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09-1221_REGENCY THEATRES, INC_Operating CovenantRECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: San Juan Capistrano Community Redevelopment Agency 32400 Paseo Adelanto San Juan Capistrano, California 92675 Attn: Executive Director Recorded in Official Records, Orange County Tom Daly, Clerk -Recorder IIIIIIIIIIIIIIIIIIIIIIIIIIIlllllllllllllllllllllllllllll NO FEE 200900068239411:51 am 12121/09 143 415 C38 20 0.00 0.00 0.00 0.00 57.00 0.00 0.00 o.00 This document is exempt from the payment of a recording fee pursuant to Government Code Sections 6103 and 27383, OPERATING COVENANT This OPERATING COVENANT ("Operating Covenant") is made as of December 1, 2009, by and between the SAN JUAN CAPISTRANO COMMUNITY REDEVELOPMENT AGENCY, a public body, corporate and politic ("Agency'), and REGENCY THEATRES, INC., a California corporation ("Participant"). with reference to the following: A. Agency and Participant have executed a Participation Agreement, dated as of July 7, 2009 ("Agreement-'), which provides for the sale of this Operating Covenant with respect to certain real property located in the City of San Juan Capistrano ("City"), County of Orange, State of California, more fully described in Exhibit "A" attached hereto and incorporated herein by this reference ("Site"). The Agreement is available for public inspection and copying at the office of Agency, 32400 Paseo Adelanto, San Juan Capistrano, California. All of the terms, conditions, provisions and covenants of the Agreement are incorporated in this Operating Covenant by reference as though written out at length herein and the Agreement and this Operating Covenant shall be deemed to constitute a single instrument or document. K Capitalized terms used herein and not otherwise defined shall have the same meaning as set forth in the Agreement. C. The Agreement provides for, among other things, Participant's conveyance to Agency of this Operating Covenant and recordation of this Operating Covenant against Participant's leasehold interest in the Site in the Official Records of Orange County, California. This Operating Covenant is intended to encumber Participant's leasehold interest in the Site. D_ The foregoing recitals constitute a substantive part of this Operating; Covenant. NOW, THEREFORE, Participant hereby conveys to Agency the following Operating Covenant: 1. Use in Accordance with Redevelopment Plan., Agreement and Operating Covenant. Participant covenants and agrees to devote, use, operate, and maintain the Site and the Movie Theatre in accordance with the Redevelopment Plan, the Operating Covenant, all entitlements, permits, Regulatory Approvals, and Governmental Requirements applicable to the Site and the Movie Theatre, this Operating Covenant and the Agreement. All uses conducted on the Site, including, without limitation, all activities undertaken by Participant pursuant to this Operating DOCSOC/1381073v2/022299-0083 Covenant and the Agreement, shall conform to the Redevelopment Plan, all applicable provisions of the City Municipal Code, all entitlements, permits, Regulatory Approvals, and Governmental Requirements applicable to the Site and the Movie Theatre and the recorded documents pertaining to and running with the Site. 2. Operating Covenant. Participant hereby covenants and agrees to each of the following covenants: (a) Covenant to Operate Movie Theatre on Site. Throughout the Operating Covenant Period, Participant shall operate (or cause its successors or assigns to operate) the Movie Theatre on the Site on a continuous basis, in compliance with all Governmental Requirements and Regulatory Approvals, with such Site devoted to the presentation to the public of newly -released, feature length motion pictures as the principal activity conducted on the Site. Food sales, video games, and related uses may also be conducted at the Site as a secondary and incidental use to the primary use of operating a Movie Theatre at the Site. In addition, pre-screening of such motion pictures and other promotional events and activities may also be conducted on the Site as a secondary use incidental to the primary use of operating a Movie Theatre at the Site. No other uses may be conducted on the Site during the Operating Covenant Period without the prior written approval of Agency, which approval may be granted, refused, or conditioned as provided in Section 4 of this Operating Covenant. The Movie Theatre shall at all times comply with the Movie Theatre Description attached to the Agreement as Attachment No. 6. (b) No Competing Theatre; Operation to Maximize Sales and Use Tax Revenues. Participant further covenants and agrees that during the Operating Covenant Period, Participant will not own, lease, and/or operate through Participant, or any entity in which Participant has at least a twenty five percent (25%) interest in profits and losses and/or management control, any other movie theatre within a two (2) mile radius of the boundaries of the Site. Participant shall use commercially reasonable efforts to operate (or to cause its successors or assigns to operate) the Movie Theatre on the Site in such a manner as to produce the maximum amount of Sales and Use Tax Revenues (defined in the Agreement) to be received by the City. (c) Public Service Announcements. Agency shall have the right to run public service announcements ("PSA") at the Movie Theatre prior to films, at no charge, during the time when advertisements are shown and prior to the presentation of movie trailers. Agency shall prepare (at Agency's cost) and provide to Participant any PSAs which Agency wishes to be shown at the Movie Theatre within a reasonable time prior to the date on which such PSAs are to be shown. Agency shall have the right to show at least one (1) PSA prior to each film shown at the Movie Theatre. (d) E -Verify Compliance. Pursuant to the Agreement, Participant has enrolled in the U.S. Department of Homeland Security's E -Verify program and shall verify the employment authorization of any and all new employees assigned to perform work at the Movie Theatre and/or employees who otherwise perform work for Participant in the City through the E -Verify program within three (3) days of hiring any such employees. Participant shall annually certify to Agency that Participant has complied with this requirement and failure to comply with this requirement or to provide the required annual certification shall constitute a Default hereunder and under the Agreement. 