2017/02/23 Agreement SH-Menifee, LLC - Development AgreementPLEASE RECORD AND WHEN RECORDED RETURN
TO:
CITY OF MENIFEE
29714 Haun Road
Menifee, CA 92586
Attn: City Clerk
Recorded for the benefit of the City of Menifee
and exempt from recording fees pursuant to
Government Code Section 27383
2017-0075807
02/23/2017 08:42 AM Fee: $ 0.00
Page 1 of 17
Recorded in official Records
County of Riverside
Peter Aldana
Assessor -County Clerk -Recorder
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COVENANTS CONDITIONS AND RESTRICTIONS AFFECTING INTERESTS IN
REAL PROPERTY
411
This COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS
IN REAL PROPERTY (the "Covenant") is entered into as of this 4th day of January 2017, by and
between the CITY OF MENIFEE, a California general law City and municipal corporation
("City"), and SH-MENIFEE, LLC, ("Developer") (individually a "Party" and collectively the
"Parties").
RECITALS
A. Developer is the owner of that certain real property consisting of approximately
2.80 acres, 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 January 4th, 2017, City and Developer entered into that certain
unrecorded agreement captioned "Agreement to Enter into Covenant to Operate and to Share
Transient Occupancy 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 (defined below),
Developer has agreed to develop and operate a hotel on the Site, containing minimum 80 guest
rooms, conference rooms, ballrooms, and other related amenities, with at least 4,000 square feet
of meeting space. The hotel flagship (the "Hotel") will be a upper mid -scale hotel, limited service
hotel, from the list on Exhibit C, and any change from this list shall be approved or denied prior
by the City with sole and absolute discretion before a franchise agreement is signed by the
Developer, provided that City may reasonably object to a proposed brand.
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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 "Transient Occupancy Tax" (as those
terms are defined below) generated by the operation of the Hotel on the Site. City and Developer
have agreed that the portion of Transient Occupancy Tax required to be paid by City to Developer
hereunder during each "Quarter" 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 Quarter.
E. Developer represents and warrants that the Hotel to be built on the Site is not
relocating, and shall not relocate, a big box retailer to the Site, within the meaning of California
Government Code section 53084.
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.
The following terms when used in this Covenant shall have the meanings set forth below:
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 Final Certificate of Occupancy for the Hotel.
The term "Covenant Payments" shall mean the amounts to be paid by City to Developer
with respect to each Quarter of the Operating Period.
The term "Covenant Payments Cap Amount" shall have the meaning ascribed in Section
4.1.1(b) of this Covenant Agreement.
The term "Default" shall have the meaning ascribed in Section 5.1 of this Covenant
Agreement.
The term "Effective Date" shall have the meaning of the date the Agreement is executed
by the Menifee City Council.
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 Owner Facility on the Site, as the same may be amended from time to time.
The term "Holder" shall have the meaning ascribed in Section 5.1(b) of this Covenant
Agreement.
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The term "Hotel" shall have the meaning described in Recital C.
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 "Quarter" shall mean City's Quarter, which occurs four times a year in
conjunction with when the hotel pays the City the transient occupancy tax that are generated from
the use and occupancy of guest rooms in the Hotel, such as any of the following three (3) month
periods during the Operating Period July 1—September 30, October 1—December 31, January 1—
March 31, or April 1 — June 30.
The term "Site" shall have the meaning ascribed in Recital A of this Covenant Agreement.
The term "Termination Date" shall mean the date that is the earliest of (i) the date that is
(10) 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, as applicable.
The term "Transient Occupancy Tax" means, for each month, or part thereof, during the
Operating Period, that portion of transient occupancy taxes reported and remitted by Developer to
City pursuant to Chapter 3.28 of the Municipal Code, that are generated from the use and
occupancy of guest rooms in the Hotel.
Notwithstanding anything herein to the contrary, Transient Occupancy Tax shall not
include any interest or penalty that has been paid by Developer pursuant to Chapter 3.28 of the
Municipal Code, and any costs City incurs in enforcing Chapter 3.28 of the Municipal Code or
any provision of this Agreement shall be deducted from the amount of Transient Occupancy Tax
that is received by City prior to calculating the amount of a Covenant Payment.
2. CONDITION TO DEVELOPER'S RIGHT TO RECEIVE COVENANT PAYMENTS.
2.1 Opening Date, Commencement Date. As a condition precedent to Developer's
right to receive the Covenant Payments, Developer shall be required to opem and to thereafter
continue operating the Hotel. Developer's obligations to continuously operate the Hotel until the
Termination Date, as described in Section 3.1 below, shall be a condition to the receipt of Covenant
Payments during the Operating Period.
