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Kohls/Sales Tax Revenue Sharing Agr 05AGREEMENT TO SHARE SALES TAX REVENUE (KOHL'S) This AGREEMENT (the "Agreement") is entered into this IV4L day of Lr: , 2005, by and between the CITY OF LA QUINTA, a California municipal corporation ("City"), and Kohl's Department Stores, Inc., a Delaware corporation ("Kohl's") (individually a "Party" and collectively the "Parties"). RECITALS A. Kohl's has the contractual right to acquire that certain real property consisting of approximately 13.134 acres of land area located generally in the I I I La Quinta Shopping Center on the west side of Adams Street at the Whitewater Channel in the City of La Quinta, County of Riverside, State of California, which is more particularly described in the legal description attached hereto as Exhibit "A" (the "Site"). The Site is owned by a third Party who is not a Party to this Agreement (the "Owner"). B. Assuming Kohl's acquires the Site from the Owner and obtains the necessary governmental permits and approvals from all governmental agencies with jurisdiction, including City, Kohl's intends to open and operate a Kohl's Department Store on the Site (the "Kohl's Department Store"). C. In consideration for Kohl's conveyance to City of the interest in the Site set forth in the Covenant (as defined hereinbelow), City has agreed to make certain periodic payments to Kohl's in an amount equal to a portion of the Sales Tax generated by Kohl's Department Store, subject to and in accordance with the other terms and conditions set forth in this Agreement and the Covenants, Conditions, and Restrictions Affecting Interests in Real Property attached hereto as Exhibit `B" (the "Covenant"). The Parties acknowledge and agree that the City's obligations to make periodic payments of a portion of Sales Tax under this Agreement and the Covenant relate only to the Sales Tax generated by the proposed Kohl's Department Store proposed to be located on the Site and shall not apply to any other use on the Site. D. By its approval of this Agreement, the City Council of City has found and determined as follows: (i) that, notwithstanding any other provision set forth in this Agreement or the Covenant to the contrary, City's approval and execution of this Agreement shall not constitute a prejudgment or precommitment by City with respect to any of the discretionary City permits and approvals that may be required for the Site, including without limitation any General Plan Amendment, Planned Community ("PC") Development Plan text amendment, and use permit, and the environmental reviews and approvals in conjunction therewith that are required to accommodate the Kohl's Department Store on the Site, and City reserves its full and unfettered discretion with respect thereto to the same extent it would have such discretion in the absence of this Agreement; (ii) the value to City of Kohl's performance of its obligations set forth in the Covenant in each fiscal year during which City payments are to be made (in terms of economic revitalization, generation of additional local tax revenues that will help to fund vital 119/015610-0062 507996.05 PM05 public services, provision of expanded and more accessible retail and shopping opportunities for the residents of the City, and job growth and retention) will be not less than the amount of such payments; and (iv) that the imposition of the covenants and use restrictions upon the Site pursuant to the Covenant in exchange for the payments to be made by City constitutes a valid public purpose. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Kohl's hereby agree as follows: 1. Defined Terms. Any capitalized terms contained in this Agreement, which are not defined in this Agreement, shall have the meanings ascribed to such terms in the Covenant. 2. Execution and Recordation of Covenant. Within (10) days after the later to occur of the following events (collectively, the "Covenant Conditions"), City and Kohl's shall fill in the blanks, date, and execute the Covenant in recordable form and Kohl's shall record the Covenant against the Site and provide a copy of the recorded Covenant to City: (i) the date Kohl's acquires fee title to the Site from the Owner and provides satisfactory evidence of such ownership to City; or (ii) the date City issues its final administrative approval of all discretionary land use permits and approvals required to accommodate the Kohl's Department Store on the Site (including without limitation any General Plan Amendment, Planned Community ("PC") Development Plan text amendment, use permit (if applicable), and environmental reviews and approvals in conjunction therewith, but specifically excluding Kohl's performance of any conditions of approval imposed on any such discretionary permit, any demolition permit, grading permit, encroachment permit for work or improvements to occur within public rights -of -way, foundation permit, plan check or inspection for public or private improvements to be constructed as part of or in conjunction with the project, building permit, and similar ministerial or minor administrative permits) or (iii) the full execution of this Agreement if romanettes (i) and (ii) have been satisfied. City agrees to cooperate in the recordation of the Covenant against the Site, at no cost to City and the City Manager or his designee is hereby authorized on behalf of City to execute all documents and take all actions necessary or appropriate to implement this Agreement. 3. Termination of Agreement. Kohl's shall have no obligation hereunder to acquire the Site and Kohl's failure for any reason to acquire the Site shall not constitute a default by Kohl's. If, however, the Covenant Conditions are not satisfied within six months from the date of execution of this Agreement, or such later deadline as may be mutually approved in writing prior to that date by City and Kohl's, this Agreement shall automatically terminate and be of no further force or effect at such time without the requirement of any further action by either Party, and thereafter neither Party shall have any further rights or obligations hereunder. 4. Covenant. Upon Kohl's timely satisfaction of the Covenant Conditions and recordation of the Covenant, the rights and obligations of the Parties shall be as set forth in the Covenant. 119/015610-0062 507996.05 PM05 2 5. Assignment. Kohl's shall not assign, hypothecate, encumber, or otherwise transfer its rights and obligations set forth in this Agreement and the Covenant to any other person or entity without the City's prior written consent, which consent the City may grant or withhold in its absolute discretion. 6. Cooperation in the Event of Legal Challenge; Validation Action. In the event any third party files an action seeking to invalidate this Agreement or the Covenant or seeking any equitable remedy that would prevent the full performance hereof or thereof, City and Kohl's agree to cooperate in the defense of such action. Kohl's shall pay all of the City's costs and expenses (including attorneys' fees) and the City shall have the sole right to select its legal counsel. Such cooperation shall include, without limitation: (i) an agreement by each Party to not default or allow a compromise of said action without the prior written consent of the other Party; (ii) an agreement by each Party to make available to the other Party all non -privileged information necessary or appropriate to conduct the defense of the action; and (iii) an agreement by each Party to make available to the other Party, without charge, any witnesses within the control of the first Party upon reasonable notice who may be called upon to execute declarations or testify in said action. In addition to the foregoing, if Kohl's delivers a written request for such action to City (c/o the City Attorney) not later than thirty (30) days after the date the City Council of City approves this Agreement at a public meeting, City shall file an action in Riverside County Superior Court pursuant to California Code of Civil Procedure Section 860 et seq. to validate this Agreement and the Covenant and each and every one of its and their provisions. In such event, City and Kohl's shall reasonably cooperate in drafting the complaint, briefs, the proposed judgment of validation, and such other pleadings, documents, and filings as may be required or desirable in connection with the validation action. City and its legal counsel shall file and prosecute the validation action, but shall reasonably coordinate and cooperate with Kohl's concerning the drafting of pleadings and other documents and with regard to the litigation strategy to be employed. Kohl's shall reimburse City within fifteen (15) days after written demand therefor for all costs ("Costs") of the validation action. Costs include without limitation, attorney's fees, filing fees and court reporter fees (if any), costs of publication and to effectuate service of process, reasonable photocopying and other reproduction charges, travel time and mileage expenses, and other costs and expenses reasonably incurred by City. In the event of an appeal of such action, the Parties shall cooperate with respect to the appeal to the same extent as at the Superior Court level of the proceedings. Upon the entry of a final non -appealable judgment of any court with jurisdiction invalidating or enjoining the performance of any material covenant set forth in this Agreement or the Covenant, this Agreement and the Covenant shall automatically terminate without the need of further action by either Party. 7. Integration and Amendment. This Agreement and the Covenant attached hereto constitute the entire Agreement by and between the Parties pertaining to the subject matter hereof, and supersede all prior agreements and understandings of the Parties with respect thereto. This Agreement may not be modified, amended, or otherwise changed except by a writing executed by both Parties. 