Exhibit 10(o)
DEVELOPMENT
AGREEMENT
This DEVELOPMENT AGREEMENT (this
“ Agreement ”) is made as of the 1st day of
October, 2005 (the “ Effective Date ”), by and
between B. F. SAUL REAL ESTATE INVESTMENT TRUST, a Maryland real
estate investment trust (“ Owner ”), and B. F.
SAUL PROPERTY COMPANY, a Maryland corporation (“
Developer ”).
A. Owner intends to design, finance,
demolish, develop, construct, renovate, own, manage, acquire,
lease, operate and maintain the parcels of real property and
improvements, if any thereon, listed on Exhibit A attached
hereto, which exhibit may be amended from time to time pursuant to
the terms of this Agreement (each, a “ Project
,” and collectively, the “ Projects
”).
B. Developer has experience in the
acquisition, management, development and disposition of real
property similar to the Projects.
C. Owner desires to engage the
services of Developer in connection with the management,
development and disposition of the Projects, and the acquisition of
other parcels of real property that may become Projects pursuant to
this Agreement (each a “ Potential Project
”).
NOW THEREFORE, in consideration of
the mutual promises and covenants contained herein, and intending
to be legally bound hereby, Owner and Developer hereby agree as
follows:
1. Agreement to Act as
Developer . (a) Owner hereby retains Developer, and
Developer hereby agrees to serve, as provider of the
development-related services set forth in this Agreement with
respect to the Potential Projects and the Projects for the Term (as
defined in Section 9) upon the terms and conditions
hereinafter set forth.
(b) The list of Projects in
Exhibit A hereto shall be amended from time to time by
mutual agreement of Owner and Developer, and each such amendment
shall be evidenced by the execution by Owner and Developer of two
copies of a Development Agreement Amendment Certificate (a form of
which is attached hereto as Exhibit B ).
2. Potential Projects . At
the request of Owner, Developer shall assist Owner with the
identification and acquisition of Potential Projects from time to
time. Developer shall provide Owner with a monthly statement of
Developer’s personnel costs and related overhead in
connection with the performance of Developer’s obligations
under this Section 2, which monthly statement shall be
accompanied by evidence reasonably satisfactory to Owner of such
costs. Owner shall pay to Developer the full amount of such costs
promptly after receipt of such monthly statement.
3. Management and Development
Services .
(a) Developer shall supervise and be
responsible for the management and maintenance of those Projects
Owner elects to maintain as raw land (and, with Owner’s
consent, the disposition thereof (including via condemnation)), and
for the development and construction
of the Projects Owner elects to develop, in
accordance with the terms of this Agreement, and shall perform the
services and carry out the responsibilities with respect to the
Projects as described herein, and such additional duties as are
reasonably within the general scope of such services and
responsibilities and are designated from time to time by
Owner.
(b) Developer’s services shall
be performed in the name and on behalf of Owner, in accordance with
the Budgets (as defined below) of Owner, and shall consist of the
following duties:
(i) Negotiate and cause to be
executed in the name and on behalf of Owner agreements for the
maintenance of raw land Projects in a safe and clean condition and
in accordance with applicable laws and regulations, and (with
Owner’s consent) for the disposition of such raw land
(including via condemnation);
(ii) Negotiate and cause to be
executed in the name and on behalf of Owner agreements for
architectural, engineering, testing and consulting services for the
Projects, and any agreements for the construction of any
improvements to be constructed or installed by Owner or the
furnishing of any supplies, materials, machinery or equipment
therefore, or any amendments thereof;
(iii) Assist Owner in dealing with
neighborhood associations or groups, local organizations, abutting
land owners and other parties interested in the development of the
Projects;
(iv) Establish and implement
appropriate administrative and financial controls for the design
and construction of the Projects, including but not limited
to:
(A) coordination and administration
of the architect, the general contractor and other contractors,
professionals and consultants employed in connection with the
design of the Projects;
(B) administration of any
construction contracts on behalf of Owner;
(C) participation in conferences and
the rendering of such advice and assistance as will aid in
developing economical, efficient and desirable design and
construction procedures;
(D) the rendering of advice and
recommendations as to the selection procedures for, and selection
of, subcontractors and suppliers;
(E) the review and submission to
Owner and, if required under the applicable loan documents, any
lender financing the development of the Projects, for approval of
all requests for payments under any architectural agreement or
general contractor’s agreement;
