The Economic Development Incentive Program is consistent with the following goals of the Vacaville Economic Vitality Strategy:

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1 Agenda Item No. 8B September 27, 2016 TO: FROM: SUBJECT: Honorable Mayor and City Council Members Laura Kuhn, City Manager Jeremy Craig, Assistant City Manager (Staff Contact: Jeremy Craig, (707) ) RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VACAVILLE APPROVING AN ECONOMIC DEVELOPMENT INCENTIVE AGREEMENT BY AND BETWEEN THE CITY OF VACAVILLE AND ANTHONY A. BATARSE, INC., RELATING TO THE ESTABLISHMENT OF A NEW AUTOMOBILE DEALERSHIP WITHIN THE CITY OF VACAVILLE DISCUSSION: Historically, the City of Vacaville has enjoyed a robust sales tax, property tax and job base; however, the Great Recession made it a challenge to maintain these important attributes of the community. Assessed property values were damaged by the economic crisis, and the City continues to experience sales tax leakage for certain types of retail goods. As a result, the City developed the Economic Development Incentive Program (EDIP). The EDIP is designed to stimulate private sector investment in Vacaville with the goal of retaining and growing the tax structure and jobs that are essential to maintaining a high quality of life for residents and businesses. The Economic Development Incentive Program is consistent with the following goals of the Vacaville Economic Vitality Strategy: Increase municipal revenues to support City services; Minimize sales tax leakage by providing a broad cross-section and variety of retail uses; Increase amenities that support a quality living environment; Increase the production of high-paying jobs; Attract new regional development; and Support the initiation, development and growth of new local business. Findings Required It is not the intent of this program to divert dollars from other communities. In compliance with Government Code sections and , such incentives may not be offered to businesses that relocate their business from another city to Vacaville. The program is also not intended to be used to relocate a business from one location to another within the City. When applying the program, the City must determine that the incentive is not a gift of public funds, and specific findings must be made. Therefore, the City Council must find that the incentives under this policy will advance the public welfare and provide adequate consideration in return to the City as follows: The net financial benefit to the public will exceed the value of the incentives provided; The new business or residential project will provide a direct public benefit through the provision of high-paying jobs, the generation of sales, property and/or transient occupancy taxes, or other benefits to the City;

2 The incentives represent a partial return of revenues or fees that will be realized once the project is completed, such that the incentives will not impact the City s current General Fund balance as the incentives will be based on future, additional revenues to the General Fund. Anthony A. Batarse, Inc., has applied for the City s EDIP for the location of a newly-awarded Hyundai Auto Dealership. The new dealership will locate into the vacant Honda dealership site in the auto center and approximately $1 million in improvements will be made to the building to convert it to a Hyundai model location. Staff has reviewed the plans for the facility and the economic impact that will be generated from construction, operation and employment created and determined the net financial benefit to the public will well exceed the total incentive available through the EDIP. The proposed incentive is a rebate of sales tax based upon actual receipts on a quarterly basis for a period of 5 years. There will be no incentive if total annual sales do not reach the minimum of $10 million per year. An incentive will begin at $10 million and cap at $30 million in annual sales. The rebate will be paid to the applicant after the actual sales tax and sales tax detailed report are received by the City (payment in arrears) quarterly from the State of California. The agreement terminates at the end of 5 years. Government Code (AB 562) Required Information The Government Code requires the disclosure of certain information as part of the consideration of any economic development incentive. Attachment 1 provides those required disclosures for the application. FISCAL IMPACT: Economic modeling estimates the total economic impact to the region from the new dealership will be approximately $6.9 million, with the City of Vacaville receiving $554,000 annually in the form of property and sales taxes, in addition to the creation of 25 full-time equivalent jobs. RECOMMENDATION: By simple motion, adopt the subject resolution. ATTACHMENTS: Resolution Action Item Attachment 1: Government Code (AB 562) Required Information Attachment 2: Economic Development Incentive Agreement

