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HomeMy WebLinkAboutR7- Economic Development ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION/COUNCIL ACTION FROM: RONALD E.WINKLER SUBJECT: COSTCO OWNER Development Director PARTICIPATION AGREEMENT DATE: May 28, 1998 , Li=J` ------------------------------------------------------------------------------------------------------------------------------------------- Synopsis of Previous Commission/Councit/Committee Action(s): On May 26, 1998,the Redevelopment Committee recommended that this item be forwarded to the Community Development Commission for approval. ------------------------------------------------------------------------------------------------------------------------------------------- Recommended Motion(s): (Community Development Commission) MOTION A: That the Community Development Commission approve an Owner Participation Agreement with Costco Wholesale Corporation. (Mayor and Common Council) MOTION B: That the Mayor and Common Council authorize the Agency to incur indebtedness in an amount not to exceed$495,040 for necessary offsite improvements. ------------------------------------------------------------------------------------------------------------------------------------------- Contact Person(s): Ronald E.Winkler/John Hoeger Phone: 5081 Project Area(s): Tri-City Ward(s): Three(3) Supporting Data Attached:0 Staff Report❑ Resolution(s) 0 Agreement(s)/Contract(s) ❑ Map(s) ❑Ltr/Memo FUNDING REQUIREMENTS: Amount: $ N/A Source: N/A Budget Authority: N/A SIGNATURE: T-x' `. I-If/11t� Ronald E.W nkler,Director Developm ------------------------------------------------------------------------------------------------------------------------------------------- Commission/Council Notes: ------------------------------------------------------------------------------------------------------------------ REW:Iag:06-01-02.cdc COMMISSION MEETING AGENDA MEETING DATE:06/01/1998 Agenda Item Number: ECONOMIC DEVELOPMENT AGENCY STAFF REPORT ------------------------------------------------------------------------------------------------------------------ Costco Owner Participation Agreement This report summarizes the subject project and action taken by the Redevelopment Committee on May 26, 1998 to recommend approval of an Owner Participation Agreement with Costco Wholesale Corporation. THE PROJECT The proposed agreement will facilitate construction of a new Costco Superstore to be located at the southwest corner of the intersection of Tippecanoe Avenue and Hospitality Lane, within the Tri-City Redevelopment Project area. The project includes construction of a 137,640 square foot Costco Superstore which includes a 5,200 square foot tire center, and a 1,075 square foot food service area; with the remaining 131,365 square feet to be used for general retailing and storage. In addition the project includes a three island, six pump fuel filling station which will be operated under the name of Costco Gasoline. The gas station will be a self service, card operated facility. The total site is comprised of 14.21 acres and will include approximately 818 parking spaces. Offsite public improvements required to be completed and dedicated for acceptance by the City as part of the overall improvement of the project generally include: • Traffic signal modifications at Tippecanoe/Hospitality • Construction of a dual left turn lane on Tippecanoe to Hospitality • Construction of an extension of the left turn lane from Hospitality to Tippecanoe • Installation of traffic signals at the westerly entrance to the project • Modification of the median on Hospitality Lane. • Modification of traffic signal at Waterman/Hospitality. (Qualifies for Traffic Systems Fee Credit) • Widening of Tippecanoe to accomadate right turn in/right out access from southbound Tippecanoe. • Street Lights, curbs, gutters, etc. ------------------------------------------------------------------------------------------------------------------ REW:lag:06-01-02.cdc COMMISSION MEETING AGENDA MEETING DATE:06/01/19998] Agenda Item Number: Economic Development Agency Staff Report Costco Owner Participation Agreement May 27, 1998 Page Number-2- ------------------------------------------------------------------------------------------------------------------ ANALYSIS Costco currently generates approximately$350,000 in annual sales tax revenues payable to the City of San Bernardino from taxable retail sales at their current location. Costco estimates that the annual sales tax revenues at the new and expanded facility after completion will increase to $650,000 per year during the first full year of operation at their proposed location. They estimate that upon completion, the valuation of the project for property tax assessment purposes will be $1 OM, including land and building assessments, which will result in gross tax increment revenues to the Agency of approximately$100,000 annually. Net tax increment available associated with the completion of the project will be approximately $78,000 after deductions for housing set aside funds and pass through agreements. Offsite public improvements as outlined above are presently estimated to cost $495,040. An additional burden on the project is the assessment created by City of San Bernardino Assessment District 961. Costs associated with Assessment District 961 are estimated to be approximately $80,936 annually through the year 2006. This District provided for the construction of various improvements including streets, sewers, fencing, water mains, curbs, gutters, sidewalks, streetlights, traffic signals, and other improvements in the Hospitality Lane area generally between Waterman and Tippecanoe. The Agency has been asked to provide public assistance to offset the costs associated with installation of various public improvements for the project and the assumption by the Agency to pay certain assessment district 961 assessments on the project. Staff recommends that no Agency funds other than those directly generated by the "Net Tax Increment" amounts upon completion of the project be pledged as part of any assistance package. As structured Net Tax Increment payments derived from development of the site would be applied as follows: 1. Reimbursement of Assessment District 961 payments made by developer in an amount estimated to be $80,936 annually commencing with tax year 1998-99 through the year 2006. 2. Reimbursement of public offsite improvement costs in an amount not to exceed $495,040, plus interest at 6%. (Note: Costco shall commit to pay all construction labor personnel who are employed on the offsite public improvements to be paid the applicable amounts of prevailing wages). ------------------------------------------------------------------------------------------------------------------ REW:lag:06-01-02.cdc COMMISSION MEETING AGENDA MEETING DATE:06/01/1998 Agenda Item Number: Economic Development Agency Staff Report Costco Owner Participation Agreement May 27, 1998 Page Number-3- ------------------------------------------------------------------------------------------------------------------ Net Tax Increment payments would continue for a period of fifteen(15)years or until all reimbursements are paid whichever is sooner. Any assistance shall be conditioned upon Costco's compliance with various performance measures and operating covenants including, completing project per Scope of Development, obtaining certificate of completion, making timely payments to County Treasurer-Tax Collector of taxes and Special Assessments, operating retail operation under the name of Costco, generating sales tax revenues of at least $400,000 per year. Based upon the above, the Redevelopment Committee recommends approval of the form motions. ul RONALD A. WINKLER, Director Development Department ------------------------------------------------------------------------------------------------------------------ REW:1ag:06-01-02.cdc COMMISSION MEETING AGENDA MEETING DATE:06/01/1998 Agenda Item Number: 7 d WHEN RECORDED MAIL TO: REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 201 North "E" Street Third Floor San Bernardino, CA 92401 (Space above for Recorder ' s Use) OWNER PARTICIPATION AGREEMENT BY AND BETWEEN REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO and COSTCO WHOLESALE CORPORATION, a Washington corporation TABLE OF CONTENTS ARTICLE I SUBJECT OF AGREEMENT . . . . . . . . . . 1 Section 1 . 1 Purposes of Agreement . . . . . . . . 1 Section 1 . 2 The Project Area . . . . . . . . . . 1 Section 1 . 3 Parties to the Agreement . . . . . . 1 Section 1 . 4 Prohibition Against Change in Ownership, Management and Control of Developer for Assignment of Agreement . 2 ARTICLE II DISPOSITION OF PROPERTY . . . . . . . . . 3 Section 2 . 1 Developer ' s Private Purchase of Property. . . . . . . . . . . . . . 3 Section 2 . 2 Proposed Project . . . . . . . . . . 3 Section 2 . 3 Agency Assistance . . . . . . . . . . 4 Section 2 . 4 Developer ' s Conditions . . . . . . . 7 Section 2 . 5 Property Use Approvals . . . . . . . 8 Section 2 . 6 Evidence of Financing Commitments . 8 Section 2 . 7 Representations And Warranties of the Agency. . . . . . . . . . . . . . . 8 Section 2 . 8 Representations and Warranties of the Developer. . . . . . . . . . . . . . 10 ARTICLE III DEVELOPMENT OF THE PROPERTY . . . . . . . 11 Section 3 . 1 Lot Line Adjustment . . . . . . . . . 11 Section 3 . 2 City Land Use Approvals . . . . . . . 11 Section 3 . 3 Scope of Development . . . . . . . . 12 Section 3 . 4 Conditions of Approval . . . . . . . 12 Section 3 . 5 Agency Review of Plans . . . . . . . 12 Section 3 . 6 City Plan Review . . . . . . . . . . 13 Section 3 . 7 Changes in Plans . . . . . . . . . . 14 Section 3 . 8 Developer' s Costs; Developer' s Permits 15 Section 3 . 9 Progress Reports . . . . . . . . . . 15 Section 3 . 10 Developer' s Insurance . . . . . . . 15 Section 3 . 11 Non-Discrimination . . . . . . . . . 16 Section 3 . 12 Agency Access . . . . . . . . . . . 16 Section 3 . 13 Certain Responsibilities of the Agency. . . . . . . . . . . . . . . 17 Section 3 . 14 Taxes Assessments, Encumbrances and Liens . . . . . . . . . . . . . . . . 17 Section 3 . 15 Certain Prohibitions Against Transfers . . . . . . . . . . . . . . 18 Section 3 . 16 Intentionally omitted. . . . . . . . 18 SBEO/0001/DOC/3330 5/27/98 1030:ah i TABLE OF CONTENTS (continued) Page(s) Section 3 . 17 Right of the Agency to Satisfy Other Liens on the Property after Conveyance of Title. . . . . . . . . . . . . . 19 Section 3 . 18 Certificate of Completion. . . . . . 19 ARTICLE IV USE OF THE PROPERTY . . . . . . . . . . . 20 Section 4 . 1 Opening Conditions . . . . . . . . . 20 Section 4 . 2 Operating Covenant . . . . . . . . 21 Section 4 . 3 Governmental Acts . . . . . . . . . 22 Section 4 . 4 LIQUIDATED DAMAGES . . . . . . . . . 22 Section 4 . 5 Subsidy Recoupment Amount . . . . . 23 Section 4 . 6 Obligation to Refrain from Discrimination. . . . . . . . . . . 23 Section 4 . 7 Form of Nondiscrimination and Nonsegregation Clauses . . . . . . . 23 Section 4 . 8 Effect and Duration of Covenants . 24 Section 4 . 9 Restrictive Covenant . . . . . . . . 25 ARTICLE V DEFAULTS AND REMEDIES . . . . . . . . . . 25 Section 5 . 1 Defaults - General . . . . . . . . . 25 Section 5 . 2 Legal Actions . . . . . . . . . . . 26 Section 5 . 3 Rights and Remedies are Cumulative . 26 Section 5 . 4 Damages . . . . . . . . . . . . . . . 26 Section 5 . 5 Specific Performance . . . . . . . . 27 ARTICLE VI GENERAL PROVISIONS . . . . . . . . . . . 27 Section 6. 1 Notices Demands and Communications Between the Parties . . . . . . . . . 27 Section 6 . 2 Conflict of Interest . . . . . . . . 28 Section 6 . 3 Warranty Against Payment of Consideration for Agreement . 28 Section 6 . 4 Nonliability of Agency Officials and Employees . . . . . . . . . . . . . . 28 Section 6 . 5 Enforced Delay: Extension of Time of Performance. . . . . . . . . . . . . 29 Section 6 . 6 Approvals . . . . . . . . . . . . . . 29 Section 6 . 7 Real Estate Commissions . . . . . . . 29 Section 6. 8 Indemnification. . . . . . . . . . . 30 Section 6 . 9 Release of Developer from Liability. 30 Section 6 . 10 Attorneys ' Fees . . . . . . . . . . . 30 Section 6 . 11 Dispute Resolution. . . . . . . . . 30 SBEO/0001/DOC/3330 5/27/98 1030:ah ii d TABLE OF CONTENTS (continued) Page (s) Section 6 . 12 Effect . . . . . . . . . . . . . . . 31 ARTICLE VII ENTIRE AGREEMENT WAIVERS AND AMENDMENT 31 Section 7 . 1 Entire Agreement . . . . . . . . . . 31 ARTICLE VIII TIME FOR ACCEPTANCE OF AGREEMENT BY AGENCY AND RECORDATION . . . . . . . . . . . . . 32 Section 8 . 1 Execution and Recordation. . . . . . 32 Page (s) EXHIBITS Exhibit "A" Site Plan Exhibit "B" Scope of Development Exhibit "C" Schedule of Performance Exhibit "D" Certificate of Completion SBEO/0001/DOC/3330 5/27/98 1030:ah 111 OWNER PARTICIPATION AGREEMENT THIS OWNER PARTICIPATION AGREEMENT is entered into by and between the Redevelopment Agency of the City of San Bernardino (the "Agency") , and Costco Wholesale Corporation, a Washington corporation (the "Developer") . The Agency and the Developer agree as follows : ARTICLE I SUBJECT OF AGREEMENT Section 1 . 