2 DOCSOC/ 13 81.073v2/022299-0083 (e) Default and Closure. Except with the prior written consent of Agency for each instance, which consent may be granted or withheld in Agency's reasonable discretion, a Closure shall, at Agency's option, constitute a Default hereunder. Termination of the Theatre Lease prior to the tenth (10th) Year following execution and recording of the Operating Covenant shall constitute a Default hereunder and tinder the Operating Covenant triggering Agency's right to accelerate repayment of the Operating Covenant Purchase Price, with interest, as set forth. in Section 3 of the Operating Covenant. (f) Certificate of Compliance. Not later than thirty (30) days prior to each Participant Payment Date (defined in Section 3(a)), Participant shall execute and deliver to Agency a Certificate of Compliance for the previous Year in substantially the form attached to the Agreement as Attachment No. 3. 3. Repayment Obligation. (a) Repayment of Operating Covenant Purchase Price. Participant shall repay the Operating Covenant Purchase Price to Agency in ten (10) equal annual installments of Forty -Five Thousand Dollars ($45,000), to be made on the last day of each of the first (1") through tenth (10b) Years following recordation of the Operating Covenant against the Site ("Participant Payment Date"). The entire outstanding principal balance to be paid by Participant to Agency hereunder, together with all accrued and unpaid interest and all other suras owing under this Operating Covenant, shall, if not sooner paid, become due and payable on the tenth (101h) anniversary of the first (1 st) disbursement of the Operating Covenant Purchase Price. (b) Interest Rate. No interest shall accrue on P'articipant's obligation to repay the Operating Covenant Purchase Price to Agency except as set forth in Section 3(c) below. (c) Closure or Default. In the event of a Closure or any Default hereunder or under the Operating Covenant which is not cured within the time set forth in Section 401 of the Agreement, Participant shall immediately repay the entire Operating Covenant Purchase Price to Agency, plus interest on. the outstanding remaining balance thereof at the rate of ten percent (10%) per annum. Upon cure of the Closure or other Default, the interest rate shall return to the amount set forth in Section 3(b) above. (d) Security. .P'articipant's repayment obligation shall be secured by execution and delivery to Agency of the Personal Guaranty attached to the Agreement as Attachment No. 4 by Lyndon Golin, Participant's President and sole shareholder. Participant shall cause the Consent of Spouse (in substantially the form attached to the Agreement as Attachment No. 5) to be executed by Lyndon Golin's spouse and delivered to the Agency concurrently with the Personal Guaranty. (e) Prepayment. Participant may, at any time, prepay any amounts outstanding under this Operating Covenant in whole or in part without premium or penalty. A payment of principal only is known as a "Prepayment." When Participant manes a Prepayment, it shall advise Agency in writing that it is doing so. Participant may make a full Prepayment or partial Prepayment without paying a prepayment charge. Participant will use such Prepayments to reduce the amount of principal that Participant owes under this Operating Covenant; however, Agency may apply any Prepayment to the accrued and unpaid interest on the Prepayment amount before applying Participant's Prepayment to reduce the principal amount of the Operating Covenant. If Participant 3 DOCSOC/ 1381073v2/022299-0083 makes a partial Prepayment, there will be no changes in the due dates of the payments required hereunder unless Agency agrees in writing to those changes. (f) Usury Law Compliance. It is Participant's and Agency's intention to comply with any applicable usury law. If for any reason Agency should have received as interest an amount which would exceed the highest lawful rate, such amount which would be in excess of the permitted interest shall, at Agency's option, be applied to the reduction of principal of this Note and not to the payment of interest, or be refunded to Participant. All agreements between Participant and Agency are expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid to Agency for the use, forbearance or detention of money under this Operating Covenant exceed the maximum permissible under applicable law. This provision shall control over any other provision in this Operating Covenant or in any other agreement between Participant and Agency related hereto. 4. Transfers of Interest in Site or Agreement. (a) Prohibition. The qualifications and identity of Participant as the operator of the Movie Theatre are of particular concern to Agency. Furthermore, the parties acknowledge that Agency has negotiated the terms of the Agreement and this Operating Covenant in contemplation of the operation of the Movie Theatre and the property tax increment and Sales and Use Tax Revenues to be generated by the operation of the Movie Theatre on the Site, in a manner that will constitute a significant draw to customers. No voluntary or involuntary successor in interest of Participant shall acquire any rights or powers under the Agreement, nor ,shall Participant make any total or partial sale, transfer, conveyance, assignment, subdivision, or sublease of the whole or any part of .Participant's interest in the Site or the Movie Theatre thereon, nor shall any other movie theatre other than a Regency brand movie theatre be operated thereon, either in addition to or in replacement of the Movie Theatre on the Site, nor shall Participant make any total or partial sale, transfer, conveyance, assignment, subdivision, or sublease of the Movie Theatre being operated upon the Site (collectively referred to herein as a "Transfer"), without the prior written approval of Agency, which approval shall not be unreasonably