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EXHIBIT 10.24
DEVELOPMENT AGREEMENT
THIS AGREEMENT ("Agreement") made this 3rd day of December, 2003,
by
and between KIRCO DEVELOPMENT LLC, a
Michigan limited liability company, whose
address is 101 West Big Beaver Road, Suite
200, Troy, Michigan 48084-5255
(hereinafter referred to as "Kirco"), and
MEADOWBROOK INSURANCE GROUP, INC., a
Michigan corporation, whose address is
26600 Telegraph Road, Southfield,
Michigan 48034-2438 (hereinafter referred
to as "Owner").
WITNESSETH:
1.
CONTRACT. Owner is the owner of certain land, containing
approximately nine (9) usable acres, to be
confirmed by the Survey, located on
American Drive with frontage on I-696, in
the City of Southfield, Oakland
County, Michigan, more fully described on
the attached Exhibit A (the
"Property"). Owner desires to, and does
hereby, engage Kirco to improve the
Property by the construction of an office
building consisting of 72,000 gross
square feet (the "Building") and related
improvements hereinafter described
(collectively with the Building, the
"Improvements" or "Project"), upon and
subject to the terms and conditions
hereinafter set forth. The Building will be
the first phase of a two-building office
complex of approximately 163,000 gross
square feet, of which the parties intend
that Kirco will be the developer and
owner of phase 2.
2.
CONTRACT PRICE, FINANCING. The contract price for the
Improvements shall be a stipulated sum of
Eleven Million and 00/100 U.S. Dollars
($11,000,000.00 U.S.) (the "Contract
Price"). Kirco will provide construction
financing for the project. Both Owner and
Kirco will provide the documentation
reasonably required by Owner, Kirco and the
lender for the construction loan
closing including, without limitation, a
tri-party agreement between Kirco,
Owner and the construction lender and Owner
in form reasonably satisfactory to
the construction lender, Owner and Kirco
pursuant to which, among other things,
(i) Owner will be required to pay the
Contract Price to the lender (subject to
set offs described herein) in full upon
satisfaction of the conditions described
in Section 3 below, and (ii) Kirco will
assign to the construction lender as
security all of its rights to receive
payment hereunder and the purchase option
rights set forth below, in lieu of granting
to the construction lender a
Mortgage on the Property.
The execution by Owner of the tri-party agreement, the Mortgage
(as
defined below) and other documents required
by the construction lender to make
the construction loan, shall be a condition
precedent to Kirco's obligation to
proceed under this Agreement. The Contract
Price is subject to adjustment based
on any changes or modifications to the
Building and other Improvements as may
hereafter be agreed to in writing by Kirco
and Owner. Owner agrees that pursuant
to the tri-party agreement, Owner shall
grant Kirco and Kirco's lender a first
Mortgage, rent assignment, security
agreement and other customary loan and
security documents (collectively
"Mortgage") to secure Owner's payment of the
Purchase Price subject to the terms and
conditions of this Development
Agreement. The Mortgage shall encumber only
phase one of the Project. If a
separate legal description is not available
for phase one, then Kirco and
Kirco's lender shall agree to release phase
two when a separate legal
description becomes available.
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If Kirco obtains a construction loan supported by a tri-party
agreement
and Mortgage materially in conformity with
the foregoing terms, and Owner
withholds its consent to the tri-party
agreement and Mortgage, either party
shall have the right to terminate this
Agreement by written notice given within
four (4) business days after delivery of
the Commitment and loan documents to
Owner, Meadowbrook will pay Kirco up to
$550,000 (less sums previously paid) to
reimburse Kirco for its actual out of
pocket costs, including architectural,
engineering, land clearing and steel
fabrication costs. If Kirco fails to obtain
a construction loan with a tri-party
agreement and Mortgage materially in
conformity with the foregoing on or before
December 31, 2003, either party shall
have the right to terminate this agreement
by written notice given within four
(4) business days after delivery of the
Commitment and loan documents to Owner
and neither party shall have any further
obligation to the other. For purposes
of this paragraph a loan shall be deemed
obtained when a commitment has been
issued and loan documents produced and
distributed.
