HomeMy WebLinkAboutC-3709(A) - Covenants, Conditions, and Restrictions Affecting Interests in Real Property (Newport Lexus Dealership)EXHIBIT "A"
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92663-3884
Attention: City Clerk
[Space above for Recorder.]
This document is being recorded for the benefit
of the City of Newport Beach and is exempt
from the requirement for payment of a recording
fee pursuant to Government. Code §§6103 and
27383.
FIRST AMENDMENT TO COVENANTS, CONDITIONS, AND RESTRICTIONS.
AFFECTING INTERESTS IN REAL PROPERTY
This FIRST AMENDMENT TO COVENANTS, CONDITIONS, AND RESTRICTIONS
AFFECTING INTERESTS IN REAL PROPERTY (the "First Amendment to CC&Rs") is
entered into as of this /Dimrday of January, 2006, by and between the CITY OF NEWPORT
BEACH, a California municipal corporation ("City"), and DAVID W. WILSON, an individual
("Owner") (individually a "Party" and collectively the "Parties").
RECITALS
A. Owner is the owner of that certain real property consisting of approximately
eight (8) acres of land area located generally at the southwest corner of MacArthur Boulevard
and Jamboree Road in the City of Newport Beach, County of Orange, State of California, which
is more particularly described in the legal description attached hereto as Exhibit "A" and
incorporated herein by this reference (the "Site").
B. On or about June 8, 2004, City and Owner entered into that certain unrecorded
Agreement (Newport Lexus Dealership) (the "Original Agreement").
C. On or about October 13, 2005, pursuant to Section 2 of the Original Agreement,
City and Owner executed and caused tobe recorded against the Site as Instrument No.
2005000822808 that certain Covenants, Conditions, and Restrictions Affecting Interests in Real
Property (the "Original CC&Rs").
D. On or about January /r) 2006, City and Owner entered into that certain
unrecorded First Amendment to Agreement ("Newport Lexus Dealership") (the "First
II2/017801-0003 1
670891.02 06/08/04
Amendment to Original Agreement"). Pursuant to the First Amendment to Original Agreement,
City and Owner agreed to execute and record this First Amendment to CC&Rs against the Site.
COVENANTS
Based upon the foregoing Recitals, which are incorporated herein by this reference, and
for other good and valuable consideration, the receipt and sufficiency of which is acknowledged
by both Parties, City and Owner hereby agree that the Original CC&Rs are hereby amended as
follows:
1. Section 4.1.1 of the Original CC&Rs are hereby amended to read in its entirety as
follows.
4.1.1 Arnount of Covenant Payments. In consideration for Owner's
undertakings pursuant to this Covenant and City's acquisition of the interest in the
Site set forth in this Covenant, City shall make the following Covenant Payments
to Owner after the end of each Quarter during the Operating Period:
(a) Subject to subparagraph (b) below, the Covenant Payments.
with respect to each Quarter shall be in an amount equal to (i) one hundred
percent (100%) of the Sales Tax for that Quarter until such time that City has paid
to Owner the cumulative sum. of Eight Hundred Forty -Three Thousand Five
Hundred Forty -Four Dollars and Forty -Four Cents ($843,544.44), and thereafter
(ii) fifty percent (50%) of the Sales Tax for that Quarter.
(b) Notwithstanding any other provision set forth in this
Covenant to the contrary, in no event shall the total amount of Covenant
Payments made by City to Owner exceed the sum of Ten Million Three Hundred
Forty -Three Thousand Five Hundred Forty -Four Dollars and Forty -Four Cents
($10,343,544.44) of assumed "principal" plus imputed "interest" on the unpaid
"principal" balance of said sum at the rate of five percent (5%) per annum from
April 28, 2005 (the date Owner closed escrow and acquired the fee interest in the
Site), until the entire amount of imputed interest and unpaid imputed principal
have been paid in full (the "Covenant Payments Cap Amount"). In this regard, it
is understood and agreed that the Covenant Payments are in consideration of
Owner's performance during each Quarter of the Operating Period and are not
repayments of a loan.
(c) Notwithstanding any other provision set forth in this
Covenant to the contrary, even in the event the Covenant Payments Cap Amount
has not been reached at the end of the Operating Period, City shall have no further
obligation after that time to make additional Covenant Payments.
2. Except as expressly set forth herein, all of the terms and conditions set forth in the
Original CC&Rs shall remain in full force and effect and all references in the Original CC&Rs to
112/017801-0003
: 670891.02 06/08/04
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the provisions of the Original CC&Rs shall be deemed to refer to the Original CC&Rs as
amended by this First Amendment.
3. This First Amendment to CC&Rs may be executed in two or more counterparts,
each of which when so executed and delivered shall be deemed an original and all of which,
when taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this First Amendment to CC&Rs to
be effective as of the first date set forth hereinabove.
ATTEST:
City Clerk
APPROV TO FORM:
By:
City Attorney
"CITY"
CITY OF NEWPORT BEACI-I,
a California municipal corporation
"OWNER"
DAVI W. WILSON, 1 individual
By:
112/017801-0003
670891.02 O6/08/04
3
STATE OF CALIFORNIA )
COUNTY OF 012-ft-K ) ss
On i})!AAi-'J //00 (a, before me, 1/61. ` I P t$ 1 " I PAI/lr!i
personally appeared
personally known to me to be the
person(.} whose name($ is/ate subscribed to the within instrument and acknowledged to me that
he/sla.P.Alloy executed the same in his/lror/their authorized capacity.(4Q4 and that by his/11e ,Ltlhehr
signature( on the instrument the person(.) or the entity upon behalf of which the person4.
acted, executed the instrument.