withheld. The transfer, sale, or other conveyance of a majority of shares in Participant shall constitute a Transfer subject to the prohibition set forth in this Section 4(a). Any Transfer by Participant during the Operating Covenant Period shall constitute a Default hereunder and shall result in acceleration of Participant's obligation to repay the Operating Covenant Purchase Price pursuant to Section 3 hereof This Section 4(a) shall be of no further force and effect following the expiration of the Operating Covenant Period. (b) Permitted Transfers. Notwithstanding any other provision of the Agreement or this Operating Covenant to the contrary, Agency approval of a Transfer shall not be required in connection with any of the following: (i) Any Transfer to an entity or entities in which Participant or Participant's Lshareholders retains a minimum of fifty-one percent (51%) of the ownership or beneficial interest and retains management and control of the transferee entity or entities, and a Regency brand movie theatre (or another Agency -authorized movie theatre) is operating on the Site. (ii) The granting of easements or permits to facilitate rehabilitation and/or operation of the Movie Theatre, 4 DOCSOC/1381073 v2/022299-0083 (iii) Any requested assignment for financing purposes (subject to such financing being considered and approved by Agency), including the grant of a deed of trust to secure the funds necessary for acquisition of Participant's leasehold interest in the Site, construction and permanent financing of the rehabilitation of the Movie Theatre, or a refinancing of a mortgage secured by Participant's leasehold interest in the Site and/or the Movie Theatre. In the event of a Transfer by Participant under subparagraphs (i) and (ii) above not requiring Agency's prior approval, Participant nevertheless agrees that at least thirty (30) days prior to such Transfer it shall give written notice to Agency of such assignment and satisfactory evidence that the assignee has assumed in writing through an assignment and assumption agreement of all of the obligations of the Agreement and this Operating Covenant. (c) Agency Consideration of Requested Transfer. Agency agrees that it will not unreasonably withhold approval of a request for approval of a Transfer made pursuant to this Section 4, provided Participant delivers written notice to Agency requesting such approval. Such notice shall be accompanied by sufficient evidence demonstrating that the proposed assignee, sublessee or new movie theatre operator has received all necessary Regulatory Approvals and evidence regarding the proposed transferee's operational qualifications and experience and its financial commitments and resources, in sufficient detail to enable Agency to evaluate the proposed assignee, sublessee, or operator pursuant to the criteria set forth in this Section 4 and as reasonably determined by Agency. Agency may, in considering any such request, take into consideration such factors as (i) the quality and reputation or any new brand of movie theatre to be operated at the Site, (ii) the Sales and Use Tax Revenues projected to be received from the Site, (iii) the transferee's past performance as an operator of a movie theatre, (iv) the current financial condition of'the transferee, and similar factors. Agency agrees not to unreasonably withhold its approval of any such requested Transfer, taking into consideration the foregoing factors_ (d) Assignment and Assumption Agreement. An assignment and assumption agreement in form satisfactory to Agency's legal counsel shall also be required for all proposed Transfers. Within thirty (30) days after the receipt of Participant's written notice requesting Agency approval of a Transfer pursuant to this Section 4, Agency shall either approve or disapprove such proposed assignment or shall respond in writing by stating what further information, if any, Agency reasonably requires in order to determine the request complete and determine whether or not to grant the requested approval. Upon receipt of such a response, Participant shall promptly furnish to Agency such further information as may be reasonably requested. Agency shall not release or cancel the Personal Guaranty (defined in the Agreement) unless Agency determines in its sole and exclusive discretion that the proposed transferee will provide an equivalent force of Security for repayment of the Operating Covenant .Purchase Price. 5. Use of the Site. (a) Compliance With Laws. Participant shall carry out the design, construction and operation of the Movie Theatre in conformity with all Governmental Requirements and Regulatory Approvals, including all entitlements and/or permits issued by the City for the Movie Theatre, as such entitlements and/or permits may be modified from time to time. (b) Hazardous Materials. Participant shall not cause or permit the presence, use generation, release, discharge, storage, or disposal of any Hazardous Materials on, under, in, or 5 DOCS0013 81073v2/022299-0083 about, or the transportation of any Hazardous Materials to or from, the Site in violation of any applicable Environmental Law. 6. Indemnification. (a) Generally. Participant shall indemnify, protect, defend (with counsel selected by Agency), and hold harmless Agency and City, and their respective officers, employees, contractors, agents, representatives, and volunteers, from and against any and all Claims of any kind or nature in any way arising from or relating to the Agreement, this Operating Covenant, the Personal Guaranty, or the implementation or approval of the Agreement, this Operating Covenant, or the Personal Guaranty, including without limitation: (i) Claims for any damages to property or injuries to persons, including accidental death, which may be caused by any acts or omissions of Participant whether such activities or performance thereof be by Participant or by anyone directly or indirectly employed or contracted with by Participant and whether such damage shall accrue or be discovered before or after termination of the Agreement and this Operating Covenant, (ii) the presence, release, use, generation, discharge, storage, or disposal of any Hazardous Materials