119/015610-0062 507996.05 PM05 3 8. Notices. Notices to be given by City or Kohl's hereunder may be delivered personally or may be delivered by certified mail or by reputable overnight delivery service providing a delivery confirmation receipt, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es) that a Party may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If notice is to City: City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, CA 92253 Attention: Tom Genovese, City Manager with a copy to: City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, CA 92253 Attention: M. Katherine Jenson, City Attorney If notice is to Kohl's: Kohl's Department Stores, Inc. N56 W 17000 Ridgewood Drive Menomonee, WI 53051 Attention: Chief Executive Officer with a copy to: Kohl's Department Stores, Inc. N56 W 1700 Ridgewood Drive Menomonee Falls, WI 53051 Attention: Law Department (SIGNATURES ON NEXT PAGE) 119/015610-0062 507996.05 PM05 4 IN WITNESS WHEREOF, City and Kohl's have executed this Agreement to be effective as of the date first set forth above. ATTEST: By: une S. Greek, City Cleric' APPROVED AS TO FORM: M. Katherine Jenson, City Atto e "City" CITY OF LA QUINTA, a California municipal corporation By: Thomas P. Genovese, City Manager "Kohl's" KOHL'S DEPARTMENT STORES, INC., a Delaware corporation Loan ATTEST: • D. -•• Secretary R. Lawrttc,4 Mon Chairma and Chi 0 Nge ��P. ve Officer 119/015610-0062 _ 507996.05 PM05 _5 EXHIBIT "A" LEGAL DESCRIPTION OF SITE PARCEL 6 OF PARCEL MAP 25865, BOOK 172, PAGES 21 THROUGH 27, INCLUSIVE, OF PARCEL MAPS, RIVERSIDE COUNTY OFFICIAL RECORDS, STATE OF CALIFORNIA. 119/015610-0062 507996.05 PM05 EXHIBIT "B" RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Rutan & Tucker, LLP 611 Anton Boulevard, 14th Floor Costa Mesa, CA 92626 Attention: M. Katherine Jenson, Esq. [Space above for recorder.] EXEMPT FROM RECORDER'S FEE PER GOV. CODE §27383 EXEMPT FROM DOCUMENTARY TRANSFER TAX PER REV. & TAX. CODE § 11922 Signature of Declarant or Agent determining tax — Firm Name COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS IN REAL PROPERTY This COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS IN REAL PROPERTY (the "Covenant") is entered into as of this day of , 200_5 by and between the CITY OF LA QUINTA, a California municipal corporation ("City"), and Kohl's Department Stores, Inc., a Delaware corporation ("Owner") (individually a "Party" and collectively the "Parties"). RECITALS A. Owner is the owner of that certain real property consisting of approximately 13.134 acres of land area located generally in the I I I La Quinta Shopping Center on the west side of Adams Street at the Whitewater Channel, in the City of La Quinta, County of Riverside, State of California, which is more particularly described in the legal description attached hereto as Exhibit "A" and incorporated herein by this reference (the "Site"). B. On or about , 2005, City and Owner entered into that certain unrecorded Agreement to Share Sales Tax Revenue (the "Agreement") authorizing the recordation of this Covenant against the Site upon the timely satisfaction of the "Covenant Conditions" identified therein. The Covenant Conditions have been satisfied. C. Owner shall operate a Kohl's Department Store on the Site, and, pursuant to the following land use permits and approvals (including all conditions to approval therein) issued by City (collectively, the "Entitlements"). 119/015610-0062 507996.05 PM05 D. In consideration for Owner's conveyance to City of the interest in the Site set forth in this Covenant, City has agreed to make certain payments to Owner, the amount of which is measured by the Sales Tax generated by the Retail Uses on the Site. City and Owner have agreed that the portion of Sales Tax required to be paid by City to Owner hereunder during each Quarter of the Operating Period provided for herein is a fair exchange for the consideration to be furnished by Owner to City in that Quarter. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Owner hereby agree as follows: 1. DEFINED TERMS. The following terms when used in this Covenant shall have the meanings set forth below: The term "Agreement" shall have the meaning ascribed in Recital B of this Covenant. The term "Commencement Date" shall have the meaning ascribed in Section 2 of this Covenant. The term "Covenant Payments" shall mean the amounts to be paid by City to Owner with respect to each Quarter of the Operating Period. The term "Covenant Payments Cap Amount" shall have the meaning ascribed in Section 4.1.1(a) as limited by Section 4.1.1(b) of this Covenant. The term "Default" shall have the meaning ascribed in Section 5.1 of this Covenant. The term "Effective Date" shall mean the date this Covenant is executed by the latter of the two Parties to sign, which date shall be inserted in the preamble to this Covenant. The term "Entitlements" shall mean those discretionary City land use permits and approvals required to authorize the opening and operation of the Kohl's Department Store on the Site which are referred to in Recital C of this Covenant, as the same may be amended from time to time. The term "Fiscal Year" shall mean City's fiscal year, which commences on July 1 and ends on the next succeeding June 30. The term "Holder" shall have the meaning ascribed in Section 5.1(b) of this Covenant. The term "Kohl's Department Store" shall mean the project described in Recital C of this Covenant, together with such incidental related uses that comply with the Entitlements and applicable provisions of City's Municipal Code. 119/015610-0062 507996.05 PM05 2 The term "Operating Period" refers to the period between the Commencement Date and the Termination Date. The term "Quarter" shall mean (i) any of the three (3) month periods during a Fiscal Year commencing July 1, October 1, January 1, or April 1, or (ii) the quarterly or other periods used by the State Board of Equalization in calculating or making Sales Tax payments to City, if such periods differ from City's fiscal quarters described in clause (i) hereinabove. The term "Sales Tax" means, for a given Quarter, or part thereof, during the Operating Period, that portion of sales and use taxes allocated, paid to, and received by City from the imposition of the Bradley -Burns Uniform Sales and Use Tax Law (commencing with Section 7200 of the California Revenue and Taxation Code), or any successor law thereto, that arises from taxable sales and lease transactions generated by the Kohl's Department Store on the Site. Notwithstanding the foregoing, the term "Sales Tax" shall not include (i) the portion of sales or use taxes attributable to the Kohl's Department Store on the Site that are retained by the State Board of Equalization as an administrative, processing, or handling charge (calculated at the same percentage of gross revenues as is applicable City-wide); (ii) the portion of such revenues which in future years may be allocated and paid to City but which is restricted by law (but not contract) by an entity other than City (and binding upon City) to be used for specific uses (other than the uses provided for in this Covenant including without limitation disaster relief, transportation improvements, or otherwise); or (iii) any Sales Tax that may be generated from other retail sources on the Site other than a Kohl's Department Store. The term "Sales Tax Statement" refers to each quarterly statement to be prepared by Owner and submitted to the SBE and City identifying the portion of Sales Tax generated from the Kohl's Department Store on the Site during the previous Quarter as a result of taxable sales transactions, as provided in Section 3.6 of this Covenant. The term "SBE" shall mean the California State Board of Equalization or successor agency with the responsibility of collecting and administering the distribution and payment to City of Sales Tax. The term "Site" shall have the meaning ascribed in Recital A of this Covenant. The term "Termination Date" shall mean the date that is the earliest of (i) the date that is eight (8) years following the Commencement Date; (ii) the date that the Covenant Payments Cap Amount is paid in full; or (iii) the date on which this Covenant is terminated pursuant to Sections 5.2 or 5.3, as applicable. 2. CONDITION TO OWNER'S RIGHT TO RECEIVE COVENANT PAYMENTS. As a condition to Owner's right to receive the Covenant Payments, Owner shall be required to open and operate until the Termination Date or cause said Kohl's Department Store to be opened and operated until the Termination Date for business to the public, all in compliance with the Entitlements. The day on which the aforesaid condition is satisfied shall constitute the "Commencement Date" (unless such date occurs before the execution of this Covenant, in which case the Commencement Date shall constitute the date upon which this Covenant is fully executed by both parties) at which time Owner's obligations pursuant to 119/015610-0062 507996.05 PM05 3 Section 3 of this Covenant and City's obligations pursuant to Section 4 of this Covenant shall commence. Notwithstanding any other provision set forth in this Covenant, and subject to extension for events of force majeure as provided in Section 6.6, (i) if the condition set forth in the first sentence of the preceding paragraph is not satisfied on or before the date that is eighteen (18) months after the issuance of the first building permit for the Kohl's Department Store project, or (ii) if a building permit is not issued for the Kohl's Department Store project on or before the date that is eighteen (18) months after the Effective Date, either Owner or City may terminate this Covenant by delivery of written notice of termination to the other Party and, in such event, neither Party shall have any further rights against or obligations to the other Party arising out of this Covenant. 3. OWNER'S OBLIGATIONS. 