HomeMy WebLinkAbout07 EXCLUSIVE NEGOTIATING AGREEMENT WITH CD-MS (TUSTIN)Agenda Item _______
Reviewed:
City Manager _______
Finance Director _______
MEETING DATE: SEPTEMBER 19, 2023
TO: MATTHEW S. WEST, CITY MANAGER
FROM: ECONOMIC DEVELOPMENT DEPARTMENT
SUBJECT: EXCLUSIVE NEGOTIATING AGREEMENT WITH CD-MS (TUSTIN)
LLC FOR PORTIONS OF TUSTIN LEGACY DISPOSITION AREA
8B
SUMMARY:
Request for authorization to enter into an Exclusive Negot iating Agreement (ENA) with
CD-MS (Tustin) LLC (Developer) for the disposition and development of portions of
Disposition Areas 8B at Tustin Legacy for a senior congregate care facility project.
RECOMMENDATION:
Authorize the City Manager to execute the Exclusive Negotiating Agreement between the
City and Developer.
FISCAL IMPACT:
Concurrent with the execution of the ENA, Developer will submit a good faith deposit of
$150,000 to be applied toward staff and third-party costs incurred by the City including
the retention of legal counsel associated with the negotiation . These costs are separate
from entitlement expenses that will be borne by Developer. Staff will negotiate the terms
and conditions under which the property will be sold including the purchase price. If
negotiations are successful, staff will present to the City Council a Disposition and
Development Agreement (DDA) for consideration.
BACKGROUND:
On January 30, 2023, the City initiated a Request for Proposals (RFP) process through a
competitive solicitation utilizing its broker CBRE. Proposals were requested for a
commercial development of a senior congregate care facility with up to 300 units
composed of a mix of independent living, assisted living, and memory care units on
approximately 6.138 acres of land located within a portion of Disposition Area 8B bounded
by future Veterans Way to the east, future John Johnson Way to the south, Armstrong
Avenue to the west and Warner Avenue to the north. The development parcel is located
AGENDA REPORT
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Agenda Report – CD-MS (Tustin) LLC ENA
September 19, 2023
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within Tustin Legacy Specific Plan Neighborhood D and more specifically within Planning
Areas 13 and 14.
Developer, a partnership of Confluent Development and its operator MorningStar Senior
Living, submitted a proposal pursuant to the RFP for purchase and development of the
disposition parcel. The Developer proposes a high-quality design for a senior congregate
care project, has significant expertise, experience and the financial capability to undertake
and complete the project; and was therefore selected for further negotiations.
DISCUSSION:
The ENA (included as Attachment 1) defines the rights and responsibilities of the City and
the Developer each in the desire to negotiate the development transaction via a DDA. If
the terms and conditions of the DDA are agreed upon and executed, the City will convey
the property to Developer.
Confluent Development will develop the project and MorningStar Senior Living will
operate the facility. Confluent Development has delivered over $1.5 billion in development
projects over the past 5 years, with a vertically integrated team and a specific senior living
division. Confluent Development has constructed twenty-three (23) senior living
communities across the U.S. including one (1) in California. Confluent Development
would serve as the owner-builder of the project, as well as the Guarantor. MorningStar
Senior Living is an operator of senior and congregate care projects, with over 40 projects
in 11 states (7 in California). Confluent Development and MorningStar Senior Living have
completed numerous projects together nationwide, most recently in Mission Viejo
(MorningStar Mission Viejo) which opened in March 2023.
Developer proposes to develop the property with two connected buildings four (4) to five
(5) stories in height over a single level of parking that will host approximately 145
independent living units, 60 assisted living units and a secure memory care wing with 28
supportive units. An additional 29 independent living units will be in the form of single-
story cottages. The total project is expected to be approximately 283,000 square feet.
The buildings feature contemporary materials and finishes with distinctive architectural
features and interior courtyards and rooftop amenities for the senior living community and
guests. The project is highly amenitized, featuring multiple high-end dining areas, fitness
areas, spa, sport courts, a pool, salon, theater, art room, and a rooftop club room.
Structured parking will be located under the main buildings and care and shuttle
transportation are provided for residents as well. The project is proposed to be
constructed in a single phase.
As proposed, the development will provide much needed senior housing and care for the
City and region. The project will address the highly visible southeast corner of Armstrong
and Warner Avenue, while providing access to the future phase of Tustin Legacy Park.
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September 19, 2023
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The ENA provides for an initial negotiating period of two hundred seventy (270) days from
the Effective Date which may be extended for one (1) additional period of ninety (90) days
at the discretion of the City Manager. If negotiations are successful, the project
entitlements will be reviewed by the Planning Commission and the DDA and project
entitlements will be brought to the City Council for consideration concurrently.
_______________________________
Christopher Koster
Director of Economic Development
__________________________________
Ryan Swiontek
Manager of Development Services
_______________________________
Kenneth Piguee
Senior Management Analyst
Attachment:
1. ENA between the City of Tustin and CD-MS (Tustin) LLC
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Exclusive Negotiating Agreement
EXCLUSIVE NEGOTIATING AGREEMENT
(TUSTIN LEGACY PORTION OF DISPOSITION AREA 8B)
THIS EXCLUSIVE NEGOTIATING AGREEMENT (TUSTIN LEGACY
PORTION OF DISPOSITION AREA 8B) (“ENA”) is made as of September __, 2023
(“Effective Date”) by and among the CITY OF TUSTIN (“City”) and CD-MS (Tustin) LLC,
a Colorado limited liability company (“Developer”), with respect to certain land referred to herein
as the Development Parcel (defined below). The City and Developer, each sometimes referred to
herein as a “Party” and collectively as the “Parties,” hereby agree as follows:
1. Introduction.
1.1 Pursuant to the Defense Base Closure and Realignment Act of 1990 (Part A of Title
XXXIX of Public Law 101-510; 10 U.S.C. Section 2687 Note), as amended, the federal
government determined to close the Marine Corps Air Station-Tustin (“MCAS Tustin”) located
substantially in the City of Tustin. In 1992, the City was designated as the Lead Agency or Local
Redevelopment Authority for preparation of a reuse plan for MCAS Tustin to facilitate the closure
of MCAS Tustin and its reuse in furtherance of the economic development of the City and
surrounding region. The MCAS Tustin Reuse Plan developed in accordance with this procedure
was adopted by the City Council of the City of Tustin (“City Council”) on October 17, 1996, and
amended in September, 1998 (“Reuse Plan”).
1.2 A Final Joint Environmental Impact Statement/Environmental Impact Report for
the Disposal and Reuse of MCAS Tustin and Mitigation Monitoring and Reporting Program for
the Final EIS/EIR were adopted by the City on January 16, 2001. In March 2001, a record of
decision was issued by the Department of the Navy (hereinafter, “Navy”) approving the Final
EIS/EIR and the Reuse Plan with several subsequent supplements and addenda approved by the
City (the original EIS/EIR, as so amended, the “Final EIS/EIR”).
1.3 In May 2002, the Navy approved an “Economic Development Conveyance of
Property at MCAS Tustin” and agreed to convey approximately 1,153 acres of MCAS Tustin to
the City. On May 13, 2002, a total of approximately 977 acres, including the Development Parcel
which are the subject of this ENA, were conveyed by the Navy to the City by quitclaim deed, as
further described below, in accordance with the provisions of that certain Memorandum of
Agreement by and between The United States of America (through the Secretary of the Army or
designee) and the City dated May 13, 2002 (“Memorandum of Agreement” or “MOA”). The
additional approximately 177 acres were made subject to a ground lease by the City from the Navy
and portions thereof have subsequently conveyed by the Navy to the City pursuant to subsequent
quitclaim deeds. The approximately 1,153 acres of MCAS Tustin located within the City of Tustin
and either conveyed by the Navy to the City or subject to ground lease between the Navy and the
City are referred to in this ENA as “Tustin Legacy”.
1.4 On February 3, 2003, the City adopted an ordinance approving the MCAS Tustin
Specific Plan/Reuse Plan setting forth the zoning and entitlement framework for future
development of Tustin Legacy. Since its initial adoption, the City has approved numerous Specific
Plan amendments. All references in this ENA to the “Specific Plan” shall be deemed to refer to
the Tustin Legacy Specific Plan/Reuse Plan, as the same may have been previously or may be
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subsequently amended. The Specific Plan conforms to and implements the Reuse Plan and the
City’s General Plan.
1.5 The City desires to effectuate development of Tustin Legacy through the sale and
development of property in accordance with applicable federal and local requirements. Tustin
Legacy shall be developed in accordance with all City requirements, including, without limitation,
the Reuse Plan and the Specific Plan.
1.6 Consistent with the requirements of Govt. Code Sections 54220-54234 (“Surplus
Land Act”) and the California Department of Housing and Community Development (“HCD”),
issued Surplus Land Act Guidelines (“Guidelines”, and collectively with the Surplus Land Act,
the “SLA Regulations”), on June 15, 2021, the City declared the Development Parcel and certain
other property at Tustin Legacy to be surplus and sent notices of availability to all required housing
entities on June 16, 2021. No affordable housing entity expressed interest in the identified
properties during the required 60-day notice period following issuance of such notice.
Accordingly, HCD has provided the City with a written determination that all the requirements
under the SLA for the purpose of disposing of the surplus land identified as the Development
Parcel have been met and the City is permitted to proceed with sale or lease of the identified
properties, including the Development Parcel.
1.7 The City initiated a competitive Request for Proposals ("RFP”) process for
development of a senior congregate care facility with up to 300 units on approximately 6.138 acres
of land located within a portion of Disposition Area 8B bounded by Warner Avenue, future
Veterans Way, future John Johnson Way and Armstrong Avenue as depicted on the site map
attached as Exhibit A to this ENA. The land depicted on Exhibit A is referred to herein as the
“Development Parcel”.
1.8 Developer submitted a proposal pursuant to the RFP for purchase and development
of the Development Parcel and was selected for further negotiations.
1.9 Developer’s proposal, and this ENA, contemplate negotiation of Transaction
Documents (defined below) providing for purchase and development of the Development Parcel
as a senior congregate care facility with approximately 262 units comprised of independent living,
assisted living and memory care units, together with required on-site infrastructure and a complete
accompanying set of high quality amenities to be constructed by Developer, including rooftop
amenities and private open space. The proposed development of the Development Parcel
described above and as further described in this ENA is referred to herein as the “Project”.
1.10 The Development Parcel comprises a portion of the land conveyed by the Navy to
the City in Navy Quitclaim Deed D dated May 13, 2002 and recorded in the Orange County Clerk
Recorder Office on May 14, 2002 as Instrument No. 20020404594 and in Navy Quitclaim Deed
G dated May 13, 2002 and recorded in the Orange County Clerk Recorder Office on May 14, 2002
as Instrument No. 20020404597 (“Navy Quitclaim Deeds”). The Development Parcel is located
in Specific Plan Neighborhood D, Planning Areas 13 and 14 and is referred to in the Navy Reuse
Plan as portions of Parcels 14, 16 and 40 and in the Navy Quitclaim Deeds as portions of Parcels
I-D-3 and I-G-1.
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1.11 The City is required by law to comply with the SLA Regulations with respect to
the Project, including recording of a covenant restricting any future residential development of the
Development Parcel. Developer acknowledges that it is responsible to investigate the requirements
of the SLA Regulations.
1.12 The City and Developer desire, for the ENA Negotiating Period (defined below),
to negotiate diligently and in good faith, the terms and conditions of a disposition and development
agreement (“DDA”) and development agreement (“DA”) and related instruments and agreements
described by the DDA or DA (collectively with the DA and DDA, the “Transaction
Documents”), which if agreed upon and executed by the Parties, shall set forth the terms and
conditions of the conveyance of the Development Parcel to Developer and the design, construction
and operation of the Project of the Project by Developer (“Transaction”).
1.13 Nothing herein shall preclude the City from negotiating with other entities for other
developments on other portions of Tustin Legacy or other City owned properties that are not the
subject of this ENA.
2. Agreement to Negotiate.
2.1 Transaction Structure.
2.1.1 Rights and Responsibilities of Developer. The City and Developer each
desire to negotiate Transaction Documents which if agreed upon and executed, shall set forth the
terms and conditions pursuant to which the Development Parcel shall be conveyed by the City to
Developer, developed by Developer and operated by Morningstar Senior Management, LLC, a
Colorado limited liability company, or its affiliates (“Morningstar”). Developer shall have the
right to contract with or delegate to Morningstar the operation of the Project (but retaining the right
and duty to enforce such assigned or delegated duties) or other operator approved by the City in
its sole discretion.
