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HomeMy WebLinkAboutIPC (USA) INC., A CALIFORNIA CORPORATION-2013NSURANCE N0' REQ'J'`- 'NURK MAY i?Rl'??E,=': CLERK 0!- GCI M f1&TF p,1G 22 2013 RELOCATION COMMITMENT AGREEMENT I .Y C U C1? J A-2013-130 This RELOCATION COMMITMENT AGREEMENT ("Agreement") is entered into as August 5 , 2013, by and between the CITY OF SANTA ANA, a California charter city ("City"), and IPC (USA), INC., a California corporation ("IPC"). RECITALS A. IPC is an independent wholesale distributer of gasoline, diesel, jet fuel and other refined petroleum products in California and other regions of the United States (such IPC activities in California are hereinafter referred to as the "Petroleum Business"). B. IPC is considering relocation of its headquarters for its California business and Orange County sales office to a location in the City of Santa Ana, and is prepared to commit to conducting that portion of its Petroleum Business that has historically been conducted in southern California in the City for an extended term in consideration for the City's performance of its obligations under this Agreement. C. In consideration for IPC's performance under this Agreement, City has agreed to pay to IPC certain payments, measured by a portion of the Sales Tax generated by the conduct of IPC's "Required Operations" in the City, provided that IPC causes Required Operations to be conducted in the City during the term of this Agreement and complies with the other terms and conditions set forth in this Agreement, as more particularly set forth herein. City and IPC have agreed that the amount to be paid by City to IPC hereunder is a fair exchange for the consideration to be furnished by IPC to City. D. By its approval of this Agreement, the City Council of City has found and determined that it is of benefit to the City and its residents for the Required Operations to be conducted within the City, and that the imposition of certain terms and conditions relating to such uses and the City's payment of the City Consideration described herein constitute valid public purposes under the City's Charter and Article XVI, section 6 of the California Constitution as necessary for the economic enhancement of the City and to contribute to the City's general fund that supports services for the health, safety and welfare of the residents of the City. The City Council has further found and determined that IPC's conduct of its "Required Operations" as contemplated in this Agreement will assist in the generation of additional sales and use tax revenues to City as well as assist in the creation and maintenance of additional jobs and economic opportunities for the residents of the City. EXECUTORY AGREEMENTS Based upon the foregoing Recitals and for good and valuable consideration, the receipt and sufficiency of which is acknowledged by both parties, City and IPC hereby agree as follows: 131/030876-0001 5940427.2 a07,30,13 1. DEFINED TERMS. The following terms when used in this Agreement shall have the meanings set forth below: "City Consideration" shall mean the amounts to be paid by City to IPC for IPC's conduct of the Required Operations during the Operating Period. The City Consideration paid for the Operating Period shall be an amount equal to (i) fifty percent (50%) of up to $1,400,000 of Sales Tax generated in the City from the Required Operations during each Contract Year, plus (ii) seventy percent (70%) of any Sales Tax exceeding $1,400,000 generated from the Required Operations within the City during that Contract Year. "Commencement Date" shall mean the date on which IPC relocates its headquarters for its California business and southern California sales office to the City of Santa Ana and commences operations in the City, as set forth in a written notice from IPC to the City. The City and IPC acknowledge that IPC may not commence operations in the City of Santa Ana until IPC leases space, completes construction of tenant improvements, and thereafter relocates sales staff and initiates sales activities. The parties anticipate that such operations may not commence until approximately January 1, 2014. "Contract Year" shall mean the period from January 1 to December 31 during each year of the Operating Period. For the purposes of this Agreement, the first Contract Year ends on December 31, 2014. "Covered Parties" shall mean the City and its elected and appointed boards, members, officials, officers, agents, representatives, employees and volunteers. "Effective Date" shall mean the date first written on page 1 of this Agreement. "Operating Period" shall mean the period commencing as of the Commencement Date, and continuing until and expiring on December 31, 2028; provided, however, that IPC may terminate this Agreement for any reason (or no reason) at any time upon one hundred eighty (180) days' written notice to the City. "Petroleum Business" refers to the operation by IPC in the City of a sales office selling petroleum products and products ancillary to the sale of refined petroleum that generate Sales Tax revenue. "Quarter" shall mean any three (3) month period commencing on January 1, 2013, and thereafter on April 1, July 1 and October 1 during the Operating Period. If the quarterly or other periods used by the State Board of Equalization in calculating or