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05-1004_WHISPERING HILLS LLC_D6_Agenda Report / • • 10/4/2005 D6 AGENDA REPORT TO: Dave Adams, City Manager FROM: Nasser Abbaszadeh, Engineering & Building Director SUBJECT: Consideration of Agreement Establishing Soils Subsidence Remediation Program; Tract 16634, WHISPERING HILLS, LLC. (Whispering Hills Estates). RECOMMENDATION By motion; approve the Agreement Establishing Soils Subsidence Remediation Program with Whispering Hills Estates Community Associations and WHISPERING HILLS, LLC. for Tract 16634, for WHISPERING HILLS, LLC. SITUATION A. Summary and Recommendation Tentative Tract No. 16634, Whispering Hills Estates, is required to establish by agreement, a Soils Subsidence Remediation Program as provided by City Municipal Code Section 9-3-545, and as conditioned by Resolution No. 04-07-20- 01, Condition 1.30 (Attachment 1). The agreement, provided in Attachment 2, provides the mechanism to establish such program. The agreement has been reviewed by the City Attorney and found to be consistent with the provisions of the Code. Staff is, therefore, recommending its approval. B. Background On July 20, 2004, the City Council approved Whispering Hills Estates' Tentative Tract Map 16634, which allowed the subdivision of a 318.96 acre parcel, into 155 residential lots (Attachment 3). One of the conditions of approval requires the developer to provide a Soils Subsidence Remediation Program. The final map has been submitted to the City and is currently in its final review process. On August 15, 1995, the City Council passed, approved and adopted Ordinance No. 768, codifying into the Municipal Code Section 9-3.545, Soils Subsidence Remediation Program of Title 9, Article 5, "Land Use Remediation Program of Title 9, Article 5, "Land Use'. • Agenda Report October 4, 2005 Page 2 This program consists of two parts: 1. Surficial Soils Displacement Element: Directed at minor slope displacement, defined by the Municipal Code as not exceeding three feet in depth. The program provides for the developer to deposit an initial amount of funds based on the slope areas maintained by the HOA. As residents move into the development, a portion of their monthly fees would be put into this fund. Once the residents' deposits reach 75% or more of the developer's initial deposit, then that deposit would be released back to the developer. 2. Catastrophic Soils Disalacement Element: Requires the formation of a Geologic Hazard Abatement District (GHAD). The GHAD provides a mechanism by which any major slope failure could be abated by assessment to the property owners. It is intended to provide for repairs in the long term beyond the developer's obligation. This Agenda Report deals only with the Surficial Soils Displacement Element. The Catastrophic Soils Displacement Element is concurrently being formed and processed separately as it requires City Council authorization to initiate the District, followed by a public hearing process. WHISPERING HILLS, LLC. Agreement: The Agreement (Attachment 2) has been drafted and reviewed by City staff and the City Attorney and found to be consistent with the Municipal Code requirements. Important elements provided in the agreement include: 1. Developer's liability for any slope failure within the first three-year period. 2. Surficial slope damages could be paid for using the Geologic Hazard Abatement District if the costs exceed the amount in the Surficial Slope Damage Program fund. 3. Return of developer's funds consistent with the requirements of the San Juan Municipal Code. 4. Homeowner assessments to special fund. The City Attorney has reviewed this Agreement and found it to be consistent with the City's Municipal Code requirements and other applicable provisions of law. Staff believes the Agreement is acceptable and recommends approval by the City Council. Agenda Report October 4, 2005 Page 3 FINANCIAL CONSIDERATIONS There is no cost impact to the City's General Fund. PUBLIC NOTIFICATION WHISPERING HILLS, LLC. Whispering Hills Estates Community I Association (HOA) Whispering Hills Estates Community II Association (HOA) Agenda report included RECOMMENDATION By motion; approve the Agreement Establishing Soils Subsidence Remediation Program with Whispering Hills Estates Community Associations and WHISPERING HILLS, LLC. For Tract 16634, for WHISPERING HILLS, LLC. Respectfully submitted, Prepared by: Nasser Abbaszadeh, P.E. am Shoucclir Engineering & Building Director Senior Engineer ss Attachments: 1. Condition of approval 1.30 of Resolution No: 04-07-20-01, for Tentative Tract Map 16634 2. Agreement Establishing Slope Displacement Warranty Program 3. Vicinity Map CONDITIONS OFAPPROVAL: VTTM 16634 be required for street maintenance purposes to insure the conditions of all local residential streets within the subdivision are acceptable to the City Engineer and to all affected HOA's until the last house is completed. En r. _ 1.30. Soils Subsidence Remediation Program. Prior to approval of the first final map in each of the two canyons, the applicant/subdivider shall comply wit the provisions of the Municipal Code's "Soils Subsidence Remediation Program" to the satisfaction of the City Engineer. Said program shall include the formation of a Geological Hazard Abatement District, for any catastrophic soil displacement. The program shall also include the incorporation into the Conditions, Covenants and Restrictions (CC&R's) o the Master Homeowners Association or sub-associations, the remediation to surficial soil displacement, as required by separate condition herein. (Engr.) 1.31. Submission of Digital Maw Prior to recordation of each final map, the applicant/subdivider shall submit for review, and shall obtain approval from the Orange County surveyor, of a digitized map pursuant to Orange County Ordinance 3809 of January 28, 1991. The applicant/subdivider shall pay for all cost of said digital submittal, including supplying digital copies to the City, of the final County Surveyor approved digital map in DXF format. In addition, the applicant/subdivider shall provide the City with digitized copies of all improvement (as-built) plans. (Engr.) 1.32. Fair-Share Circulation Improvement Participation. In accordance with a schedule in the Subdivision Improvement Agreement, to be executed in conjunction with City approval of the first final map, the applicant/subdivider shall pay for the project's pro-rata share of the cost of the design and construction of the street and intersection improvements to their ultimate respective widths and configurations in accordance with the City of San Juan Capistrano's Master Plan of Streets and Highways, including any applicable right-of-way acquisition, base on the proportion of traffic generated by the project, as determined in a City-approved traffic study. Any exception to, or deviation from this condition shall be subject to review and approval by the City Engineer: (Engr.) • Ortega Highway, Via Cordova/Hunt Club Drive to La Pata Avenue: Improvements: Construct an additional eastbound and westbound lane and appurtenances. 