2.2 Outside Date. 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
fifteen (15) months after the issuance of the first building permit for the Hotel or a later date
mutually agreed to by both parties so long as Developer demonstrates a good faith effort to
commence and complete the project, and the City may in its sole and absolute discretion grant, or
deny the building permit, or (ii) if a building permit is not issued for the Hotel on or before the
date that is fifteen (15) months after the Effective Date or a later date mutually agreed to by both
parties so long as Developer demonstrates a good faith effort with meeting the milestones (Exhibit
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B) to commence and complete the project; however, the City may in its sole and absolute discretion
grant, or deny the permit if the City can determine that the Developer has or have not demonstrated
compliance with Exhibit B, and either the Developer or City may terminate this Covenant by
delivery of written notice of termination to the other Party.
2.3 Operating Condition. If Developer, or a Permitted Assigns, ceases to operate a
Hotel on the Site other than by reason of a Permitted Closure, with at least 4,000 square feet of
available meeting space, then this Agreement shall terminate as of the date such operation is
discontinued (other than by reason of a Permitted Closure) and no further payments shall be due
under Section 4.1 below by reference to Transient Occupancy Tax Revenues generated in any
Quarter after such date.
3. DEVELOPER'S OBLIGATIONS.
3.1 Continuous Operation; Site As Point of Sale. During the Operating Period,
Developer covenants and agrees to continuously operate the Hotel at the Flagship name or better
level of hotel, on the Site (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 Hotel and uses ancillary thereto, and such use shall qualify as a
transient occupancy use under Chapter 3.28 of the Municipal Code.
3.3 Maintenance and Repair 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 (as judged by other
developments of similar quality located in Menifee) and repair 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.
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 Hotel. In the event Developer does not maintain the
Site or the Hotel 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
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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 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 and if not paid within 45 days of notice to Developer,
the City shall have the right to claim such outstanding amounts as an offset against any and all
Covenant payments. 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 Agreement shall date from the date of the recordation of the Notice of
Claim of Lien. Any lien in favor of City created or claimed hereunder is expressly made subject
and subordinate to the lien of any mortgage or deed of trust made in good faith and for value,
recorded as of the date of the recordation of the Notice of Claim of Lien describing such lien as
aforesaid, and no such lien shall in any way defeat, invalidate, or impair the obligation or priority
of any such mortgage or deed of trust, unless the mortgage or beneficiary thereunder expressly
subordinates his interest, of record, to such lien. Upon foreclosure of any mortgage or deed of
trust made in good faith and for value and recorded prior to the recordation of any unsatisfied
Notice of Claim of Lien, the foreclosure -purchaser shall take title to the Site free of any lien
imposed by City that has accrued up to the time of the foreclosure sale, and upon taking title to the
Site, such foreclosure -purchaser shall only be obligated to pay costs associated with this Covenant
Agreement accruing after the foreclosure -purchaser acquires title to the Site. 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 OVeration of Hotel. During the entire Operating Period, Developer shall
operate a Flagship hotel or higher level, that has at least 4,000 square feet of meeting space, which
City will have preferred access to for its events at no cost to the City up to three times per year or
up to 3 rental days, as well as up to two additional rental days at 50% off the rental costs per year,
until the expiration of the Covenant Agreement. City will only be responsible to pay for set up/take
down charges, cleaning fees, food service/catering fees as they may apply. Developer shall also
use its best efforts to review and hire Hotel employees from Menifee or the local area. The hotel
flagship (the "Hotel") will be a upper mid -scale hotel, limited service hotel, from the list on Exhibit
C, and any change from this list shall be approved or denied prior by the Citywith sole and absolute
discretion, before a franchise agreement is signed by the Developer, provided that City may
reasonably object to a proposed brand.
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3.6 Compliance with Laws. During the entire Operating Period, Developer shall
construct and operate the Hotel 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 Hotel shall be in compliance with all of the
requirements of any permits issued by City for the Hotel, including, without limitation, all of the
conditions of approval issued in connection therewith.
Nothing herein constitutes a representation or warranty by City that the construction of the
Hotel was not a "public work" or otherwise subject to California Health and Safety Code Sections
33423 through 33426, or Chapter 1 of Part 7 of the California Labor Code (commencing with
section 1720), and all applicable statutory and 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 Hotel 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 Hotel 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 Hotel,
Developer 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.
