DEVELOPMENT AGREEMENT
THIS
DEVELOPMENT
AGREEMENT (this “Agreement”) is made this 4th day of
March, 2004 (the “Effective Date”), by and between ST.
XXXXXXX COMMUNITY, LLC, a Maryland limited liability company (the
“Developer”) and U.S. HOME CORPORATION, a
Delaware corporation (the “Builder”).
RECITALS:
A. The
Developer is engaged in the subdivision and development of a residential planned
unit development community located in Xxxxxxx County, Maryland and known as
St.
Xxxxxxx (“St. Xxxxxxx”).
B. A
portion of the St. Xxxxxxx community identified by cross-hatching on the drawing
attached hereto as Exhibit A is being developed by the Developer as a
residential community known as Fairway Village (“Fairway
Village”). The development plans for Fairway Village
contemplate that from and after the Effective Date, Fairway Village will be
developed with an additional approximately 1,950 residential lots (each, a
“Lot” and collectively, the “Lots”), such Lots
to be for the construction of attached and detached single family homes (and
not
condominiums or multifamily units) (each, a “Unit” and
collectively, the “Units”).
C. The
Developer and the County Commissioners of Xxxxxxx County, Maryland, a body
corporate (the “County”) are parties to an Order dated as of
December 13, 1989, as amended on August 15, 1994, as further amended on July
22,
2002 (collectively, the “Order”), pursuant to which the
Developer has agreed, inter alia, to make certain public facility
improvements as more fully described in the Order (the “Public Facility
Improvements”) to facilitate the development of Fairway
Village.
D. The
Developer and the County have further agreed, on terms and conditions more
fully
set forth in the Order, that the cost of the Public Facility Improvements will
be financed through the issuance by the County of its general obligation bonds
(the “Bond Financing”).
E. The
County has required that the Developer secure its obligations with respect
to
the Bond Financing with the posting of one or more letters of credit (each,
an
“LOC” and collectively, the “LOC’s”), from
time to time with the County.
F. To
facilitate the development of Fairway Village, the Builder has agreed to post
one or more of the LOC’s required in connection with the Bond Financing, on the
terms and conditions set forth in this Agreement, and in return therefor, the
Builder will have the right to purchase Lots in Fairway Village on a
preferential basis, also on the terms and conditions set forth in this
Agreement.
NOW,
THEREFORE, for
good and valuable consideration, the receipt and adequacy of which is
acknowledged, the Developer and the Builder agree as follows:
1. Letters
of Credit. The Builder agrees that at any time, and from time to
time, upon not less than thirty (30) days written notice from the Developer,
the
Builder will provide one or more LOC’s in form substantially similar to the form
attached hereto as Exhibit B, to secure the obligations of the Developer
to the County pursuant to the Bond Financing. In no event shall the
aggregate face amount of LOC’s posted by the Builder from time to time be
required to exceed a sum equal to Twenty Million Dollars
($20,000,000.00). Each LOC shall be issued by a financial institution
acceptable to the County in its sole discretion, shall be irrevocable for a
period of one year, and shall contain an “evergreen” provision, which provides
for automatic renewal of the LOC unless prior written notice of non-renewal
is
given by the issuer of the LOC not less than thirty (30) days prior to the
expiration thereof, in which event the County shall have the right to draw
upon
the full amount thereof and hold such proceeds as cash collateral hereunder
in
lieu thereof, unless a substitute LOC acceptable to the County is posted by
the
Builder at least fifteen (15) days prior to such expiration date. The
Developer agrees that Bank One will be an acceptable issuer of the
LOC. The Builder shall pay all costs and expenses associated with
providing the LOC’s from time to time, including, without limitation, all
issuance fees, and such LOC’s shall be issued solely on the credit of the
Builder. The Builder acknowledges that the aggregate face amount of
the LOC’s required to be provided by the Builder may both increase and decrease
from time to time, provided that the maximum amount secured by the LOC’s at any
time shall not exceed $20,000,000.00.
