 and exempt from Documentary Transfer Tax pursuant to California Revenue and Taxation Code Section 11922. GRANT DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, SANDERSON J. RAY DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership, GRANTS to the CITY OF PALM DESERT, a California municipal corporation, that certain real property located in the City of Palm Desert, County of Riverside, State of California, more particularly described on Exhibit A attached hereto. SUBJECT TO, general and special real property taxes and assessments and supplemental assessments for the current fiscal year and all matters of record. [This Space Intentionally Left Blank; Signature on the Next Page] 856634.10 E-1 IN WITNESS WHEREOF, the undersigned has executed this Grant Deed as of , 2006. 856634.10 SANDERSON J. RAY - DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership By: Sanderson J. Ray DSP, a California general partnership, General Partner By: By: By: E-2 James Walker Ray, as Trustee of the James W. Ray Family Trust U/T/D September 17, 1998, General Partner Michael D. Ray, General Partner Chase O. Sanderson, Jr., General Partner 856634.10 EXHIBIT A TO SJR DEED LEGAL DESCRIPTION E-3 STATE OF CALIFORNIA ) ss. COUNTY OF On , , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. (SEAL) STATE OF CALIFORNIA ) ss. COUNTY OF Notary Public in and for the State of California On , , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) 856634.10 E-4 CERTIFICATE OF ACCEPTANCE (California Government Code Section 27281) This is to certify that the interest in real property conveyed by that certain Grant Deed dated , 2006, from Sanderson J. Ray Desert Springs Partners, L.P., a Texas limited partnership, to the City Of Palm Desert, a California municipal corporation, is accepted pursuant to the authority conferred by Resolution No. , adopted on , and the grantee consents to the recordation thereof by its duly authorized officer. Dated as of: , 2006. STATE OF CALIFORNIA ) ss. COUNTY OF RIVERSIDE City Manager On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. (SEAL) 856634.10 Notary Public in and for the State of California E-5 EXHIBIT F SJR FIRPTA CERTIFICATE CERTIFICATE OF NON -FOREIGN STATUS Section 1445 of the Internal Revenue Code provides that a transferee (buyer) of a U.S. real property interest must withhold tax if the transferor (seller) is a foreign person. To inform the transferee (buyer) that withholding of tax is not required upon the disposition of a U.S. real property interest by Sanderson J. Ray Desert Springs Partners, L.P., a Texas limited partnership ("Seller"), the undersigned hereby certifies the following on behalf of Seller: 5. Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations). 6. Seller's U. S. employer identification number is 7. Seller's office address is: 2699 White Road, Suite 150 Irvine, California 92614 8. Seller understands that this certification may be disclosed to the Internal Revenue Service by the transferee (buyer) and that any false statement contained herein could be punished by fine, imprisonment or both. Under penalties of perjury, the undersigned declares that he has examined this certification and to the best of his knowledge and belief it is true, correct and complete, and he further declares that he has the authority to sign this document on behalf of Seller. Executed as of , 2006, at , California. SELLER: SANDERSON J. RAY - DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership By: Sanderson J. Ray DSP, a California general partnership, General Partner By: James Walker Ray, as Trustee of the James W. Ray Family Trust U/T/D September 17, 1998, General Partner 856634.10 F-1 856634.10 By: By: F-2 Michael D. Ray, General Partner Chase O. Sanderson, Jr., General Partner EXHIBIT G SPECIFICALLY APPROVED EXCEPTIONS TO TITLE OF THE SIR PROPERTY 1. That Declaration of Covenants, Servitudes, Conditions, Restrictions and Easements dated as of June 24, 1994, recorded August 16, 1994, as Instrument No. 319834 in the Official Records of Riverside County, California. 2. *The Declaration of Use Restrictions dated , 2006, recorded , 2006, as Instrument No. in the Official Records of Riverside County, California. The form of such Declaration of Use Restrictions is attached to this Exchange Agreement and Joint Escrow Instructions as Exhibit K. 856634.10 G-1 856634.10 EXHIBIT H DEVELOPMENT AGREEMENT, H-1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Palm Desert 73510 Fred Waring Drive Palm Desert, CA 92260 Attention: City Clerk NO RECORDING FEE — PUBLIC AGENCY (T,c,. §61p3 (Space Above For Recorder's Use) DEVELOPMENT AGREEMENT by and between THE CITY OF PALM DESERT and SANDERSON J. RAY — DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership 2006 DOC S OC/ 1131045 v 15 /024656-0002 DEVELOPMENT AGREEMENT This DEVELOPMENT AGREEMENT ("Agreement") is made and entered into this day of , 2005 by and between the CITY OF PALM DESERT, a municipal corporation duly organized and existing under the constitution and laws of the State of California ("City"), and SANDERSON J. RAY — DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership ("Developer"), pursuant to the authority set forth in Article 2.5 of Chapter 4 of Division 1 of Title 7 a65.864 through 65869 5)_ _of the _. California_ Government Code (the "Development Agreement Act"). RECITALS: A. The Developer has entered into the Exchange Agreement pursuant to which it will acquire certain property, in the City of Palm Desert consisting of approximately 9.3 acres, described in Exhibit A attached hereto and incorporated herein by reference ("Property"). The Developer proposes to construct on the Property a residential project consisting of approximately twelve (12) residential units per gross acre (the "Project") as generally illustrated on the Site Plan attached hereto as Exhibit B and incorporated herein by reference. B. The Property is adjacent to the Desert Willow Golf Course (the "Golf Course") owned by the City. C. The City recognizes that construction and development of the Project will complement nearby development and generate significant economic benefits to the City, which will provide new revenue which will offset incremental City costs associated with the Project. D. In order to provide certainty and render development of the Project more feasible in light of the large amount of capital investment necessary to implement the Project and the planning horizon necessary to coordinate a development of such scope and complexity, Developer requires assurance from the City with respect to the Project that governmental entitlements shall, to the extent specified herein, not be changed or supplemented with inconsistent burdens and exactions; and E. •By entering into this Agreement, the City is encouraging the development of the Project as set forth in this Agreement in accordance with the goals and objectives of the City while reserving to the City the legislative powers necessary to remain responsible and accountable to its residents; and F. For the foregoing reasons, the Parties desire to enter into a development agreement for the Project pursuant to Government Code Section 65864 et seq. upon the terms set forth herein. DOC S CC/1131045 v 15/024656-0002 AGREEMENT: NOW, THEREFORE, pursuant to the authority contained in the Development Agreement Act, as it applies to the City, and in consideration of the premises and mutual promises and covenants herein contained and other valuable consideration the receipt and adequacy of which the Parties hereby acknowledge, the Parties hereto agree as follows: 1, DEFINITIONS. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Access Gate" is defined in Section 3.2.8. "Agreement" means this Development Agreement, including all exhibits attached hereto and all amendments and modifications hereto. "Applicable Development Impact Fees" is defined in Section 3.2.6. "Applicable Improvements" is defined in Section 3.2.6. "City Operator" means the City and any person or entity with whom the City contracts to manage and operate the Golf Course. "Applicable Rules" means this Agreement, the Entitlements, the Applicable Land Use Regulations and the Development Impact Fees. "Applicable Land Use Regulations" are the rules, regulations, ordinances and officially adopted plans and policies of the City contained in the PDMC which are applicable to the Property, Project and/or any action of the City and/or City Agency required in connection with either the implementation of the Entitlements or Subsequent Development Approvals, whether Discretionary Actions or Ministerial Permits and Approvals. A list of the Applicable Land Use Regulations is attached hereto as Exhibit C and incorporated herein by reference. "Applicable Processing Fees and Charges" means all processing fees and charges required by the City, applied uniformly to all new construction, including, but not limited to, fees for land use applications, project permits, building applications, building permits, grading permits, encroachment permits, tract or parcel maps, lot line adjustments, air right lots, street vacations, certificates of occupancy and other similar permits. Processing Fees and Charges shall not include Development Impact Fees. "CEQA" means the California Environmental Quality Act ("CEQA") (Cal. Public Resources Code, Sections 21000 et seq.) and the State CEQA Guidelines (Cal. Code Regs., Title 14, Sections 15000 et seq.). "CEQA Compliance Documents" mean an EIR, Negative Declaration, mitigated negative declaration or such other action taken by the City in compliance with CEQA and certified by the City in accordance with CEQA. "City" means the City of Palm Desert, a municipal corporation of the State of California. 2 DOC SOC/1131045 v 15/024656-0002 "City Agency" means each and every agency, department, board, commission, authority, employee, and/or official acting under the authority of the City, including without limitation the City Council and the Planning Commission. "City Attorney" means the City Attorney of the City. "City Council" means the City Council of the City which is the legislative body of the City pursuant to Section 65867 of the California Government Code. "City Manager" means the chief administrative officer of the City. "Conditions of Approval" means the conditions of approval imposed by the City in connection with the Entitlements and/or Subsequent Development Approvals. "CPI" means the annual Consumer Price Index -Urban for the Los Angeles -Orange -Riverside County Average, Subgroup "All Items", (1982-1984 = 100), as established by the Bureau of Labor Statistics of the U.S. Department of Labor for the applicable calendar year. "Default" means a default by the Developer of the provisions of Section 3.1 or a default by the City of the provisions of Sections 3.2 and 3.5 that remain uncured after Notice and opportunity to cure pursuant to the terms of Section 4. "Developer" means Sanderson J. Ray — Desert Springs Partners, L.P., a Texas limited partnership, and nominees, successors and assigns. "Development Agreement Act" means Article 2.5 of Chapter 4 of Division I of Title 7 (Sections 65864 through 65869.5) of the California Government Code. "Development Impact Fees" means impact fees, linkage fees, exactions, or fair share charges or other similar impact fees or charges (whether collected as a condition to issuance of demolition, grading and/or building permits, or otherwise and whether or not denominated as such "Development Impact Fees") imposed by the City on and in connection with new development. If at any time following the Effective Date it becomes legal for any of the foregoing fees or charges to be collected with property taxes, then any such amounts collectible in such manner shall constitute Development Impact Fees hereunder. Development Impact Fees do not include (a) Processing Fees and Charges or (b) impact fees, linkage fees, exactions, assessments or fair share charges or other similar fees or charges imposed by other governmental entities and which the City is required to collect or assess pursuant to applicable law (e.g., school district impact fees pursuant to Government Code Section 65995). "Discretionary Action" means an action proposed by Developer which requires the exercise of judgment, deliberation or a decision on the part of the City and/or any City Agency in the process of approving or disapproving a particular activity, as distinguished from an activity such as the issuance of Ministerial Permits and Approvals, which merely requires the City and/or any City Agency to determine whether there has been compliance with applicable statutes, ordinances and/or regulations. "Effective Date" means the date on which the City' s ordinance approving this Agreement becomes effective. 