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2019/11/06 Donahue Schriber Realty Group, LP Bushfire Kitchen restaurant AGREEMENT TO ENTER INTO COVENANT TO OPERATE AND TO SHARE SALES TAX REVENUE This AGREEMENT TO ENTER INTO COVENANT TO OPERATE AND TO SHARE SALES TAX REVENUE (the "Agreement") is entered into this J0 day of by and between the CITY OF MENIFEE, a California municipal corporation ("City"), and BUSHFIRE BEACHSIDE INC., a California corporation ("Developer") (individually a "Party" and collectively the "Parties"). RECITALS A. Developer has entered or intends to enter into a ground lease with Donahue Schriber Realty Group, L.P., a Delaware limited liability company (the "Owner"), which is the fee owner of that certain free-standing restaurant building and the real property thereon located at 30080 Haun Road, Unit #350, in Menifee, California consisting of approximately two thousand seven hundred square feet (2,700 sf), which is more particularly described in the legal description attached hereto and incorporated herein as Exhibit 1 (the "Site"). B. If Developer obtains the necessary governmental permits and approvals from all governmental agencies with jurisdiction, including City, Developer intends to construct certain tenant improvements at the Site and open and operate a Bushfire Kitchen restaurant thereon (the "Restaurant"). C. In consideration for Developer's execution of the Covenants, Conditions, and Restrictions Affecting Real Property substantially in the form attached hereto and incorporated herein as Exhibit 2 (the "Covenant"), City has agreed to make certain periodic payments to Developer to assist Developer in the continued operation of the Restaurant, in an amount equal to a portion of the sales tax generated by the operation of the Restaurant (the "Sales Tax"), subject to and in accordance with the other terms and conditions set forth in this Agreement and the Covenant. The Covenant shall become effective only if the terms and conditions set forth herein as a condition to its effectiveness are satisfied. D. By its approval of this Agreement, the City Council of City has found and determined as follows: (i) that, notwithstanding any other provision set forth in this Agreement or the Covenant which may appear to be to the contrary, City's approval and execution of this Agreement shall not constitute a prejudgment or precommitment by City with respect to any of the discretionary City permits and approvals that may be required for the Site, including without limitation any General Plan Amendment ("GPA"), Planned Community ("PC") Development Plan text amendment, and use permit, and the environmental reviews and approvals in conjunction with the foregoing that are required to accommodate the Restaurant on the Site, and City reserves its full and unfettered discretion with respect thereto to the same extent it would have such discretion in the absence of this Agreement; (ii) subject to the foregoing, City recognizes that the City 882/031858-0003 14311742.2 a10/31/19 i m I payments provided for in the Covenant are necessary in order to make locating the Restaurant financially feasible; (iii) the value to City of Developer's performance of its obligations set forth in the Covenant in each fiscal year during which City payments are to be made (in terms of economic revitalization, generation of additional local tax revenues that will help to fund vital public services, provision of expanded and more accessible full-service, sit-down dining opportunities for the residents of City, and job growth and retention) will be not less than the amount of such payments; and (iv) that the imposition of the covenants and use restrictions upon the Site pursuant to the Covenant in exchange for the payments to be made by City constitutes a valid public purpose. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Developer hereby agree as follows: 1. Defined Terms. Any capitalized terms contained in this Agreement, which are not defined in this Agreement, shall have the meanings ascribed to such terms in the Covenant. 2. Execution and Recordation of Covenant. Within ten (10) days after the latest to occur of the following events (collectively, the "Covenant Conditions"), City and Developer shall fill in the blanks, date, and execute the Covenant in recordable form and Developer shall record the Covenant against the Site and provide a copy of the recorded Covenant to City: (i) the date City issues its final approval of all discretionary land use permits and approvals required to accommodate the Restaurant on the Site including, without limitation, any GPA, PC Development Plan text amendment, use permit (if applicable), and environmental reviews and approvals in conjunction therewith, but specifically excluding Developer's performance of any conditions of approval imposed on any such discretionary permit; (ii) the date City and any other applicable government agency issues all building use and operation permits necessary for Developer to develop and operate the Restaurant other than those which by their nature cannot be issued without the progress or completion of construction including, without limitation, any demolition permit, grading permit, encroachment permit for work or improvements to occur within public rights-of-way, foundation permit, building permit, and similar ministerial or administrative permits; (iii) the date Developer enters into a ground lease with the Owner for the lease of the Site, which Ground Lease has been reviewed and approved by the City Attorney of City, in his or her reasonable discretion; and (iv) the expiration of any periods for challenge of, or appeal from, all of the foregoing and the absence of any such challenge, appeal or the successful resolution thereof. These conditions are for the benefit of both City and Developer. City agrees to cooperate in the recordation of the Covenant against the Site at no cost to City, and the City Manager or his designee is hereby authorized on behalf of City to execute all documents and take all actions necessary or appropriate to implement this Agreement; provided, however, that in no 882/031858-0003 14311742.2 a10/31/19 -2- i l' event shall such date of recordation be later than the date the Restaurant opens for business. 