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HomeMy WebLinkAbout08 AGREEMENT WITH TUSTIN MAZDAAgenda Item 8 ~ Reviewed: ~; AGENDA REPORT City Manager ~~ ~ Finance Director MEETING DATE: APRIL 6, 2010 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: REDEVELOPMENT AGENCY STAFF SUBJECT: AGREEMENT BETWEEN THE CITY OF TUSTIN AND PB&J AUTOMOTIVE, INC. ("TUSTIN MAZDA") SUMMARY Approval is requested to enter into an Auto Dealership Agreement with PB&J Automotive, Inc. (Tustin Mazda) for rehabilitation improvements on property located at 28 Auto Center Drive, formerly occupied by Heritage Lincoln Mercury. The funding source for reimbursing these improvements will come from future excess sales tax revenues generated by Tustin Mazda. RECOMMENDATION Authorize the City Manager and/or Assistant City Manager to execute the Auto Dealership Agreement between the City of Tustin and PB&J Automotive, Inc. (Tustin Mazda). FISCAL IMPACT The proposed agreement is a sales taxes reimbursement agreement. However, Tustin Mazda will be reimbursed for only a portion of any sales tax growth on the new Tustin Mazda site at 28 Auto Center, above a reasonable expected growth rate for the business at the new location. The City will retain 100% of sales tax up to $296,800 and this sales tax level is adjusted in the Agreement upward by 2% per year ("Threshold Level"). The $296,800 is selected as the threshold amount because it is equal to the dealership's highest grossing year (2006) before the recent recession which would be considered a more stable year for determining a stabilized Threshold Level. Tustin Mazda will be reimbursed from 80% of the excess sales tax greater than the Threshold Level with the City retaining 20% of the excess sales tax. Tax generated from the sale of vehicles is a major revenue source for the City's General Fund which has been impacted by the lower than normal auto sales during this recession. Staff has determined that the assistance level is reasonable. No other source of funds is proposed to be used to reimburse Tustin Mazda. While the City would forego some sales Page 2 tax revenue in the early years, if Tustin Mazda grew at a much faster growth than anticipated, the portion of the sales tax that the City will retain as revenue is revenue that the City would otherwise not receive. BACKGROUND PB&J Automotive is the owner of Tustin Mazda located within the Tustin Auto Center at 5 Auto Center Drive. Tustin Mazda has been a significant contributor to the City's tax base and employment base having been in Tustin over 5 years and employing over 40 people. Tustin Mazda wants to remain in Tustin by relocating to 28 Auto Center Drive, currently vacant, formerly occupied by Heritage Lincoln Mercury. Tustin Mazda's business operations at the new location will continue with the sales of new and .uses cars, sales of parts, service and repair. PB&J has executed a 5 year lease of the property, with options to extend the term, from the M.V. Duffy James Family Trust. The Trust has consented to the improvements being made by PB&J and the proposed terms and conditions under which the reimbursement agreement between PB&J and the City is structured. The property, 28 Auto Center Drive, has been unoccupied since being vacated by Heritage Lincoln Mercury in August 2008. The Site occupies a high visibility corner at the western entrance to the Tustin Auto Center. Any further deterioration of the buildings, facilities, and improvements (collectively the "Existing Improvements") on the site will have a negative impact on the Tustin Auto Center. PB&J proposes to rehabilitate the existing improvements by updating and reconfiguring existing facilities for the occupancy of Tustin Mazda. Ensuring occupancy of the property and rehabilitation of the existing improvements as contemplated by this Agreement will have a positive economic and physical impact on the Tustin Auto Center. The proposed agreement is a sales taxes reimbursement agreement. Major terms of the Agreement are as follows: Tustin Mazda • Will be responsible for funding, designing and constructing all improvements. • Will continue to operate the dealership on the site for the term of the Lease, shall designate the site as a point of sale for all transactions, and shall use its best efforts to designate site as the situs for all leasing transactions. The Agreement also requires both Tustin Mazda and the Trust to enter into and record a covenant regarding the intended use of the site for the Tustin Mazda dealership. Page 3 • Will provide the City with copies of all reports filed with the State Board of Equalization. City of Tustin • The City will retain 100% of sales tax up to $296,800 and adjusted upward by 2% per year (the "Threshold Level"). Tustin Mazda will be reimbursed not to exceed $106,000 for certain identified improvements necessary to occupy the facilities of a former vacated auto dealership located at 28 Auto Center Drive from any excess sales tax generated on the site. Excess sales tax is the difference between the total sales tax actually received by the City for the site annually and the Threshold Level for that year. • Tustin Mazda will be reimbursed from 80% of the excess sales tax greater than the Threshold Level with the City retaining 20% of the excess sales tax. • The proposed agreement will terminate the earlier of, the aggregate annual reimbursement equaling $106,000 or ten years after the issuance of a Certificate of Occupancy for the facilities. Tustin Mazda will not receive an annual reimbursement from the City for any year in which excess sales tax is not generated. Tax generated from the sale of vehicles is a major revenue source for the City's General Fund which has been impacted by the lower in sales during this recession. No other source of funds is proposed to be used to reimburse Tustin Mazda. Based on current Mazda sales projections, we would expect that the City would complete annual assistance payments to Tustin Mazda in the 6"' year of operation, at which point the City would retain 100% of any excess sales tax. Environmental Review The proposed Agreement is not a project defined by CEQA. To the extent any future entitlements are required for Tustin Mazda, they will be subject to environmental review. Christine Shingleton Assistant City Manager' ~w.••4~.,,~~t. Jo Buchanan development Program Manager Attachment AUTO DEALERSHIP AGREEMENT BETWEEN THE CITY OF TUSTIN AND PB&J AUTOMOTIVE, INC. The Auto Dealership Agreement ("Agreement") is hereby made and entered as of April 2010 between the City of Tustin, a California municipal corporation ("City"), and PB&J Automotive, Inc., a California Corporation ("PB&J" or "Tustin Mazda"). The City and PB&J are sometimes referred to in this Agreement individually as the "Party" and collectively as the "Parties". The Parties agree as follows: 1. SUBJECT OF THE AGREEMENT 1.1 Background. 1.1.1 PB&J is the owner of an existing automobile dealership business in good standing and has conducted an automobile dealership business as Tustin Mazda (the "Business") within the Tustin Auto Center at 5 Auto Center Drive ("Existing Site") in the City of Tustin ("Tustin"), California. Tustin Mazda at the Existing Site has been a significant contributor to City of Tustin's tax base and employment base. 1.1.2 PB&J wishes to remain in Tustin and intends to relocate Tustin Mazda within the Tustin Auto Center from the Existing Site to property located at 28 Auto Center Drive (the "Site") as described in the Legal Description, which is attached hereto as Attachment 1 and is incorporated herein by reference. PB&J intends to operate on the Site a new and used Tustin Mazda automobile dealership with related parts, services and repair operations and at PB&J's option, additional new and incidentally related vehicle lines. Tustin Mazda is expected to employ approximately 40 full time employees at the Site. 1.1.3 PB&J has leased the Site from M.V. Duffy James Family Trust (the "Property Owner") for a minimum period of 5 years and 6 months ending May 31, 2015, with two options to extend the term of the lease pursuant to a Lease Agreement entered into and commencing on December 1, 2009, and a First Amendment to Lease Agreement dated December 1, 2009 (collectively, the "Lease"). A copy of the Lease is incorporated as a part of this Agreement for reference purposes only. Nothing in this Agreement, nor any action of the City in furtherance of this Agreement shall be construed as making the City a party to the Lease in any manner whatsoever. The City shall have no obligation under the Lease and shall not be responsible for any actions taken by Property Owner and/or PB&J pursuant to the provisions of the Lease. 