3.
PAYMENT OF CONTRACT PRICE. The Contract Price includes, among
other things, a Development Fee payable to
Kirco. The Contract Price (including
the Development Fee) shall be paid in full
upon (i) Substantial Completion of
Kirco's work and receipt by Owner of a
temporary certificate of occupancy issued
by the City of Southfield, (ii) a
Certificate of Substantial Completion or
similar documented acknowledgment by the
Architect, and (iii) completion of
Improvements to the satisfaction of the
permanent Mortgage lender, provided, if
Owner's Permanent lender is not prepared to
close and fund the permanent loan,
and pay the balance due to Kirco, within
thirty (30) days after satisfaction of
the requirements of clauses (i) and (ii),
Owner shall make the full payment to
Kirco within thirty (30) days after
satisfaction of the requirements of clauses
(i) and (ii). If and to the extent Owner
has not utilized the full tenant
improvement or other allowances included in
the Contract Price, as set forth in
the budget, the unused portion shall be
credited toward Owner's payment
obligations to Kirco at the time of full
payment.
If at any time a lien is recorded with respect to the project site
or
premises, by anyone claiming amounts due
from Kirco or Kirco's suppliers and
subcontractors, Kirco shall have thirty
(30) days after written notice of
recordation of the lien to obtain a
discharge of the claim of lien by payment or
to post a bond discharging the lien in
accordance with the Construction Lien Act
or to escrow the funds necessary to pay the
claimant with the title company.
Upon failure of Kirco to do either, Owner
at its discretion shall have the right
to discharge the claim of lien and deduct
from the Contract Price the amount
paid to discharge the lien plus a
reasonable amount for Owner's administrative
time, not to exceed ten percent (10%) of
the amount paid to discharge the lien.
Kirco shall at all times comply with the
requirements of the Construction Lien
Act with respect to the payment of
subcontracting and material suppliers.
If Owner fails to make full payment of the Contract Price within
thirty
(30) days after the date of Substantial
Completion, as provided above, interest
shall accrue on the Contract Price at an
annual rate equal to 200 basis points
over the prime rate of Bank One, N.A., in
effect during the period that the
balance of the Contract Price remains
unpaid, calculated on a per diem basis for
each day after the thirtieth (30th) day
following substantial completion until
paid in full.
4.
GENERAL DESCRIPTION OF BUILDING AND IMPROVEMENTS. The Building
to be constructed shall be an approximately
72,000 gross square foot office
building, consistent with the
specifications outlined in Kirco's proposal dated
June 11, 2003, as
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modified by this Agreement and subsequent
letter agreements and subject to any
subsequent changes as properly approved and
authorized by Kirco and Owner as
stated in this Agreement, the current site
plan, elevation and floor plans
(collectively the "Preliminary Plans")
attached hereto as Exhibit B, and the
"Scope of Work" for the project attached
hereto as Exhibit C. The Property shall
be landscaped by Kirco in accordance with
the Plans and Specifications.
5.
PLANS AND SPECIFICATIONS. The Building and improvements shall
be constructed substantially as depicted on
approved site plan for the project,
a copy of which is attached hereto as
Exhibit D, and in accordance with the
Scope of Work for the project, the final
design/development Plans and
Specifications for the Building and
Improvements to be prepared by Rossetti
(hereinafter the "Architect" or
"Architects) consistent with the foregoing and
to be mutually approved by Kirco and Owner
in writing and to be attached hereto
as Exhibit F (the "Plans and
Specifications"), and any modifications or changes
to the Plans and Specifications that may
hereafter be agreed to by Kirco and
Owner; provided, that any change from the
preliminary plan and Scope of Work
that is reflected in the final Plans and
Specifications that results in a change
in cost to Kirco, including without
limitation any change in the design of the
roof from the design originally
contemplated by the parties, shall be set forth
in a written Change Order approved and
signed by Kirco and Owner, and the
Contract Price shall be increased or
decreased accordingly. The foregoing
notwithstanding, Kirco reserves the right
to make reasonable changes or
substitutions of substantially equivalent
products and materials for those
listed in the Plans and Specifications in
the event of unavailability or
unanticipated price increases or to avoid
unnecessary delays in the construction
of the Building, such changes to be agreed
in advance by Owner, whose consent
shall not unreasonably be withheld or
delayed.