2. Right
to Purchase Lots. (a) In consideration of the
Builder’s fulfillment of its obligations pursuant to this Agreement, the
Developer grants to the Builder the right to purchase, on an exclusive basis,
all of the Lots as such Lots are subdivided and developed from time to
time. The purchase of the Lots by Builder shall be on the terms and
conditions set forth in this Agreement, and otherwise on the terms and
conditions of the form purchase and sale agreement attached hereto as Exhibit
C. The mix of the lots between townhouse lots, large single
family lots and small single family lots shall be in accordance with
the existing approvals for the Fairway Village Project, which
currently include approximately 591 townhouse lots, approximately 752 large
single family detached lots and approximately 599 small single family detached
lots. At the request of the Builder, the Developer shall
make reasonable efforts to change the Lot mix, so long as the change will not
result in a material delay in any of the subdivision and development efforts
for
the Fairway Village Project. The
purchase price for the Lots to be acquired by the Builder from the Developer
shall be equal to thirty percent (30%) of the "selling price" of the homes
Builder intends to construct on the Lots being acquired at any given
Closing. For purposes of this paragraph, the “selling price” shall
mean the gross sales price of any Lot and the residence and structure
constructed or to be constructed thereon in accordance with the Builder's
published retail prices in effect at the time of the applicable Closing, and
shall include the Lot and any Lot premium charged by the Builder, the structure
or structures built or to be built on the Lot, all of the Builder's standard
features for the model of home in question, and unfinished basement, garage,
porch, and all floor coverings and standard finishes for the model in question,
but shall not include charges for any upgrades or optional features selected
by
the third party homebuyer which are not routinely included in or with residences
built by the Builder at the time of the Closing in question, including but
not
limited to sunrooms and finished basements. Additionally, for purposes of
this section "upgrades or optional features" shall only include those items
or
things which are traditionally upgrades or optional features for new homes
sold
in the Xxxxxxx County area as of the date of the Closing in question.
Sales incentives, commissions, closing help and closing costs paid by the
Builder shall not be deducted. In
the event Builder substitutes house types on any Lot following Closing, then
Builder shall so notify Developer, and at the time of closing from the Builder
to the home purchaser, Builder shall pay to Developer, or Developer shall pay
to
Builder, as applicable, any difference in price of the affected lot which
results from the substitution of house types. Builder shall keep the
Developer informed of any price adjustments made from time to time during the
term of this Agreement in the Builder's retail price of the homes to be
constructed on the lots by the Builder.
(b)
The
parties anticipate that Developer will develop Lots at the rate of two hundred
(200) Lots per year. The Builder covenants and agrees to purchase not
less than two hundred (200) Lots per calendar year (pro rated for any partial
calendar year) from the Developer to the extent that the same are available
pursuant to this Agreement. Developer shall develop the Lots timely
so as to have sufficient Lots available for Builder to purchase one-twelfth
of
its required annual number of Lots each month. If Developer does not
maintain its development pace to allow Builder to purchase one-twelfth of its
required annual number of Lots each month, then Builder’s annual purchase
requirement shall be reduced by the shortfall in available Lots. If
at any time Builder fails to purchase any Lots made available to the Builder
pursuant to this Agreement, the Developer shall be free to sell such Lots to
any
other party and on any other terms, in the Developer’s sole discretion, and such
Lots shall count against the number of Lots which the Builder is entitled to
purchase on a preferential basis pursuant to this Agreement or call the Builder
in default of the Agreement and exercise the remedies as set forth in Section
4.
(c) The
Builder acknowledges that the Developer cannot guarantee that a certain number
of Lots will be offered to the Builder pursuant to this Agreement, and that
the
Developer cannot guarantee the timing when Lots will be made available or the
exact mix of types of Lots. The Builder further acknowledges that the
Lots will be subject to the lien, operation and effect of all covenants,
conditions and restrictions, and reservations of easements, which exist from
time to time for the portions of St. Xxxxxxx community and Fairway Village
in
which such Lots are located.