3 ATTACHMENT 1 Government Code (AB 562) Required Information 1. The name and address of all corporations that are the beneficiary of the economic development subsidy: Anthony A. Batarse, Inc. 671 Orange Drive Vacaville, CA The start and end dates and schedule, if applicable, for the economic development subsidy, if applicable: January 1, 2016 December 31, 2021 Sales tax rebated quarterly based upon actual sales tax received by the City. 3. A description and amount of economic subsidy: The EDIP program provides for a rebate of sales taxes received by the City from the applicant site in accordance with a chart of total annual sales tax. Applicant total sales must exceed $10 million for a rebate to occur. Over the 5-year period the total rebate could range from $0 - $300,000 in total. 4. A statement of public purposes for the economic development subsidy: The EDIP rebate would serve the public purpose of redeveloping a vacant site in the City s vital auto center, provide new sales and property tax to the City for essential public services and provide an estimated 41 full-time equivalent jobs and 5 temporary jobs to the community. 5. Projected tax revenue to the local agency as a result of the economic development subsidy: Assuming $1 million in renovations, 25 full-time equivalent jobs and auto sales and service consistent with the auto center s other dealerships the total tax revenue to the City of Vacaville would range between $2.5 - $3.5 million over the 5-year period. 6. Estimated number of jobs created broken down by full-time, part-time and temporary positions: Using the IMPLAN Model for an auto dealer with proposed operations nets the following estimates: 20 Full-time 21 Part-time and 5 temporary jobs (related to building improvements).

4 RESOLUTION NO RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VACAVILLE APPROVING AN ECONOMIC DEVELOPMENT INCENTIVE AGREEMENT BY AND BETWEEN THE CITY OF VACAVILLE AND ANTHONY A. BATARSE, INC., RELATING TO THE ESTABLISHMENT OF A NEW AUTOMOBILE DEALERSHIP WITHIN THE CITY OF VACAVILLE WHEREAS, the City of Vacaville has established an economic development incentive program; and WHEREAS, the economic development incentive policy is designed to stimulate private sector investment in Vacaville with the goal of retaining and growing the tax structure and jobs that are essential to maintaining a high quality of life for residents and businesses; and WHEREAS, the City Council has determined the creation of a new auto dealership meets the goals of the City s economic vitality strategy in the redevelopment of vacant buildings, creation of new jobs and providing sales taxes for essential public services; and WHEREAS, the City Council has complied with all State of California requirements for disclosures and determined the public benefit to far exceed the incentive available from the economic development incentive program; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Vacaville hereby authorizes the City Manager or her designee to execute an economic development incentive agreement by and between the City of Vacaville and Anthony A. Batarse, Inc., relating to the establishment of a new automobile dealership. I HEREBY CERTIFY that the foregoing resolution was introduced and passed at a regular meeting of the City Council of the City of Vacaville, held on the 27th day of September, 2016, by the following vote: AYES: NOES: ABSENT: ATTEST: Michelle Thornbrugh, City Clerk

5 ATTACHMENT 2 AGREEMENT BY AND BETWEEN THE CITY OF VACAVILLE AND ANTHONY A. BATARSE, INC. RELATING TO THE ESTABLISHMENT OF A NEW AUTOMOBILE DEALERSHIP WITHIN THE CITY OF VACAVILLE This Agreement is made as of the date last written below by and between the City of Vacaville, a municipal corporation (the "City") and ANTHONY A. BATARSE, INC, a California corporation, hereinafter collectively referred to as the Parties, with reference to the following facts, purposes, and understandings. RECITALS A. Capitalized terms used herein are defined in Article 1 of this Agreement or elsewhere in this Agreement. B. The City has adopted the Economic Vitality Strategy that identifies as a goal the attraction of new businesses, which generate sales and other taxes that enhance the City s revenue that is used to fund needed services to the community. Further, the Economic Vitality Strategy encourages the attraction of new businesses that provide high wage jobs in order to enhance the quality of life for Vacaville residents. C. Anthony A. Batarse, Inc. is a company headquartered in Vacaville, California, and has chosen to locate its new auto dealership (Hyundai of Vacaville) in the City of Vacaville due to the City s unique location, amenities, services and other factors favorable to Anthony A. Batarse, Inc. s operations. D. Anthony A. Batarse, Inc. is proposing to locate its new dealership at 641 Orange Drive, a currently vacant property which once housed another auto dealership. E. The City has the ability to provide needed urban services necessary to the sales and maintenance of Anthony A. Batarse, Inc. s products. F. The City will also realize certain financial benefits by the establishment of the Facility on the Property through the generation of new sales tax revenue by establishing a point of sale at the Property. G. Anthony A. Batarse, Inc. projects that the proposed dealership may generate as many as twenty-five (25) full-time equivalent jobs, which would provide a source of employment for Vacaville and Solano County residents. H. The proposed dealership should enhance the current Vacaville Auto Center, thereby promoting more vehicle shoppers from throughout Northern California. I. Due to the benefits of locating Anthony A. Batarse, Inc. s business in the City as described herein, the Parties propose to enter into this Agreement as reinforcement of their mutually beneficial relationship by establishing an incentive program that will rebate to Anthony A. Batarse, Inc. a portion of the Sales Tax generated by Anthony A. Batarse, Inc. s sales activities within the City. 1