on, under, in, or about, or the transportation of any such materials to or from, the Site in violation of any applicable Environmental Law, whenever discovered, (iii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment, or license relating to the use, generation, release, discharge, storage, disposal, or transportation of Hazardous Materials on, under, in, or about, to or from, the Site, whenever discovered, and (iv) any and all Claims and/or "increased costs" (as defined in Labor Code Section 1781, as it may be amended from time to time) which, in connection with the design, construction, and/or operation of the Movie Theatre, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (1) the noncompliance by Participant with any Governmental Requirements or Regulatory Approvals, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, if applicable, the requirement to pay state prevailing wages); (2) the implementation of Section 1781 of the Labor Code, as the same may be amended from time to time, or any other similar law; and/or (3) failure by Participant to provide any required disclosure or identification as required by Labor Code Section 1'781, as the same may be amended from time to time, or any other similar law. It is agreed by the parties that, in connection with the rehabilitation of the Site, including, without limitation, any and all public works (as defined by applicable law), Participant shall bear all risks of payment or non-payment of prevailing wages under California law and/or the implementation of Labor Code Section 1781, as the same may be amended from time to time, and/or any other similar law. The foregoing indemnity shall include, without limitation, any Claims for personal injury including sickness, disease or death, tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, pollution, contamination, leak, spill, release, or other adverse effect on the environment. The foregoing indemnity shall survive termination of the Agreement and this Operating Covenant and shall continue after completion of the rehabilitation of the Site by Owner and commencement of operation of the Movie Theatre by Participant. (b) Defense of Claims. Participant shall have the obligation to defend against any Claims as provided in Section 6(a); provided, however, that this obligation to defend shall not be effective if and to the extent that Participant determines in its reasonable discretion that such action is meritorious or that the interests of the parties justify a compromise or a settlement of such action, in which case Participant shall compromise or settle such action in a way that fully protects Agency and City from any liability or obligation. In this regard, Participant's obligation and right to defend shall include the right to hire (subject to written approval by Agency and City) attorneys and experts 6 DOCS0013 81073 v2/022299-0083 necessary to defend, the right to process and settle reasonable claims, the right to enter into reasonable settlement agreements and pay amounts as required by the terms of such settlement, and the right to pay any judgments assessed against Participant, Agency, or City. If Participant defends any such action, as set forth above, (i) Participant shall indemnify and hold harmless Agency and City and their officers, employees, contractors, agents, representatives, and volunteers from and against any claims, losses, liabilities, or damages assessed or awarded against either of therm by way of judgment, settlement, or stipulation and (ii) Agency shall be entitled to settle any such claim only with the written consent of Participant, not to be unreasonably withheld, and any settlement without such reasonable consent shall release Participant's obligations under this Section 6(b) with respect to such settled claim. Notwithstanding anything to the contrary herein, Participant shall not be liable for any such claims which are caused by the sole negligence or willful acts of Agency or its officers, employees, contractors, agents, representatives, and volunteers. (e) Third Party Litigation Concerning Agreement. Participant shall defend (with counsel selected by Agency), at its expense, including attorney and expert witness fees, indemnify, and hold harmless City, Agency, and/or their officers, employees, contractors, agents, representatives, and volunteers from. any claim, action or proceeding brought by a person or entity not a party to this Operating Covenant against Agency, City, and/or their officers, employees, contractors, agents, representatives, and volunteers to attack, set aside, void, or annul the approval of the Agreement and/or this Operating Covenant. Agency shall promptly notify Participant of any claim, action, proceeding or determination included within this Section 6(c). Agency and/or City, as applicable, may, in their discretion, participate in the defense of any such claim, action, proceeding or determination. 7. Nondiscrimination. There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed. in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Operating Covenant, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises which are the subject of this Operating Covenant. The foregoing covenants shall run with the land. This covenant regarding non-discrimination shall remain in effect in perpetuity. 8. Insurance. (a) Insurance Requirements. Participant, at Participant's expense, shall throughout entire Operating Covenant Period maintain and comply with the following insurance and related requirements. (i) Commercial Property Insurance covering the premises, fixtures, equipment, buildings, all property situated in, on, or constituting a part of the Movie Theatre, including the tenant improvements (defined as "Tenant's Work" in the Theatre Lease) required to be constructed or installed by Participant. Participant shall also provide builder's all-risk insurance using an inland marine form during the period of any construction, major alteration or improvement. Coverage shall be for the full replacement value of the improvements. 