1 Purposes of Agreement . The purpose of this Owner Participation Agreement (the "Agreement") is to effectuate redevelopment within the boundaries of the City of San Bernardino (the "City") by providing for the redevelopment by the Developer of certain real property located within a duly established Redevelopment Project Area of the City (the "Project Area") , which property is shown in the Site Plan attached hereto as Exhibit "A" and incorporated herein by reference (the "Property") . The Property was previously developed for urban uses prior to the effective date of the State Legislation which enacted Health and Safety Code Section 33326 . 5 . The redevelopment of the Property by the Developer pursuant to this Agreement, and the fulfillment generally of the Agreement, are in the vital and best interests of the City, the Agency, and the health, safety, morals, and welfare of the City' s residents, and are in accord with the public purposes and provisions of applicable federal, state and local laws and requirements . Section 1 . 2 The Project Area . The Project Area was approved and adopted by the City Council of the City of San Bernardino by duly adopted ordinance in accordance with the provisions of the Community Redevelopment Law of the State of California (the "Community Redevelopment Law") . This Agreement shall be subject to the provisions of the Community Redevelopment Law. Section 1 . 3 Parties to the Agreement . a. The Agency is a public body, corporate and politic, exercising governmental functions and powers, and organized and existing under Chapter 2 of the Community Redevelopment Law, Health SBEO/0001/DOC/3330 5/27/98 1030:ah 1 and Safety Code Section 33000, et sec . The principal office of the Agency is located at 201 N. "E" Street, San Bernardino, California 92401-1507 . As used in this Agreement, the term "Agency" shall be deemed to include the Agency and any assignee and/or successor to the Agency or to its rights, powers and responsibilities under this Agreement. b. The Developer is Costco Wholesale Corporation, a Washington corporation. The principal office of the Developer for purposes of this Agreement is located at 999 Lake Drive, Issaquah, Washington 98027 (Telephone Number: (425) 313-8100) , and for purposes of Section 6 . 1 hereof, any and all notices, demands or communications shall be sent to the Developer addressed to the attention of Richard Olin. The Developer has heretofore provided to the Agency satisfactory evidence of the legal formation and existence of the Developer and the good standing of the Developer with the State of California (the "State") to transact business within the State, to hold title to the Property and to develop the Project, as hereinafter defined. Section 1 . 4 Prohibition Against Chancre in Ownership, Manaaement and Control of Developer for Assignment of Agreement . a. The qualifications and identity of the Developer are of particular concern to the Agency. It is because of these qualifications and the identity of the Developer that the Agency has entered into this Agreement with the Developer. Prior to the issuance of a Certificate of Completion, no voluntary or involuntary successor in interest of the Developer shall acquire any rights or powers under this Agreement, except as expressly set forth herein. b. Except as otherwise provided in this Agreement, the Developer shall not assign all or any part of this Agreement prior to the issuance of a Certificate of Completion without the prior written approval of the Agency, which approval shall not be unreasonably withheld. C. Nothing contained in this Agreement shall limit or impair the Developer ' s rights or powers to assign all or any part of this Agreement or to make any total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Property or Improvements which occurs on or after the date that a Certificate of Completion has been issued for the Property. SBEO/0001/DOC/3330 5/27/98 1030:ah 2 b d. Notwithstanding any other provision of this Agreement to the contrary, Agency approval of an assignment of this Agreement or conveyance of the Property or Improvements, or any part thereof, shall not be required in connection with any of the following which occurs prior to the date that a Certificate of Completion has been issued for the Property: (i) Any transfers to an entity or entities controlled by or under common control with Developer, Costco Companies, Inc. , The Price Company; and/or an entity or entities formed by the merger, consolidation or corporate reorganization of any of the foregoing companies . (ii) The conveyance or dedication of any portion of the Property, or any of the Area Off-Sites described below, to the City or other appropriate governmental agency, or the granting of easements or permits to facilitate construction of the Project (as defined herein) . (iii) Any assignment for financing purposes, including the grant of a deed of trust to secure the funds necessary for land acquisition, construction and permanent financing of the Project . (iv) Any lease of a portion of the Property which is not inconsistent with the use of the main building as a warehouse club. ARTICLE II DISPOSITION OF PROPERTY Section 2 . 1 Developer' s Private Purchase of Property. The Property which is the subject of this Agreement is currently owned by Aaron Mendelsohn ("Current Owner") . Current Owner and Developer have entered into a purchase and sale agreement ("Land Contract") pursuant to which Developer has agreed to purchase the Property upon the terms and provisions, and subject to the conditions, set forth therein. Developer ' s and Agency' s SBEO/0001/DOC/3330 5/27/98 1030:ah 3 obligations under this Agreement are subject to the occurrence of the acquisition by Developer of the Property from the Current Owner. Developer shall not be obligated to acquire the Property from the Current Owner unless Developer has determined in its sole and absolute discretion that all conditions to Developer' s obligations to purchase the Property from Current Owner under the Land Contract have first been satisfied. Section 2 . 2 Proposed Project . The development proposed by Developer on the Property comprises a warehouse club store and related common area improvements (the "Project") as generally depicted on the Site Plan. As used herein, the term "Scope of Development" means, as to the Developer' s responsibilities, the design, construction and financing of a building comprising not less than 125, 000 square feet suitable for wholesale and retail sales on the Property, together with the related internal parking, roadway and landscaped areas necessary to service the same in a manner generally consistent with the Site Plan, together with the design, construction and installation of the Area Off-Sites referenced in Section 2 . 3, below. Section 2 . 3 Agency Assistance . Upon completion of the transfer to the Developer of the Property pursuant to the Land Contract, the Agency shall incur certain indebtedness to the Developer with respect to the redevelopment of the Property and completion of the Project, and repay the Developer such indebtedness in the amounts, and on the conditions and at the times from the special source of funds of the Agency all as set forth in this Section 2 . 3 : a. Special Assessments . As of the date of recordation of the Certificate of Completion as set forth in Section 3 . 18, below, the Agency hereby agrees to assume (subject to the terms and conditions and payable solely from the special source of funds of the Agency pledged thereto under this Section) , the obligation to reimburse the Developer an amount equal to, each installment of the special assessments or special taxes imposed on the Property pursuant to Assessment District No. 961, Reassessment District No. 961-R or any modifications or refundings thereof, which may be levied and come due in any tax year beginning on or after July 1, 1998 (the "Infrastructure Assessments") . The obligation of the Agency to make such reimbursement amounts available to the Developer of the Infrastructure Assessments shall be payable solely SBEO/0001/DOC/3330 5/27/98 1030:ah 4 from the available funds of the Agency under the pledge of the "Net Tax Increment" for the "Term" set forth below in this Section 2 . 3 . b. Repayment of Developer Loan; Reimbursement to Developer. In addition to the obligation of the Agency as assumed under Section 2 . 3 .a, the Agency has agreed to bear the cost of the design, construction and installation of certain off-site public improvements associated with the redevelopment of the Property and the Project by the Developer, but the Agency does not currently have sufficient funds to finance the cost of such public improvements, and accordingly, the Agency and Developer have agreed upon the mechanism described below to accomplish such result . Developer agrees to design, construct, install and offer for dedication to the City upon completion, those off-site public improvement work elements ("Area Off-Sites") which are identified in the Scope of Development under the heading labeled "Off-Site Improvements (Area Off-Sites) , " and the Agency agrees to reimburse Developer an amount not to exceed four hundred and ninety-five thousand and forty dollars ($495, 040) in respect to the costs incurred by the Developer in connection with the design, construction and installation of the Area Off-Sites ( "Area Off- Sites Amount") , plus interest thereon at the rate of six percent (60) per annum from the date of the advance of said funds for the account of the Agency to pay for the Area Off-Sites, until the earlier date when said amount has been paid in full or the end of the Term set forth below. C. Pledge by the Agency of the Net Tax Increment . Agency hereby pledges to the Developer to pay the Agency' s obligations under Sections 2 . 3 .a and 2 . 3 .b for the "Term" as set forth below, all of the "Net Tax Increment" allowable and paid to the Agency which is attributable as certain tax increment revenues of the Agency generated by the Property and any improvements and personal property therein as described below. The words "Net Tax Increment" and "Term" and other related phrases, are defined in the following subsections of this Section 2 . 3 . d. Net Tax Increment . As used herein, the term "Net Tax Increment" means that portion of the taxes levied upon the Property by or for the benefit of the applicable taxing agencies on or after July 1, 1998, which taxes are allocated and paid to the Agency pursuant to California Health and Safety Code Section 33670 or any successor provisions of law or substitutions therefor (i) net of the required 20% deposit to the Agency' s Low and Modlerate- Income Housing Fund, and (ii) net of existing taxing entities pass- through agreements by and between the Agency and the San Bernardino City Unified School District which do not exceed 20 of Net Tax SBEO/0001/DOC/3330 5/27/98 1030:ah 5 Increment; provided, however, that Net Tax Increment shall not include such taxes allocated to the Agency by reason of any increase in the assessed value of the Property which may have occurred after the Base Year for the Project Area and the day preceding acquisition of the Property by the Developer pursuant to the Land Contract (the "Property Base Year Assessed Value") . Said taxes levied upon the taxable personal property on the Property, if any, shall be included in Net Tax Increment whether the assessment for such taxable personal property is included on the secured or the unsecured property tax assessment rolls . The parties estimate the Property Base Year Assessed Value of the Property prior to sale to the Developer pursuant to the Land Contract is approximately $9. 61 per square foot of land area, based on the assessments against the existing assessor ' s parcels out of which the Property is being created. The assessed value of the Property (real and personal property) upon completion of the redevelopment of the Project, as adjusted from time to time, is sometimes hereinafter referred to as the "Completed Property Assessed Value" . Upon the request of either party, both of the parties shall jointly execute a memorandum which confirms the amount of the Property Base Year Assessed Value based on the actual acreage being purchased by Developer under the Land Contract . e. Limitations and Pledge . The pledge of the Net Tax Increment under Section 2 . 3 .c shall be at all times subordinate to (i) any and all previously created or hereafter created security interests, liens or pledges of the taxes allocated to the Agency pursuant to California Health and Safety Code Section 33670, or any successor provisions of law or substitutions therefor (including Net Tax Increment) as previously pledged by the Agency or otherwise required to be available under such security interest, lien or pledge for the payment of principal, interest, redemption premiums and related administrative expenses for any issuance of tax allocation bonds, notes or other obligations of the Agency that are sold through traditional public underwriting processes to investors whether in the form of a direct pledge to bondholders under a trust indenture or through a pledge to a bond trustee pursuant to an Agency loan agreement or other similar financing document providing the security and repayment source of any bonds, certificate of participation, lease-purchase obligation issued by the Agency directly or through any conduit issuer is or shall be from such taxes allocated to the Agency; provided, however, that the Agency covenants not to cause the Net Tax Increments to be so encumbered as to make the Agency unable to pay its obligations to the Developer under this Section 2 . 