6 J. The City Council has found that the Rebates provided to Anthony A. Batarse, Inc. under this Agreement will advance the public welfare and provide adequate consideration in return to the City as follows: 1. The net financial benefit to the public will exceed the value of the Rebates provided to Anthony A. Batarse, Inc.; 2. The Rebates represent a partial return of the total Sales Taxes that will be realized by Anthony A. Batarse, Inc. locating its business in the City of Vacaville, which shall be paid in arrears, such that the Rebates will not impact the City s current General Fund balance as the Rebates will be based on future, additional revenues to the General Fund; and 3. The Parties now wish to enter into this Agreement setting forth the Parties understanding and agreement regarding the establishment of the auto sales and service business at the Property, recognizing that the establishment of the business at the Property and this Agreement is contingent upon Anthony A. Batarse, Inc. applying for and receiving all governmental permits, approvals, and entitlements. NOW THEREFORE, IN CONSIDERATION of the mutual agreements, obligations, representations and promises herein contained, the Parties hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. In addition to the capitalized words and phrases elsewhere defined in this Agreement, the following capitalized words and phrases shall have the following meanings: (a) "Agreement" means this Agreement by and Between the City of Vacaville and Anthony A. Batarse, Inc., for the Establishment of an Auto Sales and Service Business within the City of Vacaville. (b) "City" means the City of Vacaville, a municipal corporation organized under the laws of the State of California. (c) Section 6.2 below. "City Event of Default" means any default by the City as set forth in (d) Contract Year means the first full year commencing with the first day of the calendar year of the Execution Date of this Agreement. For example, if the Effective Date is between September 24, 2015 and December 31, 2015, the Contract Year shall begin on January 1, (e) "Effective Date" means the date of execution of this Agreement, which is the date of the last signature, below. (f) Facility means the existing building on the Property, together with any Improvements thereon. corporation. (g) Hyundai of Vacaville. means Anthony A. Batarse, Inc., a California 2

7 (h) Event of Default" means any default by Anthony A. Batarse, Inc. as provided in Section 6.3, below. (i) "Improvements" mean the tenant improvements to be constructed by or for Anthony A. Batarse, Inc. within the existing building located at the Property. Improvements do not include improvements on other property, such as property to which Anthony A. Batarse, Inc. may, in the future, relocate the sales or service business. (j) "Party" means either the City or Anthony A. Batarse, Inc., sometimes collectively referred to as the Parties. (k) Vacaville, California. (l) Property means that real property located at 671 Orange Drive, Rebates means and includes the Sales Tax Rebate Payment. (m) "Sales Tax" or Sales Taxes means sales and use taxes remitted by Anthony A. Batarse, Inc. to the State of California arising from Anthony A. Batarse, Inc. s Vacaville point of sale pursuant to the Sales and Use Tax Law of the State of California. (n) Sales Tax Payment Report means the periodic reports filed by Anthony A. Batarse, Inc. with the California Board of Equalization to report and remit Anthony A. Batarse, Inc. s sales and use taxes due. (o) "Sales Tax Rebate Payment" means the payments to Anthony A. Batarse, Inc. by the City pursuant to Section 2.1 of this Agreement. (p) Sales Tax Rebate Percentage shall mean the percentage in the table set forth in Subsection 2.1(c), below. (q) Sales Tax Received means the Sales Tax ultimately received by the City (through remittance from the State of California). (r) Sales Tax Received Report means the quarterly report received by the City by its sales tax consultant, which provides information from the California Board of Equalization that verifies the total amount of Sales Tax received. Such report is prepared in arrears of Sales Taxes paid by Anthony A. Batarse, Inc. (s) "Term" means the term of this Agreement, commencing on the Effective Date of this Agreement and ending on the fifth (5 th ) anniversary of the first day of the first Contract Year, or as agreed to by the Parties in an amendment to this Agreement. ARTICLE 2 SALES TAX REBATE 2.1 Sales Tax Rebate. Subject to the terms and conditions of this Agreement, the City shall rebate to Anthony A. Batarse, Inc. a portion of the Sales Taxes based on the amount of Sales Taxes Received as set forth below. (a) Sales Tax Rebate Payment Amount. The amount of the Sales Tax Rebate Payment shall be equal to (i) the Sales Tax Received (as calculated below) multiplied by (ii) the Sales Tax Rebate Percentage (as determined below). 3

