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Indio Water Authority

SUBMITTAL TO THE WATER AUTHORITY AND CITY COUNCIL CITY OF INDIO, CALIFORNIA January 7, 2014

ITEM NO. le

FROM: INDIO WATER AUTHORITY SUBJECT: Accept the water improvement agreement and bonds for Terra Lago East, Tracts 32341-2, 32341-3, 32462-2, and 32462-3, located east of Golf Center Parkway and north of Avenue 44. RECOMMENDED MOTION: Accept the water improvement agreement and bonds for Terra Lago East Tracts 32341-2, 32341-3, 32462-2, and 32462-3 located east of Golf Center Parkway and north of Avenue 44 from Terra Lago Indio, LLC and authorize the Mayor to sign and the City Clerk to attest the water improvement agreement.

SUMMARY: On March 13, 2013, K Hovnanian Homes filed with the Development Services
Department an application for an amendment to Terra Lago Project Master Plan (PMP 19806 Amendment Number 3) to modify land use regulations development standards and design guidelines for the existing Tract Maps 32287 and 32341 relocate the recreational center and reduce the total residential single-family lots from 851 to 826. The Project was previously entitled as the Indian Lakes Project Master Plan. The Terra Lago project site per the terms of the proposed Project is approximately five hundred sixty-three (563) acres within the RPD-4 (Country Estates/Residential Planned Development) Overlay Zone located north of Avenue 44 and east of Golf Center Parkway, Assessor's Parcel Numbers: 601-310-025, 601-310-027 through 029, 601-310-031, 601-310-032, 601-310-034 through 039, 601-310-045 through 51, 601-150-029, 601-270-026 and 601-300-015. Brian Macy General Manager
$ $0 $0

(continued on the next page)
Cost associated with this action: Current F.Y. general fund cost: Future FY. cost:

December 20, 2013

FINANCIAL DATA

In current year budget: Budget adjustment: For fiscal year:

N/A N/A 13/14

Source of funds: NIA Account number: N/A Legal Review:

Current account balance: N/A Balance remaining If approved: N/A Department Head Review: Financial Review:

General Counsel

nail Macy General Manag

N/A Kelly Smith Manager of Finance and Customer Service EXECUTIVE DIRECTOR'S/CITY MANAGER'S SIGNATURE:

EXECUTIVE DIRECTOR'S/CITY MANAGER'S RECOMMENDATION: APPROVE

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IWA/City Council Agenda Report Accept the Water Improvement Agreement and Bonds for Terra Lago East, Tracts 32341-2, 32341-3, 32462-2, and 32462-3. January 7, 2014 Page 2 BACKGROUND: Also, on May 22, 2013, the City of Indio Planning Commission held a duly noticed public hearing to consider the application for the Project. Evidence both written and oral including the staff report and supporting documents was presented at said hearing. At the conclusion of the hearing, the Planning Commission closed the public hearing and continued the item to June 12, 2013 Planning Commission meeting. At the conclusion of the June 12, 2013 meeting, the Planning Commission directed staff to prepare a resolution to approve the Project with amended conditions. On July 17, 2013, the City Council of the City of Indio conducted a duly noticed public hearing and adopted Ordinance No 1635 for the approval of a Project Master Plan 19-8-06 (Amendment No. 3) to modify the approved land use regulations development standards and design guidelines in order to develop the Terra Lago East planned development community. The attached Water Improvement Agreement and Performance Bond and Labor and Material Bond for aforementioned development guarantees the satisfactory completion of the public water improvements within the Terra Lago East planned development community, Tracts 32341-2, 32341-3, 32462-2, and 32462-3.

FINANCIAL ANALYSIS: Not Applicable. ALTERNATIVES: Not to approve the Water Improvement Agreement between Indio Water Authority and Terra Lago Indio, LLC; and not accept the Performance Bond and Labor and Material Bond for aforementioned development. ATTACHMENT(S): A. Vicinity Map Water Improvement Agreement and Bonds for Terra Lago East B.

ATTACHMENT A

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Vicinity Map
TERRA LAGO
IRRIGATION MASTER PLAN
CITY OF INDIO, CA

K. HOVNANIAN HOMES
2525 CAMPUS DRIW, IRVINE CA IRVINE, CA 92612
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ATTACHMENT B

Ind o Water Authority
Your Water, Our Responsibility.

RECORDED AT REQUEST OF AND WHEN RECORDED RETURN TO: Indio Water Authority Cynthia Hernandez, Secretary 83101 Avenue 45 Indio, California 92201

Exempt from recording fees pursuant to Govt. Cod. Sec. 27383 (Space above for recorder's use)

INDIO WATER AUTHORITY WATER IMPROVEMENT AGREEMENT DATE OF AGREEMENT:

NAME OF DEVELOPER: Terra Lago Indio LLC, a Delaware limited liability company
(referred to as "DEVELOPER')

NAME OF PROJECT: K. Hovnanian's Four Seasons at Terra Lae()
(referred to as "PROJECT or SUBDIVISION')

TRACT NO.: 32341-2. 32341-3, 32462-2, and 32462-3

TENTATIVE MAP RESOLUTION OF APPROVAL NO. OR PLANNING APPLICATION NO.: Ordinance No. 1635
(referred to as "Resolution ofApproval")

ESTIMATED TOTAL COST OF IMPROVEMENTS: COMPLETION DATE: December 31, 2014

$1,128,332.50

This Agreement is made and entered into by and between the Indio Water Authority, a joint powers authority, hereinafter referred to as 1WA, and the DEVELOPER. RECITALS A. DEVELOPER desires to construct off-site water improvements for the extension of its water mains as well as guarantee the satisfactory completion of such work for a project known as the "K. Hovnanian's Four Seasons at Terra Lago" pursuant to the provisions of the Subdivision Map Act of the State of California ("Subdivision Laws") and the applicable City of Indio ordinances and IWA requirements.