2.1.2 DDA and DA. Notwithstanding that the terms of the purchase and sale and
development of the Development Parcel are to be negotiated, Developer and the City have agreed
that the Transaction Documents to be negotiated to describe the transaction shall be in the form of
a DDA and DA. The City will prepare a draft of the Transaction Documents and submit the draft
documents to Developer for review and comment. The DDA and the DA shall not exist and shall
not be binding unless and until each is fully executed by Developer and the City, approved by the
City Council of the City and by the authorized representatives of Developer.
2.2 ENA Not a Final Agreement. The Parties acknowledge and agree that:
(a) this ENA is entered into for the sole purpose of providing a
framework for and establishing and facilitating the initial basis for negotiation of the Transaction;
(b) this ENA is not, and the Parties do not intend that this ENA be, a
lease, purchase and sale agreement, option or similar contract setting forth the essential terms of a
land transaction (“Essential Terms Agreement”);
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(c) the City and Developer acknowledge that although the Parties have
set forth a framework for negotiations of essential terms of any transaction, the Parties have not
agreed upon the essential terms or the material elements of a transaction, including, without
limitation, the purchase price, the legal description of the Development Parcel to be conveyed
(including the exact amount of acreage, and precise location of the land), the time or manner of
and significant terms related to the conveyance, the conditions precedent to conveyance (including
without limitation, related to the design and entitlement of the Project) or the requirements related
to development of the Project, each of which are an essential component of the transaction
(collectively, the “Essential Terms”) and which shall be a matter of their further negotiation
during the ENA Negotiating Period;
(d) this ENA does not contain the Essential Terms of the Transaction;
(e) this ENA is merely an agreement to enter into the ENA Negotiating
Period according to the concepts presented herein, reserving final discretion and approval of any
Transaction Documents by the City to the City Council and by Developer to the authorized
representatives of Developer, and unless and until a DDA and DA are approved as set forth in
Section 2.3 and executed by the City and Developer, the Parties do not intend to be bound in any
way to an Essential Terms Agreement, nor do they intend to be bound by any other agreement
except for the specific undertakings of each set forth in this ENA;
(f) the concurrence of the City negotiators with the terms and
provisions of a proposed DDA and DA or other Transaction Documents shall not be construed or
interpreted as the City approving or accepting such terms. Such concurrence shall be viewed as
nothing more than the willingness of the City negotiators to recommend to the Planning
Commission of the City (as to the DA) and the City Council (as to the DDA and DA and other
Transaction Documents) that they approve such terms.
Further, Developer acknowledges that the design of the Project, the identity, stability and financial
capacity of Developer and any proposed manager/operator of the Project and the terms and
conditions of the sale of the Project, if any, and the ability of Developer to deliver the Project,
including by causing Morningstar or during the term of this Agreement and the DDA, any other
operator approved by the City in its sole discretion to operate the Project, will be of material
concern to the City and comprise part of the Essential Terms that are not yet agreed upon by the
Parties.
2.3 Public Hearings and Compliance. The DDA and the DA shall not exist and shall
not be binding unless and until each is fully executed by Developer and the City, approved by the
City Council of the City and by the authorized representatives of Developer and with respect to
City action, only after and if the agreements have been considered and approved by the City
Council of the City at a properly noticed meeting and after compliance with the California
Environmental Quality Act (“CEQA”). Nothing in this ENA shall supersede or waive any
discretionary or regulatory approvals required to be obtained from the City pursuant to the Tustin
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City Code or other City ordinance or the provisions of any applicable state of California (“State”),
regional or federal law or regulation.
2.4 Assumption of Risk. The City and Developer each assume the risk that,
notwithstanding this ENA and good faith negotiations, the City and Developer may not enter into
any agreements due to their failure to agree upon Essential Terms of the transaction or the
Transaction Documents, or any of them. Accordingly, except as specifically set forth in this ENA,
no Party will have any liability to the other if the Parties are unable to reach such a definitive
agreement with respect to the proposed Transaction for any reason or no reason.
3. Developer’s Representations, Warranties and Agreements.
Developer represents, warrants and agrees as follows:
3.1 Expertise and Financial Qualifications. Developer has the necessary expertise,
experience and financial capability to undertake development of the Project at the Development
Parcel as contemplated by this ENA.
3.2 No Speculation in Land Holding. Subject to Developer’s right to Transfer this
ENA pursuant to Section 6.4, Developer’s intended acquisition of the Development Parcel and its
other intended undertakings pursuant to this ENA shall be used for the timely development of the
Project upon the Development Parcel and accompanying infrastructure and amenities and not for
speculation in land holding.
3.3 Experience. Developer is experienced in development and understands the process
and requirements required to design, construct, develop and otherwise implement development
projects such as the Project described herein.
3.4 Project Financing. Developer is capable of acquiring the Development Parcel and
developing the Project with one or more capital partners and with financing pursuant to financing
from a bank group or other institutional lender at the close of escrow pursuant to the DDA. At the
close of escrow, Developer shall cause one or more guarantor(s) approved by the City in its sole
discretion to provide the City with a performance and completion guaranty for the Project.
Developer has represented that it intends to provide a combination of equity financing, financing
from an institutional lender and that it will support such financing with bank guaranties and
indemnities.
3.5 Release. Except as specifically set forth in Sections 4.3, 4.4, 6.8 or 11.5 hereof or
in the Transaction Documents, Developer, on behalf of itself and its successors and assigns, hereby
waives the right to recover from and fully and irrevocably releases the City, the Successor Agency
to the Tustin Community Redevelopment Agency, the Tustin Finance Authority, and their
respective elected and appointed officials, employees, agents, representatives, attorneys, affiliates,
consultants, contractors, successors and assigns (“City Parties”) with respect to any and all Claims
(defined below) that Developer or its officers, directors, employees, agents, representatives,
tenants and prospective tenants, consultants or contractors or any of them may now or hereafter
have or incur relating to or arising from: (a) the process by which Developer was selected or any
modification or defect thereto, or any information set forth in the RFP or provided as part of the
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selection process; (b) the terms of this ENA including, without limitation, the information set forth
in or the termination of this ENA in accordance with its terms; (c) except as set forth in Section
4.4.1, the breach by the City of its obligations under this ENA, (d) a violation by the City of the
SLA; (e) the failure of the Parties or any of them to agree upon the Essential Terms of the
Transaction contemplated by this ENA; (f) any disputes or Claims arising between Developer and
Morningstar, or any third parties; (g) any information provided by the City during the course of
the selection or negotiation; (h) the negotiation of or failure to negotiate the Transaction
Documents, or any of them, or the failure of the City to approve any Transaction Document; (i) any
condition of the Development Parcel, or any current or future improvement thereon, known or
unknown, including, without limitation, the environmental condition of the Development Parcel
or the extent or effect of any grading of the Development Parcel; (j) economic or legal conditions
on or affecting the Project, the Development Parcel or the improvements thereon; (k) the actions
or inaction of the Navy with respect to any agreements between the City and the Navy; (l) the
ability of the City or any third party to complete, or the likelihood of the completion or actual
completion of, any of the improvements and infrastructure related to the Project described by the
General Plan, the Reuse Plan, the Specific Plan, the Tustin Legacy Backbone Infrastructure
Program, the agreements, environmental reports and statements listed on Exhibit C or otherwise
provided to Developer (“Environmental Documents”) or any other plan or policy of the City or
any other governmental entity; (m) the compliance or non-compliance by the City or any third
party, including without limitation, the Navy, with the Reuse Plan, the City's General Plan, the
Specific Plan, the Navy Quitclaim Deed and the Environmental Documents, or any special
restrictions or other covenants and agreements applicable to other property at Tustin Legacy, or
any other agreement or governmental restriction or plan affecting Tustin Legacy; and/or (n) any
action or inaction of the City or the City Parties in connection with any of the foregoing (including,
without limitation, the exercise by the City of its discretion, decision or judgment with respect to
the foregoing). This waiver and release includes, without limitation, a waiver and release with
respect to (1) any and all damages and/or monetary relief (whether based in contract or in tort),
including, without limitation, any right to claim direct, compensatory, reliance, special, indirect,
consequential, expectation, anticipation, exemplary or punitive damages or losses relating to or
arising out of this ENA, and any other rights or claims it may otherwise have at law or at equity;
(2) any right to payment or reimbursement from the City except as expressly set forth in Sections
4.3 and/or 4.4; (3) the right to protest the terms of this ENA or the selection process, any
Transaction Document or the entry by City into exclusive negotiations with Developer with respect
to the Development Parcel, or the City’s termination of this ENA; (4) any right to specific
performance or other injunctive relief, including without limitation, for conveyance of or to claim
any right of title or interest in the Development Parcel or any portion thereof, and (5) the failure
of the City to enter into any of the Transaction Documents, to negotiate in good faith pursuant to
this ENA or, except as set forth in Section 4.4, to negotiate exclusively. Nothing herein limits or
releases Claims by Developer against the United States Government, including but not limited to
the Department of the Navy, regarding the environmental condition of the Development Parcel.
For avoidance of doubt, Claims by Developer asserting a failure of the City to negotiate in good
faith or exclusively pursuant to this ENA shall not be waived but Developer’s rights and remedies
with respect to any such Claim shall be covered exclusively by Section 4.4.1.
The term “Claim” or “Claims” as used in this ENA shall mean any and all claims, actions, causes
of action, demands, orders, or other means of seeking or recovering losses, damages, liabilities,
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costs, expenses (including, without limitation, attorneys’ fees, fees of expert witnesses, consultant
fees and court, arbitration and litigation costs), costs and expenses attributable to compliance with
judicial and regulatory orders and requirements, fines, penalties, liens, taxes or any other type of
compensation, monetary payment or reimbursements of any kind whatsoever, direct or indirect,
known or unknown, foreseen or unforeseen.
3.6 Survival of Provisions. The provisions of this Section 3 shall survive the
termination of this ENA.
4. Negotiations.
4.1 Diligent and Good Faith Negotiations. The City and Developer agree for the
ENA Negotiating Period (defined below) to exclusively negotiate with one another diligently and
in good faith to prepare Transaction Documents and related documents to be entered into between
the City and Developer with respect to the purchase and sale of the Development Parcel and
development of the Project.
4.2 ENA Negotiating Period; Offer Period; Termination of Agreement.
4.2.1 Term of Negotiations. The initial period of negotiations pursuant to this
ENA shall terminate upon the date that is two hundred and seventy (270) calendar days from the
Effective Date (“Initial ENA Negotiating Period”), subject to extensions as further provided in
this Section 4.2. If at the expiration of the Initial ENA Negotiating Period (or within any extension
of time mutually approved by the City and Developer in accordance with the terms of this ENA),
Developer has not, in accordance with Section 4.2.5, signed Transaction Documents in form and
substance prepared and approved by City staff, in its sole discretion, for submittal to the City
Council, then this ENA shall automatically terminate. The Initial ENA Negotiating Period, as the
same may be extended pursuant to Section 4.2.2 or earlier terminated pursuant to Sections 4.2.5,
4.2.6 or 4.2.7 is referred to herein as the “ENA Negotiating Period”. No extension of the ENA
Negotiating Period shall be effective unless it is in writing.
4.2.2 Requests for Extensions. Developer may request from the City an extension
of the ENA Negotiating Period, with such request to be made in writing no later than twenty (20)
business days prior to the expiration of the ENA Negotiating Period, for an additional period of
ninety (90) calendar days. In its consideration of any extension request by Developer, the City
shall have the right to extend or not to extend the ENA Negotiating Period and this ENA in its sole
discretion. As part of such right, the City may, in its sole discretion, take into account the following
or any other factors: (a) whether Developer has negotiated diligently and in good faith, (b) whether
reasonable and sufficient progress has been made toward fulfillment of the requirements of this
ENA such that it is likely that the terms of the Transaction Documents offered by Developer are
likely to result in an agreement, (c) whether in the City’s determination, the Project will achieve
the City’s goals and requirements for the development, including the City’s economic
requirements and (d) whether the Project as presented by Developer appears to be feasible,
financeable and supported by a credit-worthy guarantor and guaranty or another form of security
meeting the requirements of the City.
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4.2.3 Authority Granted to City Manager to Extend. Upon receipt of a request
from Developer for an extension pursuant to Section 4.2.2, the City Manager of the City of Tustin
(“City Manager”), or designated representative, shall have the authority to grant one (1) ninety
(90) calendar day extension specified in Section 4.2.2.