1.1.4 The Site has been recently unoccupied, and has not seen significant maintenance since the automobile dealership of Lincoln Mercury vacated the property. The Site occupies a high visibility corner at the western entrance to the Tustin Auto Center. Any further deterioration of the buildings, facilities, and improvements (collectively the "Existing Improvements") on the Site will have a negative impact on the Tustin Auto Center. 1. LS PB&J proposes to rehabilitate the Existing Improvements on the Site. The City recognizes that ensuring an occupancy of the Site and rehabilitation of the Existing Improvements as contemplated by this Agreement will have a positive economic and physical impact on the Tustin Auto Center. 1.2 Purpose of Agreement. The purpose of this Agreement is to provide a financial mechanism under which PB&J will be provided an incentive to remain in Tustin and to make improvements on to the Site. PB&J will advance funds for rehabilitation of Existing Improvements on the Site (the "Rehabilitation Work") and the City, pursuant to conditions in the Agreement, will reimburse PB&J in the future for a portion of said advance of funds based on a percentage of the amount of future sales tax generated by the Business on the Site above certain threshold amounts as provided in this Agreement which generally reflect estimated sales tax revenues the City would have derived from the Business had the Business remained at the Existing Site .The purpose and intent of this Agreement is consistent with the goals stated in the City's General Plan since it will: (1) revitalize a commercial property and eliminate the condition of a vacated and underutilized property; (2) promote the continued maintenance, marketing and development of the Tustin Auto Center as a regional retail destination; (3) retain and create jobs, and; (4) promote the maintenance and expansion of the City's economic base to ensure long-term stability and maintenance of City revenues by retaining a business in the City which will contribute to the City's economic growth and employment opportunities. Provision of financial assistance as proposed in this Agreement will preserve and enhance the City's municipal revenues in that: L An existing business will be encouraged to maintain and expand its operations and increase sales tax. 2. The City will be able to retain an existing business that might otherwise relocate to another jurisdiction. 3. Assistance will be only provided to reimburse a business for project costs that make its relocation within the Auto Center feasible. -2- 4. Assistance will only be provided from incremental sales tax generated as a result of the business relocation within the Tustin Auto Center. 1.3 Definitions. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings set forth in Attachment 2. 1.4 Parties to the Agreement. 1.4.1 Cam. The City is a pubic body, corporate and politic, exercising governmental functions and powers and organized and existing under the State of California. The principal office and mailing address of the City is 300 Centennial Way, Tustin, CA 92780. "City", as used in this Agreement, includes the City of Tustin and any assignee of or successor to its rights, powers and responsibilities. 1.4.2 PB&J. PB&J is PB&J Automotive, Inc., a California Corporation (dba Tustin Mazda), authorized by a Major Motor Vehicle Manufacturer Franchiser (the "Major Motor Vehicle Manufacturer Franchiser" or the "Mazda Motor Company") to conduct Business at the Site. The principal office and mailing address of PB&J for purposes of this Agreement is 28 Auto Center Drive, Tustin, CA 92782. Attention: John Patterson, President. 1.5 Representations of PB&J. PB&J represents and warrants to the City that it has the experience, qualifications and legal status necessary to perform pursuant to this Agreement and represents and warrants as follows: 1.5.1 PB&J and the Business is duly incorporated and in good standing under the laws of the State of California and has duly authorized, executed and delivered this Agreement and any and all other agreements and documents required to be executed and delivered in order to carry out, give effect to, and consummate the transactions contemplated by this Agreement. 1.5.2 PB&J or the Business does not have any material contingent obligations or any material contractual agreements which could materially adversely affect its ability to carry out its obligations hereunder. 1.5.3 There are no material pending or, so far as is known to PB&J, threatened legal proceedings to which PB&J or the Business is or may be made a party or to which any of its property is or may become subject, which has not been fully disclosed in the material submitted to the City which could materially adversely affect the ability of PB&J or Business to carry out its obligations hereunder. 1.5.4 There is no action or proceeding pending or, to the PB&J's best knowledge, threatened, looking toward the dissolution or liquidation of PB&J or the Business, and there is no action or proceeding pending or, to the PB&J's best knowledge, threatened by or against PB&J or the Business which could affect the validity and enforceability of the terms of this Agreement, -3- or materially and adversely affect the ability of PB&J and the Business to carry out its obligations hereunder. 1.5.5 PB&J is an authorized Mazda Motor Company dealership business, in good standing with the Mazda Motor Company. Each of the foregoing items, inclusive, shall be deemed to be an ongoing representation and warranty. PB&J shall promptly advise the City in writing if there is any change pertaining to any matters set forth or referenced in the foregoing items. 2. REHABILITATION OF THE SITE 2.1 Responsibility for Rehabilitation Work. PB&J, with consent of Property Owner, shall promptly begin and thereafter diligently prosecute to completion the Rehabilitation Work on the Site, within the respective schedule times and as more fully described in the "Scope of Development" which is attached hereto as Attachment 3 and incorporated herein by reference, and open or cause said Tustin Mazda dealership to be opened for business to the public on the Site. 2.2 Acknowledgement of Governmental Requirements. PB&J acknowledges and agrees that all Rehabilitation Work on the Site shall be in compliance with all necessary governmental requirements including but not limited to zoning and building code requirements of the City (the "Governmental Requirements"). Nothing in this Agreement shall preclude or limit in any way the right of the City to approve, disapprove, or condition its approval of any matter submitted by or on behalf of PB&J in connection with or relating to the Rehabilitation Work which may require a subsequent independent exercise of discretion by the City or any other government or regulatory entity, agency, or department ("Governmental Authority"). 2.3 City Has No Responsibility for Rehabilitation Work. All costs for planning, designing, developing, and constructing Rehabilitation Work on the Site pursuant to this Agreement shall be borne solely by PB&J and nothing herein shall imply, nor be construed, to place such responsibility on the City. 2.4 Certificate of Completion. After PB&J completes the Rehabilitation Work, the City following a written request from PB&J, shall promptly furnish PB&J with a Certificate of Completion in the form approved by the City. Such Certificate shall not be construed as a notice of completion as described in California Civil Code Section 3093. 3. USE OF THE SITE 3.1 Use. PB&J owns and operates Tustin Mazda (the "Use" or "Business"). The qualifications, identity and nature of the Business of PB&J and the Use are of particular concern to the City. It is because PB&J desires to remain in Tustin and relocate the Use from the Existing -4- Site to the Site that the City is entering into this Agreement. Therefore, the City's obligations under this Agreement shall not inure to the benefit of any voluntary or involuntary successor in interest, without the prior written consent of the City, in its sole discretion. 