HomeMy WebLinkAbout07 - Acquistion of Property at 1499 Monrovia�EW `Rr CITY OF
NEWPORT BEACH
City Council Staff Report
Agenda Item No. 7
October 9, 2012
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Dave Kiff, City Manager
949 - 644 -3001, dkiff @newportbeachca.gov
PREPARED BY: Dave Kiff, City Manager
APPROVED: Nnwi 0. � /W
TITLE: Acquisition of Non - Conforming Industrial Property Located At 1499
Monrovia Avenue, Newport Beach, California
re1:4A 9:L•Gi 9
Late in 2011, Mr. Kenneth Kaplan sued the City of Newport Beach ( "City ") alleging the
City inversely condemned his 17,000 square foot property located at 1499 Monrovia
Avenue, Newport Beach, California ( "Property ") when the City rezoned the Property in
2010 from M -1 -A (industrial zone now classified as "IG ") to RM (multiple residential).
While the City contended the lawsuit was without merit, the City reached an agreement
with Mr. Kaplan to temporarily dismiss his lawsuit in exchange for the City negotiating in
good faith for the potential acquisition of the Property. Although no decisions have been
made, an acquisition of the Property would have value to the City, beyond the
settlement of a lawsuit, because it may serve as the location of a new City community
center in West Newport Beach, or provide a site for any number of other public facilities.
The City Council designated Council Member Steve Rosansky and me to act as lead
negotiators on behalf of the City. Based upon our negotiations with Mr. Kaplan, we
have arrived at a proposed purchase price of $4.3 million and a release of all of Mr.
Kaplan's past, pending or future legal claims against the City involving the Property.
RECOMMENDATION:
(1) Authorize the City Manager to execute a purchase and sale agreement, in a form
substantially similar to the attached, and all associated documents, with Mr. Ken
Kaplan to acquire the Property for a purchase price of $4.3 million.
(2) Approve the attached interfund transfer budget amendment in the amount of $4.3
million to the West Newport Capital Projects Fund, from the Facilities
Replacement Fund, to fund the acquisition of the Property.
Acquisition of Non - Conforming Industrial Property Located At 1499 Monrovia Avenue,
Newport Beach, California
October 09, 2012
Page 2
FUNDING REQUIREMENTS:
The City proposes to acquire the Property from Mr. Kaplan for a total price of $4.3
million. With the approval of the interfund transfer from the Facilities Replacement
Fund, there is adequate money available in the West Newport Capital Projects Fund to
cover the acquisition cost.
DISCUSSION:
The Property, as depicted below, is triangular in shape and although no decisions have
been made, is potentially suitable as the site of a new City community center in West
Newport Beach or other public facilities. Any determination as to the use of this site for
public facilities will have to go through appropriate processes, including but not limited to
the California Environmental Quality Act (CEQA) review.
Issues arose between Mr. Kaplan and the City after the City Council adopted a
comprehensive update of the City's Zoning Code on October 26, 2010. The Zoning Code
was prepared to implement the land use and development policies of the 2006 General
Plan, which included a reclassification of a number of commercial properties to residential
uses. The Property was included within the reclassification and was rezoned from M-1 -A
to RM. The Property is currently used for industrial purposes by a single tenant, Road and
Track Magazine (this lease is at or near its expiration).
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Acquisition of Non - Conforming Industrial Property Located At 1499 Monrovia Avenue,
Newport Beach, California
October 09, 2012
Page 3
After the Property was re- zoned, Mr. Kaplan sued the City alleging the City's zoning
change amounted to an inverse condemnation of his Property. In an effort to resolve the
pending litigation, Mr. Kaplan agreed to temporarily dismiss his lawsuit against the City to
give the parties an opportunity to amicably resolve this matter.
On March 19, 2012, Mr. Kaplan offered to permanently settle the litigation and sell the
Property to the City for a price between $4.8 and $5 million. Mr. Kaplan originally
purchased the Property in December 2007 at a price of $5.8 million. In response to Mr.
Kaplan's offer, the City contracted with John S. Adams & Associates, Inc. to conduct an
appraisal of the Property. The appraisal returned with a market value of the fee simple
interest of the Property at $3,726,000. Mr. Kaplan also obtained an appraisal of the
Property, by Waldron & Associates, Inc., which returned with a fee simple market value
of approximately $4.8 million.
Based upon the differences in value between the City's appraisal and Mr. Kaplan's
appraisal, the City Council authorized Council Member Steve Rosansky and me to
negotiate the acquisition of the Property with Mr. Kaplan. We met with Mr. Kaplan on
September 17, 2012 and negotiated a tentative deal to acquire the Property. The major
deal points are as follows:
1. The Property's purchase price is $4.3 million.
2. The closing date is November 15, 2012. However, the City would have one option
to extend the closing date through December 15, 2012, provided the City covers all
of Mr. Kaplan's carrying costs during the time extension (e.g., mortgage, interest,
taxes, insurance, etc.).
3. Mr. Kaplan will share a Phase 1 hazardous substances report regarding the Property
with the City.
4. Escrow fees will be split between the parties.
5. The purchase would resolve all of Mr. Kaplan's past, pending or future legal claims
against the City involving the Property.
The potential acquisition of the Property initially arose in the context of settlement of
litigation (litigation we believe is without merit), but the potential value of the Property to
the City has value beyond settlement, because the Property provides a site in West
Newport Beach for many potential public improvements, including, but not limited to, a
new City community center, or other public facilities. If the Property is acquired, there
will be community dialogue and Council action (including but not limited to CEQA
action) regarding potential uses of the Property prior to a final decision on the ultimate
use of the Property.
7
Acquisition of Non - Conforming Industrial Property Located At 1499 Monrovia Avenue,
Newport Beach, California
October 09, 2012
Page 4
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find that the purchase of this property is not subject
to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2)
(the activity will not result in a direct or reasonably foreseeable indirect physical change
in the environment) and 15060(c)(3) (the activity is not a project as defined in Section
15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3,
because it has no potential for resulting in physical change to the environment, directly
or indirectly.
NOTICING:
This agenda item has been noticed according to the Brown Act (72 hours in advance of
the City Council meeting).
Submitted by:
By . . e Kiff
City Manager
Attachments: (1) Purchase and Sale Agreement
(2) Budget Amendment # 13BA -014
Escrow No.
To: First American Title Insurance Company
( "Escrow Holder ")
One First American Way
Santa Ana, California 92707
Attention: Ryan Hahn, Escrow Officer
Telephone: 714.250.8394
Date of Opening of Escrow: October _, 2012
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND
ESCROW INSTRUCTIONS (this "Agreement ") is made this _ day of October, 2012, by and
between Kenneth M. Kaplan ( "Seller ") and City of Newport Beach, a Municipal corporation and
Charter City ( "City ").
RECITAILS:
A. Seller is the owner of that certain real property commonly known as 1499
Monrovia Avenue, in the City of Newport Beach, County of Orange, State of California, more
particularly described on Exhibit "A" attached hereto and by this reference incorporated herein
(or if not attached, to be attached by Escrow Holder upon issuance of the Title Report as such
terms are defined below), together with all improvements now or hereafter constructed thereon,
all easements, licenses and interests appurtenant thereto and all intangible property owned or
held by Seller in connection with the Land, including without limitation, development rights,
governmental approvals and land entitlements (collectively referred to herein as the "Property ").
B. Seller previously filed an action against City in the Superior Court of the State of
California (Case No. 00531667) alleging six causes of action including inverse condemnation
(the "Action ").
C. City has the authority to acquire property for public uses utilizing City's power of
eminent domain. In lieu of City's exercise of said power and under the threat thereof, Seller is
willing to sell the Property to City and City is willing to purchase the Property from Seller, upon the
terms and conditions set forth in this Agreement.
D. In settlement of the Action, but without admitting liability, Seller wishes to sell
the Property to City and City wishes to buy the Property from Seller pursuant to the terms and
conditions of this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
TERMS AND CONDITIONS
1. PURCHASE AND SALE OF PROPERTY. City hereby agrees to purchase from
Seller, and Seller agrees to sell to City the Property, upon the terms and conditions hereinafter set
forth.
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2. OPENING OF ESCROW. Within one (1) business day after the execution of this
Agreement by Seller, the parties shall open an escrow ( "Escrow ") with the Escrow Holder by
causing an executed copy of this Agreement to be deposited with Escrow Holder. Escrow shall
be deemed open on the date that Seller delivers this executed Agreement to Escrow Holder.
3. PAYMENT OF PURCHASE PRICE.
3.1 Amount of Purchase Price. The purchase price for the Property will be
FOUR MILLION THREE HUNDRED THOUSAND DOLLARS ($4,300,000.00) ( "Purchase
Price ").
3.2 Payment of Purchase Price.
(a) Not later than five (5) days following the Opening of Escrow, City
shall deposit in Escrow in good funds, the sum of TWENTY -FIVE THOUSAND
DOLLARS ($25,000.00) (the "Deposit "), which Deposit shall be applicable to the
Purchase Price. In the event this Agreement has not been previously terminated, the
Deposit shall be non - refundable on October 31, 2012 (the "Due Diligence Date "), and
shall be applicable against the Purchase Price upon the Closing. In the event this
Agreement is terminated by City on or before the Due Diligence Date or City disapproves
of any of the items requiring approval of City hereunder on or before the Due Diligence
Date, the Deposit shall be promptly returned to City.
(b) On or before the Closing Date, City shall deposit the balance of the
Purchase Price, subject to any other credits or debits hereunder, with Escrow Holder in
"good funds ". "Good funds" shall mean a wire transfer of funds, cashier's or certified
check drawn on or issued by the offices of a financial institution located in the State of
California, or cash.
3.3 Interest Bearing Account. Escrow Holder shall deposit the funds specified
in Section 3.2 above in an interest bearing account. All interest earned on said funds shall be
credited to City.
3.4 Return of Deposit. In the event that any of the conditions specified in
Section 7.1 below are not satisfied or otherwise waived by City, the Deposit shall be promptly
returned to City.
4. ADDITIONAL FUNDS AND DOCUMENTS REQUIRED FROM CITY AND
SELLER.
4.1 Cam. City agrees that on or before 1:00 p.m. on the business day
preceding the Closing Date, City will deposit with Escrow Holder all additional funds and/or
documents (executed and acknowledged, if appropriate) which are necessary to comply with the
terms of this Agreement, including without limitation, the following:
(a) A Preliminary Change of Ownership Statement completed in the
manner required in Orange County;
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(b) Two duplicate originals of an Assignment of Lease(s) by Seller to
City in a form to be provided by City within fifteen (15) days following the opening of
escrow and reasonably approved by Seller ( "Assignment of Leases ");
(c) Two duplicate originals of an Assignment of Contracts in a form to
be provided by City within fifteen (15) days following the opening of escrow and
reasonably approved by Seller ( "Assignment of Contracts "), which Assignment of
Contracts will convey all assignable contracts, warranties and guaranties in effect, if any,
with respect to the Property; and
Such funds and other items and instruments as may be necessary in order for Escrow
Holder to comply with this Agreement.
4.2 Seller. Seller agrees that on or before 1:00 p.m. on the business day
preceding the Closing Date, Seller will deposit with Escrow Holder such funds and other items
and instruments (executed and acknowledged, if appropriate) as may be necessary in order for
the Escrow Holder to comply with this Agreement, including without limitation, the following:
(a) A grant deed conveying the Property to City on Escrow Holder's
standard form ( "Grant Deed ").
(b) A Bill of Sale in a form to be provided by City within fifteen (15)
days following the opening of escrow and reasonably approved by Seller ( "Bill of Sale ");
(c) Two duplicate originals of the Assignment of Leases;
(d) Two duplicate originals of the Assignment of Contracts;
(e) A Non- Foreign Affidavit on Escrow Holder's Standard form or a
form substantially similar thereto ( "Non- Foreign Affidavit ");
(f) A dismissal of the Action with prejudice in a form to be provided
by City within fifteen (15) days following the opening of escrow and reasonably
approved by Seller (the "Dismissal "); and
(g) Such funds and other items and instruments as may be necessary in
order for Escrow Holder to comply with this Agreement.
