DEVELOPMENT AND MARKETING AGREEMENT
THIS DEVELOPMENT AND MARKETING AGREEMENT is made and entered into as of the
22nd day of September 1997 by and between Mirage, L.L.C., an Illinois limited
liability company ("Owner"), and UNITED HOMES, INC., an Illinois corporation
("Developer").
WITNESSETH
WHEREAS, Owner is the owner of the real property located in Joliet, Illinois,
legally described on EXHIBIT A attached hereto (the "Property"), on which
Owner intends to develop into lots suitable for residential development (the
"Project").
WHEREAS, Owner desires to engage the services of Developer as an independent
contractor to plan, develop, market, construct and sell the Project, and
Developer desires to accept such engagement, all in accordance with and
subject to the terms, conditions and provisions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the above premises, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Owner and Developer hereby agree as follows:
SECTION 1. ENGAGEMENT OF DEVELOPER
Owner hereby engages Developer to act as the developer of the Project to
perform the services described below, and Developer hereby accepts such
engagement.
SECTION 2. SERVICES TO BE PERFORMED BY DEVELOPER
Developer will plan, develop, market, construct and sell the lots comprising
the Project and perform all necessary services and duties in connection
therewith, or cause such services or duties to be rendered and performed by
others. The Developer shall cause the Project to be developed, marketed,
constructed and sold (i) substantially in accordance with the plans and
specifications for the Project approved by Owner (the "Plans and
Specifications") and (ii) in substantial compliance with the terms of the
development budget ("Full Cost Development Budget") attached hereto as
EXHIBIT B except that the expenditures may not vary from the Full Cost
Development Budget by more than five percent (5%) for any one line item of
the Full Cost Development Budget and the aggregate of all variations from the
Cost Development Budget shall not exceed two percent (2%) of the total amount
of the Full Cost Development Budget ("Permitted Variances"); PROVIDED,
however that all Permitted Variances are approved by Owner prior the
expenditures. It is expressly agreed that Developer shall have no right or
authority to take any action which is not in substantial compliance with the
Plans and Specifications set forth in (i) above or to make any
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expenditure or take any action which will result in the expenditure of
amounts in excess of those set forth in the Full Cost Development Budget,
subject to the Permitted Variances, described in (ii) above.
2.1 PROJECT PRO FORMA. Attached hereto as EXHIBIT and made a part hereof is
Developer's ProForma of the Project (the "Project Pro Forma") which has been
approved by Owner and which sets forth among other things Developer's
detailed projections of: all projected costs and expenses of the Project
including but not limited to the acquisition, development, sales and
marketing, and construction and other cash expenditures. The attached is an
estimate only and Developer makes no representation as to the accuracy of the
same.
2.2 APPROVALS. Developer shall take all actions as may be necessary to
obtain the proper zoning for the Project from the City of Joliet and
approvals from all other units of local government having jurisdiction over
the Project in order to enable Developer to obtain building permits on behalf
of Owner, subject only to the payment of applicable building permit fees.
2.3 GENERAL CONTRACTOR. Developer shall act as general contractor or,
subject to the consent of Owner, may negotiate and enter into a contract with
an affiliate or independent third party to act as general contractor (the
"General Contractor") for construction, materials, labor, and other services
to be performed in connection with the Project. The General Contractor
(whether the Developer or any other party) shall enter into a general
contractor agreement with the Owner, which agreement shall be substantially
in accordance with the Al A substantially in accordance with the AIA General
Contractor Agreement Form A-101 and General Conditions Form A-201-CM, copies
of which are attached hereto as EXHIBIT D (the "General Contractors
Agreement"). To the extent Developer is acting as Owner's general contractor
and to the extent there is a conflict between the terms of this Agreement and
the terms of the General Contractors Agreement, then the terms of this
Agreement shall prevail.
2.4 OTHER CONTRACTORS AND CONSULTANTS. Developer shall select and, on behalf
of and in the name of Owner, negotiate and enter into contracts with all
other consultants, architects, contractors, attorneys and/or suppliers
necessary for any other improvements, supplies, labor and other services to
be performed in connection with the Project. All contracts entered into
pursuant to this Section 2.4 shall be in accordance with the Full Cost
Development Budget; PROVIDED, however, that any contract for an amount in
excess of $25,000 must be submitted to Owner for the approval in writing.