3. Termination of Agreement. If the Covenant Conditions are not satisfied on or before December 31, 2019, or such later deadline as may be mutually approved in writing prior to that date by City and Developer, this Agreement shall automatically terminate and be of no further force or effect at such time without the requirement of any further notice or action by either Party, and thereafter neither Party shall have any further rights or obligations hereunder. 4. Covenant. Upon recordation of the Covenant, to the extent there are conflicts between this Agreement and the Covenant, the provisions of the Covenant shall prevail. 5. Assignment. The rights and benefits of this Agreement are personal to Developer. Developer shall not assign, hypothecate, encumber, or otherwise transfer, voluntarily, involuntarily, or by operation of law, any of its rights and/or obligations set forth in this Agreement to any other person or entity without City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion. 6. Cooperation in the Event of Legal Challenge- Validation Action. In the event any third party files an action seeking to invalidate this Agreement or the Covenant or seeking any equitable remedy that would prevent the full performance hereof or thereof, City and Developer agree to cooperate in the defense of such action. Developer shall pay all of City's costs and expenses (including attorneys' fees), shall indemnify City as provided in Section 7 of this Agreement, and City shall have the sole right to select its legal counsel; provided, however, that such obligation to indemnify and pay costs and expenses shall terminate if Developer elects in a written notice delivered to City to terminate the Covenant rather than to oppose such challenge. Such cooperation shall include, without limitation: (i) an agreement by each Party to not default or allow a compromise of said action without the prior written consent of the other Party; (ii) an agreement by each Party to make available to the other Party all non-privileged information necessary or appropriate to conduct the defense of the action; and (iii) an agreement by each Party to make available to the other Party, without charge, any witnesses within the control of the first Party upon reasonable notice who may be called upon to execute declarations or testify in said action. In addition to the foregoing, if Developer delivers a written request for such action to City (c/o the City Manager and the City Attorney) not later than five (5) days after the date the City Council of City approves this Agreement at a public meeting, City shall file an action in Riverside County Superior Court pursuant to California Code of Civil Procedure Section 860 et seq. to validate this Agreement and the Covenant and each and every one of its and their provisions. In such event, City and Developer shall reasonably cooperate in drafting the complaint, briefs, the proposed judgment of validation, and such other pleadings, documents, and filings as may be required or desirable in connection with the validation action. City and its legal counsel shall file and prosecute the validation action, but shall reasonably coordinate and cooperate with 882/031858-0003 14311742.2 a10/31/19 -3- } I I ■ I � I� Developer concerning the drafting of pleadings and other documents and with regard to the litigation strategy to be employed. Developer shall reimburse City within fifteen (15) days after written demand therefor for all costs ("Costs") of the validation action. Costs include, without limitation, attorney's fees, filing fees and court reporter fees (if any), costs of publication and to effectuate service of process, reasonable photocopying and other reproduction charges, travel time and mileage expenses, and other costs and expenses reasonably incurred by City. In the event of an appeal of such action, the Parties shall cooperate with respect to the appeal to the same extent as at the Superior Court level of the proceedings. Upon the entry of a final non-appealable judgment of any court with jurisdiction invalidating or enjoining the performance of any material covenant set forth in this Agreement or the Covenant, this Agreement and the Covenant shall automatically terminate without the need of further notice or action by either Party, except that any reimbursement obligations of Developer shall survive such termination. 7. Indemnification of City, Developer shall defend, indemnify, assume all responsibility for, and hold City, and City's representatives, volunteers, officers, members, employees and agents, harmless from any and all claims, demands, damages, defense costs or liability of any kind (including attorneys' fees and costs), that arise from this Agreement (other than those damages caused by the breach of the Agreement by City or by the gross negligence or willful misconduct of City, City's representatives, volunteers, officers, members, employees and agents) including, but not limited to, Developer's failure to pay, if required, prevailing wages on the construction and development of the Restaurant; provided, however, that such obligation shall lapse as provided in Section 6 of this Agreement if Developer elects not to oppose a challenge to the Covenant. Developer shall be solely responsible for determining and effectuating compliance with prevailing wage laws, and City makes no representation as to the applicability or non- applicability of any of such laws to the development and construction of the Restaurant or any part thereof. Developer hereby expressly acknowledges and agrees that City has not previously affirmatively represented to Developer or its contractor(s), in writing or otherwise, in a call for bids or otherwise, that the development or construction of a Restaurant is not a "public work," as defined in Section 1720 of the Labor Code. 8. Compliance with Laws. During the entire "Operating Period" (as that term is defined in the Covenant), Developer shall operate the Restaurant on the Site in conformity with all applicable federal, state (including without limitation the California Civil Code, the California Government Code, the California Health & Safety Code, the California Labor Code, the California Public Resources Code, and the California Revenue & Taxation Code), and local laws, ordinances, and regulations, provided that Developer does not waive its right to challenge the validity or applicability thereof to Developer or the Site. The operation of the Restaurant shall be in compliance with the requirements of any and all discretionary permits issued by City for the Restaurant, including, without limitation, all of the conditions of approval issued in connection therewith. 