In the event City determines that an Assignment of Contracts, Assignment of Lease or
Bill of Sale is unnecessary, City shall advise Seller and Escrow Holder and such documents shall
be waived as conditions to the Closing hereunder. Escrow Holder will cause the Grant Deed to
be recorded when (but in no event after the date specified in Section 5.1 below) it can issue the
Title Policy in the form described in Section 6 below, and holds for the account of Seller the
items described above to be delivered to Seller through Escrow, less costs, expenses and
disbursements chargeable to Seller pursuant to the terms hereof..
4.3 Assignment of Contracts. On or before five (5) business days following
the opening of escrow, Seller shall deliver to City copies of all contracts affecting the Property,
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including any leases affecting the Property (the "Existing Leases "). City shall notify Seller on or
before the Due Diligence Date of City's approval or disapproval of each contract. Seller shall
terminate any contract disapproved by City. City's failure to notify Seller within the time
specified shall be considered disapproval. As to those contracts City elects to assume, Seller
shall assign same in the form of the Contract Assignment. As to those contracts City does not
elect to assume, Seller shall terminate and otherwise remain responsible for same after close of
Escrow.
4.4 Miscellaneous Documents. On or before five (5) business days following
the opening of escrow, Seller shall deliver to City all documents relating to the Property which
Seller may have in its possession including but not limited to copies of all copies of a Phase I
Environmental Report, together with engineering reports, soils studies, environmental audits and
reports, environmental impact report, and all other documents relating to the Real Property for
City's review and approval. City shall notify Seller on or before the Due Diligence Date of
City's approval or disapproval of each item. City's failure to notify Seller within the time
specified shall be considered disapproval. If City does not acquire the Property, all said
documents shall be promptly returned to Seller. In addition, Seller shall deliver to City (or cause
Escrow Holder to deliver to City), natural hazard disclosure reports covering the Property in such
form as required by law, which shall be countersigned and returned to Seller and Escrow Holder.
4.5 Entry for Investigation. Subject to the conditions hereafter stated and the
rights of tenants in possession, Seller grants to City, its agents and employees a limited license to
enter upon any portion of the Property for the purpose of conducting engineering surveys, soil
tests, investigations or other studies reasonably necessary to evaluate the condition of the
Property, which studies, surveys, investigations and tests shall be done at City's sole cost and
expense. City shall (a) notify Seller prior to each entry of the date and purpose of intended entry
and provide to Seller the names and affiliations of the persons entering the Property; (b) conduct
all studies in a diligent, expeditious and safe manner and not allow any dangerous or hazardous
conditions to occur on the Property during or after such investigation; (c) comply with all
applicable laws and governmental regulations; (d) keep the Property free and clear of all
materialmen's liens, [is pendens and'other liens arising out of the entry and work performed
under this paragraph; (e) maintain or assure maintenance of workers' compensation insurance (or
state approved self - insurance) on all persons entering the property in the amounts required by the
State of California; (f) provide to Seller prior to initial entry a certificate of insurance evidencing
that City has procured and paid premiums for an all -risk public liability insurance policy written
on a per occurrence and not claims made basis in a combined single limit of not less than TWO
MILLION DOLLARS ($2,000,000.00) which insurance names Seller as additional insured
entitled to not less than thirty (30) days cancellation notice and is primary and non- contributing
with insurance carried by Seller; and (g) return the Property to its original condition following
City's entry. City agrees to indemnify, defend, protect and hold Seller and the Property free and
harmless from any and all loss, liability, claims, damages and expenses (including but not limited
to attorneys' fees and costs) arising directly or indirectly from the exercise of said license, or
from City's failure to comply with the conditions to City's entry onto the Property provided
herein. Such undertaking of indemnity shall survive Close of Escrow or the termination of this
Agreement for any reason. The limited license herein granted shall be co- extensive with the
term of this Agreement or any extension thereof.
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4403119.1 m0104112 4_ 8
4.6 Estoppel Certificates. In the event the Property is subject to any Existing
Lease(s), at least ten (10) days prior to the Closing Date, Seller shall have delivered to Escrow
Holder an original Estoppel Certificate, and to City, copies thereof, dated within forty-five (45)
days of the Closing Date, from the tenant under each Existing Lease. Such Estoppel Certificate
shall be in a form to be provided by City within fifteen (15) days following the opening of
escrow and reasonably approved by Seller. All such certificates shall be consistent with any
information provided by Seller on the Rent Roll. Seller shall use its best efforts to obtain such
Estoppel Certificates from all tenants, provided, however, that City shall not be required to
complete its purchase unless Seller obtains Estoppel Certificates consistent with the rent roll or
information provided to City pursuant to Section 4.4 above from tenants leasing not less than
ninety percent (90 %) of the square footage then subject to lease. The failure of Seller to obtain
the Estoppel Certificates as set forth in this Section 4.6 shall not constitute a breach of this
Agreement by Seller if such certificate is not procured despite Seller's best efforts, but shall
entitle City to terminate this Agreement.
4.7 Distribution of Documents. Following Close of Escrow, Escrow Holder
shall distribute the documents as follows:
(a) To City:
(i) One certified conformed copy of the Grant Deed, the
original to be mailed to City following recordation thereof;
(ii) One duplicate original each of the Bill of Sale, the
Assignment of Leases, the Assignment of Contracts, the Dismissal and the Non -
Foreign Affidavit; and
(iii) One certified copy, conformed if recorded, of any other
document delivered to Escrow Holder by City or Seller pursuant to the terns
hereof.
(b) To Seller:
(i) One duplicate original each of the Bill of Sale, the
Assignment of Leases, the Assignment of Contracts and the Non - Foreign
Affidavit; and
(ii) One certified copy, conformed if recorded, of any other
document delivered to Escrow Holder by City or Seller pursuant to the terms
hereof.
4.8 Independent Contract Consideration. Contemporaneously with the
execution of this Agreement, Purchaser shall deliver to Seller a check in the amount of $1,000
(the "Independent Contract Consideration "), which amount the parties bargained for and agreed
to as consideration for the Seller's grant to Purchaser of Purchaser's right to purchase the
Property pursuant to the terms hereof and for Seller's execution, delivery and performance of
this Agreement. The Independent Contract Consideration is in addition to and independent of
any other consideration or payment provided in this Agreement, is nonrefundable under any
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circumstances, will be retained by Seller notwithstanding any other provisions of this Agreement
and will be applied against the Purchase Price in the event the Closing occurs hereunder.
5. CLOSING DATE.
5.1 Initial Closing Date. Escrow shall close on or before November 15, 2012
( "Closing Date "). The terms "the Close of Escrow ", and /or the "Closing" are used herein to
mean the time Seller's Grant Deed is filed for record by the Escrow Holder in the Office of the
County Recorder of Orange County, California. City and Seller each specifically agrees to
strictly comply and perform its obligations herein in the time and manner specified and waives
any and all rights to claim such compliance by mere substantial compliance with the terms of this
Agreement.
5.2 City shall have the right to extend the Closing Date for one (1) thirty -day
extension to December 15, 2012, provided City delivers to Escrow Holder the sum of
$ , (which amount equals the interest, property taxes and insurance incurred by Seller
with respect to the Property during such thirty day period, less any amounts payable by the
tenants in possession during such period, if any) which amount shall not be applicable to the
Purchase Price, shall be deemed consideration for such extension and shall be nonrefundable to
City.
6. TITLE POLICY.
6.1 Approval of Title. Following execution of this Agreement but in no event
later than five (5) days following opening of Escrow, Seller shall deliver to City a preliminary
title report issued through First American Title Insurance Company (the "Title Company "),
describing the state of title of the Property, (the "Preliminary Title Report") together with copies
of all exceptions specified therein. City shall notify Seller in writing of any objections City may
have to title exceptions or other matters ( "Disapproved Exceptions ") contained in the
Preliminary Title Report within ten (10) business days after City's receipt of the Preliminary
Title Report ( "City's Objection Notice "). City shall not unreasonably withhold its approval of
the Preliminary Title Report. If City fails to deliver City's Objection Notice within said ten (10)
business day period, City shall be conclusively deemed to have approved the Preliminary Title
Report and all matters shown thereon. In the event City delivers City's Objection Notice within
said period, Seller shall have a period of ten (10) business days after receipt of City's Objection
Notice in which to notify City of Seller's election to either (i) agree to attempt to remove the
Disapproved Exceptions prior to the Close of Escrow; or (ii) decline to remove any such
Disapproved Exceptions ( "Seller's Notice "). Seller shall only elect to decline to remove
Disapproved Exceptions which Seller in good faith believes Seller's reasonable efforts would not
result in removal or as to which removal would result in cost or expense to Seller other than
nominal administrative expense incurred in the process of removal. Seller's failure to deliver
Seller's Notice within said ten (10) business day period shall be deemed Seller's election to
decline to remove the Disapproved Exceptions. If Seller notifies City of its election to decline to
remove the Disapproved Exceptions, if Seller is deemed to have elected to decline to remove the
Disapproved Exceptions or if Seller is unable to remove the Disapproved Exceptions, City may
elect either to terminate this Agreement and the Escrow or to accept title to the Property subject
to the Disapproved Exception(s). City shall exercise such election by delivery of written notice
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to Seller and Escrow Holder within ten (10) business days following the earlier of (i) the date of
written advise from Seller that such Disapproved Exception(s) cannot be removed; or (ii) the
date Seller declines or is deemed to have declined to remove such Disapproved Exception(s). If
City fails to deliver said written notice of termination of this Agreement and the Escrow within
said ten (10) business day period, City's disapproval of the Disapproved Exception(s) shall be
deemed waived and City shall deemed to have agreed to accept title to the Property subject to the
Disapproved Exception(s).
Upon the issuance of any amendment or supplement to the Preliminary Title Report
which adds additional exceptions, the foregoing right of review and approval shall also apply to
said amendment or supplement, provided, however, that City's initial period of review and
approval or disapproval of any such additional exceptions shall be limited to ten (10) days
following receipt of notice of such additional exceptions.
6.2 Title Policy to be Issued by City. When Escrow Holder holds for City the
Grant Deed in favor of City executed and acknowledged by Seller covering the Property, Escrow
Holder shall cause to be issued and delivered to City and Seller as of the Closing a CLTA
standard coverage policy of title insurance ( "Title Policy "), or, upon City's request therefor, an
ALTA standard coverage policy of title insurance, issued by Title Company, with liability in the
amount of the Purchase Price, covering the Property and showing title vested in City free of
encumbrances, except:
(a) All nondelinquent general and special real property taxes and
assessments for the current fiscal year;
(b) Easements, encumbrances, covenants, conditions, restrictions,
reservations, rights -of -way and other matters of record, as approved or deemed approved
by City pursuant to Section 6.1 above;
(c) The standard printed exceptions and exclusions contained in the
CLTA or ALTA form policy; and
(d) Any exceptions created or consented to by City, including without
limitation, any exceptions arising by reason of City's possession of or entry on the
Property.
CONDITIONS PRECEDENT TO CLOSE OF ESCROW.
7.1 Conditions to City's Obligations. The obligations of City under this
Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by City of
each of the following conditions precedent:
(a) Title Company will issue the Title Policy as required by Section 6
of this Agreement insuring title to the Property vested in City or other vestee designated
by City for vesting purposes only.
(b) Escrow Holder holds and will deliver to City the instruments and
funds, if any, accruing to City pursuant to this Agreement.
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(c) Seller delivers to City written evidence from local zoning
authorities and governmental entities satisfactory to City that the Property is validly
zoned to permit the use of the Property as intended by City and that the Property is in
conformance with all governmental codes and regulations.
(d) City's approval of contracts pertaining to the Property pursuant to
Section 4.3 above.
(e) City's approval of all items pertaining to the Property pursuant to
Section 4.4 above.
(f) City shall have the right to approve of all inspections, tests,
surveys and other studies as may be conducted by City. City shall have the unqualified
and unrestricted right to terminate its obligations under this Agreement on or before the
Due Diligence Date.
(g)
and correct.
(h)
Agreement.
All representations and warranties specified in Section 9.1 are true
City's approval of any other conditions specified in this
7.2 Conditions to Seller's Obligations. The obligations of Seller under this
Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by Seller of
each of the following conditions precedent:
(a) Escrow Holder holds and will deliver to Seller the instruments and
funds accruing to Seller pursuant to this Agreement.
