LETTER AGREEMENT DATED FEBRUARY 15, 2007 BETWEEN ROBERT AND KATHY DUNLAP AND TUHAYE LLC
EXHIBIT
10.25
LETTER
AGREEMENT DATED FEBRUARY 15, 2007
BETWEEN
XXXXXX AND XXXXX XXXXXX AND TUHAYE LLC
(Project
“B” Joint Venture: Approximately 40 Acres)
February
15, 2007
This
Letter Agreement (“Agreement”)
memorializes the agreement of the undersigned, Xxxxxx & Xxxxx Xxxxxx
(“Seller”), to enter into a joint venture with Tuhaye LLC or its designee
(“Tuhaye”) with respect to the development and sale of all of Seller’s right,
title and interest in and to approximately 40 acres of land in Wasatch County,
Utah, as described more particularly in Exhibit “A” attached hereto (the
“Property”), upon the terms, conditions, and covenants contained
herein. Tuhaye and Seller are sometimes called the
"Parties".
The
joint venture involving the
development and sale of the Property shall occur based on the following terms
and conditions:
A. BASIC
TRANSACTION
1. Formation
of Joint Venture. Within three (3) calendar days of
execution of this Agreement by the Parties and satisfaction of the conditions
below (the “Formation Date”), the Parties shall form a mutually-acceptable
joint-venture entity (e.g., limited liability company) domiciled in Utah (the
“Joint Venture Entity”) for the sole purpose of developing and selling the
Property, (the “Project”), and shall prepare and execute a definitive joint
venture agreement and/or charter documents (e.g., an operating agreement) that
reflect the terms and conditions of this Letter Agreement (collectively,
“Definitive JV Agreement”). The obligation of Seller to consummate formation of
the Joint Venture Entity on the Formation Date is subject to the satisfaction,
at or prior to the Formation Date, of the following conditions: Seller,
associated third parties and Talisker Realty Limited or assigns shall have
entered into and delivered copies of Letter Agreements (Project “C" Joint
Venture: Approximately 30 Acres, and Project “A”: Approximately 303.1 Acres)
mutually acceptable to the parties thereto and the directors and shareholders
of
sellers of Projects “A” and “C” shall have approved and ratified those
agreements.
2. Ownership
and Management of Joint Venture Entity. The Joint
Venture Entity shall be owned equally by Seller and Tuhaye, and shall be managed
and operated by three managers consisting of two selected by Tuhaye or its
designee under this Agreement, and one selected by Seller (collectively, the
“Managers”) in accordance with standards generally applicable to real estate
developers in the area; provided, however, that the mutual consent of Seller
and
Talisker shall be required for any and all of the following: (i) dissolution,
termination, merger or consolidation of the Joint Venture Entity; (ii)
termination of this Agreement or the Definitive JV Agreement, except as
otherwise provided herein or therein; (iii) any bulk sales of Joint Venture
Entity assets outside the ordinary course of business, or the sale, transfer
or
conveyance of substantially
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all
of
the Joint Venture Entity’s assets outside the ordinary course of business;
(iv) entry into the Joint Venture Entity of any new member or owner
(e.g., member, partner, shareholder); (v) the transfer or sale of any ownership
or membership interest in the Joint Venture Entity (other than transfers
to
affiliates that control, are controlled by, or are under common control with,
the transferring Party); (vi) borrowing money outside the ordinary course
of
business from banks, other lending institutions, or the Members, and in
connection therewith, encumbering and granting security interests in the
assets
of the Joint Venture Entity outside the ordinary course of business to secure
payments of the borrowed sum; (vii) to pay or cause to be paid compensation
to
any Member or the Managers outside the ordinary course of business or other
than
as expressly set forth herein, and (viii) to increase the number of, or replace
the managers of the Joint Venture Entity, except for a Member’s right to replace
its own designated Manager or Managers. No member of the
Joint Venture Entity may sell any portion of their ownership or membership
interest therein for a period of four (4) years following the Formation
Date. Thereafter, if a member receives a bona-fide written offer to
purchase its interest, such member shall provide the other member with written
notice of the offer together with a copy of the offer, and the other member
shall have the right for a period of sixty (60) days after receipt of such
notice to elect to purchase the interest on the same terms and conditions
as
those contained in the offer. If the other member fails to make such
election within said time period, then the selling member may consummate
the
purchase and sale of its membership interest pursuant to the terms and
conditions of such offer.