3 DOCS OC/ 1131045 v 15/024656-0002 "Entitlements" is defined in Section 2.2. Any subsequent amendment to the Entitlements that is requested by Developer and approved by the City shall automatically be incorporated into this Agreement as a part of the Entitlements without further action by the parties hereto. "Exchange Agreement" means the exchange agreement between City and Developer pursuant to which, among other things, the City will convey the Property to Developer. _Golf Course" means the Desert Willow Golf Course owned by the City and located immediately adjacent to the Property as shown on the Site Plan. "Golf Course Pro Shop" means the facility located at the Golf Course designated as the "Pro Shop". "Golf Course Shuttle Station(s)" is defined in Section 3.2.9. "General Plan" means the General Plan of the City. "Litigation" means any lawsuit (including any cross -action) filed against the City and/or Developer to the extent such lawsuit challenges the validity, implementation or enforcement of this Agreement. "Ministerial Permits and Approvals" means the permits, approvals, plans, inspections, certificates, documents, licenses, and all other actions required to be taken by the City which merely require the City and/or any City Agency to determine whether there has been compliance with applicable statutes, ordinances and/or regulations, including without limitation, building permits, public works permits, grading permits, encroachment permits and other similar permits and approvals which are required by the Applicable Rules to implement the Project, the Mitigation Measures, and the Conditions of Approval. Ministerial Permits and Approvals shall not include any Discretionary Actions. "Mitigation Measures" means the mitigation measures described in the CEQA Compliance Documents for each potential impact of the Project, if any. "Membership Fee" is defined in Section 3.2.9. "Mezzanine Lender" means a lender who provides funds for the construction of the Project, or parts thereof, and takes a security interest in an asset other than the Property or Project (e.g., a security interest in the Developer' s ownership of the Property or Project). "Mortgage" means any mortgage, deed of trust, pledge, encumbrance, sale leaseback, or other security interest with respect to the Property and/or Project and/or the Developer and/or interests of the Developer in the Property and or Project and/or this Agreement, granted to a lender not affiliated with Developer, made in good faith and for fair value, encumbering all or any part of the Property and/or Project or Developer's interest in the Property and/or Project and/or this Agreement, given by Developer for the purpose of obtaining construction financing of the Project, or any portion thereof. "Mortgaged Parcel" is defined in Section 5.1. 4 DOCSOC/1131045v 15/024656-0002 "Mortgagee(s)" means (i) any institutional lender that is a mortgagee or beneficiary under a deed of trust, (ii) a Mezzanine lender and/or (iii) any person or entity acquiring fee title under a first or second mortgage who has delivered a Mortgagee Notice to the City or any transferee of the above. "Mortgagee Notice" is defined in Section 5.2. "Notice" is defined in Section 4.1.2. "Parties" means collectively Developer and the City. "Party" means any one of Developer or the City. "PDMC" means the Palm Desert Municipal Code. "Periodic Review" means the semi-annual review process as described in Section 4 of this Agreement, and Section 25.37.070 of the Palm Desert Municipal Code, as the same may be amended from time to time. "Plaintiff" means any party seeking relief or compensation through Litigation whether as plaintiff, petitioner, cross -complainant or otherwise. "Planning Commission" means the Planning Commission of the City and the planning agency of the City pursuant to Section 65867 of the California Government Code. "Project" means the Entitlements for and development of twelve (12) residential dwelling units per gross acre in accordance with the Applicable Rules. "Property" is legally described in Exhibit A. "Redevelopment Plan" means the redevelopment plan for the Project Area Number 2 approved and adopted by the City Council of the City by Ordinance No. 509 on July 15, 1987. "Residential Units" means the residential units to be constructed on the Property. "Residents" means any persons residing at the Residential Units to be constructed on the Property. "Shuttle Service" is defined in Section 3.2.9. "Reserved Powers" means the rights and authority excepted from this Agreement's restrictions on the City's police powers and which are instead reserved to the City. The Reserved Powers include the power to enact and implement rules, regulations, ordinances and policies after the Effective Date that are not in conflict with the Applicable Rules or that may be in conflict with the Applicable Rules, but: (a) prevent or remedy conditions which the City has found to be injurious or detrimental to the public health and/or safety; (b) are Uniform Codes; (c) are necessary to comply with state and federal laws, rules and regulations (whether enacted previous or subsequent to the Effective Date) or to comply with a court order or judgment of a state or federal court; (d) relate to Processing Fees or Charges imposed and/or increased after the Effective Date; or (e) are agreed to or consented to by Developer. 5 DOCSOC/ 1131045v 15/024656-0002 "Subsequent Development Approvals" means those certain actions taken by the City after the Effective Date, whether Discretionary Actions or Ministerial Permits and Approvals, in connection with the implementation of the Entitlements or modification of the Entitlements. "Term" means the applicable period of time during which this Agreement shall be in effect and shall bind the City and Developer, as described in Section 6.2. "Uniform codes" means those building, electrical, mechanical, fire and other similar regulations of a City-wide scope which are based on recommendations of a multi -state professional organization and become applicable throughout the City, such as, but not limited to, the Uniform Building Code, the Uniform Electrical Code, the Uniform Mechanical Code, or the Uniform Fire Code (including those amendments to the promulgated uniform codes which reflect local modification to implement the published recommendations of the multi -state organization and which are applicable City-wide). 2. RECITALS OF PREMISES, PURPOSE AND INTENT. 2.1 State Enabling Statute. To strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the Legislature of the State of California adopted the Development Agreement Act, which authorizes any city to enter into binding development agreements establishing certain development rights in real property with persons having legal or equitable interests in such property. California Gov't Code § 65864 expressly provides as follows: "The Legislature finds and declares that: "(a) The lack of certainty in the approval of development projects can result in a waste of resources, escalate the cost of housing and other development to the consumer, and discourage investment in and a commitment to comprehensive planning which would make maximum efficient utilization of resources at the least economic cost to the public. "(b) Assurance to the applicant for a development project that upon approval of the project, the applicant may proceed with the project in accordance with existing policies, rules and regulations, and subject to conditions of approval, will strengthen the public planning process, encourage private participation in comprehensive planning, and reduce the economic costs of development." Notwithstanding the foregoing, to ensure that the City remains responsive and accountable to its residents while pursuing the benefits of development agreements contemplated by the Legislature, the City: (i) accepts restraints on its police powers contained in development agreements only to the extent and for the duration required to achieve the mutual objectives of the Parties; and (ii) to offset such restraints, seeks public benefits which go beyond those obtained by traditional City controls and conditions imposed on development project applications. 6 D OC S OC/ 1131045 v 15/02465 6-0002 2.2 City Procedures and Actions. 2.2.1 Planning Commission Action. On , as required by California Gov't Code § 65867, the Planning Commission held a duly noticed public hearing to take public testimony and consider its recommendation to the City Council regarding the approval, adoption or certification, as applicable, of the CEQA Compliance Documents, this Agreement and the Entitlements, which consist of the following land use applications, each of which is hereby incorporated herein by this reference' {TO BE INSERTED} (the "Entitlements"). After accepting and considering all evidence and testimony, both written and oral, the Planning Commission found and determined that: (a) this Agreement and the Entitlements are within the scope of the CEQA Compliance Documents and was contemplated therein as part of the Project; (b) this Agreement and the Entitlements are consistent with the General Plan; (c) this Agreement and the Entitlements are compatible with the orderly development of property in the surrounding area; (d) this Agreement and the Entitlements will have an overall positive impact on the health, safety and welfare of the residents of and visitors to the City; (e) this Agreement constitutes a lawful, present exercise of the City's police power and authority under the Development Agreement Act; (f) this Agreement will be entered into pursuant to and in compliance with the requirements of California Gov't Code § 65867; and (g) the CEQA Compliance Documents were prepared in conformance with CEQA. Based on these findings and determinations, the Planning Commission approved a motion recommending to the City Council the approval of the Agreement and the Entitlements. 2.2.2 City Council Action. On , the City held a duly noticed public hearing to consider the CEQA Compliance Documents, this Agreement and the Entitlements. On , after considering all testimony and evidence, both written and oral the City found and determined that the CEQA Compliance Documents complied with all requirements of 'CEQA and certified or approved, as applicable, the CEQA Compliance Documents for the Project and made the findings required by CEQA for the approval of the Project. On , after considering all testimony and evidence, both written and oral, the City Council found and determined that (a) this Agreement and the Entitlements are within the scope of the CEQA Compliance Documents and each were contemplated therein as part of the Project; (b) this Agreement and the Entitlements are consistent with the General Plan; (c) this Agreement and the Entitlements are compatible with the orderly development of property in the surrounding area; (d) the Agreement will have an overall positive effect on the health, safety and welfare of the residents of and visitors to the City; (e) this Agreement constitutes a lawful, present exercise of the City's police power and authority under the Development Agreement Act; and (f) this Agreement is entered into pursuant to and in compliance with its charter powers, the Municipal Code and the requirements of California Gov't Code § 65867. The City Council therefore adopted Resolution No. , approving the Entitlements and introduced Ordinance No. approving this Agreement. The City Council on adopted Ordinance No. , to become effective thirty days after adoption and authorized the execution hereof. 