7 DOCSOC/1381073v2/022299-0083 (ii) Plate Glass insurance covering the full replacement cost of all plate glass at the Movie Theatre. (iii) Commercial General Liability insurance on insurance Services Office form CG 20 10 or equivalent that pays on behalf of the insured and provides defense in addition to limits. Participant shall obtain an endorsement to the policy adding City and Agency, their officials, employees and agents as additional insureds. Coverage shall not exclude suits between insureds. (1v) Comprehensive Automobile Liability coverage, including owned, hired and non -owned vehicles in an amount not less than one million dollars per occurrence ($1,000,000.00). (A) As to the foregoing insurance requirements (a) to (d) inclusive of this Section 8(a), coverage and limits shall apply to the full extent of the policy with no limitation to vicarious liability for additional insureds and extending coverage to any location for operations or activities necessary or incidental to the operations of the premises. Coverage limits shall be no less than One Million Dollars and No Cents ($1,000,000.00) per occurrence. Coverage provided by Participant is intended to apply first on a primary non-contributing basis in relation to any insurance or self-insurance of City or Agency. Deductibles are not permitted unless approved in writing by City and Agency. (v) Workers' Compensation and Employer's Liability Insurance written on a policy form providing statutory benefits as required by law. Employer's liability limits shall be no less than $1,000,000.00 dollars per accident or disease. (b) Additional Insurance Requirements. (i) Participant agrees to waive rights of subrogation as to City and Agency and to have all policies of insurance required by this Agreement endorsed to permit such waiver, if necessary. All insurance is to be provided by insurers admitted and authorized to do business in the state of California with a minimum A.M. Best's rating of A -Class V11. All policies shall be endorsed to reflect that the policies shall not be canceled, non -renewed or reduced in scope or stated limits until City and Agency have been provided thirty (30) days advance written notice of such change. The insurance coverage and limits required here shall not be construed as a limit of Participant's liability. Participant agrees to respond for any losses with respect to this agreement incurred by City and not covcred by Participant's insurance whether by reason of coverage being inapplicable or by Participant's failure to obtain coverage. (ii) Proof of insurance using certificates of insurance and required endorsements must be delivered to City and Agency prior to execution of this Agreement. if Participant fails to comply, City has the right but not the duty to purchase such coverage and charge the premium to Participant who must promptly pay said premium. Participant shall also provide proof that policies of insurance required herein expiring during the term of this Agreement have been renewed or replaced with equivalent policies. Such proof shall be furnished at least two weeks prior to the expiration of the coverages. (iii) Participant agrees to provide immediate notice to City and Agency of any claim or loss against Participant that includes City or Agency as a defendant. City and Agency DOCSOC/ 13 81.073v2/022299-0083 assume no obligation by such notice, but have the right {but not the duty) to monitor the handling of any such claim or claims if they are likely to involve City or Agency. (iv) Participant agrees to periodically monitor and enforce Owner's compliance with Owner's insurance obligations under Section 13.2 of the Theatre Lease. 9. Performance of Maintenance. (a) Participant shall maintain the Site and the Movie Theatre in accordance with the Maintenance Standards, as hereinafter defined. Said improvements shall include, but not be limited to, buildings, sidewalks, pedestrian lighting, landscaping, irrigation of landscaping, architectural elements identifying the Site and any and all other improvements on the Site. (b) To accomplish the maintenance, Participant shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Operating Covenant, (c) The following standards ("Maintenance Standards") shall be complied with by Participant and its maintenance staff, contractors or subcontractors: I. Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing; edging, trimming; of grass, tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. 2. Clean up maintenance shall include, but not be limited to: maintenance of all sidewalks, paths and other paved areas in clean and weed free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. 3. All maintenance work shall conform to all applicable federal and state Occupational Safety and Health Act standards and regulations for the performance of maintenance. 4. Any and all chemicals, unhealthful substances, and pesticides used in and during maintenancc shall be applied in strict accordance with all governing regulations. Precautionary measures shall be employed recognizing that all areas are open to public access. 5. The Site and Movie Theatre shall be maintained in conformance and in compliance with the approved Site construction and architectural plans and design scheme, as the same may be amended from time to time with the approval of the City, and reasonable commercial development maintenance standards for similar projects, including but not limited to: painting and cleaning of all. exterior surfaces and other exterior facades comprising all private improvements and public improvements to the curbline. 