3 . SBEO/0001/DOC/3330 5/27/98 1030:ah 6 f. Semi-Annual Payments . With respect to the period from the date of the Project ' s opening for business in accordance with Section 4 . 1 below, until the expiration of the Term pursuant to Section 2 . 3 (g) below, Agency shall pay all available Net Tax Increment allocated and paid to the Agency with respect to the Property to the Developer. All payments due Developer hereunder shall be payable in arrears two (2) months after the conclusion of the second and fourth quarters of each state fiscal year (i .e . , on March 1 and August 1) based on each preceding two fiscal year quarters and shall be determined by reference to the amount of the Net Tax Increment with respect to the Property (if any) as allocated and paid to the Agency during the most recently concluded period. All payments by the Agency to the Developer under this Section shall be applied first to the reimbursement of the installments of Infrastructure Assessments, second to the payment of accrued interest on the Area Off-Sites Amount and third to the repayment of the Area Off-Sites Amount . In no event shall the payments of Net Tax Increment due under Section 2 . 3 (a) and Section 2 . 3 (b) during the Term exceed in the aggregate a sum which is sufficient to satisfy the Infrastructure Assessments plus the Area Off-Sites Amount and any applicable interest thereon. g. Term; Minimum Sales . The "Term" of the pledge of the Net Tax Increment under Section 2 . 3 .c shall be the period of time commencing on the "Opening Date" (as defined in Section 4 . 1 below) and ending on that date which is the last day of the fifteenth (15th) full fiscal year after the expiration of the partial fiscal year in which the Opening Date occurred. Agency shall not be required to make any payment of Net Tax Increment to the Developer under this Section 2 . 3 with respect to Net Tax Increment which is allocated and paid to the Agency for any state fiscal year which begins after the Term. In addition, the Agency shall not be required to make any payment of Net Tax Increment to the Developer under this Section 2 . 3 with respect to any state fiscal year in which after the Opening Date has occurred, the Project shall generate less than Forty Million Dollars ($40, 000, 000) of retail sales subject to retail sales taxes; provided further, that said $40, 000, 000 shall be prorated for the portion of the fiscal year in which the Opening Date occurs and prorated in any year thereafter in which the Project is not open for business due to casualty, based on the number of days during such fiscal year in which the Project is open for business . h. Limitation of Amount; Late Receipt by Agency. Agency' s obligation to remit Net Tax Increment amounts to the Developer to pay the sums due under Section 2 . 3 .a and Section 2 . 3 .b with respect to any state fiscal year shall not exceed the SBEO/0001/DOC/3330 5/27/98 1030:ah 7 aggregate amount of available Net Tax Increment from the Property as allocated and paid to the Agency for such fiscal year. Further, if during the Term the Agency has not received the Net Tax Increment corresponding with any preceding fiscal year or portion thereof from the County Auditor-Controller prior to the date a payment to Developer is due under Section 2 . 3 . f above, the Agency may defer the payment of Net Tax Increment to Developer until that date which is thirty (30) days after the Agency' s receipt of such Net Tax Increment from the County Auditor-Controller. For example, and without limitation upon the foregoing, if a supplemental assessment with respect to the Property for the 1999/2000 fiscal year is not billed by the Tax Assessor or Tax Collector or if the applicable supplemental assessment if billed is not collected by the Tax Collector and remitted to the Agency by the County Auditor- Controller until May 31, 2001, then that portion of the Net Tax Increment for the 1999/2000 fiscal year included in such supplemental assessment shall be payable to Developer on or before July 30, 2001 . If the Agency believes any payment of Net Tax Increment to the Developer may be subject to a deferral in payment under Section 2 . 3 .h, the Agency shall provide written notice to the Developer of such deferral on the date (s) payments would otherwise have become due . i . Late Payments of Property Taxes By Developer and Late Receipt of Net Tax Increment by Agency. If Developer is properly billed for any real or personal property taxes or assessments relating to the Property with respect to a particular state fiscal year, and Developer fails to pay the taxes for such year within six (6) months after the date that the second installment of taxes for such fiscal year becomes delinquent (the "Delinquency Roll Date") , then any such delinquent taxes for such fiscal year when paid by the Developer for the Property after the Delinquency Roll Date ("Delinquent Taxes") regardless of when such Delinquent Taxes may later be paid by the Developer, shall be excluded from the amount of Net Tax Increment available to the Agency from such fiscal year to make the next payment (s) to the Developer when due. Nothing contained in the foregoing shall limit or impair Developer' s right to challenge or appeal any tax or assessment on the Property in accordance with applicable law, and no such tax or assessment amount paid under protest by the Developer, shall be deemed to be Delinquent Taxes . j . The Obligation of the Agency Under Section 2 . 3 .a and Section 2 . 3 .b Is a Special and Limited Fund Obligation of the Agency Payable Solely From Net Tax Increment . The obligation of the Agency to pay any sum to the Developer under Section 2 . 3 . a and Section 2 . 3 .b is expressly acknowledged by the Developer to be a SBEO/0001/DOC/3330 5/27/98 1030:ah 8 special and limited fund obligation of the Agency, payable solely from the available Net Tax Increment collected and paid to the Agency each year during the Term, and neither the full faith or credit or taxing power of the Agency or any other local entity is pledged to the Developer hereunder. k. Discharge of the Remainina Balance of the Indebtedness of the Aaencv to the Developer at the End of the Term. [INSERT TEXT] 1 . Agency Promissory Note Evidencing Indebtedness of the Agency to the Developer. Within thirty (30) days following the Opening Date (as defined in Section 4 . 1, below, the Agency shall deliver to the Developer a promissory note of the Agency evidencing the obligation of the Agency to pay to the Developer the sums required for the Infrastructure Assessments and the Area Off-Sites Amount when due during the Term from Net Tax Increment . Section 2 . 4 Developer ' s Conditions . The Developer' s obligation to acquire the Property and to build the Project shall be expressly conditioned upon the satisfaction or waiver by Developer of each of the following: a . The Current Owner shall be able to convey good, marketable and insurable title to the Property, subject only to those exceptions as approved by Developer. b. The City shall be prepared to issue any necessary building permits for the Project including the building permit for the warehouse club store. C. The Developer shall have received final approval of any changes in zoning, variances, special use permits, site plan approvals, environmental approvals or other approvals under applicable law as are required for the Intended Use, including, without limitation, any necessary actions pursuant to CEQA. For the purposes of this Agreement, "final approval" shall mean approval by the applicable governmental agency authorized to grant such approval including, without limitation, the expiration of the applicable statute of limitations for any challenges to any determination under CEQA and expiration of any and all appeal or challenge periods with respect to any such approval without any SBEO/0001/DOC/3330 5/27/98 1030:ah 9 appeal being taken or judicial challenge to such approval being filed. d. Developer shall have approved in its sole, absolute and unrestricted discretion any fees, exactions or requirements established as a condition to (or otherwise imposed in connection with) the subdivision, development, use or occupancy of the Property or the Project including, without limitation, any mitigation measures imposed in connection with any action under CEQA. e. Developer shall have approved that the results of any inspections, hazardous materials tests, soil tests, drainage tests, surveys, topographical analysis, engineering and/or architectural drawings (all to be performed at Developer' s expense) do not disclose that the Property is unsuitable for the Project or will require extraordinary construction techniques or variations from Tenant ' s prototypical new facilities . f. The representations and warranties of the Agency shall be true and correct at the time of close of escrow. g. The Current Owner shall be prepared to proceed to closing under the Land Contract and all conditions to Developer' s obligations thereunder shall have been satisfied. Section 2 . 5 Property Use Approvals . The Developer will submit such land use approval applications as are required in connection with the contemplated development, construction and operation of the Property as contemplated by this Agreement, including, without limitation, all necessary conditional use permits required pursuant to the zoning ordinance, and variances necessary for automotive uses, gasoline sales, liquor sales, on premises signage and any and all other matters . Agency shall use its best efforts to assist Developer in identifying any necessary land use approvals and to assist Developer in processing the same with the City and any other applicable government agencies but nothing contained herein shall bind the City to issue any such land use approvals to the Developer for the Project . Section 2 . 6 Evidence of Financing Commitments . Developer presently intends to finance the development of the Project with its internal corporate funds, and Developer ' s and Agency' s obligations hereunder are not conditioned upon Developer' s obtaining construction or permanent financing for the Project . SBEO/0001/DOC/3330 5/27/98 1030:ah 10 Prior to the date hereof, Developer has made available to Agency various items of financial information concerning Developer which Developer and its affiliates have compiled in connection with their routine compliance with the applicable Federal securities laws, and Agency is satisfied that the Developer has sufficient resources to undertake the Project . Section 2 . 7 Representations And Warranties of the AaencX. The Agency hereby represents and warrants the following to the Developer for the purpose of inducing the Developer to enter into this Agreement and to consummate the transactions contemplated hereby, all of which shall be true as of the date hereof and as of the date of close of escrow for the Developer' s acquisition of the Property under the Land Contract and shall survive the Developer ' s acquisition of title to the Property: a . The Agency is a duly organized and validly existing Redevelopment Agency created under the laws of the State of California. The Agency has the legal power, right and authority to enter into this Agreement and the instruments and documents referenced herein, and to consummate the transactions contemplated hereby. The Director of the Agency executing this Agreement and the instruments referenced herein on behalf of the Agency hereby represents and warrants that he has the power, right and authority to bind the Agency. b. The Agency and City have taken all requisite action and obtained all requisite consents in connection with entering into this Agreement and the instruments and documents referenced herein and the consummation of the transactions contemplated hereby, and no consent of any other person or entity to the approval of this Agreement by the Agency is required. C. This Agreement and all related instruments and documents to be executed by the Agency pursuant to this Agreement, shall be duly executed by and are or shall be valid and legally binding upon the Agency, and enforceable by the Developer against the Agency in accordance with their respective terms . d. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby shall result in a breach of or constitute a default under any agreement, document, instrument or other obligation to which the Agency or City is a party, or by which the Agency or City may be bound, or under law, statute, ordinance, rule, governmental regulation or any SBEO/0001/DOC/3330 5/27/98 1030:ah 11 writ, injunction, order or decree of any court or governmental body applicable to the Agency or to the Property. e . There is no claim, action, litigation, arbitration or other proceeding pending or to the best of the Agency' s knowledge, threatened against the Agency or City which relates to the Property or the transactions contemplated. If the Agency receives notice of any claim, litigation or proceeding prior to close of escrow, the Agency shall promptly notify the Developer of the same in writing. f. The uses and improvements to be constructed on the Property in accordance with the Scope of Development comply with the California Community Redevelopment Law and the use of funds is consistent with the provisions of the California Community Redevelopment Law, the California Constitution, City Charter and other applicable laws and is not violative thereof. g. To the knowledge of the Agency, the Property is not in violation of, and the Agency has not received any notice of any violation of any law, ordinance, regulation order or requirement applicable to the Property including, without limitation, requirements imposed under any recorded covenants, conditions, restrictions, easements or other rights affecting the Property. The Agency has not received any notice from any governmental authority or any private person that the Agency or the Property or any portion thereof is in violation of any governmental or legal requirements . If the Agency receives such a notice prior to the close of escrow on either parcel, the Agency shall immediately notify the Developer in writing. The representations and warranties contained in this Section 2 . 7 are true and correct on the date hereof and no representation or warranty made by the Agency or in any statement or exhibit required to be furnished hereunder misstates, omits or shall misstate or omit a fact necessary to make the statement therein not misleading. The Agency shall promptly notify the Developer upon the Agency' s discovery of any fact which would render any representation or warranty in this Agreement untrue, incorrect or misleading in any respect. The knowledge of the "Agency" shall be the actual knowledge of the following officials of the Agency: Ronald Winkler, or his successor in function. Section 2 . 8 Representations and Warranties of the Developer. SBEO/0001/DOC/3330 5/27/98 1030:ah 12 The Developer hereby represents and warrants the following to the Agency for the purpose of inducing the Agency to enter into this Agreement and to consummate the transactions contemplated hereby, all of which shall be true as of the date hereof and as of the date of close of escrow as to either parcel and shall survive the close of escrow and the conveyance of title hereunder. a . The Developer is a duly organized and validly existing corporation created under the laws of the state of Washington and has qualified to do business in the State of California. The Developer has the legal right, power and authority to enter into this Agreement and the instruments and documents referenced herein and to consummate the transactions contemplated hereby. The persons executing this Agreement and the instruments referenced herein on behalf of the Developer hereby represent and warrant that such persons have the power, right and authority to bind the Developer. b. The Developer has taken all requisite action and obtained all requisite consents in connection with entering into this Agreement and the instruments and documents referenced herein and the consummation of the transactions contemplated hereby, and no consent of any other party is required. C. This Agreement is, and all agreements, instruments and documents to be executed by the Developer pursuant to this Agreement shall be duly executed by and are or shall be valid and legally binding upon the Developer and enforceable in accordance with their respective terms . d. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby shall result in a breach of or constitute a default under any agreement, document, instrument or other obligation to which the Developer is a party or by which the Developer may be bound, or under any law, statute, ordinance, rule, governmental regulation or any writ, injunction, order or decree of any court or governmental body applicable to the Developer or to the Property. The representations and warranties contained in this Section 2 . 8 are true and correct on the date hereof, and no representation or warranty made by the Developer or in any statements or exhibit required to be furnished hereunder misstates, omits or shall misstate or omit a fact necessary to make the statement therein not misleading. The Developer shall promptly notify the Agency upon the Developer' s discovery of any fact which 5BEO/0001/DOC/3330 5/27/98 1030:ah 13 would render any representation or warranty in this Agreement untrue, incorrect or misleading in any respect . ARTICLE III DEVELOPMENT OF THE PROPERTY Section 3 . 1 Lot Line Adjustment . If the Property does not already comprise a one or more separate legal parcels, the Developer shall prepare and submit for approval to the City a parcel map or lot line adjustment with respect to the Property, creating one or more separate legal parcels . Section 3 . 2 City Land Use Approvals . The City' s zoning ordinance including, but not limited to, parking and height requirements, and the City' s building requirements are applicable to the use and development of the Property pursuant to this Agreement. The Developer acknowledges that any change in the plans for development or the use of the Property as set forth in the Scope of Development shall be subject to the City' s zoning ordinance and building requirements . No action by the Agency or the City with reference to this Agreement or related documents shall be deemed to constitute a waiver of any City parking, height or other requirements which are applicable to the Property or to the . Developer, any successor in interest or tenant of the Developer or any tenant or successor in interest pertaining to the Property, except by modification or variance approved by the City consistent with this Agreement . The Agency shall cooperate with and shall assist the Developer in efforts to obtain all land use approvals necessary for the development and use contemplated hereby including modifications or variances from City zoning regulations necessary to develop the Project consistent with this Agreement and, in particular, with the Scope of Development, within forty-five (45) calendar days following written application therefor by the Developer. Any failure by the City either to approve or disapprove any of such land use approvals or modifications or variances within said forty-five (45) calendar day period shall constitute an enforced delay hereunder, and the Schedule of Performance, as defined hereinafter, shall be extended by that period of time beyond said forty-five (45) calendar day period in which the City approves or disapproves such modifications or variances . Section 3 . 3 Scope of Development . a. The Scope of Development set forth in Exhibit "B" is hereby approved by the Agency upon its execution of this Agreement. SBEO/0001/DOC/3330 5/27/98 1030:ah 14 The Project shall be developed and completed in conformance with the approved Scope of Development and any and all other plans, specifications and similar development documents required by this Agreement, except for such changes as may be mutually agreed upon in writing by and between the Developer and the Agency. The Agency agrees to approve preliminary and final construction plans and preliminary and final landscaping plans, if reasonably consistent with the approved Scope of Development . b. The approval of the Scope of Development by the Agency hereunder shall not be binding upon the City Council or the Planning Commission of the City with respect to any approvals of the Project required by such other bodies . If any revisions of the Scope of Development are required by another government official, agency, department or bureau having jurisdiction over the development of the Property after the date of this Agreement, the Developer and the Agency shall cooperate on a best efforts basis to obtain waivers of such revisions, or to obtain approvals of any such revisions which have been made by the Developer and have thereafter been approved by the Agency. The Agency shall not unreasonably withhold approval of such revisions . Section 3 . 4 Conditions of Approval . Subject to the conditions to Developer ' s obligations under Section 2 . 4 above and the Agency' s obligations under Section 2 . 3 above, the Developer agrees to comply fully with any and all reasonable conditions of approval applicable to all permits and other governmental actions affecting the Project which are consistent with this Agreement and the Scope of Development . Section 3 . 5 Agency Review of Plans . a. By its execution of this Agreement, the Agency shall be deemed to have authorized the Developer to proceed with the final submission of drawings (i .e. , working drawings) , plans and specifications to the City in connection with Developer ' s application for a building permit for the improvement of Project, including the installation of the Area Off-Sites (the "Existing Plans") . b. Any changes to the Existing Plans shall be subject to review by the Agency pursuant to Section 3 . 7 below under the standards set forth in this Section 3 . 5 and under Section 3 . 7 below. C. The Agency shall not have the right or responsibility to approve development plans, construction drawings SBEO/0001/DOC/3330 5/27/98 1030:ah 15 or related documents for purposes of the issuance of a building permit or otherwise on behalf of the City, but shall only have the right of reasonable review and approval of such plans, drawings and documents for purposes of conformity of such plans, drawings and documents with the terms and conditions of this Agreement . Any design elements previously submitted to and approved in writing by the Agency shall not be subject to subsequent disapproval by the Agency, and any Agency approvals hereunder shall not be unreasonably withheld. d. During the preparation of all drawings and plans for the Project, the Agency Staff and the Developer shall hold regular progress meetings to coordinate the preparation by the Developer, and the submission to and review by the City and the Agency of construction plans and related documents . The Agency Staff and the Developer shall communicate and consult informally as frequently as is necessary to ensure that any such plans and related documents submitted by the Developer to the City and the Agency can receive prompt and speedy consideration. e . The Agency' s right of architectural review and approval of building exteriors and design of the Project shall be reasonably exercised. The Agency shall also have the right to review all plans, drawings and related documents pertinent to the development of the Project in order to ensure that they are consistent with this Agreement and with the Scope of Development. The Agency shall not disapprove any aspects or elements of the Project which are typical of Developer' s prototypical new facilities in similar locations . Section 3 . 6 City Plan Review. a . The Developer shall timely submit to the City for its review and approval any and all plans, drawings and related documents pertinent to the development of the Project, as required by the City. The Agency shall cooperate with and shall assist the Developer in an effort to obtain the approval of any and all development plans, construction drawings and related documents submitted by the Developer to the City consistent with this Agreement within thirty (30) calendar days following the City' s receipt of said plans . Any failure by the City to approve any of such plans or to issue necessary permits for the development of the Project, as applicable, within said thirty (30) calendar day period shall constitute an enforced delay hereunder, and the Schedule of Performance shall be extended by that period of time beyond said thirty (30) calendar day period in which the City approves said plans; provided, however, that in the event that the City SBEO/0001/DOC/3330 5/27/98 1030:ah 16 disapproves of any of such plans, the Developer shall within thirty (30) calendar days after receipt of such disapproval revise and resubmit such plans in accordance with the City' s requirements and in such form and substance so as to obtain the City' s approval thereof. b. The Agency shall in good faith use its best efforts to cause the City to approve in a timely fashion any and all plans, drawings and documents submitted by the Developer hereunder and to cause the City not to impose new conditions inconsistent with: (i) prior plans, drawings and documents approved by the City; or (ii) the Scope of Development . Section 3 . 7 Changes in Plans . a . If the Developer desires to make any change in the final construction drawings, plans and specifications and related documents after their approval by the Agency and/or the City, the Developer shall submit the proposed change in writing to the Agency and/or the City for approval . The Agency shall notify the Developer of approval or disapproval thereof in writing within fifteen (15) calendar days after submission to the Agency. This fifteen (15) calendar day period may be extended by mutual consent of the Developer and the Agency. Any such change shall, in any event, be deemed to be approved by the Agency unless rejected, in whole or in part, by written notice thereof submitted by the Agency to the Developer, setting forth the reasons therefor, and such rejection shall be made within said fifteen (15) calendar day period unless extended as permitted herein. The Agency shall use its best efforts to cause the City to review and approve or disapprove any such change in accordance with the powers and responsibilities reserved to the sole and separate discretion of the City, as applicable. b. The Developer, upon receipt of a notice of disapproval by the Agency and/or the City, may revise such portions of the proposed change in construction drawings, plans and specifications and related documents as are rejected and shall thereafter resubmit such revisions to the Agency for approval in the manner provided in Sections 3 . 