3.1.1 Covenant. PB&J covenants and agrees for itself, and any successor, assignee, or successor in interest to the Site or any part thereof, that during the Rehabilitation Work and for the term of the Lease and any extension thereof, PB&J and its successors and assignees shall devote the Site to the Uses specified in this Agreement and in the Agreement to Be Recorded Affecting Real Property (the "Covenant", Attachment 4). Specifically, the Site shall be used for a Tustin Mazda automobile dealership as described in Section 1.1.2 of the Agreement with inventory and sales personnel sufficient to satisfy and respond to customer demand. Operation of the Site for the Use by PB&J shall be required to continue without an interruption greater than thirty (30) days, for a period of not less than the original term of the Lease, and any exercised lease extensions, and after the issuance of a Certificate of Completion by the City for the Rehabilitation Work. To the maximum extent permitted by law, PB&J shall designate the Site on its Sales Tax Statements as the point of sale for all sale transactions arising out of the business conducted on the Site. In addition, PB&J shall exercise diligence in an effort to cause each Affiliated Party to designate the City of Tustin on all reports required to be filed with the State Board of Equalization ("SBE") as the site of the construction contracts for Tustin Mazda or the leasing of any new or used motor vehicles where the transaction is generated from the site, as applicable. Additionally, PB&J shall comply with all applicable federal, state, and local laws, ordinances, and regulations regarding the operation and Use of the Site ("Governmental Requirements"). The foregoing covenants shall run with the land and be an obligation accepted by the Property Owner and its successors in interest. In the event of an uncured breach of the Covenant by either PB&J or Property Owner, the City shall have the right to terminate this Agreement without obligation to make future financial assistance reimbursement payments pursuant to the Agreement. 3.2 Maintenance and Repair of the Site. 3.2.1 General. During the term of this Agreement, PB&J shall keep and maintain the Site including landscaping and improvements on the Site, at its sole cost and expense, in a first class condition, free from accumulation of debris, weeds, graffiti and waste materials, and shall perform all repairs and replacements as necessary. PB&J shall also operate the Site in a manner that does not violate any term of any covenants, conditions, and restrictions applicable to the Site or the Tustin Auto Center. Minimum maintenance standards required to be complied with which apply to all buildings, signage, lighting, landscaping, irrigation of landscaping, architectural elements, and all other improvements on the Site shall be as follows: -5- (a) Improvements shall be maintained in conformance with reasonable commercial development maintenance standards for first class automobile dealerships including but not limited to painting and cleaning of all exterior surfaces and exterior facades. (b) Landscape maintenance shall include but not be limited to watering, irrigation, fertilization, mowing, edging, trimming of grass, tree and shrub pruning, trimming and shaping of trees and shrubs to maintain a healthy natural appearance and safe road conditions, irrigation coverage replacement as needed, control of weeds in all planters or other planted areas, and staking and support of trees. (c) Clean-up maintenance shall include but not be limited to maintenance of all sidewalks, paths and other paved areas in a clean and weed-free condition, maintenance of all areas free of dirt, mud, trash and debris or other matter which is unsafe or unsightly, removal of all trash and litter and other debris from improvements and landscaping. 3.3 Government Code Section 53084 Compliance: Indemnification. PB&J warrants and represents to City that no other vehicle dealership owned or operated in whole or part by PB&J or any person or entity affiliated with PB&J will be "relocating" from another jurisdiction in the "market area" to the City of Tustin, within the meaning of California Government Code Sections 53084 or 5304.5 as result of PB&J's activities pursuant to this Agreement or this Covenant and accordingly, that the Agreement and this Covenant will not result in a violation of statute. PB&J agrees to indemnify, defend, and hold City and its officers, employees and agents free and harmless from and against any and all claims, liabilities, and losses arising out of any violation or breach of the foregoing representation and warranty. 3.4 Non Discrimination. In the operation of Tustin Mazda, PB&J agrees not to violate applicable laws that prohibit the discrimination against any person or class of persons by reason of gender, marital status, race, color, creed, mental or physical disability, religion, age, ancestry, or national origin. 4. FINANCIAL ASSISTANCE TO PB&J 4.1 Maximum Level of Assistance. In consideration of and subject to the terms and conditions of this Agreement, City shall provide PB&J with a maximum level of assistance in the aggregate total sum of one hundred and six thousand sixty dollars ($106,060.00) for Rehabilitation Work identified in Attachment 2 with the method of payment as outlined in Section 4.3 of this Agreement. 42 Term of Assistance. The City's assistance to PB&J will be limited to the number of years required for PB&J to receive the maximum level of assistance allowed pursuant to Section 4.1 of this Agreement, but in no event, shall be longer than PB&J's Lease of the Site or -6- actual Use and occupancy of the Site after issuance of a Certificate of Completion by the City, whether or not PB&J has received the maximum amount of assistance (the "Term"). 4.3 Basis for Determining Annual Assistance Payments. the annual amount of assistance to PB&J will be based on sales and use tax ("Sales and Use Tax") generated by PB&J on the Site in excess of the Threshold Level as defined in Section 4.4 of this Agreement (the "Annual Assistance Payment"). Only sales tax allocated to the City of Tustin as the point of sale by PB&J for Tustin Mazda will be utilized to determine eligibility and the amount of any Annual Assistance Payment to PB&J. PB&J shall receive annual assistance in the amount of 80% of the sales tax the City receives from the Use of the Site in excess of the annual Threshold Levels specified in Section 4.4 of this Agreement. PB&J shall not receive any assistance in any year in which the sales tax attributable to the PB&J's business operation on the Site are less than the Threshold Level for such year. 4.4 Threshold Level. The annual Threshold Levels are as specified in this Section. The Threshold Level is based on an assumed baseline Threshold Level of sales tax from taxable sales equal to Two Hundred Ninety Six Thousand and Eight Hundred dollars ($296,800) which shall adjust annually as follows: Baseline $296,800 Year 1 302,700 Year 2 308,700 Year 3 314,800 Year 4 321,100 Year 5 327,500 Year 6 334,050 Year 7 340,700 Year 8 347,500 Year 9 354,450 Year 10 361,540 -7- 4.5 Definition of Excess Sales Tax and Annual Percentage Assistance Payment Percentage. Excess Sales Tax, determined annually, is the difference between the total sales tax actually received by the City of Tustin for Tustin Mazda annually pursuant to Section 43 of this Agreement and the Threshold Levels by year identified in Section 4.4 of this Agreement (the "Excess Sales Tax"). The annual assistance payment percentage used to determine the City's Annual Assistance Payment to PB&J shall be equal to eighty percent (80%) of the annual Excess Sales Tax ("Annual Assistance Percentage"). 4.6 Application of Annual Assistance Payments. Provided that the total maximum of any Annual Assistance Payments shall not exceed the maximum level of assistance as defined in Section 4.1, the Annual Assistance Payment in any year shall be equal to the Annual Assistance Percentage multiplied by the excess Sales Tax received from the City in that year, as defined in Section 4.5. In no event shall PB&J receive Annual Assistance Payments with an accumulated value greater than the maximum level of assistance specified in Section 4.1 or for a term longer than specified in Section 4.2. 4.7 Computation of Annual Assistance Payment. For any year that PB&J is entitled to receive an Annual Assistance Payment, the payment shall be the lesser of: 1. The Annual Assistance Percentage multiplied by the Excess Sales Tax for that year, or 2. An amount which, when added to the Assistance Payments from all prior years, equals the maximum level of assistance. In any year, this amount is equal to that portion of the maximum level of assistance not yet received during all previous years. Attachment 5 presents an illustrative example of the calculation methodology for determining the Annual Assistance Payments based on a projection of Tustin Mazda sales provided by the PB&J. The actual sales and resultant Annual Assistance Payments may differ from the projections. 