9 DOCSOC/1381073v2/022299-0083 6. The Site and Movie Theatre shall be maintained as required by this Section in good condition and in accordance with the custom and practice generally applicable to comparable automobile dealership facilities located in Southern California. (d) Failure to Maintain Site and Movie Theatre. In the event Participant does not maintain the Site or the Movie Theatre in the manner set forth herein andin accordance with the Maintenance Standards, Agency and/or City shall have the right to maintain such private andlor public improvements, or to contract for the correction of such deficiencies, after written notice to Participant. However, prior to taking any such action, Agency agrees to notify Participant in writing if the condition of said improvements does not meet with the Maintenance Standards and to specify the deficiencies and the actions required to be taken by Participant to cure the deficiencies. Upon notification of any maintenance deficiency, Participant shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the written notification states the problem is urgent relating to the public health and safety of the City or Agency, then Participant shall have forty eight (48) hours to rectify the problem. In the event Participant fails to correct, remedy, or cure or has not commenced correcting, remedying or curing such maintenance deficiency after notification and after the period of correction has lapsed, then City and/or Agency shall have the right to maintain such improvements. Participant agrees to pay Agency such charges and costs. Until so paid, Agency shall have a lien on Participant's leasehold interest in the Site for the amount of such charges or costs, which lien shall be perfected by the recordation of a "Notice of Claim of Lien" against Participant's leasehold interest in the Site. Upon recordation of a Notice of a Claim of Lien against Participant's leasehold interest in the Site, such lien shall constitute a lien on Participant's leasehold interest in the Site prior and superior to all other monetary liens except: (i) all taxes, bonds, assessments, and other levies which, by law, would be superior thereto; (ii) the lien or charge of any mortgage, deed of trust, or other security interest then of record made in good faith and for value, it being understood that the priority of any such lien for costs incurred to comply with the Agreement and this Operating Covenant shall date from the date of the recordation of the Notice of Claim of Lien. Any such lien shall be subject and subordinate to any lease or sublease of the interest of Participant in the Site or any portion thereof and to any casement affecting the Site or any portion thereof entered into at any time (either before or after) the date of recordation of such a Notice. Any lien in favor of Agency created or claimed hereunder is expressly made subject and subordinate to any mortgage or deed of trust made in good faith and for value, recorded as of the date of the recordation of the Notice of Claim of Lien describing such lien as aforesaid, and no such lien shall in any way defeat, invalidate, or impair the obligation or priority of any such mortgage or deed of trust, unless the mortgage or beneficiary thereunder expressly subordinates his interest, of record, to such lien. No lien in favor of Agency created or claimed hereunder shall in any way defeat, invalidate, or impair the obligation or priority of any lease, sublease or easement unless such instrument is expressly subordinated to such lien. Upon foreclosure of any mortgage or deed of trust made in good faith and for value and recorded prior to the recordation of any unsatisfied Notice of Claim of Lien, the foreclosure purchaser shall take title to the Site free of any lien imposed by Agency that has accrued up to the time of the foreclosure sale, and upon obtaining Participant's leasehold interest in the Site, such foreclosure purchaser shall only be obligated to pay costs associated with the Agreement and this Operating Covenant accruing after the foreclosure purchaser acquires Participant's leasehold interest in the Site. If Participant's leasehold interest in the Site is ever legally divided with the written approval of Agency and title to various portions of the Site is held under separate leasehold interests, then the burdens of the maintenance obligations set forth herein and in the Agreement and the charges levied by Agency to reimburse Agency for the cost of undertaking such maintenance obligations of 10 DOCS OC/ 13 8107 3 v2/022299-0083 Participant and its successors and the lien for such charges shall be apportioned among the lessees of the various portions of the Site under different leases according to the square footage contained in the respective portions of the Site leased by them. Upon apportionment, no separate owner/lessee of a portion of the Site shall have any liability for the apportioned liabilities of any other separate owner/lessee of another portion of the Site, and the lien shall be similarly apportioned and shall only constitute a lien against the portion of the Site owned/leased in by the owner/lessee who is liable for the apportioned charges levied by Agency and secured by the apportioned lien and against no other portion of the Site. Participant acknowledges and agrees City and Agency may also pursue any and all other remedies available in law or equity. Participant shall be liable for any and all attorneys' fees, and other legal costs or fees incurred in collecting said maintenance costs. 10. Miscellaneous Provisions. (a) If any provision of this Operating Covenant or portion thereof, or the application to any person or circumstances, shall to any extent be held invalid, inoperative or unenforceable, the remainder of this Operating Covenant, or the application of such provision or portion thereof to any other persons or circumstances, shall not be affected thereby; it shall not be deemed that any such invalid provision affects the consideration for this Operating Covenant; and each provision of this Operating Covenant shall be valid and enforceable to the fullest extent permitted by law. (b) This Operating Covenant shall be construed in accordance with the laws of the State of California. (c) This Operating Covenant shall be binding upon and inure to the benefit of the successors and assigns of Participant. (d) Defaults under this Operating Covenant shall be governed by Section 400, et seq. of the Agreement. (e) In the event action is instituted to enforce any of the provisions of this Operating Covenant, the prevailing party in such action shall be entitled to recover from the other party thereto as part of the judgment, reasonable attorney's fees, expert witness fees, and costs. (f) Notices relating to this Operating Covenant shall be given as provided in Section 501 of the Agreement. (g) The City and -its successors and assigns shall be intended third party beneficiaries of this Operating Covenant. City shall have full right and ability (but no obligation) to enforce each and every agreement, covenant and restriction in this Operating Covenant. No other person(s) or entity(ies) shall have any right of action hereunder. 