8. ESCROW PROVISIONS.
8.1 Escrow Instructions. This Agreement, when signed by City and Seller,
shall also constitute escrow instructions to Escrow Holder. If required by Escrow Holder, City
and Seller agree to execute Escrow Holder's standard escrow instructions, provided that the same
are consistent with and do not conflict with the provisions of this Agreement. In the event of any
such conflict, the provisions of this Agreement shall prevail.
8.2 General Escrow Provisions. Escrow Holder shall deliver the Title Policy
to the City and instruct the Orange County Recorder to mail the Grant Deed to City at the
address set forth in Section 15.15 after recordation. All funds received in this Escrow shall be
deposited in one or more general escrow accounts of the Escrow Holder with any bank doing
business in Orange County, California, and may be disbursed to any other general escrow
account or accounts. All disbursements shall be made by Escrow Holder's check. This
Agreement and any modifications, amendments, or supplements thereto may be executed in
counterparts and shall be valid and binding as if all of the parties' signatures were on one
document.
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8.3 Proration of Real Property Taxes. All nondelinquent general and special
real property taxes shall be prorated to the Close of Escrow on the basis of a thirty (30) day
month and a three hundred sixty day (360) year. In the event that property taxes are assessed on
a parcel of real property which includes land other than the Property, such proration shall include
only taxes attributable to the Property, calculated in terms of total gross square feet of land
assessed pursuant to the tax statement versus total gross square footage of the Property. Any
supplemental tax bills received after Close of Escrow shall be paid by Seller to the extent they
relate to a period prior to Close of Escrow, and by City, to the extent they relate to a period after
Close of Escrow. If a supplemental tax bill covers a period commencing before and continuing
after Close of Escrow, the party named in the bill will pay the tax and the other party shall
reimburse the first party its pro rata share within thirty (30) days after receipt of a copy of the tax
bill and evidence of the second party's payment of same. The provisions of this Section 8.3 shall
survive Close of Escrow. If either party fails to pay its pro rata share of taxes by the times herein
provided, interest shall accrue on all unpaid amounts from when owing until paid at five percent
(5 %) over the Federal Discount Rate quoted by the Federal Reserve Bank of San Francisco on
the 25th day of the month preceding the date interest commences to accrue. Rents of the tenants
under the Existing Leases, if any, shall be prorated to the Closing Date based on rents actually
collected. Any such rents collected after the Closing Date by City which are attributable to the
period prior to the Closing Date shall be paid to Seller upon collection. Rents collected after the
Closing Date from tenants whose rental was delinquent at Closing and/or constituting
reimbursements for operating expenses paid by Seller shall be deemed to first apply to costs of
collecting such rents, second to rents which accrued after the Closing and third to rentals
accruing prior to the Closing Date. City shall have no obligation to commence litigation or to
collect rents or to terminate the tenant's right to occupancy based upon tenant's failure to pay
rentals which were delinquent at Closing and/or such reimbursements; however, City shall use
reasonable efforts to collect such delinquent rents and shall reasonably and in good faith
cooperate with Seller's attempts to collect such rents at no cost or expense to City.
8.4 Payment of Costs. Seller shall pay one -half (1/2) of the Escrow fee,
documentary transfer taxes, title insurance premiums for that portion of the Title Policy premium
which would be incurred for a CLTA form policy, and the charge for drawing the Grant Deed.
City shall pay the one -half (1/2) of the Escrow fee, charges for recording the Grant Deed, and
that portion of the Title Policy premium which is attributable to the additional cost of obtaining
any additional coverage requested by City, including the difference between CLTA and ALTA
coverage. All other costs of Escrow not otherwise specifically allocated by this Agreement shall
be apportioned between the parties in a manner consistent with the custom and usage of Escrow
Holder.
8.5 Termination and Cancellation of Escrow. Time is of the essence of this
Agreement. If Escrow fails to close as provided above, Escrow shall terminate automatically
without further action by Escrow Holder or any party, and Escrow Holder is instructed to return
all funds and documents then in Escrow to the respective depositor of the same with Escrow
Holder. Cancellation of Escrow, as provided herein, shall be without prejudice to whatever legal
rights City or Seller may have against each other arising from the Escrow or this Agreement.
8.6 Information Re -port. The "Recording Person" within the meaning of
Treasury Regulation Section 1.604504(e)(5) with respect to the transactions contemplated by
255/066751-0092
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this Agreement shall be Escrow Holder. It is agreed that Escrow Holder is an eligible person
under Section 1.604504(e)(5)(ii) of said Regulations. Escrow Holder hereby agrees to be
responsible for complying with the reporting and other requirements of Internal Revenue Code
Section 6045(e) and the income tax regulations promulgated thereunder. Pursuant to said
regulations; the address for the transferor and transferee are as set forth for Seller and City
below, and the identifying information regarding the real estate transferred is the legal
description for the Property set forth herein. Escrow Holder agrees to file the form required by
said regulations between the end of the calendar year in which the Close of Escrow occurs and
February 28 of the following calendar year. City and Seller agree (i) to cooperate with Escrow
Holder and with each other in completing any report and /or other information required to be
delivered to the Internal Revenue Service pursuant to Internal Revenue Code Section 6045(e)
regarding the real estate sales transaction contemplated by this Agreement, including without
limitation, Internal Revenue Service Form 1099 -5 as such may be hereinafter modified or
amended by the Internal Revenue Service, or as may be required pursuant to any regulation now
or hereinafter promulgated by the Treasury Department with respect thereto; (ii) that City and
Seller, their respective employees and attorneys, and Escrow Holder and its employees may
disclose to the Internal Revenue Service, any information regarding the Option Agreement, this
Agreement or the transaction contemplated herein as such party reasonably deems to be required
to be disclosed to the Internal Revenue Service by such party pursuant to Internal Revenue Code
Section 6045(e); (iii) that neither City nor Seller shall seek to hold any such party liable for the
disclosure to the Internal Revenue Service of any such information; and (iv) to retain this
Agreement for at least four (4) years following the close of the calendar year in which the Close
of Escrow occurs.
9. REPRESENTATIONS AND WARRANTIES.
9.1 Representations and Warranties. Seller hereby makes the following
representations and warranties to City, each of which (i) is material and relied upon by City in
making its determination to enter into this Agreement; (ii) is true in all respects as of the date
hereof and shall be true in all respects on the date of Close of Escrow on the Property; and (iii)
shall survive the Close of Escrow of the purchase and sale of the Property as well as any future
transfer of the Property to City or any transferee, successor or assignee of City:
(a) Seller has received no notice or knowledge that any governmental
authority or any employee or agent thereof considers any construction of the proposed
improvements on the Property or the present or proposed operation; use or ownership of
the Property to violate or have violated any ordinance, rule, law, regulation or order of
any government or agency, body or subdivision thereof, or that any investigation has
been commenced or is contemplated respecting such possible violations.
(b) There are no pending or threatened litigation, allegations, lawsuits
or claims, whether for personal injury, property damage, landlord -tenant disputes,
property taxes, contractual disputes or otherwise, which do or may affect the Property or
the operation or value thereof, and there are no actions or proceedings pending or, to the
best of Seller's knowledge, threatened against Seller before any court or administrative
agency in any way connected with the Property and neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will constitute
2551066751 -0092
4407119.1 .10/04112 -10- 14
or result in a violation or breach by Seller of any judgment, order, writ, injunction or
decree issued against or imposed upon it. There is no action, suit, proceeding or
investigation pending or threatened against Seller which would become a cloud on City's
title to and have a material adverse impact upon the Property or any portion thereof or
which questions the validity or enforceability of the transaction contemplated by this
Agreement or any action taken pursuant hereto in any court or before or by any federal,
district, county, or municipal department, commission, board, bureau, agency or other
governmental instrumentality.
(c) There are no contracts, leases, claims or rights affecting the
Property and no agreements entered into by or under Seller shall survive the Close of
Escrow that would adversely affect City's rights with respect to the Property except as
heretofore disclosed in writing by Seller to City.
(d) Seller has the unimpeded power and authority to execute, deliver
and perform Seller's obligations under this Agreement and the documents executed and
delivered by Seller pursuant hereto.
(e) Seller is not a "foreign person" within the meaning of Section 1445
of the Internal Revenue Code of 1986, as amended.
All representations and warranties made hereunder are in addition to any representations
and warranties implied by law and in no event shall this Section 10.1 be construed to limit,
diminish or reduce any obligation of disclosure implied upon Seller by law.
9.2 Disclaimer of Representations and Warranties. City acknowledges that as
of Close of Escrow it will have had an adequate opportunity to inspect the Property and to
investigate its physical characteristics and conditions. Upon the Close of Escrow, City shall be
deemed to have waived any and all objections to the physical characteristics and conditions of
the Property which would be disclosed by a reasonable and diligent inspection. City
acknowledges that, except as specifically provided herein, neither Seller nor any of its
employees, agents, or representatives has made any representations, warranties or agreements to
or with City on behalf of Seller as to any matters concerning the Property, the present use
thereof, or the suitability of City's intended use of the Property.
The foregoing disclaimer includes, without limitation, topography, climate, air, water
rights, utilities, present and future zoning, soil, subsoil, the acreage of the Property or square
footage of buildings located thereon, the purpose to which the Property is suited, drainage, and
access to public roads. City further acknowledges and agrees that the Property is to be
purchased, conveyed, and accepted by City in its present condition, "AS -IS," and that no patent
or latent physical condition of the Property, whether or not known or discovered, shall affect the
rights of either party hereto. City has investigated and has knowledge of operative or imposed
governmental laws and regulations (including, but not limited to, zoning, environmental,
including specifically the regulations of the Environmental Protection Agency, and land use laws
and regulations) to which the Property may be subject, and is acquiring the Property on the basis
of its review and determination of the application and effect of such laws and regulations. City
has neither received nor relied upon any representations concerning such laws and regulations
255/066751 -0092
4,103119.1 410/04/12
made by Seller, Seller's employees,.agents, or any other person acting on behalf of Seller. Any
agreements, warranties or representations not expressly contained in this Agreement shall in no
way bind Seller.
CITY AND SELLER ACKNOWLEDGE AND AGREE THAT THE FOREGOING
PROVISIONS OF THIS SECTION 9 HAVE BEEN FREELY BARGAINED FOR BY THE
PARTIES AND CONSTITUTES A MATERIAL CONSIDERATION TO SELLER FOR THE
SALE OF THE PROPERTY AND BUT FOR THIS PROVISION SELLER WOULD NOT
SELL THE PROPERTY TO CITY.
SELLER'S INITIALS
CITY'S INITIALS
9.3 Changed Circumstances. If Seller becomes aware of any fact or
circumstance which would change or render incorrect, in whole or in part, any representation or
warranty made by Seller under this Agreement, whether as of the date given or any time
thereafter through the Close of Escrow and whether or not such representation or warranty was
based upon Seller's knowledge and/or belief as of a certain date, Seller will give immediate
written notice of such changed fact or circumstance to City, but such notice shall not release
Seller of its liabilities or obligations with respect thereto. Seller shall issue a certificate as of the
Close of Escrow stating that all the representations and warranties contained in Section 10.1 are
true and correct as of said date, or setting forth in detail which of such matters are not true and
correct.
9.4 Indemnity by Seller. Seller shall hold harmless, indemnify and defend
City, and the Property from and against (i) except for obligations, liabilities, claims, liens and
encumbrances disclosed herein or which City specifically agrees by the terms of this Agreement
to assume or take subject, any and all obligations, liabilities, claims, liens or encumbrances,
whether direct, contingent or consequential and no matter how arising, in any way related to the
Property and arising or accruing on or before the date first above written, or in any way related to
or arising from any act, conduct, omission, contract or commitment of Seller at any time or times
on or before the date of the Close of Escrow for the purchase and sale of the Property, including
without limitation, any damage to the Property or injury to or death of any person, employees or
agents of Seller; (ii) any loss or damage to City resulting from any material inaccuracy or
material breach of any representation or warranty of Seller or resulting from any breach or
default by Seller under this Agreement, or any other agreements relating to this transaction; and
(iii) all costs and expenses, including attorneys' fees, relating to any actions, suits orjudgments
incident to any of the foregoing. Should Seller fail to discharge or undertake to defend City or
the Property against such liability upon learning of the same, then City may settle such liability
and Seller's liability to City shall be conclusively established by such settlement, the amount of
such liability to include both the settlement consideration and the reasonable expenses, including
attorney's fees, incurred by City in effecting such settlement.