4.8 Basis for Measuring Sales Tax Receipts by City. Annual Assistance Payments to PB&J shall be based on quarterly sales tax returns filed with the California SBE for all Tustin Mazda business operations on the Site and required pursuant to California Revenue and Taxation Code, Section 6452 (subject to audit by the SBE), and the actual amount of sales tax actually allocated and paid to the City. A copy of the quarterly sales tax return ("Sales Tax Statement") shall besupplied by PB&J to the City at the same time as PB&J delivers the original Sales Tax Statement to the SBE. The Sales Tax Statement, subject to audit by the City or the SBE, and any~resulting corrections will be utilized each year by the City for purposes of determining the level of assistance. -8- 4.9 Schedule of Annual Assistance Payments. Annual Assistance Payments shall be made to PB&J, where PB&J is eligible and all Conditions Precedent to Annual Assistance Payments as prescribed by Section 4.12 have been met. Annual Assistance Payments will be made within sixty (60) days following the close of the first four quarters (the "Year") of Tustin Mazda operations on the Site following the issuance of a Certificate of Completion for the Rehabilitation Work, and in each subsequent four quarter period in subsequent years, or within any extended period of time as necessary for the City to confirm with the State Board of Equalization the actual amount of sales tax actually allocated and paid to the City. City shall exercise its best efforts to verify the amount of Sales Tax attributable to the Tustin Mazda business operation and City's receipt of payment from the State. Annual payments, where eligible, shall continue under the terms of assistance contained in Section 4.2 of the Agreement or until PB&J receives the maximum assistance pursuant to Section 4.1, whichever occurs earliest. Whether or not PB&J receives the maximum level of assistance pursuant to Section 4.1, payments shall not be made beyond ten (10) years after the City's issuance of a Certificate of Completion for the Rehabilitation Work, or any earlier termination of the Lease or this Agreement. The City shall not have an obligation to provide any level of assistance in any year that the Sales Tax received by the City does not exceed the Threshold Level. The term of this Agreement as defined in Section 4.2 shall not be extended because of failure of PB&J to exceed the Threshold Level in one or more years. 4.10 Effect of Changes in State Law. In the event that California Law governing the payment and/or distribution of retail sales tax is amended in such a manner as to reduce the amount of sales tax apportioned and paid to the City based on point of sale ("Sales Tax Change"), PB&J shall be entitled to assistance payments only if sales tax revenues apportioned and paid to the City based on the point of sales for Tustin Mazda in a payment year meet the applicable Threshold Level in Section 4.4, above, for the appropriate year in which payment is due. To the extent that a Sales Tax Change reduces the revenue received by the City to below the Threshold Level or causes a reduction in payments to PB&J, all assistance payments which have not become due and payable to PB&J pursuant to the payment formula outlined herein shall no longer be an obligation of the City. 4.11 Source of Annual Assistance Payments. The City reserves the right to make annual payments on behalf of the City from whatever sources it deems appropriate. The reference to sales tax for purposes of computing annual payments is solely for computational purposes. Sales Tax revenue allocated to the City is not pledged. -9- 4.12 Conditions Precedent to Annual Assistance Payments. City's obligation to make Financial Assistance Payments pursuant to Sections 4.1 and 4.7 of this Agreement shall be contingent and conditional upon PB&J's performance of its obligations set forth in Section 2 of the Agreement and the following conditions ("Conditions"): 1. A Certificate of Completion for the Rehabilitation Work shall have been issued by the City. 2. No Event of Default on the part of PB&J shall currently exist nor shall there by any condition or circumstance that with notice or the passage of time or both constitute an Event of Default on the part of the PB&J. 3. PB&J shall have delivered to the City the quarterly Sales Tax Statements required by City pursuant to Section 4.8 of the Agreement. 4. PB&J shall have delivered to the City a cost certification ("Cost Certification") which shall evidence that PB&J has expended not less 'than $100,000 for payment of Rehabilitation Work identified in which shall substantially conform to the work and Development Budget contained in Attachment 3, it being understood and agreed that PB&J shall have the right to readjust line items, apply savings in any line items to over-runs in other budget line items and adjust the Development Budget as may be required from time-to-time to reflect actual costs of the Rehabilitation Work. 5. PB&J shall have presented evidence of payment of all secured and unsecured real property taxes and assessments accessed and levied on or against all portions of the Site. No ad valorem property taxes or assessments legally and validly assessed with respect to the Site shall be delinquent at the time of delivery of any Assistance Payment. Nothing contained in this Agreement shall be deemed to limit PB&J's from contesting the validity or amount of any tax, assessment, encumbrance or lien, or to limit the remedies available to PB&J in respect thereto. 6. PB&J shall have delivered to the Agency reasonable evidence that PB&J is then in good standing and qualified to do business in the State of California. 7. PB&J is in good standing with the Property Owner on the Lease for the Site. 8. PB&J continues to use and occupy the Site as a point of sale for all Sales and Use Taxes, and tangible personal property originated by PB&J and/or the Tustin Mazda Business. In the event that any or all of the conditions above shall not be satisfied or shall no longer be satisfied, the City shall be relieved of its obligations under this Agreement for the payment of any Annual Assistance Payment that may otherwise have been due and payable. -10- 5. DEFAULT AND REMEDIES 5.1 Defaults. It shall constitute a Default under this Agreement ("Event of Default") if: 5.1.1 Either Party fails to perform any obligation, term, covenant, or provision under this Agreement within thirty (30) days after written notice of any such failure has been given by the injured Party, or if more than thirty (30) days is required to cure such failure, if the Party fails to commence such cure as promptly as practical and thereafter diligently pursue such cure and thereafter complete such cure within thirty (30) days after such notice, or 5.1.2 PB&J is or becomes bankrupt or insolvent or if any involuntary proceeding is brought against PB&J, or PB&J makes an assignment for the benefit of creditors, or institutes a proceeding under or otherwise seeks the protection of federal or state bankruptcy or insolvency laws, including filing of a petition for voluntary bankruptcy or instituting a proceeding for reorganization or arrangement. 5.1.3 PB&J abandons or vacates the Site within the existing Lease term for the Site. 5.1.4 PB&J is declared in default under its existing Lease on the Site. 5.1.5 PB&J fails to provide evidence of payment of all secured and unsecured real property taxes and assessments related to the Site when due and prior to delinquency. 5.2 City Remedies. Upon occurrence of an Event of Default by PB&J the City may at its option: 5.2.1 Terminate the Agreement by written notice to PB&J, in which case, the City's obligation to make Assistance Payments to PB&J for any period of time after occurrence of the Event of Default shall be finally terminated and discharged. 5.2.2 Suspend an annual Assistance Payment, otherwise due and payable for the period of time that PB&J remains in Default. If City suspends its payments in accordance with the terms of this clause, then upon PB&J's cure of such Default, City shall resume its payment obligations but shall have no obligation to make a payment for any year during which the City's obligations to make payments was so suspended. 5.2.3 Specific Performance. Seek specific performance of the obligations under the Agreement. 5.2.4 All other rights and remedies. Exercise any of its rights and remedies at law or in equity, or otherwise provided in this Agreement. -11- 5.3 PB&J Remedies. Upon occurrence of an Event of Default by City, PB&J shall be entitled to any or all of the following remedies: (1) terminating this Agreement by written notice to City; (2) seeking mandamus or specific performance of this Agreement; (3) seeking any other remedy available at law or in equity, provided that PB&J shall not be entitled to recover any consequential damages and provided that City's failure to timely make any Assistance Payments or City's failure to perform any of its other obligations hereunder shall not cause the acceleration of any anticipated future Assistance Payments by City to PB&J. To the maximum extent permitted bylaw, City shall be permitted to repay any of the Assistance Payments without penalty. 