2.3 Purpose of this Agreement. 2.3.1 Developer Obiectives. In accordance with the legislative findings set forth in the Development Agreement Act, and with full recognition of the City's policy of judicious restraints 7 DOCS OC/ 1131045 v 15/024656-0002 on its police powers, Developer wishes to obtain reasonable assurances that the Project may be developed over a specified period of time in accordance with the Applicable Rules subject to the City's Reserved Powers. In the absence of this Agreement, Developer would have no assurance that it can complete the Project for the uses and to the density and intensity of development and with the flexibility to adjust to market conditions as set forth in the Applicable Rules. This Agreement, therefore, is necessary to assure Developer that the Project will not be (a) reduced in density, intensity, development flexibility or use, or (b) subjected to Development Impact Fees or other -regulatory requirements -not included in the.Applicable Rules. —_..- ------ - - ---- 2.3.2 Mutual Obiectives. Development of the Project in accordance with this Agreement will provide for the orderly development of the Project in accordance with the objectives set forth in the General Plan. Moreover, a development agreement for the Project will eliminate uncertainty in planning for and securing orderly development of the Project, assure attainment of maximum efficient resource utilization within the City at the least economic cost to its citizens and otherwise achieve the goals and purposes for which the Development Agreement Act was enacted. The Parties believe that such orderly development of the Project will provide many public benefits to the City through the imposition of development standards and requirements under the provisions and conditions of this Agreement, including without limitation: increased tax revenues, installation of on -site and off -site improvements and job creation. Additionally, although development of the Project in accordance with this Agreement will restrain the City's land use or other relevant police powers, the Agreement provides the City with sufficient reserved powers during the Term hereof to remain responsible and accountable to its residents. In exchange for these and other benefits to the City, Developer will receive assurance that the Project may be developed during the Term of this Agreement in accordance with the Applicable Rules and subject to the Reserved Powers. 3. AGREEMENT AND ASSURANCES. 3.1 Agreement and Assurances on the Part of Developer. Subject to acquisition by Developer pursuant to the Exchange Agreement, in consideration for the City entering into this Agreement, and as an inducement for the City to obligate itself to carry out the covenants and conditions set forth in this Agreement, although Developer is not obligated to construct the Project, if it elects to construct the Project it will do so in conformity with, and subject to, the Entitlements, the General Plan, the Applicable Rules, the Reserved Powers and the Redevelopment Plan. 3.2 Agreement and Assurances on the Part of the City. Subject to acquisition by Developer pursuant to the Exchange Agreement, in consideration for Developer entering into this Agreement, and as an inducement for Developer to obligate itself to carry out the covenants and conditions set forth in Section 3.1 hereof, and in order to effectuate the purposes and intentions set forth in Section 2 of this Agreement, the City hereby agrees during the Term as follows: 3.2.1 Vested Right to Develop. 3.2.1.1 Project Entitlement/Density. Developer is hereby granted the vested right to develop the Project during the Term subject to the terms and conditions of the Applicable Rules, and the Reserved Powers. 3.2.2 Special Taxes and Assessments. Developer shall have the right, to the extent permitted by law, to protest, oppose and vote against any and all special taxes, assessments, levies, charges and/or fees proposed or imposed with respect to any assessment districts, Mello -Roos or 8 DOCSOC/ 1131045v 15/024656-0002 community facilities districts, maintenance districts or other similar districts applicable to the Property or any portion thereof that are not in effect as of the Effective Date. This Section 3.2.2 shall not apply to Applicable Processing Fees and Charges and Development Impact Fees. 3.2.3 Subsequent Development Approvals. The City shall not require Developer to obtain any Subsequent Development Approvals that are not required by the Applicable Rules or the Reserved Powers. City hereby agrees that it shall not unreasonably withhold or further condition its approval_ oLany Discretionary_Aciions__relating_t4_ihdivision and/or Subsequent Development Approvals or any portion thereof that is consistent with the Entitlements. The City shall appoint a single staff member to be the point of contact to manage, control, coordinate and expedite all Subsequent Development Approvals. 3.2.4 Moratoria. In the event an ordinance, resolution or other measure is enacted, whether by action of the City, by initiative, or otherwise, which relates to the rate, amount, timing, sequencing, or phasing of the development or construction of the Project on all or any part of the Property or the implementation or construction of the Mitigation Measures, City agrees that, unless required by applicable state law, such ordinance, resolution or other measure shall not apply to the Project, Property or this Agreement unless such changes are adopted pursuant to the City's exercise of its Reserved Powers or other applicable provision of this Agreement. 3.2.5 Timing of Development. The parties acknowledge that Developer cannot at this time predict when or if the Property will be developed. Such decisions depend upon numerous factors which are not within the control of Developer, such as market orientation and demand, interest rates, absorption, completion and other similar factors. Because the California Supreme Court held in Pardee Construction Co. v. City of Camarillo (1984) 37 Cal. 3d 465, that the failure of the parties therein to provide for the timing of development resulted in a later adopted initiative restricting the timing of development to prevail over such parties' agreement, it is the parties' intent to cure that deficiency by acknowledging and providing that Developer shall have the right to develop the Property at such rate and at such time as Developer deems appropriate' within the exercise of its subjective business judgment. 3.2.6 Development Impact Fees. The City may impose only those Development Impact Fees in force and effect as of the Effective Date and specified on Exhibit E attached hereto and incorporated herein by this reference ("Applicable Development Impact Fees"). Applicable Development Impact Fees may not be increased during the Term. The City finds that the cost of certain improvements that are the subject matter of the Applicable Development Fees and are identified in the Mitigation Measures and Conditions of Approval that are to be implemented in connection with the Project ("Applicable Improvements") may exceed the amount of the Applicable Development Impact Fees. The City, therefore, agrees that the actual cost of Developer's installation of the Applicable Improvements constructed at Developer's expense shall be credited by the City against the Applicable Development Impact Fees due with respect to the Applicable Improvements, upon Developer's submission of documentation of such costs in a form satisfactory to the City's Director of Public Works. To the extent Developer's actual costs of installing the Applicable Improvements exceed the Applicable Development Impact Fees, Developer shall not be entitled to any further refund or reimbursement from the City. To the extent Developer's actual costs of installing the Applicable Improvements are less than the amount of Applicable Development Impact Fees due from Developer in connection with the Project, Developer shall pay such fees when due. 9 DOCS OC/1131045v 15/024656-0002 3.2.7 Representation and Warranty of City Regarding Conformity with the Redevelopment Plan. City hereby represents and warrants that the Project is in conformity with the Redevelopment Plan and that during the Term no amendment to the Redevelopment Plan shall be applied to the Property that would render the Project not in conformity with the Redevelopment Plan. 3.2.8 Golf Course Fencing and Access Gate. Prior to the issuance of a Certificate of Occupancy for the first Residential Unit constructed on the Property, the Developer will replace andupgrade the appearance of the existing feucjbetween the Property. and. the Golf Course, located generally on the property line between the Golf Course and the Property, as shown on the Site Plan. The new fence will be designed to prevent unauthorized entry of persons from the Property to the Golf Course while at the same time not materially interfering with views of the Golf Course from the Residential Units. The new fence will accommodate one (1) mechanical access gate that is controlled by the City and/or Golf Course personnel from the Golf Course and which allows for scheduled, safe, and convenient Resident access between the Property and the Golf Course Shuttle Station ("Access Gate"). The design of the Access Gate and new fence shall each be consistent with Applicable Rules and approved by the City Manager or his designee, acting in his reasonable discretion. The City Manager or his designee shall approve a proposed new fence designed in substantial conformance with the illustration shown in Exhibit "B" attached hereto and incorporated herein by reference. 3.2.9 Golf Course Shuttle Service and Golf Cart Shuttle Station. The City Operator will enter into an agreement with the Developer (assignable to the Homeowner's Association; pursuant to which a shuttle service to and from the Project and the Golf Course Pro Shop shall be provided by the City Operator for the benefit of the Residents (the "Shuttle Service"). The City or its operator may charge the Developer or the homeowners association, as applicable, an amount not to exceed the actual and direct cost of such shuttle service. The Developer has the option to construct a golf course shuttle station near the Access Gate on the Property. The golf cart shuttle station will consist of a bench or benches, shade structure, and appropriate surrounding landscaping features (the "Golf Cart Shuttle Station"). The ultimate design and location of the Golf Cart Shuttle Station shall be subject to the approval, which shall not be unreasonably withheld, of the City Manager or his designee. The Shuttle Service will operate between the Golf Course Pro Shop and the Golf Course Shuttle Station and will be available on demand to Residents based on thirty (30) minutes prior personal or telephonic notice during normal operating hours of the Golf Course. The golf cart Shuttle Service will be evaluated six months from the time the Residential Units are eighty percent (80%) occupied and annually thereafter to ensure that the Shuttle Service does not unduly disrupt play. Should the Shuttle Service prove unduly disruptive, a door-to-door vehicle Shuttle Service shall be provided by the City operator and shall be available on demand to Residents based on thirty (30) minutes prior personal or telephonic notice during normal operating hours of the Golf Course. 