9. Representation and Warranty Regarding Restaurant. Developer represents and warrants to City that (i) it possesses the necessary rights to develop and 882/031858-0003, 14311742.2 a10/31/19 -4- I _. �I II I operate the Restaurant as a Bushfire Kitchen restaurant; and (ii) Developer is not in default of any of its obligations under any other agreements Developer has entered into to operate the Restaurant; and (iii) there are no existing conditions or occurrences that, with the passage of time, would constitute a default under any other agreements Developer has entered into to operate the Restaurant. 10. Integration and Amendment. This Agreement and the Covenant attached hereto 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 Agreement may not be modified, amended, or otherwise changed except by a writing executed by both Parties. 11. Notices. Notices to be given by City or Developer hereunder may be delivered personally or may be delivered by certified mail or by reputable overnight delivery service providing a delivery confirmation receipt, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es)that a Party may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If notice is to City: City of Menifee 29844 Haun Road Menifee, California 92586 Attention: City Manager with a copy to: City Attorney City of Menifee 29844 Haun Road Menifee, California 92586 Attention: Jeffrey T. Melching, City Attorney If notice is to Developer: Bushfire Beachside Inc. 30080 Haun Rd, Unit#350 Menifee, CA 92014 Attention: Clive Barwin and Brandon Barwin with a copy to; Attention: 12. Counterparts. This Agreement may be executed in counterparts which, when taken together, shall constitute one fully executed Agreement. 13. Authoritv to Execute. The person(s) executing this Agreement on behalf of each of the Parties hereto represent and warrant that (i) such Party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Agreement on behalf of 882/031858-0003 14311742.2 a10/31/19 -5- I ��s said Party, (iii) by so executing this Agreement, such Party is formally bound to the provisions of this Agreement, and (iv) the entering into this Agreement does not violate any provision of any other agreement to which such Party is bound. 14. Legal Actions. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles. In the event of any litigation between the Parties hereto, the prevailing Party shall be entitled to receive, in addition to the relief granted, its reasonable attorney's fees and costs and such other costs incurred in investigating the action and prosecuting the same, including costs for expert witnesses, costs on appeal, and for discovery. 15. Nonliabil'ity of City Officials. No member, official or employee of City shall be personally liable to Developer, or any successor in interest, in the event of any Default or breach by City or for any amount which may become due to Developer or its successors, or on any obligations under the terms of this Agreement or the Covenant. [End — Signature page follows] 882/031858-0003 14311742.2 a10/31/19 -6- I 5 �� IN WITNESS WHEREOF, City and Developer have executed this Agreement to be effective as of the date first set forth above. CITY: CITY OF MENIFEE, a California municipal corporation Bill Zi a an, Mayor ATTEST: S rah A. Manwaring, City APPROVED AS TO FORM: RAy . TUCKER, LLP Jeetching, Ci Attorney "Developer" BUSHFIRE BEACHSIDE INC., a California corporation By: Clive Barwin Its: By: Brandon Barwin Its: 882/031858-0003 14311742.2 a10/31/19 -7- IN WITNESS WHEREOF, City and Developer have executed this Agreement to be effective as of the date first set forth above. CITY: CITY OF MENIFEE, a California municipal corporation Armando G. Villa, City Manager ATTEST Sarah Manwaring, City Clerk APPROVED AS TO FORM RUTAN & TUCKER, LLP Jeffrey T. Melching, City Attorney "Developer" BUSHkBCC., a Califo By: Its:By. __ Brandon Barwin Its: 882/031858-0003 14311742 2 al1/01/19 _�_ EXHIBIT 1 LEGAL ❑ESCRIPTiON OF SITE 1.50 ACRES NET IN PAR 9 PM 230/060 PM 34 PM 34275 882/031858-0003 14311742.2 a11/01/19 EXHIBIT 2 COVENANTS CONDITIONS AND RESTRICTIONS AFFECTING REAL PROPERTY [See following document] 882/031858-0003 14311742.2 a10/31/19 -2- i �f �i PLEASE RECORD AND WHEN RECORDED RETURN TO: CITY OF MENIFEE 29844 Haun Road Menifee, CA 92586 Attn: City Clerk [Space above this line for Recorder's use only] [Recorded for the benefit of the City of Menifee and exempt from recording fees pursuant to 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 day of 2019, by and between the CITY OF MENIFEE, a California municipal corporation ("City"), and BUSHFIRE BEACHSIDE INC., a California corporation ("Developer") (individually a "Party" and collectively the "Parties"). RECITALS A. Developer has a leasehold interest in that certain real property consisting of approximately two thousand seven hundred square feet (7,600 sf), at 30080 Haun Road, Unit#350, in the City of Menifee, County of Riverside, 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 , City and Developer entered into that certain unrecorded agreement captioned "Agreement to Enter into Covenant to Operate and to Share Sales Tax Revenue" (the "Agreement") authorizing the recordation of this Covenant against the Site upon the timely satisfaction of the "Covenant Conditions" identified therein. C. Subject to the terms and conditions hereof and of the "Entitlements" (as that term is defined below), Developer has agreed to construct certain tenant improvements and the Site and open and operate thereon a Bushfire Kitchen restaurant (the "Restaurant"). D. In consideration for Developer's encumbrance of the Site by this Covenant and Developer's performance of its obligations hereunder, City has agreed to make certain payments to Developer, the amount of which are measured by the "Sales Taxes 882/031858-0003 14311742.2 a]0/31/19 -3- I From the Site" (as that term is defined below) generated by the operation of the Restaurant on the Site. City and Developer have agreed that the portion of Sales Taxes From the Site required to be paid by City to Developer hereunder during each "Fiscal Year" of the "Operating Period" (as those terms are defined below) provided for herein is a fair exchange for the consideration to be furnished by Developer to City in that Fiscal Year. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference and are acknowledged by the Parties as true and correct, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Developer hereby agree as follows: 1. DEFINED TERMS. below:The following terms when used in this Covenant shall have the meanings set forth The term "Agreement" shall have the meaning ascribed in Recital B of this Covenant. The term "Commencement Date" shall mean the first day of the first month following the date City issues to Developer a Certificate of Occupancy for the Restaurant. The term "Covenant Payments" shall mean the amounts to be paid by City to Developer with respect to each Fiscal Year of the Operating Period. The term "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 "Entitlements" shall mean those discretionary City land use permits and approvals (including all conditions of approval therein) required to authorize development and operation of the Restaurant on the Site, 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. The term "Holder" shall have the meaning ascribed in Section 5.1(b) of this Covenant. 882/031858-0003 14311742,2 a10/31/19 -4- i The term "Maintenance Standards" shall have the meaning ascribed in Section 3.3 of this Covenant. The term "Measure DD Tax" shall mean the sales and use taxes received by City as a result of Ballot Measure DD, which was approved in the November 2016 election and authorizes City to impose a sales tax of one percent (1%) to fund general City services. The term "Municipal Code" shall mean the Menifee Municipal Code. The term "Operating Period" refers to the period between the Commencement Date and the Termination Date. The term "Restaurant" shall have the meaning described in Recital C. The term "Site" shall have the meaning ascribed in Recital A of this Covenant. The term "Sales Taxes From the Site" means the amount equal to the sales and use taxes that are generated from sales occurring on the Site on which sales or use taxes are imposed pursuant to applicable California law in each Fiscal Year during the Operating Period which are actually received by City from the State Board of Equalization, but excluding any Measure DD Tax. In connection therewith: (i) Developer shall timely report, and shall cause its tenants (if any) to report, all sales and use taxes from the Site to the State Board of Equalization in accordance with the laws, rules, and regulations applicable to such reporting. (ii) Sales Taxes from the Site shall be deemed to have been paid by the State Board of Equalization to City if and to the extent the State Board of Equalization elects to offset the payment of any such Sales Taxes From the Site against any other obligation of City. (iii) Developer acknowledges that the State Board of Equalization makes payments to City based on both actual and anticipated sales and use tax revenues and that the State Board of Equalization makes periodic reconciliations. The determination of Sales Taxes From the Site for any annual, quarterly, or other period shall be subject to the timing and reconciliation process related to the processing by the State Board of Equalization of payments of such Sales Taxes From the Site to City. Any adjustments resulting from any interim or estimated determination of Sales Taxes From the Site for any annual, quarterly, or other period shall be reconciled by the Parties as soon as practicable without inclusion of, or any obligation to pay, interest. (iv) Sales Taxes From the Site shall be determined based on actual amounts received by City based only on City's share of the State sales and use tax applicable to the Site (which, as of the Effective Date, is 1% of the taxable amount). Sales Taxes From the Site shall not include (a) amounts paid to City by the State Board of Equalization derived from any sales tax overrides or special tax amounts received by 882/031858-0003 14311742.2 a10/31/19 -5- I City, such as Measure DD Tax, or(b) any administrative fees or charges imposed by the State Board of Equalization that reduce the actual amounts of sales and use taxes received by City. (v) Developer shall, and shall cause its tenants (if any) to, keep full and accurate books of account, records, and other pertinent data showing all gross income earned upon the Site that is reportable for California sales and use tax purposes, including all documents required to be maintained by the State of California for sales and use tax purposes. (vi) Developer shall furnish, and shall cause its tenants (if any) to furnish, to City true and correct photocopies of its quarterly California sales and use tax returns at the time each is filed with the State of California, together with a copy of all checks or wire transfers or other forms of transfer of funds sent for such payment of sales and use taxes. The term "Termination Date" shall mean the date that is the earliest of(i)the date that is four (4) years following the Commencement Date, (ii) the date that the Covenant Payments Cap Amount is paid in full; or(iii)the date on which this Covenant is terminated pursuant to Sections 5.2 or 5.3 of this Covenant, as applicable. 2. CONDITION TO DEVELOPER'S RIGHT TO RECEIVE COVENANT PAYMENTS. 2.1 Outside Dates. Notwithstanding any other provision set forth in this Covenant, and subject to extension for events of force majeure as provided in Section 6.6 of this Covenant, (i) if the Commencement Date does not occur before the date that is twelve (12) months after the date of this Covenant, or(ii) if a building permit is not issued for the Restaurant within thirty(30) days after the Effective Date, either Developer 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. 