5.4 Limitations on City's Liabilities. PB&J acknowledges and agrees that this Agreement shall not be deemed or construed as creating a partnership, joint venture or similar association between PB&J and City, and the relationship between the Parties shall remain solely that of contracting Parties, and City neither undertakes nor assumes any responsibility pursuant to this Agreement to review, inspect, supervise, approve, or inform PB&J of any manner in connection with the Rehabilitation Work or operation of the Tustin Mazda automobile dealership on the Site other than as expressly provided for herein. 6. GENERAL PROVISIONS 6.1 Integration and Amendment. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof. This Agreement may not be modified, amended, supplemented, or otherwise changed except in writing executed by both Parties. 6.2 Notices. Any notice requirement set forth herein shall be deemed to be satisfied three (3) days after mailing of the notice first-class United States certified mail, postage prepaid, or the next business day after the notice or communication has been delivered by hand or sent by telecopy or overnight delivery service, addressed to the appropriate party as follows: Notice to City: City of Tustin 300 Centennial Way Tustin, California 92780 Attention: Assistant City Manager With a copy to: Doug Holland, City Attorney 300 Centennial Way Tustin, CA 92780 -12- Notice to PB&J: John Patterson PB&J Automotive, Inc. 28 Auto Center Drive Tustin, CA 92782 Such addresses may be changed by notice to the other Party given in the same manner as provided above. 6.3 Attorneys' Fees. If either party brings an action or proceeding to enforce, protect or establish any right or remedy hereunder or under the Agreement, the prevailing party shall be entitled to recover from the other party its costs of suit and reasonable attorneys' fees. 6.4 No Third Parties Beneficiaries. This Agreement is made and entered into for the sole protection and benefit of the City, and PB&J and there no intended third party beneficiaries under the Agreement. No other entities, person or persons shall have any rights or obligations hereunder. 6.5 Construction of Words. Except where the context otherwise requires, words imparting the singular number shall include the plural number and vice versa, words imparting persons shall include firms, associations, partnerships and corporations, and words or either gender shall include the other gender. 6.6 Severability/Partial Invalidity. Every provision of this Agreement is intended to be severable. If any provision of this Agreement shall be declared invalid, illegal, or unenforceable by a court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired. 6.7 Governing Law. This Agreement shall be construed in accordance with and be governed by the laws of the State of California. 6.8 Counterparts. This Agreement may be executed in two or more counterparts, each which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties have executed this agreement to be effective as of the Effective Date. -13- "CITY" CITY OF TUSTIN By: Its: ATTEST: City Clerk APPROVED AS TO FORM: By: City Attorney "PB&J" PB&J Automotive, dba Tustin Mazda By: Its: -14- ATTACHMENT 1 LEGAL DESCRIPTION <TO BE INSERTED PRIOR TO EXECUTION> Tltk No. lo•~d9azo793-A-S9 Locate No. G4FNT0925.0925.Oi99-0259924793 LEGAL DESCRIPTION THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CItY OF TUSZIN, COUNTY OF ORANGE, SPATE OF CALIFORNIA, AND IS DESCRIBED AS FOtLAWS: PARCEL 1 OF ~PARCEt MAP IVO. 87-201, ]!V THE CITY OF TUSTIN, AS PER MAP RECORDED IN BOOK 240, PAGES) 8 THROUGH 10, INCIUSNE, OF PARCEL MAPS, IN THE OFFICE ~ TPIE COUNTY RECORDER OF ORANGE CALIFORNIA. EXCEPTTHEREPROM ANY AND ALL OII., OIL RIGHT-5, MINERALS, MINERAL RIGHTS, NATURAt GAS RIGHTS AND OTHER HYDROCARBONS . BY WHATSOEVER NAMP KNOWN, GEOTHERMAL STEAM OR OTHER RESOURCES, ANO AU• PRODUCTS DERIVED FROM ANY OF THE FOREGOING, T?iAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE I~RPETUAL RIGHT OF DRILLING, MINING OR EXPLORING AND OPERATING THEREFOR AND 5TnRING IN AND REMOVING THE SAME FROM 'THE LAND OR ANY OTHER LAND, INCLUDING THE RIGHTTO WHIPST'OpC AND OIRECTIONA1.tT' DRILL AND MINE FRONT U1NDS OTHERTHAN THOSE CONVEYED HEREBY", OIL OR GAS WELLS TUNNELS AND SHAFTS~IN1'0, THROUGH OR ACROSS'T'HE SUBSURFACE OF'THE LAND, AND -t0 BOTTOM UCH WHIPSrOCICED ~ DIRECTIONALLY DRILLED WELLS, TUNNELS ANO SHAFT'S UNDER ANO BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, ANO TO REDRII,II~~ RETUNNEL, UIP, MAINTAIN, REPAIR,, DEEPEN ANO OPERATE ANY SUCH WELLS OR MINES; Wf~tOUT, HOWEVER, ~"FHE RIGHT TO DRILL, MIN~$TORE, EXPLORE ANO OPERATE T1iR0UGH THE SURFACE OR THE UPPER 500 FEET OF THE Sl18SU ACE OF THE LANG AS RESERVED IN THE GEED RECORDED FE6RUARY 9, 1989, AS INSTRUMENT N0.89-717b5, OF OFFICIAL RECORDS. APN: 500-181-13 ara play Mport Porm • NodMea (ll1./17/Ob) ATTACHMENT 2 GLOSSARY OF DEFINED TERMS For purposes of this Agreement, the following capitalized terms shall have the following meanings: "Affiliated Party" shall mean any contractor or subcontractor involved in the construction of Rehabilitation Work on the Site and any entity that finances the leasing of vehicles for which the lease transaction originates from the Tustin Mazda automobile dealership on the Site; provided, that there is no requirement that an Affiliated Party have any common ownership interest with or control by PB&J. "Agreement" shall mean the Agreement between the City of Tustin and PB&J Automotive, Inc. including all attachments thereto. "Annual Assistance Payment" shall have the meaning as set forth in Section 4.3 of the Agreement. "Annual Assistance Percentage" shall have the meaning set forth in Section 4.5 of the Agreement. "Business" shall mean the sales, leasing and service facility operated by PB&J at the Site as a Mazda Company franchise commonly known as Tustin Mazda and as set forth in Section 1,1, l and 3.1 of the Agreement. "Certificate of Completion" shall mean a certificate substantially in the form provided by the City in Attachment 6 to be issued upon completion of Rehabilitation Work described in Attachment 3. "City" and "City of Tustin" shall have the meaning set forth in Section 1.4. "Complete or Completion" shall mean ,with respect to the Rehabilitation Work, the point in time when all of the following shall have occurred as applicable and to the extent required by the City with respect to the Rehabilitation Work and Improvements: (1) submittal by the City of a Cost Certification of the Rehabilitation Work as required by Section 4.12 of the Agreement; (2) recordation of a Notice of Completion by PB&J, or any Affiliated Party for Rehabilitation Work and sixty (60) days have passed since such recordation; (3) PB&J have paid all costs in connection with the Rehabilitation Work to Affiliated Parties in full and any mechanics liens that have been recorded or stop notices that have been delivered to PB&J have been paid, settled or otherwise extinguished, discharged, released, waived, bonded around or insured against; (4) all Rehabilitation Work shall have been completed in accordance with the Agreement, and (5) To the extent that a certificate. of occupancy is required with respect to the Rehabilitation Work required under this Agreement or finalization of any building permits issued for such Rehabilitation Work, issuance of the certificate of occupancy and the City's final of any required building permits. "Conditions" shall mean the conditions precedent to the City's obligation to make an Installment as set forth in Section 4.12 of this Agreement. "Cost Certification" shall mean the financial statement prepared and certified by PB&J's Chief Financial Officer accompanied by any necessary supporting information and data demonstrating to the satisfaction of the City that PB&J has Rehabilitation Costs consistent with Attachment 3. "Covenant" shall mean the Agreement to Be Recorded Affecting Real Property as said meaning is set forth in Section 3.1.1. "Development Budget" shall mean the costs for completion of the Rehabilitation Work and Improvements as described in the Scope of Development, Attachment 3 of the Agreement. "Excess Sales Tax" shall have the meaning set forth in Section 4.5 