1.33. Off-Site Circulation Improvement Reguirements. In accordance with a 16 ATTACHMENT RECORDING REQUESTED BY: City of San Juan Capistrano WHEN RECORDED MAIL TO: City of San Juan Capistrano Attn: City Clerk 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Space above this line for Recorder's use only AGREEMENT ESTABLISHING SOILS SUBSIDENCE REMEDIATION PROGRAM This Agreement Establishing Soils Subsidence Remediation Program and Reservation of Easements ("Agreement's is entered into as of , 2005, by and among WHISPERING HILLS, LLC, a Delaware Limited Liability Company ("Developer'), WHISPERING HILLS ESTATES I COMMUNITY ASSOCIATION and WHISPERING HILLS ESTATES II COMMUNITY ASSOCIATION ("Associations' and the CITY OF SAN JUAN CAPISTRANO ("City'), and pertains to that certain real property more particularly described on Exhibit "A" attached hereto and incorporated herein by this reference ("Property's. RECITALS This Agreement is made with reference to the following facts: A. Developer is in the process of developing Tract No. 16634 as a residential project including open space lots ("Project"), in the City of San Juan Capistrano, County of Orange, State of California. B. On September 15, 1987, the City Council ("Council') of the City passed, approved and adopted Ordinance No. 605 ("Original Ordinance'), requiring that certain residential developments in the City include a Soils Subsidence Remediation Program. On November 15, 2002, the Council passed, approved and adopted Ordinance No. 869("Amended Ordinance'), amending Title 9 of the San Juan Capistrano Municipal Code to add Section 9-3.545, entitled "Soils Subsidence Remediation Program" and deleting Title 8, Chapter 10 of the San Juan Capistrano Municipal Code as established by the Original Ordinance. C. On July 20, 2004, the Council passed, approved and adopted Resolution No. 04-07-20- 01, approving Vesting Tentative Tract Map No. 16634 and certain other matters. The City has required, as part of the conditions of approval for the Project, that Developer establish and the Associations operate a Soils Subsidence Remediation Program in compliance with Title 9, Section 9-3.545 of the San Juan Capistrano Municipal Code. The City has also required the Developer and the Association to enter into this Agreement Establishing Soil Subsidence Page 1 ATTACHMENT 2 Remediation Program. This Agreement shall set forth the terms for the implementation by Developer of a Soil Subsidence Remediation Program ("Soil Subsidence Remediation Program") with respect to Tract No. 16634. D. The Associations are California nonprofit mutual benefit corporations which will own the common area lots within the Project and will serve as the homeowners' associations for the Project. E. In addition, Tract 16634 will be subject to the terms of that certain Declaration of Covenants, Conditions, Restrictions and Reservation of Easements for Whispering Hills Estates I and for Whispering Hills Estates II (the "Declarations'l. F. The parties hereto desire to enter into this Agreement as it relates to the Soils Subsidence Remediation Program only (and not with respect to the "City Home Warranty Program", as defined therein) and as it relates solely to the Project, to, among other things, more clearly set forth the rights and obligations of the parties with respect to the Soils Subsidence Remediation Program. G. By entering into and recording this Agreement, Developer satisfies in full with respect to the Project (i) all conditions of subdivision approval relating to the Soils Subsidence Remediation Program, (ii) all requirements of the Amended Ordinance, and (iii) all conditions and requirements of the City in any way relating to any soils subsidence remediation programs at any time implemented by the City. AGREEMENT 1. Definitions. Defined terms whose initial letters are capitalized herein shall have the meanings given to such terms as set forth in this Agreement, including on Exhibit `B"attached hereto. 2. Soils Subsidence Remediation Program. 2.1 Soils Subsidence Remediation Program and Term. Developer's subdivision approvals for Tentative Tract No. 16634 require that Developer's Project include a "Soils Subsidence Remediation Program". This Agreement sets forth the above-referenced Soils Subsidence Remediation Program as it relates to Final Tract No. 16634. The term of the Soils Subsidence Remediation Program shall be in perpetuity. 2.2 Developer Repair Period. Pursuant to Municipal Code section 9-3.545 c(1)C, Developer shall be responsible for making all repairs to correct any damage to lots and structures, or common/public improvements due to soils displacement at its sole expense for the first three(3) years after completion of rough grading of the entire site or the close of escrow for all lots within the entire project, whichever is later. If the Developer fails to perform as provided herein, the City shall have the right to draw upon Developer's security posted under the terms of section 5 of this Agreement. If the amount in the Surficial Soils Subsidence Fund is less than the minimum amount as specified in section 2.4 at the conclusion of the Developer Repair Period, then the Developer shall deposit sufficient funds to meet the minimum requirements. 2.3 Long Term Rears. After the expiration of the Developer Repair Period, if a Soils Subsidence occurs within the Tract, the Associations shall make or cause to be made the Covered Repairs necessitated by such Soils Subsidence ("Long Term Covered Repairs") to the extent funds are available out of the Associations' Surficial Soils Subsidence Fund. In the Page 2 event funds available in the Associations' Surficial Soils Subsidence Fund is insufficient to cover the cost of all such Covered Repairs, the Associations shall levy and collect special assessments against the owners of the residential lots to restore the Surficial Soils Subsidence Fund to the minimum seventy-five percent (75%) level as often as necessary. 