8 (b) Determination of Sales Tax Received. Following the filing of the last Sales Tax Payment Report for a calendar quarter, Anthony A. Batarse, Inc. shall remit to City a copy of all Sales Tax Payment Reports related to the quarter (the Quarterly Sales Tax Payment Reports ). Upon receipt of each Quarterly Sales Tax Payment Report and the Sales Tax Received Report, City shall determine the Sales Tax Received. (c) Determination of Sales Tax Rebate Percentage. The Sales Tax Rebate Percentage shall mean the percentage set forth on the table below. If the eligible applicant generates a minimum of x in annual sales Then the applicant is eligible to receive a % sales tax rebate on the portion of sales tax collected by the City. $30M 50% $20M 35% $15M 30% $10M 25% (d) Payment Timing. Within thirty (30) days after receipt of the Sales Tax Payment Report and the Sales Tax Received Report, the City shall rebate to Anthony A. Batarse, Inc. by check or wire transfer the Sales Tax Rebate Payment applicable to the quarter and provide a written accounting to Anthony A. Batarse, Inc. showing the calculation thereof, including the amount of Sales Taxes received per the Sales Tax Received Report and a reconciliation thereof to the Quarterly Sales Tax Payment Reports. City shall cause the Sales Tax Received Report to be received by City as soon as practicable after the information is available. In the event of a conflict between the Sales Tax Received Report and the Quarterly Sales Tax Reports, City shall endeavor to resolve the conflict with the California Board of Equalization so that the conflict is resolved. City will report to Anthony A. Batarse, Inc. in writing the result of the resolution of the conflict between the two (2) reports. Any adjustment to the amount due shall be made on the next Sales Tax Rebate Payment. 2.2 Reconciliation of Sales Tax Received. Every two (2) years after the first Sales Tax Rebate Payment is made to Anthony A. Batarse, Inc., the City and Anthony A. Batarse, Inc. shall meet at a time and place mutually acceptable to the Parties to reconcile the Sales Tax Received by the City over the previous two (2)-year period and shall determine whether any cumulative overpayment or shortfall exists in the Sales Tax Rebate Payments. If a shortfall exists, City shall pay the amount of the shortfall to Anthony A. Batarse, Inc. within thirty (30) days of the determination that a shortfall exists. If an overpayment exists, Anthony A. Batarse, Inc. shall refund the amount of the overpayment to City within thirty (30) days of the determination that an overpayment exists. 2.3 Disclaimer as to Sales Tax Revenue. Each Party understands and acknowledges that the other Party makes no warranty, representation, covenant, or guaranty, regarding the amount of Sales Tax revenues that may be generated by Anthony A. Batarse, Inc. s operations in any year. Specifically, but without limiting the foregoing, Anthony A. Batarse, Inc. acknowledges that the City has informed Anthony A. Batarse, Inc. that the State of California (acting through the State Legislature or any other State agency having jurisdiction) may revise the manner in which Sales Tax revenues are allocated among cities and counties and other agencies in the State or may reduce or eliminate the Sales Tax rate applicable in the State. Based on the foregoing, Anthony A. Batarse, Inc. understands and acknowledges that Anthony A. Batarse, Inc. bears the sole risk that City s Sales Tax revenues generated by Anthony A. Batarse, Inc. s operations may be reduced or no longer available to the City due to 4