(F) applying for and maintaining in
full force and effect any and all governmental permits and
approvals required for the lawful development, construction and
operation of the Projects;
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(G) compliance with all terms and
conditions applicable to Owner or the Projects contained in
(i) any governmental permit or approval required or obtained
for the lawful construction and operation of the Projects,
(ii) any surety bonds or other similar guaranties (e.g.,
completion guaranties) obtained in connection with the Projects,
(iii) any applicable loan documents, or (iv) any
applicable law, order or regulation;
(H) keeping Owner fully informed on
a regular basis of the progress of the design and construction of
the Projects, including the preparation of such reports as are
provided for herein or as may reasonably be requested by
Owner;
(I) giving or making Owner’s
instructions, requirements, approvals and payments provided for in
the agreements with the architect, general contractor, and other
contractors, professionals and consultants retained for the
Projects; and
(J) at Owner’s expense, filing
on behalf of, and as the attorney-in-fact for, Owner, any notices
of completion required or permitted to be filed upon the completion
of any improvements and taking such actions as may be required to
obtain any certificates of occupancy or equivalent documents
required to permit the occupancy of dwelling units and other spaces
in the Projects;
(v) Inspect the progress of the
course of construction of the Projects, including verification of
the materials and labor being furnished to and on such construction
so as to be fully competent to approve or disapprove requests for
payment made by the architect, the general contractor or any other
parties with respect to the design and construction of the
Projects, and in addition verify that the construction is being
carried out substantially in accordance with the plans and
specifications approved by Owner or, in the event that the same is
not being so carried out, to promptly so notify Owner;
(vi) If requested to do so by Owner,
perform on behalf of Owner all obligations of Owner with respect to
the design and construction of the Projects contained in any loan
agreement or related agreement entered into in connection with any
financing for the Projects and in any agreement entered into with
any governmental body or agency relating to the terms and
conditions of such construction, provided that copies of such
agreements have been provided by Owner to Developer or Owner has
otherwise notified Developer in writing of such
obligations;
(vii) To the extent requested to do
so by Owner, prepare and distribute to Owner a critical path
schedule and periodic updates thereto, as necessary, to reflect any
material changes, but in any event not less frequently than
quarterly; other design or construction cost estimates as required
by Owner; and financial accounting reports, including monthly
progress reports on the quality, progress and cost of construction
and recommendations as to the drawing of funds from any
construction loans arranged by Owner to cover the cost of design
and construction of the Projects;
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(viii) Assist Owner in obtaining,
maintaining, and complying with insurance coverage for the
Projects, Owner and its employees in accordance with any insurance
schedule approved by Owner;
(ix) Comply and assist Owner to
comply with all applicable laws, ordinances, orders, rules,
regulations and requirements (hereinafter called
“laws”) of all Federal, state and municipal
governments, courts, departments, commissions, boards and offices,
any national or local Board of Fire Underwriters or Insurance
Services Offices having jurisdiction over the Projects, or any
other body exercising functions similar to those of any of the
foregoing, which may be applicable to the Projects or any part
thereof. Any such compliance undertaken by Developer on behalf of
and in the name of Owner, in accordance with the provisions of this
Agreement, shall be at Owner’s expense. Developer shall
endeavor to ensure that all agreements between Owner and
independent contractors will comply with all such applicable
laws;
(x) Coordinate and administer the
design and construction of all improvements to the extent required
to be constructed or furnished by Owner under any leases or other
agreements;
(xi) Use commercially reasonable
efforts to accomplish the timely completion of the Projects in
accordance with applicable laws, other agreements entered into by
Owner, the approved plans and specifications and the time schedules
for such completion approved by Owner;
(xii) At the direction of Owner,
implement any decisions of Owner made in connection with the
design, development and construction of the Project or any policies
and procedures relating thereto; and
(xiii) Perform and administer any
and all other services and responsibilities of Developer that are
set forth in any other provisions of this Agreement, or that are
requested to be performed by Owner and are within the general scope
of the services described herein.