2.4 Surficial Soils Subsidence Fund. The Associations are required to collect and maintain a restricted fund to correct damage to individual Lots, structures, or public/private improvements due to soils displacement occurrences. This restricted fund is called a Surficial Soils Subsidence Fund. Developer is required to deposit an initial amount determined by the City into the Surficial Soils Subsidence Fund. Regulation and use of the Surficial Soils Subsidence Fund shall be in accordance with the following: (a) Funds deposited in the Surficial Soils Subsidence Fund can only be used for actual costs associated with correcting Soils Subsidence. The initial security for the Surficial Soils Subsidence Fund shall be in such form and manner as to guarantee and secure the performance of the Developer and shall consist of one of the options set forth in Section 5.2 below. (b) Special Assessments shall be applied to all Lots within the Project. Said Special Assessments shall commence on the first Close of Escrow of a Lot in the Project pursuant to the regulations of the California Department of Real Estate. Said Special Assessments shall be collected by the Associations until the Surficial Soils Subsidence Fund reaches a predetermined minimum as established by the City. Developer shall be able to withdraw its initial deposit provided the Surficial Soils Subsidence Fund does not fall below seventy-five percent (75%) of the predetermined minimum. If a claim occurs during the period the Developer is responsible, and the Surficial Soils Subsidence Fund drops below the seventy-five percent(75%)level,the Developer shall restore such fund to the minimum seventy-five percent (75%) level. After the end of the Developer Repair Period (and after any deposit required by Developer at that time pursuant to Section 18.8.3 below), the Associations shall levy Special Assessments against the Owners to restore the Surficial Soils Subsidence Fund to the minimum seventy-five percent (75%) level as often as necessary. (c) If the amount in the Surficial Soils Subsidence Fund is less than the minimum amount as specified in Section 5.1 at the conclusion of the Developer Repair Period, then the Developer shall deposit sufficient funds to meet the minimum requirements. (d) Developer has reserved an exclusive license for the benefit of the Associations to enter onto Common Area and individual Lots to allow the Associations to maintain and inspect all landscaping, irrigation and drainage devices, and all other natural and artificial conditions which affect or might affect the integrity of slopes which are subject to the provisions of this program. (e) Any proposed alterations by Owners to the landscaping, grading, irrigation or drainage installed on Covered Slopes on individually owned Lots shall be subject to prior review and approval by the Associations and the City. 2.5 Applicability of Soils Subsidence Remediation Program. The off-site slopes subject to the soils subsidence remediation program are shown on Exhibit C1 and Exhibit C2 attached hereto and defined by the City as follows ("Covered Slopes'): Page 3 i (a) Common Area Slopes. All designated common area landscape slopes maintained by the Association pursuant to the Declaration or any notice of addition or supplemental declaration. (b) Manufactured Slopes. All manufactured slopes having a minimum height of five (5) feet in vertical height. (c) Natural Slopes Within 200 Feet of Individual Lots. All natural slopes within two hundred (200) feet of individual Lots, or within 150 feet if within a fuel modification zone to the subdivision,whichever occurs first. 2.6 Reserved Rights. Developer and the Associations reserve the right to assert claims against any person or entity responsible in whole or in part, by reason of negligence or willful misconduct of the person or entity against whom the claim is asserted, for displacement of soil on the slopes, whether covered by the Soils Subsidence definition or not, including without limitation, claims against one another. These reserved rights are subject to all applicable statutes of limitation, including without limitation, the ten (10) year limitations period provided by Section 337.15 of the California Code of Civil Procedure and the Right to Repair Law provided in Title 7, Section 895 to 945.5 of the California Civil Code. 3. Claims Procedures and Adjustments. 3.1 During the Developer's Liability Period for the Tract, the Soils Subsidence Remediation Program shall be administered by the Developer. Thereafter, said program shall be administered by the Association. The Associations shall retain the services of an independent claims adjusting service for all Long Term Covered Repairs in accordance with the requirements set forth in Section 3.2 below. The service shall be responsible to adjust all claims for work which are claimed to be within the coverage of this program. Claims asserted to be within the coverage of this program will be processed by forms provided by the Associations and filed with the independent adjuster, who will promptly adjust such claims after obtaining an analysis on the scope and cost of completing all necessary repairs. The Surficial Soils Subsidence Fund will compensate for the cost of the independent claims adjusting service. 3.2 In the event any party receives notice of a claim that a Soils Subsidence has occurred, such party shall give all other parties written notice of such claim setting forth the name and address of the claimant and the nature and extent of the claim to the extent such information is available. Within fifteen (15) days after receipt of any such notice, the Associations shall select an independent and reputable claims adjusting service, geologist and/or soils engineer (duly licensed to the extent required) with experience in handling soils and Soils Subsidence matters (referred to herein as a "Claims Adjuster"). Any Claims Adjuster so selected shall be subject to approval by the other parties to this Agreement, which approval shall not be unreasonably withheld, delayed or conditioned. Any disapproval of the selected Claims Adjuster shall be given in writing to the administrator of the Soils Subsidence Remediation Program at the time of the claim and to the other parties to this Agreement within ten (10) days following receipt by the disapproving party of written notice of the selection of the proposed Claims Adjuster. If such written disapproval or a written approval are not given within said ten (10) day period, then approval of the proposed Claims Adjuster shall be deemed to have been timely and properly given. If the proposed Claims Adjuster is properly and timely disapproved as contemplated above, then the selection of the Claims Adjuster shall be made by an arbitrator in connection with an arbitration conducted in accordance with the Commercial Arbitration Page 4 Rules of the American Arbitration Association as then in effect. Any such arbitration shall be held and conducted in Orange County, California before one arbitrator who shall be selected