3.2.10 Golf Course Players Club. Residents shall have the option to joint the Players Club offered by the Desert Willows Golf Club, subject to the same terms, conditions and benefits of membership then available to members of the Players Club, so long as the Desert Willows Golf Club, in its sole discretion, continues to offer this amenity. 3.2.11 Release for Damage Related to Golf Course. THE DEVELOPER, FOR ITSELF, AND ON BEHALF OF EACH OF ITS SUCCESSORS AND ASSIGNS AND SUCCESSORS IN INTEREST TO ALL OR ANY PORTION OF THE PROPERTY, AND THEIR RESPECTIVE FAMILY, GUESTS, TENANTS, INVITEES AND LICENSEES (COLLECTIVELY, THE "OWNER PARTIES", AND INDIVIDUALLY AN "OWNER PARTY"), HEREBY AGREES 10 DOC SOC/ 1131045 v 15/024656-0002 THAT UPON DEVELOPMENT OF THE. PROPERTY FOR RESIDENTIAL USES, THE OWNER PARTIES WILL RELEASE AND DISCHARGE THE CITY, THE PALM DESERT REDEVELOPMENT AGENCY, THE OPERATOR OF THE GOLF COURSE FACILITY, THE OWNER OF THE GOLF COURSE FACILITY, THE GOLF COURSE ARCHITECT AND THEIR RESPECTIVE MEMBERS, PRINCIPALS, EMPLOYEES, PARTNERS, OFFICERS, DIRECTORS, SHAREHOLDERS, TRUSTEES, AGENTS, LESSEES, ASSIGNEES AND SUCCESSORS (COLLECTIVELY THE "RELEASED PARTIES"), FROM AND AGAINST ALL --CLAIM EXPENSES - DAMAncs (v 2'S_ONCJ •UpnvCT ATTORNEY FEES), CAUSES OF ACTION, OBLIGATIONS, AND LIABILITIES INCLUDING, WITHOUT LIMITATION, DAMAGE TO THE PROPERTY OR ANY IMPROVEMENT THEREON, INJURY (INCLUDING DEATH) TO AN OWNER PARTY OF DAMAGE TO OR LOSS OF AN OWNER PARTY'S PERSONAL OR REAL PROPERTY, TO THE EXTENT ARISING FROM (1) THE ENTRY OF GOLF BALLS ONTO THE PROPERTY, (2) ANY OWNER PARTY'S PRESENCE OR ACTIVITIES ON THE GOLF COURSE, AND (3) THE PROXIMITY OF THE PROPERTY TO THE GOLF COURSE. 3.2.12 Easement. Living adjacent to or near a golf course carries with in the risk of damage caused to persons and property by the golf balls coming onto adjacent property from the golf course. City has provided no assurances whatsoever concerning the frequency with which golf balls will enter the Property, including the yards and buildings that may be constructed on the Property, and has provided no guaranties as to what, if any, action may be taken by the City to mitigate such entry. In light of such facts, the Developer does hereby grant to the City in perpetuity nonexclusive Golf Course easements, forthe benefit of and appurtenant to the City, in, over and across the Property, and the airspace there above, for the following purpose: (a) the flight of the golf balls through the air over the Property, and any buildings or other improvements that may be constructed thereon; and (b) the entry of golf balls onto the Property, and any buildings or other improvements that may be constructed thereon. 3.2.13 Covenants Runnine With the Land. The covenants of this Agreement set forth in this Section 3.2 shall run with the land and be recorded immediately following the Effective Date of this Agreement by the Memorandum of Development Agreement attached hereto as Exhibit D and incorporated herein by reference. 3.3 Periodic Review. During the Term of this Agreement, the City may initiate and conduct Periodic Review of Developer's compliance with this Agreement. Developer shall cooperate with the Periodic Review and shall promptly supply to the City such information as may be requested by the City regarding Developer's compliance with this Agreement. Such Annual Review shall be limited in scope to determining the Developer's or its successor's good faith compliance with the provisions of this Agreement as provided in the Development Agreement Act and Section 25.37.070 of the Palm Desert Municipal Code. If, at the conclusion of a Periodic Review, Developer is found to be in compliance with this Agreement City shall, upon written request from Developer or its successor in interest to the City's Director of Community Development, issue a Certificate of Compliance ("Certificate") to Developer stating that after the most recent Periodic Review and based upon the information known or made to the City that (i) this Agreement remains in effect, and (ii) Developer is not in Default. The Certificate shall be in recordable form acceptable to the City Attorney and shall contain information necessary to communicate constructive record notice 11 DOCSOG 1131045v 15/024656-0002 of the finding of compliance. Developer may record the Certificate with the County Recorder. If, at the conclusion of a Periodic Review, the City finds based on substantial evidence that the Developer or its successor has not complied in good faith with terms or conditions of this Agreement, the City Council may modify or terminate this Agreement. 4. DEFAULT PROVISIONS 4.1. Default by Developer. 4.1.1 Default. Any Default hereunder shall entitle the nondefaulting party to terminate this Agreement pursuant to Section 4.1.4 or commence legal action pursuant to Section 6.5 4.1.2 Notice of Default. In the event of a default by either party, the nondefaulting party shall submit to the defaulting party, by registered or certified mail, return receipt requested, a written notice of default in the manner prescribed in Section 6.14, identifying with specificity those obligations which have not been performed ("Notice"). Upon receipt of the Notice, the defaulting party shall promptly commence to cure the identified default(s) at the earliest reasonable time after receipt of the Notice and shall complete the cure of such default(s) not later than thirty (30) days after receipt of the Notice, or such longer period as is reasonably necessary to remedy such default(s), provided that the defaulting party shall continuously and diligently pursue such remedy at all times until such default(s) is cured. PURSUANT TO SECTION 5, MORTGAGEES MAY BE ENTITLED TO MORTGAGEE NOTICE OF ANY DEFAULT BY DEVELOPER HEREUNDER AND AN ADDITIONAL PERIOD IN WHICH TO CURE SUCH DEFAULT. 4.1.3 City Procedure Following Default. If after the cure period has elapsed, the City finds and determines that Developer is in Default and that the City intends to terminate or modify this Agreement, the City shall make a report to the Planning Commission and then set a public hearing before the Commission in accordance with the notice and hearing requirements of Government Code Sections 65867 and 65868. If after public hearing, the Planning Commission finds and determines, on the basis of substantial evidence, that Developer has not cured the Default pursuant to this Section, and that the City shall terminate or modify this Agreement, Developer shall be entitled to appeal that finding and determination to the City Council in accordance with Section 6.3. 4.1.4 Termination of Agreement by City. The City may terminate this Agreement, after final determination in accordance with Section 6.3 of the City Council on the basis of substantial evidence that Developer has not cured its Default or, where no appeal is taken, after the expiration of the appeal periods described in Section 6.3. Following the transfer of a portion of the Developer's Property to a permitted transferee, this Agreement may only be terminated with respect to the transferred parcel on account of a Default by the Developer/owner of such transfer parcel and no such Default shall result in termination of this Agreement with respect to the Property retained by the assignor (or owned by other previous transferees). CITY'S TERMINATION RIGHTS WITH RESPECT TO A MORTGAGED PARCEL SHALL BE LIMITED WITH RESPECT TO ANY MORTGAGEE OF SUCH MORTGAGED PARCEL ENTITLED TO MORTGAGEE NOTICE PURSUANT TO 5.2 BELOW. 4.1.5 Limitation in Citv's Right to Seek Specific Performance/Damages. The City shall have no right to seek a remedy of specific performance hereunder except with respect to the obligations under Sections 3.1 and 3.2.10 and only then if and to the extent Developer has 12 DOCSOC/1131045v 15/024656-0002 commenced construction of the Project. Nothing in this Section 4.1.5 shall limit the City's right to enforce all applicable provisions of the Applicable Rules and Reserved Powers for any portion of the Project. The City's right to receive damages under this Agreement shall be limited to its -direct, actual expenses incurred after the Effective Date as a result of Developer's Default with respect to this Agreement. Following the transfer of a portion of the Developer's Property to a permitted transferee, the City may only seek damages permitted hereunder on account of a Default by the Developer/owner of such transfer parcel and no such Default shall result in liability to the assignor Developer- (or-previous-.tr-ansferee-Developer (s))_._ -.—----_-- 4.2 Default by the City. In the event the City does not accept, process, or render a decision with respect to a Discretionary Action and/or Ministerial Permits and Approvals, upon compliance with the requirements therefore, or as otherwise agreed to by the Parties, or the City otherwise Defaults under the provisions of this Agreement, Developer shall have the right only to seek to compel specific performance of the City's obligations under this Agreement and shall have no right to seek monetary damages. 4.3 Multiple Developers. Because the Project may be developed by Developer or by one or more assignees of Developer, the Parties acknowledge and agree that the provisions of this Section 4 relating to any Default by Developer with respect to its obligations, and the City's enforcement rights with respect thereto, including any rights of termination and the limited rights to seek damages, shall relate only to the portion of the Property actually owned by the specific Developer whose act or omission constituted such Default. Other portions of the Property owned by Developer (provided Developer is not in Default hereunder with respect to its Property) and/or any other assignee provided such assignee(s) are not in Default hereunder with respect to its/their Property) shall not be affected nor shall the rights of such non -defaulting Developer or other assignee(s) hereunder be impaired by any such Default relating to the portion of the Property not owned by it. Prior to transferring all or any portion of the Property, the Developer shall provide the prospective transferee with written notice of the existence of this Agreement and a full and complete copy hereof. 5. MORTGAGEE PROTECTIONS 5.1 Right to Mortgage/Notice/Multiple Mortgagees. Developer shall have the absolute right to encumber Developer's right, title and interest in, to and under this Agreement and the Property pursuant to one or more Mortgages. Because certain portions of the Project may be developed by one or more assignees, the Parties acknowledge and agree that different Mortgages may encumber the Property and that there may be a separate Mortgage in effect with respect to separate parcels within the Property. It is the intention of the Parties that the rights and protections granted in this Article 5 to each Mortgagee shall only apply to the parcels upon which such Mortgagee's Mortgage is a lien (each a "Mortgaged Parcel"), and to the rights, privileges and obligations under this Agreement relating to such Mortgaged Parcel. 