making Sales Tax payments to City differ from City's fiscal quarters described above, the parties shall modify the timing (but not the amount) of the City Consideration payments to coincide with the periods used by the State Board of Equalization. "Required Operations" shall collectively refer to the following on and with respect to IPC conducting its Petroleum Business in the City: (i) IPC retaining and continuing to own or lease sufficient facilities in the City to allow the Petroleum Business to be conducted; (ii) IPC's 131/030876-0001 5940427.2 .07/30/13 -2- operation of the Petroleum Business within the corporate boundaries of the City; and (iii) IPC not transferring or otherwise relocating the retail sales operation or the point of sale as reported to the State Board of Equalization for the Petroleum Business to another facility or location outside of the City. "Sales Tax(es)" means that portion of taxes that is allocated, paid to, and actually received by City from the imposition of the Bradley-Burns Uniform Sales and Use Tax law (commencing with Section 7200 of the California Revenue and Taxation Code), or any successor law thereto, arising from all taxable sales transactions, occurring from Required Operations conducted by IPC within the City during the Operating Period. "Sales Tax" shall not include sales tax revenues that are provided to a city based upon a special election and are limited to be used for a specified governmental function or functions. "Sales Tax Reports" shall include, for each Quarter (i) a statement identifying the amount of Sales Tax paid by IPC from Required Operations within the City during the Quarter; and (ii) copies of all statements and quarterly reports filed with the State Board of Equalization. "Termination Date" shall mean December 31, 2028, subject to extension or earlier termination of the Operating Period as set forth in this Agreement. 2. IPC OBLIGATIONS. 2.1 Operating Agreement; Continuous Operation. IPC hereby covenants and agrees to maintain its headquarters for its California business and all sales offices in Santa Ana that are located in Orange County, California as of the date of this Agreement, and continuously conduct or cause to be conducted Required Operations within the City during the entire Operating Period. IPC agrees to maintain its principal place of business and all sales offices in compliance with State Board of Equalization regulations pertaining to "place of sale". Such continuous operations shall be subject to the force majeure provisions of Section 5.11 hereof. 2.2 Maximization of Sales Tax. At all times during the Operating Period, IPC shall designate its corporate headquarters and sales office in the City as the point of sale for sales and use tax purposes in all Petroleum Business and related sales that originate from within the City. 2.3 Payment of Taxes. IPC shall pay or cause to be paid any and all taxes applicable to or arising out of IPC's lease, operation and/or use of its headquarters for its California business and sales office in the City (including, without limitation, all taxes attributable to sales occurring at such office), except that IPC retains its right to protest and contest County of Orange decisions related to the value of its interest in any property or leasehold. IPC shall make or cause to be made timely sales and use tax payments to the State Board of Equalization, except that IPC retains its right to protest and contest State Board of Equalization assessments or decisions that IPC believes to be erroneous. 2.4 Compliance with Laws. Subject to IPC's right to contest same, [PC shall conduct or cause to be conducted all activities within the City and shall perform its obligations under this Agreement in conformity with all applicable federal, state, and local laws, ordinances, and regulations. Nothing in this Agreement is a representation or warranty by City that any tenant improvement or other construction work performed by IPC within the City on or after the date of 131030876-0001 5940427.2 a07/30i13 -3- this Agreement is not a public work as defined in Labor Code Sections 1720, et seq., including but not limited to Sections 1771 and 1781. 3. CITY CONSIDERATION PAYMENTS. 3.1 Payment of City Consideration to IPC. 3.1.1 Calculation of City Consideration. In consideration for IPC's undertakings pursuant to this Agreement, City shall make payments of City Consideration to IPC after the end of each Quarter, as follows: 3.1.1.1 Subject to Paragraph 3.1.1.2 below, for Required Operations conducted by IPC in the Operating Period, City shall pay IPC the City Consideration based on the actual net amount of Sales Tax directly received by the City from the State Board of Equalization during that Quarter. Subject to the terms of Section 3.1.2, the payment of City Consideration for each Quarter shall be made in a single lump sum payment within ninety (90) days following the end of that Quarter. 3.1.1.2 City Consideration shall be payable from any source of funds legally available to City. In this regard, it is understood and agreed that the Sales Tax from IPC's Required Operations in the City is being used merely as a measure of the amount of City Consideration payments that are periodically owing by City to IPC, and that City does not and legally cannot pledge any portion of that Sales Tax to IPC. 3.1.2 Payment Procedure. 