by mutual agreement of the parties to this Agreement within fifteen (15) days after any party to this Agreement has notified the other parties that it has commenced or desires to commence an arbitration proceeding for the purpose of selecting a Claims Adjuster. If the parties to the Agreement cannot or do not mutually agree upon an arbitrator within the said fifteen (15) day period, then any party to this Agreement may thereafter request in writing that the presiding Judge of the Superior Court of Orange County, California select and appoint the arbitrator, and any person so selected and appointed by such Judge shall serve as the arbitrator hereunder upon his/her acceptance of such appointment. The arbitrator appointed must be independent and have experience in dealing with soils and Soils Subsidence matters. Final decision by the arbitrator must be made within ninety (90) days from the date the arbitrator is appointed. The parties to this Agreement may submit the names and resumes of proposed Claims Adjusters to the arbitrator, but the arbitrator shall be free to select any Claims Adjuster he or she wishes to select so long as the Claims Adjuster is independent, duly licensed to the extent required, and has experience in handling soils and Soils Subsidence matters. Each party to this Agreement shall bear its own attorneys' fees, costs and expenses incurred in connection with the arbitration. The costs and fees of the arbitrator shall be borne equally by the parties to this Agreement. The decision of the arbitrator in selecting a Claims Adjuster shall be final and judgment may be entered on it in accordance with applicable law in any court having jurisdiction over the matter. The Claims Adjuster selected by the arbitrator as aforesaid shall be deemed the "approved" Claims Adjuster. The approved Claims Adjuster shall be promptly engaged by the party then administering the Soils Displacement Warranty program, and the Claims Adjuster so engaged shall be responsible for promptly investigating, allocating responsibility for and adjusting all claims which allege that a Soils Subsidence has occurred that is within the coverage of the Soils Subsidence Remediation Program. After reasonably appropriate investigation and analysis, the approved Claims Adjuster shall determine, among other things: (a) whether the claim is covered by the Soils Subsidence Remediation Program and if so then the scope and estimated cost of the Covered Repairs, (b) who has responsibility under this Agreement for actually performing the Covered Repairs or causing them to be performed, and (c) who has under this Agreement the financial responsibility for the requisite Covered Repairs. The Claims Adjuster shall complete his/its analysis as soon as reasonably possible and shall thereupon issue a written report to all of the parties to this Agreement, which written report shall set forth its findings on the issues referred to above and such other matters as the Claims Adjuster deems appropriate. The parties agree that they shall promptly comply with the decisions and findings of the Claims Adjuster as set forth in such report. The parties intend that the decisions and findings of the Claims Adjuster shall be deemed binding upon them and shall be enforceable against them by a court of competent jurisdiction and any party failing to comply with such decisions and findings of the Claims Adjuster as they affect such party shall be liable for damages and all other relief as may be determined appropriate by a court of competent jurisdiction. 4. Grace Period. A party shall only be deemed in default under this Agreement if such party fails to perform any of its duties or obligations under this Agreement and such failure is not cured within thirty (30) days after written notice of such failure has been given to such party. If such Page 5 r failure cannot reasonably be cured within thirty (30) days after the giving of such notice, then said party shall not be deemed in default under this Agreement if such party commences to cure the failure within said thirty (30) day period and thereafter diligently and in good faith continues to prosecute such curative action to completion. The notice of failure referred to in this Section 4 above shall specify the alleged failure in detail. 5. Security for Developer's Obli ations. 5.1 Security for Developer's Obligations During Developer Repair Period. Prior to the issuance of a fine grading permit for any lot within the project, the Developer shall provide a surety bond to secure Developer's performance of its obligations under section 2.2. Such security shall be in an amount of Three Hundred Eighty Five Thousand Seven Hundred and Forty Five Dollars ($385,745.00). The form of the Surety shall be approved by the Office of the City Attorney. The security posted pursuant to this section shall be released by City Council action at such time that the Developer Repair Period set forth in section 2.2 has been determined to have expired. 5.2 Developer Repair Period. (a) Deposit of Funds. Prior to the issuance of a final grading permit for any lot within the project, Developer shall deposit into the Homeowners Association's Surficial Soils Subsidence Fund cash in the amount of Three Hundred Eighty-Five Thousand Seven Hundred Forty-Five No/100 Dollars ($385,745.00). (b) Security in Lieu of Cash Deposit(s). In lieu of the cash deposit(s) by Developer into the Associations' Surficial Soils Subsidence Fund as provided above, Developer shall have the option to guaranty and secure performance of its obligations under Section 2.3, above, by one of the following alternatives, at the option of Developer with the approval of the City Council: (i) Corporate sureties approved by the City Attorney; (ii) A deposit, either with a responsible escrow agent or trust company, of money or negotiable bonds of the kind approved for securing deposits of public moneys; or (iii) An instrument of credit, from one or more financial institutions subject to regulation by the state or federal government, pledging that the funds necessary to carry out the warranty program are on deposit and guaranteed for payment. (c) Release of Security. The Developer's security is subject to release pursuant to the requirements and procedure set forth in Municipal Code section 9-3.545c(2)D(ii). 