5.2 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 as provided herein, whenever the City delivers any Notice or demand to Developer with respect to any default by Developer and if Developer fails to cure the default within the time set forth herein (thereby becoming a Default), the City shall deliver to each Mortgagee a copy of such notice or demand ("Mortgagee Notice"). Each such Mortgagee shall (insofar as the rights granted by the City are concerned) have the right, at its option, within thirty (30) days after the receipt of the Mortgagee Notice, to cure or remedy or 13 DOCS OC/ 1131045 v 15/02465 6-0002 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; provided, however if the Mortgagee is legally prevented from curing such Default because of a bankruptcy by the Developer then the thirty (30) day period shall be tolled until such bankruptcy is confirmed or rejected. Nothing contained in this Agreement shall be deemed to permit or authorize such Mortgagee, to undertake or continue the construction or completion of the Project, or any portion thereof (beyond the extent necessary to conserve or protect the improvements or construction already -made) —without first —having —expressly assumed- De e1 is ohligatinns to tl City by written agreement reasonably satisfactory to the City. It is understood that a Mortgagee shall be deemed to have satisfied the thirty (30) 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 Mortgagee has within such thirty (30) day period commenced proceedings to obtain title and/or possession and thereafter the Mortgagee diligently pursues such proceedings to completion and cures or remedies the Default. 5.3 Mortgagee Not Obligated to Construct Proiect. No Mortgagee shall in any way 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 covenant or any other provision in this Agreement be construed so to obligate such Mortgagee. Nothing in this Agreement shall be deemed to construe, permit or authorize any such Mortgagee to devote the Property to any uses or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement. 5.4 No Liability. No Mortgagee shall have any personal liability beyond its interest in the Mortgaged Parcel acquired by it through enforcement of its Mortgage for the performance or payment of any covenant, liability, warranty or obligation hereunder, and the City agrees that it shall look solely to the interests of such Mortgagee in such Mortgaged Parcel for payment or discharge of any such covenant, liability, warranty or obligation. 5.5 No Amendment or Termination. This Agreement shall not, without the prior written consent of all Mortgagees holding Mortgages on each Mortgaged Parcel to be affected thereby, be amended so as to (a) terminate this Agreement prior to the expiration of the Term hereof; or (b) change any provision of this Agreement which, by its terms is specifically for the benefit of Mortgagees or specifically confers rights on Mortgagees. No amendment to this Agreement affecting a Mortgaged Parcel made without the consent of any Mortgagee holding a Mortgage on such Mortgaged Parcel shall be binding upon such Mortgagee or its successors in interest should it become a party hereto. 5.6 Condemnation or Insurance Proceeds. Nothing in this Agreement shall impair the rights of any Mortgagee, pursuant to its Mortgage, to receive insurance and/or condemnation proceeds which are otherwise payable to Developer granting such Mortgage. 5.7 Title by Foreclosure. Except as otherwise set forth herein, all of the provisions contained in this Agreement applicable to any Mortgaged Parcel shall be binding on and for the benefit of any person who acquires title to such Mortgaged Parcel by foreclosure or deed in lieu of foreclosure under a Mortgage. 5.8 Delegation to Mortgagee. Developer may delegate and/or assign irrevocably to any Mortgagee the non-exclusive authority to exercise any or all of Developer's obligations and/or rights 14 DOCSOC/ 1131045v 15/024656-0002 hereunder with respect to the applicable Mortgaged Parcel, but no such delegation shall be binding upon the City unless and until either Developer or such Mortgagee shall give to the City a true copy of a written instrument effecting such delegation. Such delegation of authority may be effected by the terms of the Mortgage itself, in which case service upon the other Party of an executed counterpart or conformed copy of said Mortgage, together with written notice specifying the provisions therein which delegates such authority to said Mortgagee, shall be sufficient to give such other Party notice of such delegation. No such delegation or assignment shall relieve the Developer --af-such Mortgaged_Parcel ofany of its obligations hereunder with respectto such Mortgaged ParceL 5.9 No Obligation to Cure. Nothing herein contained shall require any Mortgagee to cure any default of Developer referred to above, except where the defaulted obligation has been delegated to the Mortgagee, pursuant to Section 5.8, above. 5.10 Separate Agreement. The City shall, upon request, execute, acknowledge and deliver to each Mortgagee requesting same, an agreement, in form satisfactory to such Mortgagee and the City, between the City and the Mortgagees, agreeing to all of the provisions hereof. 5.11 Estoppel Certificate. Within thirty (30) days after written request therefore, the City shall execute and deliver to any proposed Mortgagee in connection with its new Mortgage and to such Mortgagee thereafter from time to time an estoppel certificate in form and substance satisfactory to Developer and such Mortgagee ("Estoppel Certificate"). The City hereby agrees to reasonably cooperate in including in any such Estoppel Certificate from time to time any provision which may reasonably be requested by any proposed Mortgagee for the purpose of implementing the Mortgagee protection provisions contained in this Section 5 and allowing such Mortgagee reasonable means to protect or preserve the lien and security interest of its Mortgage hereunder, clarifying the non -applicability of the provisions of this Agreement to such Mortgagee as it relates to parcels other than the Mortgaged Parcel hereunder, and/or such other terms and provisions as are customarily required by Mortgagees (taking into account the customary requirements of their participants, syndication partners or ratings agencies) in connection with any such financing; provided, however, that no such Estoppel Certificate shall in any way materially adversely affect any rights of the City or increase any obligations of City under this Agreement. 5.12 Conflicts. If there is any conflict between this Section 5 and any other provision contained in this Agreement, this Section 5 shall control. 6. GENERAL PROVISIONS. 6.1 Effective Date. This Agreement shall be effective upon the date the ordinance approving it takes effect. The City Clerk shall attest to the effectiveness of the Agreement after the City Clerk attests as to approval by the City Council and it is executed by Developer and the Mayor of the City of Palm Desert. 6.2 Term. 6.2.1 Basic Term. The Term of this Agreement shall commence on the Effective Date and shall terminate ten (10) years thereafter (the "Term"), unless sooner terminated pursuant to Section 6.2.2 below. Following the expiration of the Term, this Agreement shall terminate and be of no further force and effect. The Term shall be subject to extension pursuant to Section 6.4. 15 D OC S OC/ 1131045 v 15 /02465 6-0002 6.2.2 Earlv Termination of Agreement. The Agreement is terminable: (a) by mutual written consent of the Parties with consent of the Mortgagee(s); or (b) by either Party followinga Default by the other Party under this Agreement. 6.3 Appeals to City Council. Notwithstanding the provisions of the Applicable Rules, the Developer may appeal any finding and/or determination of a City Agency relating to the Project. Such appeal shall be taken, if at all, within fifteen (15) days after the delivery of notice in accordance _vith_-Section_6_1.4of such finding and/or determination to Developer_ Th CCity Council shall act upon the finding and/or determination of the City Agency within thirty (30) days after such delivery of notice in accordance with Section 6.14, or within such additional period as may be agreed upon by Developer and the City Council. If the City Council fails to act within such thirty (30) day period, the appeal shall be deemed to have been disapproved and Developer shall have the right to pursue all of its rights and remedies (subject to the limitations set forth in Section 4.3 above) with respect to such finding or determination, including, without limitation, pursuing a writ of mandamus or other action to compel the City Council to act on such matter or a determination of the merits of such matter, and the City shall have no and hereby waives any defense under such circumstances based on a claim of Developer's failure to exhaust its administrative remedies. 6.4 Enforced Delay; Extension of Time 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: litigation challenging the validity of this transaction or any element thereof or the right of either party to engage in the acts and transactions contemplated by this Agreement; inability to secure necessary labor materials or tools; or withdrawal of financing not caused by any act or omission of Developer; war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; acts of terrorism; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; building moratoria; unusually severe weather; precipitation; acts or omissions of the other party; acts or failures to act of any other public or governmental agency or entity (other than the acts or failures to act of the City which shall not excuse performance by the City); or any other causes beyond the control or without the fault of the party claiming an extension of time to perform. Notwithstanding anything to the contrary in this Agreement, an extension of time for any such cause shall be for the period reasonably attributable to the enforced delay and shall commence to run from the time of the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the mutual agreement of the Parties. 6.5 Legal Action. Subject to the limitation on remedies imposed by this Agreement, either Party may institute legal action to cure, correct, or remedy any Default, enforce any covenant or agreement herein, enjoin any threatened or attempted violation, enforce by specific performance the obligations and rights of the Parties hereto and/or seek damages and/or declaratory relief with respect to its rights, obligations or interpretations of this Agreement or pursue other remedies under applicable law. 6.6 Applicable Law. This Agreement shall be construed and enforced in accordance with the laws of the State of California, and the venue for any legal actions brought by any Party with respect to this Agreement shall be in state court in the County of Riverside, State of California. 6.7 Amendments. This Agreement may be amended from time to time by mutual consent in writing of the Parties to this Agreement in accordance with Government Code 16 DOCSOC/1131045 v 15/024656-0002 Section 65868. As a condition precedent to City's execution of any amendment of this Agreement, Developer shall deliver to City a preliminary title report with respect to the portions of the Property to be affected by such amendment, together with a notice stating that the Mortgagees listed in such report will be entitled to notice of and consent to such amendment pursuant to Section 5 above. 6.8 Assignment. 6.8.1 Right to Assign. Subiect to the prior written consent of theCityManager given within fifteen (15) business days after receipt of a written request from Developer, Developer shall have the right to sell, transfer, or assign the Property or any portion thereof (provided that no such partial transfer shall violate the Subdivision Map Act, Government Code Section 66410, et seq.) to any person, partnership, limited liability company, joint venture, firm, or corporation, at any time during the Term of this Agreement, together with the rights granted to and obligations imposed upon the Property, or the portion transferred, pursuant to this Agreement (including the right to further allocate uses, density and other development rights pursuant to the Entitlements), or assign its rights hereunder to any party who has taken (or will take) title to the Property pursuant to the Exchange Agreement. The City's consent to such sale, transfer or assignment of the Property shall not be unreasonably withheld if the Developer presents documentation satisfactory to the City Manager that demonstrates the proposed buyer, transferee or assignee possesses the financial and professional capability to carry out Developer's obligations pursuant to this Agreement. 