of the Agreement. "Event of Default" shall have the meaning as set forth in Section 5.1 of this Agreement "Existing Improvements" shall mean the buildings, facilities and improvements on the Site: "Governmental Authority" shall mean any and all federal, state, county, municipal or local governmental or quasi-governmental bodies and authorities (including the United States of America, the State of California, and any political subdivision, public corporation, district, joint powers authority or other political or public entity) of departments thereof having or exercising jurisdiction over the Parties, the Rehabilitation Work, the Site or such portions thereof as the context indicates. "Governmental Requirements "shall mean all applicable laws, statutes, codes, ordinances, rules, regulations, standards, guidelines and other requirements of any Governmental Authority exercising jurisdiction over the Parties, the Site or any component thereof, including but not limited to the General Plan, the Tustin Municipal Code, any applicable Planned Development regulations for the Site, any entitlements or development Permits, the Tustin Auto Center Master Association Documents and covenants, conditions and restrictions, this Agreement, any other covenants, the Covenant required to be executed pursuant to Section 3. L 1 of the Agreement, all subdivision and tract maps, and all other permits and approvals required to be obtained by PB&J from all agencies having jurisdiction to commence and complete Rehabilitation Work and, as applicable, to operate and maintain the Site after Completion. "Improvements" shall mean the Existing Improvements and any additional improvements to be rehabilitated or constructed by PB&J on the Site which will constitute the Rehabilitation Work in accordance with the Scope of Development, Attachment 3 of the Agreement. "Major Motor Vehicle Manufacturer Franchiser" means Mazda Motor Company. Whenever the terms passenger vehicle or passenger vehicles are used in this Agreement they shall be meant to include passenger automobiles, trucks and sport utility vehicles. "Property Owner" shall have the meaning set forth in Section 1.1.3.. "PB&J" shall have the same meaning set forth in Section 1.4.2. "Quarter" shall mean (i) any of the three month periods during a Year commencing July 1, October 1, January 1, or April 1, or (ii) the quarterly or other periods used by the SBE in calculating or making Sales and Use Tax payments to the City, if such periods differ from the quarters described in clause (i) hereinabove. "Rehabilitation Costs" shall mean the costs for constructing, and completing the Rehabilitation Work in accordance with the Development Budget contained in the Scope of Development, Attachment 3 of this Agreement. "Rehabilitation Work" shall mean the rehabilitation of the buildings and structures on the Site or other works of Improvement upon the Site in accordance with the Scope of Development, Attachment 3 of this Agreement. "Sales Tax Change" shall have the meaning as set forth in Section 4.10 of the Agreement, "Sales Tax Statement" shall mean each quarterly statement to be prepared by PB&J or any Affiliated Party, in a form reasonably acceptable to the City, and submitted to SBE and City identifying the portion of Sales and Use Tax generated from the Site during the previous quarter as a result of taxable and lease transactions, as set forth in Section 4.8 of the Agreement. "Salesand Use Tax" shall mean for a given Calendar Year, the sum of that portion of sales and use taxes allocated, paid to, and received by the City pursuant to applicable California law including (but not limited to) the Bradley-Bums Uniform Local Sales and Use Tax Law (California Revenue and Taxation Code commencing at Section 6100 et seq.), and any successor law thereto, that arises from taxable sales and lease transactions generated by the operation of the Tustin Mazda on the Site. Notwithstanding the foregoing, the term "Sales and Use Tax shall not include: (i) the portion of sales and use taxes attributable to the Site that are retained by the SBE as an administrative, processing, or handling charge (calculated at the same percentage of gross revenues as is applicable City-wide); not (ii) the portion of such revenues, including without limitation, any revenues which may in future years be allocated and paid to City but which is restricted by law (but not contract) by an entity other than the City (and binding upon the City) to be used for specific uses (other than the uses provided for in this Agreement including without limitation disaster relief, transportation improvements, or otherwise; nor (iii) any portion of sales tax previously paid but refunded because of overpayment of such tax. "SBE" shall mean the State Board of Equalization or successor agency with the responsibility for collecting and administering the distribution and payment to the City of Sales and Use Taxes: "Schedule of Performance" shall mean the time frame for completion of the Rehabilitation Work as described in the Scope of Development, Attachment 3 of this Agreement. "Scope of Development" shall mean the description of the Rehabilitation Work as described in Attachment 3 of the Agreement. "Site" shall have the meaning set forth in Section 1.1.2 of the Agreement. "Tustin Mazda" shall having the meaning set forth in Section 1.4.2. "Term "shall have the meaning as set forth in Section 4.2 of this Agreement.. "Threshold Level" shall have the meaning as set forth in Section 4.3 and 4.4 of the Agreement. "Use" shall mean PB&J Automotive, Inc, Tustin Mazda or the Business as set forth in Section 1.4.2 and 3.1 of the Agreement. "Year" shall mean the close of four full consecutive Quarters as it relates to schedule of annual assistance payments as set forth in Section 4.9 of the Agreement. ATTACHMENT 3 SCOPE OF DEVELOPMENT [TUSTIN MAZDA] NOTE: References herein to "the Agreement" means the "Agreement Between The City of Tustin and PB&J Automotive" of which this Attachment No. 3 is a part; references to "Attachments" mean the Attachments to the Agreement unless otherwise specified. Except as otherwise noted, all capitalized terms defined within the Agreement shall retain the meanings as defined in the Agreement. 1.0 GENERAL DESCRIPTION The Site is located at 28 Auto Center Drive as legally described in Attachment 1 and defined also in the Lease between PB&J and M.V.Duffy James Family Trust (the Property Owner). 2.0 IMPROVEMENTS 2.1 Definition of Improvements PB&J shall design and construct or cause to be constructed on the Site the Rehabilitation Work, including the Improvements set forth in this Scope of Development. Additional requirements may be contained in the conditions of approval of any entitlements or building permits required for the Rehabilitation Work. All Governmental Requirements shall be met and any governmental approvals shall be obtained, where required. The Rehabilitation Work is generally required to modify what was a previous Lincoln Mercury automobile dealership and buildings which have been vacant for a time in order to respond to Mazda Motor Company requirements. A list of general Rehabilitation Work items follow: Scope of Work • Window replacement and tinting • Utilities-Upgrading & retrofitting • Removing & replacing dealer signs • Relocating & rebuilding service drive area • Concrete for service drive area • Network equipment & installation • Upgrading telephone system • Locks on external doors • Electrical work-wiring replacement • Waste removal for construction items • Interior painting • Repairs to A/C system • Fire equipment-extinguishers • Replacing & repairing lifts in service • Materials for lifts • Cabinets, lights for showroom (permanently affixed and attached to the real estate) • Oil reels for service bays • Cabinets for service bays (permanently affixed and attached to the real estate) • Electrical for service dept, lights & wiring • Painting ceiling and walls -showroom • Shelves for service (permanently affixed and attached to the real estate) • Painting & electrical • Painting doors • Counters for sales dept (permanently affixed and attached to the real estate) • Hose Reels for service • Cut doorway for customer lounge • Tile installation customer lounge • Tile installation showroom, restroom • Replace customer toilets • Replace 3 ballasts in office • Electrical outlets & paint restrooms • Electrical supplies • Build office adjacent to showroom • Electrical room materials • Materials for offices and showroom construction and rebuilt of interiors including dry-wall and hardware (doors, door jambs and hardware) including construction of separate President office adjacent to showroom. 