B. Pursuant to Ordinance No. 1635, Tentative Parcel Maps 32341 and 32462 has been approved, subject to the Subdivision Laws and the requirements and conditions contained in the Resolution of Approval, for property located at Assessor Parcel Numbers 601-310-025, 601-310-027 through 029, 601-310-031, 601-310-032, 601-310-034 through 039, 601-310-045 through 51, 601-150-029, 601-270-026 and 601-300-015 ("PROJECT") and as further described in the legal description attached as Exhibit A. C. The Resolution of Approval is on file in the Office of the IWA and is incorporated into this Agreement by reference. D. The Subdivision Laws establish as a condition precedent to the approval of a final map that DEVELOPER must have complied with the Resolution of Approval and must complete certain water improvements, among others, in compliance with City of Indio ("City") and IWA standards. E. In consideration of this Agreement and other good and sufficient consideration, DEVELOPER agrees to enter into this Agreement and promises to install and complete, at DEVELOPER'S own expense, the off-site water improvement work required by IWA in connection with the proposed subdivision. DEVELOPER has secured this Agreement by improvement security required by the Subdivision Laws. Complete improvement plans for the construction, installation and completion of F. the improvements described herein have been prepared by DEVELOPER and approved by the IWA Engineer. The improvement plans are on file in the Office of the IWA and are incorporated into this Agreement by this reference ("Improvement Plans"). All references in this Agreement to the Improvement Plans shall include reference to any specifications for the improvements as approved by the IWA Engineer. G. An estimate of the cost of construction of the improvements according to the Improvement Plans has been made and had been approved by the IWA Engineer. The estimated amount is stated on Page 1 of this Agreement. H. The City and IWA have adopted standards for the construction and installation of said improvements. The Improvement Plans have been prepared in conformance with applicable City and IWA standards in effect on the date of approval of the Resolution of Approval. 1. DEVELOPER recognizes that by approval of the final map for this subdivision, the City has conferred substantial rights upon DEVELOPER, including the right to sell, lease, or finance lots within the subdivision, and has taken the final act necessary to subdivide the property within the subdivision. As a result, the City and IWA will be damaged to the extent of the cost of installation of the improvements by DEVELOPER'S failure to perform its obligations under this Agreement, including, but not limited to, DEVELOPER'S obligation to complete construction of the improvements by the time established in this Agreement. The City and IWA shall be entitled to all remedies available to it pursuant to this Agreement and the Subdivision Laws in the event of a default by DEVELOPER. It is specifically recognized that the determination of whether a reversion to acreage or rescission of the SUBDIVISION constitutes

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an adequate remedy for default by the DEVELOPER shall be within the sole discretion of the City. NOW THEREFORE, in consideration of the recitals set forth above, DEVELOPER and IWA agree as follows: IWA Approval of Application for Extension of Water Mains. Pursuant to an application made to IWA by DEVELOPER and in consideration of this Agreement, IWA hereby agrees to extend its water mains from the presenting existing mains or allow such an extension by DEVELOPER subject to the terms and conditions set forth in this Agreement. 2. DEVELOPER'S Obligations to Construct Improvements. DEVELOPER shall: a. At its sole cost and expense, provide construction management, construction staking, design of water plans and construct and install the off-site public water system improvement together will all other appurtenances as set forth in Exhibit "B" to this Agreement (the "Improvements") based upon preliminary engineering plans and studies and the Improvement Plans submitted to IWA. This description is intended to roughly outline the scope of the works and improvements to be designed and constructed in connection with this Agreement. The exact works and improvements comprising the Improvements may change as a result of site requirements, changes in construction standards, geologic conditions, ability to locate adequate source of water pressure and supply, engineering constraints, or other factors. The IWA Engineer, in his or her reasonable discretion, may approve substitute works and improvements to replace some or all of the works and improvements set forth in Exhibit "B" to this Agreement, if such substitute works and improvements would provide the PROJECT services of a similar nature to those provided by the works and improvements set forth in "Exhibit B" to this Agreement. Complete by the time established in Exhibit "C" of this Agreement and at DEVELOPER'S own expense, the Improvements in conformance with the Improvement Plans and the IWA standards. Construct such Improvements in full compliance with the approved Improvement Plans and the requirements of this Agreement, and in accordance with any other applicable IWA or City of Indio requirements and conditions, subject to inspection and approval by IWA. Such work shall be undertaken by a qualified California licensed contractor. Furnish the necessary materials for completion of the Improvements in conformity with the Improvement plans and IWA standards. Acquire and dedicate, or pay the cost of acquisition by IWA, of all right-of-way, easements and other interests in real property for construction or installation of the Improvements, free and clear of all liens and encumbrances. The 3

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DEVELOPER'S obligations with regard to acquisition by IWA of off-site rightof-way, easements and other interests in real property shall be subject to a separate Agreement between DEVELOPER and IWA. DEVELOPER shall also be responsible for obtaining any public or private drainage easements or authorizations to accommodate the PROJECT. f. Comply with the all requirements of the Resolution of Approval and any amendments thereto, and with provisions of the Subdivision Laws.