5.3 Rights of City Upon Developer's Default. If during the Developer Repair Period, in accordance with Section 2.2., above, or the period subsequent to the Developer Repair Period pursuant to the terms of Section 2.3, above, Developer (or its successor) fails to perform its obligations as required under those Sections, the City Attorney shall provide written notice to Developer of such failure and provide Developer with an opportunity to cure in accordance with Section 4, above. In the event Developer does not cure its failure of performance within the cure period, then the Council may, by resolution or other official Council action, after a Page 6 noticed public hearing, authorize the Director of Engineering and Building ("Director') to draw upon the security posted by Developer pursuant to this Section 5 to perform such work or otherwise cure Developer's default hereunder (the "Authorized Monies'). The Associations' Surficial Soils Subsidence Fund and any security provided by Developer pursuant to this Section 5 shall be vested such that the Director can access such funds or security after such Council action and any judicial reference regarding such action pursuant to Section 5.5, below. 5.4 Public Hearing. Developer (or its successor) will be entitled to reasonable notice of such public hearing, will have the right to appear at the hearing where the Council action is considered, and will be entitled to assert any and all defenses which Developer (or its successor) may possess as to such Council action including, without limitation, a claim that the work proposed to be performed is not within the scope Developer's obligation under this Agreement or is not reasonably necessary. 5.5 Dispute Resolution. In the event of a dispute between the City and Developer (or its successor) involving any aspect of the penalty provided for herein including, without limitation, the propriety of the Council action provided for herein, such dispute shall be resolved by a judicial reference pursuant to Section 7, below. 5.6 Deemed Reduction in Developer's Contribution. Developer agrees and acknowledges that if such Council action is taken properly pursuant to this Agreement and under the laws of the State of California, then as a penalty for nonperformance by Developer (or its successor)under the terms of Section 2.3, above, the security posted by Developer pursuant to Section 5.2 shall be deemed (for purposes of timing of recovery of Developer's security only) to have been reduced by an amount equal to the amount of the Authorized Monies. Under those circumstances, Developer's recovery of its funding or posting of security pursuant to Section 5.2 will be delayed until deposits by the Associations into the Associations' Surficial Soils Subsidence Fund pursuant to Section 6.1, below, build sufficiently to offset the deemed reduction in Developer's deposits or security. 6. Homeowner Associations' Assessments to Fund the Associations' Surficial Soils Subsidence Fund. 6.1 Associations to Lew and Collect Monthly Assessments. The Associations shall levy and collect homeowner assessments (the "Annual Assessment") with respect to each residential lot in the Project then subject to assessment each month in an amount as provided in the Associations' annual budgets as approved by the DRE for the Project (the "Budgets"), commencing upon the first day of the month following the first close of escrow and conveyance of a residential lot in a DRE Phase (defined below) within the Project that is sold and conveyed to a member of the public under a final subdivision public report issued by the DRE. A "DRE Phase" consists of a group of residential lots, and may include common area lots, that are set forth in the Budgets as a phase, approved by the DRE and covered by a single final subdivision public report. A portion of the Annual Assessment shall be designated to fund the Associations' obligations under Section 2.3 as provided in the Budgets (the "Associations'Surficial Soil Subsidence Fund'. In no event shall the Associations' Budgets and the resulting Annual Assessment be changed to provide for the funding of less than $33.34 per month per residential lot within Whispering Hills Estates I Community Association and $117.43 per month per residential lot within Whispering Hills Estates Il Community Association then subject to assessment into the Associations' Surficial Soil Subsidence Fund without the prior approval of the City and the Page 7 Developer, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, the Associations shall have the right to change the Budgets and/or the Annual Assessment pursuant to the terms of the Declaration without the consent of the City or the Developer (except as otherwise required under the terms of the Declaration) provided any such change does not result in the funding of less than $33.34 per month per residential lot within Whispering Hills Estates I Community Association and $117.43 per month per residential lot Whispering Hills Estates 11 Community Association then subject to assessment into the Associations' Surficial Soils Subsidence Fund. The Associations' Surficial Soils Subsidence Fund, consisting of assessment payments and interest thereon, is intended to grow to a total of an amount (the "Project Fund Amount's equal to the sum of Three Hundred Eighty-Five Thousand Seven Hundred Forty-Five No/100 Dollars ($385,745.00) times seventy-five percent (75%) as set forth in Section 9- 3.545(c)(2)(13)(c)(h) of the Soils Subsidence Remediation Program, by the end of the Soils Subsidence Warranty Period or earlier. The Associations' Surficial Soils Subsidence Fund shall be established and maintained by the Associations as a restricted reserve fund so that the funds therein shall be available to the Developer, the Associations or the City for payment or reimbursement of costs for Covered Repairs implemented or to be implemented by the Developer and/or the Associations as the party responsible therefore in accordance with the provisions of this Agreement. Monies constituting the Associations' Surficial Soils Subsidence Fund and interest thereon shall be deposited and retained in a restricted reserve account ("Associations' Surficial Soils Subsidence Account") to be established by the Associations in their names as soon as practicably possible following the later of full execution and delivery of this Agreement or the issuance by the DRE of the final subdivision public report covering the first phase of development of any residential lots within the Project. Monies in the Associations' Surficial Soils Subsidence Account shall only be withdrawn and used for the purposes contemplated in this Agreement. 6.2 Cessation of Assessments Under Certain Circumstances. Except as otherwise provided in this Agreement, the Associations may cease levying and collecting assessments as contemplated in Section 6.1 upon the last to occur of (a) when Developer has been fully reimbursed pursuant to Section 5, or (b) when the total balance of the Associations' Surficial Soils Subsidence Account reaches the Project Fund Amount. 