UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2017
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-8814
PURE CYCLE CORPORATION
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(Exact name of registrant as specified in its charter)
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Colorado
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84-0705083
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(State or other jurisdiction of incorporation
or organization)
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(I.R.S. Employer Identification No.)
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34501 E. Quincy Ave., Bldg. 34, Box 10
Watkins, CO 80137
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(303) 292-3456
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(Address of principal executive offices) (Zip Code)
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(Registrant’s telephone number, including area
code)
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Securities registered pursuant to Section 12(b) of the
Act:
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Common Stock 1/3 of $.01 par value
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The NASDAQ Stock Market
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(Title of each class)
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(Name of each exchange on which registered)
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes
[ ] No [X]
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
[ ] No [X]
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
[X] No [ ]
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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Section 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X] No
[ ]
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K
[ ]
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer [
]
Accelerated filer [X]
Non-accelerated filer [ ] (Do not check if a smaller
reporting company)
Smaller
reporting company [ ]
Emerging
growth company [ ]
If an emerging growth company, indicate by check mark if the
registrant has elected to use the extended transition period for
complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. [
]
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
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State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold, or the average bid
and asked price of such common equity, as of the last business day
of the registrant’s most recently completed second fiscal
quarter:$87,215,786
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Indicate the number of shares outstanding of each of the
registrant’s classes of common stock, as of the latest
practicable date: November 7, 2017:
23,754,098
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DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference
from the registrant’s definitive proxy statement for the
Annual Meeting of Shareholders to be held in January 2018, which
will be filed with the SEC within 120 days of the close of the
fiscal year ended August 31, 2017.
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Table of Contents
Item
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Page
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Part I
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1
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Business
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4
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1A.
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Risk Factors
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20
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1B.
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Unresolved Staff Comments
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28
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2
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Properties
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28
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3
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Legal Proceedings
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28
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4
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Mine Safety Disclosures
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28
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Part II
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5
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Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
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29
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6
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Selected Financial Data
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31
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7
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Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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32
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7A.
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Quantitative and Qualitative Disclosures About Market
Risk
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42
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8
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Consolidated Financial Statements and Supplementary
Data
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43
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9
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Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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44
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9A.
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Controls and Procedures
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44
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9B.
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Other Information
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45
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Part III
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10
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Directors, Executive Officers and Corporate Governance
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45
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11
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Executive Compensation
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45
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12
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Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
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45
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13
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Certain Relationships and Related Transactions and Director
Independence
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46
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14
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Principal Accountant Fees and Services
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46
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Part IV
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15
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Exhibits and Financial Statement Schedules
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47
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16
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Form 10-K Summary
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47
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Signatures
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48
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FORWARD-LOOKING STATEMENTS
Statements that are not historical facts contained in this Annual
Report on Form 10-K, or incorporated by reference into this Form
10-K, are
“forward-looking
statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”).
The words “anticipate,”
“seek,” “project,” “future,”
“likely,” “believe,” “may,”
“should,” “could,” “will,”
“estimate,” “expect,” “plan,”
“intend” and similar expressions, as they relate to us,
are intended to identify forward-looking statements.
Forward-looking statements include statements relating to, among
other things:
●
factors
affecting demand for water;
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our
competitive advantage;
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plans
to develop additional water assets within the Denver
area;
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future
water supply needs in Colorado and how such needs will be
met;
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anticipated
increases in residential and commercial demand for water services
and competition for these services;
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estimated
population increases in the Denver metropolitan area and the South
Platte River basin;
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plans
for the use and development of our water assets and potential
delays;
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plans
to provide water for drilling and hydraulic fracturing of oil and
gas wells;
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changes
in oil and gas drilling activity on our property, on the Lowry
Range, or in the surrounding areas;
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regional
cooperation among area water providers in the development of new
water supplies and water storage, transmission and distribution
systems as the most cost-effective way to expand and enhance
service capacities;
●
the
impact of individual housing and economic cycles on the number of
connections we can serve with our water;
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increases
in future water tap fees;
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negotiation
of payment terms for fees;
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plans
for development of our Sky Ranch property;
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the
number of units planned for the first phase of development at Sky
Ranch;
●
the
number of lots on which construction is expected to begin in the
current fiscal year;
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capital
required and costs to develop the first phase of Sky
Ranch;
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anticipated
revenues and margins from development of our Sky Ranch
property;
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estimated time
period for build out of Sky Ranch and sufficiency of tap fees to
fund infrastructure costs;
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the
impact of any downturn in the homebuilding and credit markets on
our business and financial condition;
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the
sufficiency of our working capital and financing sources to fund
our operations;
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estimated
supply capacity of our water assets;
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need
for additional production capacity;
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costs
and plans for treatment of water and wastewater;
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plans
to use raw water, effluent water or reclaimed water for
agricultural and irrigation uses;
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participation
in regional water projects, including “WISE” and the
timing and availability of water from WISE;
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our
ability to assist Colorado “Front Range” water
providers in meeting current and future water needs;
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timing
of and interpretation of Land Board royalties;
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the
number of new water connections needed to recover the costs of our
water supplies;
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the
adequacy of the provisions in the “Lease” for the Lowry
Range to cover present and future circumstances;
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factors
that may impact labor and material costs;
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loss
of key employees and hiring additional personnel for our
operations;
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anticipated
timing and amount of, and sources of funding for (i) capital
expenditures to construct infrastructure and increase production
capacities, (ii) compliance with water, environmental and other
regulations, and (iii) operations including delivery and treatment
of water and wastewater;
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the
ability of our deep water well enhancement tool and process to
increase efficiency of wells and our plans to market that product
to area water providers;
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our
ability to reduce the amount of up-front construction costs for
water and wastewater systems;
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ability
to generate working capital and market our water
assets;
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plans
to sell certain farms;
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service
life of constructed facilities;
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use
of third parties to construct water and wastewater facilities and
Sky Ranch lot improvements;
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plans
to utilize fixed-price contracts;
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payment
of amounts due from the Rangeview District and the Sky Ranch
Districts;
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estimated
property taxes;
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utilization
of net operating losses;
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capital
expenditures for investing in expenses and assets of the Rangeview
District;
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the
impact of water quality, solid waste disposal and environmental
regulations on our financial condition and results of
operations;
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environmental
clean-up at the Lowry Range by the U.S. Army Corps of
Engineers;
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our
ability to comply with permit requirements and environmental
regulations and the cost of such compliance;
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our
ability to meet customer demands in a sustainable and
environmentally friendly way;
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the
recoverability of construction and acquisition costs from
rates;
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our
belief that we are not a public utility under Colorado
law;
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impairments
in carrying amounts of long-lived assets;
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changes
in unrecognized tax positions;
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plans
to retain earnings and not pay dividends;
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forfeitures
of option grants, vesting of non-vested options and the fair value
of option awards;
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the
effectiveness of our disclosure controls and procedures and our
internal controls over financial reporting;
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accounting
estimates and the impact of new accounting
pronouncements;
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future
fluctuations in the price and trading volume of our common stock;
and
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timing
of the filing of our proxy statement.
Forward-looking statements reflect our current views with respect
to future events and are subject to certain risks, uncertainties
and assumptions.
We cannot assure you
that any of our expectations will be realized.
Our actual results could differ materially from
those in such statements. Factors that could cause actual results
to differ from those contemplated by such forward-looking
statements include, without limitation:
●
the
timing of new home construction and other development in the areas
where we may sell our water, which in turn may be impacted by
credit availability;
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changes
in employment levels, job and personal income growth and household
debt-to-income levels;
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changes
in consumer confidence generally and confidence of potential
homebuyers in particular;
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the
ability of existing homeowners to sell their existing homes at
prices that are acceptable to them;
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changes
in the supply of available new or existing homes and other housing
alternatives, such as apartments and other residential rental
property;
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timing
of oil and gas development in the areas where we sell our
water;
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general
economic conditions;
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the
market price of water;
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the
market price of oil and gas;
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changes
in customer consumption patterns;
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changes
in applicable statutory and regulatory requirements;
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changes
in governmental policies and procedures, including with respect to
land use, environmental and tax matters;
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changes
in interest rates;
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private
and federal mortgage financing programs and lending
practices;
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uncertainties
in the estimation of water available under decrees;
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uncertainties
in the estimation of costs of delivery of water and treatment of
wastewater;
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uncertainties
in the estimation of the service life of our systems;
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uncertainties
in the estimation of costs of construction projects;
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the
strength and financial resources of our competitors;
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our
ability to find and retain skilled personnel;
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climatic
and weather conditions, including floods, droughts and freezing
conditions;
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turnover
of elected and appointed officials and delays caused by political
concerns and government procedures;
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availability
and cost of labor, material and equipment;
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delays
in anticipated permit and construction dates;
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engineering
and geological problems;
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environmental
risks and regulations;
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our
ability to raise capital;
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our
ability to negotiate contracts with new customers;
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uncertainties
in water court rulings; and
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the
factors described under “Risk Factors” in this Annual
Report on Form 10-K.
We undertake no obligation, and disclaim any obligation, to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. All
forward-looking statements are expressly qualified by this
cautionary statement.
Glossary of terms
The following terms are commonly used in the water industry and are
used throughout our annual report:
●
Acre
Foot – approximately 326,000 gallons of water, or enough
water to cover an acre of ground with one foot of water. For some
instances herein, as context dictates, the term acre feet is used
to designate an annual decreed amount of water available during a
typical year.
●
Customer
Facilities – facilities that carry potable water and
reclaimed water to customers from the retail water distribution
system (see “Retail Facilities” below) and collect
wastewater from customers and transfer it to the retail wastewater
collection system. Water and wastewater service lines, interior
plumbing, meters and other components are typical examples of
Customer Facilities. In many cases, portions of the Customer
Facilities are constructed by the developer. Customer Facilities
are typically owned and maintained by the customer.
●
Non-Tributary
Groundwater – groundwater located outside the boundaries
of any designated groundwater basins in existence on January 1,
1985, the withdrawal of which will not, within one hundred years of
continuous withdrawal, deplete the flow of a natural stream at an
annual rate greater than one-tenth of one percent of the annual
rate of withdrawal.
●
Not
Non-Tributary Groundwater – statutorily defined as
groundwater located within those portions of the Dawson, Denver,
Arapahoe, and Laramie Fox-Hill aquifers outside of designated
basins that does not meet the definition of
“non-tributary.”
●
Retail
Facilities – facilities that distribute water to and
collect wastewater from an individual subdivision or community.
Developers are typically responsible for the funding and
construction of Retail Facilities. Once we certify that the Retail
Facilities have been constructed in accordance with our design
criteria, the developer dedicates the Retail Facilities to a
quasi-municipal political subdivision of the state, and we operate
and maintain the facilities on behalf of such political
subdivision.
●
Section –
a parcel of land equal to one square mile and containing 640
acres.
●
SFE
– a single family equivalent unit. One SFE is a
customer – whether residential, commercial or
industrial – that imparts a demand on our water or
wastewater systems similar to the demand of a family of four
persons living in a single family house on a standard sized lot.
One SFE is assumed to have a water demand of approximately 0.4 acre
feet per year and to contribute wastewater flows of approximately
300 gallons per day.
●
Special
Facilities – facilities that are required to extend
services to an individual development and are not otherwise
classified as a typical “Wholesale Facility” or
“Retail Facility.” Temporary infrastructure required
prior to construction of permanent water and wastewater systems or
transmission pipelines to transfer water from one location to
another are examples of Special Facilities. We typically design and
construct the Special Facilities using funds provided by the
developer in addition to the normal rates, fees and charges that we
collect from our customers. We are typically responsible for the
operation and maintenance of the Special Facilities upon
completion.
●
Tributary
Groundwater – all water located in an aquifer that is
hydrologically connected to a natural stream such that depletion
has an impact on the surface stream.
●
Tributary
Surface Water – water on the surface of the ground flowing in
a stream or river system.
●
Wholesale
Facilities – facilities that serve an entire service
area or major regions or portions thereof. Wells, treatment plants,
pump stations, tanks, reservoirs, transmission pipelines, and major
sewage lift stations are typical examples of Wholesale Facilities.
We own, design, construct, operate, maintain and repair Wholesale
Facilities which are typically funded using rates, fees and charges
that we collect from our customers.