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 Developer Facility.
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 Developer Facility 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 an Developer Facility is not a "public work," as defined in
Section 1720 of the Labor Code.
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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 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 fifty percent (50%) of the Transient
Occupancy Tax for that Quarter, except that in the Quarter during which the Termination Date
occurs, the Covenant Payments shall be prorated such that City shall only pay to Developer 50%
of the Transient Occupancy Tax for the period between the first day of such Quarter and the
Termination Date.
(b) Notwithstanding any other provision set forth in this Covenant to
the contrary, in no event shall the aggregate amount of Covenant Payments made by City to
Developer exceed the sum of one million dollars ($1,000,000.00) and will not exceed ten years,
which ever occurs first (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 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 shall be payable only from
Transient Occupancy Tax generated from the Developer's operation of the Hotel.
4.1.3 Payment Procedure. The City's Payments to Developer hereunder shall be
made quarterly, during the payment period describered herein. The amount of the Payment due on
each payment date shall be equal to fifty percent (50%) of the total Transient Occupacy Tax
generated and received by the City during the applicable preceding each quarter period, not to
exceed 10 years and not to exceed the amount in 4.1(b), as confirmed by Transient Occupancy Tax
filed by the Developer. Each such payment shall be accompanied by a statement identifying (i) the
amount of Transient Occupancy Tax 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 Payment Cap Amount.
It is understood that the amount of City's quarter Covenant Payments to Developer shall
be based upon the amount of Transient Occupancy Tax that City shall have actually received from
Developer. In addition, if after any such quarter payment is made, either City or Developer obtains
information that the amount of City's payment was in error, including, without limitation, by
reason of Developer's overpayment of tax, the Party obtaining such information shall promptly
notify the other Party and shall provide such detailed information as may be necessary to explain
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the discrepancy. The discrepancy then shall be taken into consideration by means of an adjustment
to the next quarter Covenant Payment to be made by City (either by City making an additional
payment in the event City has underpaid a prior Covenant Payment that is due, or by City receiving
a credit against the subsequent Covenant Payment in the event City has overpaid a prior Covenant
Payment); 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 thirty (30) days from receipt of said notice.
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 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 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 Developer's performance of its obligations set forth in Section 3 of this
Covenant during such Quarter.
5. - DEFAULTS AND REMEDIES.
5.1 Defaults.
(a) Subject to Force Majeure (Section 6.6), 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 thirty (30)
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
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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 changes the name, Flagship of the hotel, or lowers
the level or operation standard of the hotel compared to similar such hotels, outside of Exhibit C,
without the written approval from the City, the City may grant, withhold, deny payments and have
absolute discreation moving forward; including termination of the agreement.
(vi) Developer closes the Hotel; or
(vii) the Hotel is materially damaged or destroyed by fire or other
casualty during the Operating Period and Developer fails to commence restoration of the
improvements within a six (6) months or thereafter fails to diligently and continuously proceed to
complete such restoration in accordance with this Covenant; or
(viii) 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 Hotel,
the Agreement, and/or this Covenant Agreement 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 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
(ix) the Ownership and/or control of the Hotel changes without
the prior written consent of City; provided, however, that changes to the Ownership and/or control
of the Hotel may be made so long as a minimum of fifty-one percent (51 %) of the Ownership and
control of the Hotel is held by SH-MENIFEE, LLC; 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 (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
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(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, City may at its option:
(i) suspend the payment of Covenant Payments otherwise due
and payable to Developer hereunder for the period that Developer remains 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 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 three
(3) 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 Transient Occupancy Tax or other revenues, whether because the amount of
Transient Occupancy Tax generated from the Site is less than projected by Developer or City, or
because Developer does not operate the Hotel on the Site for the entire Operating Period, or
otherwise.
5.3 Developer's Remedies Upon Default by City. Upon the occurrence of any Default
by City, and after City's receipt of written notice of Default from Developer and expiration of the
time for City to cure such Default as provided in Section 5.1, Developer may terminate this
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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 6.5.
5.4 Cumulative Remedies, No Waiver. Except as expressly provided herein, the
nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights
and remedies provided by law from time to time and the exercise by the nondefaulting Party of
any right or remedy shall not prejudice such Party in the exercise of any other right or remedy.
None of the provisions of this Covenant 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. 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 Hotel 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 Hotel
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.