3.1 Continuous Operation; Site As Point of Sale. Owner covenants and agrees to exercise commercially reasonable efforts to continuously operate the Kohl's Department Store on the Site or to cause said Kohl's Department Store to be continuously operated on the Site during normal business hours (subject to temporary interruptions for casualty losses, repairs, and the like) during the entire Operating Period, with inventory and sales personnel sufficient to satisfy and respond to customer demand. To the maximum extent permitted by law, Owner shall designate the Site on its Sales Tax Statements as the point of sale for all sales transactions arising out of the business conducted on the Site. In addition, Owner shall exercise commercially reasonable diligence in an effort to cause financing companies to designate the Site (and the City of La Quinta) on reports they are required to file with the SBE as the situs of the financing of any goods where the transaction is generated from the Site. 3.2 Use Restriction. During the entire Operating Period, that portion of the Site intended and approved by the City to be used as a Kohl's Department Store shall not be put to any use other than the operation of the Kohl's Department Store and incidental related uses that comply with the Entitlements and applicable provisions of City's Municipal Code. 3.3 Maintenance and Repair of Site; Landscaping. During the entire Operating Period, Owner, at its sole cost and expense, shall keep and maintain the Site and the improvements thereon and all facilities appurtenant thereto in first class condition and repair and free from accumulations of debris, weeds, graffiti, and waste materials, with landscaping in a healthy condition, and shall otherwise fully comply with the Site's maintenance standards established in that certain Operating Covenant Agreement dated , 2004. During such period, Owner shall not abandon any portion of the Site or leave the Site unguarded or unprotected, and shall not otherwise act or fail to act in such a way as to unreasonably increase the risk of any damage to the Site or of any other impairment of City's interest set forth in this Covenant. During the entire Operating Period, Owner, at its sole cost and expense shall maintain the landscaping on the Site in compliance with the approved landscape plans. 3.4 Compliance with Laws. During the entire Operating Period, Owner shall operate the Kohl's Department Store on the Site in conformity with all valid and applicable federal, state (including without limitation the California Civil Code, the California Government Code, the 119/015610-0062 507996.05 PM05 4 California Health & Safety Code, the California Labor Code, the California Public Resources Code, and the California Revenue & Taxation Code), and local laws, ordinances, and regulations, provided that Owner does not waive its right to challenge the validity or applicability thereof to Owner or the Site. 3.5 Provision of Sales Tax Statements to City. During the Operating Period, Owner shall deliver to City true and correct copies of all reports that Owner files with the California State Board of Equalization ("SBE") with regard to taxable sales transactions occurring on and with respect to the Kohl's Department Store operation on the Site (the "Sales Tax Statements"). In the event that there is any private business or customer information on the Sales Tax Statement that is not reasonably necessary to enable City to verify the accuracy thereof for purposes of performing its obligations and enforcing its rights set forth in this Covenant, Owner shall be permitted to redact such information from the copy of the document provided to City. Said Sales Tax Statements shall be provided to City concurrently with their submittal to SBE. In addition, if any such Sales Tax Statements are amended or Owner receives notice from SBE regarding any over -reporting or under -reporting of Sales Tax with respect to the Site, Owner shall provide such information to City within a reasonable period not to exceed ten (10) days. 3.6 Non -Discrimination. In the opening and operation of the Kohl's Department Store, Kohl's agrees not to violate applicable laws that prohibit discrimination against any person or class of persons by reason of gender, marital status, race, color, creed, mental or physical disability, religion, age, ancestry, or national origin. 3.7 Indemnification of City. Owner shall defend, indemnify, assume all responsibility for, and hold the City, and the City's representatives, volunteers, officers, employees and agents, harmless from any and all claims, demands, damages, defense costs or liability of any kind (including attorneys' fees and costs), that arise from Owner's operation of the Kohl's Department Store on the Site or which may be caused by any acts or omissions of the Owner under this Covenant, whether such activities or performance thereof be by Owner or by anyone directly or indirectly employed or contracted with by Owner and whether such damage shall accrue or be discovered before or after termination of this Covenant including, but not limited to, Owner's failure to pay, if required, prevailing wages on the construction and development of the Kohl's Department Store. 4. OBLIGATIONS OF CITY. 4.1 Covenant Payments to Owner. 4.1.1 Amount of Covenant Payments; Cap. In consideration for Owner's undertakings pursuant to this Covenant and City's acquisition of the interest in the Site set forth in this Covenant, City shall make the following Covenant Payments to Owner after the end of each Quarter (or part thereof) during the Operating Period: (a) Subject to subparagraph (b) below, the Covenant Payments with respect to each Quarter shall be in an amount equal to twenty-five percent (25%) of the Sales Tax for that Quarter, except that in the Quarter during which the Termination Date occurs, the 119/015610-0062 507996.05 PM05 5 Covenant Payments shall be prorated such that City shall only pay to Owner 25% of Sales Tax for the period between the first day of such Quarter and the Termination Date. (b) Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall the total amount of Covenant Payments made by City to Owner exceed the sum of Three Hundred Fifty Thousand Dollars ($350,000) (the "Covenant Payments Cap Amount"). In this regard, it is understood and agreed that the Covenant Payments are in consideration of Owner's performance during each Quarter of the Operating Period and are not repayments of a loan. (c) Notwithstanding any other provision set forth in this Covenant to the contrary, even in the event the Covenant Payments Cap Amount has not been reached at the end of the Operating Period, City shall have no further obligation after that time to make additional Covenant Payments. 4.1.2 Source of Payments. The Covenant Payments shall be payable from any source of funds legally available to City, including City's general fund. In this regard, it is understood and agreed that the Sales Tax that is generated from the Kohl's Department Store operation on the Site is being used merely as a measure of the amount of the Covenant Payments that are periodically owing by City to Owner and that City is not pledging any portion of the Sales Tax generated from the Site to Owner. 4.1.3 Payment Procedure. Not later than thirty (30) days after the Sales Tax for the Kohl's Department Store is reported to City by the SBE for each Quarter, or portion thereof, during the Operating Period, City shall pay the Covenant Payment for said Quarter, or portion thereof, to Owner. Each such payment shall be accompanied by a statement identifying (i) the amount of Sales Tax upon which the Covenant Payment amount was calculated, itemized separately for sales taxes and use taxes; (ii) in the event the portion of Sales Tax attributable to taxable sales transactions that is reported by City differs from the Sales Tax Statement provided by Owner for said Quarter, an explanation of the reasons for the difference; and (iii) a cumulative total comparing how the Covenant Payment in question, together with all prior Covenant Payments, relate to the Covenant Payment Cap Amount. It is understood that the amount of City's quarterly Covenant Payments to Owner shall be based upon the amount of Sales Tax that City shall have been able to reasonably confirm it actually has received from the SBE within fifteen (15) days prior to the applicable payment date. If and to the extent that City has not been able to confirm receipt of Sales Tax revenues prior to that date after and despite its exercise of reasonable diligence to do so, its subsequent receipt of Sales Tax with respect to a particular Quarter shall be included in the next succeeding payment(s) required to be made to Owner hereunder. In addition, if after any such quarterly payment is made, either City or Owner obtains information that the amount of City's payment was in error, the Party obtaining such information shall promptly notify the other Party and shall provide such detailed information as may be necessary to explain the discrepancy. The discrepancy then shall be taken into consideration by means of an adjustment to the next quarterly payment to be made by City (either an additional payment in the event City has underpaid a prior Covenant Payment that is due or a credit against the subsequent Covenant Payment in the event City has overpaid); provided, however, that in the event an adjustment 119/015610-0062 507996.05 PM05 6 needs to be made in excess of Ten Thousand Dollars ($10,000), the Party entitled to said sum shall be entitled to deliver a written notice to the other Party requesting an immediate adjustment and in such event the other Party shall make an appropriate payment within fifteen (15) days from receipt of said notice. 4.1.4 Books and Records. Upon the written request of either Party, the other Party shall make available for inspection (at City Hall in the event of a review of City records and at Owner's place of business in La Quinta in the event of a review of Owner's records) such of its books and records as the requesting Party may reasonably determine must be reviewed in order determine whether the correct amount of Covenant Payments have been made or are being made hereunder. Notwithstanding the foregoing, City shall not be required to produce any books or records that it is prohibited from producing by law and Owner shall not be required to produce information that violates the statutorily prescribed privacy rights of individual customers. 