IEMANI 1. BROWN
Commission # 1633477
Nolan Pit lc - California
Orange County
My Comm. Expires Jon 25, 201
[SEAL]
al seal.
STATE OF CALIFORNIA )
) ss
COUNTY OF )
On , before me,
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.
[SEAL]
Notary Public
112/017801-0003
670891.02 06/08/04
4
•
STATE OF CALIFORNIA
) ss
COUNTY OF )
On , before me,
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
[SEAL]
112/017801-0003
670891 02 06/08/04
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EXHIBIT "A"
LEGAL DESCRIPTION OF SITE
ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF ORANGE, CITY OF NEWPORT BEACH, DESCRIBED AS
FOLLOWS:
PARCEL A:
PARCEL 2, AS SHOWN ON MAP FILED IN BOOK 61, PAGE 9 OF PARCEL
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE
COUNTY, CALIFORNIA.
PARCEL B:
PARCEL 1 ON PARCEL. MAP RECORDED IN BOOK 64, PAGE 26 OF
ORANGE COUNTY PARCEL MAPS, RECORDS OF ORANGE COUNTY.
112/017801-0003
670891.02 06/08/04,
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Office of the City Attorney
City of Newport Beach,
3300 Newport Boulevard
Newport Beach, CA 92663-3816
Recorded in Official Records, Orange County
Torn Daly, Clerk -Recorder
� I tDIQIIIUIIIgIIIIIII111IIIII1I11111 IIIIIIIIII IIIIIIIINO FEE
2005000822807 10:34am 10113/05
212 4 002 16
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
[Space above for Recorder.]
[Exempt from Recordation Fee per Government Code Section 27383.]
COVENANTS, CONDITIONS, AND RESTRICTIONS
AFFECTING INTERESTS IN REAL PROPERTY
This COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS
IN REAL PROPERTY (the "Covenant") is entered into as of this 12th day of September, 2005,
by and between the CITY OF NEWPORT BEACH, a California municipal corporation ("City"),
and DAVID W. WILSON, an individual ("Owner") (individually a "Party" and collectively the
"Parties").
RECITALS
A. Owner is the owner of that certain real property consisting of approximately
eight (8) acres of land area located generally at the southwest comer of MacArthur Boulevard
and Jamboree Road in the City of Newport Beach, County of Orange, State of California, which
is more particularly described in the legal description attached hereto as Exhibit "A" and
incorporated herein by this reference (the "Site").
B. On or about June 8, 2004, City and Owner entered into that certain unrecorded
Agreement (Newport Lexus Dealership) (the "Agreement") authorizing the recordation of this
Covenant against the Site upon the timely satisfaction of the "Covenant Conditions" identified
therein. The Covenant Conditions have been satisfied.
C. Owner intends to develop and operate on the Site a new and used Lexus
automobile dealership with related parts, service, and repair operations, and parking,
landscaping, and related amenities, and, at Owner's option, additional new and incidentally
related used vehicle lines in addition to Lexus that are not being sold in the City of Newport
Beach as of the Effective Date (collectively, the "Lexus Dealership"), pursuant to the following
land use permits and approvals issued by City on or about June 14, 2005: Final Environmental
Impact Report (SCH2004081004), General Plan Amendment No. 2004-004, Planned
Community Text Amendment No. 2004-003, Use Permit No. 2004-026, Modification Permit No.
2005-0303, and Traffic Study No. 2004-003 (collectively, the "Entitlements").
112/017801.0005
6403 19.02 20910245
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D. In consideration for Owner's conveyance to City of the interest in the Site set
forth in this Covenant, City has agreed to make certain payments to Owner, the amount of which
is measured by the Sales Tax generated by the Retail Uses on the Site. City and Owner have
agreed that the portion of Sales Tax required to be paid by City to Owner hereunder during each
Quarter of the Operating Period provided for herein is a fair exchange for the consideration to be
furnished by Owner to City in that Quarter.
COVENANTS
Based upon the foregoing Recitals, which are incorporated herein by this reference, and
for other good and valuable consideration, the receipt and sufficiency of which is acknowledged
by both Parties, City and Owner hereby agree as follows:
DEFINED TERMS
The following terms when used in this Covenant shall have the meanings set forth below:
The term "Affiliated Third Party" shall mean (i) any construction contractor or
subcontractor involved in the construction of the Lexus Dealership on the Site and (ii) any entity
that finances the leasing of vehicles for which the lease transaction originates from the Lexus
Dealership on the Site; provided, that there is no requirement that an Affiliated Third Party have
any common ownership interest with or control by Owner.
The term "Agreement" shall have the meaning ascribed in Recital B of this Covenant.
The term "Commencement Date" shall have the meaning ascribed in Section 2 of this
Covenant.
The term "Covenant Payments" shall mean the amounts to be paid by City to Owner with
respect to each Quarter of the Operating Period.
The tern "Covenant Payments Cap Amount" shall have the meaning ascribed in Section
4.1. 1(b) of this Covenant:
The term "Default" shall have the meaning ascribed in Section 5.1 of this Covenant.
The term "Effective Date" shall mean the date this Covenant is executed by the latter of
the two Parties to sign, which date shall be inserted in the preamble to this Covenant.