3. Conveyance
of Property. Within three (3) business days of the
Formation Date (the “Contribution Date” or "Closing"), Seller shall convey the
Property “AS-IS,” except as otherwise expressly provided in this Agreement, to
the Joint Venture by Special Warranty Deed. For purposes of this
Agreement and the transactions contemplated hereunder, the Property shall be
deemed to have a Property Value of $2,000,000. At Closing, Seller may
file a deed of trust, collateral assignment of agreements, permits and licenses,
assignment of rents and profits, and security agreement (collectively, the
“Deed
of Trust”) in the amount of the Property Value. Seller agrees the lien of its
Deed of Trust will be subject, subordinate, junior and inferior in all respects
to the liens evidenced by and the payments due under or in connection with
any
construction loan or permanent financing provided, obtained or secured in
connection with development of the Property. At the request of such lenders
and
without further consideration, Seller agrees to execute, deliver and record
such
other documents, and take such other action to confirm and effectuate the
foregoing.
4. Tuhaye
Responsibilities. Tuhaye shall have the following
responsibilities on behalf of and in relation to the operation and management
of
the Joint Venture Entity: (i) as soon as practicable following Closing but
not
later than 18 months following Closing, create a business & development plan
that specifies development timing parameters and that is consistent with the
look and feel of Talisker residential developments in the vicinity of the
Project, and that
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addresses
material aspects of the Project including land planning, marketing, budgeting
and sales; (ii) submit the Project to Wasatch County for approvals and
permitting within 18 months following Closing; (iii) as soon as practicable
following receipt of such approvals and permits, commence construction of the
Project, and diligently proceed in good faith and complete all construction
and
development work in accordance with the business plan & development plan
through to Project completion; (iv) cause the Joint Venture Entity to pay all
direct and indirect costs (as determined in accordance with GAAP) related to
the
construction, development and sale of the Project, including sales and marketing
costs; (v) arrange financing for the Project at rates substantially the same
as
those then paid by Tuhaye or its affiliates to its commercial lenders; and
(vi)
advance to the Joint Venture Entity, as a Special Capital Contribution, any
funds necessary to complete the Project in the event the proceeds of such
financing are insufficient. In no event shall Seller have any
obligation to fund the costs or expenses of the Joint Venture Entity or the
Project. The schedule described in (i), (ii) and (iii), above, may be
amended by the unanimous consent of the Managers, which shall be granted if
Tuhaye has diligently and in good faith carried out the Project to that point,
and if either a force majeure event or other good cause exists for relief from
the schedule, which relief must be sought by Tuhaye at or about the time of
the
causal event.
5. Tuhaye
Compensation. Tuhaye shall be compensated for the
Tuhaye Responsibilities (described above) as follows:
a. A
Construction Management Fee equal to five percent (5%) of the hard and soft
costs associated with the improvement and development of the underlying
Property, but excluding: (i) the cost of the acquisition of the Property, (ii)
any above-market construction costs charged by a Talisker construction entity
for improvement and development of the Property, and (iii) the cost of Talisker
Club membership, such fee to be paid as described below. Tuhaye and
the Joint Venture Entity shall not enter into any above market construction
contracts involving the development of the Property with any Talisker-affiliated
person or entity.
b. A
Talisker Branding Fee of eighteen percent (18%) of the actual retail sales
price
(excluding broker commissions and the cost of the associated Talisker Club
membership) of all lots, parcels, and improvements sold in connection with
the
Project, such Branding Fee to be paid as described below. Neither
owner of the Joint Venture Entity shall be obligated to pay any capital
contributions, special assessments or other proceeds to the Joint Venture Entity
for purposes of allowing the Joint Venture Entity to pay the Branding Fee as
described herein.
6. Payment
and Distribution of Joint Venture Revenues. All
revenues received by the Joint Venture Entity from the transfer or sale of
lots,
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parcels,
improvements or any of its assets shall be paid and distributed as follows:
(i)
first, as required by any lender that has provided financing for the Project;
(ii) second, to Seller in payment of the Property Value; (iii) third, to
the
repayment of any Special Capital Contribution made by Tuhaye under Section
4,
above; (iv) fourth, to the payment of the Construction Management Fee, and
then
the Talisker Branding Fee; and (v) fifth, 50/50 to the
Parties.