3.

Acquisition and Dedication of Easement of Right-of-Way. If any of the public improvement and land development work contemplated by this Agreement is to be constructed or installed on land not owned by DEVELOPER, no construction or installation shall be commenced before: a. The offer of dedication to IWA of appropriate right-of-way, easements or other interest in real property, and appropriate authorization from the property owner to allow construction or installation of the improvements or work, or The dedication to, and acceptance by, the IWA of appropriate right-of-way, easements or other interests in real property, as determined by the IWA Engineer, or The issuance by a court of competent jurisdiction pursuant to the State Eminent Domain Law of an order of possession. DEVELOPER shall comply in all respects with the order of possession.

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Nothing in this Section 3 shall be construed as authorizing or granting an extension of time to DEVELOPER. 4. Security. DEVELOPER shall at all times guarantee DEVELOPER'S performance of this Agreement by furnishing to IWA, and maintaining, good and sufficient security as required by the Subdivision Laws on forms approved by IWA for the purposes and in the amounts as follows: a. To assure faithful performance of this Agreement in regard to said improvements in an amount of 100% of the estimated cost of the improvements; and To secure payment to any contractor, subcontractor, persons renting equipment, or furnishing labor materials for the improvements required to be constructed or installed pursuant to this Agreement in the additional amount of 100% of the estimated cost of the improvements; and To guarantee or warranty the work done pursuant to this Agreement for a period of one year following acceptance thereof by IWA against any defective work or labor done or defective materials furnished in the additional amount of 10% of the estimated cost of the improvements.

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The securities required by this Agreement shall be kept on file with the Office of the IWA. The terms of the security documents referenced herein are incorporated into this Agreement by this reference. If any security is replaced by another approved security, the replacement shall be filed with the Office of the IWA and, upon filing, shall be deemed to have been made a part of and incorporated into this Agreement. Upon filing of a replacement security with the Office of the IWA, the former security may be released. 5. Alterations to Improvement Plans. a. Any changes, alterations or additions to the improvement plans and specifications or to the improvements, not exceeding 10% of the original estimated cost of the improvements, which are mutually agreed upon by the IWA and DEVELOPER, shall not relieve the improvement security given for faithful performance of this Agreement. In the event such changes, alterations, or additions exceed 10% of the original estimated cost of the improvements, DEVELOPER shall provide improvement security for faithful performance as required by Paragraph 4 of this Agreement for 100% of the total estimated cost of the improvement as changed, altered, or amended, minus any completed partial releases allowed by Paragraph 7 of this Agreement. The DEVELOPER shall construct the improvements in accordance with the IWA standards in effect at the time of adoption of the Resolution of Approval. IWA reserves the right to modify the standards applicable to the PROJECT and this Agreement, when necessary to protect the public health, safety and welfare.

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Inspection. a. DEVELOPER shall at all times maintain proper facilities and safe access for inspection of the Improvements by the IWA inspector and to the businesses or residences wherein any work is in progress. IWA shall have the right to enter any construction site at any time to inspect the work or the progress of construction of the Improvements that are the subject of this Agreement. Upon completion of the work the DEVELOPER may request a final inspection by the IWA Engineer, or the IWA Engineer's authorized representative. If the IWA Engineer, or the designated representative, determines that the work has been completed in accordance with this Agreement, then the IWA Engineer shall certify the completion of the Improvements for acceptance by IWA. No improvements shall be finally accepted unless aspects of the work have been inspected and determined to have been completed in accordance with the Improvement Plans and IWA and if applicable City standards. DEVELOPER shall bear all costs of inspection and certification. The inspection by IWA of the construction for conformance with the Improvement Plans shall not be deemed to confer liability on IWA or the City or otherwise place the responsibility for properly constructing and inspecting the Improvements upon [WA.

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b.

1WA is not responsible and does not own the Improvements until they are inspected and approved and accepted by IWA and all fees and charges associated with the construction of the Improvements and/or other fees owed by Developer to the IWA are paid in full. Until such time, DEVELOPER is responsible for the Improvements and is liable for all damage to said facilities. The Developer shall indemnify IWA, its governing board, officers and employees for any and all claims of any kind relating the construction of the Improvements incurred prior to the 1WA's acceptance of said facilities. At no time during construction or prior to 1WA's acceptance of the Improvements constructed by DEVELOPER shall DEVELOPER, its agents or employees, populate or use the Improvements for any unauthorized purpose, or populate the Improvements with non-potable water or any other chemical or substance not authorized in writing by TWA.