2.5 ADMINISTRATION. Developer shall provide the administration and
coordination of all work at the Project. Specifically, during the
development and construction period, Developer shall perform the following:
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(i) cause construction and progress meetings to be held regularly (not
less than once a month) to discuss such matters with Owner such as
procedures, progress, problems and scheduling, financing;
(ii) supervise subcontractor activity Project including engaging, at
the Project's expense, a Project construction supervisor who shall be at the
Project daily; daily at the Project's supervisor who
(iii) maintain cost accounting records on authorized work performed
under unit costs, additional work performed on the basis of actual costs of
labor and materials, or other work requiring accounting records;
(iv) select and retain the professional services of surveyors, special
consultants and testing laboratories if required, and coordinate their
services and monitor and evaluate their reports;
(v) collaborate in the processing and approval of submissions required
by any unit of local governmental agency;
(vi) submit draw requests and supporting documentation to the lender
for the Project on a monthly basis for Owner's approval for the payment of
work performed at the Project;
(vii) perform such additional supervisory functions as Owner reasonably
deems necessary to accomplish the orderly and proper construction of the
Project; and
(viii) diligently attempt to obtain timely reductions in any letter of
credit which must be provided by Owner as part of the Project financing to
guaranty completion of improvement s to the Project.
2.6 FINANCING. Developer shall assist Owner in obtaining the necessary
financing for the Project in accordance with the Project Pro Forma with a
lender or lenders and on terms reasonably acceptable to Owner, including
without limitation, (a) assisting Owner in the negotiation of appropriate
instruments and documents evidencing and securing such and (b) providing such
guarantees as may be necessary to obtain such financing so that the financing
is non-recourse to Owner. Owner agrees to execute and deliver any and all
other documents reasonably requested by Developer or required by the lenders
with Developer in obtaining financing for the Project. Developer will not
accept any proposal for financing without first obtaining Owner's consent.
All financing will be in the name of Owner. Developer will use its
commercially reasonable efforts to cause the Project to comply with the
terms, covenants and provisions contained in any loan document or other
agreement encumbering or affecting the Project or any security agreement now
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or hereafter encumbering or affecting the personal property located at the
Project. Developer shall provide Owner promptly with copies of all notices
which may be received by Developer from any lender which provided financing
for the Project.
2.7 PERMITS. Developer shall undertake all actions as may be necessary to
comply with licenses, permits, laws, ordinances, order, rules, regulations
and requirements of federal, state and municipal governments, courts,
departments, commissions, boards and officers, or other bodies exercising
similar functions, which may be applicable to the Project. Owner agrees to
execute and deliver any and all applications and other documents reasonably
requested by Developer and otherwise to cooperate to the fullest extent with
Developer in applying for, obtaining and maintaining such certificates,
licenses and permits as are reasonably required. Developer shall promptly
deliver copies of all notices Developer receives to Owner from any local,
state or federal agency alleging non-compliance with any certificate, license
or permit which was issued for the Project.
2.8 EMPLOY AND SUPERVISE EMPLOYEES. Developer shall employ, train, supervise
and discharge such employees as are necessary for the development and
management of the Project and the sale of the Residences in accordance with
the Development Plan. All employees will be employees of Developer. The
Project shall have an on-site construction superintendent whose salary and
related costs shall be paid for directly with funds from the Project.
2.9 INSURANCE. Obtain insurance in form and content and from companies
reasonably acceptable to Owner for all risks regarding the Project as more
fully set forth in EXHIBIT E attached hereto and made a part hereof.
Investigate and make a full written report of all accidents or claims for
damage relating to the ownership, operation and maintenance of the Project,
including any damage or destruction to the Project and the estimated cost of
repair, and cooperate with and make all reports required by any insurance
company. Developer will not vary or modify any portion of the insurance
program previously approved by Owner and will review annually the insurance
program and make such recommendations to Owner as Developer deems advisable
or necessary.