4. Leasing
Services
(a) For office, retail, industrial
and residential Projects, until such Project is fully leased (or at
such earlier time as may be set forth in the applicable portion of
Exhibit A), Developer will perform the usual and customary duties
and functions of an exclusive leasing agent for the Projects in a
faithful and diligent manner and shall use the diligent efforts of
its organization to obtain tenants, and to negotiate leases with
such tenants, for the Projects. Developer’s leasing
responsibilities shall include the following services:
(i) Prepare a study of the Project
market area and prepare a marketing plan for the
Project.
(ii) Install appropriate signage on
the Project.
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(iii) Obtain and investigate
prospective tenants for the Project and obtain references, business
plans and credit reports on such prospective tenants.
(iv) Meet with Owner on a regular
basis to keep Owner apprised of the progress of the leasing
activities and to review and approve prospective tenants for the
Projects.
(v) Introduce the Projects to the
brokerage community and mail promotional material to prospective
tenants and brokers.
(b) Upon the mutual agreement of
Owner and Developer, Owner may retain another brokerage firm to act
as an exclusive leasing agent (hereafter referred to as an “
Other Lease Agent ”) for the procurement of leases for
new tenants at the Project. Developer will coordinate the
activities of any Other Lease Agent and advise Owner regarding the
proposed leases obtained by any Other Lease Agent.
5. Limitations and
Restrictions
Notwithstanding any other provisions
of this Agreement, Developer shall not take any action, expend any
sum, make any decision, give any consent, approval or
authorization, or incur any obligation with respect to any of the
following matters unless and until the same has been approved in
writing by Owner:
(a) Approval of any construction and
architectural contracts and any architectural plans, specifications
and drawings prior to the construction and/or alteration of any
improvements contemplated thereby, except for such matters as may
be expressly delegated in writing to Developer by Owner;
(b) Acceptance or implementation of
any proposed change in the work of the construction of the
Projects, or in the plans and specifications therefor as previously
approved, or in the cost thereof, or any change that would affect
the design, cost, value or quality of the Projects, except for such
matters as may be expressly delegated in writing to Developer by
Owner;
(c) Any expenditure the cost of
which would vary from the amount provided for such expenditure in
the applicable Budget by more than $10,000 or ten percent (10%),
provided that the prior approval of Owner shall not be required
(i) for monthly or recurring expenses and bills, such as
utilities, mortgage payments, management compensation, compensation
of on-site employees, normal monthly recurring expenses such as,
but not limited to, trash removal, routine equipment maintenance
and repairs, janitorial service and the like, (ii) for
payments to any reserve and replacement or other escrow account,
(iii) in the event emergency repairs are required to protect
the Property from damage, to mitigate further damage or to avoid
the suspension of necessary services to tenants (provided Developer
promptly notifies Owner of the nature and approximate cost of any
such emergency repair, in no event later than three
(3) business days after authorizing such repair);
(d) If the partial or complete
performance of any duty of Developer set forth in this Agreement is
beyond the reasonable control of Developer, Developer shall
nonetheless be
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obligated (i) to use commercially
reasonable efforts to perform such duty, and (ii) to promptly
notify Owner that the performance of such duty or any element
thereof is beyond its reasonable control;
(e) Developer shall have the right
to contract or otherwise deal with any Affiliate (as defined below)
for the sale of goods or services to it or Owner if (i) the
goods or services are reasonable for and necessary to Owner or the
Projects, (ii) the fees, terms and conditions for the
provision of such goods or services are at least as favorable to
the Owner and the Projects as would be obtainable in an arm’s
length transaction, and (iii) Developer provides prior notice
of the proposed transaction to Owner. For purposes of this
Agreement, “Affiliate” shall mean, as to any person,
any other person that, directly or indirectly, controls, is
controlled by or is under common control with such person or is a
director or officer of such person or of an Affiliate of such
person.
6. Budget; Accounts and
Records .
(a) At least thirty (30) days
prior to September 30 (with respect to those Projects Owner
elects to maintain as raw land), and, with respect to any other
Project, at such time as such Project is added to Exhibit A,
Developer shall submit to Owner a proposed operating budget for
each such Project (each, a “ Budget ”) for the
fiscal year beginning the following October 1st (the “
Fiscal Year ”); provided, however, that in the case of
a Project added to Exhibit A hereto after October 1 but
prior