9.5 Repair Obligations Prior to Close of Escrow. Seller agrees to repair any
items that are damaged or become in need or repair during the course of Escrow, and to maintain
the Property in good condition and repair.
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10. SETTLEMENT OF ACTION.
10.1 Release of Claims by Seller. In exchange for the promises contained in
this Agreement, and except as to the obligations provided for in this Agreement, Seller hereby
waives, releases and forever discharges, and agrees to the extent permitted by law that he will not
in any manner institute, prosecute or pursue, any and all complaints, charges, claims for relief,
demands, damages, suits, actions or causes of action, of any kind, whether in law or in equity,
which he asserts or could assert, at common law or under any statute, rule, regulation, order or
law, whether federal, state or local, or on any grounds whatsoever, against the City and/or any of
its current or former officers, councilmen, agents, representatives, employees, successors and
assigns with respect to any event, matter, claim, damage or injury, of any kind related to the
Action or the claims made thereunder as of the date of this Agreement and/or the Closing.
10.2 Release of Claims by City. In exchange for the promises contained in this
Agreement, and except as to the obligations contained in this Agreement, City hereby waives,
releases and forever discharges, and agrees to the extent permitted by law that it will not in any
manner institute, prosecute or pursue, any and all complaints, charges, claims for relief,
demands, damages, suits, actions or causes of action, of any kind, whether in law or in equity,
which it asserts or could assert, at common law or under any statute, rule, regulation, order or
law; whether federal, state or local, or on any grounds whatsoever, against the other Parties
and /or any of its or their current or former owners, trusts, trustees, officers, directors,
shareholders, affiliates, agents, representatives, employees, attorneys, successors, predecessors,
insurers, and assigns with respect to any event, matter, claim, damage or injury of any kind
related to the Action or the claims made thereunder as of the date of this Agreement and/or the
Closing.
10.3 Waiver of Unkriown Claims. With respect to the subject matter of this
Agreement, it is agreed and understood that the release's being provided by each of the Parties
above apply to all injuries and damages, whether now known or unknown, and whether now
existing or which may result in the future due to the actions or omissions of the Parties on or
before the Effective Date. With respect to the subject matter of this Agreement, the Parties
acknowledge that they have each been fully advised of and understand the provisions of Section
1542 of the California Civil Code which reads:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing this release, which if known
by him or her must have materially affected his or her settlement with the debtor.
In further consideration of the promises and payments pursuant to this Agreement, each Party
agrees to, and does hereby, waive and relinquish all rights afforded to him, her or it under
California Civil Code Section 1542, or any similar law of any State or territory of the United
States or other jurisdiction with respect to the matters of this Agreement. Notwithstanding the
above, nothing in this Agreement shall be deemed to waive or release any Party as to any of its
obligations or rights under this Agreement.
The foregoing provisions shall survive the Closing hereunder and the recordation of the
deed.
255/06675 w092
4403119.1 e10iO4n2 -13-
11. DAMAGE, DESTRUCTION AND CONDEMNATION.
11.1 Risk of Physical Loss. Risk of physical loss to the Property shall be home
by Seller prior to the Close of Escrow and by City thereafter. In the event that the Property shall
be damaged by fire, flood, earthquake or other casualty and the estimated cost to repair same
exceeds FIVE HUNDRED THOUSAND DOLLARS ($500,000), City may, at its option, elect
not to acquire the Property. If City does not so elect or the estimated cost to repair the damage is
less than FIVE HUNDRED THOUSAND DOLLARS ($500,000), City shall complete the
acquisition of the Property, in which case Seller shall assign to City the interest of Seller in all
insurance proceeds relating to such damage. In the event that such damage shall occur and City
elects not to purchase the Property as above provided, then this Agreement shall be terminated
and City shall be entitled to the return of all funds and documents deposited hereunder.
11.2 Condemnation. In the event that, prior to the Close of Escrow, any
governmental entity shall commence any actions of eminent domain or similar type proceedings
to take any portion of the Property, City shall have the option either to (i) elect not to acquire the
Property, or (ii) complete the acquisition of the Property, in which case City shall be entitled to
all the proceeds of such taking.
12. RIGIIT TO EXCHANGE: THREAT OF CONDEMNATION.
12.1 Right to Exchange. Seller or City may desire to complete this transaction
as a part of a tax - deferred exchange within the meaning of Section 1031 of the Internal Revenue
Code of 1986, as amended. Each party agrees in each such event to cooperate with the other in
order to effectuate such an exchange or exchanges. Each party's agreement to cooperate to
effect any such exchange or exchanges shall not require such party to incur any cost, expense or
liability or acquire title to any property as a consequence of such cooperation. In no event shall
any such exchange transaction delay the Close of Escrow as contemplated in this Agreement. In
so cooperating in any exchange transaction arranged hereunder, the cooperating party shall in no
event be responsible for, or in any way warrant, the tax consequences of the exchange
transaction.
12.2 Threat of Condemnation. City's purchase of the Property is in contemplation
of the use of the Property for public purposes. This negotiated acquisition arose during City's
investigations of the acquisition of the Property through eminent domain. City has the authority to
acquire property by eminent domain for public purposes. Seller has agreed to enter into this
Agreement with City under the threat of City's exercise of its power of eminent domain. In the event
this negotiated sale did not occur, subject to and pending its completion of the necessary statutory
procedures set forth in Government Code Section 7267 et seq., and Code of Civil Procedure Section
1230.010, et seq., City's staff was prepared to have taken the steps thereunder to seek authorization
from the City Council, and staff was prepared to recommend to the City Council initiation of the
steps, to acquire the Property for public purposes pursuant to Government Code Section 7267 et seq.,
and Code of Civil Procedure Section 1230.010, et seq., including providing notice to Seller of its
opportunity to be heard and to agendize, consider, and take action on a resolution of necessity under
Code of Civil Procedure Section 1245.230 et seq. Nothing herein is intended to be, or serve as, any
tax advice from City to Seller, and Seller is not in any way construing or relying on any
communications or advice by City, or City's representations herein, in any way as any type of tax
advice or opinion.
255/066751 -0092
4403119.1 a10104/12 -14"
18
13. POSSESSION. Possession of the Property shall be delivered to City as of Close
of Escrow. In the event any personal property remains on the Property following the Close of
Escrow, it shall automatically become the property of City.
14. LIQUIDATED DAMAGES. IF CITY SHOULD DEFAULT FOR ANY
REASON WHATSOEVER UNDER THIS AGREEMENT (EXCEPTING ONLY MATERIAL
DEFAULT BY SELLER HEREUNDER), THEN AND IN SUCH EVENT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, CITY AND SELLER
AGREE THAT SELLER WILL INCUR DAMAGES BY REASON OF SUCH DEFAULT BY
CITY, WHICH DAMAGES SHALL BE IMPRACTICAL AND EXTREMELY DIFFICULT,
IF NOT IMPOSSIBLE, TO ASCERTAIN. CITY AND SELLER, IN A REASONABLE
EFFORT TO ASCERTAIN WHAT SELLER'S DAMAGES WOULD BE IN THE EVENT OF
SUCH DEFAULT BY CITY HAVE AGREED BY PLACING THEIR INITIALS BELOW
THAT THE SUM OF FIFTY THOUSAND DOLLARS ($50,000) SHALL BE DEEMED TO
CONSTITUTE A REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER THE
PROVISIONS OF SECTION 1671 OF THE CALIFORNIA CIVIL CODE. IN THE EVENT
OF AND FOR SUCH DEFAULT BY CITY, CITY SHALL DELIVER SAID SUM IN GOOD
FUNDS TO SELLER WITHIN FIVE (5) DAYS AFTER SELLER'S WRITTEN DEMAND
THEREFOR AS SELLER'S SOLE MONETARY REMEDY THEREFOR, UNLESS CITY
WRONGFULLY REFUSES TO CAUSE ESCROW HOLDER TO CANCEL THE ESCROW
OR TO RELEASE THE DEPOSIT TO SELLER, IN WHICH INSTANCE SELLER SHALL
ALSO BE ENTITLED TO ALL COSTS AND EXPENSES, INCLUDING ACTUAL
ATTORNEYS' FEES INCURRED BY SELLER WITH RESPECT TO THOSE
CONSEQUENTIAL DAMAGES, IF ANY, WHICH MAY BE INCURRED BY SELLER,
AFTER THE CLOSING DATE BY REASON OF THE CLOUD ON TITLE TO THE
PROPERTY WHICH MAY RESULT FROM CITY'S WRONGFUL FAILURE TO CANCEL
THE ESCROW AND THIS AGREEMENT.
SELLER'S INITIALS CITY'S INITIALS
15. MISCELLANEOUS.
15.1 Assignment. City shall not have the right to assign this Agreement or any
interest or right hereunder or under the Escrow or to nominate another party to take title to the
Property without the prior written consent of Seller, which consent shall not be unreasonably
withheld. In no event shall City be released of liability in the event of an assignment or
nomination.
15.2 Affixation of Revenue Stamps. Escrow Holder is hereby specifically
instructed to attach documentary transfer and/or revenue stamps to the Grant Deed only after
recordation of the Grant Deed.
15.3 Cooperation. City and Seller agree to cooperate with one another, at no
cost or expense to the cooperating party, in satisfying the conditions to Close of Escrow. City
shall be responsible for proceeding with diligence and in good faith to satisfy the conditions, if
any, to City's performance set forth in Section 7.1 and Seller shall be responsible for proceeding
2551066751-0092
4403119.1 n10/04112 _15_
19
with diligence and in good faith to satisfy the conditions, if any, to Seller's performance set forth
in Section 7.2.
15.4 4ualificatim Authority. Each party represents and warrants that it is duly
formed, is authorized to do business in the state in which the Property is located and that it has
been duly authorized to enter into and perform this Agreement.
15.5 Attorneys' Fees. In any action between the parties hereto seeking
enforcement of any of the terms and provisions of this Agreement or the Escrow, or in
connection with the Property, the prevailing party in such action shall be entitled to have and to
recover from the other party its reasonable attorneys' fees and other reasonable expenses in
connection with such action or proceeding in addition to its recoverable court costs.
15.6 Interpretation; Governing Law. This Agreement shall be construed
according to its fair meaning and as if prepared by both parties hereto. This Agreement shall be
construed in accordance with the laws of the State of California in effect at the time of the
execution of this Agreement. Titles and captions are for convenience only and shall not
constitute a portion of this Agreement. As used in this Agreement, masculine, feminine or
neuter gender and the singular or plural number shall each be deemed to include the others
wherever and whenever the context so dictates.
15.7 No Waiver. No delay or omission by either party hereto in exercising any
right or power accruing upon the compliance or failure of performance by the other party hereto
under the provisions of this Agreement shall impair any such right or power or be construed to
be a waiver thereof. A waiver by either party hereto of a breach of any of the covenants,
conditions or agreements hereof to be performed by the other party shall not be construed as a
waiver of any succeeding breach of the same or other covenants, agreements, restrictions or
conditions hereof.
15.8 Modifications. Any alteration, change or modification of or to this
Agreement, in order to become effective, shall be made by written instrument or endorsement
thereon and in each such instance executed on behalf of each party hereto.
15.9 Severability. If any term, provision, condition or covenant of this
Agreement or the application thereof to any party or circumstances shall, to any extent, be held
invalid or unenforceable, the remainder of this instrument, or the application of such term,
provision, condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15.10 Merger of Prior Agreements and Understandings. This Agreement and
other documents incorporated herein by reference contain the entire understanding between the
parties relating to the transaction contemplated hereby and all prior or contemporaneous
agreements, understandings, representations and statements; oral or written, are merged herein
and shall be of no further force or effect.