4.2.4 Additional City Council Authorized Extensions. All extensions other than
the one (1) ninety (90) calendar day extension for which the City Manager has authority under
Section 4.2.3 shall require approval by the City Council, which approval shall be at the sole
discretion of the City Council. If the City Council determines to authorize any such extension of
this Agreement, the extension shall only be effective upon request from and payment by Developer
to the City of the following extension deposits (“Extension Deposits”). Upon receipt of request
from Developer and the City Council approval of any additional ninety (90) calendar day extension
the Developer shall provide to the City a One Hundred Thousand Dollar ($100,000) non-
refundable deposit within five calendar days from the date of approval of each such extension
approved by the City Council. The Extension Deposits shall be non-refundable in all cases,
provided that, if executed, the DDA shall provide that the Extension Deposits shall then be
applicable to the purchase price for the Development Parcel. In the event Developer does not
make either of the Extension Deposits on or before the date for such deposit to be made as specified
above, the Agreement shall automatically terminate on the date upon which such Extension
Deposit was due to be made and without further action of the parties. The Extension Deposits are
not part of the ENA Deposit and shall not be subject to the provisions of Section 4.3 or 4.4. Interest
accrued on the Extension Deposits, if any, shall be the property of the City and shall not be
applicable to the purchase price.
4.2.5 Offer to Purchase. The execution by Developer of a form DDA and DA
that, subject to Sections 2.2.(e) and (f), is considered acceptable by City staff, and submittal by
Developer of same to the City shall constitute an offer to purchase the Development Parcel. If
Developer has not submitted an executed form of the DDA and DA to the City prior to the
termination of the ENA Negotiating Period, this ENA shall automatically terminate. If Developer
does submit an executed DA and DDA, then this ENA shall remain in effect for an additional
period of ninety (90) calendar days following the submittal of the last of the executed DDA and
DA to the City (“Offer Period”) to enable the City to (a) consider the environmental impacts of
the proposed Transaction Documents as evaluated in an environmental document prepared by the
City during the ENA Negotiating Period in accordance with the California Environmental Quality
Act; (b) determine whether it desires to enter into the Transaction Documents; (c) take the actions
necessary to authorize the City to sign the Transaction Documents if the City desires to do so; and
(d) sign the Transaction Documents. Developer hereby agrees that it shall not withdraw such offer
to purchase during the Offer Period. This ENA shall automatically terminate at the end of the
Offer Period, including any extension thereof agreed upon by the Parties. The City shall have the
right to request, in writing, an extension of the Offer Period to complete required CEQA
documentation for the Transaction Documents. If an extension of the Offer Period is requested by
the City for such purpose, Developer shall either consent to the extension within seven (7) calendar
days following such request or this ENA shall automatically terminate. This ENA shall remain in
full force and effect during the Offer Period.
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4.2.6 Rights of the Parties to Earlier Terminate ENA for Breach. Any termination
of this ENA or the ENA Negotiating Period authorized by this ENA shall be effective only upon
provision of seven (7) calendar days’ prior written notice to the other Party.
4.2.7 Rights to Earlier Terminate Due to Infeasibility or Non-Economic
Transaction. Either Developer or the City may terminate this ENA and the ENA Negotiating
Period upon provision of ten (10) business days’ prior written notice to the other (which notice
shall specify one of the following reasons for such termination if, during the course of negotiations,
investigations and evaluation of the Development Parcel, the Transaction or the Project, either
such Party determines in its good faith discretion that (a) the Project or the Transaction is not
feasible or financeable, (b) based on the terms offered by the other Party, that it is unlikely to reach
agreement on the terms of the DDA and/or the DA or (c) the terms offered by the other Party do
not meet its economic, or in the case of the City, public policy or health, safety or welfare
requirements.
4.2.8 Termination Following Determination of City Council Not to Approve
DDA or DA. The effectiveness of the DA and DDA are conditioned on approval, execution and
effectiveness of both agreements during the Offer Period. Therefore, notwithstanding any other
provision of this ENA, if the DDA and DA are executed and presented by Developer to the City
pursuant to Section 4.2.5, and, during the Offer Period, the City Council disapproves (affirmatively
or by failure to consider) either the DDA or DA or the City Council approves either the DDA or
the DA but does not approve (affirmatively or by failure to consider) the second such document,
then, upon the earlier of (i) the termination of the Offer Period or (ii) the affirmative determination
of the City Council not to approve either the DA or DDA, this ENA and all rights of the Parties in
and to the first document approved, if any, shall automatically terminate and the Parties will
cooperate and execute such instruments as may be requested by the City to effect such termination.
The determination of the City to approve or disapprove the DDA and/or the DA, any other
Transaction Documents or any entitlements related to the Project shall be made in the sole
discretion of the City Council and the City Council’s determination to disapprove or not to take
action on the DDA, the DA, any other Transaction Document or any Project entitlements shall not
be a breach of the City’s obligation to negotiate diligently, in good faith or exclusively under this
ENA.
4.2.9 Due Diligence Period. Developer acknowledges that execution of the
Transaction Documents by Developer shall constitute its agreement that it has completed its
physical and environmental site inspections, title and survey, entitlements, and all other inspections
and investigations with respect to the Development Parcel, the Project and the Transaction and
that the DDA shall provide no additional due diligence period.
4.3 Deposits and Costs.
4.3.1 Good Faith Deposit. Within seven (7) calendar days following approval by
the City Council of this ENA, and prior and as a condition to execution of this ENA by the City,
Developer will submit to the City a good faith deposit in the sum of One Hundred Fifty Thousand
Dollars ($150,000.00) (together with interest, if any, accruing thereon and any additional amount
deposited as set forth below in this Section 4.3.1, the “ENA Deposit”) in the form of a check or
wire transfer to the City to ensure that Developer will proceed diligently and in good faith to
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negotiate and perform all of Developer’s obligations under this ENA and to also be applied to
cover any City Transaction Expenses (defined below) incurred by the City whether arising before
or after the Effective Date of this ENA. The ENA Deposit shall be deposited in an account in a
bank or trust company selected by the City. Interest, if any, shall accrue to any balances in the
account for the benefit of Developer and as additional security for Developer’s obligations
hereunder. The ENA Deposit will be expended to cover the City Transaction Expenses, as further
described in Section 4.3.2 and the ENA Deposit will be depleted accordingly. Each time the
amount of funds in the ENA Deposit account is depleted below Fifty Thousand Dollars ($50,000),
Developer shall be required to submit an additional Fifty Thousand Dollars ($50,000) to City
which shall be credited by the City to the ENA Deposit account. Amounts due to the City on
account of City Transaction Expenses and deducted by the City from the ENA Deposit are referred
to herein as “City Expense Payments”.
4.3.2 City Transaction Expenses. The ENA Deposit may be used by the City to
pay the predevelopment and negotiation costs and expenses incurred or accrued by the City with
respect to the drafting, negotiation and execution of this ENA and during the ENA Negotiating
Period and the Offer Period, if any, including, without limitation, costs incurred by the City for
drafting, negotiation and execution of this ENA and Transaction Documents, City staff costs
attributable to the Project and fees and costs of third-party consultants, legal counsel (including,
without, limitation, fees and expenses of the City Attorney and outside legal counsel), financial
advisors, engineers, appraisers and environmental and other consultants and any other
expenditures required in connection with the implementation of the Transaction, the drafting,
negotiation, execution, implementation and, if applicable, amendment or termination of the ENA
and the Transaction Documents, and other acts carried out in contemplation of the proposed Project
(collectively, the “City Transaction Expenses”). Developer shall pay all costs of processing
entitlement applications and complying with provisions of CEQA and the State CEQA
implementing regulations, which fees and deposits shall be separately funded by Developer and
shall not constitute City Transaction Expenses. Determination of costs, expenses, and fees
constituting City Transaction Expenses shall be made by the City in its sole discretion and
Developer shall upon request be entitled to receive summary notices, including summary invoices
of third party consultants from the City setting forth the identity of the provider or cost and the
amounts attributable to each that constitute City Transaction Expenses and related non-confidential
documents evidencing such expenses; provided that Developer shall identify its objections, if any,
to each summary notice provided by the City within fifteen (15) calendar days following its receipt
of each such notice and provided further that in no event shall Developer have the right to challenge
the hourly rates of City staff, nor those of the City’s third party attorneys or consultants.
4.3.3 Return of Unapplied Deposit Funds Under Specified Conditions. If the
Parties enter into Transaction Documents, the Unapplied Deposit Funds (defined below) shall be
returned to Developer or, at Developer’s request, applied to any deposit required as security for
performance by Developer, or its authorized transferee, under the Transaction Documents. Except
as otherwise set forth in Section 4.4, if the Parties fail to enter into the Transaction Documents
within the ENA Negotiating Period or any subsequent Offer Period, then upon the termination of
this ENA, the City shall have the right to retain in full all City Expense Payments (and to be paid
any additional sums due to the City under this ENA on account of City Transaction Expenses or
otherwise) and, after deducting any amounts due to the City under this ENA from the ENA
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Deposit, the City shall return to Developer the Unapplied Deposit Funds. “Unapplied Deposit
Funds” means the amount of the ENA Deposit (including any additional funds deposited by
Developer pursuant to this Section 4.3) remaining after the City has deducted therefrom the full
amount of the City Transaction Expenses incurred by the City to the date of termination of this
ENA and, if applicable, the Offer Period.
4.3.4 Additional Transaction Deposit. Developer acknowledges that it is
currently anticipated that the Transaction Documents shall require an additional deposit in an
amount to be determined as security for the performance of Developer’s obligations under the
Transaction Documents.
4.3.5 Costs and Expenses Borne by Developer. Developer acknowledges and
agrees that the City shall have no responsibility to pay or reimburse Developer for costs and
expenses incurred by Developer in connection with this ENA, the compliance by Developer with
its obligations under this ENA, the termination of this ENA, the negotiation of the DDA, DA or
any other Transaction Documents, or any other matters unless the City, in its sole discretion, agrees
to assume any specific responsibilities in the fully executed and delivered Transaction Documents.
Developer shall be responsible, without any cost or liability to the City (except as specifically set
forth in Sections 4.4.1, 6.9.2 or 11.55), for all City Transaction Expenses and all costs and expenses
incurred by Developer with respect to compliance with the terms of this ENA, including without
limitation, costs incurred by Developer in planning and designing the Project, preparing Plans,
submitting applications, conducting due diligence or property investigations, arranging financing,
negotiating the terms of the Transaction Documents or carrying out other acts in contemplation of
the possible purchase and sale of the Development Parcel.
4.3.6 Payment of Outstanding Amounts. Upon a termination of this ENA other
than as set forth in Section 4.4.1, to the extent that the ENA Deposit or other funds provided by
Developer to pay City Transaction Expenses are not sufficient to pay all City Transaction
Expenses, Developer shall promptly upon termination of this ENA fund the amount remaining
unpaid to the City.
4.3.7 Survival of Provisions. The provisions of this Section 4.3 shall survive the
termination of this ENA.
4.4 Exclusivity; Good Faith Negotiations and Remedies.
4.4.1 City Failure to Negotiate Exclusively and in Good Faith. During the ENA
Negotiating Period, the City covenants and agrees to negotiate exclusively with Developer and
any assignee or transferee of Developer authorized by or otherwise approved by the City in its sole
discretion pursuant to Section 6.4 and the City shall not solicit another Person (defined below) for
the Project or enter into any agreement with any other Person regarding the disposition and
development of the Development Parcel or any portion thereof. The City acknowledges and agrees
that but for this exclusivity, Developer would not have entered into this ENA. In the event a court
of competent jurisdiction determines in a final decision that the City has breached this exclusivity
covenant, the City shall be deemed to have failed to negotiate diligently and in good faith. Breach
of this exclusivity covenant shall be the sole means by which City may be deemed to have breached
its obligation to negotiate diligently and in good faith under this ENA and Developer’s sole
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claim damages, reimbursements or monetary payments of any kind or nature from the City except
as set forth herein. Nothing herein shall be deemed to preclude Developer from seeking payment
for amounts which City is obligated to pay pursuant to Sections 4.4.1, 6.9.2 and/or 11.55 of this
ENA, provided that Developer shall not be entitled to any damages in addition to the actual
amounts owed by the City to Developer pursuant to such Sections.
4.4.4 Waiver of Certain Rights. Each of the Parties, on behalf of itself and its
successors and assigns, hereby expressly waives, releases and relinquishes any and all right to any
expectation, anticipation, indirect, consequential, exemplary or punitive damages or damages or
monetary remedies not otherwise specifically set forth in this ENA.