4.1.5 No Acceleration; Prepayment. It is acknowledged by the Parties that any payments by City provided for in this Covenant are in consideration for the performance by Owner during the time period(s) for which payments are due. Therefore, City's failure to timely make any payments or City's failure to perform any of its other obligations hereunder shall not cause the acceleration of any anticipated future Covenant Payments by City to Owner. To the maximum extent permitted by law, City shall be permitted to prepay any of the Covenant Payments without penalty. 4.2 Additional Condition Precedent to City's Obligations. In addition to the provisions set forth in Section 2 of this Covenant, City's obligation to make the Covenant Payments pursuant to Section 4.1 of this Covenant for any Quarter during the Operating Period shall be contingent and conditional upon Owner's performance of its obligations set forth in Section 3 of this Covenant during such Quarter. 5. DEFAULTS AND REMEDIES. 5.1 Defaults. (a) Subject to Section 6.6 of this Covenant, the occurrence of any of the following shall constitute a Default: (i) the failure by either Party to perform any obligation of such Party for the payment of money under this Covenant if such failure is not cured within fifteen (15) calendar days after the nonperforming Party's receipt of written notice from the other Party that such obligation was not performed when due; or (ii) the failure by either Party to perform any of its obligations (other than obligations described in clause (i) of this Section 5.1) set forth in this Covenant, if such failure is not cured within thirty (30) days or, if such failure is of a nature that cannot reasonably be cured within thirty (30) days, the failure by such Party to commence such cure within thirty (30) days and thereafter diligently prosecute such cure to completion; or 119/015610-0062 507996.05 PM05 % (iii) any representation or warranty by a Party set forth in this Covenant proves to have been incorrect in any material respect when made; or (iv) the Kohl's Department Store is materially damaged or destroyed by fire or other casualty during the Operating Period and Owner fails to commence restoration of the improvements within a reasonable time or thereafter fails to diligently proceed to complete such restoration in accordance with this Covenant; or (v) Owner is enjoined or otherwise prohibited by any governmental agency from occupying the Site during the Operating Period and such injunction or prohibition continues unstayed for ninety (90) days or more for any reason. (b) In the event Owner fails to perform any of its obligations under this Covenant and City sends a notice of such failure to Owner, concurrently therewith City shall send a copy of such notice to any mortgagee or deed of trust holder with respect to the Site (herein the "Holder") (the name and address of which Holder shall be furnished by Owner or such Holder to City) and the Holder shall have the same period of time as is available to Owner to remedy such breach or failure under this Covenant. City shall accept any proper cure of a breach or failure tendered by the Holder. 5.2 City's Remedies Upon Default by Owner. Upon the occurrence of any Default by Owner, and after Owner's receipt of written notice of default and expiration of the time for Owner to cure such Default as provided in Section 5.1, City may at its option: (i) suspend the payment of Covenant Payments otherwise due and payable to Owner hereunder for the period that Owner remains in Default. If City has so suspended its payments in accordance with the terms of this clause (i), then upon Owner's cure of such Default, City shall resume its payment obligations, but shall have no obligation to make payments for any Quarter or portion thereof during which City's obligation to make payments was so suspended; or (ii) if the Default continues uninterrupted for a period of six (6) months, City may terminate this Covenant, in which case City's obligation to make payments to Owner for any period of time after the occurrence of the Default shall be finally terminated and discharged. In no event, however, shall City have the right to specifically enforce Owner's covenants set forth in Section 3 of this Covenant, to prevent Owner's conversion of the Site to another lawful use (even if such use would be inconsistent with this Covenant), or to sue Owner or to recover from Owner any amount that is actually or allegedly attributable to loss of anticipated Sales Tax or other revenues, whether because the amount of Sales Tax generated from the Site is less than projected by Owner or City, or because Owner does not operate the Kohl's Department Store on the Site for the entire Operating Period, or otherwise. 5.3 Owner's Remedies Upon Default by City. Upon the occurrence of any Default by City, and after City's receipt of written notice of Default from Owner and expiration of the time for City to cure such Default as provided in Section 5.1, Owner may terminate this Covenant by 119/015610-0062 507996.05 PM05 g written notice to City and/or seek whatever legal or equitable remedies may be available to Owner, subject to the provisions of Section 4.1.5. 5.4 Cumulative Remedies; No Waiver. Except as expressly provided herein, the nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights and remedies provided by law from time to time and the exercise by the nondefaulting Party of any right or remedy shall not prejudice such Party in the exercise of any other right or remedy. None of the provisions of this Covenant shall be considered waived by either Party except when such waiver is delivered in writing. No waiver of any Default shall be implied from any omission by City to take action on account of such Default if such Default persists or is repeated. No waiver of any Default shall affect any Default other than the Default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of this Covenant shall be construed as a waiver of any subsequent breach of the same provision. A Party's consent to or approval of any act by the other Party requiring further consent or approval shall not be deemed to waive or render unnecessary the consenting Party's consent to or approval of any subsequent act. A Party's acceptance of the late performance of any obligation shall not constitute a waiver by such Party of the right to require prompt performance of all further obligations. A Party's acceptance of any performance following the sending or filing of any notice of Default shall not constitute a waiver of that Party's right to proceed with the exercise of its remedies for any unfulfilled obligations. A Party's acceptance of any partial performance shall not constitute a waiver by that Party of any rights relating to the unfulfilled portion of the applicable obligation. 5.5 Limitations on City's Liability. Owner acknowledges and agrees that: (i) this Covenant shall not be deemed or construed as creating a partnership, joint venture, or similar association between Owner and City, the relationship between Owner and City pursuant to this Covenant is and shall remain solely that of contracting Parties, that the development and operation of the Kohl's Department Store is a private undertaking and is not a public work, and City neither undertakes nor assumes any responsibility pursuant to this Covenant to review, inspect, supervise, approve, or inform Owner of any matter in connection with the development or operation of the Kohl's Department Store on the Site other than as expressly provided for herein, including matters relating to architects, designers, suppliers, or the materials used by any of them; and Owner shall rely entirely on its own judgment with respect to such matters; provided, that nothing herein is intended to release City from whatever obligations it may have pursuant to applicable laws independent of this Covenant; (ii) by virtue of this Agreement, City shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Site, whether arising from: (a) any defect in any building, grading, landscaping, or other onsite or offsite improvement; (b) any act or omission of Owner or any of Owner's agents, employees, independent contractors, licensees, lessees, or invitees; or (c) any accident on the Site or any fire or other casualty or hazard thereon; and (iii) by accepting or approving anything required to be performed or given to City under this Covenant, including any certificate, survey, appraisal, or insurance policy, City shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by City to anyone. 119/015610-0062 507996.05 PM05 9 6. GENERAL PROVISIONS. 6.1 Integ_ration and Amendment. This Covenant and the Agreement constitute the entire agreement by and between the Parties pertaining to the subject matter hereof, and supersede all prior agreements and understandings of the Parties with respect thereto. This Covenant may not be modified, amended, supplemented, or otherwise changed except by a writing executed by both Parties. 6.2 Captions. Section headings used in this Covenant are for convenience of reference only and shall not affect the construction of any provisions of this Covenant. 6.3 Bindiniz Effect; Successors and Assigns; Assignments. This Covenant shall run with the land and shall be binding upon and inure to the benefit of, the Parties hereto and their respective successors and assigns, as limited by this Section 6.3. Except as such assignment relates to Holder, the Owner shall not assign, hypothecate, encumber or otherwise transfer its rights or obligations as set forth in this Covenant without first obtaining the City's written consent, which may be given or denied or conditioned in the City's sole discretion. Owner may assign its right to receive the Covenant Payments to any Holder for security purposes or to any lessee or business owning and operating the Kohl's Department Store on the Site. In the event of an assignment for security purposes to a Holder, City agrees that this Covenant be subordinated to the lien of said Holder's deed of trust or mortgage and City agrees to cooperate with Owner in executing an appropriate subordination agreement. In the event that the Holder forecloses on its deed of trust or mortgage or accepts a deed in lieu of foreclosure, then upon the request of such Holder or its successor or assignee, City agrees to enter into a new Covenant on the same terms and conditions set forth herein for the balance of the Operating Period. In the event of any assignment that is consented to in writing by the City, the references in this Covenant to "Owner" shall be deemed to refer to the assignee. 