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Release of Securities. Subject to approval by the IWA Board, the securities required by this Agreement shall be released as follows: a. Security given for faithful performance of any act, obligation, work or agreement shall be released upon the final completion and acceptance of the act or work, subject to the provisions of subsection (b) hereof. The IWA Engineer may release a portion of the security given for faithful performance of improvement work as the improvement progresses upon application therefore by the DEVELOPER; provided, however, that no such release shall be for an amount less than 25% of the total improvement security given for faithful performance of the improvement work and that the security shall not be reduced to an amount less than 50% of the total improvement security given for faithful performance until final completion and acceptance of the improvement work. In no event shall the IWA Engineer authorize a release of the improvement security, which would reduce such security to an amount below that required to guarantee the completion of the improvement work and any other obligation imposed by this Agreement. Security given to secure payment to the contractor, his or her subcontractors and to persons furnishing labor, materials or equipment shall, six months after the completion and acceptance of the work, be reduced to an amount equal to the total claimed by all claimants for who lien have been filed and of which notice has been given to the legislative body, plus an amount reasonably determined by the IWA Engineer to be required to assure the performance of any other obligations secured by the Security. The balance of the security shall be released upon the settlement of all claims and obligations for which the security was given. No security given for the guarantee or warranty of work shall be released until the expiration of the warranty period and until any claims filed during the warranty period have been settled. As provided in paragraph 12, the warranty period shall

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not commence until final acceptance of all the work and Improvements by the IWA Board. e. The IWA may retain from any security released, an amount sufficient to cover costs and reasonable expenses and fees, including reasonable attorney's fees, if the City is required to undertake any action related to the security provided (such as ensuring the performance of the work, actions required related to liens filed or otherwise enforce the provisions of this section). Any statute of limitations with respect to the obligations of DEVELOPER shall not apply to any bonds or other forms of security provided pursuant to this Agreement. The Surety's liability under any bonds or other forms of security provided pursuant to this Agreement shall be released only upon final completion and IWA's acceptance of the work required pursuant to this Agreement. The expiration of any statute of limitations with respect to DEVELOPER shall not bar an action against the Surety under the bond or any other form of security provided pursuant to this Agreement.

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8.

Injury to Public Improvements. Public Property or Public Utility Facilities. DEVELOPER shall replace or have replaced, or repair or have repaired, as the case may be, all public improvements, public utility facilities and surveying or subdivision monuments which are destroyed or damaged as a result of any work under this Agreement. DEVELOPER shall bear the entire cost of replacement or repairs of any and all public or public utility property damaged or destroyed by reason of any work done under this Agreement, whether such property is owned by the United States or any agency thereof, or the State of California, or any agency or political subdivision thereof, or by the IWA or any public or private utility corporation or by any combination of such owners. Any repair or replacement shall be to the satisfaction, and subject to the approval, of the IWA Engineer. Limitations of Damages. Until such time as all Improvements required by this Agreement are fully completed and accepted by IWA, and IWA authorizes connection of all or any part of the PROJECT to IWA's water system, DEVELOPER shall not allow or request permits for occupancy of the PROJECT or any portion thereof. IWA shall not, nor shall any officer or employee thereof, be liable or responsible for any accident, loss or damage, regardless of the cause, happening or occurring to any third parties in privity with the DEVELOPER prior to the authorization by 1WA to connect the PROJECT or any unit or portion thereof to IWA's public water system, in accordance with IWA's rules and regulations. All such risks shall be the responsibility of and are hereby assumed by DEVELOPER. Permits. DEVELOPER shall, at DEVELOPER'S expense, obtain all necessary permits and licenses for the construction and installation of the improvements, give all necessary notices and pay all fees and taxes required by law.

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Default of DEVELOPER. a. Default of DEVELOPER shall include, but not limited to, DEVELOPER'S failure to timely commence construction of this Agreement; DEVELOPER'S failure to timely complete construction of the Improvements; DEVELOPER'S failure to timely cure any defect in the Improvements; DEVELOPER'S failure to perform substantial construction work for a period of twenty (20) calendar days after commencement of the work; DEVELOPER'S insolvency, appointment of a receiver, or the filing of any petition in bankruptcy either voluntary or involuntary which DEVELOPER fails to discharge within thirty (30) days; the commencement of a foreclosure action against the PROJECT or a portion thereof, or any conveyance in lieu or in avoidance of foreclosure; or DEVELOPER'S failure to perform any other obligation under this Agreement. The IWA reserves to itself all remedies available to it at law or in equity for breach of DEVELOPER'S obligations under this Agreement. The IWA shall have the right, subject to this section, to draw upon or utilize the appropriate security to mitigate TWA damages in event of default by DEVELOPER. The right of TWA to draw upon or utilize the security is additional to and not in lieu of any other remedy available to IWA. It is specifically recognized that the estimated costs and security amounts may not reflect the actual cost of construction or installation of the improvements and, therefore, TWA damages for DEVELOPER'S default shall be measured by the cost of completing the required improvements. The sums provided by the improvement security may be used by TWA for the completion of the Improvements in accordance with the Improvement Plans and specifications contained therein. In the event of DEVELOPER'S default under this Agreement, DEVELOPER authorizes TWA to perform such obligation twenty (20) days after mailing written notice of default to DEVELOPER and to DEVELOPER'S Surety, and agrees to pay the entire cost of such performance by IWA. At the sole discretion of IWA, IWA may take over the work and prosecute the same to completion, by contract or by any other method IWA may deem advisable, for the account and at the expense of DEVELOPER, and DEVELOPER'S Surety shall be liable to IWA for any excess cost or damages occasioned TWA thereby; and, in such event, IWA, without liability for so doing, may take possession of, and utilize in completing the work, such materials, appliances, plant and other property belonging to DEVELOPER as may be on the site of the work and necessary for performance of the work. Failure of DEVELOPER to comply with the terms of this Agreement shall constitute consent to the filing by TWA of a notice of violation against all the lots in the PROJECT, or to request that the City rescind the approval or otherwise revert the SUBDIVISION to acreage. The remedy provided by this Subsection c is in addition to and not in lieu of other remedies available to 1WA.