9 the actions of the State, which could reduce or eliminate the Sales Tax Payments to Anthony A. Batarse, Inc. Notwithstanding the foregoing, in the event of a change in the Sales and Use Tax Law that impacts the manner in which Sales Tax is collected and distributed to the City, this Agreement shall be interpreted so as to adjust its provisions to apply the revised Sales and Use Tax Law in the manner most consistent with the Agreement s intent which is to rebate to Anthony A. Batarse, Inc. the Sales Tax Rebate Percentage of the Sales Taxes remitted by Anthony A. Batarse, Inc. that are ultimately included in the City s revenues. ARTICLE 3 OTHER BENEFITS 3.1 Processing of Development Applications. The City shall use its best efforts and shall commit the necessary time and resources of City staff to work with Anthony A. Batarse, Inc. for the expedited processing of the applications and requests for City planning and building entitlements needed for the Improvements. Anthony A. Batarse, Inc. shall pay the City s normal processing fees charged by the City for the processing and review of such applications and requests. Anthony A. Batarse, Inc. shall endeavor to submit complete applications to the City so that the City can commence processing of the applications. (a) Due Diligence by City. City will accept, make completeness determinations, and process, promptly and diligently to completion, all planning and building approval applications for the Improvements, in accordance with the terms of this Agreement, including, but not limited to, the following: (i) Processing of applications for and issuance of all discretionary approvals requiring the exercise of judgment and deliberation by City, including without limitation, planning and building approvals; approvals. (ii) (iii) Notices and holding of any required public hearings; and Processing of applications for and issuing of all ministerial (b) Fast-Track Processing. City will use its best efforts to process plan checks and permitting requests for the Improvements in a timely manner. To ensure the fastest possible processing of the various plan check and permit requests, Anthony A. Batarse, Inc. shall provide complete submittals to the City. City, at Anthony A. Batarse, Inc. s request, will establish a regular meeting schedule between City staff and Anthony A. Batarse, Inc. to coordinate the processing of such plan checks and requests and to facilitate communication between the Parties. ARTICLE 4 CONTINUING OBLIGATIONS 4.1 Point of Sale. As consideration for the City making the Rebates to Anthony A. Batarse, Inc. and other consideration provided by the City under this Agreement, Anthony A. Batarse, Inc. covenants to establish the Property as the principal point of sale in California for the sales of its automobiles from the Hyundai of Vacaville dealership, including, but not limited to, transactions that occur on-site and internet transactions. 4.2 Community Support. Anthony A. Batarse, Inc. acknowledges the importance of Anthony A. Batarse, Inc. s participation in and support for local organizations, businesses, and 5

10 community events and may, in its discretion, support or participate in such organizations and events. 4.3 Indemnity. (a) Anthony A. Batarse, Inc. shall indemnify, defend, and hold the City and its officials, employees, agents, volunteers, and successors (the "Indemnified Parties") harmless against any of the following: (i) All legal or administrative proceedings, arbitrations, or enforcement actions commenced by a third party or parties for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of Anthony A. Batarse, Inc. and its contractors and subcontractors to pay prevailing wages pursuant to Labor Code Sections 1720 et seq. or regulations implementing the same or to comply with other applicable provisions of Labor Code Sections 1720 et seq. (or regulations implementing the same) in connection with construction of the Improvements. (ii) All administrative, legal or equitable actions commenced by a third party or parties challenging the enforceability, validity or legality of: (A) (I) this Agreement; or (II) the power of the City to enter into this Agreement or provide the incentives hereunder based on an alleged violation of California Government Code Section or ; or (B) the City s issuance of a permit, entitlement, or approval, as required by Section of the Vacaville Municipal Code. For the avoidance of doubt, Anthony A. Batarse, Inc. s obligations under this Subsection (ii) apply solely to the extent such actions pertain to this Agreement, and do not apply to other matters alleged or involved in such third party actions. (b) Anthony A. Batarse, Inc. s obligation to indemnify, defend, and hold harmless the Indemnified Parties under this Section 4.3 is subject to the City: (i) promptly notifying Anthony A. Batarse, Inc. of the initiation of any such claim, action, or proceeding (unless Anthony A. Batarse, Inc. is already aware of the claim, action, or proceeding), and (ii) giving Anthony A. Batarse, Inc. the full authority to defend and settle such claim, action, or proceeding at Anthony A. Batarse, Inc. s expense. The City shall reasonably cooperate with Anthony A. Batarse, Inc. in the defense of such claim, action, or proceeding and may be represented, at the City s option and expense, by counsel of the City s selection. The City s duty under this Subsection (b) to cooperate with Anthony A. Batarse, Inc. does not include contributing to or sharing in the cost of such defense. (c) Notwithstanding anything to the contrary, Anthony A. Batarse, Inc. s obligations related to the Indemnified Parties shall not apply to any claim or action to the extent arising from the Indemnified Parties' gross negligence or willful misconduct. ARTICLE 5 ASSIGNMENTS 5.1 Assignments. Except as provided in Section 5.2, below, neither Party may assign this Agreement without the prior written consent of the other Party, which consent will not be unreasonably withheld, conditioned, or delayed. The City s consent to an assignment by Anthony A. Batarse, Inc. may be provided by the City s City Manager. 5.2 Sale or Assignment by Anthony A. Batarse, Inc. Section 5.1 notwithstanding, the City s consent shall not be required for any assignment by Anthony A. Batarse, Inc.: (i) in connection with the sale of all or substantially all of its business operations in Vacaville provided that the acquirer has a tangible net worth that exceeds Anthony A. Batarse, Inc. s tangible net 6