Item 1 – Business
Pure Cycle Corporation, a Colorado corporation (“we,”
“us” or “our”), is a vertically integrated
water company that:
●
provides
wholesale water and wastewater services;
●
designs,
constructs, operates and maintains water and wastewater
systems;
●
supplies
untreated water for hydraulic fracturing and other
commercial/industrial uses; and
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is
developing a master planned residential community as part of our
plan to monetize our water assets.
As a vertically integrated water company, we own or control
substantially all assets necessary to provide wholesale water and
wastewater services to our customers. We own or control the water
rights that we use to provide domestic and irrigation water to our
wholesale customers (including surface water, groundwater,
reclaimed water rights and water storage rights). We own the
infrastructure required to (i) withdraw, treat, store and deliver
water (such as wells, diversion structures, pipelines, reservoirs
and treatment facilities); (ii) collect, treat, store and reuse
wastewater; and (iii) treat and deliver reclaimed water for
irrigation use. We are principally targeting the “I-70
corridor,” a largely undeveloped area located east of
downtown Denver and south of Denver International Airport along
Interstate 70, as we expect the I-70 corridor to experience
substantial growth over the next 30 years.
We provide wholesale water and wastewater services predominantly to
two local governmental entities that in turn provide residential
and commercial water and wastewater services to communities along
the eastern slope of Colorado in the area referred to as the
“Front Range,” extending essentially from Fort Collins
on the north to Colorado Springs on the south. Our largest customer
is the Rangeview Metropolitan District (the “Rangeview
District”), which is a quasi-municipal political subdivision
of the State of Colorado. We have the exclusive right to provide
wholesale water and wastewater services to the Rangeview District
and its end-use customers pursuant to the “Rangeview Water
Agreements” and the “Off-Lowry Service Agreement”
(each defined below). Through the Rangeview District, we currently
provide wholesale service to 391 SFE water connections and 157 SFE
wastewater connections located in the Rangeview District’s
service area of southeastern metropolitan Denver in an area called
the Lowry Range and other nearby areas where we have acquired
service rights.
We supply untreated water to industrial customers for various
purposes and to oil and gas companies for hydraulic fracturing on
properties located within or adjacent to our service areas. Oil and
gas operators have leased more than 135,000 acres within and
adjacent to our service areas to explore and develop oil and gas
interests in the oil-rich Niobrara and other formations. We have
capitalized on the need for significant water supplies for
hydraulic fracturing in proximity to our existing water supplies
and infrastructure.
In addition to our water and wastewater operations we are
developing 931 acres of land we own along Denver’s I-70
corridor as a master planned community known as Sky Ranch. In June
2017, we entered into agreements to sell a total of 506 residential
lots at Sky Ranch to three national home builders. Pursuant to
agreements with the Rangeview District, we are the exclusive
provider of wholesale water and wastewater services to the future
residents of Sky Ranch
.
Pure Cycle Corporation was incorporated in Delaware in 1976 and
reincorporated in Colorado in 2008. Unless otherwise specified or
the context otherwise requires, all references to “we,”
“us,” or “our” are to Pure Cycle
Corporation and its subsidiaries on a consolidated basis. Pure
Cycle’s common stock trades on The NASDAQ Stock Market under
the ticker symbol “PCYO.”
Our Water and Land Assets
This section should be read in conjunction with
Item 1A – Risk
Factors, Item 7 – Management’s Discussion and
Analysis of Financial Condition and Results of
Operations – Critical Accounting Policies and Use of
Estimates
, and Note 4
–
Water and Land
Assets
.
The $34.6 million of capitalized water costs on our balance sheet
represents the costs of the water rights we own or have the
exclusive right to use and the related infrastructure developed to
provide wholesale water and wastewater services. Our water assets
are as follows:
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Water Source
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Lowry
(Rangeview Water Supply)
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Export (1)
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11,650
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Non-Export (1)
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12,035
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Fairgrounds
|
321
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Sky
Ranch
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828
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24,834
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Surface Water (acre feet)
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Lowry
(1)
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3,300
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WISE
|
500
|
|
3,800
|
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Total
(Groundwater and Surface Water)
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28,634
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(1)
The combined Lowry water rights are 26,985 acre feet.
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We believe we can serve approximately 60,000 SFEs.
Our service areas and water and land assets are described in
greater detail in the maps and discussion that follow:
The map below indicates the location
of our Denver area assets.
Rangeview Water Supply and the Lowry Range
Our Rangeview Water –
We
own or control a total of approximately 3,300 acre feet of
tributary surface water, 23,685 acre feet of non-tributary and not
non-tributary groundwater rights, and approximately 26,000 acre
feet of adjudicated reservoir sites that we refer to as our
“Rangeview Water Supply.” This water is located in the
southeast Denver metropolitan area at the “Lowry
Range,” which is owned by the State Board of Land
Commissioners (the “Land Board”) and is described
below.
Rangeview Water Agreements –
We acquired our Rangeview Water Supply in April
1996 pursuant to the following agreements:
(i)
The
1996 Amended and Restated Lease Agreement between the Land Board
and the Rangeview District, which was superseded by the 2014
Amended and Restated Lease Agreement, dated July 10, 2014 (the
“Lease”), among the Land Board, the Rangeview District
and us;
(ii)
The
Agreement for Sale of non-tributary and not non-tributary
groundwater which we can “export” from the Lowry Range
to supply water to nearby communities (this portion of the
Rangeview Water Supply is referred to as our “Export
Water”) between us and the Rangeview District (the
“Export Agreement”); and
(iii)
The
1996 Service Agreement between us and the Rangeview District for
the provision of water service to the Rangeview District’s
customers located on the Lowry Range, which was superseded by the
Amended and Restated Service Agreement, dated July 11, 2014 (the
“Lowry Service Agreement”), between us and the
Rangeview District.
Additionally, in 1997 we entered into a Wastewater Service
Agreement (the “Lowry Wastewater Agreement”) with the
Rangeview District to provide wastewater service to the Rangeview
District’s customers on the Lowry Range.
The Lease, the Export Agreement, the Lowry Service Agreement the
Lowry Wastewater Agreement, are collectively referred to as the
“Rangeview Water Agreements.”
Pursuant to the Rangeview Water Agreements, we design, construct,
operate and maintain the Rangeview District’s water and
wastewater systems to allow the Rangeview District to provide water
and wastewater service to its customers located within the
Rangeview District’s service area at the Lowry
Range.
Subject
to the terms and conditions of the Lease, we are the exclusive
water and wastewater provider on the Lowry Range, and we operate
both the water and the wastewater systems during our contract
period on behalf of the Rangeview District, which owns the
facilities for both systems. At the expiration of our contract term
in 2081, ownership of the water system facilities located on the
Lowry Range used to deliver Non-Export Water to customers will
revert to the Land Board, with the Rangeview District retaining
ownership of the wastewater facilities. Through facilities we own,
we use our Export Water, and we intend to use other supplies owned
by us, to provide wholesale water service and wastewater service to
customers located outside of the Lowry Range, including customers
of the Rangeview District and other governmental entities and
industrial and commercial customers.
Of the approximately 26,985 acre feet of water comprising our
Rangeview Water Supply, we own 11,650 acre feet of Export Water,
which consists of 10,000 acre feet of groundwater and 1,650 acre
feet of average yield surface water, pending completion by the Land
Board of documentation related to the exercise of our right to
substitute 1,650 acre feet of our groundwater for a comparable
amount of surface water. Additionally, assuming the completion of
the substitution of groundwater for surface water, we hold the
exclusive right to develop and deliver through the year 2081 the
remaining 13,685 acre feet of groundwater and approximately 1,650
acre feet of average yield surface water to customers either on or
off of the Lowry Range. The Rangeview Water Agreements also grant
us the right to use surface reservoir capacity to provide water
service to customers both on and off the Lowry Range.
The Lowry Range Property
– The Lowry Range is located in
unincorporated Arapahoe County, about 20 miles southeast of
downtown Denver. The Lowry Range is one of the largest contiguous
parcels under single ownership next to a major metropolitan area in
the United States. The Lowry Range is approximately 27,000 acres in
size or about 40 square miles of land. Of the 27,000 acres,
pursuant to our agreements with the Land Board and the Rangeview
District, we have the exclusive rights to provide water and
wastewater services to approximately 24,000 acres of the Lowry
Range.
Rangeview Metropolitan District –
The Rangeview District is a quasi-municipal
corporation and political subdivision of Colorado formed in 1986
for the purpose of providing water and wastewater service to the
Lowry Range and other approved areas. The Rangeview District is
governed by an elected board of directors. Eligible voters and
persons eligible to serve as directors of the Rangeview District
must own an interest in property within the boundaries of the
Rangeview District. We own certain rights and real property
interests which encompass the current boundaries of the Rangeview
District. The current directors of the Rangeview District are Mark
W. Harding, Scott E. Lehman, and James Ewing (all are employees of
Pure Cycle), and two independent board members. Pursuant to
Colorado law, directors may receive $100 for each board meeting
they attend, up to a maximum of $1,600 per year. Mr. Harding, Mr.
Lehman, and Mr. Ewing have all elected to forego these
payments
.
South Metropolitan Water Supply Authority (“SMWSA”) and
Water Infrastructure Supply Efficiency Partnership
(“WISE”) –
SMWSA is a municipal water authority in the State
of Colorado organized to pursue the acquisition and development of
new water supplies on behalf of its members, including the
Rangeview District. SMWSA members include 14 Denver area water
providers in Arapahoe and Douglas Counties. The Rangeview District
became a member of SMWSA in 2009 in an effort to participate with
other area water providers, in developing regional water supplies
along the Front Range. We entered into a Participation Agreement
with the Rangeview District on December 16, 2009, whereby we
agreed to provide funding to the Rangeview District in connection
with its membership in the SMWSA (the “SMWSA Participation
Agreement”). SMWSA members have been working with the City
and County of Denver acting through its Board of Water
Commissioners (“Denver Water”) and the City of Aurora
acting by and through its Utility Enterprise (“Aurora
Water”) on a cooperative water project known as the WISE,
which seeks to develop regional infrastructure that would
interconnect members’ water transmission systems to be able
to develop additional water supplies from the South Platte River in
conjunction with Denver Water and Aurora Water. In July 2013, the
Rangeview District together with nine other SMWSA members formed
the South Metro WISE Authority (“SMWA”) pursuant to the
South Metro WISE Authority Formation and Organizational
Intergovernmental Agreement (the “SM IGA”) to enable
its members to participate in WISE. The SM IGA specifies each
member’s pro rata share of WISE and the members’ rights
and obligations with respect to WISE. On December 31, 2013,
SMWA, Denver Water and Aurora Water entered into the Amended and
Restated WISE Partnership – Water Delivery Agreement (the
“WISE Partnership Agreement”), which provides for the
purchase and construction of certain infrastructure (pipelines,
water storage facilities, water treatment facilities, and other
appurtenant facilities) to deliver water to and among the 10
members of the SMWA, Denver Water and Aurora Water. We have entered
into the Rangeview/Pure Cycle WISE Project Financing and Service
Agreement with the Rangeview District dated November 19, 2014
(effective as of December 22, 2014), which obligates us to fund the
Rangeview District’s cost of participating in WISE (the
“WISE Financing Agreement”). In exchange for funding
the Rangeview District’s obligations in WISE, we will have
the sole right to use and reuse the Rangeview District’s
approximate 7% share of the WISE water and infrastructure to
provide water service to the Rangeview District’s customers
and to receive the revenue from such service. Upon completion of
the WISE infrastructure in 2017, we will be entitled to
approximately three million gallons per day of transmission
pipeline capacity and 500 acre feet per year of water.
In
accordance with the WISE Financing Agreement and the SMWSA
Participation Agreement, to date we have provided approximately
$3.1 million of financing to the Rangeview District to fund its
obligation to finance the purchase of infrastructure for WISE, its
obligations related to SMWSA, and the construction of a connection
to the WISE system.