4.4.5 No Liens or Lis Pendens. Developer, on behalf of itself and its successors
and assigns, hereby expressly waives any and all rights to record a lis pendens or to otherwise
place a lien or restriction of any type upon or affecting the Development Parcel.
4.4.6 Other Remedies and Restrictions. In the event the Parties enter into one or
more Transaction Documents, each Party, on behalf of itself and its successors and assigns, hereby
expressly waives its right to assert any breach by the other Party of the covenants of good faith
and exclusivity in this ENA. Nothing in this ENA shall preclude either Party from seeking
injunctive relief to enforce the ENA Negotiating Period, the Offer Period, release and/or
confidentiality requirements of this ENA.
4.4.7 Survival of Provisions. The provisions of this Section 4.4 shall survive the
termination of this ENA.
4.5 Inspection; License.
4.5.1 Access License. The City hereby grants to Developer, for use by Developer
and its employees, representatives, agents, contractors, subcontractors, officers and consultants
(collectively, the “Developer Parties”), a license during the ENA Negotiating Period to enter upon
the Development Parcel for purposes of conducting a due diligence inspection, provided that
Developer shall, and shall cause the Developer Parties to: (a) deliver to the City written evidence
that Developer has procured and then maintains in effect the insurance required under Section
4.5.2 prior to entry on the Development Parcel; (b) give the City twenty-four (24) hours advance
telephonic or written notice of any intended access which involves work on or may result in any
impairment of the use of the Development Parcel; (c) access the Development Parcel in a safe
manner; (d) conduct invasive testing or boring only after obtaining the written consent of the City
to a work plan for such testing, which consent shall not be unreasonably withheld; (e) allow no
dangerous or hazardous condition created by Developer and/or the Developer Parties to continue
beyond the completion of such access; (f) comply with all laws and obtain all permits required in
connection with such access; (g) keep the Development Parcel free and clear of any and all liens
of any kind caused by Developer or the Developer Parties, including without limitation, mechanics'
liens or materialmen's liens related to Developer's or any Developer Parties’ access to or inspection
of the Development Parcel; (h) conduct inspections and testing, subject to the rights of any existing
tenants or contractors doing work on the Development Parcel, if any (which inspections and
testing, if conducted at times other than normal business hours, shall be conducted only after
obtaining the City's consent, which shall not be unreasonably withheld) and in accordance with
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reasonable terms and conditions established by the City; (i) cause the portion of the Development
Parcel subject to such inspection and modified or affected by such inspection to be restored to
substantially similar condition and grade as existed immediately prior to such inspection promptly
upon completion of each inspection; and (j) in accordance with Section 6.9.2, provide City, at no
additional charge, with copies of the results of each inspection made by or for Developer after
Developer’s receipt of such results. The limited license granted herein is revocable by the City
during the continuation of any breach of this ENA by Developer and unless otherwise agreed by
the Parties, shall be automatically revoked and terminated, without further action of the City, upon
the termination of this ENA.
4.5.2 Insurance. Prior to commencement of any access or investigative activities
on the Development Parcel, Developer, at its sole cost and expense, shall obtain or cause the
Developer Parties, with respect to their access and investigative activities, to obtain, such types
and amounts of insurance coverage as set forth in Exhibit B.
4.5.3 Indemnity. Developer hereby agrees to indemnify, defend, protect and hold
the City and the City Parties free and harmless from and against any and all Claims arising in
connection with or resulting from or related to Developer's or the Developer Parties’: (a) exercise
of the license provided in Section 4.5.1, including without limitation, entry onto or access to the
Development Parcel, or breach by Developer or any Developer Parties of the terms and conditions
of the grant of license; (b) exercise of any rights hereunder, including, without limitation, any
inspections, surveys, tests or studies performed by Developer or the Developer Parties with respect
to the Development Parcel, the Project or the Transaction; (c) presence, activities or work on or
related to use of the Development Parcel and any mechanics’ or materialmen’s liens arising with
respect thereto; (d) bodily injury to or death of any person (including, without limitation, any of
the City Parties); or (e) damage to or loss of use of property resulting from any of the foregoing,
save and except to the extent such Claims result from (x) the discovery by Developer or the
Developer Parties of any pre-existing environmental conditions on the Development Parcel not
caused or contributed to by Developer or the Developer Parties, or (y) the gross negligence or
willful misconduct of the City, the City Parties or their respective employees.
4.5.4 Survival of Provisions. The insurance obligations in Section 4.5.2 and
Exhibit B and the indemnification by Developer set forth in Section 4.5.3 shall survive the
termination of this ENA and, if applicable, the execution of the DDA and the closing and transfer
to Developer and shall not merge into any deed conveying the Development Parcel.
5. Proposed Development Concept.
5.1 Compliance with Existing Land Use and Zoning Requirements. The proposed
Project to be negotiated hereunder shall include the development and use of the Development
Parcel consistent with the Reuse Plan, the City’s General Plan, and the Specific Plan.
5.2 Terms of Transaction Documents to be Negotiated. Developer and the City agree
that it is their intent during the ENA Negotiating Period to negotiate Transaction Documents which
are anticipated to address the following terms and conditions and such other terms and conditions
as they may agree, and which will be binding upon the City and Developer and, to the extent
provided therein, their successors and assigns. The following terms and conditions shall not be
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binding upon the Parties during the term of this ENA and are provided in this ENA only to provide
general guidance for negotiation of the DDA and DA:
5.2.1 As-Is Conveyance. While Developer should undertake its own
investigation to determine the presence of hazardous materials and suitability of the Development
Parcel for development, Developer acknowledges and agrees that if the Development Parcel are
conveyed by the City pursuant to a DDA, the Development Parcel shall be conveyed on an “AS-
IS, WHERE-IS AND WITH ALL FAULTS” basis, and Developer shall be obligated to release,
defend, indemnify and hold harmless the City and the City Parties with respect to its acquisition
and development of the Development Parcel and the condition of the Development Parcel,
including, without limitation, any and all land use, soil and environmental conditions of the
Development Parcel, as more fully to be provided in the DDA.
5.2.2 Development. It is anticipated by the Parties that Developer shall be
responsible for design, development, construction and operation of the Project. Developer shall
design and construct the Project on the Development Parcel at its own cost and expense in
accordance with the scope of development, and schedule of performance to be negotiated as part
of the Transaction Documents and in accordance with plans and specifications prepared by
Developer, and approved by the City in accordance with such schedule of performance and in
compliance with all requirements and regulations of the City including, without limitation, the
Specific Plan and applicable zoning.
5.2.3 Compliance with City Requirements. The Project will be subject to
approval by the City, in its governmental and proprietary capacity, and Developer will be required
to comply with the applicable requirements of the Surplus Land Act, as determined by the City
from time to time, and all necessary City entitlement approvals requested to carry out development
of the Project on the Development Parcel and with the development standards in the Specific Plan
and any requirements contained in the Transaction Documents. The Project shall contain a mix of
independent living, assisted living and memory care units in a building containing approximately
262 units; provided that in no event shall the percentage of independent living units exceed seventy
percent (70%) of the total of the unit counts in the Project.
5.2.4 Tustin Legacy Backbone Infrastructure Program Costs. In connection with
development of the Development Parcel, Developer shall make a fair share contribution to the
Tustin Legacy Backbone Infrastructure Program based on the allocations to the Development
Parcel in the City’s Tustin Legacy Backbone Infrastructure Financing Program-2017 Update
adopted October 17, 2017 as the same may be amended from time to time (“Tustin Legacy
Backbone Infrastructure Program”). Pursuant to the Tustin Legacy Backbone Infrastructure
Program, a fair share contribution shall be allocated to the Development Parcel (“Project Fair
Share Contribution”). The DDA shall address the timing of payment of the Project Fair Share
Contribution by Developer to the City.
5.2.5 Community Facilities District (“CFD”). Developer acknowledges that the
City has formed a community facilities district for services (CFD 18-01) funded by a Special Tax
“B” (“Tax B”) imposed within the boundaries of the CFD to fund a portion of the City essential
services, including, without limitation, police and fire protection, ambulance and paramedic
services, recreation programs and services, street sweeping, traffic signal maintenance and the
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maintenance of City-owned parks, parkways and open spaces, lighting, flood control and storm
drain services and other City services and facilities at Tustin Legacy. Developer acknowledges
and agrees that (a) the CFD shall impose Tax B upon the Development Parcel and the
improvements constructed thereon in connection with the Project in an amount to be determined
in a rate and method of apportionment (“RMA”) to be adopted by the CFD for the Project prior to
the close of escrow pursuant to the DDA; and (b) Tax B shall be perpetual and shall not be time
limited in any manner unless determined by the City in its sole discretion. Developer agrees that
it shall affirmatively support and shall cooperate with the City and CFD in the adoption of the
RMA and imposition of Tax B upon the Development Parcel. Developer acknowledges and agrees
that its development plan for the Project will not require use of community facility district proceeds
(including, without limitation, Special Tax A (“Tax A”) funds) and that neither assessment district
nor community facilities district proceeds will be used to reimburse Developer for its development
costs, including Project Fair Share Contribution or Project specific infrastructure costs and the City
agrees that Tax A shall not be applicable to the Development Parcel or the improvements thereon
and Developer shall have no obligation or liability on account thereof.
5.2.6 Construction of In-Tract and Off-Site Infrastructure. Other than as provided
in the Transaction Documents, Developer will be responsible for all costs of any necessary in-tract
improvements and other off-site improvements identified by the City in the DDA, the DA or the
Project entitlements, which work shall not be subject to reimbursement by the City . The off-site
infrastructure work may include installation of or modifications to utilities, roadways, sidewalks,
curb and parking on perimeter streets and will be further defined and described as the planning
effort for the Project evolves.
5.2.7 Applications. Developer shall prepare and process applications for and
obtain from the City and other federal, State and local jurisdictions, all applicable land use,
planning and zoning approvals for the proposed development with the support of the City. These
entitlements will be required to be consistent with the Specific Plan, unless, as part of approval of
any application, modifications to the Specific Plan or any development standards are granted by
the City.
5.2.8 Project Costs; Local Infrastructure. Project costs and revenues will be
separately analyzed and funding of all Project costs will be the sole responsibility of Developer.
Project costs for which Developer will be responsible shall include, without limitation, all costs of
planning, designing, entitling and constructing the Project and all costs of any necessary local
infrastructure improvements and in-tract improvements required in connection with development
of the Project, except as may be otherwise provided in the DDA. Nothing in this ENA waives or
limits the applicability of the Tustin Legacy Backbone Infrastructure Program.
5.2.9 Development Fees. In connection with its development of the Development
Parcel, Developer acknowledges that the Development Parcel will be subject to applicable
development fees, including, but not limited to, those required by the City or other jurisdictions
such as the Transportation Corridor Agencies’ Foothill/Eastern Corridor Fee and school impact
fees and school facility bonds, if any, by the Santa Ana Unified School District, current Orange
County School Facility Bonds, if any, as well as utility meter and connection fees from the Irvine
Ranch Water District and other utilities and districts as applicable.
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5.2.10 Transfer and Assignment Restrictions. Developer acknowledges that the
Transaction Documents shall contain limitations on transfer and assignment of the rights of
Developer including, among other things, the right of the City to approve in its sole discretion
certain assignments and transfers by Developer of the Transaction Documents, the Project or the
Development Parcel or of controlling interests in Developer, as and to the extent set forth in the
DDA.
5.2.11 Mortgagee Limitations and Subordination. Developer acknowledges that
the Transaction Documents shall impose limitations on mortgages and mortgagees on the
Development Parcel and shall require subordination of any mortgage to the Transaction
Documents.
5.2.12 Remedies and Termination Rights. Developer acknowledges that the
Transaction Documents shall contain remedies and termination rights in favor of the City for
breach by Developer of the Transaction Documents, which shall include without limitation, rights
of reverter and rights of repurchase in conveyed land.
5.2.13 Payment and Completion Guaranty. To secure the completion of the Project
and the performance of Developer's construction obligations under the DDA, Developer shall
cause a guarantor approved by the City in its sole discretion to execute a payment and completion
guaranty in form and substance acceptable to each of the Parties in its sole discretion or shall
furnish the City with another form of security meeting the requirements of the City in its sole
discretion (“Guaranty”).
5.2.14 Insurance. Developer shall be obligated in the Transaction Documents to
provide commercial general liability, workers compensation, builder’s risk property insurance, and
environmental insurance as set forth therein.