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DEVELOPER agrees that the choice of remedy or remedies for DEVELOPER'S breach shall be in the discretion of IWA. f. In the event that DEVELOPER fails to perform any obligation, hereunder, DEVELOPER agrees to pay all costs and expenses incurred by IWA in securing performance of such obligations, including costs of suit and reasonable attorney's fees. The failure of [WA to take an enforcement action with respect to a default, or to declare a breach, shall not be construed as a waiver of that default or breach or any subsequent default or breach of DEVELOPER.

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Warranty. DEVELOPER shall guarantee or warranty the work done pursuant to this Agreement for a period of one year after final acceptance by the IWA Board of the work and Improvements against any defective work or labor done or defective materials furnished. Where certain improvements are to be constructed in phases or sections, the one year warranty period shall commence after IWA acceptance of the last completed improvement, If within the warranty period any work or improvement or part of any work or Improvement done, furnished, installed, constructed or caused to be done, furnished, installed or constructed by DEVELOPER fails to fulfill any of the requirements of this Agreement or the Improvement Plans and specifications referred to herein, DEVELOPER shall without delay and without any cost to IWA, repair or replace or reconstruct any defective or otherwise unsatisfactory part or parts of the work or structure. Should DEVELOPER fail to act promptly or in accordance with this requirement, DEVELOPER hereby authorizes IWA at [WA's option, to perform the work twenty (20) days after mailing written notice of default to DEVELOPER and to DEVELOPER'S and agrees to pay the cost of such work by IWA. Should the IWA determine that urgency requires repairs or replacements to be made before DEVELOPER can be notified, [WA may, in its sole discretion, make the necessary repairs or replacement or perform the necessary work and DEVELOPER shall pay to IWA the cost of such repairs. DEVELOPER Not Agent of IWA. Neither DEVELOPER nor any of DEVELOPER'S agents or contractors are or shall be considered to be agents of IWA in connection with the performance of DEVELOPER'S obligations under this Agreement. Injury to Work. Until such time as the improvements are accepted by IWA, DEVELOPER shall be responsible for and bear the risk of loss to any of the improvements constructed or installed, Until such time as all improvements required by this Agreement are fully completed and accepted by IWA, DEVELOPER will be responsible for the care, maintenance of, and any damage to such improvement. IWA shall not, nor shall any officer or employee thereof, be liable or responsible for any accident, loss or damage, regardless of cause, happening or occurring to the work or Improvements specified in this Agreement prior to the completion and acceptance of the work or improvements. All such risks shall be the responsibility of and are hereby assumed by DEVELOPER.

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Other Azreements. Nothing contained in this Agreement shall preclude IWA from expending monies pursuant to Agreements concurrently or previously executed between the parties, or from entering into Agreements with other DEVELOPERs for the apportionment of costs of water and sewer mains, or other improvements, pursuant to the provisions of the IWA ordinance providing therefore, nor shall anything in this Agreement commit 1WA of any such apportionment. DEVELOPER'S OBLIGATION TO WARN PUBLIC DURING CONSTRUCTION. Until final acceptance of the Improvements, DEVELOPER shall give good and adequate warning to the public of each and every dangerous condition existent in said improvements, and will take all reasonable actions to protect the public from such dangerous condition. Vesting of Ownership. DEVELOPER shall promptly dedicate or grant to IWA, without charge, any and all rights, rights-of-way or other property interests necessary to IWAs ownership and control of the Improvements to be constructed pursuant to this Agreement, which are on property owned or controlled by DEVELOPER. Upon acceptance of the work on behalf of IWA and recordation of the Notice of Completion, ownership of the improvements constructed pursuant to this Agreement shall vest in IWA. DEVELOPER shall execute any documents to effectuate this provision. Final Acceptance of Work. Acceptance of the work on behalf of IWA shall be made by the IWA Board upon recommendation of the IWA Engineer after final completion and inspection of all improvements. The IWA Board shall act upon the Engineer's recommendation within thirty (30) days from the date the IWA Engineer certifies that the work has been finally completed, as provided herein, or at such other time deemed reasonable. Such acceptance shall not constitute a waiver of defects by IWA. Indemnity/Hold Harmless. IWA or any officer or employee thereof shall not be liable for injury to persons or property occasioned by reason of the acts or omissions of DEVELOPER, its agents or employees in the performance of this Agreement. DEVELOPER agrees to defend, indemnify and hold harmless TWA, its officials and employees from any and all claims, demands, causes or action, liability or loss of any sort, because of, or arising out of, acts or omissions of DEVELOPER, its agents or employees in the performance of this Agreement, including all claims, demands, causes of action, liability, or loss because of, or arising out of, in whole or in part, the design or construction of the Improvements. This indemnification and agreement to hold harmless shall extend to injuries to persons and damages or taking of property resulting from the design or construction of said SUBDIVISION, and the Improvements as provided herein, and in addition, to adjacent property owners as a consequence of the diversion of waters from the design or construction of public drainage systems, streets and other public improvements. Acceptance by the IWA of the Improvements shall not constitute an assumption by the IWA of any responsibility for the design or construction of the SUBDIVISION or the Improvements pursuant to the approved Improvement Plans or map, regardless of any negligent action or inaction taken by the TWA in approving the plans, unless the particular improvement design was specifically required by IWA over written objection by DEVELOPER submitted to the IWA Engineer before approval of