The term "Entitlements" shall mean those discretionary City land use permits and
approvals required to authorize development and operation of the Lexus Dealership on the Site
which are referred to in Recital C of this Covenant, as the same may be amended from time to
time.
The term "Fiscal Year" shall mean City's fiscal year, which commences on July 1 and
ends on the next succeeding June 30.
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The term "Force Majeure" shall have the meaning ascribed in Section 6.6 of this
Covenant.
The term "Holder" shall have the meaning ascribed in Section 5.1(b) of this Covenant.
The term "Lexus Dealership" shall mean the project described in Recital C of this
Covenant, together with such incidental related uses that comply with the Entitlements and
applicable provisions of City's Municipal Code.
The term "Operating Period" refers to the period between the Commencement Date and
the Termination Date.
The term "Quarter" shall mean (i) any of the three (3) month periods during a Fiscal Year
commencing July 1, October 1, January 1, or April 1, or (ii) the quarterly or other periods used
by the State Board of Equalization in calculating or making Sales Tax payments to City, if such
periods differ from City's fiscal quarters described in clause (i) hereinabove.
The term "Sales Tax" means, for a given Quarter during the Operating Period, the sum of
(i) that portion of sales and use taxes allocated, paid to, and received by City from the imposition
of the Bradley -Burns Uniform Sales and Use Tax Law (Part 1 of Division 2 of the California
Revenue and Taxation Code commencing at Section 6001), or any successor law thereto, that
arises from taxable sales and lease transactions generated by the construction and operation of
the Lexus Dealership on the Site and (ii) the City's Portion of Replacement Sales Tax Revenues.
As used herein, the term "City Portion of Replacement Sales Tax Revenues" shall mean
identifiable and quantifiable tax revenues or subventions actually paid to and received by City
that arise from the operation of the Lexus Dealership on the Site due to a change in California
law occurring after January 1, 2004, and as a substitute for or replacement of Sales Tax that
would have been allocated, paid to, and received by City as a result of taxable sales and lease
transactions occurring on the Site based on California law in effect as of January 1, 2004, but
which Sales Tax is not so allocated, paid to, and received by City due to a change in California
law occurring after January 1, 2004. Notwithstanding the foregoing, the term "Sales Tax" shall
not include (i) the portion of sales or use taxes attributable to the Site that are retained by the
State Board of Equalization as an administrative, processing, or handling charge (calculated at
the same percentage of gross revenues as is applicable City-wide); nor (ii) the portion of such
revenues (including without limitation City's Portion of Replacement Sales Tax Revenues, if
applicable) which in future years may be allocated and paid to City but which is restricted by law
(but not contract) by an entity other than City (and binding upon City) to be used for specific
uses (other than the uses provided for in this Covenant including without limitation disaster
relief transportation improvements, or otherwise); nor (iii) any portion of sales tax previously
paid but refunded because of overpayment of such tax.
The term "Sales Tax Statement" refers to each quarterly statement to be prepared by
Owner or any Affiliated Third Party, in a form reasonably acceptable to City, and submitted to
the SBE and City identifying the portion of Sales Tax generated from the Site during the
previous Quarter as a result of taxable sales and lease transactions, as provided in Section 3.6 of
this Covenant.
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The term "SBE" shall mean the California State Board of Equalization or successor
agency with the responsibility of collecting and administering the distribution and payment to
City of Sales Tax.
The term "Site" shall have the meaning ascribed in Recital A of this Covenant.
The term "Termination Date" shall mean the date that is the earlier of (i) the date that is
eighteen (18) years following the Commencement Date; or (ii) the date on which this Covenant
is terminated pursuant to Section 5.2 or 5.3, as applicable.
CONDITION TO OWNER'S RIGHT TO RECEIVE COVENANT PAYMENTS
As a condition to Owner's right to receive the Covenant Payments, Owner shall be
required to complete or cause to be completed (as evidenced by a certificate or certificates of
occupancy) construction of the Lexus Dealership on the Site, and open or cause said dealership
to be opened for business to the public, all in substantial compliance with the Entitlements. The
first day of the first Quarter that occurs after the date on which the aforesaid condition is satisfied
shall constitute the "Commencement Date," at which time Owner's obligations pursuant to
Section 3 of this Covenant and City's obligations pursuant to Section 4 of this Covenant shalt
commence.
Notwithstanding any other provision set forth in this Covenant, and subject to extension
for events of Force Majeure as provided in Section 6.6, (i) if the condition set forth in the first
sentence of the preceding paragraph is not satisfied on or before the date that is eighteen (18)
months after the issuance of the first building permit for the Lexus Dealership project, or (ii) if a
building permit is not issued for the Lexus Dealership project on or before the date that is
eighteen (18) months after the Effective Date, either Owner or City may terminate this Covenant
by delivery of written notice of termination to the other Party and, in such event, neither Party
shall have any further rights against or obligations to the other Party arising out of this Covenant.