2.10 TAXES, LOANS AND OTHER PAYMENTS. Pay from Project funds, as made
available when due, all taxes, assessments and other impositions applicable
to the Project including all loan payments (including required escrows of
taxes and/or insurance premiums, insuring Owner and Developer from, if any),
all operating expenses and all authorized expenses relating to the
development and maintenance of the Project.
2.11 BOOKS AND RECORDS. Maintain complete and accurate books, records
and accounts of all costs and expenses incurred and all income and receipts
received in connection with the Project. All such books and records of
Developer which relate to the Project will be available for inspection and
audit by Owner or any of its authorized representatives at all reasonable
times during normal business hours.
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2.12 OPERATING ACCOUNTS. Establish a commercial checking account (the
"Operating Account") at such bank as Owner may select in the name of Owner.
Developer is authorized to withdraw funds from the Operating Account on
behalf of Owner for the purpose of making payment of operating expenses
pursuant to Section 4.1 hereof, and disbursements authorized herein
(including the fees payable to Developer pursuant to Section 5 hereof);
provided that such expenditures may only be made in accordance with the Full
Cost Development Budget. The Operating Account shall require the cosignature
of one representative of Owner for any disbursement which is not reflected in
the Full Cost Development Budget and is (i) in excess of $25,000 for payment
of "soft costs," i.e. any fees and related costs to architects, accountants,
attorneys, surveyors and similar costs; (ii) in excess of $100,000 for
payment to an Affiliate of the Owner or Developer including the payment of
the fees to Developer pursuant to Section 5 hereof.
SECTION 3. MARKETING PROGRAM.
3.1 MARKETING PROGRAM. Owner and Developer agree that it is in their mutual
interest to create a high level of demand for the lots through advertising
and other means (the Marketing Program"). The Marketing Program should be
designed by Developer for Owner's prior approval, to attract purchasers to
the Project and shall present an image commensurate with the quality and
pricing of lots to be sold in the Project. Developer shall be responsible to
make sure that the Marketing Program fully complies with all federal and
state laws which are in effect during the term of the Project.
3.2 MARKETING PROGRAM CONTENT. The Marketing Program shall include
marketing, promotion and advertising services for the Project and Developer
shall make such expenditures in support thereof as Developer shall deem
appropriate, consistent with the Full Cost Development Budget attached as
Exhibit B. All decisions regarding the content of the Marketing Program and
any expenditures thereon shall be approved by Owner and such approval shall
not be unreasonably withheld. Any part of the Marketing Program submitted to
Owner wherein Owner does not respond within ten (10) days thereafter, shall
be deemed to have been approved by Owner.
3.3 OTHER PROJECTS. Owner acknowledges that the Marketing Programs shall
highlight the Joliet area and may indicate references to other development
projects of Developer located outside the Project as necessary or desirably
in Developer's judgement to benefit the Project. In such event, Developer
shall prorate such costs between Developer's other projects and the Project
as may be equitable.
SECTION 4. COSTS AND EXPENSES
4.1 OPERATING EXPENSES. Owner will be responsible for the payment of all
costs of developing, marketing and selling the lots in accordance with the
Full Cost Development Budget
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attached hereto. Developer is authorized to pay all such costs of the
Project to the extent that funds are available and such expenditure is in
accordance with the Full Cost Development Budget. In the event, however,
that sufficient funds are not budgeted to pay such costs, there is
insufficient cash to pay budgeted items due to slow sales or closings or for
any other reason whatsoever, Developer will promptly notify Owner.
4.2 REIMBURSEMENT. Developer will be reimbursed for all out-of-pocket
expenses paid to third parties in. connection with the rendition of the
services contemplated herein, including travel, entertainment, printing, long
distance telephone expenses and delivery costs for the Project to the extent
such costs are provided for in the Full Cost Development Budget.
SECTION 5. COMPENSATION
5.1 GENERAL AND ADMINISTRATIVE OVERHEAD REIMBURSEMENT. In order to reimburse
Developer for general and administrative overhead expenses related to or
arising out of development and construction of the Project, Owner will pay to
Developer a General and Administrative Overhead Reimbursement ("GAO Fee").