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the particular improvement design, which objection indicated that the particular improvement design was dangerous or defective and suggested an alternative safe and feasible design. After acceptance of the Improvements, the DEVELOPER shall remain obligated to eliminate any defect in design or dangerous condition causes by the design or construction defect, however DEVELOPER shall not be responsible for routine maintenance. Provisions of this paragraph shall remain in full force and effect for ten years following the acceptance by the IWA of Improvements. It is the intent of this action that DEVELOPER shall be responsible for all liability for design and construction of the Improvements installed or work done pursuant to this Agreement and that IWA shall not be liable for any negligence, nonfeasance, misfeasance or malfeasance in approving, reviewing, checking, or correcting any plans or specifications or in approving, reviewing or inspecting any work or construction. The improvement security shall not be required to cover the provisions of this paragraph. 20. Sale or Disposition of Project. Sale or other disposition of this property will not relieve DEVELOPER from the obligations set forth herein. If DEVELOPER sells the property or any portion of the property within the PROJECT to any other person, the DEVELOPER may request a novation of this Agreement and a substitution of security. Upon approval of the novation and substitution of securities, the DEVELOPER may request a release or reduction of the securities required by this Agreement. Nothing in the novation shall relieve the DEVELOPER of the obligations under this Agreement for the work or improvement done by DEVELOPER. Time of the Essence. Time is of the essence of this Agreement. Time for Completion of Work/Time Extension. DEVELOPER shall complete construction of the improvements required by this Agreement in accordance with the schedule of performance attached as Exhibit C hereto and incorporated herein ("Schedule of Performance"). The IWA, in his or her sole discretion, may authorize acceptance of individual Improvements to accommodate phasing of PROJECT development; provided, however, that production, storage and transmission needs must be complete and adequate for each phase of PROJECT development before they are considered for acceptance. In no instance will water service be provide by IWA to the PROJECT, or any part or phase thereof, without corresponding sewer service. IWA will not approve or accept any onsite improvement, or permit any connection to the Improvements, until all related improvements have been completed and accepted by IWA. In the event good cause exists as determined by the IWA Engineer, the time for completion of the improvements hereunder may be extended. The extension shall be made by writing executed by the IWA Engineer. Any such extension may be granted without notice to DEVELOPER'S Surety and shall not affect the validity of this Agreement or release the Surety or Sureties on any security given for this Agreement. The IWA Engineer shall be the sole and final judge as to whether or not good cause has been shown to entitle DEVELOPER to an extension. Delay, other than delay in the commencement of work, resulting from an act of IWA, or 'by an act of God', which DEVELOPER, could not have reasonable foreseen, or by storm or inclement weather which prevent the conducting of work, and which were not caused by or contributed to by DEVELOPER, shall constitute good cause for an extension of time for completion. As a condition of such extension, the IWA Engineer

21. 22.

may require DEVELOPER to furnish new security guaranteeing performance of this Agreement as extended in an increased amount as necessary to compensate for any increase in construction costs as determined by the IWA Engineer. 23. Legal Responsibilities. The DEVELOPER shall keep itself informed of all local, State and Federal Laws and regulations which in any manner affect those employed by it or in any way affect the performance of its obligations pursuant to this Agreement. The DEVELOPER shall at all times observe and comply with all such laws and regulations. The IWA, and its officers and employees, shall not be liable at law or in equity occasioned by failure of the DEVELOPER to comply with this section. No Vesting of Rights. Performance by DEVELOPER of this Agreement shall not be construed to vest DEVELOPER'S rights with respect to any change in any capacity or service fee or regulation of IWA. Non-disturbance of Maps and Obligations. This Agreement does not rescind, replace, or otherwise affect any obligation that the DEVELOPER may have under any map recorded pursuant to the Subdivision Laws to complete the design and construction of any improvements, nor does it alter any obligation to the DEVELOPER may have under any such map to dedicate or otherwise transfer any real property or improvements to IWA or to any other public entity. Performance by DEVELOPER of this Agreement shall not be construed to vest DEVELOPER'S rights with respect to any change in any capacity or service fee or regulation of IWA. Assignment. This Agreement may not be assigned by DEVELOPER in whole or in part without the prior written consent of the IWA. If assigned by DEVELOPER pursuant hereto, this Agreement shall apply to, bind and inure to the benefit of the Parties and their respective successors and assigns. Non-Liability of Officials and Employees of IWA. No official, representative, agent, attorney, consultant or employee of IWA shall personally be liable to the DEVELOPER in the event of any default by IWA under the terms of this Agreement. Notices. All notices required or provided for under this Agreement shall be in writing and delivered in person or sent by mail, postage prepaid and addressed as provided in this Section. Notice shall be effective on the date it is delivered in person, or, if mailed, on the date of deposit in the United States Mail. Notices shall be addressed as follows unless a written change of address is filed with the IWA: Notice to IWA: General Manager Indio Water Authority 83101 Avenue 45 Indio, California 92201 Notice to DEVELOPER:

24.