6.8.2 Release of Developer. With respect to a sale, transfer, or assignment of all or substantially all of Property and the related rights hereunder to a purchaser, transferee, upon the effective date of any such sale, transfer, or assignment, as evidenced by the recordation of a written assignment and assumption agreement between Developer and the proposed purchaser, transferee, or assignee, and delivery thereof to the City, Developer shall automatically be released from any obligations to the City under this Agreement with respect to the Property so transferred. With respect to a sale, transfer, or assignment of any portion of the Property (i.e., less than all or substantially all) to a purchaser, transferee, or assignee, upon the effective date of any such sale, transfer, or assignment as evidenced by the recordation of a written assignment and assumption agreement between Developer and the proposed purchaser, transferee, or assignee and delivery thereof to the City, Developer shall automatically be released from any obligations to the City under this Agreement with respect to the portion of the Property so sold, transferred, or assigned, and no default by the purchaser, transferee, or assignee of such portion of the Property under this Agreement shall be deemed a default by Developer with respect to Property retained by it following such sale, transfer, or assignment. Developer shall cause a copy of each such assignment and assumption agreement to be delivered to City following recordation thereof. 6.8.3 Release of Purchaser. Transferee. or Assignee. A purchaser, assignee, or transferee of any portion of the Property so sold, transferred, or assigned shall be automatically released from any obligations to the City under this Agreement relating to all other unsold, unassigned, non -transferred portions of the Property, and no default by Developer under this Agreement with respect to such unsold, unassigned, non -transferred portions of the Property shall be deemed a default by the purchaser, transferee, or assignee of such portion of the Property. 6.8.4 Allocation of Development Rights. Notwithstanding the foregoing, to the extent permitted by the Entitlements, Developer shall have the right to contractually allocate with any proposed purchaser, transferee, or assignee of any portion of the Property, the rights and obligations of Developer hereunder with respect to such portion of the Property, including, without limitation, 17 DOCSOC/ 1131045 v 15/024656-0002 use, permitted density and/or other development rights, and the right and obligation to perform Mitigation Measures and Conditions of Approval, all of which shall be set forth in a written assignment and assumption agreement between Developer and the purchaser, transferee, or assignee. Any such allocation shall be subject to compliance with the maximum permitted density in the Property and the constituent components of the Property as set forth in the Entitlements. 6.9 Covenants. The provisions of this Agreement shall constitute covenants which shall run with the land comprising the Property fotshe benefit thereof and_as a burden thereon, and the burdens and benefits hereof shall bind and inure to the benefit of all assignees, transferees, and successors to the Parties hereto until this Agreement expires or is earlier terminated in accordance with its terms. 6.10 Implementation. 6.10.1 Additional Special Mutual Cooperation. The City agrees that timely processing of Ministerial Permits and Approvals, Discretionary Actions, and any other approvals or actions required in connection with the Project are important to the successful implementation of the Project and the enjoyment of the benefit to the City anticipated to be obtained thereby. In recognition of the importance of timely processing and review of such Ministerial Permits and Approvals and Discretionary Actions, the City agrees to work with Developer to establish time frames for processing and reviewing such Ministerial Permits and Approvals and Discretionary Actions. During the preparation of all Plans, City staff and Developer agree to work together to conduct progress meetings as necessary to coordinate the preparation and review of plans, City staff and Developer further agree to work together to communicate and consult informally as frequently as is necessary to ensure that the formal submittal of any completed plans, drawings, and related documents to the City can receive prompt and efficient consideration. Subject to the availability of City staffing or outside consultants (which shall be permitted if requested by Developer and paid for by Developer), City will endeavor to designate a single in-house plan checker to coordinate the checking of construction plans. Subject to the availability of City staffing or outside consultants (which shall be permitted if requested by Developer and paid for by Developer), additional plan checkers shall be assigned to the Project on an as needed basis. 6.10.2 Other Governmental Permits. Developer shall apply in a timely manner for such other permits and approvals as may be required from other governmental or quasi -governmental agencies having jurisdiction over the Project as may be required for the development of, or provision of services to, the Project. The City shall cooperate with Developer in its endeavors to obtain such permits and approvals. 6.11 Relationship of the Parties. It is understood and agreed by the Parties hereto that the contractual relationship created between the Parties hereunder is that Developer is an independent party and not an agent of the City. Further, the City and Developer hereby renounce the existence of any form of joint venture or partnership between them and agree that nothing herein or in any document executed in connection herewith shall be construed as making the City and Developer a joint venture or partnership. 6.12 Cooperation in Event of Litigation. 6.12.1 Cooperation in the Event Of Litigation. In the event of any Litigation instituted by a third party or other governmental entity or official challenging the validity of this 18 ROCS OC/ 1131045 v 15/024656-0002 Agreement, the approval of the Entitlements and/or the Exchange Agreement, the Parties hereby agree to affirmatively cooperate in defending said action. However, nothing the other party this Agreement shall be deemed to compel either party to obtain the consent or approval of any action or strategy during the course of the litigation including, without limitation, whether and how to appear and/or respond to such an action, and whether to settle such litigation. 6.12.2 Attorney Fees. In any action between the parties to interpret, enforce, reform, -modify, regrind or otherwise in connection withany of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to specific performance, injunctive relief or any other relief to which it might be entitled, reasonable costs and expenses including, without limitation, litigation costs and reasonable attorneys' fees. Costs recoverable for enforcement of any judgment shall be deemed to include reasonable attorneys' fees. 6.12.3 Continuine Oblisations. This Section 6.12 shall survive termination of this Agreement. 6.13 Subdivision of Proiect. The City agrees that, pursuant to the Applicable Rules, Developer may modify the boundaries of existing lots of the Property within the Property by means of lot line adjustments. 6.14 Notices. Any notice or communication required hereunder between the City or Developer must be in writing, and may be given either personally, by registered or certified mail, return receipt requested or by overnight courier. If given by registered or certified mail, the same shall be deemed to have been delivered and received on the first to occur of (a) actual receipt by any of the addressees designated below as the Party to whom notices are to be sent, or (b) five days after a registered or certified letter containing such notice, properly addressed, with postage prepaid, is deposited in the United States mail. If personally delivered or delivered by courier, a notice shall be deemed to have been delivered when received by the Party to whom it is addressed. Any Party hereto may at any time, by giving ten (10) days' written notice to the other Party hereto, designate any other address in substitution of the address, or any additional address, to which such notice or communication shall be given. Such notices or communications shall be given to the Parties at their addresses set forth below: 19 DOCSOC/ 1131045 v 15/024656-0002 To City: City of Palm Desert 73510 Fred Waring Drive Palm Desert, CA 92260 Attention: City Manager With copies to: City of Palm Desert City Attorney 7351-0-Fred Waring -Drive ----- Palm Desert, California 92260 To Developer: Sanderson J. Ray — Desert Springs Partners, L.P. 2699 White Road, Suite 150 Irvine, California 92614 Attention: Martin Hannigan, Partner With copy to: Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attention: Thomas P. Clark, Jr. With copies of any default notices or notices relating to proposed amendments to: ANY MORTGAGEE WHO HAS DELIVERED A MORTGAGEE NOTICE PURSUANT TO SECTION 5 WITH RESPECT TO ANY PARCELS AFFECTED BY SUCH NOTICE 6.15 Estoppel Certificates. Either Party may, at any time, deliver written notice to the other Party requesting such Party to certify in writing that, to the best knowledge of the certifying Party, (a) this Agreement is in full force and effect and a binding obligation of the Parties, (b) this Agreement has not been amended or modified either orally or in writing, and if so amended, identifying the amendments, and (c) the requesting Party is not in default in the performance of its obligation set forth in this Agreement or, if in default, to describe therein the nature and amount of any such defaults. A Party receiving a request hereunder shall execute and return such certificate within thirty (30) days following the receipt thereof. Any third Party including a Mortgagee shall be entitled to rely on the Estoppel Certificate. 6.16 Recordation. As provided in Government Code Section 65868.5, the City Clerk of Palm Desert shall record a copy of this Agreement with the Registrar -Recorder of Riverside County within ten (10) days following its execution by both Parties. 6.17 Constructive Notice and Acceptance. Every person who now or hereafter owns or acquires any right, title, interest in or to any portion of the Property is and shall be conclusively deemed to have consented and agreed to every provision contained herein, whether or not any reference to this Agreement is contained in the instrument by which such person acquired an interest in the Property. 6.18 Successors and Assignees. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the Parties, and their respective successors, assignees and transferees. 