developmentagreement.htm


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    DEVELOPMENT
      AGREEMENT

    


    THIS
      DEVELOPMENT
      AGREEMENT (this “Agreement”) is made this 4th day of
      March, 2004 (the “Effective Date”), by and between ST.
      CHARLES 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 Charles County, Maryland and known as
      St.
      Charles (“St. Charles”).

    


    B.           A
      portion of the St. Charles 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 Charles 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 Charles 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. Charles 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, Ryan 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                                                                

    10230
      New
      Hampshire Avenue

    Suite
      300

    Silver
      Spring, MD  20903

    Attn:  Philip
      F. Barber,

                                                            Division
      President

    Fax
      No.:
      (301) 408-0443

    


    With
      a
      copy
      to:                    U.S.
      Home Corporation

    Legal
      Department

    10707
      Clay Road

    Houston,
      Texas 77041

    Fax
      No.: (713) 877-2471

    


    And
      to:                                
 David J. Bomgardner

    Walsh,
      Colucci, Stackhouse,

    Emrich
      & Lubeley, P.C.

    13663
      Office Place, Suite 201

    Woodbridge,
      VA  22192

    Fax
      No.:
      (703) 690-2412

    


    To
      the
      Developer:                Mr.
      Edwin L. Kelly

    President

    American
      Community Properties
      Trust

    222
      Smallwood Village
      Center

    St.
      Charles, Maryland
      20602

    


    With
      a copy
      to:                    Stephen
      H. Scott, Esq.

                                             
      Chapman, Bowling & Scott, P.A.

                                             
      112 La Grange Ave

                                                           
      PO Box 610

                                                           
      La Plata, Maryland 20646

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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/
      Philip F.
      Barber

    Name:
      Philip F. Barber

    Title:
      Division
      President


    


    THE
      DEVELOPER:

    


    ST.
      CHARLES COMMUNITY,
      LLC

    


    By:
/s/
      Edwin L.
      Kelly

    Edwin
      L. Kelly, Chariman of the
      Management

    Committee