6.3 Replenishment of the Associations' Surficial Soils Subsidence Account. In the event the Associations' Surficial Soils Subsidence Account is depleted by the cost of making Covered Repairs, as contemplated by Section 2.4 of this Agreement, the Associations will, by regular or special assessments, restore the total amount in the Associations' Surficial Soils Subsidence Account to the lesser of(a) the balance of such fund immediately prior to such depletion or (b) the Project Fund Amount,within a reasonable period of time. 6.4 Responsibility of the Association and its Board of Directors. The Association and its Board of Directors shall be responsible for establishing and maintaining the Associations' Surficial Soils Subsidence Fund and the Associations' Surficial Soils Subsidence Account as herein provided, and for levying and using best efforts to collect assessments to fund the Associations' Surficial Soils Subsidence Fund as herein provided. 7. DiMute Resolution. Any dispute arising out of this Agreement, but excluding any construction defect claims or right to repair claims made under Section 895 to 945.5 of the California Civil Code, shall be submitted to general judicial reference pursuant to California Code of Civil Procedure Sections 638 and 641-645.1 or any successor statutes thereto. Construction defect claims Page 8 or right to repair claims made under Section 895 to 945.5 of the California Civil Code, shall be resolved in accordance with Article XIX of the Declaration. Within ten (10) days of receipt by any party of a written request to resolve any such dispute, the parties shall agree upon a single referee. If the parties are unable to agree upon a referee within such ten (10) day period, then any party may thereafter seek to have a referee appointed under the California Code of Civil Procedure Sections 638 and 640. If the referee is appointed by the Court, the referee shall be a retired judge from JAMS, the American Arbitration Association ("AAA') or similar mediation/arbitration entity. The proposed referee may be challenged for any of the grounds listed in Section 641 of the California Code of Civil Procedure. The parties shall cooperate in good faith to ensure that all necessary and appropriate parties are included in the judicial reference proceeding. If a dispute involves parties other than those listed above, this provision shall be interpreted to bring those third-party disputes into the general reference procedure prescribed herein to the extent permitted by law. All parties shall cooperate in good faith to ensure that all necessary and appropriate parties are included in the judicial reference proceeding. 7.1 The parties shall use the procedures adopted by JAMS for judicial reference (or any other entity offering judicial reference dispute resolution procedures as may be mutually acceptable to the parties), provided that the following rules and procedures shall apply in all cases unless the parties agree otherwise: (a) If the Developer is a party to such judicial reference proceedings, any fee to initiate such proceedings shall be advanced by the Developer; however, the fees and costs of the judicial reference proceedings (e.g., the fee for the referee and all expert witness fees and costs, etc., but excluding all attorneys' fees) shall ultimately be borne as determined by the referee. In all cases, each party shall bear its own attorneys' fees at its sole cost and expense; (b) The proceedings shall be heard in the County in which the Project is located,unless all parties agree to a different location; (c) The referee shall have the power to decide all issues of fact and/or law, and to report a statement of decision to the court on such issues, and to issue all recognized remedies available at law or in equity for any cause of action that is before the referee; (d) The referee may require one or more pre-hearing conferences; (e) The parties shall be entitled to discovery, and the referee shall oversee discovery and may enforce all discovery orders in the same manner as any trial court judge; (f) A stenographic record of the proceedings shall be made; (g) The referee's statement of decision shall contain findings of fact and conclusions of law to the extent applicable and shall stand as the decision of the court; (h) The referee shall have the authority to rule on all post-hearing motions in the same manner as a trial judge; (i) The parties shall promptly and diligently cooperate with one another and the referee, and shall perform such acts as may be necessary to obtain a prompt and expeditious resolution of the dispute; and Page 9 (j) The statement of decision of the referee upon all of the issues considered by the referee shall be binding upon the parties, and upon filing of the statement of decision with the clerk of the court, or with the judge where there is no clerk, judgment may be entered thereon in the same manner as if the action had been tried by the court. The decision of the referee shall be appealable as if rendered by the court. 7.2 WAIVER OF COURT AND JURY TRIAL. AS TO ALL DISPUTES SUBJECT TO THE ALTERNATIVE DISPUTE RESOLUTION PROVISIONS SET FORTH OR REFERENCED IN SECTION 7, EACH PARTY WAIVES ANY RIGHTS TO JURY TRIAL, APPEAL AND OTHER CIVIL LITIGATION PROCEEDINGS FOR SUCH DISPUTES, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH OR REFERENCED HEREIN. IN THE EVENT ANY OF THE PROCEDURES SET FORTH OR REFERENCED HEREIN ARE DETERMINED TO BE INVALID OR UNENFORCEABLE, IN WHOLE OR IN MATERIAL PART, SUCH THAT THE RESOLUTION OF THE DISPUTE SHALL PROCEED BY WAY OF CIVIL LITIGATION PROCEEDINGS, EACH PARTY NONETHELESS WAIVES THE RIGHT TO JURY TRIAL WITH RESPECT TO SUCH DISPUTE. 8. Miscellaneous. 8.1 Additional Limitations on Soils Subsidence Remediation Program. Nothing to the contrary in this Agreement withstanding,it is agreed that: (a) The Soils Subsidence Remediation Program provided herein expressly excludes Soils Subsidence or any other soils or earth movement or failure of slopes, regardless of cause, not expressly referred to herein, and any and all resulting damage, whether arising out of covered Soils Subsidence or not. (b) In no event will performance of repair work by any person or entity or any other circumstances extend the Developer Repair Period provided herein. 