11 worth at the time of sale and the acquirer agrees to perform and observe, from and after the date of the sale, the obligations, terms and conditions of this Agreement (provided, however, such acquirer shall not be liable for the failure of its predecessor to perform any such obligation); or (ii) to an affiliate of Anthony A. Batarse, Inc. in connection with a corporate restructuring or other reorganization. 5.3 Breach. In the event of a breach of this Article 5 by either Party, the sole remedy of the other Party shall be to terminate this Agreement by written notice to the other within thirty (30) days after becoming aware of the breach (in which event it is understood that Anthony A. Batarse, Inc. s indemnification obligations in Section 4.3 shall survive such termination). ARTICLE 6 DEFAULT AND REMEDIES 6.1 Application of Remedies. The provisions of this Article shall govern the Parties' remedies for breach of this Agreement. 6.2 Default by City. (a) City Event of Default. If, after providing the notice and opportunity to cure as provided in Subsection (b) below, the City is in breach of any material provision of this Agreement, such breach shall constitute a "City Event of Default" and a basis for Anthony A. Batarse, Inc. to take action against the City if left uncured by the City pursuant to Subsection (b) of this Section 6.2. (b) Notice and Cure Procedure; Remedies. Upon the occurrence of a breach of any material provision of this Agreement by the City, Anthony A. Batarse, Inc. shall first notify the City in writing of the purported breach, giving the City thirty (30) days from receipt of such notice to cure the breach. In the event the City does not cure the breach within such thirty (30)-day period (or, if the breach is not reasonably susceptible of cure within such thirty (30)- day period, the City fails to commence the cure within such period or fails thereafter to diligently prosecutes the cure to completion), then Anthony A. Batarse, Inc. shall be afforded all of its rights at law or in equity by taking any or all of the following remedies: (i) terminating this Agreement by written notice of termination to the City; (ii) prosecuting an action for damages (excluding punitive damages and consequential damages); or (iii) seeking any other remedy available at law or in equity (excluding punitive damages and consequential damages). 6.3 Default by Anthony A. Batarse, Inc. (a) Anthony A. Batarse, Inc. Event of Default. If after providing the notice and opportunity to cure as provided in Subsection (b) below, Anthony A. Batarse, Inc. is in breach of any material provision of this Agreement, such breach shall constitute an "Anthony A. Batarse, Inc. Event of Default" and a basis for the City to take action against Anthony A. Batarse, Inc. if left uncured by Anthony A. Batarse, Inc. pursuant to Subsection (b) of this Subsection 6.3. (b) Notice and Cure Procedure; Remedies. Upon the occurrence of breach of any material provision of this Agreement by Anthony A. Batarse, Inc., the City shall first notify Anthony A. Batarse, Inc. in writing of the purported breach, giving Anthony A. Batarse, Inc. thirty (30) days from receipt of such notice to cure the breach. In the event Anthony A. Batarse, Inc. does not cure the breach within such thirty (30)-day period (or if the breach is not reasonably susceptible of being cured within such thirty (30)-day period, Anthony A. Batarse, Inc. fails to commence the cure within such period or fails thereafter to diligently prosecutes the cure to completion), then the City shall be afforded all of its rights at law or in equity by taking any or all 7