6.4 Counterparts. This Covenant may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. 6.5 Governing Law. This Covenant shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles. 6.6 Force Majeure. Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall a Party be deemed to be in Default of its obligations set forth herein where delays or failures to perform are caused by circumstances without the fault and beyond the reasonable control of such Party, which circumstances shall include, without limitation, fire/casualty losses; strikes; litigation; unusually severe weather; inability to secure necessary labor, materials, or tools; delays of any contractor, subcontractor, or supplier; unjustified acts or failure to act by City or other governmental agency in the processing or approval of plans or permits or inspection or approval of the construction of the Kohl's Department Store project; litigation by third Parties challenging the validity or enforceability of the Agreement or this Covenant or the Entitlements; and acts of God (collectively, "force 119/015610-0062 _ 1 O_ 507996.05 PM05 majeure"). Adverse market conditions or Owner's inability to obtain financing or approval to operate the Kohl's Department Store shall not constitute events of force majeure. In the event of an event of force majeure, the Party so delayed shall notify the other Party of the circumstances and cause of the delay within a reasonable time period after commencement of the delay, it shall keep the other Party informed at reasonable intervals upon request regarding the status of its efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform as soon as practicable thereafter. 6.7 Notices. Notices to be given by City or Kohl's hereunder may be delivered personally or may be delivered by certified mail or by reputable overnight delivery service providing a delivery conformation receipt, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es) that a Party may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If notice is to City: City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, CA 92253 Attention: Mr. Tom Genovese, City Manager with a copy to: City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, CA 92253 Attention: M. Katherine Jenson, City Attorney If notice to Kohl's: Kohl's Department Stores, Inc. N56 W 17000 Ridgewood Drive Menomonee, WI 53051 Attention: Chief Executive Officer with a copy to: Kohl's Department Stores, Inc. N56 W 17000 Ridgewood Drive Menomonee, WI 53051 Attention: Law Department 6.8 Further Acts. Each Party agrees to take such further actions and to execute such other documents as may be reasonable and necessary in the performance of its obligations hereunder; reserving to City, however, its lawful discretionary and police power authority. Without limiting the generality of the foregoing, upon the expiration or termination of the Operating Period, City will execute and deliver such instruments as may be prepared by Owner at Owner's expense to release the cloud upon title to the Site created by this Covenant; provided, however, that any such document shall be in a form reasonably acceptable to the City Attorney of City. 119/015610-0062 -11- 507996.05 PM05 6.9 Third Party Beneficiaries. With the exception of the specific provisions set forth in this Covenant for the benefit of Holder, there are no intended third party beneficiaries under this Covenant and no such other third parties shall have any rights or obligations hereunder [Remainder of this page intentionally left blank.] 119/015610-0062 -12- 507996.05 PM05 IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of the Effective Date. ATTEST: M June S. Greek, City Clerk APPROVED AS TO FORM: M M. Katherine Jenson, City Attorney ATTEST: 0 Richard D. Schepp, Secretary "CITY" CITY OF LA QUINTA, a California municipal corporation. By: - Thomas P. Genovese, City Manager "OWNER" KOHL'S DEPARTMENT STORES, INC., a Delaware corporation By: Its: By: Its: 119/015610-0062 -13 - 507996.05 PM05 STATE OF WISCONSIN ) ) ss COUNTY OF WAUKESHA ) On , before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. [SEAL] STATE OF CALIFORNIA ) ss COUNTY OF ) On personally appeared Notary Public before me, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] 119/015610-0062 -14- 507996.05 PM05 STATE OF CALIFORNIA ) ss COUNTY OF ) On , before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] 119/015610-0062 -15 - 507996.05 PM05 EXHIBIT "A" LEGAL DESCRIPTION OF SITE PARCEL 6 OF PARCEL MAP 25865, BOOK 172, PAGES 21 THROUGH 27, INCLUSIVE, OF PARCEL MAPS, RIVERSIDE COUNTY OFFICIAL RECORDS, STATE OF CALIFORNIA. 119/015610-0062 507996.05 PM05 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of La Quinta P. O. Box 1504 La Quinta, CA 92247-1504 Attn: June S. Greek, City Clerk DOC # 2003-0329257 04/27/2005 08:00A Fee:NC Page 1 of 15 Recorded in Official Records County of Riverside Larry W. Ward Assessor, County Clerk & Recorder 1111111111111111111111111111111111111111111111111111111 M S ILI PAGE SIZE DA PCOR NOCOR SMF MISC. A R L COPY LONG REFUND I NCHG I EXAM [Space above for recorder.] EXEMPT FROM RECORDER'S FEE PER GOV. CODE §27383 EXEMPT FROM DOCUMENTARY TRANSFER TAX PER REV. & TAX. CODE § 11922 0 Signature of Declarant or Agent determining tax — Firm Name COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS IN REAL PROPERTY This COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECT GZ--i RESTS " of this da of IN REAL PROPERTY (the Covenant) is entered into as j `� _ y 200.'!5'* by and between the CITY OF LA QUINTA, a California municipal corporation ("City"), and Kohl's Department Stores, Inc., a Delaware corporation ("Owner") (individually a "Party" and collectively the "Parties"). RECITALS A. Owner is the owner of that certain real property consisting of approximately 13.134 acres of land area located generally in the I I I La Quinta Shopping Center on the west side of Adams Street at the Whitewater Channel, in the City of La Quinta, County of Riverside, State of California, which is more particularly described in the legal description attached hereto as Exhibit "A" and incorporated herein by this reference (the "Site"). B. On or about 4, .! 1-?, 2005, City and Owner entered into that certain unrecorded Agreement to S are Sales Tax Revenue (the "Agreement") authorizing the recordation of this Covenant against the Site upon the timely satisfaction of the "Covenant Conditions" identified therein. The Covenant Conditions have been satisfied. C. Owner shall operate a Kohl's Department Store on the Site, and, pursuant to the following land use permits and approvals (including all conditions to approval therein) issued by City (collectively, the "Entitlements"). C TP 2156/015610-0062 597064.01 AM05 D. In consideration for Owner's conveyance to City of the interest in the Site set forth in this Covenant, City has agreed to make certain payments to Owner, the amount of which is measured by the Sales Tax generated by the Retail Uses on the Site. City and Owner have agreed that the portion of Sales Tax required to be paid by City to Owner hereunder during each Quarter of the Operating Period provided for herein is a fair exchange for the consideration to be furnished by Owner to City in that Quarter. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Owner hereby agree as follows: 1. DEFINED TERMS. The following terms when used in this Covenant shall have the meanings set forth below: The term "Agreement" shall have the meaning ascribed in Recital B of this Covenant. The term "Commencement Date" shall have the meaning ascribed in Section 2 of this Covenant. The term "Covenant Payments" shall mean the amounts to be paid by City to Owner with respect to each Quarter of the Operating Period. The term "Covenant Payments Cap Amount" shall have the meaning ascribed in Section 4.1.1(a) as limited by Section 4.1.1(b) of this Covenant. The term "Default" shall have the meaning ascribed in Section 5.1 of this Covenant. The term "Effective Date" shall mean the date this Covenant is executed by the latter of the two Parties to sign, which date shall be inserted in the preamble to this Covenant. The term "Entitlements" shall mean those discretionary City land use permits and approvals required to authorize the opening and operation of the Kohl's Department Store on the Site which are referred to in Recital C of this Covenant, as the same may be amended from time to time. The term "Fiscal Year" shall mean City's fiscal year, which commences on July 1 and ends on the next succeeding June 30. The term "Holder" shall have the meaning ascribed in Section 5.1(b) of this Covenant. The term "Kohl's Department Store" shall mean the project described in Recital C of this Covenant, together with such incidental related uses that comply with the Entitlements and applicable provisions of City's Municipal Code. 2005-0329257 2156/015610-0062 597064.01 AM05 2 The term "Operating Period" refers to the period between the Commencement Date and the Termination Date. The term "Quarter" shall mean (i) any of the three (3) month periods during a Fiscal Year commencing July 1, October 1, January 1, or April 1, or (ii) the quarterly or other periods used by the State Board of Equalization in calculating or making Sales Tax payments to City, if such periods differ from City's fiscal quarters described in clause (i) hereinabove. The term "Sales Tax" means, for a given Quarter, or part thereof, during the Operating Period, that portion of sales and use taxes allocated, paid to, and received by City from the imposition of the Bradley -Burns Uniform Sales and Use Tax Law (commencing with Section 7200 of the California Revenue and Taxation Code), or any successor law thereto, that arises from taxable sales and lease transactions generated by the Kohl's Department Store on the Site. Notwithstanding the foregoing, the term "Sales Tax" shall not include (i) the portion of sales or use taxes