5.2 PAYMENT OF GAO FEE. The GAO Fee shall be in the amount of 3% of the
Gross Sales Price (as defined below) of a lot.
SECTION 6. REPORTING AND MONITORING
During the entire term of the Project, Developer shall provide Owner with the
following reports:
(i) A monthly sales and marketing report listing lots sold.
(ii) A monthly balance sheet, income statement, and operating cash flow
statement for the L.L.C.
(iii) A quarterly comparison of the original Full Cost Budget to the
combination of actual costs and the costs to complete the Project.
(iv) A quarterly list of aged accounts payable.
(v) A year-end analysis of all of the reports required under this
Section. At the request of Owners, all such reports shall be audited by an
independent accounting firm at Owner's expense.
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(vi) Within 90 days after the end of each fiscal year of Owner, an income
statement, balancesheet, and operating cash flow statement for the Owner.
(vii) Within 90 days after the end of each fiscal year, an income
statement, balance sheet, and operating cash flow statement for the Developer.
(vii) A copy of the tax return for the Partnership.
(ix) Within 10 days from the annual expiry, a copy of the Project's
insurance policy as detailed in Section 8. 1. 1.
(x) A written report detailing the status of bonds or letters of credit
which may have been pledged for the Project.
SECTION 7. DEFAULTS
7.1 DEVELOPER EVENTS OF DEFAULT. The following acts or events which have not
been cured within thirty (30) days of notice thereof by Developer, shall
constitute "Developer Events of Default":
(i) Failure of Developer to report any material Full Cost Development Budget
variances as required by Section 2.6;
(ii) The existence of any variance greater than the Permitted Variances
from the Full Cost Development Budget which have not been approved by Owner;
(iii) The expenditure of funds by Developer other than in accordance
with the Full Cost Development Budget;
(iv) Failure of Developer to submit any of the monthly, quarterly or
annual reports as required by Section 6;
(v) Failure of Developer to obtain and maintain insurance in the amounts
and for the coverage required by Section 8.1 or to provide Owner with copies
of all policies of insurance;
(vi) Failure by Developer to send Owner promptly with any notice alleging a
default or to notify Owner timely of an event of default under any agreement
affecting the Project including financing for the Project;
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(vii) The default by Developer or any of its affiliates, in the
performance of any of its obligations under this Agreement, the Partnership
Agreement or the General Contractors Agreement, and such default continues
uncured for thirty (30) days, provided however, with respect to any non-monetary
default by the Developer under this Agreement, if the Developer begins to cure
such non-monetary default within such thirty (30) day period and, in good faith,
diligently prosecutes such cure to such non-monetary default to completion, such
non-monetary default shall not be considered a Developer Event of Default
hereunder; and
(viii) If Developer files a voluntary petition in bankruptcy or is
adjudicated a bankrupt or insolvent or files any petition or answer seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or other relief under any present or any future Federal, state or
other statute or law, or seeks or consents to the appointment of any trustee,
receiver or similar officer of Developer or the Project.
7.2 OWNER EVENTS OF DEFAULT. The following acts or events which have not been
cured within thirty (30) days of notice thereof by Developer, shall constitute
"Owner Events of Default":
(i) Non-payment of any of Owner's obligations pursuant to this Agreement;
or
(ii) Failure to execute any documents when so required under the terms
of this Agreement.
SECTION 8. TERM AND TERMINATION
8.1 TERM. This Agreement will commence as of the date first above-written and
will continue thereafter until the completion the Project. Upon the expiration
or earlier termination of this Agreement, Developer will deliver to Owner at
Owner's expense copies of all books, records and materials related to the
Project (provided, however, that Developer will be entitled to retain such
copies thereof as Developer deems appropriate) and Owner and Developer will
account to each other with respect to all matters outstanding and all sums owing
as of the effective date of termination.
SECTION 9. INDEMNIFICATION
9.1 INDEMNIFICATION AND INSURANCE.
9.1.1 INSURANCE. Developer will maintain at Owner's expense, public
liability and builders all risks insurance for the Project with a broad form
comprehensive general liability endorsement,
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which liability policy will also name Developer as an insured. The public
liability insurance may be procured under an umbrella policy, but the limits
of liability thereunder will not be less than $2,000,000. Developer will
also maintain at Owner's expense casualty insurance on the Project.