3. OWNER'S OBLIGATIONS
3.I Continuous Operation: Site As Point of Sale. Owner covenants and agrees to
exercise commercially reasonable efforts to continuously operate the Lexus Dealership on the
Site or to cause such dealership to be continuously operated on the Site during normal business
hours (subject to temporary interruptions for casualty losses, repairs, and the like) during the
entire Operating Period, with inventory and sales personnel sufficient to satisfy and respond to
customer demand. To the maximum extent permitted by law, Owner shall designate the Site on
its Sales Tax Statements as the point of sale for all sales transactions arising out of the business
conducted on the Site. In addition, Owner shall exercise commercially reasonable diligence in
an effort to cause each Affiliated Third Party to designate the Site (and the City of Newport
Beach) on reports they are required to file with the SBE as the situs of the construction
contract(s) for the Lexus Dealership or the leasing of any new or used motor vehicles where the
transaction is generated from the Site, as applicable.
. 3.2 Use Restriction. During the entire Operating Period, the Site shall not be put to
any use other than the operation of the Lexus Dealership and incidental related uses that comply
with the Entitlements and applicable provisions of City's Municipal Code.
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3.3 Maintenance and Repair of Site. During the entire Operating Period, Owner, at its
sole cost and expense, shall keep and maintain the Site and the improvements thereon and all
facilities appurtenant thereto in first class condition and repair and free from accumulations of
debris, weeds, graffiti, and waste materials, and with landscaping in a healthy condition. During
such period, Owner shall not abandon any portion of the Site or leave the Site unguarded or
unprotected, and shall not otherwise act or fail to act in such a way as to unreasonably increase
the risk of any damage to the Site or of any other impairment of City's interest set forth in this
Covenant.
3.4 Compliance v,ith Laws. During the entire Operating Period, Owner shall operate
the Lexus Dealership on the Site in conformity with all valid and applicable federal, state, and
local laws, ordinances, and regulations, provided that Owner does not waive its right to challenge
the validity or applicability thereof to Owner or the Site.
3.5 Government Code Section 53084 Compliance; Indemnification. Owner warrants
and represents to City that no other vehicle dealership owned or operated in whole or in part by
Owner or any person or entity affiliated with Owner will be "relocating" from another
jurisdiction in the "market area" to the City of Newport Beach within the meaning of California
Government Code Section 53084 as a result of Owner's activities pursuant to the Agreement or
this Covenant and; accordingly, that the Agreement and this Covenant will not result in a
violation of said statute. Owner agrees to indemnify, defend, and hold City and its officers,
employees, and agents free and harmless from and against any and all claims, liabilities, and
losses arising out of any violation or breach of the foregoing representation and warranty.
3.6 Provision of' Sales Tax Statements to City. During the Operating Period, Owner
shall deliver and exercise commercially reasonable efforts to cause each Affiliated Third Party to
deliver to City true and conect copies of all reports that Owner and such Affiliated Third Parties
file with the California State Board of Equalization ("SBE") with regard to taxable sales and
lease transactions occurring on and with respect to the Lexus Dealership construction and
operation on the Site (the "Sales Tax Statements"), each of which statements identifies the
amount of Sales Tax upon which the Covenant Payment amount should be calculated. Said
Sales Tax Statements shall be provided to City concurrently with their submittal to SBE. In
addition, if any such Sales Tax Statements are amended or Owner receives notice from SBE
regarding any over -reporting or under -reporting of Sales Tax with respect to the Site, Owner
shall provide such information to City within a reasonable period not to exceed thirty (30) days.
In the event that there is any private business or customer information on the Sales Tax
Statement that is not reasonably necessary to enable City to verify the accuracy thereof for
purposes of performing its obligations and enforcing its rights set forth in this Covenant, Owner
and the Affiliated Third Parties shall be permitted to redact such information from the copy of
the document provided to City. With respect to Sales Tax Statements to be obtained from
Affiliated Third Parties, it is understood that to the extent a Sales Tax Statement to be filed by an
Affiliated Third Party with the SBE contains information unrelated to the Lexus Dealership on
the Site the copy of such statement to be filed with City may be redacted to remove references to
information that is irrelevant to the purposes of this Agreement, so long as such statement is
sufficient to enable City to verify the Sales Tax attributable to the Lexus Dealership and the Site,
as reasonably determined by City. In addition, it is understood that in no event shall Owner be
deemed to be in Default hereunder if one or more Affiliated Third Parties fails to submit a
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satisfactory Sales Tax Statement or Statements to City; in such event, if City reasonably
determines it is unable to verify its receipt of Sales Tax attributable to such Affiliated Third Party
or the amount thereof its recourse shall simply be that it shall not be required to include any
unverified amounts in its calculation of Sales Tax for purposes of calculating the amount of the
Covenant Payment(s) due to Owner hereunder.
3.7 Non -Discrimination. In the development and operation of the Le\us Dealership
DWIN agrees not to violate applicable laws that prohibit discrimination against any person or
class of persons by reason of gender, marital status, race, color, creed, mental or physical
disability, religion, age, 'ancestry, or national origin.
4 OBLIGATIONS OF CITY.
4. I Covenant Payments to Owner_
4.1.1 Amount of Covenant Payments. In consideration for Owner's
undertakings pursuant to this Covenant and City's acquisition of the interest in the Site set forth
in this Covenant, City shall make Covenant Payments to Owner after the end of each Quarter
during the Operating Period in an amount equal to fifty percent (50%) of the Sales Tax for that
Quarter. It is understood and agreed that the Covenant Payments are in consideration of Owner's
performance during each Quarter of the Operating Period and are not repayments of a loan.
(a) Subject to subparagraph (b) below, the Covenant Payments with
respect to each Quarter shall be in an amount equal to fifty percent (50%) of the Sales Tax for
that Quarter.