2.2 Opening Date. As a condition precedent to Developer's right to receive the Covenant Payments, Developer shall be required to develop the Restaurant in accordance with the development plan set forth in Exhibit "B", which is attached hereto and incorporated herein by this reference, and commence operations and open the Restaurant to members of the public within thirty (30) days after the Commencement Date. 2.3 Operating Condition. If Developer, or any assignee permitted by this Covenant, ceases to operate a Restaurant on the Site other than by reason of any closure that is permitted by this Covenant, then this Agreement shall terminate as of the date such operation is discontinued (other than by reason of a closure that is permitted by this Covenant) and no further payments shall be due under Section 4.1 below by reference to Sales Taxes From the Site generated in any calendar quarters after such date. 882/031858-0003 14311742.2 a10/31/19 -6- i 3. DEVELOPER'S OBLIGATIONS. 3.1 Continuous Operation. During the Operating Period, Developer covenants and agrees to continuously operate the Restaurant on the Site, serving, at a minimum, lunch and dinner, seven (7) days a week (subject to temporary interruptions for casualty losses, repairs, labor unrest, and the like, provided, however, that no such interruptions shall continue for more than five (5) days without City's prior written consent, which consent may be withheld in City's sole and absolute discretion during the entire Operating Period). 3.2 Use Restriction. During the entire Operating Period, the Site shall not be put to any use other than the operation of the Restaurant and uses ancillary thereto. 3.3 Maintenance and Re air of Site- Landscaping. During the entire Operating Period, Developer, 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, consistent with Developer's other three (3) Bushfire Kitchen restaurant locations in Southern California, and free from accumulations of debris, weeds, graffiti, and waste materials, with landscaping in a healthy condition, and shall otherwise fully comply with the Site's maintenance standards established in the Entitlements (collectively, the "Maintenance Standards"). During such period, Developer 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. During the entire Operating Period, Developer, at its sole cost and expense shall maintain the landscaping on the Site in compliance with the approved landscape plans. 3.4 Failure to Maintain Site and Restaurant. In the event Developer does not maintain the Site or the Restaurant in the manner set forth herein and in accordance with the Maintenance Standards, City shall have the right, but not the obligation, to maintain such private and/or public improvements, or to contract for the correction of such deficiencies, in accordance with the provisions of this Section 3.4. City shall notify Developer in writing if the condition of said improvements do not meet with the Maintenance Standards and to specify the deficiencies and the actions required to be taken by Developer to cure the deficiencies. Subject to the following sentence, upon notification of any maintenance deficiency, Developer shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the written notification states the problem is urgent relating to the public health and safety of City, then Developer shall have forty-eight (48) hours to correct, remedy, or cure the problem. In the event Developer or any person or entity acting on behalf of Developer fails to correct, remedy, or cure after notification and after the period of correction has lapsed (or, for deficiencies that cannot reasonably be corrected, remedied, or cured within such period, if Developer or any person or entity acting on behalf of Developer has not commenced correcting, remedying or curing such maintenance deficiency within such 882/031858-0003 14311742.2 a]0/31/19 -7- i ,� period and diligently pursued such correction, remedy or cure to completion), then City shall have the right to maintain such improvements. Developer agrees to pay City such charges and costs. Until so paid, City shall have a lien on the Site for the amount of such charges or costs, which lien shall be perfected by the recordation of a "Notice of Claim of Lien" against the Site. Upon recordation of a Notice of a Claim of Lien against the Site, such lien shall constitute a lien on the fee estate in and to the Site prior and superior to all other monetary liens except: (i) all taxes, bonds, assessments, and other levies which, by law, would be superior thereto; (ii) the lien or charge of any mortgage, deed of trust, or other security interest then of record made in good faith and for value, it being understood that the priority of any such lien for costs incurred to comply with this Covenant shall date from the date of the recordation of the Notice of Claim of Lien. Any lien in favor of City created or claimed hereunder is expressly made subject and subordinate to the lien of any mortgage or deed of trust made in good faith and for value, recorded as of the date of the recordation of the Notice of Claim of Lien describing such lien as aforesaid, and no such lien shall in any way defeat, invalidate, or impair the obligation or priority of any such mortgage or deed of trust, unless the mortgage or beneficiary thereunder expressly subordinates his interest, of record, to such lien. Upon foreclosure of any mortgage or deed of trust made in good faith and for value and recorded prior to the recordation of any unsatisfied Notice of Claim of Lien, the foreclosure-purchaser shall take title to the Site free of any lien imposed by City that has accrued up to the time of the foreclosure sale, and upon taking title to the Site, such foreclosure-purchaser shall only be obligated to pay costs associated with this Covenant accruing after the foreclosure-purchaser acquires title to the Site. Developer acknowledges and agrees City may also pursue any and all other remedies available in law or equity. Developer shall be liable for any and all attorneys' fees, and other legal costs or fees incurred in collecting said maintenance costs. 