We
anticipate that we will be spending the following over the next
five fiscal years to fund the Rangeview District’s purchase
of its share of the water transmission line and additional
facilities, water and related assets for WISE and to fund
operations and water deliveries related to
WISE:
Table B
- Estimated WISE Costs
|
|
For the
Fiscal Years Ended August 31,
|
|
|
|
|
|
|
Subscription
(Operations)
|
$
51,800
|
$
51,800
|
$
51,800
|
$
51,800
|
$
51,800
|
Water
Deliveries
|
232,000
|
348,000
|
493,000
|
738,000
|
897,000
|
Capital
(Infrastructure)
|
338,100
|
1,555,400
|
74,200
|
-
|
-
|
Other
|
23,600
|
86,600
|
23,600
|
68,300
|
83,200
|
|
$
645,500
|
$
2,041,800
|
$
642,600
|
$
858,100
|
$
1,032,000
|
Land Board Royalties –
Pursuant to the Rangeview Water Agreements, the
Land Board is entitled to royalty payments based on a percentage of
revenues earned from water sales that utilize water from the
Rangeview Water Supply. The calculation of royalties depends on the
water source, whether the customer is a public or private entity,
and the location of the customer. Royalties were modified in July
2014 pursuant to the terms of the Lease. The Land Board does not
receive a royalty from wastewater services.
Water Customers
–
When we develop, operate and deliver
water service utilizing water from our Rangeview Water Supply,
payments from customers generate royalties to the Land Board at a
rate of 12% of gross revenues from private customers and customers
on the Lowry Range and 10% from public entity customers. In the
event that either (i) metered production of water used on the Lowry
Range in any calendar year exceeds 13,000 acre feet or (ii) 10,000
surface acres on the Lowry Range have been rezoned to
non-agricultural use, finally platted and water tap agreements have
been entered into with respect to all improvements to be
constructed on such acreage, the Land Board may elect, at its
option, to receive, in lieu of its royalty of 12% of gross
revenues, 50% of the collective net profits (ours and the Rangeview
District’s) derived from the sale or other disposition of
water on the Lowry Range. To date neither of these conditions has
been met, and such conditions are not likely to be met any time
soon. In addition to royalties on the sale of metered water
deliveries, the Land Board will receive a royalty on the sale of
water taps at the rate of two percent, except for the sale of any
taps to Sky Ranch, of the gross amount received from the sale of a
water tap.
Sale of Water
Rights
–
In the event we sell our Export Water
right outright rather than developing and delivering water service,
royalties to the Land Board escalate based on the amount of gross
revenue we receive and are lower for sales to a water district or
similar municipal or public entity than for sales to a private
entity as noted in Table C.
Table C - Royalties for Sale of Export Water Rights
|
|
|
|
|
|
$
0 - $45,000,000
|
12
%
|
10
%
|
$
45,000,001 - $60,000,000
|
24
%
|
20
%
|
$
60,000,001 - $75,000,000
|
36
%
|
30
%
|
$
75,000,001 - $90,000,000
|
48
%
|
40
%
|
|
50
%
|
50
%
|
We are also required to pay the Land Board a minimum annual water
production fee, which is currently under negotiation, but we have
estimated the minimum fee to be approximately $45,600 per year,
which is to be credited against future royalties.
East Cherry Creek Valley System –
Pursuant to a 1982 contractual right, the
Rangeview District may purchase water produced from East Cherry
Creek Valley Water and Sanitation District’s
(“ECCV”) Land Board system. ECCV’s Land Board
system is comprised of eight wells and more than 10 miles of buried
water pipeline located on the Lowry Range. In May 2012, in order to
increase the delivery capacity and reliability of these wells, in
our capacity as the Rangeview District’s service provider and
the Export Water Contractor (as defined in the Lease among us, the
Rangeview District and the Land Board), we entered into an
agreement to operate and maintain the ECCV facilities allowing us
to utilize the system to provide water to commercial and industrial
customers, including customers providing water for drilling and
hydraulic fracturing of oil and gas wells.
Our costs associated
with the use of the ECCV system are a flat monthly fee of $8,000
per month from January 1, 2013 through December 31, 2020, and will
decrease to $3,000 per month from January 1, 2021 through April
2032. Additionally, we pay a fee per 1,000 gallons of water
produced from ECCV’s system, which is included in the water
usage fees charged to customers.
Arapahoe County Fairgrounds Agreement for Water
Service
In 2005, we entered into an Agreement for Water Service (the
“County Agreement”) with Arapahoe County to design,
construct, operate and maintain a water system for, and provide
water services to, the county for use at the Arapahoe County
fairgrounds (the “Fairgrounds”), which are located west
of the Lowry Range. Pursuant to the County Agreement, we purchased
321 acre feet of water from the county in 2008. Further details of
the arrangements with the county are described in Note 4
–
Water and Land Assets
to the accompanying financial
statements.
Pursuant to the County Agreement, we constructed and own a deep
water well, a 500,000-gallon water tank and pipelines to transport
water to the Fairgrounds. The construction of these items was
completed in our fiscal 2006, and we began providing water service
to the county in 2006.
|
|
|
Water Sales for Fracking
We provide water for hydraulic fracturing (“fracking”)
of oil and gas wells being developed in the Niobrara Formation to
and around the Land Board’s Lowry Range property and our Sky
Ranch property. Oil and gas drilling in our area is affected by the
price of oil and can vary from year to year. Wells developed in the
Niobrara Formation utilize between 10 and 20 million gallons of
water to drill and frack, which equates to selling water to between
approximately 100 and 200 homes for an entire year.
Water revenues from sales of water for the construction of well
sites and for drilling and fracking wells drilled into the Niobrara
Formation were approximately $478,000 and $600 during the fiscal
years ended August 31, 2017 and 2016, respectively. With a large
percentage of the acreage surrounding the Lowry Range in Arapahoe,
Adams, Elbert, and portions of Douglas Counties already leased by
oil companies, we anticipate providing additional water for
drilling and fracking of oil and gas wells in the future.
Previously nearly all oil and gas development was attributable to
our largest fracking customer ConocoPhillips Company
(“ConocoPhillips”). However, in the past year there
have been two other oil and gas companies acquiring lease interests
in the area and each of these companies have drilled and fracked
wells. We anticipate continued development of oil and gas wells at
the Lowry Range, Sky Ranch and the surrounding area by multiple
operators.
Service to Customers Not on the Lowry Range
Since January 2017, we have had an agreement with the Rangeview
District to be the Rangeview District’s exclusive provider of
water and wastewater services to the Rangeview District’s
customers located outside of its Lowry Range service area. This
agreement was confirmed in the Export Service Agreement, dated June
16, 2017 (the “Off-Lowry Service Agreement”), between
us and the Rangeview District. Pursuant to the Off-Lowry Service
Agreement, we design, construct, operate and maintain the Rangeview
District’s water and wastewater systems and the systems of
other communities that have service contracts with the Rangeview
District to provide water and wastewater services to the Rangeview
District’s customers that are not on the Lowry Range
(currently, Wild Pointe Ranch and Sky Ranch). In exchange for
providing water and wastewater services to the Rangeview
District’s customers that are not on the Lowry Range, we
receive 100% of water and wastewater tap fees, 98% of the water
usage fees, and 90% of the monthly wastewater service fees and
wastewater usage fees received by the Rangeview District from its
customers that are not located on the Lowry Range, after deduction
of royalties due to the Land Board, if applicable. See Rangeview
Water Supply and Lowry Range –
Land Board Royalties
above. The water usage fees to be
collected for service at Sky Ranch are the only fees that would
currently be subject to the Land Board royalty.
Wild Pointe – Elbert & Highway 86 Commercial Metropolitan
District –
In 2017, we
entered into an agreement with the Rangeview District, which had
entered into an agreement with Elbert & Highway 86 Commercial
Metropolitan District (“Elbert 86 District”) to operate
and maintain a water system for residential and commercial
customers at the Wild Pointe development in Elbert County. The
water system includes two deep water wells, a pump station,
treatment facility, storage facility, over eight miles of
transmission lines, and approximately 457 acre feet of water rights
serving the development. We provided $1.6 million in funding to
acquire the exclusive rights to operate and maintain all the water
facilities in exchange for payment of the remaining residential and
commercial tap fees and annual water use fees. Service to Wild
Pointe is governed by the Off-Lowry Service
Agreement.
Sky Ranch Water and Wastewater Service –
As described in more detail below, we are
developing 931 acres of land we own as a master planned
community
known
as Sky Ranch. Pursuant to the Sky Ranch Water and Wastewater
Service Agreement, dated June 19, 2017 (the “Sky Ranch
Service Agreement”), between PCY Holdings, LLC, our wholly
owned subsidiary and the owner of the Sky Ranch property
(“PCY Holdings”), and the Rangeview District, PCY
Holdings agreed to construct certain facilities necessary to
provide water and wastewater service to Sky Ranch, and the
Rangeview District agreed to provide water and wastewater services
for the Sky Ranch development. Pursuant to the Off-Lowry Service
Agreement, we are the exclusive provider of water and wastewater
services to future residents of the Sky Ranch
development.
Sky Ranch Development
In 2010, we purchased approximately 931 acres of undeveloped land
located in unincorporated Arapahoe County known as Sky Ranch. Sky
Ranch is located directly adjacent to I-70, 16 miles east of
downtown Denver, four miles north of the Lowry Range, and four
miles south of Denver International Airport.
The property includes rights to approximately 830 acre feet of
water and approximately 640 acres of oil and gas mineral rights and
has been zoned for residential, commercial and retail uses that may
include up to 4,850 SFEs. Sky Ranch is zoned for 4,400 homes and
1.35 million square feet of commercial and retail property. We
currently lease the land to an area farmer on a year to year basis.
We have leased the minerals underlying the land to a major
independent exploration and production company. We have been
engaged in the design, permitting, engineering and development of
Sky Ranch to develop residential lots for entry-level housing
(houses costing in the $300,000 range). We plan to develop the
first phase of Sky Ranch, which will include 151 acres and 506
detached single family lots. We anticipate beginning construction
of an initial 200 lots in fiscal 2018 pursuant to the Purchase and
Sale Contracts described below.
In June
2017, we entered into purchase and sale agreements (collectively,
the “Purchase and Sale Contracts”) with three separate
home builders pursuant to which we agreed to sell, and each builder
agreed to purchase, a certain number (totaling 506) of
single-family, detached residential lots at the Sky Ranch property.
We will be developing finished lots for each of the three home
builders (which are lots on which homes are ready to be built that
include roads, curbs, wet and dry utilities, storm drains and other
improvements). Each builder is required to purchase water and sewer
taps for the lots from the Rangeview District, the cost of which
depends on the size of the lot, the size of the house, and the
amount of irrigated turf. Pursuant to the
Off-Lowry Service Agreement,
we will receive all of the
water tap
fees and wastewater tap fees and 90% of the monthly service fees
and usage fees for wastewater services received
by the
Rangeview District from customers at Sky Ranch. We will also
receive
98% of the usage fees for
water services received by the Rangeview District from customers at
Sky Ranch, after deduction, in most instances, of the royalty to
the Land Board related to the use of the Rangeview Water
Supply.
The
closing of the transactions contemplated by each Purchase and Sale
Contract is subject to customary closing conditions, including,
among others, the builder’s completion to its satisfaction of
a title review and other due diligence of the property, the
accuracy of the representations and warranties made by us in the
Purchase and Sale Contract, and a commitment by the title company
to issue to the builder a title policy, subject to certain
conditions. Within three business days of the execution of each
Purchase and Sale Contract, each builder paid an earnest money
deposit. Each builder had a 60-day due diligence period during
which it had the right to terminate the Purchase and Sale Contract
and receive a full refund of its earnest money deposit. The
initial due diligence period was extended; however, on
November 10, 2017, each builder completed its due diligence period
and agreed to continue with its respective Purchase and Sale
Contract. Pursuant to certain Purchase and Sale Contracts, the
builder is required to make an additional earnest money deposit or
deposits after the due diligence period and/or final approval of
the entitlements for the property. The earnest money deposit or
deposits will be applied to the payment of the purchase price of
the lots at closing in accordance with a specified takedown
schedule or be paid to us in the event of certain defaults by a
builder. Pursuant to each Purchase and Sale Contract, we must
obtain final approval of the entitlements for the property by
August 2018 (which date we may extend by six
months).