25.

26.

27.

28.

12

Terra Lago Indio, LLC Attn: Division President 2525 Campus Drive Irvine, CA 92626 29. Severability. The provisions of this Agreement are severable. If any portion of this Agreement is held invalid by a court of competent jurisdiction, the remainder of the Agreement shall remain in full force and effect unless amended or modified by the mutual consent of the parties. Captions. The captions of this Agreement are for convenience and reference only and shall not define, explain, modify, limit, exemplify, or aid in the interpretation, construction or meaning of any provisions of this Agreement. Litigation or Arbitration. In the event that suit or arbitration is brought to enforce the terms of this Agreement, the prevailing party shall be entitled to litigation costs and reasonable attorney's fees. Governing Law; Venue. This Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California, with venue in Riverside County Superior Court. Amendment. This Agreement may be amended or modified only by a written instrument approved and signed by the Parties. No Third Party Beneficiaries. No person or entity shall be deemed to be a third party beneficiary hereof and nothing in this Agreement (either express or implied) is intended to confer upon any person or entity, other than 1WA and the DEVELOPER, any rights, remedies, obligations or liabilities under or by reason of this Agreement. Severability. The provisions of this Agreement are severable. If any portion of this Agreement is held invalid by a court of competent jurisdiction, and the intent, rights and obligations of the Parties hereunder remain intact without substantial change, the remainder of the Agreement shall remain in full force and effect unless amended or modified by the mutual consent of the parties. Incorporation of Recitals. The Recitals to this Agreement are hereby incorporated into the terms of this Agreement. Entire Agreement. This Agreement constitutes the entire Agreement of the parties with respect to the subject matter. All modifications, amendments, or waivers of the terms of this Agreement must be in writing and signed by the appropriate representatives of the parties. In the case of the IWA, the appropriate party shall be the 1WA Manager.

30.

31.

32.

33. 34.

35.

36. 37.

[Signatures continued on next page]

13

IN WITNESS WHEREOF, this Agreement is executed by IWA, by and through its Mayor. DEVELOPER* TERRA LAGO INDIO, LLC, a Delaware limited liability company INDIO WATER AUTHORITY

By: Its: By: K. Hovnanian Terra Lago Investment, LLC a California limited liability company, its Manager Indio Water Authority Name: Title:

By: Name:

ATTEST:

Secretary Title: (Proper Notarization of DEVELOPER'S signature is required and shall be attached) APPROVED AS TO FORM

General Counsel

14

EXHIBIT A LEGAL DESCRIPTION

15

IN THE ..7;TY OF IND1C, '-';')IINTY Or R

, SI Ali.

CAL:FDNIA

WATER IMPROVEMENT PLANS
TRACT 32341-2 — K HOVNANIAN COMPANIES OF CALIFORNIA, INC. LCATU IN A f'",fiTtUl CF :EC-ICNS 17 it IB, z LaJIH, AANK.r. a C.S-r s Y.

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GENERAL WATER NOTES
WS;

ABBREVIATIONS

LEGEND

WORK TO BE DONE LEGEND
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Roia a EAS1. c r A.O.

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ABBREVIATIONS

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WATER IMPROVEMENT PLANS
TRACT 32462-3 — TERRA LAO INDIO, LLC
LOCA1C9 IN A PORT AMWAY 01. cluOrmis SE:-:DA5 '7 k tfl, I6415rIT S 59.11+. RAGE 6 EAST. 5 9 M.

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STA72ONA P1 Aro LiNE'6'-C GIP WATER

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rPACT 3244124
WaterAuth oncy
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WAT.VAUth C 617 TRACT 524624 14.06.1.114.. 'INC 2141-3 /11.1.1 BIM we
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640

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11400 ONE

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$14220144 4.40.

fr i
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/

,
FT,77

Yintirli IT341014/14.40i
ME MeV g

ss

,

matootri ttascoA ft'''' PORTEZZA COURT LINE 'V • DIP WATER
WAN 1344, 4

1 1.1Cirei'vf
CUSINO COURT LIRE T.. r DIP WATER

r

pJJrNinarN •Pfah-ela

sae

3

1

-•

"L'. ."..1 I dzo War& Aut.hortry

TRACT 3202-3
,1991.1 Li= OM 4C
10111Thrtl .1

asa nuCP-iU Pe= 4014341

111.14119

EXHIBIT B SCOPE OF WORK FOR IMPROVEMENTS

16

Tract No. 32341-2
Project Four Seasons, Indio ITEM UNirr

Engineer's Estimate
ESTIMATED DUMMY neer COST AMOUNT

Water Improvements 8• D.I.P. Waterline) 2 3 4 5 8 7 408 LF EA 771 3 1 1 1 3 1 2 2 EA EA EA EA 1 3 1 1 1,254 53 2 27.00, 38.00 1,500.00 1,500.00 2,300.00 2,000.00 3,000.00 1,800.00 3,000.00 4,900.00 5,000.00 4,975.40 500.00 2,500.00 5.00 1,503.00 1,500.1X1 10,952.00

aLP. Waterline
8' D.L Gate Vafve 8"xlir Reducer 8"x8N5' D.I. Tee 8"xtriV D.I. Tee 12" DJ. Butterfly Valve