(b) Notwithstanding any other provision set forth in this Covenant to
the contrary, in no event shall the total amount of Covenant Payments made by City to Owner
exceed the sum of Nine Million Five Hundred Thousand Dollars ($9,500,000) of assumed
"principal" plus imputed "interest" on the unpaid "principal" balance of said sum at the rate of
five percent (5%) per annum from April 28, 2005 (the date Owner closed escrow and acquired
the fee interest in the Site) until the entire amount of imputed interest and unpaid imputed
principal have been paid in full (the "Covenant Payments Cap Amount"). In this regard, it is
understood and agreed that the Covenant Payments are in consideration of Owner's performance
during each Quarter of the Operating Period and are not repayments of a loan.
(c) Notwithstanding any other provision set forth in this Covenant to
the contrary, even in the event the Covenant Payments Cap Amount has not been reached at the
end of the Operating Period, City shall have no further obligation after that time to make
additional Covenant Payments.
4.1.2 Source of Payments. The Covenant Payments may be paid from any
source of funds legally available to City. In this regard, it is understood and agreed that the Sales
Tax that is generated from the construction and operation of the Lexus Dealership on the Site is
being used merely as a measure of the amount of the Covenant Payments that are periodically
owing by City to Owner and that City is not pledging any portion of the Sales Tax generated
from the Site to Owner.
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J.1.3 Payment Procedure. After the end of each Quarter during the Operating
Period, Owner shall deliver to City a copy of its Sales Tax Statement at the same time it delivers
the original Sales Tax Statement to the SBE and Owner shall exercise commercially reasonable
efforts to cause each Affiliated Third Party to do the same, all in accordance with the provisions
of Section 3.6 of this Covenant. In addition, if California law or regulations change after the
Effective Date with respect to the time or frequency for the filing of Sales Tax Statements, the
governmental entity with which Sales Tax Statements must be filed, or otherwise, this Covenant
automatically shall be deemed amended to conform to those changed procedures. Finally, if
after filing a Sales Tax Statement with respect to a particular Quarter Owner discovers that the
information set forth in said Sales Tax Statement was in error or the SBE notifies Owner that
said Sales Tax Statement was or could be in en -or, Owner shall notify City within a reasonable
time.
City shall exercise its best efforts to verify the amount of Sales Tax attributable to
the Site and City's receipt of payment from the SBE as soon as reasonably practicable after
City's receipt of a copy of each quarterly Sales Tax Statement from Owner and the Affiliated
Third Parties.
Not later than six (6) months after the end of the each Quarter during the
Operating Period, City shall pay the Covenant Payment for said Quarter to Owner. Each such
payment shall be accompanied by a statement identifying (i) the amount of Sales Tax upon
which the Covenant Payment amount was calculated, itemized separately for Owner and
Affiliated Third Parties; (ii) in the event the portion of Sales Tax attributable to taxable sales and
lease transactions that City uses as the basis for its Covenant Payment differs from the Sales Tax
Statements provided by Owner and the Affiliated Third Parties for said Quarter, a detailed
explanation of the reasons for the difference; and (iii) a cumulative total comparing how the
Covenant Payment in question, together with all prior Covenant Payments, relate to the
Covenant Payment Cap Amount.
It is understood that the amount of City's quarterly Covenant Payments to Owner
shall be based upon the amount of Sales Tax that City shall have been able to reasonably confirm
it actually has received from the SBE within fifteen (15) days prior to the applicable payment
date. If and to the extent that City has not been able to confirm receipt of Sales Tax revenues
prior to that date after and despite its exercise of reasonable diligence to do so, its subsequent
receipt of Sales Tax with respect to a particular Quarter shall be included in the next succeeding
payment(s) required to be made to Owner hereunder. In addition, if after any such quarterly
payment is made, either City or Owner obtains information that the amount of City's payment
was in error, the Party obtaining such information shall promptly notify the other Party and shall
provide such detailed information as may be necessary to explain the discrepancy. The
discrepancy then shall be taken into consideration by means of an adjustment to the next
quarterly payment to be made by City (either an additional payment in the event City has
underpaid a prior Covenant Payment that is due or a credit against the subsequent Covenant
Payment in the event City has overpaid); provided, however, that in the event an adjustment
needs to be made in excess of Ten Thousand Dollars ($10,000), the Party entitled to said sum
shall be entitled to deliver a written notice to the other Party requesting an immediate adjustment
and in such event the other Party shall make an appropriate payment within fifteen (15) days
from receipt of said notice.
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4. 1.4 Books and Records. Upon the written request of either Party, the other
Party shall make available for inspection (at City Hall in the event of a review of City records
and at Owner's place of business in Orange County in the event of a review of Owner's records)
such of its books and records as the requesting Party may reasonably determine must be
reviewed in order determine whether the correct amount of Covenant Payments have been made
or are being made hereunder. Notwithstanding the foregoing, City shall not be required to
produce any books or records that it is prohibited from producing by law and Owner shall not be
required to produce information that violates the privacy rights of individual customers. In
addition, the City shall have the right to audit such books and records of Owner once a year.
Such audit shall be at the City's sole cost and expense, provided, however, that if such audit
determines that the actual Sales Tax received by City is two percent (2%) or more Tess than that
reported by Owner, Owner shall reimburse City for such audit cost and expense.