attributable to the Kohl's Department Store on the Site that are retained by the State Board of Equalization as an administrative, processing, or handling charge (calculated at the same percentage of gross revenues as is applicable City-wide); (ii) the portion of such revenues which in future years may be allocated and paid to City but which is restricted by law (but not contract) by an entity other than City (and binding upon City) to be used for specific uses (other than the uses provided for in this Covenant including without limitation disaster relief, transportation improvements, or otherwise); or (iii) any Sales Tax that may be generated from other retail sources on the Site other than a Kohl's Department Store. The term "Sales Tax Statement" refers to each quarterly statement to be prepared by Owner and submitted to the SBE and City identifying the portion of Sales Tax generated from the Kohl's Department Store on the Site during the previous Quarter as a result of taxable sales transactions, as provided in Section 3.6 of this Covenant. CUIML Nl a The term "SBE" shall mean the California State Board of Equalization or successor ,M %"' agency with the responsibility of collecting and administering the distribution and payment to �r- N- City of Sales Tax. it 0 The term "Site" shall have the meaning ascribed in Recital A of this Covenant. The term "Termination Date" shall mean the date that is the earliest of (i) the date that is eight (8) years following the Commencement Date; (ii) the date that the Covenant Payments Cap �• Amount is paid in full; or (iii) the date on which this Covenant is terminated pursuant to Sections 5.2 or 5.3, as applicable. 2. CONDITION TO OWNER'S RIGHT TO RECEIVE COVENANT PAYMENTS. As a condition to Owner's right to receive the Covenant Payments, Owner shall be required to open and operate until the Termination Date or cause said Kohl's Department Store to be opened and operated until the Termination Date for business to the public, all in compliance with the Entitlements. The day on which the aforesaid condition is satisfied shall constitute the "Commencement Date" (unless such date occurs before the execution of this Covenant, in which case the Commencement Date shall constitute the date upon which this Covenant is fully executed by both parties) at which time Owner's obligations pursuant to 2156/015610-0062 _ 597064.01 AM05 -3 Section 3 of this Covenant and City's obligations pursuant to Section 4 of this Covenant shall commence. Notwithstanding any other provision set forth in this Covenant, and subject to extension for events of force majeure as provided in Section 6.6, (i) if the condition set forth in the first sentence of the preceding paragraph is not satisfied on or before the date that is eighteen (18) months after the issuance of the first building permit for the Kohl's Department Store project, or (ii) if a building permit is not issued for the Kohl's Department Store project on or before the date that is eighteen (18) months after the Effective Date, either Owner or City may terminate this Covenant by delivery of written notice of termination to the other Party and, in such event, neither Party shall have any further rights against or obligations to the other Party arising out of this Covenant. 3. OWNER'S OBLIGATIONS. 3.1 Continuous Operation; Site As Point of Sale. Owner covenants and agrees to exercise commercially reasonable efforts to continuously operate the Kohl's Department Store on the Site or to cause said Kohl's Department Store to be continuously operated on the Site during normal business hours (subject to temporary interruptions for casualty losses, repairs, and the like) during the entire Operating Period, with inventory and sales personnel sufficient to satisfy and respond to customer demand. To the maximum extent permitted by law, Owner shall designate the Site on its Sales Tax Statements as the point of sale for all sales transactions arising out of the business conducted on the Site. In addition, Owner shall exercise commercially reasonable diligence in an effort to cause financing companies to designate the Site (and the City of La Quinta) on reports they are required to file with the SBE as the situs of the financing of any goods where the transaction is generated from the Site. 3.2 Use Restriction. During the entire Operating Period, that portion of the Site intended and approved by the City to be used as a Kohl's Department Store shall not be put to any use other than the operation of the Kohl's Department Store and incidental related uses that comply with the Entitlements and applicable provisions of City's Municipal Code. 3.3 Maintenance and Repair of Site; Landscaping. During the entire Operating Period, Owner, at its sole cost and expense, shall keep and maintain the Site and the improvements thereon and all facilities appurtenant thereto in first class condition and repair and free from accumulations of debris, weeds, graffiti, and waste materials, with landscaping in a healthy condition, and shall otherwise fully comply with the Site's maintenance standards established in that certain Operating Covenant Agreement dated , 2004. During such period, Owner shall not abandon any portion of the Site or leave the Site unguarded or unprotected, and shall not otherwise act or fail to act in such a way as to unreasonably increase the risk of any damage to the Site or of any other impairment of City's interest set forth in this Covenant. During the entire Operating Period, Owner, at its sole cost and expense shall maintain the landscaping on the Site in compliance with the approved landscape plans. 3.4 Compliance with Laws. During the entire Operating Period, Owner shall operate the Kohl's Department Store on the Site in conformity with all valid and applicable federal, state (including without limitation the California Civil Code, the California Government Code, the 2156/015610-0062 5970e401aM05 4 II III III I II III IIII III II II II ae32a55e�ea en California Health & Safety Code, the California Labor Code, the California Public Resources Code, and the California Revenue & Taxation Code), and local laws, ordinances, and regulations, provided that Owner does not waive its right to challenge the validity or applicability thereof to Owner or the Site. 3.5 Provision of Sales Tax Statements to City. During the Operating Period, Owner shall deliver to City true and correct copies of all reports that Owner files with the California State Board of Equalization ("SBE") with regard to taxable sales transactions occurring on and with respect to the Kohl's Department Store operation on the Site (the "Sales Tax Statements"). In the event that there is any private business or customer information on the Sales Tax Statement that is not reasonably necessary to enable City to verify the accuracy thereof for purposes of performing its obligations and enforcing its rights set forth in this Covenant, Owner shall be permitted to redact such information from the copy of the document provided to City. Said Sales Tax Statements shall be provided to City concurrently with their submittal to SBE. In addition, if any such Sales Tax Statements are amended or Owner receives notice from SBE regarding any over -reporting or under -reporting of Sales Tax with respect to the Site, Owner shall provide such information to City within a reasonable period not to exceed ten (10) days. 3.6 Non -Discrimination. In the opening and operation of the Kohl's Department Store, Kohl's agrees not to violate applicable laws that prohibit discrimination against any person or class of persons by reason of gender, marital status, race, color, creed, mental or physical disability, religion, age, ancestry, or national origin. 3.7 Indemnification of City. Owner shall defend, indemnify, assume all responsibility for, and hold the City, and the City's representatives, volunteers, officers, employees and agents, harmless from any and all claims, demands, damages, defense costs or liability of any kind (including attorneys' fees and costs), that arise from Owner's operation of the Kohl's Department Store on the Site or which may be caused by any acts or omissions of the Owner under this Covenant, whether such activities or performance thereof be by Owner or by anyone directly or indirectly employed or contracted with by Owner and whether such damage shall accrue or be discovered before or after termination of this Covenant including, but not limited to, Owner's failure to pay, if required, prevailing wages on the construction and development of the Kohl's Department Store. 4. OBLIGATIONS OF CITY. 4.1 Covenant Payments to Owner. 4.1.1 Amount of Covenant Payments; Cap. In consideration for Owner's undertakings pursuant to this Covenant and City's acquisition of the interest in the Site set forth in this Covenant, City shall make the following Covenant Payments to Owner after the end of each Quarter (or part thereof) during the Operating Period: (a) Subject to subparagraph (b) below, the Covenant Payments with respect to each Quarter shall be in an amount equal to twenty-five percent (25%) of the Sales Tax for that Quarter, except that in the Quarter during which the Termination Date occurs, the 2156/015610-0062 597064.01 nv05 5 II III III III III II II III IIII II eaa005 �5eaa Covenant Payments shall be prorated such that City shall only pay to Owner 25% of Sales Tax for the period between the first day of such Quarter and the Termination Date. (b) Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall the total amount of Covenant Payments made by City to Owner exceed the sum of Three Hundred Fifty Thousand Dollars ($350,000) (the "Covenant Payments Cap Amount"). In this regard, it is understood and agreed that the Covenant Payments are in consideration of Owner's performance during each Quarter of the Operating Period and are not repayments of a loan. (c) Notwithstanding any other provision set forth in this Covenant to the contrary, even in the event the Covenant Payments Cap Amount has not been reached at the end of the Operating Period, City shall have no further obligation after that time to make additional Covenant Payments. 