7. Lot
Selection Right. Seller shall have the first right to
select a lot from among all lots platted on the Property. Tuhaye
shall provide to Seller a copy of the recorded plat within thirty (30) days
of
recordation, together with lot pricing information. Seller’s first
right is exercisable by written notice to the Joint Venture Entity within thirty
(30) days after Seller’s receipt of a copy of the recorded plat and the pricing
information regarding the lots. In the event Seller elects to
exercise this right as provided above, the Value of said lot (as defined below)
shall be deducted from the amount of the Property Value to be paid to seller
under Section A.6.(ii), above. The lot Value shall be the retail
price of the lot as established by the Joint Venture Entity during the ordinary
course of business and in a manner not designed or intended to discriminate
against Seller.
B. OTHER
TERMS AND CONDITIONS
1. Seller
Warranties and
Representations. Seller
represents that Seller has fee title to the Property and will convey to the
Joint Venture Entity good and marketable title to the Property free from any
options, claims, rights to purchase, or encumbrances, except those approved
by
Tuhaye. Seller agrees to be responsible for taxes related to the
Property prior to Contribution Date. Seller will cause to be paid by
the Contribution Date all mortgages, trust deeds, judgments, mechanic's liens,
damages, claims, tax liens and warrants involving the Property which appear
in
the Title Commitment delivered to the Joint Venture Entity as of the
Contribution Date, and will indemnify and hold the Joint Venture Entity and
its
principals harmless from and against such to the extent related to any events
and/or ownership of the Property prior to the Contribution Date, except Seller’s
indemnity shall not apply to any claims by through or under Xxxxx Xxxxxxx,
his
affiliated company, or their predecessors, successors or assigns (collectively,
“Xxxxxxx”), for an easement on, through or across the Property to the extent any
such Xxxxxxx claim results from any action taken by Seller upon the instruction
of Tuhaye; and the Joint Venture Entity will indemnify and hold Seller harmless
from and against any such Xxxxxxx claim. The parties
acknowledge that commencing in the fall of 2006, Xxxxxxx made a demand upon
Seller for an easement on, through or across the Property and ultimately, Seller
declined to xxxxx Xxxxxxx an easement upon the instruction of Tuhaye; the
parties further acknowledge that the Joint Venture Entity shall indemnify and
hold Seller harmless from and against any claim by Xxxxxxx arising
therefrom. Seller shall fully cooperate with and support in any way
necessary the Joint Venture Entity’s development efforts including all
entitlement and permitting processes. Seller disclaims, and makes no
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representation
or warranty with respect to water or water rights including, without limitation,
the ability of the Property to participate in, or purchase water rights from
any
water district.
2. Seller
Disclosures. No later than ten days following execution
of this Agreement, Seller shall provide to Tuhaye the following (“collectively,
"Seller Disclosures"): (a) a current commitment for a policy of title insurance
issued by Coalition Title Agency; (b) a copy of any leases and rental agreements
now in effect, if any, with regard to the Property; (c) a copy of written
notices of any claims or conditions concerning the Property, if any, including
without limitation, any relating to environmental conditions; and (d) any
agreements, documents, surveys or studies in Seller’s possession concerning the
Property including, without limitation, any option or purchase
agreements. Within three days of receipt of the Seller Disclosures,
Tuhaye may terminate this Agreement based on any material condition adversely
affecting the Property, as identified in the Seller Disclosures, or give Seller
written notice of unmerchantability of title or of any other unsatisfactory
title condition shown by the title documents. If Seller receives
notice of unmerchantability of title or any other unsatisfactory title
conditions, Seller shall use reasonable efforts to correct said items and bear
any nominal expense to correct the same prior to the Contribution
Date. If such unsatisfactory title conditions are not corrected to
Tuhaye's satisfaction on or before Contribution Date, this Agreement shall
then
terminate; provided, however, Tuhaye may, by written notice received by Seller,
on or before Contribution Date, waive objection to such items, in which case
the
Property shall be deeded to the Joint Venture Entity as provided
herein. Upon such waiver and notwithstanding any other provision of
this Agreement to the contrary, all of Seller’s obligations as to any such
waived conditions shall be deemed discharged and satisfied, and Seller deemed
released by Tuhaye and Joint Venture Entity from any and all claims in
connection therewith.