20 DOCSOC/1131045v 15/024656-0002 6.19 Severability. If any provisions, conditions, or covenants of this Agreement, or the application thereof to any circumstances of either Party, shall be held invalid or unenforceable, the remainder of this Agreement or the application of such 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 thereby and shall be valid and enforceable to the fullest extent permitted by law. 6.20 Time of the Essence. Time is of the essence for each provision of this Agreement of which time is_an.element 6.21 Waiver. No waiver of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the Party against whom enforcement of a waiver is sought and such waiver refers expressly to this Section. No waiver of any right or remedy in respect of any occurrence or event shall be deemed a waiver of any right or remedy in respect of any other occurrence or event. 6.22 No Third Party Beneficiaries. The only Parties to this Agreement are the City and Developer. There are no third party beneficiaries and this Agreement is not intended, and shall not be construed to benefit or be enforceable by any other person whatsoever. 6.23 Entire Agreement. This Agreement and the documents, agreements and exhibits referenced herein or attached hereto set forth and contain the entire understandings and agreements of the Parties and there are no oral or written representations, understandings or ancillary covenants, undertakings or agreements which are not contained or expressly referred to herein and no testimony or evidence of any such representations, understandings, or covenants shall be admissible in any proceedings of any kind or nature to interpret or determine the provisions or conditions of this Agreement. 6.24 Legal Advice: Neutral Interpretation: Headings, and Table of Contents. Each Party has received independent legal advice from its attorneys with respect to the advisability of executing this Agreement and the meaning of the provisions hereof. The provisions of this Agreement shall be construed as to their fair meaning and not for or against any Party based upon any attribution to such Party as the source of the language in question. The headings and table of contents and definitions used in this Agreement are for the convenience of reference only and shall not be used in construing this Agreement. 6.25 - No Personal Liability. No board member, councilmember, official or employee of the City shall be personally liable to Developer nor shall any individual partner of Developer be personally liable to City in the event of any Default. 6.26 Counterparts. This Agreement is executed in _ duplicate originals, each of which is deemed to be an original. This Agreement, not counting the Cover Page and Table of Contents, consists of 21 pages and 5 Exhibits that constitute the entire understanding and agreement of the Parties. The Exhibits are identified in the List of Exhibits, which is contained in the Table of Contents of this Agreement. [SIGNATURES ON THE FOLLOWING PAGE] 21 DOC SOC/ 1131045 v 15/024656-0002 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above. CITY OF PALM DESERT, CALIFORNIA By= -- Date: SANDERSON J. RAY — DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership By: Sanderson J. Ray-DSP, a California general partnership Its: General Partner By: Chase O. Sanderson, Jr. Its: General Partner Date: By: Michael D. Ray Its: General Partner Date: APPROVED AS TO FORM: ATTORNEY By, ATTEST: By: 22 , CITY , City Clerk DOCSOC/ 1131045v 15/024656-0002 STATE OF )ss. COUNTY OF On 200_, before me, , a notary public, personal y-appeared -- ----- - ----- personally knnw10 me or 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. Witness my hand and official seal. Notary Public STATE OF COUNTY OF )ss. 1 (Official Seal) On 200_, before me, , a notary public, personally appeared personally known to me or 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. Witness my hand and official seal. (Official Seal) Notary Public DOCSOC/ 1131045v 15/024656-0002 STATE OF )ss. COUNTY OF On 200_, before me, , a notary -public, -personally-appeared - -- - - - -- --- - - - ------------------... . - --- --- personally _known -to me or 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. Witness my hand and official seal. Notary Public STATE OF COUNTY OF )ss. 1 (Official Seal) On 200_, before me, , a notary public, personally appeared personally known to me or 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. Witness my hand and official seal. (Official Seal) Notary Public DOCSOC/1131045v 15/024656-0002 EXHIBIT A LEGAL DESCRIPTION OF CITY PROPERTY PARCEL 1: THE EAST HALF OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH,. RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MARCH 31, 1958 AS INSTRUMENT NO. 23183, OFFICIAL RECORDS. PARCEL 2: THE WEST HALF OF THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 4, TOWNSHIP 5 SOUTH, RANGE 6 EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF APPROVED BY THE SURVEYOR GENERAL, JULY 15, 1856. EXCEPT THEREFROM THE SOUTHERLY 44 FEET AS CONVEYED TO THE COUNTY OF RIVERSIDE BY DEED RECORDED MAY 20, 1958 IN BOOK 2273, PAGE 480, OFFICIAL RECORDS. A-1 DOC S OC/ 1131045 v 15 /02465 6-0002 a01 0 rxi cn 0 z V • NVId a.LIS "IVflidaDNOD EXHIBIT B SITE PLAN f1:1 9 f ; 9 r---r-1 I 1,11 • 1-2-4 A 1 I • r EL-11 -=11111 f ' ! r ? 4-- i 1 1477, - i ? ' i--i - ---1:ii--. -"--:, ' L 4.--, — 1 • I '-__.1_ " il ', ! ' I • ,L_I I--,--.• i t( _ 1 B-1 c CI DOCS 001131045 v15/024656-0002 EXHIBIT C LIST OF APPLICABLE LAND USE REGULATIONS C-1 DOCSOC/ 1131045 v 15/024656-0002 EXHIBIT D MEMORANDUM OF DEVELOPMENT AGREEMENT RECORDING REQUESTING BY WHEN RECORDED MAIL TO: Sanderson J. Ray Desert Springs Partners, L.P. 2699 White Road, Suite 150 Irvine, California 92614 Attn: Mr. Michael Ray APN: [Space Above For Recorder's Use Only] MEMORANDUM OF DEVELOPMENT AGREEMENT This MEMORANDUM OF DEVELOPMENT AGREEMENT (this "Memorandum") is entered into this day of , 2006 by and between the City of Palm Desert, California, municipal corporation ("City") and Sanderson J. Ray -Desert Springs Partners, L.P., Texas limited partnership ("SJR"). 1. The City and SJR have entered into that certain Development Agreement dated , 2006 (the "Development Agreement"). All capitalized terms not defined herein shall have the meaning set forth in the Development Agreement. 2. The covenants and obligations of the parties contained in the Development Agreement are intended to run with the land and be binding upon the successors and assigns of the parties. Accordingly, this Memorandum shall be recorded against the Property the legal description for which is attached hereto as Exhibit "A" and incorporated herein by reference. 3. This Memorandum was prepared for the purpose of recordation only and in no way modifies provisions of the Development Agreement. 4. Upon termination of the Development Agreement in accordance with the terms thereof, the parties shall execute such documents as may reasonably required to remove this Memorandum from title to the Property. [SIGNATURES ON THE FOLLOWING PAGE] DOCSOC/ 1131045v 15/024656-0002 DATED: ATTEST: City Clerk SJR: CITY OF PALM DESERT, a California municipal corporation By: Name: Its: SANDERSON J. RAY —DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership By: Sanderson J. Ray—DSP, a California general partnership, its General Partner By: By: Chase O. Sanderson, Jr., General Partner Michael D. Ray, General Partner DOCSOC/ 1131045v 15/024656-0002 D-2 STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On , , before me, a Notary Public in and for the State of California, personally appeared - - , persona11 own-ta-t e--(orproved-to-rile -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. WITNESS my hand and official seal. (SEAL) STATE OF CALIFORNIA ) ss. COUNTY OF Notary Public in and for the State of California On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) D-3 DOCSOC/ 1131045v 15/024656-0002 EXHIBIT E LIST OF APPLICABLE DEVELOPMENT IMPACT FEES E-1 DOCS OC/1131045v 15/024656-0002 Table of Contents Page 1. DEFINITIONS. 2 2. RECITALS OF PREMISES, PURPOSE AND INTENT. 6 2.1 State Enabling Statute 6 2.2 City Procedures and Actions. 7 Planning Commission Action ---- — —7 — 2.2.2 City Council Action 7 2.3 Purpose of this Agreement. 7 2.3.1 Developer Objectives 7 2.3.2 Mutual Objectives 8 3. AGREEMENT AND ASSURANCES. 8 3.1 Agreement and Assurances on the Part of Developer 8 3.2 Agreement and Assurances on the Part of the City 8 3.2.1 Vested Right to Develop 8 3.2.2 Special Taxes and Assessments 8 3.2.3 Subsequent Development Approvals 9 3.2.4 Moratoria 9 3.2.5 Timing of Development 9 3.2.6 Development Impact Fees 9 3.2.7 Representation and Warranty of City Regarding Conformity with the Redevelopment Plan 10 3.2.8 Golf Course Fencing and Access Gate 10 3.2.9 Golf Course Shuttle Service and Golf Cart Shuttle Station 10 3.2.10 Champions Club Error! Bookmark not defined. 3.2.11 Release for Damage Related to Golf Course 10 3.2.12 Easement 11 3.2.13 Section 3.2 Covenants Running With the Land 11 3.3 Periodic Review 11 4. DEFAULT PROVISIONS 12 4.1 Default by Developer. 12 4.1.1 Default 12 4.1.2 Notice of Default 12 4.1.3 City Procedure Following Default 12 4.1.4 Termination of Agreement by City 12 4.1.5 Limitation in City's Right to Seek Specific Performance/Damages 12 4.2 Default by the City 13 4.3 Multiple Developers 13 5. MORTGAGEE PROTECTIONS 13 5.1 Right to Mortgage/Notice/Multiple Mortgagees 13 5.2 Notice of Default to Mortgagee or Deed of Trust Holders; Right to Cure 13 5.3 Mortgagee Not Obligated to Construct Project 14 5.4 No Liability 14 5.5 No Amendment or Termination 14 5.6 Condemnation or Insurance Proceeds 14 5.7 Title by Foreclosure 14 i DOC SOC/ 1131045 v 15/024656-0002 Table of Contents (Cont'd) Page 5.8 Delegation to Mortgagee 14 5.9 No Obligation to Cure 15 5.10 Separate Agreement 15 5.11 Estoppel Certificate 15 5.12 Conflicts 15 6. GENERAL PROVISIONS. 15 6.1 Effective Date 15 6.2 Term. 15 6.2.1 Basic Term 15 6.2.2 Early Termination of Agreement 16 6.3 Appeals to City Council 16 6.4 Enforced Delay; Extension of Time of Performance 16 6.5 Legal Action 16 6.6 Applicable Law 16 6.7 Amendments 16 6.8 Assignment 17 6.8.1 Right to Assign 17 6.8.2 Release of Developer 17 6.8.3 Release of Purchaser, Transferee, or Assignee 17 6.8.4 Allocation of Development Rights 17 6.9 Covenants 18 6.10 Implementation. 18 6.10.1 Additional Special Mutual Cooperation 18 6.10.2 Other Governmental Permits 18 6.11 Relationship of the Parties 18 6.12 Cooperation in Event of Litigation 18 6.12.1 Cooperation in the Event Of Litigation 18 6.12.2 Attorney Fees 19 6.12.3 Continuing Obligations 19 6.13 Subdivision of Project 19 6.14 Notices 19 6.15 Estoppel Certificates 20 6.16 Recordation 20 6.17 Constructive Notice and Acceptance 20 6.18 Successors and Assignees 20 6.19 Severability 21 6.20 Time of the Essence 21 6.21 Waiver 21 6.22 No Third Party Beneficiaries 21 6.23 Entire Agreement 21 6.24 Legal Advice; Neutral Interpretation; Headings, and Table of Contents 21 6.25 No Personal Liability 21 6.26 Counterparts 21 DOCSOC/1131045 v 15/024656-0002 LIST OF EXHIBITS EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D EXHIBIT E Table of Contents (Cont'd) Page LEGAL DESCRIPTION OF PROPERTY A-1 SITE PLAN B-1 LIST OF APPLICABLE LAND USE REGULATIONS C-1 MEMORANDUM OF DEVELOPMENT AGREEMENT- — — - - LIST OF APPLICABLE DEVELOPMENT IMPACT FEES E-1 11s DOCSOC/1131045v 15/024656-0002 856634.10 EXHIBIT I SJR PROPERTY SITE PLAN I-1 856634.10 EXHIBIT J INTENTIONALLY OMITTED J-1 EXHIBIT K DECLARATION OF USE RESTRICTIONS RECORDING REQUESTING BY First American Title Insurance Company WHEN RECORDED MAIL TO: Sanderson J. Ray Desert Springs Partners, L.P. 2699 White Road, Suite 150 Irvine, California 92614 Attn: Mr. Michael Ray APN: [Space Above For Recorder's Use Only] DECLARATION OF USE RESTRICTIONS THIS DECLARATION OF USE RESTRICTIONS (this "Declaration") is made as of , 2006, by SANDERSON J. RAY — DESERT SPRINGS PARTNERS, L.P. a Texas limited partnership ("Sanderson"), with reference to the following: RECITALS A. Sanderson is the owner of certain real property located in Palm Desert, California ("Property"). The Property is comprised of a shopping center (the "Shopping Center") and an undeveloped parcel containing approximately 11.24 acres (the "Undeveloped Property.") The legal description of the Shopping Center is attached hereto as Exhibit A, and the legal description of the Undeveloped Property is attached hereto as Exhibit B. A site plan showing the Shopping Center and the Undeveloped Property is attached hereto as Exhibit C. B. Sanderson and its predecessors in interest have previously entered into certain leases with respect to portions of the Shopping Center, which leases (the "Tenant Leases") impose certain use restrictions. A correct and complete list of the Tenant Leases is set forth on Exhibit D attached hereto. C. Sanderson desires to record this Declaration, resulting in such tenant use restrictions being made of public record against the Undeveloped Property. AGREEMENT NOW, THEREFORE, Sanderson hereby declares that the Undeveloped Property shall be owned, operated and conveyed subject to the following use restrictions: 856634.10 K-1 1. Use Restriction. No portion of the Undeveloped Property shall be developed or used in any manner that conflicts with the terms, conditions, provisions or restrictions set forth in the Tenant Leases. Upon the expiration or earlier termination of a Tenant Lease, the terms, conditions, provisions and restrictions set forth therein shall no longer affect the Undeveloped Property. The terms, conditions, provisions or restrictions set forth in any agreement first affecting the Shopping Center after the date hereof shall not affect the use of the Undeveloped Property. 