4.1 5 No Acceleration: Prepayment. It is acknowledged by the Parties that
any payments by City provided for in this Covenant are in consideration for the performance by
Owner during the time period(s) for which payments are due. Therefore, City's failure to timely
make any payments or City's failure to perform any of its other obligations hereunder shall not
cause the acceleration of any anticipated future Covenant Payments by City to Owner. To the
maximum extent permitted by law, City shall be permitted to prepay any of the Covenant
Payments without penalty.
4.2 Additional Condition Precedent to City's Obligations. In addition to the
provisions set forth in Section 2 of this Covenant, City's obligation to make the Covenant
Payments pursuant to Section 4.1 of this Covenant for any Quarter during the Operating Period
shall be contingent and conditional upon Owner's performance of its obligations set forth in
Section 3 of this Covenant during such Quarter.
DEFAULTS AND REMEDIES.
51 Defaults.
la) Subject to Section 6.6 of this Covenant, the occurrence of any of
the following shall constitute a Default:
(i) the failure by either Party to perform any obligation of such
Party for the payment of money under this Covenant if such failure is not cured within
fifteen (15) calendar days after the nonperforming Party's receipt of written notice from
the other Party that such obligation was not perforated when due; or
(ii) the failure by either Party to perform any of its obligations
(other than obligations described in clause (i) of this Section 5.1) set forth in this
Covenant, if such failure is not cured within thirty (30) days or, if such failure is of a
nature that cannot reasonably be cured within thirty (30) days, the failure by such Party to
commence such cure within thirty (30) days and thereafter diligently prosecute such cure
to completion; or
(iii) any representation or warranty by a Party set forth in this
Covenant proves to have been incorrect in any material respect when made; or
112017801-WO5
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(iv) the Lexus Dealership is materially damaged or destroyed
by fire or other casualty during the Operating Period and Owner fails to commence
restoration of the improvements within a reasonable time or thereafter fails to diligently
proceed to complete such restoration in accordance with this Covenant; or
(v) Owner is enjoined or otherwise prohibited by any
governmental agency from occupying the Site during the Operating Period and such
injunction or prohibition continues unstayed for ninety (90) days or more for any reason.
(b) In the event Owner fails to perform any of its obligations under
this Covenant and City sends a notice of such failure to Owner, concurrently therewith City shall
send a copy of such notice to any mortgagee or deed of trust holder with respect to the Site
(herein the "Holder") (the name and address of which Holder shall be furnished by Owner or
such Holder to City) and thereafter the Holder shall have the same period of time as is available
to Owner to remedy such breach or failure under this Covenant. City shall accept any proper
cure of a breach or failure tendered by the Holder.
52 City's Remedies Upon Default be Otcner. Upon the occurrence of any Default by
Owner, and after Owner's receipt of written notice of default and expiration of the time for
Owner to cure such Default as provided in Section 5.1, City may at its option:
(i) suspend the payment of Covenant Payments otherwise due
and payable to Owner hereunder for the period that Owner remains in Default. If City
has so suspended its payments in accordance with the terms of this clause (i), then upon
Owner's cure of such Default, City shall resume its payment obligations, but shall have.
no obligation to make payments for any Quarter or portion thereof during which City's
obligation to make payments was so suspended; or
(ii) if the Default continues uninterrupted for a period of
one (1) year, City may terminate this Covenant, in which case City's obligation to make
payments to Owner for any period of time after the occurrence of the Default shall be
finally terminated and discharged.
In no event, however, shall City have the right to specifically enforce Owner's
covenants set forth in Section 3 of this Covenant, to prevent Owner's conversion of the Site to
another lawful use (even if such use would be inconsistent with this Covenant), or to sue Owner
or to recover from Owner any amount that is actually or allegedly attributable to loss of
anticipated Sales Tax or other revenues, whether because the amount of Sales Tax generated
from the Site is less than projected by Owner or City, or because Owner does not operate the
Lexus Dealership on the Site for the entire Operating Period, or otherwise.
5.3 Owner's Remedies Upon Default tw City. Upon the occurrence of any Default by
City, and after City's receipt of written notice of Default from Owner and expiration of the time
for City to cure such Default as provided in Section 5.1, Owner may terminate this Covenant by
written notice to City and/or seek whatever legal or equitable remedies may be available to
Owner, subject to the provisions of Section 4.1.5.
In/017801-0005
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5.4 Cunulatne Remedies: No Waiver. Except as expressly provided herein, the
nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights
and remedies provided by law from time to time and the exercise by the nondefaulting Party of
any right or remedy shall not prejudice such Party in the exercise of any other right or remedy.
None of the provisions of this Covenant shall be considered waived by either Party except when
such waiver is delivered in writing. No waiver of any Default shall be implied from any
omission by City to take action on account of such Default if such Default persists or is repeated.
No waiver of any Default shall affect any Default other than the Default expressly waived, and
any such waiver shall be operative only for the time and to the extent stated. No waiver of any
provision of this Covenant shall be construed as a waiver of any subsequent breach of the same
provision. A Party's consent to or approval of any act by the other Party requiring further
consent or approval shall not be deemed to waive or render unnecessary the consenting Party's
consent to or approval of any subsequent act. A Party's acceptance of the late performance of
any obligation shall not constitute a waiver by such Party of the right to require prompt
performance of all further obligations. A Party's acceptance of any performance following the
sending or filing of any notice of Default shall not constitute a waiver of that Party's right to
proceed with the exercise of its remedies for any unfulfilled obligations. A Party's acceptance of
any partial performance shall not constitute a waiver by that Party of any rights relating to the
unfulfilled portion of the applicable obligation.