3.1.2.1 After the end of each Quarter, and no later than thirty-five (35) days after IPC's payment of the Sales Tax to the State Board of Equalization for that Quarter, IPC shall submit to City the Sales Tax Reports for the preceding Quarter and a written request for payment of the City Consideration owing to IPC. Any delay shall not constitute either a breach of this Agreement or a waiver of IPC's right to receive the City Consideration under this Agreement, but may result in a delay in the City's payment of City Consideration to the extent that such delay by IPC causes the City to be unable to meet its payment obligations on a timely manner. 3.1.2.2 Payment of the amount determined by City to be owing to IPC for each Quarter shall be made by City within thirty (30) days after the later of the following: (i) IPC's submission of its completed payment request; and (ii) City's verification (based upon corroborating information provided to City by either the State Board of Equalization and/or a sales tax consultant retained by City) that City has received the Sales Tax attributable to sales from all Required Operations within the City for the applicable Quarter. Any disapproval by City of an IPC payment request shall state in writing the reasons for disapproval and shall be provided to IPC within fifteen (15) days after City has received information necessary to make the determination that the payment request cannot be approved. City agrees to expeditiously process IPC's requests for payment of City Consideration. IPC expressly understands that nothing contained in this Agreement shall obligate or otherwise commit City to pay the City Consideration for a Quarter unless and until City receives reasonably satisfactory verification 131/030876-0001 5940427.2 a0790/13 -4- that City has received the Sales Tax attributable to sales from the Required Operations in the City for that Quarter. 3.1.2.3 In the event that the State Board of Equalization conducts a review or audit of IPC's Required Operations or Sales Tax payments during the Operating Period that results in an actual and final loss or reduction of monies that City has already paid to IPC as City Consideration for one or more Quarters, or in the event that IPC amends any sales tax returns that causes a reduction in the Sales Tax due to the City for one or more Quarters, IPC shall, within thirty (30) days of its receipt of written notice by the City, return that portion of the City Consideration attributable to the monies that were lost or reduced. In the event that the State Board of Equalization conducts a review or audit of IPC's Required Operations or Sales Tax payments during the Operating Period that results in an increase of Sales Tax that IPC must pay for one or more Quarters, or in the event that IPC amends any sales tax returns that causes an increase in the Sales Tax due for one of more Quarters, IPC shall inform the City and the City shall commensurately increase the City Consideration paid by IPC. The provisions of this paragraph shall survive the termination of this Agreement. 3.1.2.4 The parties acknowledge that certain payments of Sales Tax received by City may be based on estimates and that such amounts will be periodically reduced or increased by the State Board of Equalization to reflect the actual amount of Sales Tax owed to City. The City Consideration payments shall be adjusted accordingly as necessary to conform to such reconciliations. The adjustment shall be made within sixty (60) days through a payment by IPC to City in the case of an overpayment to IPC, or a payment by City to IPC in the case of an underpayment to IPC. Within thirty (30) days of a written request by IPC, the City shall provide IPC with documentation to substantiate the adjustment of the City Consideration payment(s). 3.1.2.5 Within ninety (90) days following the end of each Contract Year, the City may conduct an accounting of all of IPC's Sales Tax Reports and Sales Tax payments during the immediately preceding Contract Year, and the amount of the City Consideration payments made to IPC for each Quarter during that immediately preceding calendar year. However, the City may conduct such an accounting at any time by giving thirty (30) days written notice in the event that facts or circumstances arise (such as change in operations, change of ownership or business entity status) that can impact the method or amount of IPC's Sales Tax Reporting or Payments. The City shall provide IPC a copy of that accounting and reconciliation upon its completion. In the event that the accounting and reconciliation identifies a disparity between the Required Operations, IPC's Sales Tax payments, or City Consideration during that immediately preceding calendar year, appropriate adjustments shall be made within sixty (60) days by a payment from IPC to City in the case of an overpayment to IPC, or a payment from City to IPC in the case of an underpayment to IPC. 3.1.3 No Acceleration. It is acknowledged by the parties that any payments by City provided for in this Agreement may only be paid for those periods in which City receives the performance of IPC pursuant to this Agreement. Therefore, the failure of City to make any payments or the failure by City to perform any of its other obligations hereunder