9.1.2 OWNER'S INDEMNITY. Owner, but not its constituent partners, agrees
to indemnify and hold harmless Developer to the fullest extent permitted by
law from and against any and all claims, demands, actions, actions, losses,
and rights of action (including, without limitation, reasonable attorneys'
fees, whether suit is instituted or not, and if instituted, whether incurred
at any trial or appellate level or post judgment) threatened or assessed
against, levied upon, or collected from Developer, arising out of, from or in
any way related to, the development, construction, management or operation of
the Project, except any such liabilities, losses, damages, costs or expenses
to the extent relating to or arising out of Developer's negligence, gross
negligence or willful and wanton misconduct.
9.1.3 DEVELOPER'S INDEMNITY. Developer agrees to indemnify and hold
harmless Owner from all liabilities, losses, interest, damages, costs or
expenses (including, without limitation, reasonable attorneys' fees, whether
suit is instituted or not and if instituted, whether incurred at any. trial
or appellate level), threatened or assessed against, levied upon collected
from or incurred by Owner arising from the default by Developer of any of its
obligations hereunder, negligence, gross negligence or willful or wanton
misconduct of Developer or any of the agents or employees of Developer.
Notwithstanding the foregoing, Developer will not be required to indemnify
Owner with respect to any liability, loss, damage, cost or expense to the
extent that the same are adequately covered by proceeds of insurance
maintained on the Project and Owner receives payment of such proceeds.
9.1.4 NOTICES REQUIRED. A party's duty to indemnify pursuant to the
provisions of this Section 8 is conditioned upon the indemnified party giving
the indemnifying party notice of such suit or proceeding and upon the
indemnifying party being permitted to assume, in cooperation with the
indemnified party, the defense of any such action, suit or proceeding. Each
party will bear its own expenses in connection with the defense of such
action, suit or proceeding.
SECTION 10. MISCELLANEOUS
10.1 OTHER PROJECTS. Developer may acquire, develop, construct, operate
and manage other real estate (or any one or more of the foregoing) on its own
behalf or on behalf of any other person or entity during the term hereof.
Notwithstanding the existence of this Agreement, Developer may engage in any
activity it chooses, without having or incurring any obligation to offer any
interest in such activities to Owner. Neither this Agreement nor any
activity undertaken pursuant hereto will prevent Developer from engaging in
such activities or require Developer to permit Owner to participate in such
activities, and, as a material part of the consideration for Developer's
execution hereof, Owner hereby waives, relinquishes and reserves any such
right or
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claim of participation. Developer will not be required to spend all of its
time in the performance of its duties hereunder, but rather will spend such
time as it deems reasonably necessary to satisfy its obligations hereunder
and to successfully complete the Project. Notwithstanding the foregoing,
Developer shall not participate, directly or indirectly, in any project or
endeavor which would materially and adversely affect the success or viability
of the Project or render it unable to completely fulfill its obligations
under this Agreement.
10.2 AFFILIATE TRANSACTIONS. In the performance of its duties hereunder,
Developer may retain, employ or contract with or on behalf of Owner, any
affiliate, subsidiary or other related person or entity for the furnishing of
materials or services in connection with the Project; PROVIDED. HOWEVER, that
the terms of any such agreement shall be (i) approved in advance by Owner and
(ii) at least as favorable to Owner as would be obtained by Developer in a
comparable arm's length transaction with a person or entity other than
Developer's affiliate, subsidiary or other related person or entity.
10.3 INDEPENDENT CONTRACTOR. Developer's performance of its duties
hereunder will be as an independent contractor on behalf of the account of
Owner. Under no circumstances will Developer be deemed to be a partner or a
joint venturer with Owner under the terms hereof, nor will Developer have any
obligation or liability, in tort or contract, with respect to the Project,
either by virtue of this Agreement or otherwise which may be directly
attributed to the act of Developer.
10.4 ASSESSMENT. Neither Owner nor Developer may assign this Agreement
without the prior written consent of the other.