29,298.00
4,500.00 1.500.00 2,300.00 2.000.00 9.000.00 1,600.00 6,000.00 9,84)0.00 5,400.00 14,925.00 500.00

12x8' Reducer
12-x12N1Y D.I. Tee 18" D.I. Butterfly Valve 11 12 13 14 15 16 17 18"AI D.I. Tee

Standard Fire Hydrant 5" Misc. Bends and Finings 12'5:6" D.L Tee Service Connections (63 lots

2,500.00
6,270.00 79,500.00 3,000.00

a 32 average length)

LF EA EA Sub Total

3/4" Water Meter vii/ 1" Service Removal of Blow Off Ass'y

leaszLaa.
18,665.50 LS 28,295.25 18,555.56 25,29525

CONTINGENCY (10%) ADMINISTRATIVE (15%) TOTAL

mkAteni

Bead Dona's, RCE 58828

Checked by

Date:

Tract No. 32341-3
Project Four Seasons, Indio niar NO. ITEM UNIT

Engineer's Estimate
STI1MATED 00ANITTY UNIT COST AMOUNT

Water Improvements 1 2 3 4 5 8" D.P. WatawlIna Ir D.I. Gate Veto rrtirtita• D.I. Tee Standard fire Hydrant Service Cznnadacrts (38 lots @ 22' average length) 3/4" Water Meier wi 1' Service 7 2* Blew Off Asey 1,792 9 3 6 842 38 27.00 1.500.00 2,500.00 4,975.00 5.00 1,500.00 2,500.00 48,384.00 13,500 00 7,500.00 29,850 00 4,210.00 57,000.00 5,000.00 186,444.00, 18,544.40 24,816.80 16,514A0 24,818.80 P35.60,

sip Tritor

(De
Date:

Tract No. 32462-2
Project Four Seasons, Indio
REM NO, ITEM UNIT

Engineer's Estimate
ESTIMATED QUANTITY UNIT COST AMOUNT

Water Improvements 1 2 I 8" D.I.P. Waterline 12' D.I.P. Waterline LF LF 2.153 476. 27.00' 39.00! 1,500.00I 1 3,000.001 2,200.00i 3,000.00 4,975.031 EA ! 500.001 750.00 5.00i EA
EA

58,131.00
18,088.00 10,500.00 12,000.00 2,200.00 9,000.00 44,775.00 4,500.00 3,750.00 11,810.00j 96,000.00 3,000 00 273,754.00

I

3 1 r DA. Gate Valve
4 5 t12" D.1. Butterfty Valve 6"x8"x8" D.I. Tee 12'41 2'x12" DI. Tee Standard Are Hydrant 8' Misc. Bends and Fittings 12" Misc. Bends end Fittings 10 11 Service Connections (64 lots i 37' average length) 3/4" Water Meter w11" Service Removal of Blow Off Ass'y ISatTotal CONTINGENCY (10%) ADMINISTRATIVE (15%) TOTAL

7 8

1,500.00 1,600.001

I 12

27,375.40! 41,083.10

27,375,40 41,063.10

.302,192.50

Brad Mavis, RCE 6882 Checked hy:

8 (V 3
DatiC

Tract No. 32462-3
Protect Four Seasons, Indio ITEM NO. tram UNST

Engineers Estimate
ESTIMATED QUANTITY UNIT COST AMOUNT

1 2

8" D.I.P. Waterline 12' D.I.P. Waterline

LF LE EA EA

2,321 342 10 2 2 2 10 7 8 2,000 83 2 2 2

27.00 38.00 850.00 3,000.00 2,200.00 3,000.00 4,975.00 500.00 750.00 5.00 1,500,00 1,500.00 2,000.00 2,500.00

82,667.00 12,996.00 8,500.00 6,000.00 4.400,00 6,000.00 49,750.00 3,500.00 4,500.00 10o00,0e 94,500.00 3,000.00 4,000.00 5,000.00 274,513,00

5 8 7 8 9 10 11 12 13 14

8",(8"x8" D.I. Tee 12'7(12"x-12" Di. Tee Standard Fire Hydrant fr Mac, Bends and Fittings 12' 1,4%, Bends and Fittings Service ConnectIons (63 lots © 32' average length) 3/4" Water Meter w/ 1" Service Removal of Blow Off Any 1" Alr Vac and Ak Release Assy Blowoff Ass'y Sub Talat CONTINGENCY (10%) ADMINISTRATIVE (15%) TOTAL

EA EA EA EA EA LF EA EA EA

LS LS

1 1

27,481,30 4141.95

27,411.30 41,221.95 244,916.25,

Brad Donais, RCE 68828 Chocked by:

( t 2)/8 // Data:

EXHIBIT C SCHEDULE OF PERFORMANCE

The estimated construction schedule for the Terra Lago East (aka K. Hovnanian's Four Seasons at Terra Lago) is below: Tract 32341-2 o Start Construction: January 8, 2014 o End Construction: December 31, 2014 • Tract 32341-3 o Start Construction: January 8, 2014 o End Construction: December 31, 2014 Tract 32462-2 o Start Construction: January 8, 2014 o End Construction: December 31, 2014 • Tract 32462-3 o Start Construction: January 8, 2014 o End Construction: December 31, 2014

The Development Impact Fees for these tracts have been paid. Supplemental Water Supply Fee will be paid in accordance with the 1WA Development Services Procedural Guidelines.

17