11. Effect of Operating Covenant. All covenants and agreements established in this Operating Covenant shall, without regard to technical classification and designation, run with the land and be binding on Participant and each successor and assignee of Participant's leasehold interest in the Site, for the benefit of and in favor of Agency, City, and their successor and assigns. The covenants contained in this Operating Covenant shall remain in effect for the periods of time specified therein. Agency and City are deemed the beneficiaries of the terms and provisions of this Operating Covenant and of the covenants running with the land, for and in their own rights and for ll DOC SOC/ i 381073v2/022299-0083 the purposes of protecting the interests of the community and other parties, public or private, in whose favor and for whose benefit this Operating Covenant and the covenants running with the land have been provided. The Operating Covenant shall run in favor of Agency and City, without regard to whether Agency or City have been, remain or are owners of any land or interest in the Site or in the Project Area. Agency and/or City shall have the right, if any provision of the Operating Covenant is breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which they or any other beneficiaries of this Operating Covenant may be entitled. 12. Subordination to Landlord's Financing. The Agency hereby acknowledges that this Operating Covenant only affects the leasehold interest of the Participant in the Theatre Lease, and is not intended to restrict the rights of Owner. Agency also acknowledges that this Operating Covenant is, and shall remain, subordinate to any existing and/or future financing secured by the Site, which may be obtained by Owner. 13, Owner's. Non -Responsibility. Under no circumstances shall Owner be responsible for repaying any of the moneys advanced by the Agency to the Participant hereunder. 14. Removal of the Lien. If, for any reason, the Theatre Lease with Participant terminates or the Operating Covenant terminates, upon written request of Owner, Agency shall promptly provide Owner with sufficient documentation to remove the lien of record created by the Operating Covenant, as may be .reasonably requested by Owner. [Signatures appear on following page.] 12 DOCSOC/ 13 81073x2/022299-0083 IN WITNESS WHEREOF, the paries hereto have executed. this Operating Covenant as of the day and year first set forth above. ATTEST: Maria Morris, ge�tcy Secretary APPROVED AS 11TO FORM: Stradling Yocca Carlson & Rauth Agency Counsel AGENCY: SAN JUAN CAPISTRANO COMMUNITY REDEVELOPMENT AGENCY, a public body, corporate and politic By: Joe T# Executive Director PARTICIPANT: REGENCY THEATRES, INC., a California corporation B �"Yndon Golin, President 13 DOC S OC/ 1381073v2/022299-0083 OPERATING COVENANT ACCEPTED FOR RECORDING: ALFA PLAZA, LLC a California limited liability company fl By: Alberto Mobrici, Managing Member 14 DOC S OC/ 1381073v2/022299-0083 PUBLIC AGENCY FORM OF ACKNOWLEDGEMENT State of California ) County of Orange ) ss. City of San .Tuan Capistrano ) (Gov't Code 40814 & Civil Code 1181.) On December 1. 1, 2009, before me, Maria Morris,_ Agency_ Secretary, personally appeared Joe Tait, Executive Director, who proved to me on the basis of satisfactory evidence to the be 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, and that by his/her/there signature on the instrument the person(s), or the entity upon behalf of which the person(s) acted., executed the instrument . I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. (SEAL) Capacity Claimed by Signers Executive Director Title Signers are Representing Community Redevelopment Agency WITNESS my hand and official seal. Maria Morn s, OPTIONAL Description of .Attached Document Title or Type of Document Operating Covenant — San Juan Capistrano Community Redevelopment Agency & Regency Theatres, Inc Number of Mages: 20 STATE OF CALIFORNIA ) ss. COUNTY OF On °C �% ,before me, J~ G'�i t ell , Notary Public, (Print Name of Notary Pubtic) personally appeared/�'bt'/ who proved to me on the basis of satisfactory evidence to be the person whose narne(� is/a76 subscribed to the within instrument and acknowledged to the that he/slcthPy executed the same in his/herAf= authorized capacity < and that by his/hc44- eir signature on the instrument the personas or the entity upon behalf of which the person acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. w Y � WITNESS.my,4and and official seal. OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER ❑ Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney - In- Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name OfPerson(s) Or Fntity(ies) DOCSOC/ 13 S 1073 v 2/022299-0083 DESCRIPTION OF ATTACHED DOCUMENT .mm,..� �e. Or T t3cicument T Number Of Pages C f _ Pate Of Documents Signer(s) Other Than Named Above STATE OF CALIFORNIA t6-' ss. COUNTY OF ;t r On before me,.,"�",Notary Public, (Print Name of Notary Public) personally appeared i ?' 't r'. t` i . ,. t') ( .i who proved to cele on the basis of satisfactory evidence to be the person(s) whose name(sf is/are subscribed to the within instrument and acknowledged to me that heAshe/they executed the same in his/her/their authorized capacity(ies), and that byfiis/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. ;y A SCsNIA MAFC3iNA DE nARRIGA �< Comrnisrton # 1684095 WITNESS my hand and official seal. Notary Public - California Orange Coun4y � y EViy Comm. Fxpims Aug 24, 2A l it 4 rr r j C ir' .6 { _ fi„i'�', 1�'L✓.- f./ ,4 0 ` `i,f ✓!