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6.1 Integration 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 Captions. 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 Assigns, Assignments. 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 Hotel 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 Developer in executing an appropriate subordination agreement.
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 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 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 Force Maieure. 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 Developer Facility project; 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 Developer Facility 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.
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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
29714 Haun Road
Menifee, California 92586
with a copy to: City Attorney
City of Menifee
29714 Haun Road
Menifee, California 92586
Attention: Jeffrey T. Melching, City Attorney
If notice is to Developer: SH-MENIFEE, LLC
Attention: Hiral Patel
1030 S. Summer Breeze Ln
Anaheim, CA 92808
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 Attorney's Fees. The prevailing party shall be entitled to recover its reasonable
attorney's fees and costs in connection with any breach or default by the other party under this
Agreement.
[End — Signature page follows]
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IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of
the Effective Date.
M
A. Manwaring, City
APPROVED AS TO
RUT ;-e
UCKER, LLP
J y thing, Cit Att rney
CITY:
CITY OF MENIFEE, a California municipal
corpo at n
Nk I R. Winter, Mayor
DEVELOPER:
SH-MENIFEE, LLC
a Vi6mr,. L-�&%rto,
01 ..
By:
Its:
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EXHIBIT A
Le&al Description of Site
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY
OF MENIFEE, IN THE COUNTY OF
RIVERSIDE, STATE OF CALIFORNIA,
AND IS DESCRIBED AS FOLLOWS:
PARCELS 18 AND 19 OF PARCEL MAP NO. 36299-1, IN THE CITY OF
MENIFEE, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AS PER MAP FILED IN
BOOK 238, PAGES 88 THROUGH 93_ INCLUSIVE OF PARCEL MAPS, IN THE OFFICE
OF THE COUNTY RECORDER OF SAID COUNTY, APRIL 28, 2015.
APNS: 360-080-082 AND 360-080-083
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EXHIBIT B
DEVELOPMENT MILESTONES
ACTION ITEM
TIMING
1
Developer shall submit a Signed Letter of
Submitted within 90 days of the Effective Date
Intent between Developer and Hotel brand
of the Agreement.
to the City, and the City shall approve or
deny the Hotel brand within fifteen (15)
days of receiving the Signed Letter of
Intent. City's approval will not be
unreasonably withheld, conditioned or
delayed; provided that City may
reasonably object to a proposed brand.
2
If the Hotel is to be operated by a Hotel
Before commencement of construction, within
brand, a Signed Hotel Franchise and/or
120 days of the Effective Date of the
Management Agreement between
Agreement..
Developer and Hotel brand and/or
Management Company shall be sent to the
City by start of construction.
3
Developer shall submit to City a complete
Submitted to the City within 180 days of the
development application for the Hotel,
Effective Date of the Agreement..
including conceptual plans, materials
board, and all items required by the
application.
4
The City shall turn around comments on all
With concurrent processing, the total processing
Plan Check within 3 (three) weeks or 15
time is expected to be 6 months to obtain
working days for submittals. The
Planning Commission approval, and in a good
Developer will turn around Plan Check
faith effort it shall be no longer than 9 months
revisions or comments within 3 weeks or
to obtain full plan approval including all plans
sooner to guarantee project stays on track.
and construction documents necessary to begin
grading and construction of the Hotel; overall
being completed by 441 days of the Effective
Date of the A eement.
5
Start of grading for Hotel
Within 60 days from grading permit issuance.
6
Start of construction of the Hotel
Within 1 month of full city approved building
permit issuance; no later than 500 days of the
Effective Date of the Agreement.
7
Completion of Developer Improvements.
Shall be completed within fifteen months (15)
following commencement of construction.
8
Hotel opens for business (Certificate of
Within fifteen (15) months of start of
Occupancy or Temporary Certificate of
construction; no later than 956 days of the
Occupancy issued).
Effective Date of the Agreement..
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1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
EXHIBIT C
Flagship Hotels
Fairfield Inn & Suites — Marriott
Hampton Inn & Suites — Hilton
Tru by Hilton — Hilton
Springhill Suites - Marriott
Hilton Garden Inn — Hilton
Residence Inn - Marriott
Home2Suites — Hilton
Homewood Suites - Hilton
Courtyard - Marriott
Aloft- Marriott
Doubletree Club — Hilton
Wyndham Garden — Wyndham
Hyatt Place — Hyatt
Four Points - Sheraton
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