We are obligated pursuant to the Purchase and Sale Contracts, or
separate Lot Development Agreements (the “Lot Development
Agreements” and, together with the Purchase and Sale
Contracts, the “Builder Contracts”), to construct
infrastructure and other improvements, such as roads, curbs and
gutters, park amenities, sidewalks, street and traffic signs, water
and sanitary sewer mains and stubs, storm water management
facilities, and lot grading improvements for delivery of finished
lots to each builder. Pursuant to the Builder Contracts, we must
cause the Rangeview District to install and construct off-site
infrastructure improvements (
i.e.
, drainage and storm water retention ponds, a
wastewater reclamation facility, and wholesale water facilities)
for the provision of water and wastewater service to the property.
In conjunction with our approvals with Arapahoe County for the Sky
Ranch project, we and/or the Rangeview District and the Sky Ranch
Districts are obligated to deposit into an account the anticipated
costs to install and construct substantially all the off-site
infrastructure improvements (which include drainage, wholesale
water and wastewater, and entry roadway), which we estimate will be
approximately $10.2 million.
We estimate the total capital required to develop lots in the first
phase (506 lots) of Sky Ranch is approximately $27.8 million, and
estimate lots sales to home builders to generate $35 million
providing a margin on lots of approximately $7.2 million. Utility
revenues are derived from tap fees (which vary depending on lot
size, house size, and amount of irrigated turf) and usage fees
(which are monthly water and wastewater fees). Our current Sky
Ranch water tap fees are $26,650 (per SFE), and wastewater taps
fees are $4,659 (per SFE).
Sky Ranch Metropolitan District No. 1, 3, 4, and 5 –
The Sky Ranch Metropolitan District
Nos. 1, 3, 4 and 5 are quasi-municipal corporations and
political subdivisions of Colorado formed in 2004 for the purpose
of providing service to the approximately 930 acres of the Sky
Ranch property (the “Sky Ranch Districts”). The Sky
Ranch Districts are governed by an elected board of directors.
Eligible voters and persons eligible to serve as directors of the
Sky Ranch Districts must own an interest in property within the
boundaries of the district. We own certain rights and real property
interests which encompass the current boundaries of the districts.
The current directors of the districts are Mark W. Harding, Scott
E. Lehman, and James Ewing (all are employees of Pure Cycle), and
two independent board members. Pursuant to Colorado law, directors
may receive $100 for each board meeting they attend, up to a
maximum of $1,600 per year. Mr. Harding, Mr. Lehman, and Mr. Ewing
have all elected to forego these payments.
|
|
Oil and Gas Leases
In 2011, we entered into a three year Oil and Gas Lease (the
“O&G Lease”) and Surface Use and Damage Agreement
(the “Surface Use Agreement”) and received an up-front
payment of $1,243,400 ($1,900 per mineral acre), and a 20% of gross
proceeds royalty (less certain taxes) from the sale of any oil and
gas produced from the approximately 634 acres of mineral estate we
own at Sky Ranch. In 2014 the O&G Lease was extended for an
additional two (2) years, and we received an additional up-front
payment of $1,243,400 for the extension. The O&G Lease is now
held by production and we have been receiving royalties from the
oil and gas production from two wells drilled within our mineral
interest. During the fiscal year ended August 31, 2017, we received
$186,600 in royalties attributable to these two wells.
In 2015, we received an up-front payment of $72,000, pursuant to a
lease (which expired in fiscal 2017) for the purpose of exploring
for, developing, producing, and marketing oil and gas of 40 acres
of mineral estate we own adjacent to the Lowry Range (the
“Rangeview Lease”). In September 2017, we entered into
a three-year Paid-Up Oil and Gas Lease with Bison Oil and Gas, LLP
(the “Bison Lease”), for this 40-acre mineral estate,
and we received an up-front payment of
$167,200.
|
Arkansas
River Land and Minerals
We own three farms totaling 700 acres in the Arkansas River Valley.
The farms were acquired in order to correct dry-up covenant issues
related to water only farms and we currently lease all three farms
for dry land grazing. We intend to sell the farms in due course and
have classified the farms as long term investments. We also own
approximately 13,900 acres of mineral interests in the Arkansas
River Valley, which have an estimated value of approximately $1.4
million. We currently have no plans to sell our mineral
interests.
Well Enhancement and Recovery Systems
In 2007, we, along with two other parties, formed Well Enhancement
and Recovery Systems LLC (“Well Enhancement LLC”), to
develop a new deep water well enhancement tool and process that we
believe will increase the efficiency of wells completed into the
Denver Basin groundwater formations. According to results from
studies performed by an independent hydro-geologist, the well
enhancement tool effectively increased the production of the two
test wells by 80% and 83% when compared to that of nearby wells
developed in similar formations at similar depths. Based on the
positive results of the test wells, we continue to refine the
process of enhancing deep water wells and are marketing the tool to
area water providers. We currently hold a 50% interest in Well
Enhancement LLC. We have not drilled any new wells in the past
three years and have not used the tool during this period, but we
intend to continue to use the tool when we drill new water
wells.
Revenues
We generate revenues through our wholesale water and wastewater
operations predominately from three sources: (i) monthly
service and contract delivery fees, (ii) one-time water and
wastewater tap fees and construction fees, and (iii) consulting
fees. Our revenue sources and how we account for them are described
in greater detail below. We typically negotiate the payment terms
for tap fees, construction fees, and other water and wastewater
service fees with our wholesale customers as a component of our
service agreements prior to construction of the project. However,
with respect to customers on the Lowry Range, pursuant to the
Lease, the Rangeview District’s rates and charges to such
end-use customers may not exceed the average of similar rates and
charges of three nearby water providers.
i)
Monthly Service
Fees
–
Monthly wholesale water usage fees are
assessed to our customers based on actual metered deliveries to
their end-use customers each month. Water usage fees are based on a
tiered pricing structure that provides for higher prices as
customers use greater amounts of water. The water usage fees for
end-use customers on the Lowry Range are noted below in Table
D:
Table D - Lowry Range Tiered Water Usage Pricing
Structure
|
|
Price
($ per thousand gallons)
|
Base
charge per SFE
|
$
32.27
|
$
30.35
|
$
30.35
|
0
gallons to 10,000 gallons
|
$
3.91
|
$
3.51
|
$
3.51
|
10,001
gallons to 20,000 gallons
|
$
5.14
|
$
5.31
|
$
5.31
|
20,001
gallons to 40,000 gallons
|
$
8.08
|
$
8.12
|
$
8.12
|
40,001
gallons and above
|
$
9.87
|
$
9.55
|
$
9.55
|
The figures in Table D reflect the amounts charged
to the Rangeview District’s end-use customers on the Lowry
Range. In exchange for providing water service to the Rangeview
District’s Lowry Range customers, we receive 98% of the usage
charges received by the Rangeview District relating to water
services after deducting the required royalty to the Land Board
(described above at Rangeview Water Supply and Lowry Range
–
Land Board
Royalties
). The amounts charged
by the Rangeview District to its end-use customers off the Lowry
Range are determined pursuant to the Rangeview District’s
service agreements with such customers and such rates may vary. In
exchange for providing water service to the Rangeview
District’s customers off the Lowry Range, we receive 98% of
the usage charges received by the Rangeview District relating to
water services after deducting any required royalty to the Land
Board. The royalty to the Land Board is required for water service
provided utilizing our Rangeview Water Supply, which includes most
of our current customers except those at Wild Pointe. In exchange
for providing wastewater services, we receive 90% of the Rangeview
District’s monthly wastewater service and usage fees, as well
as the right to use or sell the reclaimed
water.
In
addition to the tiered water usage pricing structure, we currently
charge a hydrant rate of $10.50 per thousand gallons for commercial
and industrial customers. We also collect other immaterial fees and
charges from customers and other users to cover miscellaneous
administrative and service expenses, such as application fees,
review fees and permit fees.
ii)
Water and Wastewater
Tap Fees and Construction Fees
–
Tap
fees are typically paid by developers in advance of construction
activities and are non-refundable. Tap fees are typically used to
fund construction of the Wholesale Facilities and defray the
acquisition costs of obtaining water rights and operating
facilities.
The
Rangeview District’s 2017 water tap fees are $24,974, and its
wastewater tap fees are $4,659.
In
exchange for providing water service to the Rangeview
District’s customers on the Lowry Range, we receive 100% of
the Rangeview District’s tap fees after deducting the two
percent royalty to the Land Board described above. In exchange for
providing water service to the Rangeview District’s customers
off the Lowry Range, we currently receive 100% of the Rangeview
District’s tap fees. If water taps are sold to customers not
located on the Lowry Range that are to be serviced utilizing the
Rangeview Water Supply (other than taps to Sky Ranch, which are
exempt), the two percent royalty to the Land Board would be
deducted from the amount we receive. In exchange for providing
wastewater services, whether to customers on or off the Lowry
Range, we receive 100% of the Rangeview District’s wastewater
tap fees.
Construction
fees are fees we receive, typically in advance, from developers for
us to build certain infrastructure such as Special Facilities which
are normally the responsibility of the developer.
iii)
Consulting Fees
– Consulting fees are fees we
receive, typically on a monthly basis, from municipalities and area
water providers along the I-70 corridor, for systems with respect
to which we provide contract operations
services.
Significant Customers
Our wholesale water and wastewater sales to the Rangeview District
pursuant to the Rangeview Water Agreements accounted for 26%, 67%
and 19% of our total water revenues for the fiscal years ended
August 31, 2017, 2016 and 2015, respectively. The Rangeview
District has one significant customer, the Ridgeview Youth Services
Center (“Ridgeview”). Pursuant to our Rangeview Water
Agreements with the Rangeview District, we are providing water to
Ridgeview on behalf of the Rangeview District. Ridgeview accounted
for 21%, 55% and 16% of our total water revenues for the fiscal
years ended August 31, 2017, 2016 and 2015,
respectively.
Our industrial water sales (i) directly and indirectly to
ConocoPhillips accounted for approximately 30%,
less
than
1% and 75% and (ii) to Bison Oil and Gas accounted
for approximately 25%, nil, and nil, of our total water revenues
for the fiscal years ended August 31, 2017, 2016 and 2015,
respectively.
Our Projected Operations
This section should be read in conjunction with
Item 1A – Risk
Factors
.
Along the Colorado Front Range, there are over 70 water providers
with varying needs for replacement and new water supplies. We
believe we are well positioned to assist certain of these providers
in meeting their current and future water needs.
We design, construct and operate our water and wastewater
facilities using advanced water purification and wastewater
treatment technologies which allow us to use our water supplies in
an efficient and environmentally sustainable manner. We plan to
develop our water and wastewater systems in stages to efficiently
meet demands in our service areas, thereby reducing the amount of
up-front capital costs required for construction of facilities. We
use third-party contractors to construct our facilities as needed.
We employ licensed water and wastewater operators to operate our
water and wastewater systems. As our systems expand, we expect to
hire additional personnel to operate our systems, which include
water production, treatment, testing, storage, distribution,
metering, billing, and operations management.
Our water and wastewater systems conjunctively use surface and
groundwater supplies and storage of raw water and highly treated
effluent supplies to provide a balanced sustainable water supply
for our wholesale customers and their end-use customers.
Integrating conservation practices and incentives together with
effective water reuse demonstrates our commitment to providing
environmentally responsible, sustainable water and wastewater
services. Water supplies and water storage reservoirs are
competitively sought throughout the west and along the Front Range
of Colorado. We believe regional cooperation among area water
providers in developing new water supplies, water storage, and
transmission and distribution systems provides the most cost
effective way of expanding and enhancing service capacities for
area water providers. We continue to discuss developing water
supplies and water storage opportunities with area water
providers.
We expect the development of our Rangeview Water Supply to require
a significant number of high capacity deep water wells. We
anticipate drilling separate wells into each of the three principal
aquifers located beneath the Lowry Range. Each well is intended to
deliver water to central water treatment facilities for treatment
prior to delivery to customers. Development of our Lowry Range
surface water supplies will require facilities to divert surface
water to storage reservoirs to be located on the Lowry Range and
treatment facilities to treat the water prior to introduction into
our distribution systems. Surface water diversion facilities will
be designed with capacities to divert the surface water when
available (particularly during seasonal events such as spring
run-off and summer storms) for storage in reservoirs to be
constructed on the Lowry Range. Based on preliminary engineering
estimates, the full build-out of water facilities (including
diversion structures, transmission pipelines, reservoirs, and water
treatment facilities) on the Lowry Range will cost in excess of
$412 million, based on estimated costs, and will accommodate water
service to customers located on and outside the Lowry Range. We
expect this build out to occur in phases over an extended period of
at least 50 years, and we expect that tap fees will be sufficient
to fund the infrastructure costs.