15.11 Covenants to Survive Escrow. The covenants and agreements contained
herein shall survive the Close of Escrow and, subject to the limitations on assignment contained
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in Section 15.1 above, shall be binding upon and inure to the benefit of the parties hereto and
their representatives, heirs, successors and assigns.
15.12 No Withholding Because Non - Foreign Seller. Seller represents and
warrants to City that Seller is not, and as of the Close of Escrow will not be, a foreign person
within the meaning of Intemal Revenue Code Section 1445 and that it will deliver to City on or
before the Close of Escrow the Non - Foreign Affidavit as described hereinabove, pursuant to
Intemal Revenue Code Section 1445(b)(2) and the Regulations promulgated thereunder.
15.13 Time is of the Essence. Time is hereby expressly made of the essence of
this Agreement.
15.14 Execution in Counterpart. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all parties are not signatories to the original or the same counterpart.
15.15 Notices. Any notice which either party may desire to give to the other
party or to the Escrow Holder must be in writing and shall be effective when personally
delivered or three (3) business days after deposit in the United States mail, registered, certified,
postage fully prepaid and addressed to the respective parties as set forth below or to such other
address and to such other persons as the parties may hereafter designate by written notice to the
other parties hereto:
To Seller: Kenneth M. Kaplan
Copy to:
To City: City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92660
Attn: Michael Torres
Copy to: Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, CA 92626 -1998
Attn: Kim D. Thompson, Esq.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Purchase
and Sale of Real Property and Escrow Instructions as of the date set forth above.
"SELLER"
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4403119.1 010/04112 -17- 21
Kenneth M. Kaplan
"CITY"
CITY OF NEWPORT BEACH
a Municipal corporation and Charter City
go
ATTEST:
Leilani I. Brown, City Clerk
APPROVED AS TO FORM:
Aaron C. Harp, City Attorney
Nancy Gardner, Mayor
255/066751.0092
4407119.1 00/04/12 -18- 22
City of Newport Beach NO. BA- 13BA -014
BUDGET AMENDMENT
2012 -13
EFFECT ON BUDGETARY FUND BALANCE:
Increase Revenue Estimates
X Increase Expenditure Appropriations AND
Transfer Budget Appropriations
SOURCE:
from existing budget appropriations
from additional estimated revenues
X from unappropriated fund balance
EXPLANATION:
AMOUNT: ba,3oo,aoo.00
Increase in Budgetary Fund Balance
X Decrease in Budgetary Fund Balance
No effect on Budgetary Fund Balance
This budget amendment is requested to provide for the following:
To increase revenue estimates and expenditure appropriations for the acquisition of the property at 1499 Monrovia Avenue
in Newport Beach. Funds will be transferred out of the Facilties Replaement Fund and into the West Newport Capital Project
Fund.
ACCOUNTING ENTRY:
BUDGETARY FUND BALANCE
Number
Amount
Fund
Account
Description
Debit Credit
405
3605
Facilities Replacement Fund - Fund Balance
$4,300,000.00
416
3605
West Npt Capital Project Fund - Fund Balance
' $4,300,000.00
REVENUE ESTIMATES (3601)
Fund /Division
Account
Description
9416
6000
West Npt Capital Project Fund - Transfer In
$4,300,000.00
EXPENDITURE APPROPRIATIONS (3603)
Division
Number
Account
Number
Division
Number
Account
Number
Division
Number
Account
Number
Division
Number
Account
Number
Division
Number
Account
Number
Description
9405 Facilities Replacement Fund
9900 Transfer Out
Automatic
Signed: 4L, I / [C
Financial Approval: Finance Director
Signed
Administre t Manager
pproval: City Man
Signed.
City Council Approval: City Clerk
$4,300,000.00
Date
Date
Date
23
Escrow No.
"RECEIVED AFTER GENDA
�RIS�TED." �Q
AGREEMENT FOR PURCHASE AND SALE
OF REAL PROPERTY AND ESCROW INSTRUCTIONS
Date of Opening of Escrow: October _, 2012
To: First American Title Insurance Company
("Escrow Holder ")
One First American Way
Santa Ana, California 92707
Attention: Ryan Hahn, Escrow Officer
Telephone: 714.250.33 94
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND
ESCROW INSTRUCTIONS (this `'Agreement ") is made this _ day of October, 2012, by and
between Kenneth M. Kaplan (`'Seller ") and City of Newport Beach, a Municipal corporation and
Charter City ("City").
RECITALS:
A. Seller is the owner of that certain real property commonly known as 1499
Monrovia Avenue, located in the City of Newport Beach, County of Orange, State of California,
more particularly described on Exhibit "A" attached hereto and by this reference incorporated
herein (or if not attached, to be attached by Escrow Holder upon issuance of the Title Report as
such terns are defined below), together with all improvements now or hereafter constructed
thereon, all easements, licenses and interests appurtenant thereto and all intangible property
owned or held by Seller in connection with the Land, including without limitation, development
rights, governmental approvals and land entitlements (collectively referred to herein as the
"Property").
B. Seller previously filed an action against City in the Superior Court of the State of
California for the County of Orange (bearing Case No. 30- 2011 - 00531667- CU- EI -CJC) alleging
six causes of action including inverse condemnation (the "Action'), which was previously
dismissed by Seller in connection with a tolling agreement entered into between the parties (the
"Tolling Agreement ").
C. City has the authority to acquire property for public uses utilizing City's power of
eminent domain. In lieu of City's exercise of said power and under the threat thereof, Seller is
willing to sell the Property to City and City is willing to purchase the Property from Seller, upon
the teens and conditions set forth in this Agreement.
D. In settlement of the matters surrounding the Action, but without admitting
liability, Seller wishes to sell the Property to City and City wishes to buy the Property from
Seller pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1551066751 -0092
4403119. fl10109117
TERMS AND CONDITIONS
1. PURCHASE AND SALE OF PROPERTY. City hereby agrees to purchase from
Seller, and Seller agrees to sell to City the Property, upon the terms and conditions hereinafter set
forth.
2. OPENING OF ESCROW. Within one (1) business day after the execution of this
Agreement by Seller, the parties shall open an escrow (`Escrow") with the Escrow Holder by
causing an executed copy of this Agreement to be deposited with Escrow Holder. Escrow shall
be deemed open on the date that Seller delivers this executed Agreement to Escrow Holder.
3. PAYMENT OF PURCHASE PRICE.
3.1 Amount of Purchase Price. The purchase price for the Property will be
FOUR MILLION THREE HUNDRED THOUSAND DOLLARS ($4,300,000.00) (`Purchase
Price ").
3.2 Payment of Purchase Price.
(a) Not later than five (5) days following the Opening of Escrow, City
shall deposit in Escrow in good funds, the sum of FIFTY THOUSAND DOLLARS
($50,000.00) (the "Deposit'), which Deposit shall be applicable to the Purchase Price. In
the event this Agreement has not been previously terminated, the Deposit shall be non-
refundable on November 10, 2012, as may be extended below (the "Due Diligence
Date "), and shall be applicable against the Purchase Price upon the Closing. In the event
this Agreement is terminated by City on or before the Due Diligence Date or City
disapproves of any of the items requiring approval of City hereunder on or before the
Due Diligence Date, the Deposit shall be promptly returned to City. City shall have the
unqualified and unrestricted right to terminate its obligations under this Agreement on or
before the Due Diligence Date.
(b) On or before the Closing Date, City shall deposit the balance of the
Purchase Price, subject to any other credits or debits hereunder, with Escrow Holder in
"good funds". "Good funds' shall mean a wire transfer of funds, cashier's or certified
check drawn on or issued by the offices of a financial institution located in the State of
California, or cash.
3.3 Interest Bearing Account. Escrow Holder shall deposit the funds specified
in Section 3.2 above in an interest beating account. All interest earned on said funds shall be
credited to City.
3.4 Return of Deposit. In the event that any of the conditions specified in
Section 7.1 below are not satisfied or otherwise waived by City, the Deposit shall be promptly
returned to City.
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4. ADDITIONAL FUNDS AND DOCUMENTS REQUIRED FROM CITY AND
SELLER.
4.1 City. City agrees that on or before 1:00 p.m. on the business day
preceding the Closing Date, City will deposit with Escrow Holder all additional funds and /or
documents (executed and acknowledged, if appropriate) which are necessary to comply with the
terms of this Agreement, including without limitation, the following:
(a) A Preliminary Change of Ownership Statement completed in the
manner required in Orange County;
(b) Two duplicate originals of an Assignment of Lease by Seller to
City in a form to be provided by City within fifteen (15) days following the opening of
escrow and reasonably approved by Seller ( "Assigmnent of Lease");
(c) Two duplicate originals of an Assignment of Contracts in a form to
be provided by City within fifteen (15) days following the opening of escrow and
reasonably approved by Seller ( "Assignment of Contracts"), which Assigmment of
Contracts will convey all assignable contracts; warranties and guaranties in effect, if any,
with respect to the Property; and
Such funds and other items and instruments as may be necessary in order for Escrow
Holder to comply with this Agreement.
4.2 Seller. Seller agrees that on or before 1:00 p.m. on the business day
preceding the Closing Date, Seller will deposit with Escrow Holder such funds and other items
and instruments (executed and acknowledged, if appropriate) as may be necessary in order for
the Escrow Holder to comply with this Agreement, including without limitation, the following:
(a) A grant deed conveying the Property to City on Escrow Holder's
standard form ('Grant Deed ").
(b) A Bill of Sale in a form to be provided by City within fifteen (15)
days following the opening of escrow and reasonably approved by Seller ('Bill of Sale ");
(c) Two duplicate originals of the Assignment of Lease;
(d) Two duplicate originals of the Assignment of Contracts;
(e) A Non - Foreign Affidavit on Escrow Holder's Standard form or a
form substantially similar thereto (`Non- Foreign Affidavit'); and
(f) Such funds and other items and instruments as may be necessary in
order for Escrow Holder to comply with this Agreement.
In the event City determines that an Assignment of Contracts, Assignment of Lease or
Bill of Sale is unnecessary, City shall advise Seller and Escrow Holder and such documents shall
be waived as conditions to the Closing hereunder. Escrow Holder will cause the Grant Deed to
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be recorded when (but in no event after the date specified in Section 5.1 below) it can issue the
Title Policy in the form described in Section 6 below, and holds for the account of Seller the
items described above to be delivered to Seller through Escrow, less costs, expenses and
disbursements chargeable to Seller pursuant to the terms hereof.
4.3 Assignment of Contracts. On or before five (5) business days following
the opening of escrow, Seller shall deliver to City copies of all contracts affecting the Property,
including any lease affecting the Property (the "Existing Lease'), which the parties acknowledge
is scheduled to expire on October 31,2012. City shall notify Seller on or before the Due
Diligence Date of City's approval or disapproval of each contract. Seller shall terminate any
contract disapproved by City. City's failure to notify Seller within the time specified shall be
considered disapproval. As to those contracts City elects to assume, Seller shall assign same in
the form of the Contract Assignment. As to those contracts City does not elect to assume, Seller
shall terminate and otherwise remain responsible for same after close of Escrow.
4.4 Miscellaneous Documents. On or before five (5) business days following
the opening of escrow, Seller shall deliver to City all documents relating to the Property which
Seller may have in its possession including but not limited to copies of all copies of a Phase I
Environmental Report; together with engineering reports, soils studies, environmental audits and
reports, environmental impact report, and all other documents relating to the Real Property for
City's review and approval. City shall notify Seller on or before the Due Diligence Date of
City's approval or disapproval of each item. Citys failure to notify Seller within the time
specified shall be considered disapproval. If City does not acquire the Property, all said
documents shall be promptly returned to Seller. In addition, Seller shall deliver to City (or cause
Escrow Holder to deliver to City), natural hazard disclosure reports covering the Property in such
form as required by law, which shall be countersigned and returned to Seller and Escrow Holder.