5.5 Limitations on City's Liability Owner acknowledges and agrees that: (i) this
Covenant shall not be deemed or construed as creating a partnership, joint venture, or similar
association between Owner and City, the relationship between Owner and City pursuant to this
Covenant is and shall remain solely that of contracting Parties, and City neither undertakes nor
assumes any responsibility pursuant to this Covenant to review, inspect, supervise, approve, or
inform Owner of any matter in connection with the development or operation of the Lexus
Dealership on the Site other than as expressly provided for herein, including matters relating to
architects, designers, suppliers, or the materials used by any of them; and Owner shall rely
entirely on its own judgment with respect to such matters; provided, that nothing herein is
intended to release City from whatever obligations it may have pursuant to applicable laws
independent of this Covenant; (ii) by virtue of this Agreement, City shall not be directly or
indirectly liable or responsible for any loss or injury of any kind to any person or property
resulting from any construction on, or occupancy or use of, the Site (except to the extent
proximately caused by City's active negligence or intentional misconduct), whether arising from:
(a) any defect in any building, grading, landscaping, or other onsite or offsite improvement;
(b) any act or omission of Owner or any of Owner's agents, employees, independent contractors,
licensees, lessees, or invitees; or (c) any accident on the Site or any fire or other casualty or
hazard thereon; and (iii) by accepting or approving anything required to be performed or given to
City under this Covenant, including any certificate, survey, appraisal, or insurance policy, City
shall not be deemed to have warranted or represented the sufficiency or legal effect of the same,
and no such acceptance or approval shall constitute a warranty or representation by City to
anyone.
5 a Litigation Expenses. In the event of any litigation or arbitration proceeding
arising out of or related to this Covenant, the prevailing party shall be entitled to recover all of its
reasonable litigation expenses in addition to whatever other relief to which it may be entitled,
including without limitation attorney's fees, expert witness fees, costs of investigation and
II2/017801-0005
in
discovery, and other costs, whether or not the same would be recoverable under California Code
of Civil Procedure Section 1033.5 in the absence of this Covenant.
GENERAL PROVISIONS.
6.1 Integratien and Amendment. This Covenant and the Agreement constitute the
entire agreement by and between the Parties pertaining to the subject matter hereof, and
supersede all prior agreements and understandings of the Parties with respect thereto. This
Covenant may not be modified, amended, supplemented, or otherwise changed except by a
writing executed by both Parties.
6.2 Options. Section headings used in this Covenant are for convenience of
reference only and shall not affect the construction of any provisions of this Covenant.
6.3 8indimu Effect. Successors and Assiwu: Assicnments. This Covenant shall run
with the land and shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and assigns. Owner shall be entitled to assign its right to receive the
Covenant Payments to any Holder for security purposes or to any lessee or business owning and
operating the Lexus Dealership on the Site. In the event of an assignment for security purposes
to a Holder, City agrees that this Covenant be subordinated to the lien of said Holder's deed of
trust or mortgage and City agrees to cooperate with Owner in executing an appropriate
subordination agreement. In the event that the Holder forecloses on its deed of trust or mortgage
or accepts a deed in lieu of foreclosure, then upon the request of such Holder or its successor or
assignee, City agrees to enter into a new Covenant on the same terms and conditions set forth
herein for the balance of the Operating Period.
Nothing in this Covenant is intended to prohibit Owner from selling or leasing the Site to
a third party, nor shall City approval be required with respect thereto; provided, that as a
condition to its obligation to accept an assignment of the rights and obligations set forth in this
Covenant, City shall be entitled to require that the assignor and assignee execute an appropriate
assignment and assumption agreement in a form reasonably approved by the City Attorney of
City and in no event shall City be required to make any of the Covenant Payments to any person
or entity other than the fee owner of the Site unless and until such assignment and assumption
agreement is executed and delivered.
In the event of any assignment, the references in this Covenant to "Owner" shall be
deemed to refer to the assignee.
6.4 Counterparts. This Covenant may be executed in two or more counterparts, each
of which when so executed and delivered shall be deemed an original and all of' which, when
taken together, shall constitute one and the same instrument.
6.5 Governine Law. This Covenant shall be governed by and construed in
accordance with the internal laws of the State of California without regard to conflict of law
principles.
6.6 Force R lajeure. Notwithstanding any other provision set forth in this Covenant to
the contrary, in no event shall a Party be deemed to be in Default of its obligations set forth
112/017801-0005
•
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herein where delays or failures to perform are caused by circumstances without the fault and
beyond the reasonable control of such Party, which circumstances shall include, without
limitation, fire/casualty losses; strikes; litigation; unusually severe weather; inability to secure
necessary labor, materials, or tools; delays of any contractor, subcontractor, or supplier;
unjustified acts or failure to act by City or other governmental agency in the processing or
approval of plans or permits or inspection or approval of the construction of the Lexus
Dealership project; litigation by third Parties challenging the validity or enforceability of the
Agreement or this Covenant or the Entitlements; and acts of God (collectively, events of "Force
Majeure"). Adverse market conditions or Owner's inability to obtain financing or approval from
the manufacturer of Lexus automobiles to operate the Lexus Dealership shall not constitute
events of Force Majeure. In the event of an event of Force Majeure, the Party so delayed shall
notify the other Party of the circumstances and cause of the delay within a reasonable time period
after commencement of the delay, it shalt keep the other Party informed at reasonable intervals
upon request regarding the status of its efforts to overcome said delay, and it shall exercise
commercially reasonable diligence to perform as soon as practicable thereafter.