Our Denver-based supplies are a valuable, locally available
resource located near the point of use. This enables us to
incrementally develop infrastructure to produce, treat and deliver
water to customers based on their growing demands.
During fiscal 2017, we invested approximately $4.5 million to
construct pipelines that interconnect the Rangeview District, WISE,
and Sky Ranch water systems. We expect to continue to invest in
pipelines at the Sky Ranch property in anticipation of the first
phase of development. We also expect to add additional wells as
demand for water grows.
The Rangeview District is a participant in the WISE project. This
project is developing infrastructure to interconnect
providers’ water systems and to extend renewable water
sources owned by Denver Water and Aurora Water to participating
South Metro water providers, including the Rangeview District and,
through our agreements with the Rangeview District, us. This system
will diversify our sources of water and will enable providers to
move water among themselves, which will increase the reliability of
our and others’ water systems. Through the WISE Financing
Agreement, we funded the Rangeview District’s purchase of
certain rights to use existing water transmission and related
infrastructure acquired and constructed by the WISE project. We
invested approximately $198,200 in the WISE system during fiscal
2017 and have invested approximately $3.1 million to date. We
anticipate that we will be spending approximately $645,500 on this
system during fiscal 2018 and $4.6 million during the next four
years to fund the Rangeview District’s purchase of its share
of the water transmission line and additional facilities, water and
related assets for WISE and to fund operations and water deliveries
related to WISE. Timing of the investment will vary depending on
the schedule of projects within WISE.
We are in the process of developing our Sky Ranch property,
including building finished lots for home builders and building the
water and wastewater infrastructure for housing and commercial
development of the property. We currently anticipate construction
starting on the first phase of development (506 lots) in early
2018, subject to obtaining approvals and the timing of the final
engineering designs. The timing for us to develop the remaining
phases of the property will be largely dependent on the Denver real
estate market and the interest we receive from home builders and
developers. During fiscal 2017, we invested approximately $902,600
in our Sky Ranch property, which consisted of planning, preliminary
and final engineering designs, grading, erosion, sediment control,
drainage design, water and wastewater facility designs, and
construction of approximately 10 miles of new transmission
lines.
We plan to develop additional water assets within the Denver area
and are exploring opportunities to utilize our water assets in
areas adjacent to our existing water supplies.
Water and Growth in Colorado
Colorado has experienced a robust housing market over the past 24
months. The key drivers to housing in the area are:
●
Housing
Starts
–
From September 2016 to September 2017, annual
housing starts increased by 6%. From September 2015 to September
2016, annual housing starts increased by 24%.
●
Unemployment
–
The unemployment rate
in Colorado was 2.4% at August 31, 2017, compared to a national
unemployment rate of 4.4%. Colorado added an estimated 118,200 jobs
from August 2016 to August 2017.
●
Population
–
The Denver Regional
Council of Governments (“DRCOG”), a voluntary
association of over 50 county and municipal governments in the
Denver metropolitan area, estimates that the Denver metropolitan
area population will increase by about 38% from today’s 3.4
million people to 4.7 million people by the year 2040. A Statewide
Water Supply Initiative report by the Colorado Water Conservation
Board estimates that the South Platte River basin, which includes
the Denver metropolitan region, will grow from a current population
of 3.9 million to 4.9 million by the year 2030, while the
state’s population will increase from 5.7 million to 7.2
million.
●
Demand
–
Approximately 70% of
the state’s projected population increase is anticipated to
occur within the South Platte River basin. Significant increases in
Colorado’s population, particularly in the Denver metro
region and other areas in the water-short South Platte River basin,
together with increasing agricultural, recreational, and
environmental water demands, will intensify competition for water
supplies. The estimated population increases are expected to result
in demands for water services in excess of the current capabilities
of municipal service providers, especially during drought
conditions.
●
Supply
–
The Statewide Water
Supply Initiative estimates that population growth in the Denver
region and the South Platte River basin could result in additional
water supply demands of over 400,000 acre feet by the year
2030.
●
Development
–
Colorado law requires
property developers to demonstrate that they have sufficient water
supplies for their proposed projects before rezoning applications
will be considered. These factors indicate that water and
availability of water will continue to be critical to growth
prospects for the region and the state, and that competition for
available sources of water will continue to intensify. We focus the
marketing of our water supplies and services to developers and home
builders that are active along the Colorado Front Range as well as
other area water providers in need of additional
supplies.
Colorado’s future water supply needs will be met through
conservation, reuse and the development of new supplies. The
Rangeview District’s rules and regulations for water and
wastewater service call for adherence to strict conservation
measures, including low-flow water fixtures, high efficiency
appliances, and advanced irrigation control devices. Additionally,
our systems are designed and constructed using a dual-pipe water
distribution system to segregate the delivery of high quality
potable drinking water to our local governmental entities and their
end-use customers through one system and a second system to supply
raw or reclaimed water for irrigation demands. About one-half of
the water used by a typical Denver-area residential water customer
is used for outdoor landscape and lawn irrigation. We believe that
raw or reclaimed water supplies provide the lowest cost, most
environmentally sustainable water for outdoor irrigation. We expect
our systems to include an extensive water reclamation system in
which essentially all effluent water from wastewater treatment
plants will be reused to meet non-potable water demands. Our
dual-distribution systems demonstrate our commitment to
environmentally responsible water management policies in our water
short region.
Labor and Raw Materials
The Builder Contracts for Sky Ranch and the contracts we enter into
to design and construct water facilities are fixed-price contracts
in which we bear all or a significant portion of the risk for cost
overruns. Under these fixed-price contracts, the contract prices
that we agree to are established in part based on fixed, firm
subcontractor quotes on contracts and on cost and scheduling
estimates. These quotes may be based on a number of assumptions,
including assumptions about prices and availability of labor,
equipment and materials, and other issues.
Increased costs
or shortages of skilled labor and/or concrete, steel, pipe and
other materials could cause increases in property development costs
and delays. These shortages and delays may result in delays in the
delivery of the residential lots under development, reduced gross
margins from lot sales, or both. We plan to contract with third
parties for our labor and materials at a fixed price, which should
allow us to mitigate the risks associated with increases in the
cost of labor and building materials.
Competition
We negotiate individual service agreements with our governmental
customers and with their developers and/or home builders to design,
construct and operate water and wastewater systems and to provide
services to end-use customers of governmental entities and to
commercial and industrial customers. These service agreements seek
to address all aspects of the development of the water and
wastewater systems including:
(i)
the
purchase of water and wastewater taps in exchange for our
obligation to construct certain Wholesale Facilities;
(ii)
the
establishment of payment terms, timing, capacity and location of
Special Facilities (if any); and
(iii)
specific
terms related to our provision of ongoing water and wastewater
services to our local governmental customers as well as the
governmental entity’s end-use customers.
Although we have exclusive long-term water and wastewater service
contracts for 24,000 acres of the 27,000-acre Lowry Range pursuant
to the Lowry Service Agreement, providing water and wastewater
services to areas other than Wild Pointe, Sky Ranch and a portion
of the Lowry Range is subject to competition. Alternate sources of
water are available, principally from other private parties, such
as farmers or others owning water rights that have historically
been used for agriculture, and from municipalities seeking to annex
new development areas in order to increase their tax base. Our
principal competition in areas close to the Lowry Range is the City
of Aurora. Principal factors affecting competition for potential
purchasers of our Export Water include the availability of water
for the particular purpose, the cost of delivering the water to the
desired location (including the cost of required taps), and the
reliability of the water supply during drought periods. We estimate
that the water assets we own and have the exclusive right to use
have a supply capacity of approximately 60,000 SFE units, and we
believe they provide us with a significant competitive advantage
along the Front Range. Our legal rights to the Rangeview Water
Supply have been confirmed for municipal use, and our water supply
is close to Denver area water users. We believe our pricing
structure is competitive and our water portfolio is well balanced
with senior surface water rights, groundwater rights, storage
capacity and reclaimed water supplies.
Environmental, Health and Safety Regulation
Provision of water and wastewater services is subject to regulation
under the federal Safe Drinking Water Act, the Clean Water Act,
related state laws, and federal and state regulations issued under
these laws. These laws and regulations establish criteria and
standards for drinking water and for wastewater discharges. In
addition, we are subject to federal and state laws and other
regulations relating to solid waste disposal and certain other
aspects of our operations.
Environmental compliance issues may arise in the normal course of
operations or as a result of regulatory changes. We attempt to
align capital budgeting and expenditures to address these issues in
a timely manner.
Safe Drinking Water Act –
The Safe Drinking Water Act establishes criteria
and procedures for the U.S. Environmental Protection Agency (the
“EPA”) to develop national quality standards for
drinking water. Regulations issued pursuant to the Safe Drinking
Water Act and its amendments set standards on the amount of certain
microbial and chemical contaminants and radionuclides allowable in
drinking water. The State of Colorado has assumed primary
responsibility for enforcing the standards established by the Safe
Drinking Water Act and has adopted the Colorado Primary Drinking
Water Standards (5 CCR 1003-1). Current requirements for drinking
water are not expected to have a material impact on our financial
condition or results of operations as we have made and are making
investments to meet existing water quality standards. In the
future, we might be required to change our method of treating
drinking water and make additional capital investments if
additional regulations become effective.
The federal Groundwater Rule became effective December 1,
2009. This rule requires additional testing of water from well
sources and under certain circumstances requires demonstration and
maintenance of effective disinfection. In 2009, Colorado adopted
Article 13 to the Colorado Primary Drinking Water Standards to
establish monitoring and compliance criteria for the Groundwater
Rule. We have implemented measures to comply with the Groundwater
Rule.
Clean Water Act
–
The Clean Water Act regulates wastewater
discharges from drinking water and wastewater treatment facilities
and storm water discharges into lakes, rivers, streams, and
wetlands. The State of Colorado has assumed primary responsibility
for enforcing the standards established by the federal Clean Water
Act for wastewater discharges from domestic water and wastewater
treatment facilities and has adopted the Colorado Water Quality
Control Act and related regulations, which also regulate discharges
to groundwater. It is our policy to obtain and maintain all
required permits and approvals for discharges from our water and
wastewater facilities and to comply with all conditions of those
permits and other regulatory requirements. A program is in place to
monitor facilities for compliance with permitting, monitoring and
reporting for wastewater discharges. From time to time, discharge
violations might occur which might result in fines and penalties,
but we have no reason to believe that any such fines or penalties
are pending or will be assessed.
In the future, we anticipate changing our method of treating
wastewater, which will require future additional capital
investments, as additional regulations become effective. In 2016,
we invested $368,600 to design, permit and construct a 13 million
gallon effluent storage reservoir at our wastewater treatment
facility and have converted our facility to a zero discharge
treatment facility. We are storing the treated effluent water and
expect to use the water for agricultural and irrigation
uses.
Solid Waste Disposal –
The handling and disposal of residuals and solid
waste generated from water and wastewater treatment facilities is
governed by federal and state laws and regulations. We have a
program in place to monitor our facilities for compliance with
regulatory requirements, and we do not anticipate that costs
associated with our handling and disposal of waste material from
our water and wastewater operations will have a material impact on
our business or financial condition.
Employees
We currently have 11 full-time employees.
Available Information and Website Address
Our website address is
www.purecyclewater.com
.
We make available free of charge through our website our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to these reports as soon as
reasonably practicable after filing with the Securities and
Exchange Commission (“SEC”).
These reports and all other material we file with the SEC may be
obtained directly from the SEC’s website,
www.sec.gov/edgar/searchedgar/companysearch.html
,
under CIK code
276720
.
The contents of our website are not incorporated by reference into
this report. You may also read and copy any materials we file with
the SEC at the SEC’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549. Operating information for the Public
Reference Room is available by calling the SEC at
1-800-SEC-0330.