12 of the following remedies: (i) terminating this Agreement by written notice of termination to Anthony A. Batarse, Inc.; (ii) prosecuting an action for damages (excluding punitive damages and consequential damages); or (iii) seeking any other remedy available at law or in equity (excluding punitive damages and consequential damages). 6.4 Rights and Remedies Cumulative; Waiver of Default. Except as expressly provided, the rights and remedies of the Parties are cumulative, and the exercise or failure to exercise any right or remedy shall not preclude the exercise, at the same time or different times, of any right or remedy for the same breach or of any other breach. No waiver with respect to any breach or default in the performance of any obligation under the terms of this Agreement shall be deemed to be a waiver with respect to any subsequent breach or default, whether of similar or different nature. Any waiver, permit, consent or approval of any kind or character shall be effective only if made in writing and only to the extent specifically set forth in such writing. 6.5 Limitation on Liability. NEITHER PARTY SHALL BE LIABLE HEREUNDER FOR ANY LOSS OF PROFITS, SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR OTHER INDIRECT DAMAGES ARISING HEREUNDER, HOWEVER CAUSED, EVEN IF SUCH PARTY HAS BEEN MADE AWARE OF THE POSSIBILITY OF SUCH DAMAGES. ARTICLE 7 GENERAL PROVISIONS 7.1 Identity of Anthony A. Batarse, Inc. Anthony A. Batarse, Inc. represents and warrants to the City as of the execution date of this Agreement, as follows: (a) Organization. Anthony A. Batarse, Inc. is a corporation, duly organized, validly existing and in good standing under the laws of California with full power and authority to conduct its business as presently conducted and to execute, deliver and perform its obligations under this Agreement. (b) No Conflict. The execution, delivery and performance of this Agreement by Anthony A. Batarse, Inc. does not and will not conflict with, or constitute a material violation or material breach of, or constitute a material default under: (i) the organizational documents of Anthony A. Batarse, Inc.; (ii) to Anthony A. Batarse, Inc. s knowledge, any applicable law, rule or regulation binding upon or applicable to Anthony A. Batarse, Inc.; or (iii) any other material agreements to which Anthony A. Batarse, Inc. is a party. (c) No Litigation. Unless disclosed in writing to the City, to the best of Anthony A. Batarse, Inc.'s actual or constructive knowledge, there is no existing, pending or threatened litigation, suit, action or proceeding before any court or administrative agency affecting Anthony A. Batarse, Inc. or the Property that would, if adversely determined, materially and adversely affect Anthony A. Batarse, Inc.'s ability to perform its obligations under this Agreement. 7.2 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be personally served or mailed, postage prepaid and addressed to the respective parties as follows: 8