^ Fi OPTIONAL Though the data below is not required by taw, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT �0.... Individual S .... El Corporate Officer Titte(s) � � l itte Or TYpt Of Doctlmcnt ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney- ln-Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of PeNOJI(s) Or Cmiiy(ies) DOC SOC/ i 3 810 73 Q/t122299-0083 Num r tgc Os 0 bate Of Documents t Signers) Other Than famed Above EXHIBIT "A" LEGAL DESCRIPTION OF SITE LOT 40 OF TRACT NO. 103 AS Sl -TOWN ON A MAP RECORDED IN BOOK 11, PAGES 29 THROUGH 33 INCLUSIVE OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPTING THEREFROM THE WESTERLY 13.00 FEET OF SAID LOT, BEING A STRIP OF LAND 13.00 FEET IN WIDTH LYING EASTERLY AND CONTIGUOUS TO THE RIGHT OF WAY OF THE ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, AS DESCRIBED IN DEED RECORDED FEBRUARY 27, 1936 IN BOOK 807 PAGE 286 OF OFFICIAL RECORDS. ALSO EXCEPTING THEREFROM THAT PORTION THEREOF DESCRIBED AS FOLLOWS: COMMENCING ATA POINT IN THE NORTHERLY LINE OF LOT 42 OF SAID TRACT NO. 103, SAID POINT BEING SOUTH 84 DEGREES 07 MINUTES 30 SECONDS WEST 202.60 FEET FROM THE NORTHEAST CORNER OF SAID LOT 42; THENCE SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 135.66 FEET TO A POINT IN THE SOUTHERLY LINE OF SAID LOT 42, SAID POINT BEING SOUTH 84 DEGREES 28 MINUTES 00 SECONDS WEST 201.44 FEET FROM THE SOUTHEAST CORNER OF SAID LOT 42: THENCE CONTINUING SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 84.18 FEET TO A POINT IN THE SOUTHERLY LINE OF LOT 41 OF SAID TRACT NO. 103; THENCE SOUTH 84 DEGREES 27 MINUTES WESTALONG SAID SOUTHERLY LINE 15.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE ALONG SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 9.50 FEET TO A POINT IN A LINE THAT IS PARALLEL WITH AND DISTANT SOUTHERLY 9.50 FEET FROM THE NORTHERLY LINE OF SAID LOT 40; THENCE WESTERLY PARALLEL WITH AND DISTANT SOUTHERLY 9.50 FEETFROM SAID NORTHERLY LINE TO A POINT IN THE WESTERLY LINE OF SAID LOT 40; THENCE NORTHERLY ALONG SAID WESTERLY LINE TO THE NORTHWEST CORNER OF SAID LOT 40; THENCE EASTERLY ALONG THE NORTHERLY LINE OF SAID LOT 40 TO THE TRUE POINT OF BEGINNING. ALONG WITH: LOT 43, AS SHOWN ON A LICENSED SURVEYO 'S MAP, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 2, PAGES 31 TO 38 INCLUSIVE, RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THE WESTERLY 12 FEET. ALONG WITH: THAT PORTION OF LOT 40 OF TRACT NO. 103, IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11, PAGES 29 THROUGH 33 INCLUSIVE OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS: EXHIBIT A-1 DOCS00 13 81073v2/022299-0083 COMMENCING AT A POINT IN THE NORTHERLY LINE OF LOT 42 OF SAID TRACT NO. 103, SAID POINT BEING SOUTH 84 DEGREES 07 MINUTES 30 SECONDS WEST 202.60 FEET FROM THE NORTHEAST CORNER OF SAID LOT 42; THENCE SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 1.35.66 FEET TO A POINT IN THE SOUTHERLY LINE OF SAID LOT 42, SAID POINT BEING SOUTH 84 DEGREES 28 MINUTES 00 SECONDS WEST 201.44 FEET FROM THE SOUTHEAST CORNER OF SAID LOT 42; THENCE CONTINUING SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 84.18 FEET TO A POINT IN THE SOUTHERLY LINE OF LOT 41 OF SAID TRACT 103; THENCE SOUTH 84 DEGREES 27 MINUTES WEST ALONG SAID SOUTHERLY LINE 15.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 9.50 FEET TO A POINT IN A LINE THAT IS PARALLEL WITH AND DISTANT SOUTHERLY 9.50 FEET FROM THE NORTHERLY LINE OF SAID LOT 40; THENCE LINE TO A POINT IN THE WESTERLY LINE OF SAID LOT 40; THENCE NORTHERLY ALONG SAID WESTERLY LINE TO THE NORTHWEST CORNER OF SAID LOT 40; THENCE EASTERLY ALONG THE NORTHERLY LINE OF SAID LOT 40 TO THE TRUE POINT OF BEGINNING. EXCEPTING THEREFROM THE WESTERLY 13.00 FEET OF SAID LOT, BEING A STRIP OF LAND 13.00 FEET IN WIDTH LYING EASTERLY OF AND CONTIGUOUS TO THE RIGHT OF WAY OF THE ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, AS DESCRIBED IN DEED RECORDED FEBRUARY 27, 1936 IN BOOK 807 PAGE 286 OF OFFICIAL RECORDS. ALONG WITH: LOT 42 OF TRACT NO. 103, IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11, PAGES 29 TO 30 INCLUSIVE OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PROPERTY: BEGINNING AT THE MOST EASTERLY CORNER OF SAID LOT 42, SAID CORNER BEING ON THE WESTERLY PROPERTY LINE OF THE CALIFORNIA STATE 14IGHWAY: THENCE NORTH 5 DEGREES 23 MINUTES 00 SECONDS WEST ALONG THE ABOVE MENTIONED PROPERTY LINE 136.88 FEET TO AN INTERSECTION WITH THE SOUTHERLY LINE OF GARDEN STREET: THENCE SOUTH 84 DEGREES 07 MINUTES 30 SECONDS WEST ALONG THE SOUTHERLY LINE OF GARDEN STREET 202.60 FEET TO A POINT: THENCE SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 135.66 FEET TO A POINT ON THE SOUTHERLY LINE OF THE ABOVE MENTIONED LOT 42: THENCE NORTH 84 DEGREES 28 MINUTES 00 SECONDS EAST ALONG THE SOUTHERLY LINE OF LOT 42, 201.44 FEET TO 'THE POINT OF BEGINNING. ALONG WITH: THAT PORTION OF LOT 41 OF TRACT NO. 103, IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11, PAGES 29 THROUGH 33 INCLUSIVE OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS: EXHIBIT A-2 DOC SOC! [ 381073v2/022299-0083 BEGINNING AT THE SOUTHWEST CORNER OF SAID LOT 41; RUNNING THENCE NORTH 9 DEGREES 40 MINUTES WEST 84.41 FEET ALONG THE WEST LINE OF SAID LOT 41 TO THE NORTHWEST CORNER THEREOF: THENCE NORTH 84 DEGREES 28 MINUTES EAST 41.13 FEET ALONG THE NORTHERLY LINE OF SAID LOT 41 TO A POINT WHICH IS LOCATED 201.44 FEET SOUTH 84 DEGREES 28 MINUTES WEST FROM. THE SOU'T'HEAST CORNER OF LOT 42 OF SAID TRACT NO. 103; THENCE SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 84.18 FEET TO A POINT IN THE SOUTHERLY LINE OF SAID LOT 41; THENCE SOUTH 84 DEGREES 27 MINUTES WEST 35.55 FEET ALONG THE SOUTHERLY LINE OF SAID LOT 41 TO THE POINT OF BEGINNING. ALONG WITH: THAT PORTION OF LOT 42 OF TRACT NO. 103, IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BACK 11, PAGES 29 TO 33, INCLUSIVE OF MISCELLANEOUS MAPS, RECORDS OF SAID ORANGE COUNTY, DESCRIBED AS FOLLOWS: BEGINNING TO THE MOST EASTERLY CORNER OF SAID LOT, SAID CORNER BEING IN THE WESTERLY PROPERTY LINE OF THE CALIFORNIA STATE HIGHWAY; THENCE NORTH 5 DEGREES 23 MINUTES 00 SECONDS WEST ALONG THE ABOVE MENTIONED PROPERTY LINE 136.88 FEET TO AN INTERSECTION WITH THE SOUTHERLY LINE OF GARDEN STREET; THENCE SOUTH 84 DEGREES 07 MINUTES 30 SECONDS WEST, ALONG THE SOUTHERLY LINE OF GARDEN STREET, 202.60 FEET TO A POINT; THENCE SOUTH 5 DEGREES 52 MINUTES 30 SECONDS EAST 135.66 FEET TO A POINT IN THE SOUTHERLY LINE OF SAID LOT 42; THENCE NORTH 84 DEGREES 28 MINUTES 00 SECONDS EAST, ALONG THE SOUTHERLY LINE OF SAID LOT, 201.44 FEET TO THE POINT OF BEGINNING. Assessor Parcel Number: 121-150-27 EXHIBIT A-3 DDCSOC/1381073 v2/022299-0083