8.2 Reservation of License and Rip-ht to Enter. (a) There is hereby reserved for the benefit of Developer and its successors and the Associations, a license and right to enter onto the common areas and individually-owned lots within the Project so that Developer or its successors and the Associations and their agents may (a) inspect all landscaping, irrigation and drainage devices, and all other natural and artificial conditions which affect or might affect the integrity of the slopes which are the subject of the Slope Warranty, and (b) perform the duties of Developer to the full extent provided for herein. (b) Appropriate provisions in the grant deeds will grant the Associations a license and right to enter onto the common areas and individually-owned lots of the Project so that the Associations or their agents may inspect, maintain and repair the slopes within the Project to the full extent provided for herein. 8.3 Review and Approval by Association. Any proposed alterations by homeowners or any other person or entity to the landscaping, grading, irrigation or drainage on the residential lots or common areas will be subject to review and approval by the Boards of the Associations and/or by their Architectural Review Committees. Page 10 8.4 Reference in Deeds. The grant deeds for the residential lots will reference this Agreement and the Soils Subsidence Remediation Program provided herein. The provisions of this Agreement constitute covenants running with the land and an equitable servitude as to the real property referenced herein. 8.5 Collection and Reporting. The Boards of the Associations will be responsible for the collection of homeowner assessments for the Associations' Surficial Soils Subsidence Fund and accounting for such assessments and interest thereon. The Boards of the Associations will report to Developer and to the City the incidence of covered and non-covered claims, as well as the balance in the Associations' Surficial Soils Subsidence Fund as of the date of the report. Such reports will be made on or before January 31 and July 31 of each year. The Boards will also provide to Developer at its request, and to the City at the City's request, any further information, documentation and cooperation as is reasonably necessary to effectuate the purposes of this Agreement. 8.6 Further Acts. The parties to this Agreement agree to perform such other and further acts and execute such other and further documents as are necessary to effectuate the intent of this Agreement. 8.7 Headings. The headings in this Agreement are inserted for convenience and identification only and are in no way intended to describe, define or limit the scope, intent or interpretation of this Agreement or any provisions hereof. 8.8 No Representations. No party or any agent, employee, representative, or attorney of or for any party has made any statement or representation to any other party regarding any fact relied upon in entering into this Agreement, and no party relies upon any statement, representation or promise of any other party or of any agent, employee, representative or attorney of any other party, in executing this Agreement, or making this settlement provided for herein, except as expressly stated in this Agreement. 8.9 Entire Agreement. This Agreement is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions, except Article XVIII of the Declaration, which was prepared in accordance with City conditions of approval for Tract No. 16634 and is consistent with this Agreement. This Agreement may be amended only by an agreement in writing among Developer (or its successors in interest or assignees), the City, and the Associations. 8.10 Binding Upon Successors. This Agreement is binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns. (a) This Agreement is binding upon Developer's successors in interest or assignees as to the Project, and any or all of them. (b) Effective upon the sale or other conveyance of Tract 16634 or any portion thereof in bulk, Developer will be relieved of its obligations under this Agreement as to the real property so sold or conveyed, to the extent that such obligations are assumed in writing by Developer's successors in interest or assignees, including without limitation the obligation to provide security for the Developer Repair Period herein. Upon the City's receipt of reasonably adequate substitute security from any assuming party, the Developer's Security or the appropriate pro rata portion thereof shall be appropriately released and exonerated to Developer by the City. Page I I 8.11 Construction of Agreement. Each party has cooperated in the drafting and the preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party. This Agreement shall be construed under California law. 8.12 Counterparts. This Agreement may be executed in counterparts, and when each party has signed and delivered to the other at least one such counterpart, each counterpart shall be deemed an original, and when taken together with the other signed counterparts, shall constitute one agreement, which shall be binding upon and effective as to all parties. 8.13 Severability and No Waiver. The invalidity or unenforceability of any provision of this Agreement shall not invalidate or render unenforceable any of the other provisions of this Agreement. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, nor shall any such waiver constitute a continuing waiver unless otherwise agreed in writing. 8.14 Termination. Unless otherwise agreed among the parties, this Agreement shall continue in perpetuity. 8.15 Notices. Any notice which either party may desire to give to the other party must be in writing and may be given by personal delivery, by mailing the same by registered or certified mail, return receipt requested, postage prepaid, or by Federal Express or other reputable overnight delivery service, or by facsimile or other reliable electronic type mail system to the party to whom the notice is directed at the address of such party hereinafter set forth, or such other address and to such other persons as the parties may hereafter designate. Any such notice shall be deemed given upon receipt if by personal delivery, forty-eight (48) hours after deposit in the United States mail, if sent by mail pursuant to the foregoing, or twenty-four (24) hours after deposit with Federal Express or other reputable overnight delivery service, or twenty-four (24) hours after transmission by facsimile or other reliable electronic type mail system. To Developer: Whispering Hills, LLC 19700 Fairchild Road, Suite 120 Irvine, CA 92612 Attention: Dennis Gage, Managing Member Copy To: LEGAL COUNSEL To Association: Whispering Hills Estates I Community Association c/o Dennis Gage 19700 Fairchild Road, Suite 120 Irvine, CA 92612 To Association: Whispering Hills Estates II Community Association c/o Dennis Gage 19700 Fairchild Road, Suite 120 Irvine, CA 92612 Page 12 To Association: Whispering Hills Estates II Community Association C/o To the City: The City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn: Director of Engineering and Building Facsimile: (949) 493-1251 