2.1.1 Compliance with Codes and Conditions. The Rehabilitation Work and all installed Improvements shall be in compliance with all City of Tustin planning, building, electrical, plumbing, mechanical, fire codes and standards, as well as in compliance with any and all applicable Governmental Requirements and governmental agencies having jurisdiction, including, but not limited to, the City of Tustin. (a) The Rehabilitation Work and Improvements shall be designed in which the commercial building will have afirst-class architectural quality and character, both individually and in the context of the surrounding Tustin Auto Center. All public spaces and parking areas shall be designed, landscaped and developed with the same degree of quality. The City and PB&J will cooperate and direct their consultants, architects and/or engineers to cooperate so as to ensure the continuity and coordination necessary for the proper and timely completion of the Rehabilitation Work on the Site; (b) PB&J acknowledges the responsibility to obtain any approvals required by any governmental agency, utility or other agency, including the City, which has jurisdiction over all or any portion of the Rehabilitation Work and Improvements ("Governmental Approvals"). 2.2 Schedule of Performance PB&J shall commence and complete the Improvements by the October 1, 2010. 3.0 CHANGES TO SCOPE OF WORK If PB&J desires to make any changes to the Scope of Work approved by the City, PB&J shall submit the proposed change(s) to the City for approval. Such changes shall be reviewed in the context of the purpose of the Agreement and applicable provisions of the City of Tustin Municipal Code and shall be approved or disapproved by the City in writing. The Assistant City Manager and/or City Manager shall have the authority to approve minor modifications to the Scope of Work in writing which are determined to be consistent with the Scope of Development described herein and the intent of this Agreement. 4.0 DEVELOPMENT BUDGET The Development Budget which is included herein and which follows in Table 1 estimates the costs for completion of the Rehabilitation Work and Improvements to be $106,060. PB&J acknowledges that the Development Budget may exceed the amounts set forth in Table 1 but acknowledges that is shall bear all costs in excess of the costs as shown in the Project Budget Table 1 Rehabilitation Work Costs Window replacement and tinting Utilities-Upgrading & retrofitting Removing & replacing dealer signs Relocating & rebuilding service drive area Concrete for service drive area Network equipment & installation Upgrading telephone system Locks on external doors Electrical work-wiring replacement Waste removal for construction items Interior painting Repairs to A/C system Fire equipment-extinguishers Replacing & repairing lifts in service Materials for lifts Cabinets, lights for showroom Oil reels for service bays Cabinets for service bays Electrical for service dept, lights & wiring Painting ceiling and walls -showroom Shelves for service Painting & electrical Painting doors Counters for sales dept Hose Reels for service Cut doorway for customer lounge Tile customer lounge Tile showroom, restroom Replace toilets Replace 3 ballasts in office Electrical outlets & paint restrooms Electrical supplies Build office adjacent to showroom Electrical room materials Upgrade of Landscaping/Hardscape/Irrigation Materials for offices and showroom Subtotal Permits and Fees Costs for 28 Auto Center Drive $ 3,200 $ 4,248 $ 3,525 $ 17,143 $ 6,200 $ 8,993 $ 2,186 $ 694 $ 8,335 $ 1,065 $ 50 $ 950 $ 235 $ 3,106 $ 2,000 $ 2,310 $ 800 $ 1,600 $ 4,256 $ 1,500 $ 520 $ 3,420 $ 1,362 $ 810 $ 650 $ 560 $ 560 $ 560 $ 86 $ 159 $ 950 $ 4,909 $ 4,125 $ 1,768 $ 6,000 $ 5,225 104,060 $ 2,000 $ 106,060 ATTACHMENT 4 COVENANT (Attached) CITY OF TUSTIN OFFICAL BUSINESS REQUEST DOCUMENT TO BE RECORDED AND TO BE EXEMPT FROM RECORDING FEES PER GOVERNMENT CODE SECTION 6103. Recording Requested by and When recorded mail to: Assistant City Manager City of Tustin 300 Centennial Way Tustin, CA 92780 [Space Above This Line is Reserved for Recorder's Use) CITY OF TUSTIN COVENANT AND DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS TO BE RECORDED AFFECTING INTERESTS IN REAL PROPERTY This Covenant and Declaration of Covenants, Conditions, and Restrictions affecting interests in real property (the "Covenant") is entered into as of this day of 2010, by and between the City of Tustin, a California municipal corporation (the "City"), PB&J Automotive Inc., a California Corporation (the "Tenant") and the M.V. Duffy James Trust (the "Property Owner") (individually a "Party" and collectively the "Parties"). RECITALS A. The Property Owner is the owner of that certain real property (the "Property") located in the City of Tustin, County of Orange and State of California legally described in the attached Exhibit A. The Property Owner has entered into that certain unrecorded lease (the "Lease") dated for the use of a portion of the Property as legally described and depicted in the Lease. This Covenant affects the Property. B. The City and the Tenant have entered into that certain Agreement, dated as of 2010, concerning Tenant's use of the Property (the "Agreement"), which Agreement is on file with the City of Tustin as a public record and is incorporated by reference, and which Agreement provides for the execution and recording of this document. Except as otherwise expressly provided in this Covenant, all terms shall have the same meaning as set forth in the Agreement. NOW THEREFORE, THE CITY, THE TENANT, AND THE PROPERTY OWNER AGREE AS FOLLOWS: 1. The Tenant and the Property Owner, on behalf of itself and its successors, assigns, and each successor in interest in the Property or any part thereof, hereby covenants and agrees to exercise commercially reasonable efforts to continuously operate and use the Property for a Tustin Mazda automobile dealership with related parts, service, and repair operations, and parking, landscaping and related amenities, and at Tenant's option, additional new and incidentally related used vehicle lines in addition to Mazda vehicles. Operation of the Site for the Use by the Tenant shall be required to continue without interruption for the term of the Agreement. Additionally, the Tenant, its successors and assignees, shall comply with all applicable Governmental Requirements regarding their operations and use of the Site. During the Term of the Agreement, neither the Property Owner nor Tenant shall change, or cause to be changed, the Use on the Site, without the prior written approval of the City. Approval of the change of the Use on the Site shall be at the sole discretion of the City, which shall have no obligation to approve such change. 2. To the maximum extent permitted by law, the Tenant shall designate the Site on its Sales Tax Statements as the point of sale for all sales transactions arising out of the Use conducted on the Site. In addition, the Tenant shall exercise commercially reasonable diligence in an effort to cause any Affiliated Party as defined in the Agreement to designate the Site (the "City of Tustin") on reports that are required to be filed with the State Board of Equalization as the situs for the construction contracts for the Tustin Mazda automobile dealership or the leasing of any new or used motor vehicles where the transaction is generated from the Site, as applicable. 3. The Tenant shall, at its sole cost and expense, keep and maintain the Site and Improvements thereon and all facilities appurtenant in first class condition and repair consistent with provisions of the Agreement. 4. The Tenant and the Property Owner, on behalf of themselves and their successors, assigns, and each successor in interest to the Property, or any part thereof, hereby agree and covenant, that there shall be no discrimination against or segregation of any person or group of persons on account of sex, marital status, race, color, creed, religion, national origin or ancestry, in the sale, rental, rental transfer, use, occupancy, tenure and enjoyment of the Property, or any part thereof, nor shall the Tenant, Property Owner, its successors or assigns to any interest of Tenant or Property Owner or any part thereof of any person claiming under or through them, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees or vendees of the Property or any party thereof. 