(d) The
Builder shall have the right to assign its right to purchase the Lots which
it
is entitled to purchase hereunder to third parties reasonably acceptable to
the
Developer, provided, however, such ultimate purchasers shall purchase the Lots
on the terms and conditions of and subject to this Agreement, and such
assignment shall in no way relieve the Builder of any of its duties or
obligations pursuant to this Agreement. Developer agrees that
Washington Homes, Xxxx Homes, Pulte and Centex are all acceptable third parties
to which Builder may assign its right to purchase Lots hereunder. In
addition, the Builder shall have the right to assign its right to purchase
any
or all of the Lots which it is entitled to purchase hereunder to any affiliate
of Builder, however, upon such assignment such Lots shall remain subject to
the
restrictions on transfers set forth in this Agreement. For purposes
of this Agreement, an “affiliate” of Builder shall mean any other person or
entity who directly or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with Builder. As used
in this paragraph, the term “control” (including the terms “controlling”,
“controlled by”, or “under common control with”) means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such party, whether through ownership of voting securities or
otherwise.
3. Security
for Developer’s Obligations. (a) The parties
acknowledge and agree that from time to time all or part of the property which
constitutes Fairway Village may be subject to one or more land loans or
development loans, which loans will be secured by a first priority lien against
all or such parts of Fairway Village (collectively, the “Senior
Liens”). To secure the obligation of the Developer to
reimburse the Builder for any Developer’s Reimbursement Obligation (as defined
below), the Developer will grant to the Builder a recorded subordinate lien
on
the Lots owned by the Developer from time to time (the “Junior
Lien”), which Junior Lien shall also encumber any portion of Fairway
Village owned by the Developer from time to time which the Developer's
development plans indicate as being intended to be, but which have not yet
been,
developed into Lots. The Junior Lien shall at all times be junior and
subordinate to the Senior Liens, as the same may be amended, extended, modified,
replaced or refinanced from time to time; provided, however, that in no event
shall the amount of the Senior Liens to which Builder’s Junior Lien is
subordinate exceed a sum equal to Ten Thousand Dollars ($10,000.00) times the
number of single-family detached and single-family attached Lots owned by
Developer, which amount shall be increased on an annual basis by a percentage
amount equal to the increase, if any, in the Consumer Price Index (Urban Wage
Earners and Clerical Workers for All Items – U.S. City Average) for the
preceding year. The Builder covenants and agrees from time to time to
provide written evidence of such subordination in form and substance reasonably
satisfactory to the Developer and any lenders extending loans to the Developer
secured in whole or in part by liens on all or parts of Fairway
Village. Developer agrees to use its best efforts to obtain an
intercreditor agreement between the holder of any Senior Liens which affect
the
Lots as of the date hereof and Builder, and to obtain such an agreement from
any
person or entity who acquires a Senior Lien subsequent to the date hereof,
substantially in the form attached hereto as Exhibit
D. Developer’s procurement of such an agreement from the holder
of any Senior Liens (whether of record now or in the future) shall be a
condition precedent to Builder’s obligations hereunder.
(b) As
the Developer sells each Lot in Fairway Village, the Builder shall release
such
lot from the Junior Lien provided that, in each instance, the Developer shall
take Ten Thousand Two Hundred Fifty Six Dollars ($10,256.00) of the proceeds
of
the purchase price for such Lot and escrow the same with an escrow agent
mutually acceptable to Developer and the Builder, for the sole purpose of paying
Developer’s obligations with respect to the Bond Financing as and when the same
come due. At the time the last section of Lots in Fairway Village is
platted, the partial release escrow amount for the Lots in such section shall
be
adjusted as necessary so that, once all of the Lots have been sold, sufficient
funds are contained in the said escrow account to pay off the Bond Financing
in
full and permit Builder to obtain the full and complete release of its
LOC’s. As the escrowed proceeds are used to pay the Developer’s
obligations with respect to the Bond Financing (which shall occur on a not
less
frequently than annual basis), the Builder shall be entitled to reduce its
LOC’s
on a pro rata basis. Developer agrees to procure from the applicable
governmental authorities, in form and content reasonably acceptable to Builder,
written confirmation that such authorities will permit Builder to reduce its
LOC’s as set forth above.