Once the Plans and Specifications and Scope of Work have been
approved
in writing by both Kirco and Owner, if the
Owner requests any changes in the
Scope of Work, any upgrade in materials or
any variation from the preliminary
plans prior to completion of the Plans and
Specifications, Kirco will obtain an
estimate of any cost differential resulting
from such change from one or more of
Kirco's contractors or suppliers, as
applicable, and shall provide that estimate
to Owner, along with an estimate of the
increase or decrease in Kirco's on-site
personnel costs, if any, resulting from
such change, and Owner shall notify
Kirco in writing within ten (10) business
days thereafter if Owner desires to
include that change in the Plans and
Specifications. In the absence of a timely
notice electing to make such change, Owner
shall be deemed to have elected to
not make such change. Upon completion of
the Plans and Specifications, as part
of Kirco's bidding process Kirco will
obtain bids that reflect the actual
difference in cost resulting from the
changes requested by Owner. Owner shall
have the right to approve or disapprove the
actual cost as reflected in the bids
and to withdraw the request for a change in
the Plans and Specifications,
provided that such approval or disapproval
must be communicated to Kirco in
writing within ten (10) days after delivery
of the bids to Owner. If Owner fails
to disapprove the bids within that time
period, Owner will be deemed not to have
approved the bids. Upon award of the
contracts by Kirco, the amount of the
difference in cost resulting from the
changes requested by Owner as bid by the
successful bidder for that work or material
will, as applicable, be added to or
subtracted from the Contract Price,
together with any increase or decrease in
Kirco's on-site personnel costs resulting
from such change and, in the case of
an increase in the costs, a construction
management fee equal to five percent
(5%) of all the additional costs, including
Kirco's on-site personnel costs,
shall also be
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added to the Contract Price. Kirco's
on-site personnel costs shall include
direct salary or hourly pay, reasonable and
customary fringe benefits and
ordinary and necessary employer costs
directly related to such change.
Upon completion of the proposed Plans and Specifications, Kirco
shall
deliver the same to Owner and Owner shall
have ten (10) business days following
the date of delivery to Owner to review and
approve or comment in writing on the
proposed Plans and Specifications. If Owner
timely comments or raises any
objection to the proposed Plans and
Specifications, Kirco shall address the
comments and objections with the Architect
within five (5) business days and, if
necessary, will convene a meeting between
representatives of Kirco, Owner and
the Architect to resolve any outstanding
issues. Upon completion of any revised
proposed Plans and Specifications and
delivery of the same to Owner, Owner shall
have five (5) business days to review and
approve or comment in writing on them.
If a second set of revised proposed Plans
and Specifications is necessitated by
Owner's timely comments, the parties shall
follow the same procedure as in the
case of the first set of revised plans.
Upon review, revision and approval in
accordance with the foregoing, the proposed
Plans and Specifications shall be
attached to this Agreement as Exhibit F and
shall be the final Plans and
Specifications. Once the final Plans and
Specifications have been approved, any
changes or revisions thereafter requested
by Owner shall be deemed to be changes
concerning which Owner shall be liable for,
and shall pay any increase in the
Contract Price directly occasioned by such
changes and the cost incurred by
Kirco in connection therewith including,
without limitation, any additional
Architect's fees incurred for the
preparation of revisions to the design and
development drawings or Plans and
Specifications and all additional fees and
costs of Kirco's construction
contractor.