5 and 3 . 6 hereof and to the City in accordance with the powers and responsibilities reserved to the sole and separate discretion of the City, as applicable . C. The Developer shall have the right during the course of construction to make changes in construction concerning the interior of structures and "minor field changes" without seeking the approval of the Agency; provided, however, that such changes do SBEO/0001/DOC/3330 5/27/98 1030:ah 17 not affect the type of use to be conducted within all or any portion of a structure . Said "minor field changes" shall be defined as those changes from the approved final construction drawings, plans and specifications which have no substantial effect on the improvements and are made in order to expedite the work of construction in response to field conditions . Nothing contained in this Section shall be deemed to constitute a waiver of or change in the City' s Building Code requirements governing such "minor field changes" or in any and all approvals by the City otherwise required for such "minor field changes . " Section 3 . 8 Developer ' s Costs; Developer' s Permits . a . The costs of developing the Property and of constructing all improvements thereon for the Project (including without limitation, the Area Off-Site as set forth in the Scope of Development) shall be borne by the Developer. To the extent that the actual costs incurred by the Developer in connection with the design, construction and installation of the Area Off-Site exceeds the sum of $495, 040 . 00, the Developer shall be solely responsible for paying all amounts in excess of $495, 400 . 0, as required to complete the construction and installation of the Area Off-Sites and the acceptance of the dedication therefrom by the City upon completion. b. The Developer shall at its expense cause to be prepared, and shall pay any and all fees pertaining to the review and approval by the City of, all required construction, planning and other documents reasonably required by governmental bodies pertinent to the development of the Property hereunder including, but not limited to, specifications, drawings, plans, maps, permit applications, land use applications, zoning applications and design review documents . C. The Developer shall pay for any and all costs for the improvement of the Property and the Project . The Developer shall obtain any and all necessary approvals prior to the commencement of applicable portions of said construction, and the Developer shall take reasonable precautions to ensure the safety and stability of surrounding properties during said construction. d. The Developer shall be solely responsible for ensuring that pursuant to Labor Code Sections 1770 to 1777, prevailing wages shall be paid during the course of construction and installation of the Area Off-Sites to each craft or type of SBEO/0001/DOC/3330 5/27/98 1030:ah 18 worker engaged by the Developer or its contractors or subcontractors to contract or install the Area Off-Sites . Section 3 . 9 Progress Reports . a . Before commencement of construction and development of any buildings, structures or other work or improvements upon the Property, the Developer shall, at its own expense, secure or shall cause to be secured, any and all permits which may be required for such construction, development or work by the City or any other governmental agency having jurisdiction thereof. The Agency shall cooperate in good faith with the Developer in the Developer ' s efforts to obtain from the City or any other appropriate governmental agency any and all such permits and, upon completion of applicable portions of the Project, certificates of occupancy. b. Prior to and during the period of construction of the Project, the Developer shall submit to the Agency written progress reports when and as reasonably requested by the Agency but in no event more frequently than every two (2) weeks . The reports shall be in such form and detail as may reasonably be required by the Agency, and shall upon request include a reasonable number of construction photographs taken since the last such report submitted by the Developer. Section 3 . 10 Developer' s Insurance . Prior to the commencement of construction on the Property, the Developer shall furnish, or shall cause to be furnished, to the Agency duplicate originals or appropriate certificates of public indemnity and liability insurance in the amount of One Million Dollars ($1, 000, 000 . 00) combined single limit, naming the Agency and the City as additional insureds . Said insurance shall cover comprehensive general liability including, but not limited to: contractual liability; acts of subcontractors; premises-operations; explosion, collapse and underground hazards, if applicable; broad form property damage; and personal injury including libel, slander and false arrest . In addition, the Developer shall provide to the Agency adequate proof of comprehensive automobile liability insurance covering owned, non-owned and hired vehicles, combined single limit in the amount of One Million Dollars ($1, 000, 000 . 00) each occurrence; and proof of workers ' compensation insurance. Any and all insurance policies required hereunder shall be obtained from insurance companies admitted in the State of California and rated at least B+ XII in Best ' s Insurance Guide. All said insurance policies shall provide that they may not be canceled unless the Agency and the City receive written notice of cancellation at least thirty (30) calendar days prior to the SBEO/0001/DOC/3330 5/27/98 1030:ah 19 effective date of cancellation. Any and all insurance obtained by the Developer hereunder shall be primary to any and all insurance which the Agency and/or City may otherwise carry, including self insurance, which for all purposes of this Agreement shall be separate and apart from the requirements of this Agreement . Any insurance policies governing the Property as obtained by the Agency shall not be transferred from the Agency to the Developer. Appropriate insurance means those insurance policies approved by the Agency Counsel consistent with the foregoing. Any and all insurance required hereunder shall be maintained and kept in force until the Agency has issued the Certificate of Completion for the Property. Section 3 . 11 Non-Discrimination. The Developer for itself and its successors and assigns agrees that during the course of the construction of the improvements on the Property, the Developer will not discriminate against any employee or applicant for employment because of sex, marital status, race, color, religion, creed, national origin, or ancestry. Section 3 . 12 Aaency Access . Officers, employees, agents or representatives of the Agency and the City shall have the right of reasonable access to the Property, without the payment of charges or fees, during normal construction hours during the period of construction of the Project for the purpose of inspecting work being performed in constructing the Project. Such access and inspection will be undertaken in such a way as not to unreasonably interfere with construction and development activities . Such officers, employees, agents or representatives of the Agency and/or the City shall be those persons who are so identified by the Director. Any and all officers, employees, agents or representatives of the Agency and the City who enter the Property pursuant hereto shall identify themselves at the job site office upon their entrance thereon and shall at all times be accompanied by a representative of the Developer; provided, however, that the Developer shall make a representative of the Developer available for this purpose at all times during normal construction hours upon reasonable notice from the Agency. The Agency shall indemnify and hold the Developer harmless from injury, property damage or liability arising out of the exercise by the Agency and/or the City of any right of access to the Property under this Agreement, other than injury, property damage or liability relating to the negligence of the Developer or its officers, agents or employees . Section 3 . 13 [Intentionally Omitted] SBEO/0001/DOC/3330 5/27/96 1030:ah 20 d — Section 3 . 14 Taxes Assessments, Encumbrances and Liens . The Developer shall pay prior to delinquency all real property taxes and assessments assessed and levied on or against the Property subsequent to the close of the escrow under the Land Contract and the conveyance to the Developer of title to the Property. Nothing herein contained shall be deemed to prohibit the Developer from contesting the validity or amounts of any tax assessment, encumbrance or lien under applicable law, nor to limit the remedies available to the Developer in respect thereto; provided however, that to the extent any such real property taxes and assessments may not be paid prior to the Delinquency Roll Date, then the provisions of Section 2 . 3 . i, shall apply to Delinquent Taxes, if any. Section 3 . 15 Certain Prohibitions Against Transfers . a. Prior to the recordation of a Certificate of Completion with respect to the Property, as set forth in Section 3 .18 of this Agreement, the Developer shall not, without prior written approval of the Agency, or except as permitted by this Agreement, (i) assign or attempt to assign this Agreement or any right herein or (ii) make any total or partial sale, transfer, conveyance, lease, leaseback, or assignment of the whole or any part of the Property or the improvements thereon except to a "Costco Affiliate" . The term "Costco Affiliate" means Costco Companies, Inc. , Costco Wholesale Corporation, The Price Company, any entity controlled by or under common control within any of the foregoing, any successor by merger, acquisition or corporate reorganization to any of the foregoing or any other entity which may acquire not less than ten (10) stores in California presently operated under the trade names "Costco" or "Price Club" . This prohibition shall not apply to any of the following: (i) the reasonable grant of limited easements or permits to facilitate the development of the Property; or (ii) leases, other than ground leases, to prospective tenants whose use of the Property, as applicable, is in conformity with the Community Redevelopment Law and all applicable zoning laws or ordinances . b. It is understood and agreed by the Developer that during the Term of the pledge of the Net Tax Increment to pay the obligation of the Agency under Section 2 . 3, neither the Developer, nor its assigns or successors in interest to the Property or this Agreement, shall use or otherwise sell, transfer, convey, assign, lease, leaseback or hypothecate the Property or any portion of either to any entity or party, for any use of the Property that is SBEO/0001/DOC/3330 5/27/98 1030:ah 21 partially or wholly exempt from the payment of real property taxes pertinent to the Property or any portion thereof, or which would cause the exemption of the payment of all or any portion of such real property taxes . C. In the absence of specific written agreement or approval by the Agency, no unauthorized sale, transfer, conveyance, lease, leaseback or assignment of the Property shall be deemed to relieve the Developer from any of its obligations to the Agency under this Agreement . Section 3 . 16 [Intentionally Omitted] Section 3 . 17 . As promptly as feasible following the completion of the installation of the Area Off-Sites by the Developer and the acceptance thereof by the City, or concurrently upon the submission of a written request for the issuance of a Certificate of Completion for the Project under Section 3 . 18, the Developer shall submit an appropriately itemized and detailed written accounting of the costs actually incurred by the Developer in connection with the design, construction and installation of the Area Off-Sites . Such accounting shall be accompanied by final certification of the payroll records of all contractors and subcontractors of the Developer who provided construction related labor service in connection with the construction and installation of the Area Off-Sites that the applicable amounts of prevailing wages have been paid pursuant to Labor Code Sections 1770-1777, inclusive, for each craft or type of worker engaged in the work of installation of the Area Off-Sites . To the extent such costs actively incurred are less the maximum amount of the Agency indebtedness authorized for such purpose under Section 2 . 