(c) Provided
that the Builder is not in default under Section 2 of this Agreement and a
draw
is made by the County on one or more LOC’s posted by the Builder pursuant to
this Agreement (a “Draw”), the Developer shall reimburse the
Builder for the amount of such Draw, together with interest at the rate of
ten
percent (10%) per annum on all amounts of such LOC’s drawn and outstanding from
time to time, prorated on a daily basis from the date of the Draw to the date
on
which such reimbursement is made, within thirty (30) days of written notice
from
the Builder of the occurrence of such Draw (such reimbursement obligation,
including all principal and interest accrued thereon, hereinafter being referred
to collectively as “Developer’s Reimbursement
Obligation”).
(d) From
and after any time when the Developer fails to timely satisfy a Developer’s
Reimbursement Obligation, the Builder shall have the following
remedies:
(i) if
(A) the value of all remaining Lots owned by the Developer is reasonably
estimated to exceed (B) the sum of the obligations of the Developer with respect
to the loans secured by the Senior Liens, the Junior Lien and all other junior
liens securing other builders, the Builder shall not have the right to foreclose
on the Junior Lien, but the Builder shall be entitled to apply the amount of
such unpaid Developer’s Reimbursement Obligation on a pro rata basis based on
the number of lots remaining to be made available to the Builder pursuant to
this Agreement until such Developer’s Reimbursement Obligation has been paid in
full; and
(ii) if
(A) the value of all remaining Lots owned by the Developer is not reasonably
estimated to exceed (B) the sum of the obligations of the Developer with respect
to the loans secured by the Senior Liens, the Junior Lien and all other junior
liens securing other builders, then the Builder may elect either (X) the remedy
set forth in Section 3(d)(i) above, or (Y) the Builder may convert the amount
due to a five-year fully-amortizing recourse term loan at an interest rate
of
ten percent (10%) per annum, which requires Developer to make monthly payments
of principal and interest to Builder. In the event Builder elects
option (Y) as described above, and Developer thereafter defaults in its
obligations under such recourse term loan, Builder may foreclose on the Junior
Lien pursuant to the provisions of applicable law.
For
so long as any delinquent
Developer’s Reimbursement Obligation remains unpaid, Developer shall place no
new Senior Liens against Fairway Village, nor shall the maximum amount secured
by any then-existing Senior Liens be increased, without the prior written
consent of the Builder.
4. Security
For Builder’s Obligations. The Builder acknowledges that the
posting of the LOC’s as and when required hereunder is a vital component of the
Developer’s ability to develop the infrastructure required for Fairway Village
pursuant to the Bond Financing, and that the Developer will be significantly
harmed if the Builder fails to comply with such obligation. The
Builder further acknowledges that this Agreement and the rights granted to
the
Builder hereunder are of significant and material benefit to the
Builder. Accordingly, the Builder covenants and agrees that, if the
Builder breaches this Agreement, and such breach is not cured within twenty
(20)
days following written notice thereof from the Developer, then in addition
to
any other rights and remedies to which the Developer may be entitled at law
or
in equity, all LOC’s posted by the Builder pursuant to this Agreement shall be
immediately forfeited in favor of the Developer, and the Builder shall have
no
further rights to purchase Lots on the terms of this Agreement; provided,
however, that upon any such default, Developer shall use its good faith
commercially reasonable efforts to attempt to obtain an agreement by any
subsequent purchaser of the Lots which were to be purchased by Builder pursuant
to this Agreement to post its own LOC’s in substitution for Builder’s LOC’s, and
upon the posting of substitute LOC’s by such subsequent purchaser of such Lots,
all LOC’s posted by the Builder (or, if said LOC’s had previously been drawn
upon and converted into cash, then the cash derived from said LOC’s) shall be
returned to the Builder.