Item 1A – Risk Factors
The following section describes the material risks and
uncertainties that management believes could have a material
adverse effect on our business, financial condition, results of
operations, and the market price of our common stock. The risks
discussed below include forward-looking statements, and our actual
results may differ materially from those discussed in these
forward-looking statements. These risks should be read in
conjunction with the other information set forth in this report,
including the accompanying financial statements and notes
thereto.
Our net losses may continue and we may not have sufficient cash
flows from operations or other capital resources to pursue our
business objectives.
We have
experienced significant net losses; our cash flows from operations
have not been sufficient to fund our operations in the past; and we
have been required to raise debt and equity capital and sell assets
to remain in operation. Since 2004, we have obtained $76.2 million
through (i) the issuance of $25.2 million of common stock
(including the issuance of stock pursuant to the exercise of
options, net of expenses), (ii) the issuance of $5.2 million of
Convertible Debt, which was converted to common stock on
January 11, 2011, and (iii)
the sale of our
Arkansas River water and land for approximately $45.8 million in
cash
. Our development of the
first 250 homes in the first phase of Sky Ranch requires
significant cash expenditures of approximately $18 million before
we will generate positive cash flows from the sale of lots and
water and sewer tap fees. We expect to fund such expenditures with
cash on hand and cash flows from operations. At August 31, 2017, we
had $26 million of cash and marketable securities on hand. We
currently have a limited number of customers. If our cash on hand
and future cash flows from operations are not sufficient to fund
our operations and the significant capital expenditure requirements
to build our water delivery systems and develop Sky Ranch, we may
be forced to seek to obtain additional debt or equity capital.
Economic conditions and disruptions have previously caused
substantial volatility in capital markets, including credit markets
and the banking industry, increasing the cost and significantly
reducing the availability of financing, which may reoccur in the
future. There can be no assurance that financing will be available
on acceptable terms or at all.
The rates the Rangeview District is allowed to charge customers on
the Lowry Range are limited by the Lease with the Land Board and
our contract with the Rangeview District and may not be sufficient
to cover our costs of construction and operation.
The prices charged by the Rangeview
District for water service on the Lowry Range are subject to
pricing regulations set forth in the Lease with the Land Board.
Both the tap fees and usage rates and charges are capped at the
average of the rates of three nearby water providers. Annually the
Rangeview District surveys the tap fees and rates of the three
nearby providers, and the Rangeview District may adjust tap fees
and rates and charges for water service on the Lowry Range based on
the average of those charged by this group, and we receive 98% of
whatever the Rangeview District charges its customers. Our costs
associated with the construction of water delivery systems and the
production, treatment and delivery of water are subject to market
conditions and other factors, which may increase at a significantly
higher rate than that of the fees we receive from the Rangeview
District. Factors beyond our control and which cannot be predicted,
such as government regulations, insurance and labor markets,
drought, water contamination and severe weather conditions, like
tornadoes and floods, may result in additional labor and material
costs that may not be recoverable under the current rate structure.
Both increased customer demand and increased water conservation may
also impact the overall cost of our operations. If the costs for
construction and operation of our wholesale water services,
including the cost of extracting our groundwater, exceed our
revenues, we would be providing service to the Rangeview District
for use at the Lowry Range at a loss. The Rangeview District may
petition the Land Board for rate increases; however, there can be
no assurance that the Land Board would approve a rate increase
request. Further, even if a rate increase were approved, it might
not be granted in a timely manner or in an amount sufficient to
cover the expenses for which the rate increase was
sought.
Our business is subject to seasonal fluctuations and weather
conditions that could affect demand for our water service and our
revenues.
We depend on an
adequate water supply to meet the present and future demands of our
customers and their end-use customers and to continue our expansion
efforts. Conditions beyond our control may interfere with our water
supply sources. Drought and overuse may limit the availability of
water. These factors might adversely affect our ability to supply
water in sufficient quantities to our customers, and our revenues
and earnings may be adversely affected. Additionally, cool and wet
weather, as well as drought restrictions and our customers’
conservation efforts, may reduce consumption demands, adversely
affecting our revenue and earnings. Furthermore, freezing weather
may contribute to water transmission interruptions caused by pipe
and main breakage. If we experience an interruption in our water
supply, it could have a material adverse effect on our financial
condition and results of operations. Demand for our water during
the warmer months is generally greater than during cooler months
due primarily to additional requirements for water in connection
with cooling systems, irrigation systems and other outside water
use. Throughout the year, and particularly during typically warmer
months, demand will vary with temperature and rainfall levels. If
temperatures during the typically warmer months are cooler than
expected or there is more rainfall than expected, the demand for
our water may decrease and adversely affect our
revenues.
Sales to the fracking industry can fluctuate significantly.
Our water sales have been historically
highly concentrated directly and indirectly with one company
providing fracking services to the oil and gas industry on and
around the Lowry Range and our Sky Ranch property. Sales to this
customer base as well as renewals of our oil and gas leases, if
any, in the future are impacted by regulations, fracking
technologies, the success of the wells and the price of oil and
gas, among other things. Investment in oil and gas development is
dependent on the price of oil and gas. While water sales for
fracking are now increasing, we have no contractual commitment that
will ensure these sales in the future.
We are dependent on the housing market and development in our
targeted service areas for future revenues.
Providing wholesale water service using our
Colorado Front Range water supplies is our principal source of
future revenue. The timing and amount of these revenues will depend
in part on housing developments being built near our water assets.
The development of the Lowry Range, Sky Ranch and other properties
is subject to many factors that are not within our control. If
wholesale water sales are not forthcoming or development on the
Lowry Range, Sky Ranch or other properties in our targeted service
areas is delayed, we may need to use our capital resources, incur
additional short or long-term debt obligations or seek to sell
additional equity. We may not have sufficient capital resources or
be successful in obtaining additional operating capital. After
several years of significant declines in new home construction,
there have been positive market gains in the Colorado housing
market since 2013. However, if the downturn in the homebuilding and
credit markets return or if the national economy weakens and
economic concerns intensify, it could have a significant negative
impact on our business and financial condition and our plans for
future development of additional phases of Sky
Ranch.
Development on the Lowry Range is not within our control and is
subject to obstacles.
Development on the Lowry Range is controlled by
the Land Board, which is governed by a five-person citizen board of
commissioners representing education, agriculture, local government
and natural resources, plus one at-large commissioner, each
appointed for a four-year term by the Colorado governor and
approved by the Colorado Senate. The Land Board’s focus with
respect to issues such as development and conservation on the Lowry
Range tends to change as membership on the Land Board changes. In
addition, there are often significant delays in the adoption and
implementation of plans with respect to property administered by
the Land Board because the process involves many constituencies
with diverse interests. In the event water sales are not
forthcoming or development of the Lowry Range is delayed or
abandoned, we may need to use our capital resources, incur
additional short or long-term debt obligations or seek to sell
additional equity. We may not have sufficient capital resources or
be successful in obtaining additional operating
capital.
Because of the prior use of the Lowry Range as a military facility,
environmental clean-up may be required prior to development,
including the removal of unexploded ordnance. The U.S. Army Corps
of Engineers has been conducting unexploded ordnance removal
activities at the Lowry Range for more than 20 years. Continued
activities are dependent on federal appropriations, and the Army
Corps of Engineers has no assurance from year to year of such
appropriations for its activities at the Lowry Range.
We do not have experience with the development of real
property.
While we have
experience designing and constructing water and wastewater
facilities and maintaining and operating these facilities, we do
not have experience developing real property. We may underestimate
the capital expenditures required to develop the first phase of Sky
Ranch, including the costs of certain infrastructure improvements.
We lack experience in managing property development activities,
including the permitting and other approvals required, which may
result in delays in obtaining the necessary permits and government
approvals.
Our construction of water and wastewater projects may expose us to
certain completion, performance and financial risks.
We expect to rely on independent
contractors to construct our water and wastewater facilities and
Sky Ranch lot improvements. These construction activities may
involve risks, including shortages of materials and labor, work
stoppages, labor relations disputes, weather interference,
engineering, environmental, permitting or geological problems and
unanticipated cost increases. These issues could give rise to
delays, cost overruns or performance deficiencies, or otherwise
adversely affect the construction or operation of our water and
wastewater delivery systems and the construction and delivery of
residential lots pursuant to our Builder Contracts. In addition, we
may experience quality problems in the construction of our systems
and facilities, including equipment failures. We may not meet the
required deadlines under our Builder Contracts. We may face claims
from customers or others regarding product quality and installation
of equipment placed in service by contractors.
The Builder Contracts for Sky Ranch and for the water facilities
that we design and construct are fixed-price contracts, in which we
bear all or a significant portion of the risk for cost overruns.
Under these fixed-price contracts, contract prices are established
in part based on fixed, firm subcontractor quotes on contracts and
on cost and scheduling estimates. These estimates may be based on a
number of assumptions, including assumptions about prices and
availability of labor, equipment and materials, and other issues.
If these subcontractor quotations or cost estimates prove
inaccurate, or if circumstances change, cost overruns may occur,
and our financial results would be negatively impacted. In many
cases, the incurrence of these additional costs would not be within
our control.
Pursuant to our Builder Contracts for Sky Ranch, we guarantee
project completion of water and wastewater delivery systems and lot
improvements by a scheduled date. We also guarantee that the
project, when completed, will achieve certain performance
standards, meet certain quality specifications and satisfy certain
requirements for governmental approvals. If we fail to complete the
project as scheduled, or if we fail to meet guaranteed performance
standards or quality specifications, or obtain the required
governmental approvals, we may be held responsible for cost impacts
and/or penalties to the customer resulting from any delay or for
the costs to alter the project to achieve the performance standards
and the quality specifications and to obtain the required
government approvals. To the extent that these events occur and are
not due to circumstances for which the customer accepts
responsibility or cannot be mitigated by performance bonds or the
provisions of our agreements with contractors, the total costs of
the project would exceed our original estimates and our financial
results would be negatively impacted.
We are required to secure, or to have our subcontractors secure,
performance and completion bonds for certain contracts and
projects. The market environment for surety companies has become
more risk averse. We and our subcontractors secure performance and
completion bonds for our contracts from these surety companies. To
the extent we or our subcontractors are unable to obtain bonds, we
may breach existing agreements and/or not be awarded new contracts.
We may not be able to secure performance and completion bonds when
required.
We may be subject to significant potential liabilities as a result
of warranty and liability claims made against us.
Design, construction or system
failures related to our water and wastewater delivery systems could
result in injury to third parties or damage to property.
As
a property developer, we are also subject in the ordinary course of
our business to warranty claims. We are also subject to claims for
injuries that occur in the course of our property development
activities. We plan to record warranty and other reserves for the
residential lots we sell based on historical experience in our
market and our judgment of the qualitative risks associated with
the type of lots we sell. We have, and many of our subcontractors
have, general liability, property, workers’ compensation and
other business insurance. These insurance policies are intended to
protect us against a portion of our risk of loss from claims,
subject to certain self-insured retentions, deductibles and
coverage limits. However, it is possible that this insurance will
not be adequate to address all warranty and liability claims to
which we are subject. Additionally, the coverage offered and the
availability of general liability insurance for construction
defects are currently limited and policies that can be obtained are
costly and often include exclusions based upon past losses those
insurers suffered as a result of use of defective materials used by
other property developers. As a result, our subcontractors may be
unable to obtain insurance, and we may have to waive our customary
insurance requirements, which increases our and our insurers’
exposure to claims and increases the possibility that our insurance
will not be adequate to protect us for all the costs we incur.
Any losses that exceed claims against
our contractors, the performance bonds and our insurance limits at
such facilities could result in claims against us. In addition, if
there is a customer dispute regarding performance of our services,
the customer may decide to delay or withhold payment to
us.
We have a limited number of employees and may not be able to manage
the increasing demands of our expanded operations.
We have a limited number of employees
to administer our existing assets, interface with applicable
governmental bodies, market our services and plan for the
construction and development of our assets. We may not be able to
maximize the value of our assets because of our limited manpower.