3 .b, above, then the obligation of the Agency to repay such amount, plus interest, shall be reduced accordingly. The Developer shall include in such accounting a written certification of an authorized officer of the Developer signed under penalty of perjury, that the information and cost accounting included therein is true and correct to the best knowledge of such officer based upon due and diligent inquiry. Section 3 . 18 Certificate of Completion. a. Following the written request therefor by the Developer and the completion of construction and development of the improvements, excluding any normal and customary tenant improvements and reasonable building "punch-list" items to be completed by the Developer for the Project, the Agency shall furnish the Developer with a Certificate of Completion for the SBEO/0001/DOC/3330 5/27/98 1030:ah 22 a — Project as is applicable, substantially in the form in Exhibit "D" attached hereto. The completion of construction and development of improvements for the Project shall be deemed to include the completion of construction and development of any and all buildings and any and all parking, landscaping and related improvements necessary to support or which meet the requirements applicable to the building and its use and occupancy for the Project and the acceptance by the City of the dedication of the Area Off-Sites as complete. b. The Agency shall not unreasonably withhold the issuance of such Certificate of Completion. The Certificate of Completion shall be, and shall state that it is, a conclusive determination of satisfactory completion of all of the obligations of this Agreement with respect to the development of the Project including, without limitation, under the Scope of Development . After the recordation of the Certificate of Completion, any party then owning or thereafter purchasing, leasing or otherwise acquiring any interest in the Project, as applicable, shall not (because of such ownership, purchase, lease or acquisition) incur any obligation or liability with respect to the development of the Project. C. The Certificates of Completion shall be in such form as to permit them to be recorded in the Recorder' s Office of the County where the Property is located. d. If the Agency refuses or fails to furnish a Certificate of Completion for the Project after written request from the Developer, the Agency shall, within fifteen (15) business days of its receipt of such written request or within ten (10) calendar days after the next regular meeting date of the Agency following the date of its receipt of such request, whichever date occurs later, provide to the Developer a written statement setting forth the reasons with respect to the Agency' s refusal or failure to furnish a Certificate of Completion. The statement shall also contain the Agency' s opinion of the action the Developer must take to obtain a Certificate of Completion. If the reason for such refusal is confined to the immediate unavailability of specific items or materials for construction or landscaping at a price reasonably acceptable to the Developer or other reasonable building "punch-list" items, the Agency will issue its Certificate of Completion upon the posting of a bond or irrevocable letter of credit, reasonably approved as to form and substance by the Agency Counsel and obtained by the Developer in an amount representing a fair value of the work not yet completed as reasonably determined by the Agency. If the Agency shall have failed to provide such SBEO/0001/DOC/3330 5/27/98 1030:ah 23 written statement within the foregoing period, the Developer shall be deemed conclusively and without further action of the Agency to have satisfied the requirements of this Agreement with respect to the applicable portion of the Property as if a Certificate of Completion had been issued therefor. Notwithstanding any language in this Agreement or in a Certificate of Completion to the contrary, the issuance of a Certificate of Completion does not relieve the Developer from the obligation to complete, free of liens against the Property as applicable, any such remaining works of improvement . e. Such Certificate of Completion shall not constitute evidence of compliance with or satisfaction of any obligation of the Developer to any holder of a mortgage, or any insurer of a mortgage securing money loaned to finance the improvements described herein, or any part thereof. Such Certificate of Completion shall not be deemed to constitute a notice of completion as referred to in Section 3093 of the California Civil Code, nor shall it act to terminate the continuing covenants or conditions subsequent contained in Sections 2 . 3, and 4 . 2 through 4 . 9 hereof. ARTICLE IV USE OF THE PROPERTY Section 4 . 1 Opening Conditions . If the Developer has not completed the Project within 24 months after the close of escrow to purchase the Property from the Current Owner under the term of the Land Contract and thereafter applied to the Agency for the issuance of a Certificate of Completion under Section 3 . 18 and thereafter opened the Project for business to the general public (the "Opening Date") for a period of one (1) day as a retail and/or wholesale store under the trade name Costco, Price Club or such other trade name as Developer or a Costco Affiliate may utilize in not less than ten (10) of their similar facilities in Southern California (a "Costco Trade Name") , this Agreement shall have no further force or effect, and the parties shall each execute an appropriate form of written acknowledgment of such expiration of the Agreement and the discharge and release of the pledge of the Net Tax Increment and the discharge, release, waiver and the forgiveness of the indebtedness and obligation of the Agency to pay any sum to the Developer under Section 2 . 3 .a or Section 2 . 3 .b. SBEO/0001/DOC/3330 5/27/98 1030:ah 24 Section 4 . 2 Operating Covenant . a. Covenant . Developer covenants and agrees, subject to the provisions and limitations of remedies under Sections 4 .2 through 4 . 6 hereof and except during any periods of Temporary Closure (as defined below) , that from and after the Opening Date, it will operate or cause to be operated a retail and/or wholesale store in the Project under a Costco Trade Name or an "Acceptable Substitute (s) " in not less than an aggregate of One Hundred Thousand (100, 000) square feet of floor area during that period commencing on the Opening Date and ending fifteen (15) years thereafter. The words "Temporary Closure" means any cessation of business operations open to the public in the 100, 000 square foot of floor area store in the Project after the Opening Date for a period for (i) no more than ninety (90) days, plus (ii) a period equal to any period ("Excused Closure") of the cessation of such business operations due to events of repair, restoration, alteration, construction, remodeling or due to events of force majeure as set out in Section 6 . 5 hereof. The sole and exclusive remedy of the Agency for a breach or default under the covenant and agreement of the Developer in this Section 4 . 2 is the liquidated damages provided for below in Section 4 . 4 below. A "Permanent Closure" of the Project shall be deemed to have occurred on the date of the expiration of any applicable period of "Temporary Closure" . b. Excused Closure. Any Excused Closure must be due to events which are, in the reasonable business judgment of the Developer, sufficient to justify the temporary cessation of business operations . If after the Opening Date there is a closure of more than ninety (90) days and the Agency and Developer disagree as to whether an Excused Closure has occurred, then either the Developer or the Agency may petition the American Arbitration Association for final and binding arbitration in accordance with Title 9, Chapter 3 of the California Code of Civil Procedure. All of the provisions of Section 1283 . 05 of the California Code of Civil Procedure are hereby incorporated into this Agreement . In the event that a determination is made that such closure was not an Excused Closure then the Developer may cure such closure by opening for business within ninety (90) days after such determination becomes final, in which case such closure shall be deemed to have been a Temporary Closure . NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE SBEO/0001/DOC/3330 5/27/98 1030:ah 25 "ARBITRATION OF DISPUTES" PROVISION CONTAINED IN SECTION 4 . 2 DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. Agency: Developer: C. Acceptable Substitute (s) . As used herein, the term "Acceptable Substitute (s) " means retail or warehouse retail business operation (s) which (i) generate annual retail sales which are subject to sales taxes of not less than four hundred million dollars ($400, 000, 000) per annum or (ii) are approved by Agency in its sole and absolute discretion. Section 4 . 3 Governmental Acts . If the Developer is prevented from operating as provided above by a judgment or delivery of possession of the Property to a governmental entity under power of eminent domain or other governmental action, the operating covenants set forth in Section 4 .2 shall terminate on the date on which a governmental entity takes possession of the Property. Accordingly, in such event, the Developer shall have no further obligation to pay liquidated damages pursuant to Section 4 . 4 below and the obligation of the Agency to make any further payments to the Developer under Section 2 . 3 . a or Section 2 . 3 .b shall cease and the remaining balance thereof and the pledge of the Net Tax Increment shall be deemed waived, discharged and forgiven. Section 4 . 4 LIQUIDATED DAMAGES. IN THE EVENT OF A BREACH OR DEFAULT BY DEVELOPER UNDER THE OPERATING COVENANT UNDER SECTION 4 .2 ABOVE, THE DEVELOPER SHALL PAY TO THE AGENCY AN AMOUNT EQUAL TO THE "SUBSIDY RECOUPMENT AMOUNT" AS OF THE DATE OF PERMANENT CLOSURE AS LIQUIDATED DAMAGES AS THE SOLE AND EXCLUSIVE REMEDY OF THE AGENCY HEREUNDER. IN THE EVENT OF SUCH BREACH OR DEFAULT, THE AGENCY WOULD SUSTAIN DAMAGES BY REASON THEREOF WHICH WOULD BE UNCERTAIN. SUCH DAMAGES WOULD INVOLVE SUCH VARIABLE FACTORS AS THE DELAY OR FRUSTRATION OF TAX REVENUES THEREFROM TO THE CITY AND THE AGENCY, THE DELAY OR FAILURE OF THE AGENCY TO FURTHER THE SBEO/0001/DOC/3330 5/27/98 1030:ah 26 IMPLEMENTATION OF THE REDEVELOPMENT PLAN, AND A LOSS OF OPPORTUNITY TO ENGAGE IN OTHER POTENTIAL TRANSACTIONS, RESULTING IN DAMAGE AND LOSS TO THE AGENCY. IT IS IMPRACTICABLE AND EXTREMELY DIFFICULT TO FIX THE AMOUNT OF SUCH DAMAGES TO THE AGENCY, BUT THE PARTIES ARE OF THE OPINION, UPON THE BASIS OF ALL INFORMATION AVAILABLE TO THEM, THAT SUCH DAMAGES WOULD APPROXIMATELY EQUAL THE AMOUNT OF THE SUBSIDY RECOUPMENT AMOUNT, AND SUCH AMOUNT SHALL BE RETAINED BY THE AGENCY AS THE TOTAL OF ALL LIQUIDATED DAMAGES FOR ANY AND ALL SUCH DEFAULTS AND NOT AS A PENALTY. THIS LIQUIDATED DAMAGE PROVISION SHALL BE APPLICABLE ONLY IN THE EVENT OF A BREACH OR DEFAULT BY THE DEVELOPER UNDER THE OPERATING COVENANT CONTAINED IN SECTION 4 . 2 AND NOT IN THE EVENT OF ANY OTHER BREACH OR DEFAULT BY THE DEVELOPER UNDER THIS AGREEMENT. THE DEVELOPER AND THE AGENCY SPECIFICALLY ACKNOWLEDGE THIS LIQUIDATED DAMAGES PROVISION BY THE SIGNATURES OF THEIR REPRESENTATIVES BELOW: Developer Agency Section 4 . 5 Subsidy Recoupment Amount . The term "Subsidy Recoupment Amount" means the product of (i) all sums paid to Developer by the Agency pursuant to Section 2 . 3 .a and Section 2 . 3.b, above, multiplied by (ii) the "Applicable Percentage" with respect to the date upon which the Permanent Closure of the Project occurs . The term Applicable Percentage means : 100%, minus that percentage of fifteen (15) years which has elapsed from the Opening Date to the date of a Permanent Closure. For example, if the Developer has operated as provided under Section 4 . 2 for five (5) years (e.g. 33 . 33% of the duration of its operating covenant) , then the Applicable Percentage in such an instance would be 33 . 33% . Section 4 . 6 Obligation to Refrain from Discrimination. The Developer covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that there shall be no discrimination against or segregation of any person, or group of persons, on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property nor shall the Developer, itself or any person claiming under or through it, 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, subtenants, sublessee or vendees of the Property. SBEO/0001/DOC/3330 5/27/98 1030:ah 27 Section 4 . 7 Form of Nondiscrimination and Nonse_regation Clauses . The Developer covenants and agrees for itself, its successors, its assigns, and every successor in interest to the Property or any part thereof, that the Developer, such successors and such assigns shall refrain from restricting the sale, lease, sublease, rental, transfer, use, occupancy, tenure or enjoyment of the Property (or any part thereof) on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All deeds, leases or contracts pertaining thereto shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses : a . In deeds : "The grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through it, 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, subtenants, sublessee, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land. " b. In leases : "The Lessee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this lease is made and accepted upon and subject to the following conditions : That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee itself, or any person claiming under or through it, 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, sublessee, subtenants, or vendees in the premises herein leased. " C. In contracts : "There shall be no discrimination against or segregation of any person or group of persons on account SBEO/0001/DOC/3330 5/27/98 1030:ah 28 of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed or leased, nor shall the transferee or any person claiming under or through it, 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, sublessees, subtenants, or vendees of the premises herein transferred. " The foregoing provision shall be binding upon and shall obligate the contracting party or parties and any subcontracting party or parties, or other transferees under the instrument. Section 4 . 