4.5 Entry for Investigation. Subject to the conditions hereafter stated and the
rights of tenants in possession, Seller grants to City, its agents and employees a limited license to
enter upon any portion of the Property for the purpose of conducting engineering surveys, soil
tests, investigations or other studies reasonably necessary to evaluate the condition of the
Property, which studies, surveys, investigations and tests shall be done at City's sole cost and
expense. City shall (a) notify Seller prior to each entry of the date and purpose of intended entry
and provide to Seller the names and affiliations of the persons entering the Property; (b) conduct
all studies in a diligent, expeditious and safe manner and not allow any dangerous or hazardous
conditions to occur on the Property during or after such investigation; (c) comply with all
applicable laws and governmental regulations; (d) keep the Property free and clear of all
materialmen's liens, lis pendens and other liens arising out of the entry and work performed
under this paragraph; (e) maintain or assure maintenance of workers' compensation insurance (or
state approved self- insurance) on all persons entering the property in the amounts required by the
State of California; (f) provide to Seller prior to initial entry a certificate of insurance evidencing
that City has procured and paid premiums for an all -risk public liability insurance policy written
on a per occurrence and not claims made basis in a combined single limit of not less than TWO
MILLION DOLLARS ($2,000,000.00) which insurance names Seller as additional insured
entitled to not less than thirty (30) days cancellation notice and is primary and non - contributing
with insurance carried by Seller; and (g) return the Property to its original condition following
City's entry. City agrees to indemnify, defend, protect and hold Seller and the Property free and
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harmless fi-om any and all loss, liability, claims, damages and expenses (including but not limited
to attorneys' fees and costs) arising directly or indirectly from the exercise of said license, or
from City's failure to comply with the conditions to City's entry onto the Property provided
herein. Such undertaking of indemnity shall survive Close of Escrow or the termination of this
Agreement for any reason. The limited license herein granted shall be co- extensive with the
tern of this Agreement or any extension thereof.
4.6 Estoppel Certificate. In the event the Property is subject to the Existing
Lease as of the Closing (i.e. in the event the existing tenant holds over), at least ten (10) days
prior to the Closing Date, Seller shall have delivered to Escrow Holder an original Estoppel
Certificate, and to City, copies thereof, dated within forty -five (45) days of the Closing Date,
from the tenant under the Existing Lease. Such Estoppel Certificate shall be in a form to be
provided by City within two (2) business days following delivery of notice by Seller to City that
the tenant under the Existing Lease is holding over and shall be reasonably approved by Seller.
The certificate shall confirm that the Existing Lease expired on or before October 31, 2012.
Seller shall use its best efforts to obtain such Estoppel Certificate fi-om the tenant under the
Existing Lease and Seller shall provide a Seller's estoppel in the event Seller is unable to obtain
such Estoppel Certificate from the tenant under the Existing Lease. The failure of Seller to
obtain the Estoppel Certificates as set forth in this Section 4.6 shall not constitute a breach of this
Agreement by Seller if such certificate is not procured despite Seller's best efforts, but shall
entitle City to tenninate this Agreement.
4.7 Distribution of Documents, Following Close of Escrow, Escrow Holder
shall distribute the documents as follows:
(a) To City:
(i) One certified conformed copy of the Grant Deed, the
original to be mailed to City following recordation thereof;
(ii) One duplicate original each of the Bill of Sale, the
Assignment of Lease, the Assignment of Contracts and the Non - Foreign
Affidavit; and
(iii) One certified copy, conformed if recorded, of any other
document delivered to Escrow Holder by City or Seller pursuant to the terms
hereof.
(b) To Seller:
W One duplicate original each of the Bill of Sale, the
Assignment of Lease, the Assignment of Contracts and the Non- Foreign
Affidavit; and
(ii) One certified copy, conformed if recorded, of any other
document delivered to Escrow Holder by City or Seller pursuant to the terms
hereof.
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4.8 Independent Contract Consideration. Contemporaneously with the
execution of this Agreement, Purchaser shall deliver to Seller a check in the amount of $1,000
(the "Independent Contract Consideration"), which amount the parties bargained for and agreed
to as consideration for the Seller's grant to Purchaser of Purchaser's right to purchase the
Property pursuant to the terms hereof and for Seller's execution, delivery and performance of
this Agreement. The Independent Contract Consideration is in addition to and independent of
any other consideration or payment provided in this Agreement, is nonrefundable under any
circumstances, will be retained by Seller notwithstanding any other provisions of this Agreement
and will be applied against the Purchase Price in the event the Closing occurs hereunder.
5. CLOSING DATE.
5.1 Initial Closing Date. Escrow shall close on or before November 15, 2012
( "Closing Date"). The terms "the Close of Escrow"; and /or the "Closing' are used herein to
mean the time Seller's Grant Deed is filed for record by the Escrow Holder in the Office of the
County Recorder of Orange County, California. City and Seller each specifically agrees to
strictly comply and perform its obligations herein in the time and manner specified and waives
any and all rights to claim such compliance by mere substantial compliance with the terms of this
Agreement.
5.2 City shall have the right to extend the Closing Date for one (1) thirty -day
extension to December 15, 2012, provided City delivers to Escrow Holder the sum of
$23,000.00, (which amount equals the interest, property taxes and insurance incurred by Seller
with respect to the Property dining such thirty day period, less any amounts payable by the
tenants in possession during such period, if any) which amount shall not be applicable to the
Purchase Price, shall be deemed consideration for such extension and shall be nonrefundable to
City.
6. TITLE POLICY.
6.1 Approval of Title. Following execution of this Agreement but in no event
later than five (5) days following opening of Escrow, Seller shall deliver to City a preliminary
title report issued through First American Title insurance Company (the "Title Company"),
describing the state of title of the Property, (the "Preliminary Title Report") together with copies
of all exceptions specified therein. City shall notify Seller in writing of any objections City may
have to title exceptions or other matters ('Disapproved Exceptions") contained in the
Preliminary Title Report within ten (10) business days after City's receipt of the Preliminary
Title Report ( "City's Objection Notice "). City shall not unreasonably withhold its approval of
the Preliminary Title Report. If City fails to deliver City's Objection Notice within said ten (10)
business day period, City shall be conclusively deemed to have approved the Preliminary Title
Report and all matters shown thereon. In the event City delivers City's Objection Notice within
said period, Seller shall have a period of ten (10) business days after receipt of City's Objection
Notice in which to notify City of Seller's election to either (i) agree to attempt to remove the
Disapproved Exceptions prior to the Close of Escrow; or (ii) decline to remove any such
Disapproved Exceptions ( "Seller's Notice "). Seller shall only elect to decline to remove
Disapproved Exceptions which Seller in good faith believes Seller's reasonable efforts would not
result in removal or as to which removal would result in cost or expense to Seller other than
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nominal administrative expense incurred in the process of removal. Seller's failure to deliver
Seller's Notice within said ten (10) business day period shall be deemed Seller's election to
decline to remove the Disapproved Exceptions. If Seller notifies City of its election to decline to
remove the Disapproved Exceptions, if Seller is deemed to have elected to decline to remove the
Disapproved Exceptions or if Seller is unable to remove the Disapproved Exceptions, City may
elect either to terminate this Agreement and the Escrow or to accept title to the Property subject
to the Disapproved Exception(s). City shall exercise such election by delivery of written notice
to Seller and Escrow Holder within ten (10) business days following the earlier of (i) the date of
written advise from Seller that such Disapproved Exception(s) cannot be removed; or (ii) the
date Seller declines or is deemed to have declined to remove such Disapproved Exception(s). If
City fails to deliver said written notice of termination of this Agreement and the Escrow within
said ten (10) business day period, City's disapproval of the Disapproved Exception(s) shall be
deemed waived and City shall deemed to have agreed to accept title to the Property subject to the
Disapproved Exception(s).
Upon the issuance of any amendment or supplement to the Preliminary Title Report
which adds additional exceptions, the foregoing right of review and approval shall also apply to
said amendment or supplement, provided, however, that City's initial period of review and
approval or disapproval of any such additional exceptions shall be limited to ten (10) days
following receipt of notice of such additional exceptions.
6.2 Title Policy to be Issued by City. When Escrow Holder holds for City the
Grant Deed in favor of City executed and acknowledged by Seller covering the Properly, Escrow
Holder shall cause to be issued and delivered to City and Seller as of the Closing a CLTA
standard coverage policy of title insurance ("Title Policy'), or, upon City's request therefor, an
ALTA standard coverage policy of title insurance, issued by Title Company, with liability in the
amount of the Purchase Price, covering the Property and showing title vested in City free of
encumbrances, except:
(a) All nondelinquent general and special real properly taxes and
assessments for the current fiscal year;
(b) Easements, encumbrances, covenants, conditions, restrictions,
reservations, rights -of -way and other matters of record, as approved or deemed approved
by City pursuant to Section 6.1 above;
(c) The standard printed exceptions and exclusions contained in the
CLTA or ALTA form policy; and
(d) Any exceptions created or consented to by City, including without
limitation, any exceptions arising by reason of City's possession of or entry on the
Property.
7. CONDITIONS PRECEDENT TO CLOSE OF ESCROW.
7.1 Conditions to City's Obligations. The obligations of City under this
Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by City of
each of the following conditions precedent:
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4403119.4 a I Oi09112 —7—
(a) Title Company will issue the Title Policy as required by Section 6
of this Agreement insuring title to the Property vested in City or other vestee designated
by City for vesting purposes only.
(b) Escrow Holder holds and will deliver to City the instruments and
funds, if any, accruing to City pursuant to this Agreement.
(c) Seller has delivered all documents required to be delivered under
Section 4.2 above.
(d) All representations and warranties specified in Section 9.1 are true
and correct.
(e) City's approval of any other conditions specified in this
Agreement.
7.2 Conditions to Seller's Obligations. The obligations of Seller under this
Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by Seller of
each of the following conditions precedent:
(a) Escrow Holder holds and will deliver to Seller the instruments and
funds accruing to Seller pursuant to this Agreement.
8. ESCROW PROVISIONS.
8.1 Escrow Instructions. This Agreement, when signed by City and Seller,
shall also constitute escrow instructions to Escrow Holder. If required by Escrow Holder, City
and Seller agree to execute Escrow Holder's standard escrow instructions, provided that the same
are consistent with and do not conflict with the provisions of this Agreement. In the event of any
such conflict, the provisions of this Agreement shall prevail.
8.2 General Escrow Provisions. Escrow Holder shall deliver the Title Policy
to the City and instruct the Orange County Recorder to mail the Grant Deed to City at the
address set forth in Section 15.15 after recordation. All funds received in this Escrow shall be
deposited in one or more general escrow accounts of the Escrow Holder with any bank doing
business in Orange County, California, and may be disbursed to any other general escrow
account or accounts. All disbursements shall be made by Escrow Holder's check. This
Agreement and any modifications, amendments, or supplements thereto may be executed in
counterparts and shall be valid and binding as if all of the parties' signatures were on one
document.
8.3 Proration of Real Property Taxes. All nondelinquent general and special
real property taxes shall be prorated to the Close of Escrow on the basis of a thirty (30) day
month and a three hundred sixty day (360) year. In the event that property taxes are assessed on
a parcel of real property which includes land other than the Property, such proration shall include
only taxes attributable to the Property, calculated in terns of total gross square feet of land
assessed pursuant to the tax statement versus total gross square footage of the Property. Any
supplemental tax bills received after Close of Escrow shall be paid by Seller to the extent they
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relate to a period prior to Close of Escrow, and by City, to the extent they relate to a period after
Close of Escrow. If a supplemental tax bill covers a period commencing before and continuing
after Close of Escrow, the party named in the bill will pay the tax and the other party shall
reimburse the first party its pro rata share within thirty (30) days after receipt of a copy of the tax
bill and evidence of the second party's payment of same. The provisions of this Section 8.3 shall
survive Close of Escrow. If either party fails to pay its pro rata share of taxes by the times herein
provided, interest shall accrue on all unpaid amounts from when owing until paid at five percent
(5 %) over the Federal Discount Rate quoted by the Federal Reserve Bank of San Francisco on
the 25th day of the month preceding the date interest commences to accrue. Rents of the tenants
under the Existing Lease, if any, shall be prorated to the Closing Date based on rents actually
collected. Any such rents collected after the Closing Date by City which are attributable to the
period prior to the Closing Date shall be paid to Seller upon collection. Rents collected after the
Closing Date from tenants whose rental was delinquent at Closing and /or constituting
reimbursements for operating expenses paid by Seller shall be deemed to first apply to costs of
collecting such rents, second to rents which accrued after the Closing and third to rentals
accruing prior to the Closing Date. City shall have no obligation to commence litigation or to
collect rents or to terminate the tenant's right to occupancy based upon tenant's failure to pay
rentals which were delinquent at Closing and /or such reimbursements; however, City shall use
reasonable efforts to collect such delinquent rents and shall reasonably and in good faith
cooperate with Seller's attempts to collect such rents at no cost or expense to City.