The City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn: City Attorney Facsimile: (714) 493-1053 IN WITNESS WHEREOF, this Agreement was executed on the date first above written. CITY: THE CITY OF SAN JUAN CAPISTRANO By: Wyatt Hart, Mayor Attest: Margaret R. Monahan, City Clerk DEVELOPER: WHISPERING HILLS, LLC, a Delaware Limited Liability Company B y: Name: Its: OWNER Whispering Hills, LLC, a Delaware limited Liability Company By:Concorde Development, L.P., a California limited partnership BY:Ferrari Investments, a California corporation, General Partner Page 13 ASSOCIATION: WHISPERING HILLS ESTATES I COMMUNITY ASSOCIATION, a California nonprofit mutual benefit corporation By: Name: Its: By: Name: Its: ASSOCIATION: WHISPERING HILLS ESTATES II COMMUNITY ASSOCIATION, a California nonprofit mutual benefit corporation By: Name: Its: By: Name: Its: Approved as to form and content This day of 2005 ol f John Shl1w, City Attorney City of an Juan Capistrano Page 14 STATE OF CALIFORNIA ) ss. COUNTY OF ) On , S� before me, -D, Vkxc-VC,�-, personally appeared and 1— personally known to me ( evr a to be the person(s)- whose nameW(is) � subscribed to the within instrument and acknowledged to me that (he),(shej— Oey executed the same in (his)Sher) Ltjbirj authorized capacity <, and that by (his)_0ier)'(Aieirj"' signatureks)"'on the instrument the personS,$)!'or the entity upon behalf of which the perso5w acted, executed the instrument. WITNESS my hand and official seal. b.HARVEY Notary ub is in and for said State (SEAL) commrao�rtstevaa N0kKV►WAc moo•C«nw - Mycomm.rxr«oa t.20 Page 15 1 ` y • STATE OF CALIFORNIA ) ss. COUNTY OF ) On before me, personally appeared and personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) (is) (are) subscribed to the within instrument and acknowledged to me that (he) (she) (they) executed the same in (his) (her) (their) authorized capacity(ies), and that by (his) (her) (their) signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for said State (SEAL) Page 16 STATE OF CALIFORNIA ) ss. COUNTY OF ) On before me, personally appeared and personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) (is) (are) subscribed to the within instrument and acknowledged to me that (he) (she) (they) executed the same in (his) (her) (their) authorized capacity(ies), and that by (his) (her) (their) signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for said State (SEAL) Page 17 EXHIBIT "B" DEFINITIONS The defined terms set forth below shall have the definitions given to them herein: "Amended Ordinance" shall have the meaning given to such term in Paragraph B of the Recital to the Agreement. "Amending Resolution" shall have the definition given to such term in Paragraph C of the Recitals to the Agreement. "Annual Assessment" shall have the meaning given to it in Section 6.1 of the Agreement. "Associations" shall mean Whispering Hills Estates I Community Association, a California nonprofit mutual benefit corporation, and Whispering Hills Estates II Community Association, a California nonprofit mutual benefit corporation. "Associations' Surficial Soils Subsidence Fund" shall have the meaning given to it in Section 6.1 of the Agreement. "Associations' Surficial Soils Subsidence Account" shall have the meaning given to it in Section 6.1 of the Agreement. "Authorized Monies " shall have the meaning given to it in Section 5.3 of the Agreement. "Boards" shall mean the Boards of Directors of the Associations. "City" means the City of San Juan Capistrano, California. "Claims Adjuster" shall have the meaning given to such term in Section 3 of the Agreement. "Council" shall have the meaning given to it in Paragraph `B" of Recitals of the Agreement. "Covered Repairs" shall mean Damage to Lots, structures or public/private improvements due to soil displacement occurrences occurring after the Developer Repair Period shall be corrected by the Geologic Hazard Assessment District with funds from the Surficial Soils Subsidence Fund. The costs of performing the Covered Repairs shall be deemed surficial soils subsidence expenses and shall be paid from the Surficial Soils Subsidence Fund. "Covered Slopes" means the slopes within the Property described in Section 2.5 of the Agreement and shown on Exhibit "C 1" and Exhibit "C2" attached hereto. "Declaration" shall have the meaning given to it in Paragraph "E" of Recitals of the Agreement. "Developer" means Whispering Hills, LLC, a Delaware Limited Liability Page 19 EXHIBIT B Company. "Developer Repair Period" shall mean the three (3) year period that Developer will be required make or cause to be made all repairs to correct any damage to Lots, structures or public/private improvements due to soils displacement at Developer's sole expense. The three (3) year period shall commence on the last close of escrow for all Lots within the Project. "Director" shall have the meaning given to it in Section 5.3 of the Agreement. "DRE" shall mean the California Department of Real Estate and any successor thereto. "Project" shall have the meaning given to it in Paragraph A of the Recitals to this Agreement. "Project Fund Amount" shall have the meaning given to it in Section 6.1 of the Agreement. "Property" means that certain real property more particularly described on Exhibit "A" attached hereto. "Soils Subsidence" means is defined as displacement of a manufactured slope at a depth of up to three (3) feet with a vertical movement of one foot or more, regardless of cause. Soils Subsidence does not include surface cracking and fissures, including desiccation cracks, or erosion (defined as the wearing away of surface of the slope, as opposed to movement of the slope, resulting from the force of water, wind, persons, or vehicles moving over the surface, unless erosion ultimately results in displacement). Surficial damage shall be considered catastrophic if due to the extent of movement, sufficient funds as required under Section 5.1 herein are not available to repair the damage. "Soils Subsidence Remediation Program" shall have the meaning given to it in Paragraph C of the Recitals and in Paragraph 2.1 of this Agreement. "Tract" means Tract No. 16634, as more particularly described on Exhibit "A" attached hereto. Page 20 0 0 EXHIBIT Cl COVERED SLOPES (WHISPERING HILLS ESTATES I COMMUNITY ASSOCIATION) Page 21 � �� 1. � 46 OL a f1 ice^ 4 eY :�=i!1 y•i a _ �.� � di iI d * �+ Si EXHIBIT C2 COVERED SLOPES (WHISPERING HILLS ESTATES II COMMUNITY ASSOCIATION) Page 22 t iok \\ 6\ Ili iiiiipi r, y. ,a . 0 0 ATTACHMENT 3: WHISPERING HILLS ESTATES LOCATION MAP COUNTY Of ORANGE CITY OF SANjUAWCAPISTRANOMODWAIN PRIMA DESHECKA LANDFIU CITY' OF SAN JUAN CAPISTRANO f CITY OF SAN CLEMENTE i ATTACHMENT 3