3.5 Continued Operation of Restaurant. During the entire Operating Period, Developer shall operate the Restaurant. Developer shall also use its best efforts to review and hire Restaurant employees from Menifee or the local area. 3.6 Compliance with Laws. During the entire Operating Period, Developer shall construct and operate the Restaurant on the Site in conformity with all applicable federal, state (including without limitation the California Civil Code, the California Government Code, the California Health & Safety Code, the California Labor Code, the California Public Resources Code, and the California Revenue & Taxation Code), and local laws, ordinances, and regulations (including without limitation City standards relating to the placement of storage containers), provided that Developer does not waive its right to challenge the validity or applicability thereof to Developer or the Site. The operation of the Restaurant shall be in compliance with all of the requirements of any permits issued by City for the Restaurant, including, without limitation, all of the conditions of approval issued in connection therewith. Nothing herein constitutes a representation or warranty by City that the construction of the Restaurant is not a "public work" or otherwise subject to California Health and Safety Code Sections 33423 through 33426, or Chapter 1 of Part 7 of the California Labor Code (commencing with section 1720), and all applicable statutory and 882/031858-0003 14311742.2 a10/31/19 _g i ti i regulatory provisions related thereto, and Developer expressly waives any right of reimbursement for any "increased costs" under California Labor Code Section 1781 or otherwise with respect to the Restaurant or Developer's development thereof. Developer shall indemnify, defend, and hold City and City's representatives, volunteers, officers, officials, members, employees, and agents harmless, including, but not limited to, litigation costs, expert witness fees, and reasonable attorneys' fees, from and against any and all claims pertaining to the payment of wages in connection with Developer's development of the Restaurant on the Site or failure to comply with federal or state labor laws, regulations, or standards. 3.7 Non-Discrimination. In the development, opening, and operation of the Restaurant, Developer agrees not to violate applicable laws that prohibit discrimination against any person or class of persons by reason of gender, sexual orientation, marital status, race, color, creed, mental or physical disability, religion, age, ancestry, or national origin. 3.8 Indemnification of City. Developer shall defend, indemnify, assume all responsibility for, and hold City, and City's representatives, volunteers, officers, employees and agents, harmless from any and all claims, demands, damages, defense costs or liability of any kind (including attorneys' fees and costs), that arise from Developer's operation of the Site or which may be caused by any acts or omissions of the Developer under this Covenant, whether such activities or performance thereof be by Developer or by anyone directly or indirectly employed or contracted with by Developer and whether such damage shall accrue or be discovered before or after termination of this Covenant including, but not limited to, Developer's failure to pay, if required, prevailing wages on the construction and development of the Restaurant. Developer shall be solely responsible for determining and effectuating compliance with prevailing wage laws, and the City makes no representation as to the applicability or non-applicability of any of such laws to the development and construction of the Restaurant or any part thereof. Developer hereby expressly acknowledges and agrees that City has not previously affirmatively represented to Developer or its contractor(s), in writing or otherwise, in a call for bids or otherwise, that the development or construction of the Restaurant is not a "public work," as defined in Section 1720 of the Labor Code. 4. OBLIGATIONS OF CITY 4.1 Covenant Payments to Developer. 4.1.1 Amount of Covenant Payments; Cap. In consideration for Developer's undertakings pursuant to this Covenant and the encumbrance of Developer's interest in the Site pursuant to this Covenant, City shall make the following Covenant Payments to Developer after the end of each Fiscal Year (or part thereof) during the Operating Period: (a) Subject to subparagraph (b) below, the Covenant Payments with respect to each Fiscal Year shall be in an amount equal to fifty percent (50%) of the Sales Taxes, excluding Measure DD revenue generated, From the Site for that Fiscal 882/031858-0003 14311742.2 a10/31/19 -9- i i ��� �ti i Year, except that in the Fiscal Year during which the Termination Date occurs, the Covenant Payments shall be prorated such that City shall only pay to Developer 50% of the Sales Taxes excluding Measure DD revenue generated From the Site for the period between the first day of such Fiscal Year and the Termination Date. ng any other provision to the contrary, in no event shall the total'amount of Covenant Payment t forth (made Covenant Cityt Y y City to Developer exceed the sum of Twenty-Five Thousand Dollars ($25,000) (the "Covenant Payments Cap Amount"). In this regard, it is understood and agreed that the Covenant Payments are in consideration of Developer's performance during each Fiscal Year 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 Pa menu. The Covenant Payments shall be payable only from any source of funds legally available to City, Including City's general fund, excluding Measure DD funding. In this regard, it is understood and agreed that the Sales Taxes From the Site are being used merely as a measure of the amount of the Covenant Payments that are periodically owing by City to Developer, and that City is not pledging any portion of the actual Sales Taxes From the Site to Developer. 4.1.3 Payment Procedure. Payment will occur every October following each fiscal year, and will be made annually. Each such Covenant Payment shall be accompanied by a statement identifying(i) the amount of Saes Taxes From the Site upon which the Covenant Payment was calculated, and (ii) a cumulative total comparing how the Covenant Payment in question, together with all prior Covenant Payments, relate to the Covenant Payments Cap Amount. 