6.7 Notices. Notices to be given by City or DWW hereunder may be delivered
personally or may be delivered by certified mail or by reputable overnight delivery service
providing a delivery conformation receipt, with mailed notices to be addressed to the appropriate
address(es) hereinafter set forth or to such other address(es) that a Party may hereafter designate
by written notice. If served by overnight delivery service or certified mail, service will be
considered completed and binding on the Party served on the date set forth in the confirmation or
certification receipt.
I12/O17S014005
If notice is to City:
with a copy to:
If notice to Owner:
with a copy to:
City of Newport Beach
3300 Newport Boulevard
P.O. Box 1768
Newport Beach, CA 92658-8915
Attention: City Manager
City of Newport Beach
3300 Newport Boulevard
P.O. Box 1768
Newport Beach, CA 92658-8915
Attention: City Attorney
David W. Wilson
c/o DWW Co., Inc.
1400 North Tustin Avenue
Orange, CA 92867
Rutan & Tucker, LLP
6] 1 Anton Boulevard, 14th Floor
Costa Mesa, CA 92626
Attention: Je$rey M. Oderman, Esq.
•
6.8 Further Acts. Each Party agrees to take such further actions and to execute such
other documents as may be reasonable and necessary in the performance of its obligations
hereunder; reserving to City, however, its lawful discretionary and police power authority.
Without limiting the generality of the foregoing, upon the expiration or termination of the
Operating Period, City will execute and deliver such instruments as may be prepared by Owner
at Owner's expense to release the cloud upon title to the Site created by this Covenant; provided,
however, that any such document shall be in a form reasonably acceptable to the City Attorney
of City.
6.9 Estoppels. At the request of Owner or any Holder, City shall promptly execute
and deliver to Owner or such Holder a written statement of City as to any of the following
matters as to which Owner or Holder may inquire: (i) that no Default exists hereunder or would
exist with the passage of time, or giving of notice, or both, by Owner pursuant to this Covenant,
if such be the case; (ii) the total amount of Covenant Payments made by City to Owner pursuant
to this Covenant prior to the date of such written statement; (iii) the remaining portion of the
Covenant Payments Cap Amount that is unpaid as of the date of such written statement; (iv) if
City has determined that Owner is in Default hereunder, the nature of such Default and the action
or actions required to be taken by Owner to cure such Default; and (v) any other matter affecting
Owner's or Holder's rights or obligations hereunder as to which Owner or Holder may
reasonably inquire. The form of any estoppel letter or certificate shall be prepared by Owner or
Holder at its sole cost and expense and shall be reasonably acceptable in form and content to
City.
6.10 Third Party Beneficiaries. With the exception of the specific provisions set forth
in this Covenant for the benefit of Holder and successors and assigns of Owner, there are no.
intended third party beneficiaries under this Covenant and no such other third parties shall have
any rights or obligations hereunder.
(SIGNATURES ON NEXT PAGE)
112'017801-0095
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IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of
the Effective Date.
ATTEST:
City Attorney
712/017801-0005
"CITY"
CITY OF NEWPORT BEACH,
a California municipal corporation
"OWNER"
D W. WILSON, individual,
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STATE OF CALIFORNIA
) ss
COUNTY OF ORANGE
On J e 7k r SOrkO"), before me, �. � � �t�i' j (1,1i (,
personally appeared i-otwr !_ . 'itA-Gi at/ -
personally known to me o be the
person(*) whose name(s) is/atesubscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/hes/Oleic authorized capacity(ies); and that by his/herRheic
signature(*) on the instrument the person(s) or the entity upon behalf of which the person(s)-
acted, executed the instrument.
cial seal.
LEILANI I. BROWN
• •• ission * 1336673
tartPu•' -California
[SEAL]
STATE OF CALIFORNIA
) ss
COUNTY OF ORANGE
Notary Public
On before me,
personally appeared ii r ,/
LEILANI I. BROWN
Commission *1336673 33
Notary Public- California q
"'•� Orange County
My Comm. Expires Jan 25, 2006
personally known to me to be the
persons}whose name(s)-is/are-subscribed to the within instrument and acknowledged to me that
het-she/they executed the same in his/her/their authorized capacity(ics), and that by hi� het/y,.o , heir —
signature(*) on the instrument the person(*) -or the entity upon behalf of which the person(s)
acted, executed the instrument.
Witness my hand and official seal.
[SEAL]
I IL017801-0005
VIKKI L. MURPHY
cam. s 1451764
NOTARY PUOUX• CIWFOWNM
ORANGE cow vY
Comm. Exp. DEC. 13 2007
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•
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EXHIBIT "A"
LEGAL DESCRIPTION OF SITE
ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF ORANGE, CITY OF NEWPORT BEACH, DESCRIBED AS
FOLLOWS:
PARCEL A:
PARCEL 2, AS SHOWN ON MAP FILED IN BOOK 61, PAGE 9 OF PARCEL
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE
COUNTY, CALIFORNIA.
PARCEL B:
PARCEL 1 ON PARCEL MAP RECORDED IN BOOK 64, PAGE 26 OF
ORANGE COUNTY PARCEL MAPS, RECORDS OF ORANGE COUNTY.
112/O17801.0005
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