We depend significantly on the services of Mark W. Harding, our
President and Chief Financial Officer. The loss of Mr. Harding
would cause a significant interruption of our operations. Further,
the execution of the Builder Contracts for Sky Ranch has increased
the size and complexity of our business. The success of our current
business and future business development and our ability to
capitalize on growth opportunities depends on our ability to
attract and retain additional experienced and qualified persons to
operate and manage our business. State regulations set the
training, experience and qualification standards required for our
employees to operate specific water and wastewater facilities.
Failure to find state-certified and qualified employees to support
the operation of our facilities could put us at risk for, among
other things, regulatory penalties (including fines and suspension
of operations), operational errors at the facilities, improper
billing and collection processes, and loss of contracts and
revenues. We may be unsuccessful in managing our assets and
growth.
Supply shortages and risks related to the demand for skilled labor
and building materials could increase costs and delay
closings.
The property development industry is highly
competitive for skilled labor and materials. Labor shortages in the
Colorado Front Range have become more acute in recent years as the
supply chain adjusts to uneven industry growth. Increased costs or
shortages of skilled labor and/or concrete, steel, pipe and other
materials could cause increases in property development costs and
delays. We are unable to pass on increases in property development
costs to home builders with whom we have already entered into
purchase and sale contracts for residential lots, as our contracts
fix the price of the lots at the time the contracts are signed,
which will be well in advance of property development. Sustained
increases in development costs may, over time, erode our
margins.
Products supplied to us and work done by subcontractors can expose
us to risks that could adversely affect our business.
We
rely on subcontractors to perform the actual property development,
and in many cases, to select and obtain concrete and other
materials. Subcontractors may use improper construction processes
or defective materials. Defective products can result in the need
to perform extensive repairs. The cost of complying with our
warranty obligations may be significant if we are unable to recover
the cost of repairs from subcontractors, materials suppliers and
insurers.
A failure of the water wells or distribution networks that we own
or control could result in losses and damages that may affect our
financial condition and reputation.
We distribute water through a network of pipelines
and store water in storage tanks and a pond. A failure of these
pipelines, tanks or the pond could result in injuries and damage to
property for which we may be responsible, in whole or in part. The
failure of these pipelines, tanks, or pond may also result in the
need to shut down some facilities or parts of our water
distribution network in order to conduct repairs. Such failures and
shutdowns may limit our ability to supply water in sufficient
quantities to our customers and to meet the water delivery
requirements prescribed by our contracts, which could adversely
affect our financial condition, results of operations, cash flow,
liquidity and reputation. Any business interruption or other losses
might not be covered by insurance policies or be recoverable
through rates and charges, and such losses may make it difficult
for us to secure insurance in the future at acceptable
rates.
Conflicts of interest may arise relating to the operation of the
Rangeview District and the Sky Ranch Districts.
Our officers and employees constitute 60% of the
directors of the Rangeview District and the Sky Ranch Districts.
Pure Cycle, along with our officers and employees and two unrelated
individuals, own the 40 acres that constitute the Rangeview
District and the acreage that constitutes the Sky Ranch Districts.
We have made loans to the Rangeview District to fund its
operations. At August 31, 2017, total principal and interest owed
to us by the Rangeview District was $776,400. Pursuant to our water
and wastewater service agreements with the Rangeview District, the
Rangeview District retains two percent of the revenues from the
sale of water to its end-use customers and 10% of the revenues from
the provision of wastewater services to its end-use customers.
Proceeds from the fee collections will initially be used to repay
the Rangeview District’s obligations to us, but after these
loans are repaid, the Rangeview District is not required to use the
funds to benefit Pure Cycle.
Similarly, we have made loans to and incurred expenses reimbursable
by the Sky Ranch Districts. At August 31, 2017, total
principal and interest owed to us by the Sky Ranch Districts was
$215,500. It is anticipated that these amounts will be repaid once
Sky Ranch has sold residential units and has a tax base to issue
bonds to pay for services. We have received benefits from our
activities undertaken in conjunction with these districts, but
conflicts may arise between our interests and those of the
Rangeview and Sky Ranch Districts and our officers and employees
who are acting in dual capacities in negotiating contracts to which
both we and a district are parties. We expect that the Rangeview
and Sky Ranch Districts will expand when more properties are
developed and become part of the respective districts, and our
officers and employees acting as directors of these districts will
have fiduciary obligations to those other constituents. Conflicts
may not be resolved in the best interests of the Company and our
shareholders. In addition, other landowners coming into a district
will be eligible to vote and to serve as directors of that
district. Our officers and employees may not remain as directors of
these districts, and the actions of subsequently elected boards
could have an adverse impact on our operations.
Our operations are affected by local politics and governmental
procedures that are beyond our control.
We operate in a highly political environment. We
market our water rights to municipalities and other governmental
entities run by elected or politically appointed officials. Our
principal competitors are municipalities seeking to expand their
sales tax base and other water districts. Various constituencies,
including our competitors, developers, environmental groups,
conservation groups, and agricultural interests, have competing
agendas with respect to the development of water rights in
Colorado, which means that decisions affecting our business are
based on many factors other than economic and business
considerations. Additional risks associated with dealing with
governmental entities include turnover of elected and appointed
officials, changes in policies from election to election, and a
lack of institutional history in these entities concerning their
prior courses of dealing with the Company. We spend significant
time and resources educating elected officials, local authorities
and others regarding our water rights and the benefits of
contracting with us. Political concerns and governmental procedures
and policies may hinder or delay our ability to enter into service
agreements or develop our water rights or infrastructure to deliver
our water. While we have worked to reduce the political risks in
our business through our participation as the service provider for
the Rangeview District in regional cooperative resource programs,
such as the SMWSA and its WISE partnership with Denver Water and
Aurora Water, as well as education and communication efforts and
community involvement, our efforts may be
unsuccessful.
Delays in property development may extend the time it takes us to
recover our property development costs.
We incur many costs,
such as the costs of preparing land, finishing and entitling lots,
installing roads, sewers, water systems and other utilities, taxes
and other costs related to ownership of the land, before we close
on the sale of residential lots to home builders. If the rate at
which we develop residential lots slows, we may incur additional
costs, and it may take longer for us to recover our costs. In
addition, if sales of homes on the finished lots are delayed, our
revenue from utility services will be delayed.
Government regulations and legal challenges may delay the closing
of the sale of our residential lots, increase our expenses or limit
other activities, which could have a negative impact on our results
of operations.
The approval of numerous governmental
authorities must be obtained in connection with our property
development activities, and these governmental authorities often
have broad discretion in exercising their approval authority. We
incur substantial costs related to compliance with legal and
regulatory requirements. Any increase in legal and regulatory
requirements may cause us to incur substantial additional costs.
Various local, state and federal statutes, ordinances, rules and
regulations concerning building, health and safety, site and
building design, environment, zoning, and similar matters apply to
and/or affect property developers like us. In addition, our ability
to obtain or renew permits or approvals and the continued
effectiveness of permits already granted or approvals already
obtained depends on factors beyond our control, such as changes in
federal, state and local policies, rules and regulations and their
interpretations and application. Furthermore, we are also subject
to various fees and charges of government authorities designed to
defray the cost of providing certain governmental services and
improvements. For example, local and state governments have broad
discretion regarding the imposition of development fees for
projects under their jurisdictions, as well as requiring
concessions or that the property developer and/or home builder
construct certain improvements to public places such as parks and
streets or fund schools.
Municipalities
or state water agencies may restrict or place moratoriums on the
availability of utilities, such as water and sewer taps, which
could have an adverse effect on our business by causing delays or
increasing our costs.
We must provide water that meets all federal and state regulatory
water quality standards and operate our water and wastewater
facilities in accordance with these standards. Future changes in
regulations governing the supply of drinking water and treatment of
wastewater may have a material adverse impact on our financial
results. With respect to service of customers on the Lowry Range,
the Rangeview District’s rates might not be sufficient to
cover the cost of compliance with additional or more stringent
requirements. If the cost of compliance were to increase, we
anticipate that the rates of the nearby water providers that the
Rangeview District uses to establish its rates and charges would
increase to reflect these cost increases, thereby allowing the
Rangeview District to increase its rates and charges. However,
these water providers may not raise their rates in an amount that
would be sufficient to enable the Rangeview District (and us) to
cover any increased compliance costs.
In
addition, there is a variety of legislation being enacted, or
considered for enactment, at the federal, state and local level
relating to energy and climate change. This legislation relates to
items such as carbon dioxide emissions control and building codes
that impose energy efficiency standards. Such environmental laws
may affect, for example, how we manage storm water runoff,
wastewater discharges and dust; how we develop or operate on
properties on or affecting resources such as wetlands, endangered
species, cultural resources, or areas subject to preservation laws;
and how we address contamination. As climate change concerns
continue to grow, compliance with legislation and regulations of
this nature are expected to become more costly. Energy-related
initiatives affect a wide variety of companies throughout the
United States and the world and, because our operations are now
dependent on significant amounts of raw materials, such as steel
and concrete, they could have an indirect adverse impact on our
operations and profitability to the extent the manufacturers and
suppliers of the materials used in the development of our
properties are burdened with expensive cap and trade and similar
energy related taxes and regulations.
It is possible that new standards could be imposed
that will require additional capital expenditures or raise our
operating costs. With respect to service of customers on the
Lowry Range, the Rangeview District’s rates might not be
sufficient to cover the cost of compliance with new requirements.
Although we would expect the rates of the nearby water providers
that the Rangeview District uses to establish its rates and charges
to increase to cover increased compliance costs, such rates may not
cover all our costs and our costs of complying with new standards
or laws could adversely affect our business, results of operations
or financial condition.
Our noncompliance with environmental
laws could result in fines and penalties, obligations to remediate,
permit revocations and other sanctions.
Government
agencies may initiate audits, reviews or investigations of our
business practices to ensure compliance with applicable laws and
regulations, which can cause us to incur costs or create other
disruptions in our business that can be significant. Further, we
may experience delays and increased expenses as a result of legal
challenges to our proposed development activities, whether brought
by governmental authorities or private parties.
Our Lowry Range surface water rights are “conditional
decrees” and require findings of reasonable diligence.
Our surface water interests and
reservoir sites at the Lowry Range are conditionally decreed and
are subject to a finding of reasonable diligence from the Colorado
water court every six years. To arrive at a finding of reasonable
diligence, the water court must determine that we continue to
diligently pursue the development of said water rights. If the
water court is unable to make such a finding, we could lose the
water right under review. During fiscal 2012, the Lowry Range
conditional decrees were granted their first review by the water
court, which determined that we and the Rangeview District met the
diligence criteria. The water court entered a finding of reasonable
diligence on the Lowry Range surface water decrees on February 11,
2012. Our next diligence period will be in February 2018. If the
water court does not make a determination of reasonable diligence
in 2018, it would materially adversely impact the value of our
interests in the Rangeview surface water
supply.
Contamination to our water supply may result in disruption in our
services and litigation, which could adversely affect our business,
operating results and financial condition.
Our water supplies are subject to the risk of
potential contamination, including contamination from naturally
occurring compounds, pollution from man-made sources and
intentional sabotage. Our land at Sky Ranch and a portion of the
Lowry Range have been leased for oil and gas exploration and
development. Such exploration and development could expose us to
additional contamination risks from related leaks or spills. In
addition, we handle certain hazardous materials at our water
treatment facilities, primarily sodium hypochlorite. Any failure of
our operation of the facilities or any contamination of our
supplies, including sewage spills, noncompliance with water quality
standards, hazardous materials leaks and spills, and similar events
could expose us to environmental liabilities, claims and litigation
costs. If any of these events occur, we may have to interrupt the
use of that water supply until we are able to substitute the supply
from another source or treat the contaminated supply. We cannot
assure you that we will successfully manage these issues, and
failure to do so could have a material adverse effect on our future
results of operations.
We may incur significant costs in order to treat the contaminated
source through expansion of our current treatment facilities or
development of new treatment methods. If we are unable to
substitute water supply from an uncontaminated water source, or to
adequately treat the contaminated water source in a cost-effective
manner, there may be an adverse effect on our revenues, operating
results and financial condition. The costs we incur to
decontaminate a water source or an underground water system could
be significant and could adversely affect our business, operating
results and financial condition and may not be recoverable in
rates.