8.4 Payment of Costs. Seller shall pay one -half (1/2) of the Escrow fee, title
insurance premiums for that portion of the Title Policy premium which would be incurred for a
CLTA form policy, and the charge for drawing the Grant Deed. City shall pay the one -half (1/2)
of the Escrow fee, charges for recording the Grant Deed, and that portion of the Title Policy
premium which is attributable to the additional cost of obtaining any additional coverage
requested by City, including the difference between CLTA and ALTA coverage. All other costs
of Escrow not otherwise specifically allocated by this Agreement shall be apportioned between
the parties in a manner consistent with the custom and usage of Escrow Holder. This transaction
is exempt from payment of documentary transfer taxes.
8.5 Termination and Cancellation of Escrow. Time is of the essence of this
Agreement. If Escrow fails to close as provided above, Escrow shall terminate automatically
without further action by Escrow Holder or any party, and Escrow Holder is instructed to return
all funds and documents then in Escrow to the respective depositor of the same with Escrow
Holder. Cancellation of Escrow, as provided herein, shall be without prejudice to whatever legal
rights City or Seller may have against each other arising from the Escrow or this Agreement.
8.6 Information Report. The "Reporting Person" within the meaning of
Treasury Regulation Section 1.6045- 4(e)(5) with respect to the transactions contemplated by this
Agreement shall be Escrow Holder. It is agreed that Escrow Holder is an eligible person under
Section 1.6045- 4(e)(5)(ii) of said Regulations. Escrow Holder hereby agrees to be responsible
for complying with the reporting and other requirements of Internal Revenue Code Section
6045(e) and the income tax regulations promulgated thereunder. Pursuant to said regulations,
the address for the transferor and transferee are as set forth for Seller and City below, and the
identifying information regarding the real estate transferred is the legal description for the
Property set forth herein. Escrow Holder agrees to file the form required by said regulations
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between the end of the calendar year in which the Close of Escrow occurs and February 28 of the
following calendar year. City and Seller agree (i) to cooperate with Escrow Holder and with
each other in completing any report and /or other information required to be delivered to the
Internal Revenue Service pursuant to Internal Revenue Code Section 6045(e) regarding the real
estate sales transaction contemplated by this Agreement, including without limitation, Internal
Revenue Service Form 1099 -5 as such may be hereinafter modified or amended by the Internal
Revenue Service, or as may be required pursuant to any regulation now or hereinafter
promulgated by the Treasury Department with respect thereto; (ii) that City and Seller, their
respective employees and attorneys, and Escrow Holder and its employees may disclose to the
Internal Revenue Service, any information regarding the Option Agreement, this Agreement or
the transaction contemplated herein as such party reasonably deems to be required to be
disclosed to the Internal Revenue Service by such party pursuant to Internal Revenue Code
Section 6045(e); (iii) that neither City nor Seller shall seek to hold any such party liable for the
disclosure to the Internal Revenue Service of any such information; and (iv) to retain this
Agreement for at least four (4) years following the close of the calendar year in which the Close
of Escrow occurs.
9. REPRESENTATIONS AND WARRANTIES.
9.1 Representations and Warranties. Seller hereby makes the following
representations and warranties to City, each of which (i) is material and relied upon by City in
making its determination to enter into this Agreement; (ii) is true in all respects as of the date
hereof and shall be true in all respects on the date of Close of Escrow on the Property; and (iii)
shall survive the Close of Escrow of the purchase and sale of the Property as well as any future
transfer of the Property to City or any transferee, successor or assignee of City:
(a) Seller has received no notice or has no actual knowledge that any
governmental authority or any employee or agent thereof considers any construction of
the proposed improvements on the Property or the present or proposed operation, use or
ownership of the Property to violate or have violated any ordinance, rule, law, regulation
or order of any government or agency, body or subdivision thereof, or that any
investigation has been commenced or is contemplated respecting such possible
violations.
(b) There are no pending or threatened litigation, allegations, lawsuits
or claims, whether for personal injury, property damage, landlord- tenant disputes,
property taxes, contractual disputes or otherwise, which do or may affect the Property or
the operation or value thereof, and there are no actions or proceedings pending or, to the
best of Sellers knowledge, threatened against Seller before any court or administrative
agency in any way connected with the Property and neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will constitute
or result in a violation or breach by Seller of any judgment, order, writ, injunction or
decree issued against or imposed upon it. There is no action, suit, proceeding or
investigation pending or threatened against Seller which would become a cloud on City's
title to and have a material adverse impact upon the Property or any portion thereof or
which questions the validity or enforceability of the transaction contemplated by this
Agreement or any action taken pursuant hereto in any court or before or by any federal,
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district, county, or municipal department, commission, board, bureau, agency or other
governmental instrumentality.
(c) There are no contracts, leases, claims or rights affecting the
Property and no agreements entered into by or under Seller shall survive the Close of
Escrow that would adversely affect City's rights with respect to the Property except as
heretofore disclosed in writing by Seller to City.
(d) Seller has the unimpeded power and authority to execute, deliver
and perform Sellers obligations under this Agreement and the documents executed and
delivered by Seller pursuant hereto.
(e) Seller is not a "foreign person" within the meaning of Section 1445
of the Internal Revenue Code of 1986, as amended.
All representations and warranties made hereunder are in addition to any representations
and warranties implied by law and in no event shall this Section 10.1 be construed to limit,
diminish or reduce any obligation of disclosure implied upon Seller by law. The representations
and warranties of Seller set forth in Section 9.1 hereof shall survive Closing for a period of one year.
Seller shall have no liability to Purchaser for a breach of any representation or warranty unless
written notice (the 'Breach Notice ") containing a description of the specific nature of such breach
shall have been given by City to Seller prior to the expiration of said one year period and an action
shall have been commenced by Purchaser against Seller within sixty (60) days following the
expiration of such one year period (the "Outside Date ").
9.2 Disclaimer of Representations and Warranties. City acknowledges that as
of Close of Escrow it will have had an adequate opportunity to inspect the Property and to
investigate its physical characteristics and conditions. Upon the Close of Escrow, City shall be
deemed to have waived any and all objections to the physical characteristics and conditions of
the Property which would be disclosed by a reasonable and diligent inspection. City
acknowledges that, except as specifically provided herein, neither Seller nor any of its
employees, agents, or representatives has made any representations, warranties or agreements to
or with City on behalf of Seller as to any matters concerning the Property, the present use
thereof, or the suitability of City's intended use of the Property.
The foregoing disclaimer includes, without limitation, topography, climate, air, water
rights, utilities, present and future zoning, soil, subsoil, the acreage of the Property or square
footage of buildings located thereon, the purpose to which the Property is suited, drainage, and
access to public roads. City further acknowledges and agrees that the Property is to be
purchased, conveyed, and accepted by City in its present condition, "AS -IS," and that no patent
or latent physical condition of the Property, whether or not known or discovered, shall affect the
rights of either party hereto. City has investigated and has knowledge of operative or imposed
governmental laws and regulations (including, but not limited to, zoning, environmental,
including specifically the regulations of the Environmental Protection Agency, and land use laws
and regulations) to which the Property may be subject, and is acquiring the Property on the basis
of its review and determination of the application and effect of such laws and regulations. City
has neither received nor relied upon any representations concerning such laws and regulations
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made by Seller, Seller's employees, agents; or any other person acting on behalf of Seller. Any
agreements, warranties or representations not expressly contained in this Agreement shall in no
way bind Seller.
CITY AND SELLER ACKNOWLEDGE AND AGREE THAT THE FOREGOING
PROVISIONS OF THIS SECTION 9 HAVE BEEN FREELY BARGAINED FOR BY THE
PARTIES AND CONSTITUTES A MATERIAL CONSIDERATION TO SELLER FOR THE
SALE OF THE PROPERTY AND BUT FOR THIS PROVISION SELLER WOULD NOT
SELL THE PROPERTY TO CITY.
SELLER'S INITIALS
CITY'S INITIALS
9.3 Changed Circumstances. If Seller becomes aware of any fact or
circumstance which would change or render incorrect, in whole or in part, any representation or
warranty made by Seller under this Agreement, whether as of the date given or any time
thereafter through the Close of Escrow and whether or not such representation or warranty was
based upon Seller's knowledge and /or belief as of a certain date, Seller will give immediate
written notice of such changed fact or circumstance to City, but such notice shall not release
Seller of its liabilities or obligations with respect thereto. Seller shall issue a certificate as of the
Close of Escrow stating that all the representations and warranties contained in Section 10.1 are
true and correct as of said date, or setting forth in detail which of such matters are not true and
correct.
9.4 Indemnity by Seller. Seller shall hold harmless, indemnity and defend
City, and the Property from and against (i) except for obligations, liabilities, claims, liens and
encumbrances disclosed herein or which City specifically agrees by the terms of this Agreement
to assume or take subject, any and all obligations, liabilities, claims, liens or encumbrances,
whether direct, contingent or consequential and no matter how arising, in any way related to the
Property and arising or accruing on or before the date first above written, or in any way related to
or arising fi-om any act, conduct, omission, contract or commitment of Seller at any time or times
on or before the date of the Close of Escrow for the purchase and sale of the Property, including
without limitation, any damage to the Property or injury to or death of any person, employees or
agents of Seller; (ii) any loss or damage to City resulting from any material inaccuracy or
material breach of any representation or warranty of Seller or resulting from any breach or
default by Seller under this Agreement, or any other agreements relating to this transaction; and
(iii) all costs and expenses, including attorneys' fees, relating to any actions, suits or judgments
incident to any of the foregoing. Should Seller fail to discharge or undertake to defend City or
the Property against such liability upon learning of the same, then City may settle such liability
and Sellers liability to City shall be conclusively established by such settlement, the amount of
such liability to include both the settlement consideration and the reasonable expenses, including
attorney's fees, incurred by City in effecting such settlement.
9.5 Repair Obligations Prior to Close of Escrow. Seller agrees to repair any
items that are damaged or become in need of repair during the course of Escrow, and to maintain
the Property in good condition and repair.
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4409119.4 n10 /09/13
10. SETTLEMENT OF CLAIMS.
10.1 Release of Claims by Seller. In exchange for the promises contained in
this Agreement, and except as to the obligations provided for in this Agreement, Seller hereby
waives, releases and forever discharges, and agrees to the extent permitted by law that he will not
in any manner institute, prosecute or pursue, any and all complaints, charges, claims for relief,
demands, damages, suits, actions or causes of action, of any kind, whether in law or in equity,
which he asserts or could assert, at common law or under any statute, rule, regulation, order or
law, whether federal, state or local, or on any grounds whatsoever, against the City and /or any of
its current or former officers, councilmen, agents, representatives, employees, successors and
assigns with respect to any event, matter, claim, damage or injury, of any kind related to the
Action, the Property and /or the Tolling Agreement or the claims made thereunder or in
connection therewith as of the date of this Agreement and /or the Closing.
10.2 Release of Claims by City. In exchange for the promises contained in this
Agreement, and except as to the obligations contained in this Agreement, City hereby waives,
releases and forever discharges, and agrees to the extent permitted by law that it will not in any
manner institute, prosecute or pursue, any and all complaints, charges, claims for relief,
demands, damages, suits, actions or causes of action, of any kind, whether in law or in equity,
which it asserts or could assert, at common law or under any statute, rule, regulation, order or
law, whether federal, state or local, or on any grounds whatsoever, against the other Parties
and /or any of its or their current or former owners, hosts, trustees, officers, directors,
shareholders, affiliates, agents, representatives, employees, attorneys, successors, predecessors,
insurers, and assigns with respect to any event, matter, claim, damage or injury of any kind
related to the Action, the Property and /or the Tolling Agreement or the claims made thereunder
or in connection therewith as of the date of this Agreement and/or the Closing.