5. The covenants and agreements established in this Covenant shall, with regard to technical classification and designation be binding on the Property Owner and any successor in interest to any interest of the Property Owner in the Property, or any part thereof, for the benefit of and in the favor of the City, its successors and assigns, and the City of Tustin and no other persons or entities. The covenants contained in this Covenant shall remain in effect until expiration of the Lease between the Property Owner and Tenant or for the Term of the Agreement at which time the covenants contained in this Agreement shall be of no further force or effect. For purposes of this Covenant only, and without regard to the rights of the City pursuant to the Agreement with respect to Tustin Mazda, the expiration or earlier termination of the Lease maybe evidenced without limitation, by the Property Owner providing a written notice to the City of Tustin acknowledging the termination of the leasehold interest by the Tenant in the Property. 6. The agreements and covenants set forth in this Covenant shall run with the land. The Agreement shall remain in effect for the periods provided herein. Covenants regarding discrimination shall remain in effect in perpetuity. IN WITNESS WHEREOF, the City, the Tenant, and the Property Owner have executed this Covenant. "CITY" CITY OF TUSTIN sy: Its: ATTEST: City Clerk APPROVED AS TO FORM: By: City Attorney "TENANT" PB&J Automotive, dba Tustin Mazda By: Its: "PROPERTY OWNER" "M.V. DUFF'Y JAMES TRUST, dated Apri120. 1992 By: Kenneth Paul James, Co-Trustee By: Darryl L. Snyder, Co-Trustee EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY TO THE DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS TO BE RECORDED AFFECTING INTERESTS IN REAL PROPERTY [To Be Inserted] r~a~ No. io-xssgxo~~3-A-ss larate No. CAFNT0925-0925-0199-0259920793 LEGAL DESCRIPTION aC1iI8IT "A" THE LAND REFERRED TO HEREIN BELOW IS STt'UATED IN THE CI1Y OF TUSTIN, COUNTY OF ORANGE, STATE Of CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: PARCEL 1 OF ~PARCEt MAP N0. 87-201, IN THE CITY OF TtlSTIN, AS PER MAP RECORDED IN BOOK 2~0, PAGE(5) 8 THROUGH 10, INCLUSNE, OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE CALIFORNIA. EXCEPT THEREFROM ANY AND ALl OIL, OIL RIGHTS, MINERAt5, MINERAL RIGHTS, NATURAL GAS RIGHTS AND OTHER HYDROCAR80NS . BY WHATSOEVER NAME KNOWN, GEQTHERMAL STEAM OR OTHER RESOURCES, AND ALL PRODUCTS DERNED FROM ANY OF THE FOREGOING, THAT MAY 8E WITHIN OR UNDER THE LAND, TOGETHER Wlfl-! THE PERP~IIAL RIGHT OF DRILLING, MINING OR EXPLORING AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME FROM THE LAND UR ANY OTHER LAND, INCLUDING THE RIGHTTO WHIPSTOCK AND pIRECT10NA1,LY DRILL AND MINE FROM (ANDS OTHERTHAN THOSE CONVEYED HEREBY; OIL OR GAS WELLS TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND; AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELl5, TUNNELS AND SHAFtS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, UIP, MAINTAIN, REPAIR, DEEPEN ANO OPERATE ANY SUCH WELLS OR MINES; WIT4~t0UT, HOWEVER, ~'~HE R.IGHT TO DRTU., MINE STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND AS RESERVED IN THE bEED RECORDED FE6RUARY 9, 1989, AS INSTRUMENT N0.89-71765, OF OFFICIAL RECORDS. APN: 500-181-13 CITa PrAhnlnory Report Form - ModK+ec (11!17/06) State of California ) :ss County of ) On 2010, before me, notary public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public State of California ) :ss County of ) On 2010, before me, notary public, personally appeared ,who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify: under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public State of California ) :ss County of ) On 2010, before me, notary public, personally appeared ,who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Notary Public (Seal) ATTACHMENT 5 ILLUSTRATIVE EXAMPLE OF THE CALCUATION METHODOLOGY FOR DETERMINING ANNUAL ASSISTANCE PAYMENTS Assumptions 106,060 Maximum Level of Assistance 80.00°~o Annual Assistance Percentage of Excess Sales Tax used to determine Annual Assistance l O.OU example of potential Term of Assistance depending of Excess Sales Tax levels A B C D ~ Calendar Years Threshold Levels Actual Sales Tax Received by City Excess Sales Tax Annual Reimbursement Payment Amount Cumulative Reimbursement Amount (B - A = C) (C x 80%) 0 296,800 $ 296,800 - _ $ _ 1 302,700 308,075 5,375 4,300 4,300 2 308,700 328,800 20,100 16,080 20,380 3 314,800 328,800 14,000 11,200 31,580 4 321,100 349,350 28,250 22,600 54,180 5 327,500 349,350 21,850 17,480 71,660 6 334,050 389,950 55,900 34,400 106,060 7 340,700 389,950 49,250 - 106,060 8 347,500 400,674 53,174 - 106,060 9 354,450 411,692 57,242 - 106,060 10 361,540 423,014 61,474 - 106,060 Total 3,609,840 3,976,454 366,614 106,060 This Example is provided for illustrative purposes to clarify the methodology for calculation of Annual Assistance Payments under the Agreement. . ATTACHMENT 6 FORM OF CERTIFICATE OF COMPLETION CITY OF TUSTIN OFFICAL BUSINESS REQUEST DOCUMENT TO BE RECORDED AND TO BE EXEMPT FROM RECORDING FEES PER GOVERNMENT CODE SECTION 6103. Recording Requested by and When recorded mail to: Assistant City Manager City of Tustin 300 Centennial Way Tustin, CA 92'780 [Space Above This Line is Reserved for Recorder's Use] CITY OF TUSTIN CERTIFICATE OF COMPLETION A. The City of Tustin, a public body, corporate and politic ("City") and PB&J Automotive, Inc. (PB&J) entered into that certain Agreement, dated as of , 2010 (the "Agreement"), which Agreement is on file with the City of Tustin as a public record and is incorporated by reference, and which Agreement requires certain Rehabilitation Work for a Tustin Mazda automobile dealership on the certain real property (the "Site") legally described o the attached Exhibit A according to the terms and conditions of the Agreement. B. PB&J has now completed the Rehabilitation Work. C. Pursuant to Section 4.12 of the Agreement, after completion of the Rehabilitation Work, as therein defined, the City shall furnish PB&J with a Certificate of Completion. D. The issuance by the City of the Certificate of Completion shall be conclusive evience that the completion of the Rehabilitation Work conforms to the Agreement. E. The City has determined that, as of 2010, the completion of the Rehabilitation Work conforms to the Agreement. NOW THEREFORE: 1. As provided in the Agreement, the City does hereby certify that the completion of the Rehabilitation Work has been satisfactorily performed and completed, and that such Rehabilitation Work complies with the Agreement. 2. This Certificate of Completion is not a notice of completion as referred to in Section 3093 of the California Civil Coe. 3. Executory provisions of the Agreement and that certain Covenant and Declaration of Covenants, Conditions and Restrictions (the "Covenant") executed by PB&J and the Property Owner in favor of the City, the original of which was recorded in the Official Records of Orange County on ,2010 as Instrument No. ,shall remain in full force and effect per the terms of such Covenant. IN WITNESS WHEREOF, the City, the Tenant, and the Property Owner have executed this Covenant. "CITY" CITY OF TUSTIN By: Its: ATTEST: City Clerk APPROVED AS TO FORM: By: City Attorney "PB&J" PB&J Automotive, dba Tustin Mazda By: Its: EXHIBIT A DESCRIPTION OF THE SITE (To Be Inserted] Tidc No, 10.2s992b793-A-S9 Loeabe No. CAFIYT0925-0925-0~99.0259920793 LEGAL DESCRIPTION pCIiIBIT "A" THE LAND REFERRED TO HEREIN BELOW IS SINATED IN THE CTIY OF TUSTIN, COUNTY OF ORANGE, 5I-ATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: PARCEL 1 OF ~RARCEL MAP N0. 87-201, IN THE CTiY OF TUSTIN, AS PER MAP RECORDED IN BOOK 2~, PAGE(S) 8 THROUGH 10, TNCLUSNE, OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE CALIFORNIA. EXCEPT THEREFROM ANY AND Al.L OIL, OIL RIGHT'S, MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS AND OTHER HYDROCAR80N5 . BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM OR OTHER RESOURCES, AND AU. PRODUCTS DERNEO FROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING OR EXPLORING AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME FROM THE LAND OR ANY OTHER LAND, INCLUDING THE RIGHTTO WHIPSTOCK AND DIRECTTONAt-LY DRILL AND MINE FROM LANDS OTHERTHAN THOSE CONVEYED HEREBY';'OIL OR GAS WELLS TUNNELS AND SHAFTS~INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LANG; AND TO BOTTOM ~aUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS ANO SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETtJNNEL, UIP, MAINTAIN, REPAIR, DEEPEN ANO OPERATE ANY SUCH WELLS OR MINES; WIThtOI~', HOWEVER, '('HE RIGHT TO GRILL, MINE STORE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE SUBSUI~tFACE OF THE LAND AS RESERVED IN THE DEED RECORDED FE6RUARY 9, 1989, AS INSTRUMENT N0. 89-?17bS, OF OFFICIAL RECORDS. APN: 500-181-13 CI.Tk PI+sJiminarY Report Fo,m - ModifiCO (~,~/17/06)