4.1.2 Source of Payments. The Covenant Payments shall be payable from any source of funds legally available to City, including City's general fund. In this regard, it is understood and agreed that the Sales Tax that is generated from the Kohl's Department Store operation on the Site is being used merely as a measure of the amount of the Covenant Payments that are periodically owing by City to Owner and that City is not pledging any portion of the Sales Tax generated from the Site to Owner. 4.1.3 Payment Procedure. Not later than thirty (30) days after the Sales Tax for the Kohl's Department Store is reported to City by the SBE for each Quarter, or portion thereof, during the Operating Period, City shall pay the Covenant Payment for said Quarter, or portion thereof, to Owner. Each such payment shall be accompanied by a statement identifying (i) the amount of Sales Tax upon which the Covenant Payment amount was calculated, itemized separately for sales taxes and use taxes; (ii) in the event the portion of Sales Tax attributable to taxable sales transactions that is reported by City differs from the Sales Tax Statement provided by Owner for said Quarter, an explanation of the reasons for the difference; and (iii) a cumulative total comparing how the Covenant Payment in question, together with all prior Covenant Payments, relate to the Covenant Payment Cap Amount. It is understood that the amount of City's quarterly Covenant Payments to Owner shall be based upon the amount of Sales Tax that City shall have been able to reasonably confirm it actually has received from the SBE within fifteen (15) days prior to the applicable payment date. If and to the extent that City has not been able to confirm receipt of Sales Tax revenues prior to that date after and despite its exercise of reasonable diligence to do so, its subsequent receipt of Sales Tax with respect to a particular Quarter shall be included in the next succeeding payment(s) required to be made to Owner hereunder. In addition, if after any such quarterly payment is made, either City or Owner obtains information that the amount of City's payment was in error, the Party obtaining such information shall promptly notify the other Party and shall provide such detailed information as may be necessary to explain the discrepancy. The discrepancy then shall be taken into consideration by means of an adjustment to the next quarterly payment to be made by City (either an additional payment in the event City has underpaid a prior Covenant Payment that is due or a credit against the subsequent Covenant Payment in the event City has overpaid); provided, however, that in the event an adjustment 2156/015610-0062 597064.01 aMos 6 II III III I II III IIII III III I II eo z00a�55eeA needs to be made in excess of Ten Thousand Dollars ($10,000), the Party entitled to said sum shall be entitled to deliver a written notice to the other Party requesting an immediate adjustment and in such event the other Party shall make an appropriate payment within fifteen (15) days from receipt of said notice. 4.1.4 Books and Records. Upon the written request of either Party, the other Party shall make available for inspection (at City Hall in the event of a review of City records and at Owner's place of business in La Quinta in the event of a review of Owner's records) such of its books and records as the requesting Party may reasonably determine must be reviewed in order determine whether the correct amount of Covenant Payments have been made or are being made hereunder. Notwithstanding the foregoing, City shall not be required to produce any books or records that it is prohibited from producing by law and Owner shall not be required to produce information that violates the statutorily prescribed privacy rights of individual customers. 4.1.5 No Acceleration; Prepayment. It is acknowledged by the Parties that any payments by City provided for in this Covenant are in consideration for the performance by Owner during the time period(s) for which payments are due. Therefore, City's failure to timely make any payments or City's failure to perform any of its other obligations hereunder shall not cause the acceleration of any anticipated future Covenant Payments by City to Owner. To the maximum extent permitted by law, City shall be permitted to prepay any of the Covenant Payments without penalty. 4.2 Additional Condition Precedent to City's Obligations. In addition to the provisions set forth in Section 2 of this Covenant, City's obligation to make the Covenant Payments pursuant to Section 4.1 of this Covenant for any Quarter during the Operating Period shall be contingent and conditional upon Owner's performance of its obligations set forth in Section 3 of this Covenant during such Quarter. 5. DEFAULTS AND REMEDIES. 5.1 Defaults. (a) Subject to Section 6.6 of this Covenant, the occurrence of any of the following shall constitute a Default: (i) the failure by either Party to perform any obligation of such Party for the payment of money under this Covenant if such failure is not cured within fifteen (15) calendar days after the nonperforming Party's receipt of written notice from the other Party that such obligation was not performed when due; or (ii) the failure by either Party to perform any of its obligations (other than obligations described in clause (i) of this Section 5.1) set forth in this Covenant, if such failure is not cured within thirty (30) days or, if such failure is of a nature that cannot reasonably be cured within thirty (30) days, the failure by such Party to commence such cure within thirty (30) days and thereafter diligently prosecute such cure to completion; or 2156/015610-0062 snowof nM05 ' II III III III III II II III II III II aiz00enee�SeeA (iii) any representation or warranty by a Party set forth in this Covenant proves to have been incorrect in any material respect when made; or (iv) the Kohl's Department Store is materially damaged or destroyed by fire or other casualty during the Operating Period and Owner fails to commence restoration of the improvements within a reasonable time or thereafter fails to diligently proceed to complete such restoration in accordance with this Covenant; or (v) Owner is enjoined or otherwise prohibited by any governmental agency from occupying the Site during the Operating Period and such injunction or prohibition continues unstayed for ninety (90) days or more for any reason. (b) In the event Owner fails to perform any of its obligations under this Covenant and City sends a notice of such failure to Owner, concurrently therewith City shall send a copy of such notice to any mortgagee or deed of trust holder with respect to the Site (herein the "Holder") (the name and address of which Holder shall be furnished by Owner or such Holder to City) and the Holder shall have the same period of time as is available to Owner to remedy such breach or failure under this Covenant. City shall accept any proper cure of a breach or failure tendered by the Holder. 5.2 City's Remedies Upon Default by Owner. Upon the occurrence of any Default by Owner, and after Owner's receipt of written notice of default and expiration of the time for Owner to cure such Default as provided in Section 5.1, City may at its option: (i) suspend the payment of Covenant Payments otherwise due and payable to Owner hereunder for the period that Owner remains in Default. If City has so suspended its payments in accordance with the terms of this clause (i), then upon Owner's cure of such Default, City shall resume its payment obligations, but shall have no obligation to make payments for any Quarter or portion thereof during which City's obligation to make payments was so suspended; or (ii) if the Default continues uninterrupted for a period of six (6) months, City may terminate this Covenant, in which case City's obligation to make payments to Owner for any period of time after the occurrence of the Default shall be finally terminated and discharged. In no event, however, shall City have the right to specifically enforce Owner's covenants set forth in Section 3 of this Covenant, to prevent Owner's conversion of the Site to another lawful use (even if such use would be inconsistent with this Covenant), or to sue Owner or to recover from Owner any amount that is actually or allegedly attributable to loss of anticipated Sales Tax or other revenues, whether because the amount of Sales Tax generated from the Site is less than projected by Owner or City, or because Owner does not operate the Kohl's Department Store on the Site for the entire Operating Period, or otherwise. 5.3 Owner's Remedies Upon Default by City. Upon the occurrence of any Default by City, and after City's receipt of written notice of Default from Owner and expiration of the time for City to cure such Default as provided in Section 5.1, Owner may terminate this Covenant by 2156/015610-0062 'r°"°'°.,°, %- I IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII a.�aaa.=��a written notice to City and/or seek whatever legal or equitable remedies may be available to Owner, subject to the provisions of Section 4.1.5. 5.4 Cumulative Remedies; No Waiver. Except as expressly provided herein, the nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights and remedies provided by law from time to time and the exercise by the nondefaulting Party of any right or remedy shall not prejudice such Party in the exercise of any other right or remedy. None of the provisions of this Covenant shall be considered waived by either Party except when such waiver is delivered in writing. No waiver of any Default shall be implied from any omission by City to take action on account of such Default if such Default persists or is repeated. No waiver of any Default shall affect any Default other than the Default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of this Covenant shall be construed as a waiver of any subsequent breach of the same provision. A Party's consent to or approval of any act by the other Party requiring further consent or approval shall not be deemed to waive or render unnecessary the consenting Party's consent to or approval of any subsequent act. A Party's acceptance of the late performance of any obligation shall not constitute a waiver by such Party of the right to require prompt performance of all further obligations. A Party's acceptance of any performance following the sending or filing of any notice of Default shall not constitute a waiver of that Party's right to proceed with the exercise of its remedies for any unfulfilled obligations. A Party's acceptance of any partial performance shall not constitute a waiver by that Party of any rights relating to the unfulfilled portion of the applicable obligation. 