5.2.15 Additional DDA Deposit. Developer acknowledges that the DDA shall
require additional deposits in amounts to be determined (a) as security for the performance of
Developer's obligations under the DDA and (b) to pay City costs and expenses (including all staff
and third-party costs and expenses, on the same basis as described in Section 4.3.2) incurred by
the City for the periods from execution of the DDA to issuance by the City of a final certificate of
compliance evidencing completion of all of the buildings and other improvements comprising the
Project and satisfaction of all other conditions precedent set forth in the DDA (“Certificate of
Compliance"). The purchase price deposit paid by Developer as a condition to execution of the
DDA, as negotiated by the Parties in the DDA, shall be non-refundable from and after the date the
Parties execute and deliver the DDA.
5.2.16 Purchase Price. The purchase price for the Development Parcel shall be
payable at close of escrow.
5.2.17 Master Marketing Program Fees. Developer acknowledges that the City
acting in its proprietary capacity requires that all builders within Tustin Legacy pay a one-time
master marketing fee towards the marketing of Tustin Legacy by the City in the amount of Fifty
Thousand Dollars ($50,000).
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5.2.18 Licenses and Covenants. The DDA shall include such construction
licenses as the Parties may mutually agree, each in its sole discretion and a Declaration of Special
Restrictions, an SLA Covenant and other covenants recorded against the Development Parcel
restricting the Development Parcel to use as a senior congregate care facility and establishing
certain maintenance requirements and incorporating other City standard provisions, each in form
approved by the Parties, each in its sole discretion.
5.2.19 SLA Regulations and Covenant. To comply with SLA Regulations, the
City shall be required to record a covenant (“SLA Covenant”) against the Development Parcel at
the close of escrow, that requires that if ten (10) or more residential units are developed thereon,
not less than 15 percent of the total number of residential units developed on the property shall be
sold or rented at affordable housing cost, as defined in Section 50052.5 of the California Health
and Safety Code, or affordable rent, as defined in Section 50053 of the California Health and
Safety Code, to lower income households, as defined in Section 50079.5 of the California Health
and Safety Code. Any such rental units shall remain affordable to, and occupied by, lower income
households for a period of 55 years for rental housing and 45 years for ownership housing. The
initial occupants of all ownership units shall be lower income households, and the units shall be
subject to an equity sharing agreement consistent with the provisions of paragraph (2) of
subdivision (c) of 65915 of the California Government Code. Developer acknowledges that these
requirements shall be restrictions running with the land and shall be enforceable against any owner
who violates such restrictions and each successor-in-interest who continues the violation by any
of the entities described in subdivisions (a) to (f), inclusive, of Section 54222.5 of the California
Government Code. Notwithstanding the foregoing the Parties acknowledge and agree that
development of a senior congregate care facility is not subject to the affordable housing
requirements of this covenant.
6. Developer’s Responsibilities.
6.1 Status Reports. Developer agrees to make monthly oral and/or written reports
advising the City and/or its staff of all matters and studies being made (City acknowledging that
meeting minutes will be sufficient as a written report), including Developer’s progress in analyzing
the feasibility of the Project and Developer’s compliance with the requirements of this ENA, and
such other information as may be requested by the City or its staff and to meet as requested by
City staff during the ENA Negotiating Period to report on progress in development of Project
design and financial information, and such other matters as City may request from time to time.
6.2 Development Team. Developer shall, within ten (10) calendar days following the
Effective Date, submit in writing to the City full disclosure of the names of Developer’s agents,
authorized negotiators, professional employees or other associates of Developer who may be
participants in development of the Project and other relevant information concerning the above,
such as addresses, telephone numbers and employers. Developer shall also designate and submit
in writing to the City the names of all Developer’s lead negotiators who shall have authority to
make decisions on behalf of Developer. Developer may amend and/or supplement such
information from time to time as necessary and shall provide prompt written notice to the City
(email being acceptable) with respect to any changes.
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6.3 Financial Status.
6.3.1 Financial Capacity. Developer shall continue to be responsible for
demonstrating to the City the Developer’s financial capacity and capability to perform its
obligations under this ENA and the proposed Transaction Documents. Subject to the provisions
of Section 6.3.2 (the “Confidentiality Protocols”), Developer shall submit any additional
financial information required to demonstrate Developer’s, and guarantor’s, if any, financial
capacity and capability to perform its obligations under this ENA and the proposed Transaction
Documents as requested by the City within thirty (30) calendar days of a request.
6.3.2 Confidentiality Protocols. Developer acknowledges that documents or
other “records” (as that term is defined in the California Public Records Act (“CPRA”)) related to
the Project may be required to be made public upon request. California Government Code Section
6253(a) provides that “[p]ublic records are open to inspection at all times during the office hours”
of the City. If Developer believes that any documents or other records provided to the City are
exempt from the CPRA, Developer shall state in writing the legal basis for Developer's belief that
such documents or other records are exempt from the CPRA, Developer and City shall meet and
confer about exemption of such documents or other records, and City shall evaluate the asserted
basis for the exemption(s) in good faith. If City determines that the requested documents or other
records qualify for an exemption, Developer shall conspicuously mark the documents and other
records “Confidential” and shall submit them to City, and City will not make the records public
except as otherwise required by law or by court order. City's failure to correctly determine the
applicability or inapplicability of an exemption to the CPRA shall not constitute a breach of this
ENA or the Transaction Documents. City will endeavor to notify Developer of any request made
for records related to the Project when the request for the records allows adequate time to provide
such notice. Developer agrees to defend, indemnify and hold harmless the City and the City Parties
from any claims for damages, costs, court costs, awards of attorney fees, or related claims in all
lawsuits and writ proceedings seeking to make records public that Developer has marked
“Confidential” hereunder and requests the City to protect as confidential. City shall promptly
notify Developer of any claim made against City of an alleged breach of CPRA resulting from
document(s) that Developer elected to mark as “Confidential” so that Developer may evaluate
such claim and its determination of the confidentiality of such document(s). In no event shall the
City be required to maintain as confidential any materials required by law to be disclosed by
Developer, or otherwise disclosed by Developer in connection with its public filings.
6.4 Assignment and Transfer. Neither this ENA nor the interest of Developer in this
ENA shall be Transferred (defined below) without the prior written consent of the City in its sole
discretion. Any Transfer shall take place only in accordance with the requirements of this Section
6.4 and any attempted or purported Transfer without the consent of the City as aforesaid shall be
void and a breach by Developer of its obligation to negotiate in good faith under this ENA.
6.4.1 Qualifications of Developer; Limitation on Transfer. Developer recognizes
that the qualifications and identity of Developer and its Controlling Person are important to the
City in light of the importance of the development of the Development Parcel and Tustin Legacy
to the general welfare of the community; the fact that a Transfer is for practical purposes a transfer
of rights and obligations under this ENA and that it is because of the qualifications and identity of
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Developer, Controlling Persons and its key employees that the City is entering into this ENA with
Developer. Therefore, Developer shall not make any Transfer that results in Confluent
Development, LLC (i.e., the initially designated Controlling Person) no longer being in Control of
Developer, and Confluent Development, LLC shall not make any Transfer that results in Marshall
Burton, Chief Executive Officer, no longer being in Control of Confluent Development, LLC, in
each case without the prior written consent of the City, which consent may be given or withheld
in the sole discretion of the City.
6.4.2 Consent Required. Any consent or approval of the City pursuant to this
Section 6.4 shall be as authorized by the City Council. In the absence of express written approval
by the City, no Transfer shall relieve Developer or any other Person from any obligations pursuant
to this ENA. Except as set forth in clause (a) and (b) below, any attempted or purported Transfer
without the consent of the City as required by this Section 6.4 and Section 7.1 shall be void and
immediately upon such Transfer this ENA shall terminate. Further, any Transfer without the
consent of the City shall be a breach by Developer of its obligation to negotiate in good faith under
this ENA. Any termination of this ENA pursuant to this Section shall not relieve Developer of its
obligations to pay sums due to the City pursuant to this ENA, including without limitation,
pursuant to Sections 4.2.4, 4.3, 4.5.3, 11.1 and/or 11.5 of this ENA.
6.4.3 Financial Capacity of Transferee. Prior and as a condition to the
effectiveness of any Transfer, Developer shall cause the proposed assignee to provide (a) the
information, including without limitation, assets and liquidity, of the proposed assignee and any
Guarantor as required by Section 7.1, which shall be subject to the approval of the City in its sole
discretion, and (b) where the City indicates that a Guaranty will be required as a condition of the
Transaction Documents, written assurance from such Guarantor to the City, satisfactory to the City
in its sole discretion, that Guarantor will provide, on behalf of assignee, a Guaranty for the Project
at close of escrow for the Development Parcel.
6.4.4 Definitions. As used in the main body of this ENA:
(a) The term “Control” “Controlled” or “Controlling”, as used with
respect to any Person, shall mean the possession, directly or indirectly (including through one or
more intermediaries), of the power to direct or cause the direction of the management and policies
of such Person, including through the ownership or control of voting securities, partnership
interests, membership interests, or other equity interests, acting as the manager of a limited liability
company, or otherwise.
(b) The term Controlling Person” shall mean (a) any Person who
Controls Developer and (b) any Person who Controls a Controlling Person. Notwithstanding the
foregoing, if a Person has the right to participate directly or indirectly (including through one or
more intermediaries) in significant management decisions of Developer, such Person shall not be
deemed to be a Controlling Person unless such Person also possesses, directly or indirectly
(including through one or more intermediaries), the power to direct or cause the direction of the
management and policies of Developer. The Controlling Person as of the Effective Date is
Confluent Development, LLC, a Colorado limited liability company.
(c) The term “Developer Affiliate” shall mean any entity that directly
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or indirectly Controls, is Controlled by or is under common Control with Confluent Development,
LLC or any Person for which the Controlling Person of CD-MS (Tustin) LLC is the Controlling
Person.
(d) The term “Governmental Authority” shall mean any and all
federal, State, county, municipal and local governmental and quasi-governmental bodies and
authorities (including the United States of America, the State and any political subdivision, public
corporation, district, joint powers authority or other political or public entity) or departments
thereof having or exercising jurisdiction over the Parties, the Project, the Development Parcel or
such portions of the foregoing as the context indicates.
(e) The term “Guarantor” shall mean an entity with assets and liquidity
meeting the requirements of the City and sufficient, in the determination of the City in its sole
discretion, to secure the development, construction and maintenance obligations of Developer
under the Transaction Documents.
(f) The term “Person” shall mean any individual, partnership, limited
partnership, trust, estate, association, corporation, limited liability company, joint venture, firm,
joint stock company, trust, unincorporated association, Governmental Authority, governmental
agency or other entity, domestic or foreign or any other entity or association.
(g) The term “Ownership Interests” shall mean the possession,
directly or indirectly, of voting securities or partnership, general partnership, membership or other
ownership interests (based upon value or vote) of a Person.
(h) The term “Transfer” shall mean any voluntary or involuntary
transfer, sale, assignment, pledge, hypothecation or the like to any Person, including without
limitation, any transfer, sale, assignment, pledge or hypothecation of this ENA, the Ownership
Interests in Developer, or of Developer’s interest in this ENA or any part thereof.
6.5 Design Review/Entitlements Schedule and Submittals.
6.5.1 Entitlement Schedule. It is understood and agreed by Developer that
the quality, character and uses proposed for the Project are of particular importance to the City and
that planning and design review approval and other entitlements by the City will be required for
the development of the Development Parcel. Developer and the proposed architect and engineer
for the Project shall meet with representatives of the City to review and come to a clear
understanding of the planning and design criteria required by the City. Within twenty (20) calendar
days after the Effective Date, Developer shall submit a schedule for entitlement processing that
contains ENA milestones, anticipated submittal dates and City approvals.
6.5.2 Preliminary Design Review. Within ninety (90) calendar days after
the Effective Date, Developer shall submit, for proprietary approval by the City, preliminary
revised design drawings and related documents containing the overall plan for development of the
Project including, but not limited to, the following: a preliminary site plan showing building layout
and dimensions, unit counts for each of the independent living (including cottages), assisted living
and memory care units, parking, landscaping and access on or related to each individual parcel,
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floor plans, preliminary materials call-outs and conceptual building renderings and a development
schedule.
6.6 Project Financial Pro Forma and Other Required Deliverables. Within
ninety (90) calendar days after the Effective Date, Developer shall submit the following business
plan and schedule in a mutually agreed upon format:
(a) overall cost and revenue estimates;
(b) Project cost and revenue data, including information on the Project’s
financial return adequate to enable the City to evaluate Developer’s business offer and economic
feasibility of the proposed development of the Project, as proposed, on the Development Parcel.