13 City: With copy to: Anthony A. Batarse, Inc.: With copy to: City of Vacaville 650 Merchant Street Vacaville, CA Attention: City Manager Office of the City Attorney 650 Merchant Street Vacaville, CA Anthony A. Batarse, Inc. Auto Group 671 Orange Drive Vacaville, CA Attention: Rami Yanni Adriana Ayala 671 Orange Drive Vacaville, CA Notice shall be deemed effective on the date personally delivered or, if mailed, three (3) days after deposit in the mail. 7.4 Non-Liability of Officials, Employees and Agents. No member, official, officer, director, employee or agent of either Party shall be personally liable to the other Party, or any successor in interest, for: (i) any default or breach of this Agreement, (ii) any amount that may become due under this Agreement, or (iii) any obligation required under this Agreement. 7.5 Enforced Delay. In addition to the specific provisions of this Agreement, performance by either Party shall not be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; moratoria, or other restrictions imposed by governmental entities other than City; freight embargoes; the filing of a lawsuit or action challenging the entitlements or environmental review for the project contemplated hereunder, this Agreement, or Anthony A. Batarse, Inc. or the City's authority to perform their respective obligations hereunder (which shall be deemed to be a delay of the Parties); or any other similar causes (not including the lack of funds) beyond the control of and without the fault of the Party claiming the inability to perform. An extension of time for any such cause of delay will be deemed granted if notice by the Party claiming the delay is sent to the other within thirty (30) days from the commencement of the cause causing the delay. In no event, however, shall the cumulative delays exceed twelve (12) months, unless otherwise agreed to by the Parties in writing. Where the default is due to a Party s failure or delay in making a payment, such Party shall promptly make the payment following the resolution or termination of the event causing the delay. 7.6 Applicable Law. This Agreement shall be interpreted under and pursuant to the laws of the State of California exclusive of its conflict of law principles. 7.7 Venue. In the event that suit shall be brought by either Party to this Agreement, the Parties agree that venue shall be exclusively vested in the state courts of the County of Solano or, where appropriate, exclusively in the United States District Court, Eastern District of California, Sacramento, California. 7.8 Severability. If any term, provision, covenant or condition of this Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or unenforceable, such provision shall be severed and the remaining provisions of this Agreement 9

14 shall continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability Attorneys Fees. This clause is intentionally omitted Binding Upon Successors. This Agreement shall be binding upon and inure to the benefit of the successors in interest and assigns of each of the Parties hereto. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any successor, heir, administrator, executor, successor, or assign of such Party who has acquired an interest in this Agreement or under law City Approval. Whenever City approval or consent is requested, the written approval or consent of the City Manager of the City shall constitute the approval or consent of the City, without further authorization required from the City Council unless, in the opinion of the City Attorney, such approval or consent requires City Council approval as provided herein or under the law. The City hereby authorizes the City Manager to deliver such approvals or consents as are required or permitted by this Agreement on behalf of the City, subject to the concurrence of the City Attorney. If the City Attorney determines that City Council approval is required, the City Manager shall agendize the matter for the next regularly-scheduled meeting of the City Council subject to the noticing provisions of the Ralph M. Brown Act (Government Code Sections et seq.) Discretion Retained By City. The City's execution of this Agreement does not constitute approval by the City and in no way limits the discretion of the City to approve, deny, or conditionally approve any permit, entitlement, or approval required for the construction, creation, erection, establishment, or modification of the Improvements Time for Performance. Unless otherwise specified, any reference herein to "days" shall mean calendar days. If the time for performance ends on a Saturday, Sunday, City holiday, or when the City is not open for business, the time for performance shall be extended to the next business day Parties Not Co-Venturers. Nothing in this Agreement is intended to or does establish the Parties as partners, co-venturers, or principal and agent with one another Counterparts. This Agreement may be executed in counterparts and multiple originals Recitals Incorporated. The Recitals set forth above are incorporated into this Agreement and made a part hereof, but do not constitute covenants or representations of either Party Standard of Approval. Any consents or approvals required or permitted under this Agreement shall not be unreasonably withheld or made, except where it is specifically provided that a sole discretion standard applies Effectiveness of Agreement. This Agreement shall only become effective on the Effective Date Interpretation. Each Party has reviewed this Agreement and any question of doubtful interpretation shall not be resolved by any rule or interpretation providing for interpretation against the drafting Party. This Agreement shall be construed as if both Parties drafted it. The captions and headings contained herein are for convenience only and shall not affect the meaning or interpretation of this Agreement. 10

15 7.20 Signator s Warranty. Each Party warrants to the other Party that he or she is fully authorized and competent to enter into this Agreement in the capacity indicated by his or her signature and agrees to be bound by this Agreement Entire Agreement and Amendments. This Agreement represents the entire understanding of the Parties as to those matters contained herein. No prior oral or written understanding shall be of any force or effect with respect to those matters covered hereunder. This Agreement may only be modified by a written amendment duly executed by the Parties to this Agreement. WHEREFORE, the Parties have executed this Agreement on the day and year last written below. CITY: APPROVED AS TO FORM: Melinda Stewart City Attorney CITY OF VACAVILLE, a municipal corporation By: Its: Date: Anthony A. Batarse, Inc.: Anthony A. Batarse, Inc. a California corporation By: Its: Date: 11