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 Developer's place of business in Menifee in the event of a review of Developer'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 Developer shall not be required to produce information that violates the statutorily prescribed privacy rights of individual customers. 4.1.5 No Acceleration- Prepayment Permitted. It is acknowledged by the Parties that any payments by City provided for in this Covenant are in consideration for the performance by Developer 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 882/031858-0003 1431 1742.2 a]0/31/19 -10- i Covenant Payments by City to Developer. The City shall be permitted to prepay any of the Covenant Payments at any time without penalty. 4.2 Additional Condition Precedent to City's Obli ationa. 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 Fiscal Year during the Operating Period shall be contingent and conditional upon Developer's performance of its obligations set forth in Section 3 of this Covenant during such Fiscal Year. 5. DEFAULTS AND REMEDIES 5.1 Defaults. (a) Subject to Force Majeure (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 performed 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 after the nonperforming Party's receipt of written notice from the other Party 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 and continuously prosecutes 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 (iv) Developer fails to meet any Development Milestone, attached hereto as Exhibit "B": or (v) Developer closes the Restaurant; or (vi) the Restaurant is materially damaged or destroyed by fire or other casualty during the Operating Period and Developer fails to commence restoration of the improvements within six (6) months or thereafter fails to diligently and continuously proceed to complete such restoration in accordance with this Covenant; or (vii) Developer makes any total or partial sale, transfer, conveyance, assignment, subdivision, or lease of the whole or any part of any of the Site, the Restaurant, the Agreement, and/or this Covenant without City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion, or if any voluntary or involuntary successor-in-interest of Developer acquires any rights or powers 882/031858-0003 14311742.2 a 10/31/19 _1 1- i under the Agreement and/or this Covenant without City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion; or (viii) the ownership and/or control of Developer changes without the prior written consent of City; or (ix) Developer refinances any existing construction, permanent, or other loans encumbering the Site without the City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion; or (x) Developer, or any constituent member of Developer, (1) is the subject of an order for relief for a bankruptcy court, or is unable or admits its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; (2) applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or any part of its property; or (3) institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, rehabilitation or similar proceeding relating to it or any part of its property, or any similar proceeding is instituted without the consent of Developer and continues undismissed or unstayed for ninety (90) days; or (xi) any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of Developer, and the appointment continues undischarged or unstayed for ninety(90)days; or any judgment, writ, warrant of attachment or execution, or similar process is issued or levied against the Site and is not released, vacated, or fully bonded within ninety (90) days after its issue or levy; or (xii) Developer is enjoined or otherwise prohibited by any governmental agency from occupying the Site at any time during the Operating Period and such injunction or prohibition continues unstayed for ninety(90)days or more for any reason. (b) In the event Developer fails to perform any of its obligations under this Covenant and City sends a notice of such failure to Developer, 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 Developer or such Holder to City) and the Holder shall have the same period of time as is available to Developer to remedy such breach or failure under this Covenant. City shall accept any proper cure of a breach or failure tendered by the Holder. 5.2 City's Remedies Upon Default by Developer.. Upon the occurrence of any Default by Developer, and after Developer's receipt of written notice of default and expiration of the time for Developer to cure such Default as provided in Section 5.1 of this Covenant, City may at its option: 0) suspend the payment of Covenant Payments otherwise due and payable to Developer hereunder for the period that Developer remains 882/031858-0003 14311742.2 a]0/31/19 -12- I �' ,. in Default. If City has so suspended its payments in accordance with the terms of this clause (i), then upon Developer's cure of such Default, City shall resume its payment obligations, but shall have no obligation to make payments for any Fiscal Year 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 six (6) months, City may terminate this Covenant, in which case City's obligation to make payments to Developer 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(i) to specifically enforce Developer's covenants set forth in Section 3 of this Covenant, (ii) to seek damages other than by offset of future Covenant Payments otherwise due hereunder, (iii) to prevent Developer's conversion of the Site to another lawful use (even if such use would be inconsistent with this Covenant), or(iv) to sue Developer or to recover from Developer any amount that is actually or allegedly attributable to loss of anticipated Sales Taxes From the Site or other revenues, whether because the amount of Sales Taxes From the Site is less than projected by Developer or City, or because Developer does not operate the Restaurant on the Site for the entire Operating Period, or otherwise. 