shall not cause the acceleration of any anticipated future City Consideration payments by City to IPC. 131'030876-0001 5940427.2 a07/30/13 -5- 3.2 Conditions Precedent to City's Obligations. City's obligation to perform hereunder, including without limitation its obligation to pay the City Consideration pursuant to Section 3.1 of this Agreement, shall be contingent and conditional upon IPC's full and satisfactory performance of its obligations set forth in this Agreement. Notwithstanding the foregoing, any delay by IPC in sending reports or other information to the City, or the existence of inadvertent errors in reports or information sent by IPC to the City, shall not constitute either a breach of this Agreement or a waiver of IPC's right to receive the City Consideration payable under this Agreement. However, such delay or error by IPC may result in a delay in the City's payment of City Consideration to IPC to the extent that such delay or error by IPC causes the City to be unable to meet its payment obligations on a timely basis. 3.3 Disclosure of Payments. IPC agrees that the City Consideration payments and the amounts thereof do not constitute a violation of Revenue and Taxation Code Section 7056 or any other provision of law pertaining to the disclosure of sales tax information, shall be a matter of public record, may be disclosed to any person, and may be included on the City's warrant register. IPC waives any law that is contrary to any of the agreements in this Section 3.3. 3.4 City Facilitation of Site Improvements. The City shall take commercially reasonable steps to expedite the review and processing of building permits, certificates of occupancy and final inspection, and other permits, approvals and entitlements needed by IPC in connection with its construction of tenant improvements in order to relocate its corporate headquarters and sales office to a facility in the City. 4. TERMINATION RIGHTS. 4.1 City Termination Rights. Subject to the force majeure provisions of Section 5.11 below, City shall have the right to terminate this Agreement if, following the Commencement Date, Required Operations are not conducted within the City for a period of ninety (90) consecutive days. 4.2 IPC Termination Rights. IPC may terminate this Agreement for any reason (or no reason) upon one hundred eighty (180) days written notice to the City. 4.3 Mutual Termination Rights. City makes no representation or warranty to IPC as to the legality of the City Consideration payments or the City's authority to make such payments. In the event that a final, non-appealable judgment or decree is rendered against City invalidating its payment obligations set forth in this Agreement, either City or IPC may terminate this Agreement by delivery of written notice of termination to the other party. 5. GENERAL PROVISIONS. 5.1 Entire Agreement, and Amendments. This Agreement incorporates all of the terms and conditions mentioned herein, or incidental hereto, and supersedes all negotiations and previous agreements between the parties with respect to the subject matter hereof. Any amendment or modification to this Agreement must be in writing and executed by IPC and City. 5.2 Limitations on City's Liability. IPC acknowledges and agrees that: 131'030876-0001 5940427.2 a07 30/13 -6- 5.2.1 The relationship between IPC and City pursuant to this Agreement is and shall remain solely that of contracting parties, and City neither undertakes nor assumes any responsibility pursuant to this Agreement to review, inspect, supervise, approve, or inform IPC of any matter in connection with this Agreement or the Required Operations; 5.2.2 City shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property (except to the extent proximately caused by City's active negligence or intentional misconduct), resulting or in any way arising from (a) any defect in any building, grading, landscaping, or other onsite or offsite improvement; (b) any act or omission of IPC or any of IPC's agents, employees, independent contractors, licensees, sublessees or invitees; or (c) any accident at the facility to which IPC relocates its headquarters for its California business and sales office, or any fire or other casualty or hazard thereon; and 5.2.3 By accepting or approving anything required to be performed or given to City under this Agreement, City shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by City to anyone. 5.3 Interpretation; Governing Law; Venue. 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, without regard to conflict of law principles. All legal actions must be instituted and maintained in the Superior Court of the County of Orange, State of California, or in any other appropriate court in that County. 5.4 Severability. If any term, provision, Agreement, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of this Agreement shall not be affected thereby to the extent such remaining provisions are not rendered impractical to perform taking into consideration the purposes of this Agreement. 5.5 Binding Effect; Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. 