5. Title
to Lots. The Developer hereby represents and warrants to the
Builder that the status of title to the Lots is as set forth on Developer’s
title policy, a copy of which is attached to this Agreement as Exhibit E
and incorporated herein by reference, and that the Lots are not subject to
any
exceptions to title other than those identified in Schedule B-2 of the said
policy. Following the date of this Agreement, Developer shall not,
without the prior written consent of Builder, which consent shall not
unreasonably be withheld, conditioned or delayed, create any new encumbrances
on
or exceptions to title to the Lots which will survive closing on the sale of
such Lots to Builder, other than (i) covenants, conditions, easements and
restrictions ordinarily recorded in the development of residential housing
developments, and typical and customary utility agreements and subdivision
agreements, provided such covenants, conditions, easements restrictions and
agreements shall not prevent or materially affect Purchaser’s ability to
construct, market and sell Purchaser’s standard single family homes thereon;
(ii) ad valorem taxes and assessments not then due and payable; (iii) zoning
regulations of the County or city in which the lots lie; (iv) sewer and water
facility charges; and (v) the Declaration of Easements, Covenants, Conditions
and Restrictions recorded for Fairway Village and Sheffield Neighborhoods and
Fairway Village Architectural Covenants.
6. Notices.
All notices and other communications hereunder shall be in writing and shall
be
delivered personally against receipt or shall be sent by registered mail,
certified mail, or Express Mail service, postage prepaid and return receipt
requested, or by a nationally-recognized overnight delivery service, addressed
to the parties as follows:
To
the
Builder: U.S.
Home
Corporation
00000
Xxx
Xxxxxxxxx Xxxxxx
Xxxxx
000
Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx
X. Xxxxxx,
Division
President
Fax
No.:
(000) 000-0000
With
a
copy
to: U.S.
Home Corporation
Legal
Department
00000
Xxxx Xxxx
Xxxxxxx,
Xxxxx 00000
Fax
No.: (000) 000-0000
And
to:
Xxxxx X. Xxxxxxxxxx
Walsh,
Colucci, Xxxxxxxxxx,
Xxxxxx
& Xxxxxxx, P.C.
00000
Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Fax
No.:
(000) 000-0000
To
the
Developer: Xx.
Xxxxx X. Xxxxx
President
000
Xxxxxxxxx Xxxxxxx
Xxxxxx
Xx.
Xxxxxxx, Xxxxxxxx
00000
With
a copy
to: Xxxxxxx
X. Xxxxx, Esq.
Xxxxxxx, Bowling & Xxxxx, P.A.
000 Xx Xxxxxx Xxx
XX Xxx 000
Xx Xxxxx, Xxxxxxxx 00000
7. Counterparts.
This Agreement may be executed in a number of identical
counterparts. If so executed, each of such counterparts shall,
collectively, constitute one agreement; but in making proof of this agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
8. Non-Business
Days. If the date for delivery of a notice or performance of some
obligation of the County or the Developer falls on a Saturday, Sunday or legal
holiday in the State of Maryland, then the date for such notice or performance
shall be postponed until the next business day.
9. Governing
Law. This Agreement, and the validity, construction,
interpretation and enforcement thereof, shall be governed by the laws of the
State of Maryland.
10. Condition
Precedent. Builder acknowledges that it has obtained the
written approval of this transaction from the Corporate Investment Committee
of
Lennar Corporation, and has thus satisfied a condition precedent to its
obligations under this Agreement.
11.
Cross Default. For purposes of this Agreement, a default
under this agreement by either party shall also constitute a default by that
party under the Purchase Agreement, and a default under the Purchase Agreement
by Developer shall also constitute a default under this agreement by Developer;
however, a default under the Purchase Agreement by Builder shall not constitute
a default under this Agreement by Builder.
WITNESS
the signatures of the parties
set forth below:
THE
BUILDER:
U.S.
HOME CORPORATION
By:
/s/
Xxxxxx X.
Xxxxxx
Name:
Xxxxxx X. Xxxxxx
Title:
Division
President
THE
DEVELOPER:
ST.
XXXXXXX COMMUNITY,
LLC
By:
/s/
Xxxxx X.
Xxxxx
Xxxxx
X. Xxxxx, Chariman of the
Management
Committee