Kirco shall be responsible for reviewing the Plans and
Specifications
and satisfying itself as to the accuracy
and completeness of the same, except
for those matters pertaining to layout and
functionality for Owner's proposed
use, which shall be Owner's responsibility
to review. Kirco shall provide
summaries or copies of manufacturer's and
installation warranties for Owner's
approval regarding all major systems, HVAC,
windows, roofing, parking and major
fixtures which shall meet or exceed
commercially reasonable warranties which are
normal for construction of this size and
type. Subject to the limitations on
Kirco's liability set forth in Section 13
below, Kirco shall bear all
responsibility for any errors or defects in
the Plans and Specifications of the
Building and Improvements with respect to
the types, characteristics and
specifications of appropriate materials or
components, but Owner shall be
responsible for any errors or defects in
the Plans and Specifications of the
Building and Improvements pertaining to
layout and functionality for Owner's
proposed use.
Upon completion of the work, Kirco shall provide to Owner at
Kirco's
expense original manufacturer's and
installer's warranties to Owner regarding
all major systems, HVAC, windows, roofing,
parking and major fixtures, and three
(3) complete sets of "as-built" plans for
the Building, which shall be delivered
as soon as practicable following
Substantial Completion. Failure of Kirco's
subcontractors relating to the timely
delivery of the as-built plans shall not
excuse Kirco's performance.
Simultaneously with the signing of this Agreement, the Architect
has
delivered to Owner a statement to the
effect that the Architect has acted as
architect for Owner and that Owner is
entitled to rely upon the Architect's
professional expertise in Owner's
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approval of the Plans and Specifications.
The Architect shall provide proof of
professional liability insurance to
Owner.
Kirco shall not be liable for the cost of, and the work to be
performed
for the Contract Price by Kirco does not
include, certain items identified as
"Exclusions" on Exhibit B and Exhibit C,
all of which costs shall be the
responsibility of Owner and shall be added
to the Contract Price. In general,
all work not expressly included within the
Scope of Work and not reflected in
the Plans and Specifications approved by
Owner and Kirco shall be an exclusion
from the work; provided, however, it is
contemplated that completion of all
construction pursuant to all approved Plans
and Specifications is included
within the Contract Price, as the same may
be adjusted in accordance with the
terms of this Agreement.
6.
CONSTRUCTION. Kirco shall provide all labor and materials for
the construction of the Building and all
related Improvements on the Property to
provide the completed Building to Owner
substantially in accordance with the
Plans and Specifications. Kirco shall
commence the performance of its
obligations hereunder as soon as practical
after (i) satisfaction of all
conditions precedent to Kirco's obligation
to perform as set forth in this
Agreement, (ii) Owner's acquisition of fee
title to the Property and the
issuance of all necessary building permits
and other permits to permit the
construction of the Building and related
improvements, and (iii) completion of a
pre-construction orientation meeting
between the designated representatives of
Kirco and Owner.
Kirco will proceed with the site work based upon the approved
site
plan, but shall not be obligated to
commence construction of the Building and
related improvements until the Preliminary
Plans and Specifications have been
approved by Owner and Kirco. Kirco shall
pursue the issuance of all permits,
approvals and construction with reasonable
diligence and shall Substantially
Complete the construction on or before
September 30, 2004 (the "Outside
Completion Date"), subject to delays
occasioned by changes requested by Owner
and set forth in signed change orders,
weather conditions which cause a work
stoppage of greater than eighteen (18) days
in the aggregate, strikes, fires and
other casualties which damage the Building,
acts of God, war, insurrection,
actions of terrorists or foreign
insurgents. The Outside Completion Date shall
be extended one day for each day of delay
occasioned by changes requested by
Owner and set forth in signed change
orders, weather conditions which cause a
work stoppage of greater than eighteen (18)
days in the aggregate, strikes,
fires and other casualties which damage the
Building, acts of God, war,
insurrection, actions of terrorists or
foreign insurgents. If Kirco has failed
to Substantially Complete the construction
by the Outside Completion Date, as
the same may be extended as provided above,
Kirco shall pay to Owner, as Owner's
sole monetary remedy, liquidated damages in
the amount of Two Thousand and
00/100 Dollars ($2,000.00) per day for each
day that Substantial Completion is
delayed after the Outside Completion Date,
which liquidated damages shall be
credited toward the Contract Price to be
paid by Owner at the time of final
payment hereunder. Except as set forth in
this Agreement, no warranty or
representation is made by Kirco as to the
specific completion date or schedule
of construction, and no person other than
Kirco has any authority to so bind
Kirco. In no event shall Kirco have any
liability to Owner for any damage caused
by delays in completion of construction
except as provided in this Agreement.