10.3 Waiver of Unknown Claims. With respect to the subject matter of this
Agreement, including, but not limited to the Property, it is agreed and understood that the
releases being provided by each of the Parties above apply to all injuries and damages, whether
now known or unknown, and whether now existing or which may result in the future due to the
actions or omissions of the Parties on or before the Effective Date. With respect to the subject
matter of this Agreement, the Parties acknowledge that they have each been fully advised of and
understand the provisions of Section 1542 of the California Civil Code which reads:
"A general release does not extend to clainis which the creditor does not know or
suspect to exist in his or her favor at the time of executing this release, which if known
by l7irn or her must have materially affected his or her settlement ivith the debtor. "
In further consideration of the promises and payments pursuant to this Agreement, each Party
agrees to, and does hereby, waive and relinquish all rights afforded to him, her or it under
California Civil Code Section 1542, or any similar law of any State or territory of the United
States or other jurisdiction with respect to the matters of this Agreement. Notwithstanding the
above, nothing in this Agreement shall be deemed to waive or release any Party as to any of its
obligations or rights under this Agreement.
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4403119.4 a10,00112
deed.
The foregoing provisions shall survive the Closing hereunder and the recordation of the
11. DAMAGE, DESTRUCTION AND CONDEMNATION.
11.1 Risk of Physical Loss. Risk of physical loss to the Property shall be borne
by Seller prior to the Close of Escrow and by City thereafter. In the event that the Property shall
be damaged by fire, flood, earthquake or other casualty and the estimated cost to repair same
exceeds FIVE HUNDRED THOUSAND DOLLARS ($500,000), City may, at its option, elect
not to acquire the Property. If City does not so elect or the estimated cost to repair the damage is
less than FIVE HUNDRED THOUSAND DOLLARS ($500,000), City shall complete the
acquisition of the Property, in which case Seller shall assign to City the interest of Seller in all
insurance proceeds relating to such damage. In the event that such damage shall occur and City
elects not to purchase the Property as above provided, then this Agreement shall be terminated
and City shall be entitled to the return of all funds and documents deposited hereunder.
11.2 Condemnation. In the event that, prior to the Close of Escrow, any
governmental entity shall commence any actions of eminent domain or similar type proceedings
to take any portion of the Property, City shall have the option either to (i) elect not to acquire the
Property, or (ii) complete the acquisition of the Property, in which case City shall be entitled to
all the proceeds of such taking.
12. THREAT OF CONDEMNATION. City's purchase of the Property is in
contemplation of the use of the Property for public purposes. This negotiated acquisition arose
during City's investigations of the acquisition of the Property through eminent domain. City has
the authority to acquire property by eminent domain for public proposes. Seller has agreed to
enter into this Agreement with City under the threat of City's exercise of its power of eminent
domain. In the event this negotiated sale did not occur, subject to and pending its completion of
the necessary statutory procedures set forth in Government Code Section 7267 e[ seq., and Code
of Civil Procedure Section 1230.010 et seq., City's staff was prepared to have taken the steps
thereunder to seek authorization from the City Council, and staff was prepared to recommend to
the City Council initiation of the steps, to acquire the Property for public purposes pursuant to
Government Code Section 7267 et seq., and Code of Civil Procedure Section 1230.010 et seq.,
including providing notice to Seller of its opportunity to be heard and to agendize, consider, and
take action on a resolution of necessity under Code of Civil Procedure Section 1245.230 et seq.
Nothing herein is intended to be, or serve as, any tax advice from City to Seller, and Seller is not
in any way construing or relying on any communications or advice by City, or City's
representations herein, in any way as any type of tax advice or opinion. Upon request, City shall
provide Seller with a letter, separate and apart from this Agreement, restating the foregoing.
13. POSSESSION. Possession of the Property shall be delivered to City as of Close
of Escrow. In the event any personal property remains on the Property following the Close of
Escrow, it shall automatically become the property of City.
14. LIQUIDATED DAMAGES. IF CITY SHOULD DEFAULT FOR ANY
REASON WHATSOEVER UNDER THIS AGREEMENT (EXCEPTING ONLY MATERIAL
DEFAULT BY SELLER HEREUNDER), THEN AND IN SUCH EVENT,
2551066751 -0092
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NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, CITY AND SELLER
AGREE THAT SELLER WILL INCUR DAMAGES BY REASON OF SUCH DEFAULT BY
CITY, WHICH DAMAGES SHALL BE IMPRACTICAL AND EXTREMELY DIFFICULT,
IF NOT IMPOSSIBLE, TO ASCERTAIN. CITY AND SELLER, IN A REASONABLE
EFFORT TO ASCERTAIN WHAT SELLER'S DAMAGES WOULD BE IN THE EVENT OF
SUCH DEFAULT BY CITY HAVE AGREED BY PLACING THEIR INITIALS BELOW
THAT THE SUM OF FIFTY THOUSAND DOLLARS ($50,000) SHALL BE DEEMED TO
CONSTITUTE A REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER THE
PROVISIONS OF SECTION 1671 OF THE CALIFORNIA CIVIL CODE. IN THE EVENT
OF AND FOR SUCH DEFAULT BY CITY, CITY SHALL DELIVER SAID SUM IN GOOD
FUNDS TO SELLER WITHIN FIVE (5) DAYS AFTER SELLER'S WRITTEN DEMAND
THEREFOR AS SELLER'S SOLE MONETARY REMEDY THEREFOR. UNLESS CITY
WRONGFULLY REFUSES TO CAUSE ESCROW HOLDER TO CANCEL THE ESCROW
OR TO RELEASE THE DEPOSIT TO SELLER, IN WHICH INSTANCE SELLER SHALL
ALSO BE ENTITLED TO ALL COSTS AND EXPENSES, INCLUDING ACTUAL
ATTORNEYS' FEES INCURRED BY SELLER WITH RESPECT TO THOSE
CONSEQUENTIAL DAMAGES, IF ANY, WHICH MAY BE INCURRED BY SELLER,
AFTER THE CLOSING DATE BY REASON OF THE CLOUD ON TITLE TO THE
PROPERTY WHICH MAY RESULT FROM CITY'S WRONGFUL FAILURE TO CANCEL
THE ESCROW AND THIS AGREEMENT.
SELLER'S INITIALS CITY'S INITIALS
15. MISCELLANEOUS.
15.1 Assignment. City shall not have the right to assign this Agreement or any
interest or right hereunder or under the Escrow or to nominate another party to take title to the
Property without the prior written consent of Seller, which Seller may withhold in Seller's sole
discretion. In no event shall City be released of liability in the event of an assignment or
nomination.
15.2 Affixation of Revenue Stamps. Escrow Holder is hereby specifically
instructed to attach documentary transfer and /or revenue stamps to the Grant Deed only after
recordation of the Grant Deed.
153 Cooperation. City and Seller agree to cooperate with one another, at no
cost or expense to the cooperating party, in satisfying the conditions to Close of Escrow. City
shall be responsible for proceeding with diligence and in good faith to satisfy the conditions, if
any; to City's performance set forth in Section 7.1 and Seller shall be responsible for proceeding
with diligence and in good faith to satisfy the conditions, if any, to Seller's performance set forth
in Section 7.2.
15.4 Qualification; Authority. Each party represents and warrants that it is duly
formed, is authorized to do business in the state in which the Property is located and that it has
been duly authorized to enter into and perform this Agreement.
255'066751 -0092 -15
4403119.4 x10109/12
15.5 Attorneys' Fees. In any action between the parties hereto seeking
enforcement of any of the terms and provisions of this Agreement or the Escrow, or in
connection with the Property, the prevailing party in such action shall be entitled to have and to
recover from the other party its reasonable attorneys' fees and other reasonable expenses in
connection with such action or proceeding in addition to its recoverable court costs.
15.6 Interpretation; Governing Law. This Agreement shall be construed
according to its fair meaning and as if prepared by both parties hereto. This Agreement shall be
construed in accordance with the laws of the State of California in effect at the time of the
execution of this Agreement. Titles and captions are for convenience only and shall not
constitute a portion of this Agreement. As used in this Agreement, masculine, feminine or
neuter gender and the singular or plural number shall each be deemed to include the others
wherever and whenever the context so dictates.
15.7 No Waiver. No delay or omission by either party hereto in exercising any
right or power accruing upon the compliance or failure of performance by the other party hereto
under the provisions of this Agreement shall impair any such right or power or be construed to
be a waiver thereof. A waiver by either party hereto of a breach of any of the covenants,
conditions or agreements hereof to be performed by the other party shall not be construed as a
waiver of any succeeding breach of the same or other covenants, agreements, restrictions or
conditions hereof.
15.8 Modifications. Any alteration, change or modification of or to this
Agreement, in order to become effective, shall be made by written instrument or endorsement
thereon and in each such instance executed on behalf of each party hereto.
15.9 Severability. If any term, provision, condition or covenant of this
Agreement or the application thereof to any party or circumstances shall, to any extent, be held
invalid or unenforceable, the remainder of this instrument, or the application of such term,
provision, condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable, shall not be affected thereby, and each tern and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15.10 Merger of Prior Agreements and Understandings. This Agreement and
other documents incorporated herein by reference contain the entire understanding between the
parties relating to the transaction contemplated hereby and all prior or contemporaneous
agreements, understandings, representations and statements, oral or written, are merged herein
and shall be of no further force or effect.
15.11 Covenants to Survive Escrow. The covenants and agreements contained
herein shall survive the Close of Escrow and, subject to the limitations on assignment contained
in Section 15.1 above, shall be binding upon and inure to the benefit of the parties hereto and
their representatives, heirs, successors and assigns.
15.12 No Withholding Because Non - Foreign Seller. Seller represents and
warrants to City that Seller is not, and as of the Close of Escrow will not be, a foreign person
within the meaning of Internal Revenue Code Section 1445 and that it will deliver to City on or
255i066751 -0092
4403119.4 a 1 0309112 —16-
before the Close of Escrow the Non - Foreign Affidavit as described hereinabove, pursuant to
Internal Revenue Code Section 1445(b)(2) and the Regulations promulgated thereunder.
15.13 Time is of the Essence. Time is hereby expressly made of the essence of
this Agreement.
15.14 Execution in Counterpart. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all parties are not signatories to the original or the same counterpart.
15.15 Notices. Any notice which either party may desire to give to the other
party or to the Escrow Holder must be in writing and shall be effective upon delivery if sent via
overnight mail with tracking; upon delivery, if delivered by confirmed facsimile or email (with a
back up sent by first class mail); when personally delivered, if sent postage prepaid by registered
or certified mail, return receipt requested; three (3) business days after deposit in the United
States mail, registered, certified, postage fully prepaid and addressed to the respective parties as
set forth below or to such other address and to such other persons as the parties may hereafter
designate by written notice to the other parties hereto:
To Seller: Kenneth M. Kaplan, Esq.
361 Forest Avenue, Suite 204
Laguna Beach, CA 92651
(949) 715 -0770 (office)
(949) 230 -3117 (cell)
(949) 715 -0772 (fax)
kaplankm c,gmail.com
Copy to: Peter Collisson, Esq.
361 Forest Avenue, Suite 204
Laguna Beach, CA 92651
(949) 250 -7474 (office)
(949) 660 -8001 (fax)
pete@pdclaw.com
To City: City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92660
Attn: Michael Torres, Esq.
(949) 644 -3131
(949) 644 -3139 (fax)
iiitorres@newportbeachca.gov
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4401119.4 010109/12 -17-
Rutan & Tucker. LLP
Copy to: 611 Anton Boulevard, Suite 1400
Costa Mesa, CA 92626 -1998
Attn: Kim D. Thompson, Esq.
(714) 641 -3449 (office)
(714) 546 -9035 (fax)
kthomuson a iutan.com
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Purchase
and Sale of Real Property and Escrow Instructions as of the date set forth above.
"SELLER"
Kenneth M. Kaplan
"CITY"
CITY OF NEWPORT BEACH
a Municipal corporation and Charter City
0
Nancy Gardner, Mayor
ATTEST:
Leilani I. Brown, City Clerk
APPROVED AS TO FORM:
Aaron C. Harp, City Attorney
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