10.5 NOTICE. All notices, requests, consents or other communications
required or permitted under this Agreement will be in writing (including
facsimile transmission) and will be addressed to:
IF TO DEVELOPER:
United Homes, Inc.
0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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IF TO OWNER:
Mirage, L.L.C.
2 1 00 Xxxx Xxxx, Xxxxx XX 0
Xxxxxxx Xxxxxxx XX 00000
Attn: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each such notice will be deemed delivered (i) on the date delivered if by
personal delivery, (ii) on the date of transmission prior to 5:00 PM if by
written confirmed facsimile transmission, and (iii) on the date upon which
the return receipt if signed or delivery is refused or the notice is
designated by postal authorities as not deliverable, as the case may be, if
mailed. By giving to the other party at least 15 days written notice
thereof, the parties hereto and their respective successors and assigns will
have the right from time to time and at any time during the ten-n of this
Agreement to change their respective addresses and each will have the right
to specify as its address any other address:
10.6 GOVERNING LAW, SUBMISSION TO JURISDICTION, VENUE. This Agreement
and the rights of the parties hereunder will be governed by, and interpreted
in accordance with, the laws of the State of Illinois and any applicable laws
of the Untied States of America. Any legal action or proceeding with respect
to this Agreement shall be brought in Xxxx County, Illinois, in the courts of
the State of Illinois or of the United States for the Eastern Division of the
Northern District of Illinois, and by execution and delivery of this
Agreement, the parties hereby irrevocably accept for themselves and in
respect of their property, generally and unconditionally, the jurisdiction of
the aforesaid courts. The parties hereby irrevocably waive any objection
which they may now or hereafter have to the laying of venue of any action or
proceeding arising out of or in connection with this Agreement brought in the
aforesaid courts and hereby further irrevocably waive and agree not to plead
or claim that any such action or proceeding has been brought in an
inconvenient forum.
10.7 SUCCESSORS. Except as herein otherwise specifically provided, this
Agreement will be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.
10.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument.
10.9 ATTORNEYS' FEES. If any party commences an action against the other
party to interpret or enforce any of the terms of this Agreement or as the
result of a breach by the other party of any terms hereof, the losing (or
defaulting) party will pay to the prevailing party all reasonable
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attorneys' fees, costs and expenses incurred in connection with the
prosecution or defense of such action, including those incurred in any
appellate proceedings, and whether or not the action is prosecuted to a final
judgment.
10.10 FURTHER ASSURANCES. Each party agrees to execute and deliver any and
all additional instruments and documents and do any and all acts and things as
may be necessary or expedient to more fully effectuate this Agreement and carry
on the business contemplated hereunder.
10.11 EQUITABLE REMEDIES. In the event of a breach or threatened breach of
this Agreement by any party, the remedy at law in favor of the other party
may be inadequate and such other party, in addition to any and all other
rights which may be available, will accordingly have the right of specific
performance in the event of any breach, or injunction in the event of any
threatened breach of this Agreement by any party.
10.12 FORCE MALEURE. Inability of either party to commence or complete
its obligations hereunder by the dates herein required resulting from delays
caused by strikes, picketing, acts of God, war, emergencies, shortages or
unavailability of materials or other causes beyond either party's reasonable
control which have been timely communicated to the other party, will extend
the period for the performance of the obligations for the period equal to the
period(s) of any such delay(s).
10.13 RELIANCE ON EXPERTS. Whenever the Developer of Owner reasonably
require or retain the use of an expert in order to discharge a duty
hereunder, the Developer's or Owner's sole responsibility in connection with
said duties shall be the reasonable reliance upon the advice of the experts
and no party shall be liable on account of any duty or obligation imposed
hereunder in the event of a reliance upon professional advice.
10.14 BAD FAITH. Notwithstanding any other provision hereof, but without
limiting the provisions of Section 6 hereof, each party hereto shall be
liable only for bad faith breach of an express provision of this Agreement or
for gross negligence, but in no event shall be liable for good faith mistakes
or judgment.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
OWNER:
Mirage, L.L.C.
By:____________________________________
DEVELOPER:
United Homes, Inc.
By:____________________________________
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