3. Talisker
Club. The purchasers or transferees of any platted
Project lot shall be required to acquire a Talisker Club membership at the
then
applicable price or deposit amount.
D. COSTS
Tuhaye
and Seller are responsible for
their respective costs and expenses incurred at any time in connection with
pursuing or consummating this Agreement. Notwithstanding the
foregoing, Joint Venture Entity shall be responsible for the title insurance
premium for an Owner’s Policy of Title Insurance issued to the Joint Venture
Entity in the full amount of the Property Value. Items such as
property taxes and other assessments and charges shall be pro-rated between
Seller and the Joint Venture Entity as of the Contribution Date.
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E. MISCELLANEOUS
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Counterparts. This
Agreement may be executed in one or more counterparts, each of which
will
be deemed to be an original copy and all of which, when taken together,
will be deemed to constitute one and the same
agreement.
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Binding
Effect. Upon execution of this Agreement, the
development and sale of the Property shall occur in accordance with
the
terms and conditions of this
Agreement.
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Confidentiality. The
Parties shall at all times keep the terms and conditions of this
Agreement
and the transactions contemplated hereunder in relation to the development
and sale of the Property strictly confidential, and shall not disclose
such outside their respective organizations except that Tuhaye may
disclose such to any party providing financing or professional services
to
Tuhaye or its affiliates, or as required by law either through mandatory
legal process or in disclosures required of public companies. Each Party
shall
cause its members, officers, employees, agents, representatives and
affiliates to abide by the provisions of this
Paragraph.
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Governing
Law; Jurisdiction; Costs. This Agreement shall be
construed in accordance with and governed by the laws of the State
of
Utah. In the event of any dispute related to this Agreement or
the Property, (i) any formal action shall be commenced and maintained
in
federal and/or state courts located in Utah, and (ii) the prevailing
party
shall be entitled to all costs and expenses related thereto, including
attorney’s fees.
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5.
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Commissions. Each
party represents and warrants that no broker or finder has acted
directly
or indirectly for it in connection with this Agreement, and no broker
or
finder is entitled to any brokerage or finder’s fee or other commission in
connection with the transactions contemplated
herein.
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6.
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General. The
captions and headings of this Agreement are for convenience and reference
only, and do not affect the construction or interpretation of any
of its
provisions. In this Agreement the singular includes the plural,
the plural the singular, and the use of any gender is applicable
to all
genders. This Agreement shall not be assigned without the prior written
consent of the parties hereto, such consent not to be unreasonably
withheld.
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7.
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Notices. Notice
required or permitted hereunder shall be in writing and delivered
in a
manner most efficient under the circumstances. Subject to the
foregoing and unless otherwise specifically provided, notice shall
be
given by (1) hand delivery, (2) facsimile, or (3) certified mail
(postage
prepaid & return receipt requested), delivered as
follows:
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Seller: Xxxxxx
X. Xxxxxx
00000
Xxxxxxxxx Xxxxx
Xxxxxxxxx,
Xxxxxxxx 00000
Telephone
No.: 000 000
0000
Facsimile
No.: 000
000 0000
Email:
xxxxxxx@xxx.xxx
Tuhaye:
Xxxxx X. Xxxxx
000 Xxxx Xxxxxx
X. X. Xxx 0000
Xxxx Xxxx, XX 00000
Telephone
No.:
000-000-0000
Facsimile
No.:
000-000-0000
Email:
xxxxxx@xxxxxxxxxxxxxxxx.xx m
or
at
such other address as a party hereto may designate by written
notice. Notice shall be deemed effective on the date of delivery if
hand delivered or faxed (to be an effective notice by fax, there must be a
written confirmation of the date and time of the transmission, generated
contemporaneously by the transmission device in the ordinary course), or on
the
third day after mailing if sent by certified mail.
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[SIGNATURES
COMMENCE ON NEXT PAGE]
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/s/ Xxxxxx X. Xxxxxx |
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Xxxxxx
X. Xxxxxx
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/s/ Xxxxx X. Xxxxxx |
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Xxxxx
X. Xxxxxx
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Tuhaye
LLC
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/s/ Xxxxx X. Xxxxx |
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By:
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Xxxxx X. Xxxxx |
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Its:
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Authorized Signing Officer |
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