Developer shall periodically update the financial pro formas for the Project throughout the ENA
Negotiating Period to reflect changes to the Project, the Plans (defined below), expected costs and
revenue assumptions, and any comments the City provides to Developer on the Project, including,
without limitation, the preliminary site plan and Developer shall provide updated pro formas to
the City on a quarterly basis, or more frequently if requested by the City, within thirty (30) calendar
days of such request therefor by the City.
(c) a comprehensive Project proforma demonstrating the feasibility of
the Project, including a static analysis and a cash flow analysis by quarter, that shall reflect any
comments the City provides to Developer on the preliminary site plan;
(d) a Project schedule for land takedown and construction.
The financial proformas for the Project shall reflect any comments the City provides to Developer
on the preliminary site plan.
6.7 Additional Information. Developer understands and agrees that the City’s
negotiating team reserves the right at any time to request from Developer additional information,
including data and commitments to ascertain the depth of Developer’s capability and desire to
develop the Development Parcel expeditiously. The City’s negotiating team will provide a
reasonable time in which Developer may obtain and submit to the City such additional information.
6.8 Contacts During Negotiation. Developer shall only negotiate with the City’s
negotiating team (as defined in writing by the City Manager or designated representative) and with
no other Persons unless expressly authorized to do so by the City’s negotiating team. During the
ENA Negotiating Period and Offer Period, no employee, member or agent of Developer shall have
any communications regarding this Project with any City official, its advisors or any of its
contractors or consultants involved with the Project or negotiations except for communications
expressly permitted by this ENA. Developer shall make no statements to the media and shall issue
no press releases about the proposed Project without the approval of the City Manager or
designated representative. Developer’s failure to comply with the provisions of this Section 6.8
shall be conclusive evidence that Developer has not “negotiated in good faith”. The foregoing
shall not preclude any proposer from applying for or processing entitlements for the Project or
participating in public meetings of the City Council and/or the Tustin Planning Commission.
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6.9 Environmental and Other Studies.
6.9.1 Environmental Requirements. Compliance with CEQA is a legal
precondition to any final City action to approve and execute Transaction Documents for the
Development Parcel. While the City has agreed to process and reflect the terms of a proposed
transaction in Transaction Documents to be considered by the City for approval, the Parties agree
that no obligation to enter into such Transaction Documents, or transaction, shall exist and no
project nor Transaction Document shall be approved or deemed to be approved on the part of any
Party, until after the Project is reviewed by the City in accordance with the requirements of CEQA.
It is contemplated by the Parties that the City will commence preparation of any CEQA
documentation required in connection with the Transaction Documents and entitlements upon
submittal by Developer of an application for entitlements pursuant to Sections 5.2.7 and 6.5.
Developer agrees to supply information and otherwise assist the City as requested to enable the
City to determine the environmental impact of the proposed development of the Project as
described by the Transaction Documents and to prepare such additional environmental documents,
if any, as may be needed to be completed for the development, including without limitation, a ny
supplement or addendum to the Final EIS/EIR and to cooperate with the City and abide by the
City’s environmental compliance procedures and fee requirements.
6.9.2 Plans, Reports, Studies and Investigations. Developer shall provide the
City, without cost or expense to the City, copies of all plans, reports, studies or investigations
prepared by consultants, architects, engineers and other parties that are contracted with and doing
work on behalf of Developer with respect to the Development Parcel or the Project (provided that
such information shall specifically exclude any proprietary design documents, plans and
specifications, appraisals, internal analysis of the foregoing or other valuation analyses)
(collectively, “Plans”) prepared by or on behalf of Developer for development of the Project on
the Development Parcel. All Plans shall be prepared at Developer’s sole cost and expense. Plans
prepared by Developer’s surveyor, geotechnical consultant(s) or hazardous materials consultant(s)
shall be certified in favor of the City and Developer. Developer hereby agrees that if this ENA is
terminated for any reason other than a breach or default hereunder by the City pursuant to Section
4.4.1, Developer shall, at City request, transfer its rights to any or all Plans identified by the City,
at a cost to the City not to exceed five hundred dollars ($500). In order to assure that the City shall
be able to acquire Developer’s interest in the contracts and the Plans, Developer agrees as follows:
(a) All agreements with consultants and/or engineers shall state that the
contract is assignable by Developer to the City and either (i) such work product is assignable, to
the extent such work product is owned by the applicable consultant or engineer, or (ii) Developer
is the owner of the work product.
(b) Upon request from the City in connection with or following
termination of this ENA other than as a result of a breach or default hereunder by the City
following adjudication pursuant to Section 4.4.1, Developer shall deliver to the City copies of all
Plans requested by the City together with a bill of sale executed by Developer pursuant to which
Developer shall convey to the City all right, title and interest of Developer in and to the contracts
and the Plans requested by the City, and such contracts and Plans shall be free of all claims or
interests of Developer and all liens or encumbrances, provided that Developer makes no
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representations, warranties or guarantees whatsoever (express or implied) regarding the right to
use such Plans or the completeness or accuracy of the Plans, Developer does not covenant to
convey the copyright or other ownership rights of third parties thereto and such conveyance shall
be subject to the rights of the preparers thereof with respect to copyright or ownership of Plans as
set forth in such assigned contracts. Such Plans shall thereupon be free of all claims or interests
of Developer or any liens or encumbrances.
(c) Upon the City’s acquiring Developer’s rights to any or all of the
Plans, subject to the rights of the preparers thereof, the City shall be permitted to use, grant, license
or otherwise dispose of such Plans to any Person for development of the Development Parcel;
provided, however, that Developer shall have no liability whatsoever to the City or any transferee
of title to the Plans in connection with the use of the Plans.
6.9.3 Hazardous Materials Assessment. Developer acknowledges that pursuant
to the Navy Quitclaim Deeds, the Navy found and determined that there was no contamination on
the Development Parcel and issued Finding of Suitability for Transfer for Southern Parcels 4-8,
10-12, 14, and 42 and Parcels 25, 26, 30-33, 37, and Portions of 40 and 41 dated September 28,
2001 (“FOST #2”) and Finding of Suitability for Transfer for Parcels 23, 29, 34, 35, and 36, and
Portions of 1, 16, 17, 24, 27, 28, 40 and 41 dated April 22, 2002 (“FOST #3”). Upon approval of
a DDA the City would intend to sell the Development Parcel by quitclaim deed in the same manner
as the parcels were conveyed to the City to include the covenants and warranties as identified in
the Navy Quitclaim Deeds.
7. Developer.
7.1 Nature of Developer. Developer is a single purpose entity formed by Confluent
Development, LLC, a Colorado limited liability company (“Confluent”), for purposes of
development of the Development Parcel. The City will require that the “Developer” under the
DDA and DA or its manager and Controlling Person be an entity with substantial development
expertise and shall demonstrate to the City that it, either individually or with equity investors has
assets in an amount sufficient to provide assurance to the City, in its sole discretion, that Developer
has the financial capacity to develop, construct and maintain the Project, to secure such obligations
and to comply with its obligations under the Transaction Documents. In addition, Developer shall,
as a condition to close of escrow for the Development Parcel, provide a guaranty from a guarantor,
in each case approved by the City in its sole discretion. Unless otherwise approved by the City
pursuant to the terms of the agreed-upon DDA, the “Developer” under the DDA and DA shall be
CD-MS (Tustin) LLC or another business entity (such as a limited liability company) Controlled
by Confluent as the City may approve for this Transaction in its sole discretion and in accordance
with Section 6.4, upon such terms and conditions as the City may request and the City and
Developer may agree, as specified in the Transaction Documents. Should another business entity
be desired by Developer, subject to approval of the City, Developer shall submit a copy of the
applicable formation documents relating to Developer and any corporate members of Developer
(i.e., as applicable: articles of incorporation; partnership agreement; and/or limited liability
corporation articles of incorporation, statement of information and operating agreement).
Developer acknowledges and agrees that the financial capacity of such entity shall be of critical
importance to the City. Accordingly, throughout the term of this ENA and the DDA, the City shall
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have the right (a) to review and approve the Developer and its owners, including the financial
capacity, assets and liquidity of each of the foregoing and (b) to require, as a condition to execution
of the Transaction Documents and close of escrow for the Development Parcel, security for
performance of the obligations of such entity to be provided by a Person approved by the City in
its sole discretion as Guarantor. The foregoing security shall be provided by a Guaranty provided
by such approved Guarantor in a form acceptable to the City and Developer each in its sole
discretion and by other instrument approved by the City in its sole discretion, as further described
in the DDA. Unless otherwise approved by the City in accordance with Section 6.4, in no event
shall Developer propose as Developer a business entity that is not Controlled by or under common
Control with Confluent.
7.2 Offices of Developer. The principal offices of Developer are located at 2215
Market Street, Denver, Colorado 80205.
7.3 Developer’s Consultants and Professionals. Developer is required to make full
disclosure in writing (email being sufficient) to the City of any changes to its principals, officers,
stockholders, partners, joint venturers, Project employees, lead negotiators and other associates
and all other pertinent information concerning Developer, as may be requested by the City from
time to time. Developer agrees to substitute or supplement any of its consultants and professionals
as reasonably requested by the City.
8. Developer’s Financial Capacity.
8.1 Financial Capacity. Any additional financial information required to demonstrate
financial capacity and capability to perform the obligations under this ENA of Developer, if
requested, shall, subject to the Confidentiality Protocols set forth in Section 6.3, be submitted to
the City or its consultant as requested by the City for the purposes of this ENA.
8.2 Equity. Developer proposes to obtain its equity capital for development of the
Development Parcel as further set forth in the DDA.
8.3 Construction Financing. Developer anticipates financing Project costs for
development of the Development Parcel with thirty-five percent (35%) equity and shall have the
right to secure the Development Parcel with a mortgage or similar financing meeting the
requirements to be established in the DDA for the purpose of constructing the Project, provided
that any indebtedness, liens, security instruments or other Developer and lender obligations
associated with the Project and the Development Parcel shall be subordinate to the DDA and any
obligations thereunder, including the rights of repurchase and reversion contained therein.
8.4 Bank and Other Financial References. Developer shall provide the City with
Developer’s bank and other financial references as requested by the City from time to time.
8.5 Full Disclosure. With respect to any and all such financing, Developer will be
required to make and maintain full disclosure to the City of the methods of financing to be used
for the development and to obtain City consent to the financing documents to be used for such
development, as and to the extent set forth in the DDA.
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9. Intentionally Omitted.
10. City’s Responsibilities.
10.1 Plans and Studies. The City shall, within ten (10) business days following the
Effective Date and at no cost to Developer, provide Developer with copies of all environmental
documents, plans, reports, studies, investigations and other materials the City may have pertinent
to disposition of the Development Parcel and/or development of the Project on the Development
Parcel (“City Plans and Studies”); provided, however, that the City makes no representations,
warrantee or guarantee regarding the completeness or accuracy of such plans, reports, studies,
investigations and other materials and the City shall have no liability whatsoever to Developer or
any transferee of Developer in connection with such plans and studies or the use thereof for any
purposes.
10.2 Environmental Documents. To the extent not previously delivered, the City
agrees to provide a copy of the Environmental Documents to Developer within ten (10) business
days following the Effective Date.
11. Miscellaneous.
11.1 Real Estate Commissions. The City has retained CBRE pursuant to a separate
agreement which stated that Developer will be responsible for payment of amounts due to CBRE
thereunder in connection with the Transaction described in this ENA. Developer agrees to
indemnify and hold the City and the City Parties harmless from any and all Claims arising from or
in any way related to any claim by any broker, agent, or finder regarding this ENA or the sale to
Developer or development of the Development Parcel or any portion thereof by Developer. The
provisions of this Section shall survive the termination of this ENA. City represents that it has not
engaged any broker, agent, or finder in connection with this ENA other than CBRE.
11.2 No City Duty. Except as expressly provided above in Sections 4.3 and 4.4, the
City shall have no obligations or duties hereunder and no liability whatsoever in the event the City
and Developer fail to agree upon or to execute a DDA, DA or any other Transaction Documents.
11.3 Non-Liability of City Officials and Employees. No elected or appointed official,
officer, representative, director, staff member, attorney or employee of the City shall be personally
liable to Developer or any successor in interest in the event of any default or breach by the City or
for any amount which may become due to Developer or to its successor, or on any obligations
under the terms of this ENA.
11.4 Entire Agreement. This ENA represents the entire agreement of the City and
Developer with respect to the matters set forth herein and supersedes any prior negotiations or
contemporaneous writings or statements. This ENA may not be amended except in writing signed
by each of the City and Developer hereunder.