5.5 Limitations on City's Liability. Owner acknowledges and agrees that: (i) this Covenant shall not be deemed or construed as creating a partnership, joint venture, or similar association between Owner and City, the relationship between Owner and City pursuant to this Covenant is and shall remain solely that of contracting Parties, that the development and operation of the Kohl's Department Store is a private undertaking and is not a public work, and City neither undertakes nor assumes any responsibility pursuant to this Covenant to review, inspect, supervise, approve, or inform Owner of any matter in connection with the development or operation of the Kohl's Department Store on the Site other than as expressly provided for herein, including matters relating to architects, designers, suppliers, or the materials used by any of them; and Owner shall rely entirely on its own judgment with respect to such matters; provided, that nothing herein is intended to release City from whatever obligations it may have pursuant to applicable laws independent of this Covenant; (ii) by virtue of this Agreement, City shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Site, whether arising from: (a) any defect in any building, grading, landscaping, or other onsite or offsite improvement; (b) any act or omission of Owner or any of Owner's agents, employees, independent contractors, licensees, lessees, or invitees; or (c) any accident on the Site or any fire or other casualty or hazard thereon; and (iii) by accepting or approving anything required to be performed or given to City under this Covenant, including any certificate, survey, appraisal, or insurance policy, City shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by City to anyone. 2156/015610-0062 59.0e401.M05 9 II III III I III IIII III III I II e�.2.e90see32m aea 6. GENERAL PROVISIONS. 6.1 Integration and Amendment. This Covenant and the Agreement constitute the entire agreement by and between the Parties pertaining to the subject matter hereof, and supersede all prior agreements and understandings of the Parties with respect thereto. This Covenant may not be modified, amended, supplemented, or otherwise changed except by a writing executed by both Parties. 6.2 Captions. Section headings used in this Covenant are for convenience of reference only and shall not affect the construction of any provisions of this Covenant. 6.3 Binding Effect; Successors and Assigns; Assignments. This Covenant shall run with the land and shall be binding upon and inure to the benefit of, the Parties hereto and their respective successors and assigns, as limited by this Section 6.3. Except as such assignment relates to Holder, the Owner shall not assign, hypothecate, encumber or otherwise transfer its rights or obligations as set forth in this Covenant without first obtaining the City's written consent, which may be given or denied or conditioned in the City's sole discretion. Owner may assign its right to receive the Covenant Payments to any Holder for security purposes or to any lessee or business owning and operating the Kohl's Department Store on the Site. In the event of an assignment for security purposes to a Holder, City agrees that this Covenant be subordinated to the lien of said Holder's deed of trust or mortgage and City agrees to cooperate with Owner in executing an appropriate subordination agreement. In the event that the Holder forecloses on its deed of trust or mortgage or accepts a deed in lieu of foreclosure, then upon the request of such Holder or its successor or assignee, City agrees to enter into a new Covenant on the same terms and conditions set forth herein for the balance of the Operating Period. In the event of any assignment that is consented to in writing by the City, the references in this Covenant to "Owner" shall be deemed to refer to the assignee. 6.4 Counterparts. This Covenant may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. 6.5 Governing Law. This Covenant shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles. 6.6 Force Majeure. Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall a Party be deemed to be in Default of its obligations set forth herein where delays or failures to perform are caused by circumstances without the fault and beyond the reasonable control of such Party, which circumstances shall include, without limitation, fire/casualty losses; strikes; litigation; unusually severe weather; inability to secure necessary labor, materials, or tools; delays of any contractor, subcontractor, or supplier; unjustified acts or failure to act by City or other governmental agency in the processing or approval of plans or permits or inspection or approval of the construction of the Kohl's Department Store project; litigation by third Parties challenging the validity or enforceability of the Agreement or this Covenant or the Entitlements; and acts of God (collectively, "force 2156/015610-0062 59.06401 nMos 'O 1111111111111111111111111111111111111111111111111111111 eoiz0�zeeBa�ee Seaw majeure"). Adverse market conditions or Owner's inability to obtain financing or approval to operate the Kohl's Department Store shall not constitute events of force majeure. In the event of an event of force majeure, the Party so delayed shall notify the other Party of the circumstances and cause of the delay within a reasonable time period after commencement of the delay, it shall keep the other Party informed at reasonable intervals upon request regarding the status of its efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform as soon as practicable thereafter. 6.7 Notices. Notices to be given by City or Kohl's hereunder may be delivered personally or may be delivered by certified mail or by reputable overnight delivery service providing a delivery conformation receipt, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es) that a Party may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If notice is to City: City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, CA 92253 Attention: Mr. Tom Genovese, City Manager with a copy to: City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, CA 92253 Attention: M. Katherine Jenson, City Attorney If notice to Kohl's: Kohl's Department Stores, Inc. N56 W 17000 Ridgewood Drive Menomonee, WI 53051 Attention: Chief Executive Officer with a copy to: Kohl's Department Stores, Inc. N56 W 17000 Ridgewood Drive Menomonee, WI 53051 Attention: Law Department 6.8 Further Acts. Each Party agrees to take such further actions and to execute such other documents as may be reasonable and necessary in the performance of its obligations hereunder; reserving to City, however, its lawful discretionary and police power authority. Without limiting the generality of the foregoing, upon the expiration or termination of the Operating Period, City will execute and deliver such instruments as may be prepared by Owner at Owner's expense to release the cloud upon title to the Site created by this Covenant; provided, however, that any such document shall be in a form reasonably acceptable to the City Attorney of City. 2156/015610-0062 .9.06401..M05 'f II III III I II III IIII III III III II ea i�z aa�eeyees 6.9 Third Party Beneficiaries. With the exception of the specific provisions set forth in this Covenant for the benefit of Holder, there are no intended third party beneficiaries under this Covenant and no such other third parties shall have any rights or obligations hereunder [Remainder of this page intentionally left blank.] "°°°°'""°' 12 I 1111111111111111111111111111111111111111111111111111111 a.�';=a��a 15 IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of the Effective Date. ATTEST: APPROVED AS TO FORM: ATTEST: . Katherine Jenson, City)Kttornd o 51hepp, Secretary "CITY" CITY OF LA QUINTA, a California municipal corporation By: l Thomas P. Genovese, City Manager "OWNER" KOHL'S DEPAFtXMENT STORES, INC., a Delaware co ration ma R. Lawre ce Montgo e Chairma and Chief cut e Officer j5z1 N do 2156/015610-0062 sa.00i �.m� '} wI 1111111111111111111111111111111111111111111111111111111 e°z �Bareegea STATE OF WISCONSIN ) ) ss COUNTY OF WAUKESHA ) On Air; 1 I,5 , gno5 , before me, Lu Ann M. Lipke , personally appeared R Lawren Mont-,clompry personally: known to me (or proved to me on the basis of satisfactory evidence) to be the person(it) whose nameW is/wR subscribed to the within instrument and acknowledged to me that he%1 y, executed the same in his"V#Wjf authorized capacity( j and that by his&iRrARif, signatur45� on the instrument the person(*) or the entity upon behalf of which the personk4 acted, executed the instrument. . Witness my hand and official seal. V111 Notary Public My commission expires 11-20-05 [SEAL] STATE OF CALIFORNIA ) ) ss , J %' COUNTY OF c% --s / ele-, before me �0_ c personally appeared 7 Z o Al2 a. 's o personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/aye subscribed to the within instrument and acknowledged to me that he/Ate4hey executed the same in his/hekkeir authorized capacity(ies), and that by his/heritheir signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. REGENIA Y eomrnis on i321A23 JVoiaY Pubec +�f.Wr1b Riverside CGtx'►1Y I! MYComm Expi<esod2&2006 [SEAL] ­=== . -) C /�. 4 Nota ublic 2156/015610-0062 597064.01 AM05 " I I IIIIII IIIIIII IIII IIIIII IIIII III IIIIIII III IIIIII III IIII a� _�:�;.aa,�° EXHIBIT "A" LEGAL DESCRIPTION OF SITE PARCEL 6 OF PARCEL MAP 25865, BOOK 172, PAGES 21 THROUGH 27, INCLUSIVE, OF PARCEL MAPS, RIVERSIDE COUNTY OFFICIAL RECORDS, STATE OF CALIFORNIA. 2156/015610-0062 5970e4.01.M05 II III III I II III IIII III IIII III II ea/e005�Wof 2eegean