8 Effect and Duration of Covenants . The covenants established against discrimination shall remain in effect in perpetuity. The covenants respecting uses of the Property shall remain in effect for a period of fifteen (15) years from the Opening Date, shall run with the land and shall constitute equitable servitudes thereon, and shall, without regard to technical classification and designation, be binding for the benefit and in favor of the Agency, its successors and assigns . The Agency is deemed the beneficiary of the terms and provisions of this Agreement and of the covenants running with the land for and in its own rights and for the purposes of protecting the interests of the community. The Agency shall have the right, if such covenants are breached, to exercise all rights and remedies and to maintain any actions or suits at law or in equity or such other proper proceedings to enforce the curing of such breaches to which it or any other beneficiary of such covenants may be entitled, including, without limitation, to specific performance, damages and injunctive relief. The Agency shall have the right to assign all of its rights and benefits hereunder to the City. Section 4 . 9 Restrictive Covenant . Upon Agency' s request, Developer shall cause to be recorded against the title to the Property a Community Redevelopment Covenant memorializing the terms of Sections 4 .2 through 4 . 8, inclusive, including, without limitation, the obligation of the Developer, and its successors in interest in the Property to pay the Subsidy Recoupment Amount to the Agency when due as liquidated damages under Section 4 . 4 . SBEO/0001/DOC/3330 5/27/98 1030:ah 29 ARTICLE V DEFAULTS AND REMEDIES Section 5 . 1 Defaults - General . a. Subject to the extensions of time set forth in Section 6. 5 hereof, failure or unexcused delay by either party to perform any term or provision of this Agreement shall constitute a default under this Agreement; provided, however, that if a party otherwise in default commences to cure, correct or remedy such default within thirty (30) calendar days after receipt of written notice specifying such default and shall diligently and continuously prosecute such cure, correction or remedy to completion (and where any time limits for the completion of such cure, correction or remedy are specifically set forth in this Agreement, then within said time limits) , such party shall not be deemed to be in default hereunder. b. The injured party shall give written notice of default to the party in default, specifying the default complained of by the nondefaulting party. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. C. Any failure or delays by either party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies . Delays by either party in asserting any of its rights and remedies shall not deprive either party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies . Section 5 . 2 Leaal Actions . a. In addition to any other rights or remedies, either party may institute legal action to cure, correct or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement . Such legal actions must be instituted in the Superior Court of the County of San Bernardino, State of California, in any other appropriate court in that County, or in the Federal District Court in the Eastern District of California. b. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. SBEO/0001/DOC/3330 5/27/98 1030:ah 30 C. In the event that any legal action is commenced by the Developer against the Agency, service of process on the Agency shall be made by personal service upon the Secretary of the Agency, or in such other manner as may be provided by law. d. In the event that any legal action is commenced by the Agency against the Developer, service of process shall be by personal service on the registered agent for service of process in California for the Developer (or such other agent for service of process and at such address as may be specified in written notice to the Agency) , or in such other manner as may be provided by law, and shall be valid whether made within or without the State of California. Section 5 . 3 Rights and Remedies are Cumulative . Except with respect to any rights and remedies expressly declared to be exclusive in this Agreement, the rights and remedies of the parties are cumulative and the exercise by either party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. Section 5 . 4 Damages . If either party defaults with regard to any provision of this Agreement other than Section 4 . 2, the nondefaulting party shall serve written notice of such default upon the defaulting party. If the defaulting party does not diligently commence to cure such default within thirty (30) calendar days after service of the notice of default and promptly complete the cure of such default within a reasonable time, not to exceed ninety (90) calendar days (or such shorter period as may otherwise be specified in this Agreement for any specific default) , after the service of written notice of such default, the defaulting party shall be liable to the other party for damages caused by such default. Section 5 . 5 Specific Performance. If either party defaults under any of the provisions of this Agreement other than Section 4 . 2, the nondefaulting party shall serve written notice of such default upon such defaulting party. If the defaulting party does not commence to cure the default and diligently and continuously proceed with such cure within thirty (30) calendar days after service of the notice of default, and such default is not cured within a reasonable time thereafter (and where SBEO/0001/DOC/3330 5/27/96 1030:ah 31 any time limits for the completion of such cure, correction or remedy are specifically set forth in this Agreement, then within said time limits) , the nondefaulting party, at its option, may institute an action for specific performance of the terms of this Agreement, except as otherwise provided in Section 6 . 9 hereof. ARTICLE VI GENERAL PROVISIONS Section 6 . 1 Notices Demands and Communications Between the Parties . a. Any and all notices, demands or communications submitted by any party to another party pursuant to or as required by this Agreement shall be proper if in writing and dispatched by messenger for immediate personal delivery, or by registered or certified United States mail, postage prepaid, return receipt requested, to the principal office of the Agency or the Developer, as applicable, as designated in Section 1 . 3 . a and Section 1 . 3 .b hereof. Such written notices, demands and communications may be sent in the same manner to such other addresses as either party may from time to time designate as provided in this Section. Any such notice, demand or communication shall be deemed to be received by the addressee, regardless of whether or when any return receipt is received by the sender or the date set forth on such return receipt, on the day that it is dispatched by messenger for immediate personal delivery, or two (2) calendar days after it is placed in the United States mail as heretofore provided. b. In addition to the submission of notices, demands or communications to the parties as set forth above, copies of all notices to any party shall also be sent to: (If to Developer) Costco Wholesale Corporation, a Washington corporation 999 Lake Drive Issaquah, WA 98027 (With copy to) Greenberg, Glusker, Fields, Claman & Machtinger LLP 1900 Avenue of the Stars Suite 2100 Los Angeles, CA 90067 Attn: Henry D. Finkelstein, Esq. SBEO/0001/DOC/3330 5/27/96 1030:ah 32 (If to Agency) Redevelopment Agency of the City of San Bernardino 201 N. "E" Street, 3rd Floor San Bernardino, CA 92401-1507 Attn: Development Director (With copy to) Sabo & Green, A Professional Corporation 23801 Calabasas Road, Suite 1015 Calabasas, CA 91302 Attn: Timothy Sabo, Esq. Section 6 . 2 Conflict of Interest . No member, official or employee of the Agency having any conflict of interest, direct or indirect, related to this Agreement and the development of the Property shall participate in any decision relating to the Agreement . The parties represent and warrant that they do not have knowledge of any such conflict of interest. Section 6 . 3 Warranty Aaainst Payment of Consideration for Aareement . The Developer warrants that it has not paid or given, and will not pay or give, any third party any money or other consideration for obtaining this Agreement . Third parties, for the purposes of this Section, shall not include persons to whom fees are paid for professional services if rendered by attorneys, financial consultants, accountants, engineers, architects and the like when such fees are considered necessary by the Developer. Section 6 . 4 Nonliability of Agency Officials and Employees . No member, official or employee of the Agency shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the Agency or for any amount which may become due to the Developer or to its successor, or on any obligations under the terms of this Agreement, except for gross negligence or willful acts of such member, officer or employee. Section 6 . 5 Enforced Delay: Extension of Time of Performance. In addition to specific provisions of this Agreement, performance by either party hereunder shall not be deemed to be in SBEO/0001/DOC/3330 5/27/98 1030:ah 33 default where delays or defaults are due to war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of public enemy; epidemics; quarantine restrictions; freight embargoes or lack of transportation; weather- caused delays; inability to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplier; acts of the other party other than as permitted or required by the terms of this Agreement; acts or failure to act of any public or governmental agency or entity other than as permitted or required by the terms of this Agreement (except that action or failure to act by the City or the Agency shall not extend the time for the Agency to act unless such extension is otherwise expressly authorized herewith unless such action or failure to act is the result of a lawsuit or injunction including by way of illustration, but not limited to, lawsuits pertaining to the adoption of the Agreement, other-Project related approvals of the City, and the like) or any other causes beyond the control or without the fault of the party claiming an extension of time to perform. The foregoing are sometimes referred to herein as "force majeure" . Any extension of time for any such cause hereunder shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) calendar days of the commencement of the cause . Times of performance under this Agreement may also be extended by mutual agreement in writing by and between the Agency and the Developer. Section 6 . 6 Approvals . a. Approvals required of the Agency or the Developer, or any officers, agents or employees of either the Agency or the Developer, shall not be unreasonably withheld and approval or disapproval shall be given within the time set forth in the Schedule of Performance or, if no time is given, within a reasonable time . b. The Director of the Agency is authorized to sign on his own authority amendments to this Agreement which are of routine or technical nature, including minor adjustments to the Schedule of Performance. Section 6 . 7 Real Estate Commissions ., The Agency shall not be liable for any real estate commissions, brokerage fees or finder fees which may arise from or in relation to this Agreement . SBEO/0001/DOC/3330 5/27/98 1030:ah 34 The Agency represents to Developer that it has not retained or entered into any Agreement with any broker in connection with the sale of the Property or negotiation of this Agreement. Section 6 . 8 Indemnification. The Developer agrees to indemnify and hold the City and the Agency, and their officers, employees and agents, harmless from and against all damages, judgments, costs, expenses and fees arising from or related to any act or omission of the Developer in performing its obligations hereunder. The Agency agrees to indemnify and hold the Developer and its officers, employees and agents, harmless from and against all damages, judgments, costs, expenses and fees arising from or related to any act or omission of the Agency in performing its obligations hereunder. Section 6 . 