2. Breach. In the event of a breach of the restrictions set forth in this Declaration, the owner of the Shopping Center may prosecute any appropriate proceedings at law or in equity. The owner of the Shopping Center may, in any such proceeding, obtain injunctive or other equitable relief to enforce this Declaration or restraining violations of this Declaration; recover damages on account of such violation; secure, by way of specific performance or otherwise, the performance of this Declaration; and/or obtain any other remedy provided for at law or in equity. 3. Eauitable Servitude. The Undeveloped Property shall be held, developed, transferred and conveyed subject to and upon the foregoing express restrictions. This Declaration shall run with the land for the sole benefit the owner of the Shopping Center and its successors and assigns, and shall be binding on all parties having or acquiring any right, title or interest in the Undeveloped Property. 4. Attorneys Fees. In any action to enforce the provisions of this Declaration, the prevailing party shall be entitled to its attorney's fees and costs. 5. Morteaeee Protection. Notwithstanding any provision hereof to the contrary, no amendment or violation of this Declaration shall operate to defeat or render invalid the rights of the beneficiary under any recorded deed of trust or the mortgagee under any recorded mortgage of any portion of the Undeveloped Property made in good faith and for value, provided that after the foreclosure of any such deeds or mortgage such portion of the Undeveloped Property shall remain subject to this Declaration. 856634.10 [This Space Intentionally Left Blank; Signature On The Next Page] K-2 IN WITNESS WHEREOF, the undersigned has executed this Declaration of Use Restrictions as of the date first written above. SANDERSON: SANDERSON J. RAY - DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership 856634.10 By: Sanderson J. Ray DSP, a California general partnership, General Partner By: By: By: K-3 James Walker Ray, as Trustee of the James W. Ray Family Trust U/T/D September 17, 1998, General Partner Michael D. Ray, General Partner Chase O. Sanderson, Jr., General Partner STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. (SEAL) STATE OF CALIFORNIA ) ss. COUNTY OF Notary Public in and for the State of California On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) 856634.10 K-4 STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) STATE OF CALIFORNIA ) ss. COUNTY OF On , , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) 856634.10 K-5 EXHIBIT A TO DECLARATION OF USE RESTRICTIONS LEGAL DESCRIPTION OF SHOPPING CENTER (See Attached) 856634.10 K-6 856634.10 EXHIBIT B TO DECLARATION OF USE RESTRICTIONS LEGAL DESCRIPTION OF UNDEVELOPED PROPERTY (See Attached) K-7 856634.10 EXHIBIT C TO DECLARATION OF USE RESTRICTIONS SITE PLAN (See Attached) K-8 3AId0 arm AniNno3 o :` >w� z> ramoikaaam 1 y� \\\\\\\\\\\\\\\X.. ~• H i M\M\Ssu 38\LJ--° \\K \a\-rr'41 rho Z \*M \\\\\\\\\\\\\\\\\\\\\ COOK STREET 0 0 - 0 _2:7 o -Till! ifiVlf{llll w r 1 1RD2IVd 2I1GNIVNIMI SHd1d2I 0 m EXHIBIT D TO DECLARATION OF USE RESTRICTIONS SCHEDULE OF LEASES Lease Agreement dated July , 1993, to Pay Less Drugstores Northwest, Inc., a Maryland corporation, as Tenant, as amended by Memorandum confirming Commencement Date dated June 14, 1994, as further amended by Amendment to Pay Less/Desert Springs Marketplace Lease dated July 3, 1996, and as further amended by Second Amendment to Lease dated June 12, 2003. Lease dated October 4, 1992, to Ralph's Grocery Company, a Delaware corporation, as Tenant, as evidenced of record by Agreement of Memorandum of Lease For Recordation dated August 15, 1994, recorded August 16, 1994, as Document No. 319836, in the Office of the County Recorder of Riverside County, California, as amended by Confirmation of Lease Commencement Date, dated March 30, 1994, and as further amended by Addendum to Lease dated September 21, 1995. Lease dated April 20, 1993, to Morton's of Chicago/Palm Desert, Inc., a Delaware corporation Desert Springs Marketplace Retail Lease dated September 29, 1994, to Walter K. and Connie M. Ro, as Tenant, as amended by Amendment to Desert Springs Marketplace Retail Lease dated November 30, 1995, and as assigned to and assumed by Hyun D. Shin by an Assignment of Lease dated February 27, 1998, and further assigned to and assumed by Eun Kyung Lee and Hong Yoon Lee by Assignment and Amendment to Desert Springs Marketplace Retail Lease dated January 2, 1999. Desert Springs Marketplace Retail Lease dated May 7, 1996, to Lillian Roberts, DVM, as Tenant, as amended by Desert Springs Marketplace Lease Amendment dated April 10, 2002. Desert Springs Marketplace Retail Lease dated September 29, 1995, to Hu -Yu, Inc., a California corporation, as Tenant, as amended by First Lease Amendment dated September 14, 2004 and as further amended by Second Lease Amendment dated April 29, 2005. Desert Springs Marketplace Retail Lease dated March 12, 1996, to Randy Szutz, DDS and Cheri Szutz, as Tenant. Desert Springs Marketplace Retail Lease dated August 21, 1997, to Thoai Truong, Khiem T. Nguyen and Truyen Truong, as Tenant, as amended by Desert Springs Marketplace Lease Amendment dated August 8, 2002. Standard Form Shopping Center Lease dated June 22, 2005, to John Howard Boulton and David Kelders, as Tenant. 856634.10 K-9 Desert Springs Marketplace Retail Lease dated April 20, 2001, to Temple Realty, Inc., a California corporation, as Tenant. Desert Springs Marketplace Retail Lease dated January 16, 1997, to Indio Emergency Medical Group, Inc., DBA Desert Urgent Care, as Tenant. Desert Springs Marketplace Retail Lease dated July 12, 1996, to John Boop and Sherry Boop, as Tenant, as amended by Amendment to Retail Lease dated July 23, 1999, and as further amended by Desert Springs Marketplace 2nd Lease Amendment dated July 30, 2002. Standard Form Shopping Center Lease dated August 18, 2005, to Suzanne Houser, as Tenant. Desert Springs Marketplace Retail Lease dated December 1, 1996, to Nazih E. Noujaim, as Tenant, as amended by Amendment to Retail Lease dated December 1, 1999 and as further amended by Desert Springs Marketplace 2nd Lease Amendment dated November 6, 2002. Desert Springs Marketplace Retail Lease dated October 22, 1997, to William E. Hanan, as Tenant, as amended by Desert Springs Marketplace Lease Amendment dated October 11, 2002 and as assigned to and assumed by Commodore Clay Collins and Theresa Joy Collins by Assignment and Assumption of Lease and Consent dated November 1, 2002, and as further assigned to and assumed by Michael Griffin and Pennye Griffin by Assignment of Lease dated April 19, 2005. Desert Springs Marketplace Retail Lease dated September 15, 1999, to Patricia Pandolfo, Gabriele O. Luetke and Hilko H. Luetke, as Tenant, as amended by Desert Springs Marketplace Lease Amendment dated August 8, 2002. Desert Springs Marketplace Retail Lease dated November 2, 2002, to All Pro Pizza, Inc. a California corporation, as Tenant. 856634.10 K-10 EXHIBIT L MEMORANDUM RE ACQUISITION OF POST CLOSING COVENANT RECORDING REQUESTING BY First American Title Insurance Company WHEN RECORDED MAIL TO: City of Palm Desert 73510 Fred Waring Drive Palm Desert, CA 92260 Attention: City Clerk APN: [Space Above For Recorder's Use Only] MEMORANDUM RE ACQUISITION OF POST CLOSING COVENANT THIS MEMORANDUM RE ACQUISITION OF POST CLOSING COVENANT (this "Memorandum") is made as of _, 2006, by SANDERSON J. RAY -DESERT SPRING PARTNERS, L.P., a Texas limited Partnership ("SJR"), in favor of the CITY OF PALM DESERT, a California Municipal Corporation ("City"), with reference to the following: 1. City and SJR have entered into that certain Exchange Agreement and Joint Escrow Instructions dated as of , 2006 (the "Exchange Agreement"). All capitalized terms not defined herein shall have the meaning set forth in the Exchange Agreement. 2. As part of the consideration for the exchange of property described in the Exchange Agreement, SJR agreed to provide a covenant in favor of the City regarding the development and landscaping of the Ralph's Remainder Parcel, which covenant was intended to run with the land and be binding upon SJR's successors and assigns in the ownership of the Desert Spring Commercial Center in accordance with the terms of Section 19(v) of the Exchange Agreement, which terms are incorporated herein by this reference. 3. This Memorandum shall be recorded against the Desert Springs Commercial Center, the legal description of which is attached hereto as Exhibit A. This Memorandum was prepared for the purpose of recordation only and in no way modifies provisions of Section 19(v) of the Exchange Agreement. 4. Upon termination of the covenant described in Section 19(v) of the Exchange Agreement in accordance with the terms thereof, City shall execute such documents as may be 856634.10 L-1 reasonably required by the then -owner of the Desert Springs Commercial Center to remove this Memorandum from title thereto. 856634.10 [This Space Intentionally Left Blank; Signatures On The Next Page] L-2 IN WITNESS WHEREOF, the undersigned have executed this Memorandum Re Acquisition of Post Closing Covenant as of the date first written above. CITY: CITY OF PALM DESERT, a California municipal corporation ATTEST: City Clerk SJR: 856634.10 By: Name: Its: SANDERSON J. RAY —DESERT SPRINGS PARTNERS, L.P., a Texas limited partnership By: Sanderson J. Ray—DSP, a California general partnership, its General Partner By: By: L-3 Chase O. Sanderson, Jr., General Partner Michael D. Ray, General Partner EXHIBIT A TO MEMORANDUM RE ACQUISITION OF POST CLOSING COVENANT 856634.10 DESERT SPRINGS COMMERCIAL CENTER LEGAL DESCRIPTION, L-4 STATE OF CALIFORNIA ) ss. COUNTY OF On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) 856634.10 L-5 STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On , before me, a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On , , before me, , a Notary Public in and for the State of California, personally appeared , personally known to me (or 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. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) 856634.10 L-6