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If Kirco obtains the necessary permits and commences construction
but
fails to complete construction within
twelve (12) months after the issuance of
all building and other necessary permits,
unless delayed by changes requested by
Owner, weather conditions which cause a
work stoppage of greater than eighteen
(18) days in the aggregate, strikes, fires
or other casualties which damage the
Building, acts of God, war, insurrection,
actions of terrorists or foreign
insurgents, Owner shall have the right, but
not the obligation, to take over the
project and complete the same in the same
manner as provided in Section 18(b)
below.
Kirco shall be free to engage such contractors, subcontractors
and
suppliers of Kirco's selection as Kirco
deems appropriate in its sole
discretion. In particular but without
limiting Kirco's right to engage the
contractors and subcontractors of its
selection, Owner acknowledges that Kirco
intends to engage a related entity, Kirco
Construction LLC, to perform the
actual construction work. No work shall be
performed and no appliances, wiring,
cabinets, fixtures or other materials shall
be installed in the Building or on
the Property by Owner or any contractor,
supplier or other person acting on
Owner's behalf prior to Substantial
Completion without Kirco's prior written
consent, which consent shall not be
unreasonably withheld or delayed. In
addition, Owner shall be responsible for
all actual and demonstrable loss, cost
or damage suffered or incurred by Kirco, if
any, as a result of any such work
performed or installations made by Owner or
on Owner's behalf, with or without
Kirco's consent, and Owner shall indemnify
and hold Kirco harmless with respect
to the same. Any such additional loss,
costs or damage actually incurred by
Kirco as a result of Owner's work on site
shall be added to the Contract Price
and shall be payable in full by Owner upon
Substantial Completion.
Kirco shall keep Owner advised of the progress of construction on
a
periodic basis and shall advise Owner of
the anticipated date on which
Substantial Completion will be achieved at
least thirty-five (35) days prior to
such date, and Owner shall have access to
the Building during the thirty (30)
days immediately prior to the anticipated
Substantial Completion date for the
purpose of Owner's installation of its own
furniture and fixtures in the
Building and to commence the move-in to the
Building, providing that Owner shall
pre-schedule all of such activities with
Kirco, shall conduct such activities at
a time and in such manner as to not
interfere with the timely completion of the
Building, and shall not occupy the Building
or any portion thereof prior to the
issuance of a temporary or permanent
certificate of occupancy for the Building.
7. CHANGES.
All changes or revisions to the final Plans and
Specifications ("Change Order") must be in
writing and signed by both Owner and
Kirco to be effective. In the event any
such Change Order results in an increase
in Kirco's costs, whether for increases in
contractor/subcontractor/supplier
charges or for Kirco's on-site personnel
costs, or both, the Contract Price
shall be increased to reflect those
increased costs plus a construction
management fee of five percent (5%) of
those increased costs. The additional
costs occasioned by such Change Order shall
be added to the Contract Price and
paid over the term of the contract through
progress payments as provided in
Section 3 above. If the actual change in
the Contract Price can be determined at
the time the Change Order is signed, the
Change Order shall include the amount
of any increase or decrease in the Contract
Price resulting from such change. If
the actual change in the Contract Price
cannot be determined at that time due to
lack of revised construction drawings or
any other reason, Kirco shall obtain an
estimate of the cost of the change in the
same manner as provided in Section 5
above, the Change Order shall include an
estimate of any change in the Contract
Price, and a revised Change Order shall
be
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prepared and executed when the actual
change in the Contract Price can be
determined. The cost of the Change Order
shall be net of (ie. reduced by) any
cost savings resulting from the change. If
a change results in a net cost
savings, seventy-five percent (