11.5 Attorneys’ Fees. If either the City or Developer institutes any action, suit,
counterclaim or other proceeding for any relief against another Party, declaratory or otherwise
(collectively an “Action”'), to enforce the terms hereof or to declare rights hereunder or with
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respect to any inaccuracies or material omissions in connection with any of the covenants,
representations, warranties or obligations on the part of the other Party to this ENA, then the
Prevailing Party (defined below) in such Action shall be entitled to have and recover of and from
the other Party all costs and expenses of the Action, including (a) the Prevailing Party's reasonable
attorneys' fees which shall be payable at the actual contractual hourly rate for City's litigation
counsel at the time the fees were incurred, but in no event more than $200 per hour and (b) costs
actually incurred in bringing and prosecuting such Action and/or enforcing any judgment, order,
ruling or award (collectively, a “Decision”) granted therein, all of which shall be deemed to have
accrued on the commencement of such Action and shall be paid whether or not such Action is
prosecuted to a Decision. Any Decision entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit, including reasonable
attorneys' fees and expert fees and costs (collectively “Costs”) incurred in enforcing, perfecting
and executing such judgment. For the purposes of this paragraph, Costs shall include in addition
to Costs incurred in prosecution or defense of the underlying action, reasonable attorneys' fees,
costs, expenses and expert fees and costs incurred in the following: (a) post judgment motions and
collection actions; (b) contempt proceedings; (c) garnishment, levy, debtor and third-party
examinations; (d) discovery; (e) bankruptcy litigation; and (f) appeals of any order or judgment.
“Prevailing Party” within the meaning of this Section includes a Party who agrees to dismiss an
Action in consideration for the other Party's payment of the amounts allegedly due or performance
of the covenants allegedly breached, or obtains substantially the relief sought by such Party.
11.6 Covenant Against Discrimination. Developer shall not discriminate against nor
segregate, any person or group of persons on account of sex, race, color, age, marital status,
religion, handicaps, creed, national origin or ancestry in the sale, lease, sublease, transfer, use,
occupancy, tenure or enjoyment of the Development Parcel, nor shall Developer establish or
permit any such practice or practices of discrimination or segregation in the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the
Development Parcel.
11.7 Notices/Submittals. All notices, demands, consents, requests and other
communications required or permitted to be given under this ENA shall be in writing and shall be
deemed conclusively to have been duly given (a) when hand delivered to the other Party; (b) three
(3) business days after such notice has been sent by U.S. Postal Service via certified mail, return
receipt requested, postage prepaid, and addressed to the other Party as set forth below; (c) the next
business day after such notice has been deposited with an overnight delivery service reasonably
approved by the Parties (Federal Express, Overnite Express, United Parcel Service and U.S. Postal
Service are deemed approved by the Parties), postage prepaid, addressed to the Party to whom
notice is being sent as set forth below with next-business-day delivery guaranteed, provided that
the sending Party receives a confirmation of delivery from the delivery service provider; or
(d) when transmitted if sent by email to the email address set forth below; provided, however, that
notices given by email shall not be effective unless either (i) a duplicate copy of such notice is
promptly sent by any method permitted under this Section other than by email (provided that the
recipient Party need not receive such duplicate copy prior to any deadline set forth herein); or
(ii) the receiving Party delivers a written confirmation of receipt for such notice either by email or
any other method permitted under this Section. Any notice given by email shall be deemed
received on the next business day if such notice is received after 5:00 p.m. (recipient’s time) or on
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28 Tustin/Confluent Development
Exclusive Negotiating Agreement
a non-business day. Unless otherwise provided in writing, all notices hereunder shall be addressed
as follows:
City: City Manager
City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: Matthew S. West
Email: mwest@tustinca.org
With a copy to: Director of Economic Development
City of Tustin
300 Centennial Way
Tustin, CA 92780
Attention: Christopher Koster
Email: ckoster@tustinca.org
And with a copy to: City Attorney
Woodruff, Spradlin & Smart
555 Anton Blvd., Suite 1200
Costa Mesa, CA 92626
Attention: David Kendig, Esq.
Email: dkendig@woodruff.law
And with a copy to: Hepner & Myers LLP
1241 Johnson Avenue, Suite 360
San Luis Obispo, CA 93401
Attention: Amy E. Freilich. Esq.
Email: afreilich@HepnerMyers.com
Developer:
CD-MS (Tustin) LLC
c/o Confluent Development, LLC
2215 Market Street
Denver, CO 80202
Attention: Matt Derrick
Email: mderrick@confluentdev.com
And with a copy to: CD-MS (Tustin) LLC
c/o Confluent Development, LLC
2215 Market Street
Denver, CO 80202
Attention: Lauren Selinger
Email: lselinger@confluentdev.com
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29 Tustin/Confluent Development
Exclusive Negotiating Agreement
And with a copy to: Polsinelli
1401 Lawrence Street, Suite 2300
Denver, CO 80202
Attention: Nick McGrath
Email: nmcgrath@polsinelli.com
11.8 Action Taken. Following its approval by the City, this ENA shall be administered
by the City Manager or the City Manager’s designee. Except where the terms of this ENA
expressly require the approval of a matter or the taking of any action by the City Council, any
matter to be approved by the City shall be deemed approved, and any action to be taken by the
City shall be deemed taken, upon the written approval by the City Manager (or the City Manager’s
designee). The City Manager or the City Manager’s designee shall have the authority to issue
interpretations, clarifications and confirmations with respect to this ENA and to determine whether
any action requires the approval of the City Council. All waivers of terms and conditions,
amendments and modifications of this ENA shall require the approval of the City Council.
11.9 No Third-Party Beneficiaries. Execution of this ENA is not intended to create or
confirm any third-party beneficiary rights in or create any liability on the part of either the City or
Developer to any third parties.
11.10 Effect of Transaction Documents. Following mutual execution by the City and
Developer of the Transaction Documents, this ENA shall be of no further force or effect, except
that, unless otherwise agreed in writing by Developer and the City, the release set forth in Section
3.5, the insurance requirements set forth in Section 4.5.2 and Exhibit B, the indemnities set forth
in Sections 4.5.3, 6.3.2 and 11.11, and the confidentiality provisions of Section 11.11 shall remain
in effect with respect to Claims arising and documents and information delivered, during the ENA
Negotiating Period and the Offer Period. Following execution and delivery of the DDA and DA
by the City and Developer, in the event of any conflict between the provisions of this ENA and
any Transaction Document approved by the City and Developer, the provisions of the Transaction
Document shall for all purposes prevail.
11.11 Confidentiality. Except as otherwise required by law or court order, the City and
Developer represent and warrant that each shall keep all information and/or reports obtained from
the other, or related to or connected with the Development Parcel, the other Party, this ENA, and
until presentation to the City for approval, the Transaction Documents or any other documents
negotiated by the City and Developer, including but not limited to City Plans and Studies,
confidential and will not disclose any such information to any Person without obtaining the prior
written consent of the other Party, except that (a) the City shall have the right (i) to disclose any
information contained in any third party reports obtained by Developer and (ii) to make disclosures
to City’s employees and independent contractors, including, but not limited to consultants,
financial planners, outside counsel, contractors and experts as necessary in order to determine if
the Project is feasible and financeable, provided such Persons are made aware the information is
confidential; and (b) Developer shall have the right to make disclosures to Developer’s and/or
Controlling Person’s potential and existing capital partners, investors and lenders, employees,
partners, members and independent contractors, including but not limited to consultants, financial
planners, outside counsel, and experts as necessary in order to determine if the Project is feasible
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30 Tustin/Confluent Development
Exclusive Negotiating Agreement
and financeable, provided such Persons are made aware the information is confidential. Except as
provided in subsection (b) above, Developer shall not disclose such information to any of its
Developer Affiliates or other affiliates not working on the Project. Notwithstanding the foregoing,
(i) information which is or becomes in the public domain, or which is required by any law, rule or
regulation to be disclosed shall not be considered confidential, and (ii) this ENA, the draft
Transaction Documents and all other material relating to this ENA are subject to the provisions of
the CPRA. The City's use and disclosure of its agreements and records are governed by the Act
and nothing herein limits the City’s right and obligation to comply with the Act or with laws
mandating public notice or disclosure of public records, including without limitation, agendas,
public hearings, staff reports and minutes produced in connection therewith, including, without
limitation, the Ralph M. Brown Act. The City makes no representation or warranty that writings
and materials provided to or generated by the City during negotiations will be exempt from the
Public Records Act; provided however that nothing in the foregoing shall relieve the City of its
obligation to abide by the Confidentiality Protocols as set forth in Section 6.3 of this ENA. The
provisions of this Section shall survive the termination of this ENA with respect to matters
provided or disclosed during the ENA Negotiating Period and Offer Period, if any.
11.12 Governing Law/Exclusive Venue. This ENA shall be interpreted in accordance
with California law. The Parties agree that in the event of litigation, exclusive venue shall be in
Orange County, California.
11.13 Counterparts. This ENA may be executed in one or more counterparts each of
which, when so executed, shall be deemed to be an original, and with the signatures delivered by
submission of materials by electronic means, which may include using either DocuSign or similar
program (“Electronic Submission”), or email attachment, each of which shall constitute an
original and all of which together shall constitute one and the same agreement. Signature pages
may be detached from the counterparts and attached to a single copy of this ENA to physically
form one document. Such counterparts shall, together, constitute and shall be one and the same
instrument. This ENA shall not be effective until the execution and delivery by the Parties of at
least one set of counterparts.
11.14 Business Day Defined; Performance of Acts on Business Days. All references
to “business days” in this ENA shall mean and refer to days on which the City of Tustin City Hall
is open for business. In the event that the final date for payment of any amount or performance of
any act under this ENA falls on a Saturday, Sunday or other day on which the City of Tustin City
Hall is closed, such payment may be made or act performed on the next succeeding business day
or day upon which the City of Tustin City Hall is open (as applicable).
11.15 Assistance and Cooperation. Developer and the City shall cooperate in good faith
with one another to achieve the objectives and purposes of this ENA.
(remainder of page is blank; signatures commence on following page}
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S-1 Tustin/Confluent Development
Exclusive Negotiating Agreement
IN WITNESS WHEREOF, authorized signatories of the City and Developer hereto have
executed this ENA as of the Effective Date.
CITY OF TUSTIN:
By: _____________________
Matthew S. West
City Manager
APPROVED AS TO FORM
By: ____________________________
David Kendig
City Attorney
Hepner & Myers LLP
Special Real Estate Counsel to the City
By: ____________________________
Amy E. Freilich, Partner
{signatures continued on following page}
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Tustin Confluent Development ENA 9.5.23
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Exhibit A Tustin/Confluent Development
Exclusive Negotiating Agreement
Exhibit A
Depiction of Development Parcel
(Site Map)
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Exhibit B
Page 1
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Exclusive Negotiating Agreement
Exhibit B
Insurance Requirements
This Exhibit B is attached to and forms part of the ENA to which it is attached. Unless otherwise
indicated, Section references in this Exhibit B are to Sections in this Exhibit B. Initially capitalized
terms used and not defined in this Exhibit B shall be defined as set forth in the ENA.
1. Insurance.
1.1. Required Insurance.
Without limiting the City’s rights to indemnification, Developer shall procure and
maintain, or cause to be procured and maintained, at no expense to the City, and furnish or cause
to be furnished to the City, evidence of the following policies of insurance (complying with the
requirements set forth below) naming Developer as insured with respect to the coverage required
by Sections 1.1.1 and 1.1.2 below, and, with respect to the commercial general liability and
business automobile liability required pursuant to Section 1.1.1, naming the City Parties as
additional insureds. With respect to the environmental liability insurance required pursuant to
Section 1.1.3 below, Developer shall cause its subcontractor or its consultants to procure, maintain
and evidence such insurance at no expense to the City and name the City Parties as additional
insured. All insurance required below shall be obtained by the times set f orth below and kept in
force until termination of the ENA, or for such longer period as is described below. Claims
asserted after termination of the ENA for incidents and occurrences during the term of the ENA
shall be covered as provided herein.