9 Release of Developer from Liability. Notwithstanding any provision herein to the contrary, the Developer shall be relieved of any and all liability for the obligations of the Developer hereunder with regard to the Property when a Certificate of Completion has been issued by the Agency hereunder with respect to said parcel, other than any covenants and obligations provided by the grant deeds by which the Property is conveyed to the Developer hereunder. Section 6 . 10 Attorneys ' Fees . If either party hereto files any action or brings any action or proceeding against the other arising out of this Agreement, seeks the resolution of disputes pursuant to Section 6 . 11 hereof, or is made a party to any action or proceeding brought by the Escrow Agent, then as between the Developer and the Agency, the prevailing party shall be entitled to recover as an element of its costs of suit or resolution of disputes pursuant to Section 6 . 11 hereof, and not as damages, its reasonable attorneys ' fees as fixed by the Court or other forum for resolution of disputes as set forth in Section 6 . 11 hereof, in such action or proceeding or in a separate action or proceeding brought to recover such attorneys ' fees . Section 6. 11 Dispute Resolution. Any controversy or dispute arising from or relating to this Agreement shall be heard by a reference pursuant to California Code of Civil Procedure Sections 638 (1) , 640 and 641 through 645 . 1, inclusive, by the Court in an action or proceeding to be commenced SBEO/0001/DOC/3330 5/27/98 1030:ah 35 only in San Bernardino County, California. Upon commencement of any such action or proceeding, the parties hereto shall endeavor to agree upon and have appointed by the Court a retired Superior Court Judge or Court of Appeal Justice from the then current list of retired judges and justices available to serve as referees in San Bernardino County. If the parties are unable to agree upon the referee within five (5) business days after service of the complaint, or the referee selected by the parties is unable or unwilling to serve and the parties cannot agree on an alternate within five (5) business days of notice thereof, then either party may make application to the Court in which the action or proceeding is pending for the appointment of a judge or justice from said list to serve as the referee. In connection therewith, the parties each shall be entitled to submit the names of three names from said list, each party shall be entitled to strike one name proposed by the other party, and the appointment shall be made from the remaining four names, unless each of them are unwilling or unable to serve, in which case the Court shall exercise its powers under California Code of Civil Procedure Section 640 . The referee shall try any or all of the issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon. The parties shall advance, in equal shares, the fees and expenses of the referee selected pursuant to this Section 6. 11 . However, the referee ' s statement of decision shall award the party that, in light of the issues litigated and the referee ' s decision on those issues, was the more successful in the reference, all of its actual attorneys ' fees reasonably incurred in good faith, all of its fees and expenses associated with the reference, including, without limitation, any administrative fees, room charges, and referee fees, and those costs allowable in an action at law. Notwithstanding anything contained herein to the contrary, the parties hereto expressly preserve all rights and remedies they may have at law or in equity unless and until a referee is appointed pursuant to this Section 6 . 11, including, without limitation, the right to seek provisional remedies or injunctive relief. Section 6 . 12 Effect . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns . SBEO/0001/DOC/3330 5/27/98 1030:ah 36 ARTICLE VII ENTIRE AGREEMENT WAIVERS AND AMENDMENT Section 7 . 1 Entire Agreement . a. This Agreement shall be executed in four (4) duplicate originals each of which is deemed to be an original . This Agreement, and the attachments hereto, constitute the entire understanding and Agreement of the parties . b. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the parties with respect to all or any part of the Property and the development thereof. C. None of the terms, covenants, agreements or conditions set forth in this Agreement shall be deemed to be merged with the grant deed conveying title to the Property and this Agreement shall continue in full force and effect as to the Property before and after such conveyance until issuance of the Certificate of Completion for the Property. d. All waivers of the provisions of this Agreement and all amendments hereto must be in writing and signed by the appropriate authorities of the Agency and the Developer. ARTICLE VIII TIME FOR ACCEPTANCE OF AGREEMENT BY AGENCY AND RECORDATION Section 8 . 1 Execution and Recordation. a . Following its execution by the Developer and prompt delivery thereafter to the Agency, this Agreement must be approved by the governing board of the Agency and thereafter, executed on behalf of the Agency by its officers and delivered to the Developer within thirty (30) calendar days after the date of signature by the Developer. In the event that the Agency has not approved, executed and delivered the Agreement to the Developer within the foregoing period, then this Agreement shall be deemed to be of no further force or effect unless the time for such approval, execution and delivery is extended by written notice from the Developer to the Agency. The date of this Agreement shall be the date when the Agreement shall have been approved by the Agency. SBEO/0001/DOC/3330 5/27/98 1030:ah 37 b. The Developer and the Agency agree to permit recordation of this Agreement or any portion thereof against the Property in the Office of the County Recorder for the County where the Property is located. SBEO/0001/DOC/3330 5/27/98 1030:ah 38 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the dates set forth below. REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO Date of Agency Governing Board Approval of this Agreement : 1998 By: Chair By: Agency Secretary APPROVED AS TO FORM: Agency Counsel Dated: COSTCO WHOLESALE CORPORATION, a Washington corporation Dated: By: Its : APPROVED AS TO FORM: GREENBERG GLUSKER FIELDS CLAMAN & MACHTINGER, LLP Counsel for the Developer Dated: SBEO/0001/DOC/3330 5/27/98 1030:ah 39 EXHIBIT "B" SCOPE OF DEVELOPMENT I On-Site Improvements The Developer shall construct at its sole cost an approximately 135, 000 square foot building suitable for warehouse club use together with related parking, internal driveways, lighting and landscaping on the Property in accordance with City of San Bernardino Design Approval Case No. DPII 98-03, dated April _, 1998, and the Existing Plans, all as generally depicted on the Site Plan II Off-Site Improvements (Area Off-Sites - See: OPA Section 2 . 3 .b The Developer shall design, construct and install the following public improvements, as indicated in City of San Bernardino Design Approval Case No. DPII 98-03, dated April 1998 : 1 . New traffic signal at Hospitality Lane adjacent to the (westerly) Shared Driveway accessing the Property and the balance of Parcel 2 ("Shared Driveway") . 2 . Median modification, geometric striping changes and signage changes on Hospitality Lane near Shared Driveway. 3 . Sidewalk and landscape improvements interior to the new curb at Tippecanoe Avenue adjacent to the Property. 4 . Sidewalk and landscape improvements interior to the existing curb at Hospitality Lane adjacent to the Property. 5 . New curb to allow for acceleration/deceleration lane along Tippecanoe Avenue adjacent to the Property. 6 . Geometric striping and signage changes for acceleration/deceleration lane along Tippecanoe Avenue adjacent to the Property within 18 ' dedication. SBEO/0001/DOC/3330 5/27/98 1030:ah 7 . If necessary, new conduit and pull boxes beneath/within new sidewalk along Tippecanoe Avenue . 8 . Median modification on Hospitality Lane closest to Tippecanoe Avenue . 9 . New traffic signal at Hospitality Lane and Shared Driveway. 10 . Two new northbound left turn lanes and geometric striping changes, signage changes and related improvements on Tippecanoe Avenue . 11 . Related geometric striping and signage changes on Hospitality Lane and Coulston Street . 12 . Modifications to traffic signal at Tippecanoe Avenue and Hospitality Lane, including new conduit and interconnect . 13 . Additional geometric striping and signage changes on Hospitality Lane near Shared Driveway. 14 . Modifications to traffic signal at Waterman Avenue and Hospitality Lane, and related geometric striping and signage changes for northbound right- turn-only lane . SBEO/0001/DOC/3330 5/27/98 1030:ah EXHIBIT "C" SCHEDULE OF PERFORMANCE 2. 1 Costco Work Costco shall complete the improvements for the Project under the Scope of Development within one (1) year of the date of the OPA. 2 .2 Force Maleure The foregoing dates are subject to Section 6 . 5 of the OPA captioned "Enforced Delay, Extension of Time for Performance. " SBEO/0001/DOC/3330 5/27/98 1030:ah Recording Requested By: When Recorded Return to: Costco Wholesale Corporation 999 Lake Drive Issaquah, WA 98027 Attn: General Counsel [Free Recording Requested Government Code Section 6103] CERTIFICATE OF COMPLETION WHEREAS, the Redevelopment Agency of the City of San Bernardino, a public body, corporate and politic ( "Agency") , and Costco Wholesale Corporation, a Washington corporation ("Developer) , entered into an Owner Participation Agreement ("OPA") with respect to that certain real property described in Exhibit "A" attached hereto and incorporated herein by this reference (the "Property") ; WHEREAS, as referenced in section 3 . 18 of the OPA, Agency shall furnish Developer with a Certificate of Completion upon written request therefor from Developer; WHEREAS, such Certificate of Completion shall conclusively establish completion of construction of the improvements required to be made to the Property pursuant to the OPA (the "Improvements") ; WHEREAS, Agency has conclusively determined that construction of the Improvements has been completed. NOW THEREFORE : 1. As provided in the OPA, Agency does hereby certify that construction of the Improvements has been completed. 2 . This Certificate of Completion shall not constitute evidence of compliance with or satisfaction of any obligation of Developer to any holder of a mortgage or any insurer of a mortgage, securing money loaned to finance the Improvements or any part thereof. SBEO/0001/DOC/3330 5/27/98 1030:ah EXHIBIT "D" SBEO/0001/DOC/3330 5/27/98 1030:ah 44 3 . Nothing contained in this instrument shall modify in any way other provisions of the OPA. 4 . This Certificate of Completion is not a Notice of Completion as referred to in California Civil Code Section 3093 . IN WITNESS WHEREOF, Agency has caused this Certificate of Completion to be executed this day of 199 by its duly authorized representative . REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, corporate and politic By: Its : SBEO/0001/DOC/3330 5/27/98 1030:ah EXHIBIT "A" LEGAL DESCRIPTION OF THE PROPERTY EXHIBIT "A" TO EXHIBIT "D" SBEO/0001/DOC/3330 5/27/98 1030:ah CITY OF SAN BERNARDINO INTEROFFICE MEMORNMOnto Record at r,o1je1ci11Cmy0evCms Mtg: X14 TO: James F. Penman rp A4 l' 7 City Attorney FROM: Huston T. Carlyle, Jr. Sr. Assistant City Atto e. City ClerkiCOC Secy City of Sar) Bernardino DATE: June 1, 1998 RE: Owner Participation Agreement Between The Redevelopment Agency of the City of San Bernardino("Agency")and Costco Wholesale Corporation(Costco) I have reviewed the forty-six(46)page Owner Participation Agreement(OPA) between the Agency and Costco. I have five areas of observation/concern which should be addressed: 1. First, and this is technical and merely an observation, the pagination in the table of contents is not accurate. Apparently there was more than one draft of the document, but the table of contents was not updated to accurately reflect which sections appear on which pages; this would need to be corrected. 2. Second, Section 2.')k. will need to be known as to its language. Currently, it merely says "Insert Text." 3. Third, Section 4.2 contains at the bottom of page 25 and the top of page 26 a place for both parties to initial if they agree to have disputed matters included in the "Arbitration of Disputes" provision decided by neutral arbitration. The "Arbitration of Disputes" provision in the OPA refers to the language referenced in Section 4.2b. Section 4.2b. in its entirety should be deleted and 4.2c. relettered to 42b. 4. Fourth. Section 6.10 on page 35. entitled "Attorneys' Fees" should contain one additional sentence at the end of said section: "The costs. salary and expenses of the City Attorney and members of his office in enforcing this Agreement on behalf of the Agency shall be considered as 'attorneys' fees' for the purposes of this paragraph." 5. Fifth, Section 6.11 on pages 35 and 36 of the OPA should be deleted in its entirety. Again, this Section would obligate the Agencv to use a fact finder in the form of a referee (usually 67 /� a retired judge or justice) should any controversy or dispute arise from this OPA. While this may be better than binding arbitration, it is still not the forum which the Agency would want, which is the full panoply of the judicial system.