5.6 Notices. All notices and other communication required under this Agreement shall be in writing and shall be delivered by either (i) personal delivery, (ii) reliable courier service that provides a receipt showing date and time of delivery, (iii) registered or certified U.S. Mail, postage prepaid, return receipt requested, or (iv) facsimile. Notices shall be 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 party hereto: To City: City of Santa Ana 20 Civic Center Plaza P.O. Box 1988 Santa Ana, CA 92702 Attn: City Manager Facsimile: (714) 647-6954 131/030876-0001 5940427.2 a07 30i 13 -7- To IPC: IPC (USA), Inc. 20 Pacifica Suite 650 Irvine, CA. 92618 Attention: Chief Financial Officer Facsimile: (949) 861-6475 Each notice shall be deemed delivered on the date delivered if by personal delivery or by overnight courier service, on the date of receipt as disclosed on the return receipt if by mail, or on the date of transmission with confirmed successful transmission and receipt if by facsimile. By giving to the other party written notice as provided above, the parties to this Agreement shall have the right from time to time, and at any time during the term of this Agreement, to change their respective addresses or contact persons. 5.7 Representations and Warranties. As a material inducement to City's entry into this Agreement, IPC represents and warrants to City that (i) IPC has the full power and authority to enter into and perform under this Agreement; and (ii) all authorizations and approvals required to make this Agreement binding upon IPC have been duly obtained As a material inducement to IPC's entry into this Agreement, City represents and warrants to IPC that, subject to and limited by the provisions of Section 5.2, (i) City has the full power and authority to enter into and perform under this Agreement; and (ii) all authorizations and approvals required to make this Agreement binding upon City have been duly obtained. 5.8 Litigation Expenses. If either of the parties institutes any legal action against the other in connection with any controversy related to, concerning or arising out of this Agreement, or any facts based upon or involving this Agreement, then the prevailing party, whether in court, through mediation, arbitration or by way of out-of-court settlement, shall be entitled to recover from the non-prevailing party such prevailing party's reasonable attorneys' fees, court costs, expert witness fees and other expenses relating to such controversy, including such fees, costs and expenses on appeal, if any; and the arbitrator(s), if any, is hereby authorized to make such an award to the prevailing party in arbitration. 5.9 Termination. In the event this Agreement terminates, no termination shall release any party in default and this Agreement shall survive for purposes of allowing a party to enforce its rights and remedies under this Agreement in the event of a default, including without limitation the provisions of Section 4.3. All indemnification provisions and any other provision that by its nature cannot be performed during the term of this Agreement shall survive the termination of this Agreement. 5.10 Defense of Third Party Claims. To the fullest extent permitted by law, IPC shall indemnify, defend and hold harmless the City, its officers, agents, and employees from and against any and all losses, liabilities, damages, costs and expenses that may be asserted by a third party, including attorney's fees and costs in the event that a third party files litigation challenging the validity or enforceability of this Agreement, or any payment of the City Consideration by the City to IPC. The City and IPC may jointly defend the Agreement and/or City Consideration payment. If the litigation is filed only against the City, IPC may move to intervene as a defendant, respondent or real party in interest, based upon the nature and form of the litigation. 131/030876-0001 5940427.2 a07/30/13 '8- 5.11 Force Maieure. The obligations by either party hereunder shall not be deemed in default and times for performance hereunder shall be extended where delays are caused by fire/casualty losses; strikes, riots or war; litigation; unusually severe weather; inability to secure necessary labor, materials or tools because of a shortage in the market; delays of any contractor, subcontractor or supplier; unjustified acts or failure to act by City in the processing or approval of plans or permits or inspection or approvals of improvements for IPC's relocation of its headquarters for its California business and sales office to the City; acts of God, or other similar causes without the fault and beyond the reasonable control of the party, despite the party's diligent efforts (collectively, "force majeure"), if written notice is provided to the other party within a reasonable period following commencement of any such circumstances and, provided further, that the extension of time shall be only for the period of the force majeure delay. Adverse market conditions or the inability to obtain financing shall not constitute an event of force majeure. 5.12 Counterpart s. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, City and IPC have entered into this Agreement as of the date first written above. ATTEST: City Clerk CITY OF SANT ANA, a California charter city By: ._ Kevin O'Rourke, Interim City Manager IPC (USA), INC., a California corporation r By: Hiroki kinaga Chief Executive Officer B, Jim akeuchi ief Financial Officer 131/030876-0001 5940427.2 a07'30/13 -9- 131/030876-0001 59404272 a07,30/13 ' 1 ?'