1.1.1. Commercial General and Business Automobile Liability Insurance. Prior
to entry by Developer onto the Development Parcel (which entry shall be solely pursuant to the
terms of the license described in Section 4.5.1 of the ENA), Developer shall maintain or cause to
be maintained commercial general liability insurance and business automobile liability, to protect
against loss from liability imposed by law for damages on account of personal injury, including
death therefrom, suffered or alleged to be suffered by any Person or Persons whomsoever on or
about the Development Parcel, the Project and/or the improvements and the business of Developer
on the Development Parcel, or in connection with the entry, access, inspection and/or investigative
activity pursuant to the ENA and resulting directly or indirectly from any acts or activities of
Developer or anyone directly or indirectly employed or contracted with or acting for Developer,
or under its respective control or direction, and also to protect against loss from liability imposed
by law for damages to any property of any Person occurring on or about the Development Parcel
in connection with the entry, access, inspection and/or investigative activity pursuant to the ENA,
caused directly or indirectly by or from acts or activities of Developer or any Person acting for
Developer, or under its control or direction. Such insurance shall also provide for and protect the
City against incurring any legal cost in defending Claims for alleged loss.
1.1.1.1. Minimum Requirements. Developer’s policies of
commercial general liability and business automobile liability insurance shall be “occurrence”
based policies and shall be maintained in full force and effect at all times until termination of the
ENA. The amount of insurance required under commercial general liability is at least Five Million
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Tustin Confluent Development ENA 9.5.23
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Exhibit B
Page 2
Tustin/Confluent Development
Exclusive Negotiating Agreement
Dollars ($5,000,000.00) each occurrence and in the aggregate, and business automobile liability
with limits of at least Two Million Dollars ($2,000,000.00) combined single limit each accident.
Developer’s subcontractors and consultants shall maintain policies of commercial general liability
and business automobile liability insurance “occurrence” based policies that shall be in full force
and effect at all times when subcontractor and consultant is performing any work or inspections
on or about the Development Parcel with commercial general liability limits of at least One Million
Dollars ($1,000,000.00) each occurrence and Two Million Dollars ($2,000,000.00) aggregate limit
and business automobile liability with limits of at least One Hundred Thousand ($100,000.00)
combined single limit each accident. The commercial general liability and business automotive
liability insurance shall be issued by a company permitted by the Insurance Department of the
State and rated A-/VII or better, by the latest edition of AM Best’s Key Rating Guide. Such
insurance may be provided by a combination of underlying commercial general liability and
business automobile liability, self insurance, and an umbrella or excess liability insurance policy
otherwise meeting the requirements of this Section 1 provided that such umbrella or excess liability
insurance is primary insurance to the City’s insurance and the City has been provided an
opportunity to review and confirm that the coverage evidence via the policy or endorsements is
equally protective.
1.1.1.2. Evidence of Insurance and Required Endorsements. An
ACORD certificate evidencing the foregoing and providing the following endorsements approved
by the authorized representative of the underwriter and approved by the City shall be delivered
prior to entry by Developer and annually (upon request from the City) evidencing renewals of each
policy until termination of the ENA. The commercial general liability and business automobile
liability policies shall be endorsed as follows: (a) designate the City Parties as additional insureds
(b) the insurance coverage shall be primary, and not require contribution of any insurance or self-
insurance maintained by the City; and (c) a waiver of subrogation for the benefit of the City Parties.
The procuring of such insurance and the delivery of certificates and omnibus additional insured
endorsements evidencing the same shall not be construed as a limitation of Developer’s obligation
to indemnify the City Parties as set forth in the ENA. The actual coverage provided by each
insurance policy required under the ENA shall be the minimum limits stated herein or the actual
policy limits, whichever is greater.
1.1.2. Workers’ Compensation Insurance. Prior to entry by Developer onto the
Development Parcel (which entry shall be solely pursuant to the terms of the license described in
Section 4.5.1 of the ENA), Developer shall obtain, and thereafter maintain or cause to be
maintained, workers’ compensation insurance issued by a responsible carrier authorized under the
laws of the State to insure employers against liability for compensation under the workers’
compensation laws now in force in California, or any laws hereafter enacted as an amendment or
supplement thereto or in lieu thereof. Such workers’ compensation insurance shall cover all
Persons employed by Developer in connection with the Project and shall cover liability within
statutory limits for compensation under any such act aforesaid, based upon death or bodily injury
claims made by, for or on behalf of any Person employed by Developer incurring or suffering
injury or death in connection with the Project or the operation thereof by Developer.
Notwithstanding the foregoing, Developer may, in compliance with the laws of the State and in
lieu of maintaining such insurance, self-insure for workers’ compensation in which event
Developer shall deliver to the City evidence that such self-insurance has been approved by the
appropriate State authorities. Each such insurance policy, and each renewal or replacement
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Exhibit B
Page 3
Tustin/Confluent Development
Exclusive Negotiating Agreement
thereof, by endorsement approved by an authorized representative of the underwriter, shall contain
a waiver of rights of subrogation against the City Parties.
1.1.2.1. Contractor and Subcontractor Worker’s Compensation
Insurance. Prior to entry on to the Development Parcel or otherwise pursuant to the ENA by each
contractor and subcontractor, Developer shall cause to be furnished to the City evidence
satisfactory to the City that such contractor and subcontractor involved in performance of work on
the Development Parcel or otherwise pursuant to the ENA maintains workers’ compensation
insurance in compliance with all applicable State laws. Each such insurance policy, and each
renewal or replacement thereof, by endorsement approved by an authorized representative of the
underwriter, shall contain a waiver of rights of subrogation against the City Parties.
1.1.2.2. The insurance required by Sections 1.1.2 and 1.1.2.1 shall be
issued by a company rated A-/VII or better by the latest edition of AM Best’s Key Rating Guide,
or by the State Compensation Fund.
1.1.3. Environmental Insurance. Prior to any invasive testing by Developer upon
the Development Parcel (which shall be solely pursuant to the terms of the license described in
Section 4.5.1 of the ENA), Developer shall obtain, or cause Developer’s environmental consultant
or contractor to obtain, and shall thereafter maintain or cause to be maintained environmental and
pollution legal liability insurance coverage in connection with the investigative activity of
Developer on the Development Parcel pursuant to the ENA and, including coverage for loss,
remediation expense and legal defense expenses, and naming each of Developer and City Parties
as additional insureds to address pollution risks at the Development Parcel. Such policy shall
include coverage for pollution legal liability conditions to the extent that the conditions are created
or exacerbated by the activities or work of environmental consultant or contractor on or about the
Development Parcel.
Such policy shall comply with the following requirements:
(a) The policy shall be written by the insurance company selected by,
or reasonably approved by Developer, and approved by the City, which approval shall not be
unreasonably withheld, and which insurer(s) shall have an AM Best’s rating of A-/VII or better;
(b) The policy shall provide not less than Five Million Dollars
($5,000,000) in coverage, subject to a maximum One Hundred Thousand Dollar ($100,000)
deductible and include a claim reporting period of not less than ten (10) years from the initial date
of access to the Development Parcel pursuant to Section 4.5.1 of the ENA. Such claim reporting
period shall survive expiration or termination of the ENA;
(c) The policy shall be paid for in full at the time of issuance. Such
evidence of full policy premium payment shall be provided on contractor’s, subcontractor’s or
consultant’s letterhead, or their agent’s or broker’s or insurer’s letterhead. The policy shall contain
a waiver of right of subrogation against the City and shall contain a notice of cancellation
endorsement in favor of the City Parties which shall require written notice to the City by the insurer
at least seven (7) days prior to the effective date of cancellation. An endorsement that provides the
insurer “will endeavor to” provide the required notice, or similar non-committal language, is not
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Exhibit B
Page 4
Tustin/Confluent Development
Exclusive Negotiating Agreement
sufficient. As such, Developer’s (or Developer’s environmental consultant or contractor’s)
obligation to maintain or cause the maintenance of the environmental insurance pursuant to this
Section 1.1.3 shall survive the termination of the ENA for the term required for such insurance
policy pursuant to Section 1.1.3(b); and
(d) Developer’s insurance policies shall name the City Parties as
additional insureds with respect to any additional environmental and pollution legal liability
insurance coverage obtained pursuant to this Section 1.1.3.
The DDA will further address the requirements for indemnity and insurance
coverage for environmental and pollution legal liability. The provisions of this Section 1.1.3 shall
survive the termination of the ENA for the period set forth in Section 1.1.3(b).
1.2. General Insurance Requirements.
1.2.1. For all policies or certificates, the insurer endorsements (or a copy of the
policy binder, if applicable) shall identify the ENA in the description section and shall provide
evidence that either (a) the primary insured has paid for its premium in full for any policy that is
currently in place, or (b) that said insurance shall not be cancelled except if the City is given thirty
(30) calendar days advance written notice of any cancellation, except ten (10) day notice shall be
provided for cancellation or termination due to non-payment of premium.
1.2.2. All insurance provided under this Section 1 shall be for the benefit of the
City Parties and any additional parties that Developer may require. Developer agrees to timely
pay, or cause to be paid, all premiums for such Developer’s insurance and, at no cost or expense
to the City, to comply and secure compliance with all insurance requirements necessary for the
maintenance of such insurance. Developer agrees to submit all required certificates and
endorsements evidencing the insurance required under this Exhibit B to the City prior to its entry
onto the Development Parcel. Except as provided in Section 1.2.2.1 below, between seven (7) to
thirty (3) calendar days before the expiration of any such policy, certificates and endorsements
evidencing renewal policies shall be submitted to the City.
1.2.2.1. In the event that endorsements are not available at the time
of initial renewal, the City will accept written confirmation of coverage ordered on behalf of
Developer by their agent/broker on agent/broker letterhead, followed by carrier-issued
endorsements within sixty (60) calendar days.
1.2.3. If Developer or its contractors or subcontractors or consultants fail or refuse
to procure and maintain insurance as required by the ENA, the City shall have the right, at the
City’s election, to suspend Developer’s license to access the Development Parcel pursuant to
Section 4.5.1 of the ENA.
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Tustin Confluent Development ENA 9.5.23
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Exhibit C
1
Tustin/Confluent Development
Exclusive Negotiating Agreement
Exhibit C
Environmental Documents
1. Department of Navy “Final Environmental Baseline Survey” dated March 2001
2. Finding of Suitability to Transfer for Southern Parcels 4-8, 10-12, 14, and 42 and Parcels 25, 26,
30-33, 37, and Portions of 40 and 41 Marine Corps Air Station Tustin, California” dated
September 28, 2001.
3. Finding of Suitability for Transfer for Parcels 23, 29, 34, 35, and 36, and Portions of 1, 16, 17,
24, 27, 28, 40 and 41 dated April 22, 2002
4. Agreement Between The United States of America and The City of Tustin, California for the
Conveyance of a Portion of the Former Marine Corps Air Station Tustin dated May 13, 2002
5. Quitclaim Deed D and Environmental Restriction Pursuant to Civil Code Section 1471 dated May
13, 2002
6. Quitclaim Deed G and Environmental Restriction Pursuant to Civil Code Section 1471 dated May
13, 2002.
7. Geotechnical Report of Observation and Testing during Rough Grading, "Neighborhood D"
Phases I and II, Disposition Area 8, 2C and a Portion of 2B, Tustin Legacy, City of Tustin,
California dated September 26, 2014.
8. Final Summary Report for Per-and Polyfluoroalkyl Substances Sampling at Operable Unit 3, IRP
Site 1, Former Marine Corps Air Station Tustin dated April 2018
9. Final Site Assessment and Soil Removal Action Report Tustin Neighborhood D-South, Areas 1
and 2 Total Petroleum Hydrocarbon Impacts Former Marine Corps Air Station Tustin, Tustin,
California dated September 2018.
10. Determination of No Further Action for Petroleum Release at Neighborhood D South at Former
Marine Corps Air Station Tustin, Orange County, California dated September 10, 2018.
11. Final Summary Report for PFAS Groundwater Sampling in Carve-Outs 5 and 6 (November
2018)
12. N-D South PFAS Investigation Report (August 2019)
13. N-D South PFAS Investigation Report Appendices
14. Final Summary Report, Additional Assessment of PFAS in Groundwater in Carve-Outs 2, 5, 6
and 9 and near OU-3 (June 2020)
15. Final Summary Report, Additional Assessment of PFAS in Groundwater in Carve-Outs 2, 5, 6
and 9 and near OU-3 Phase 2 (October 2020)
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Tustin Confluent Development ENA 9.5.23
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Exhibit C
2
Tustin/Confluent Development
Exclusive Negotiating Agreement
16. Final Preliminary Assessment/Site Inspection Report Basewide Investigation of Per- and
Polyfluoroalkyl Substances (December 2021)
17. Revised Final Preliminary Assessment/Site Inspection Report Basewide Investigation of Per- and
Polyfluoroalkyl Substances (August 2022)
18. Draft Work Plan Remedial Investigation of Per- and Polyfluoroalkyl Substances (June 2023)
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