5.3 Develo er's Remedies Uloon Default b Cit . Upon the occurrence of any Default by City, and after City's receipt of written notice of Default from Developer and expiration of the time for City to cure such Default as provided in Section 5.1 of this Covenant, Developer may terminate this Covenant by written notice to City and/or seek whatever legal or equitable remedies may be available to Developer, subject to the provisions of Section 4.1.5 and Section 5.5 of this Covenant. 5.4 Cumulative Remedies-, No Waiver. Except as expressly provided herein, the non-defaulting 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 non- defaulting 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. 882/031858-0003 -13- 5.5 Limitations on Cit 's Liability. Developer acknowledges and agrees that: (i) this Covenant shall not be deemed or construed as creating a partnership, joint venture, or similar association between Developer and City, the relationship between Developer and City pursuant to this Covenant is and shall remain solely that of contracting Parties, that the development and operation of the Restaurant is a private undertaking and is not a public work, and City neither undertakes nor assumes any responsibility pursuant to this Covenant to review, inspect, supervise, approve, or inform Developer of any matter in connection with the development or operation of the Restaurant 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 Developer shall rely entirely on its own judgment with respect to such matters; (ii) by virtue of this Agreement and/or Covenant, 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, whether arising from: (a) any defect in any building, grading, landscaping, or other onsite or offsite improvement; (b) any act or omission of Developer or any of Developer'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. 6. GENERAL PROVISIONS. 6.1 rote_ ration 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 Ca Lions. 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 Binding Effect-, Successors and Assi ns• As nments. This Covenant shall run with the land and shall be binding upon and inure to the benefit of, the Parties and their respective successors and assigns, as limited by this Section 6.3. Except as such assignment relates to Holder, the Developer shall not assign, hypothecate, encumber or otherwise transfer, either voluntarily, involuntarily or by operation of law, its rights or obligations as set forth in this Covenant without first obtaining the City's written consent, which may be given or denied or conditioned in the City's sole and absolute discretion. Developer may assign its right to receive the Covenant Payments to any Holder for security purposes or to any lessee or business owning and operating the Restaurant on the Site. In the event of an assignment for security purposes to a Holder, City agrees that this Covenant shall be subordinated to the lien of said Holder's deed of trust or mortgage and City agrees to cooperate with Developer in executing an appropriate subordination agreement. 882/031858-0003 14311742.2 a]0/31/19 -14- 0 In the event of any assignment that is consented to in writing by the City, the references in this Covenant to "Developer" shall be deemed to refer to the assignee. 6.4 Counter arts. 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 Governin 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 Eorce Majeure. 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 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 Restaurant; litigation by third Parties challenging the validity or enforceability of the Agreement or this Covenant or the Entitlements; and acts of God (collectively, "force majeure"). Adverse market conditions or Developer's inability to obtain financing or approval to operate the Restaurant 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 shall keep the other Party informed at reasonable intervals upon request regarding the status of its efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform as soon as practicable thereafter. 6.7 Notices. Notices to be given by City or Developer 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. If notice is to City: City Manager City of Menifee 29844 Haun Road Menifee, California 92586 882/031858-0003 1431 1742.2 a 10/31/19 -1 5 .. � i 4� i with a copy to City Attorney City of Menifee 29844 Haun Road Menifee, California 92586 Attention: Jeffrey T. Melching, City Attorney If notice is to Developer: Bushfire Beachside Inc. 30080 Haun Rd, Unit# :, v Menifee, CA 92014 Attention: Clive Barwin and Brandon Barwin with a copy to: Attention' 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 Developer at Developer'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 Third Party Beneficiaries. With the exception of the specific provisions set forth in this Covenant for the benefit of Holder, there are no intended third party beneficiaries under this Covenant and no such other third parties shall have any rights or obligations hereunder. 6.10 Attorne 's Fees. The prevailing party shall be entitled to recover its reasonable attorney's fees and costs, including without limitation expert witness fees, in connection with any breach or default by the other party under this Agreement. [End — Signature page follows] 882/031858-0003 14311742 2 a11/01/19 -16- IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of the Effective Date. CITY: CITY OF MENIFEE, a California municipal corporation Armando G. Villa, City Manager ATTEST Sarah Manwaring, City Clerk APPROVED AS TO FORM, RUTAN & TUCKER, LLP Jeffrey T. Melching, City Attorney "Develop rN BUSHFI B ACHSIDE, INC. By: V rwin Its: By: Brandon Barwin Its.. 882/03 1 8 5 8-0003 _17 14311742 2 a11/01/19 IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of the Effective Date. CITY: CITY OF MENIFEE, a California municipal corporation Bill Zimme a ayor ATTEST: I fl Sa ah A. an h g, ity Cle PPROVED AS TO FORM: RUTAN TUCKER, LLP Je y Melching, City orney "Developer" BUSHFIRE BEACHSIDE, INC. By: Clive Barwin Its: By: Brandon Barwin Its: 882/031858-0003 14311742 2 a 10/31/19 _1 _ I '� � F� 'A:M .. }{ � 1 1 - ��ti1 11 +I �� +I EXHIBIT "A" Legal Description of Site 1.50 ACRES NET IN PAR 9 PM 230/060 PM 34 PM 34275 882/031858-0003 14311742.2 a]0/31/19 s EXHIBIT "B" De�efa men# Plan rr �I. .._. n 12 !1.1.11 11.1-! Lill,i 4 : ... 99 ROAD E3 A O � .� r D "- I 1 V 882/031858-0003 14311742.2 a 10/31/19 i sr i� fl I� i _.