We could also be held liable for consequences arising out of human
exposure to hazardous substances in our water supplies or other
environmental damage. For example, private plaintiffs could assert
personal injury or other toxic tort claims arising from the
presence of hazardous substances in our drinking water supplies.
Although we have not been a party to any environmental or
pollution-related lawsuits, such lawsuits have increased in
frequency in recent years. If we are subject to an environmental or
pollution-related lawsuit, we might incur significant legal costs,
and it is uncertain whether we would be able to recover the legal
costs from ratepayers or other third parties. Our insurance
policies may not cover or provide sufficient coverage for the costs
of these claims.
We may be adversely affected by any future decision by the Colorado
Public Utilities Commission to regulate us as a public
utility.
The Colorado Public
Utilities Commission (“CPUC”) regulates investor-owned
water companies operating for the purpose of supplying water to the
public. The CPUC regulates many aspects of public utilities’
operations, including establishing water rates and fees, initiating
inspections, enforcement and compliance activities and assisting
consumers with complaints. We do not believe we are a public
utility under Colorado law. We currently provide services by
contract mainly to the Rangeview District, which supplies the
public. Quasi-municipal metropolitan districts, such as the
Rangeview District and the Sky Ranch Districts, are exempt by
statute from regulation by the CPUC. However, the CPUC could
attempt to regulate us as a public utility. If this were to occur,
we might incur significant expense challenging the CPUC’s
assertion of jurisdiction, and we may be unsuccessful. In the
future, existing regulations may be revised or reinterpreted, and
new laws and regulations may be adopted or become applicable to us
or our facilities. If we become regulated as a public utility, our
ability to generate profits could be limited, and we might incur
significant costs associated with regulatory
compliance.
The Rangeview District’s and our rights under the Lease have
been challenged by third parties.
The Rangeview District’s and our rights
under the Lease have been challenged by third parties, including
the Land Board, in the past. In 2014, in connection with settling a
lawsuit filed by us and the Rangeview District against the Land
Board, the Land Board, the Rangeview District and we amended and
restated the Lease to clarify and update a number of provisions.
However, there are issues still subject to negotiation and it is
likely that during the remaining 64-year term of the Lease the
parties will disagree over interpretations of provisions in the
Lease again. The Rangeview District’s or our rights under the
Lease could be challenged in the future, which could require
potentially expensive litigation to enforce our
rights.
Our operations are concentrated in the Front Range area of
Colorado; we are subject to general economic conditions in
Colorado.
Our water assets and
operations are located solely in the Front Range area of Colorado.
Our performance could be adversely affected by economic conditions
in, and other factors relating to, Colorado, including supply and
demand for housing, zoning and other regulatory conditions. To the
extent the general economic conditions in the Front Range area of
Colorado deteriorate, the value of our assets, our results of
operations and our financial condition could be materially
adversely affected.
Natural disasters and severe weather conditions could delay the
closing of the sale of residential lots at Sky Ranch and increase
our costs, which could harm our sales and results of
operations.
We conduct our property development operations
in the Colorado Front Range, which is subject to natural disasters,
including droughts, tornadoes, wildland fires, and severe weather.
The occurrence of natural disasters or severe weather conditions in
Colorado or elsewhere could delay property development, increase
costs by delaying closings and lead to shortages of labor and
materials. If our insurance or the insurance of our subcontractors
does not fully cover business interruptions or losses resulting
from these events, our results of operations could be adversely
affected. For example, as a result of Hurricane Harvey in the Texas
Gulf Coast, the cost of pipe increased approximately 35%. This
additional cost is not clearly reimbursable by
insurance.
We could be hurt by efforts to impose liabilities or obligations on
persons with regard to labor law violations by other persons whose
employees perform contracted services.
The infrastructure
and improvements on our water and wastewater systems and on the
finished lots we sell or that we must provide pursuant to service
agreements and lot development agreements are done by employees of
subcontractors and other contract parties. We do not have the
ability to control what these contract parties pay their employees
or the work rules they impose on their employees. However, various
governmental agencies are trying to hold contract parties like us
responsible for violations of wage and hour laws and other work
related laws by firms whose employees are performing contracted-for
services. A 2016 National Labor Relations Board ruling holds that
for labor law purposes a firm could under some circumstances be
responsible as a joint employer of its contractors’ employees
even if the firm had no direct control over the employees’
terms and conditions of employment. If that ruling is upheld on
appeal, it could make us responsible for collective bargaining
obligations and labor law violations by our subcontractors.
Governmental rulings that make us responsible for labor practices
by our subcontractors could create substantial exposures for us in
situations that are not within our control.
We experience variability in our operating results on a quarterly
basis and, as a result, our historical performance may not be a
meaningful indicator of future results
. We historically have
experienced, and expect to continue to experience, variability in
quarterly results. As a result of such variability, our short-term
performance may not be a meaningful indicator of future results.
Our quarterly results of operations may continue to fluctuate in
the future as a result of a variety of factors, including, among
others, the timing of the closings of sales of residential lots and
weather-related problems.
Our stock price has been volatile in the past and may decline in
the future.
Our common stock
has experienced significant price and volume fluctuations in the
past and may experience significant fluctuations in the future
depending upon a number of factors, some of which are beyond our
control. Factors that could affect our stock price and trading
volume include, among others, the perceived prospects of our
business; differences between anticipated and actual operating
results; changes in analysts’ recommendations or projections;
the commencement and/or results of litigation and other legal
proceedings; and future sales of our common stock by us or by
significant shareholders, officers and directors. In addition,
stock markets in general have experienced price and volume
volatility from time to time, which may adversely affect the market
price of our common stock for reasons unrelated to our
performance.
Item 1B – Unresolved Staff Comments
None.
Item 2 – Properties
Corporate Office
Effective January 2016, we entered into an operating lease for
approximately 2,500 square feet of office and warehouse space. The
lease has a two-year term with payments of $3,000 per
month.
Water Related Assets
In addition to the water rights and adjudicated reservoir sites
that are described in
Item 1 – Our Water
and Land Assets
, we also own a
500,000-gallon water tank, 400,000-barrel storage reservoir, a
300,000-barrel storage reservoir, three deep water wells, a pump
station, and several miles of water pipeline in Arapahoe County,
Colorado. Although owned by the Rangeview District, we operate and
maintain another 500,000-gallon water tank, two deep water wells, a
pump station, three alluvial wells, the Rangeview District’s
wastewater treatment plant, and water distribution and wastewater
collection pipelines that serve customers located at the Lowry
Range. Although owned by the Elbert 86 District, we operate and
maintain two water tanks with a combined capacity of
438,000-gallons of water, two deep water wells, a pump station, and
10 miles of transmission line for the Wild Pointe development in
Elbert County. These assets are used to provide service to our
customers.
Land
We own approximately 931 acres of land known as Sky Ranch that is
described further in
Item 1 – Our Water
and Land Assets – Sky Ranch.
We own 40 acres of land that comprise the current
boundaries of the Rangeview District. We also own approximately 700
acres of land in the Arkansas River Valley, which is currently
classified as land held for sale.
Item 3 – Legal Proceedings
None.
Item 4 – Mine Safety Disclosures
None.
PART II
Item 5 – Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock is traded on The NASDAQ Stock Market under the
symbol “PCYO.” The high and low sales prices of our
common stock, by quarter, for the fiscal years ended August 31,
2016 and 2015 are presented below:
Table E - Market Information
|
Fiscal 2017 quarters ended:
|
|
|
|
|
Market price of common stock
|
|
|
|
|
High
|
$
8.73
|
$
8.10
|
$
5.70
|
$
5.93
|
Low
|
$
6.55
|
$
5.20
|
$
4.90
|
$
4.60
|
|
|
|
|
|
Fiscal
2016 quarters ended:
|
|
|
|
|
Market price of common stock
|
|
|
|
|
High
|
$
5.20
|
$
4.91
|
$
5.12
|
$
5.73
|
Low
|
$
4.34
|
$
4.29
|
$
3.65
|
$
4.56
|
Holders
On October 17, 2017, there were 552 holders of record of our common
stock.
Dividends
We have never paid any dividends on our common stock and expect for
the foreseeable future to retain all of our capital and earnings
from operations, if any, for use in expanding and developing our
business. Any future decision as to the payment of dividends will
be at the discretion of our board of directors and will depend upon
our earnings, financial position, capital requirements, plans for
expansion and such other factors as our board of directors deems
relevant. The terms of our Series B Preferred Stock prohibit
payment of dividends on common stock unless all dividends accrued
on the Series B Preferred Stock have been paid and require
dividends to be paid on the Series B Preferred Stock if proceeds
from the sale of Export Water exceed $36,026,232. For further
discussion see Note 8 –
Shareholders’
Equity
to the accompanying
financial statements.
Performance
Graph
1
This graph compares the cumulative total return of our common stock
for the last five fiscal years with the cumulative total return for
the same period of the S&P 500 Index and a peer group
index.
2
The graph assumes the investment of
$100 in common stock in each of the indices as of the market close
on August 31 and reinvestment of all dividends.
|
8/12
|
8/13
|
8/14
|
8/15
|
8/16
|
8/17
|
|
|
|
|
|
|
|
Pure Cycle Corporation
|
100.00
|
260.00
|
326.00
|
250.00
|
242.00
|
362.50
|
S&P 500
|
100.00
|
118.70
|
148.67
|
149.38
|
168.13
|
195.43
|
Peer Group
|
100.00
|
119.89
|
133.12
|
139.83
|
178.40
|
213.02
|
1.
This
performance graph is not “soliciting material,” is not
deemed “filed” with the SEC and is not to be
incorporated by reference in any of our filings under the
Securities Act or the Exchange Act whether made before or after the
date hereof and irrespective of any general incorporation language
in any such filing.
2.
The
Peer Group consists of the following companies that have been
selected on the basis of industry focus or industry leadership:
American States Water Company, Aqua America, Inc., Artesian
Resources Corp., California Water Service Group, Connecticut Water
Service, Inc., Middlesex Water Company, SJW Corp., and The York
Water Company.
Recent Sales of Unregistered Securities; Use of Proceeds From
Registered Securities
None.
Purchase of Equity Securities By the Issuer and Affiliated
Purchasers
None.
Item 6 – Selected Financial Data
Table F - Selected Financial Data
|
In thousands (except per share data)
|
For the
Fiscal Years Ended August 31,
|
|
|
|
|
|
|
Summary
Statement of Operations Items:
|
|
|
|
|
|
Total revenue
|
$
1,227.8
|
$
452.2
|
$
1,196.6
|
$
2,023.1
|
$
615.6
|
(Loss) income from continuing operations
|
$
(1,678.8
)
|
$
(1,230.3
)
|
$
(575.1
)
|
$
285.5
|
$
(1,227.9
)
|
Net loss
|
$
(1,710.9
)
|
$
(1,310.6
)
|
$
(23,127.9
)
|
$
(311.4
)
|
$
(4,150.4
)
|
Basic and diluted loss per share
|
$
(0.07
)
|
$
(0.06
)
|
$
(0.96
)
|
$
(0.01
)
|
$
(0.17
)
|
Weighted average shares outstanding
|
23,754
|
23,781
|
24,041
|
24,038
|
24,038
|
|
|
Summary
Balance Sheet Information:
|
|
|
|
|
|
Current assets
|
$
27,124.3
|
$
29,085.9
|
$
39,580.9
|
$
4,463.3
|
$
9,900.0
|
Total assets
|
$
69,787.6
|
$
70,879.6
|
$
73,060.9
|
$
108,173.8
|
$
108,618.3
|
Current liabilities
|
$
940.2
|
$
482.2
|
$
1,499.1
|
$
3,274.4
|
$
5,402.3
|
Long-term liabilities
|
$
1,341.3
|
$
1,399.5
|
$
1,476.4
|
$
13,868.9
|
$
65,443.5
|
Total liabilities
|
$
2,281.5
|
$
1,881.7
|
$
2,975.5
|
$
17,143.3
|
$
70,845.8
|
Equity
|
$
67,506.1
|
$
68,997.9
|
$
70,085.5
|
$
91,030.5
|
$
37,772.5
|
The following items had a significant impact on our
operations:
(a)
In
fiscal 2017, we invested $2.5 million in our water and wastewater
systems, $4.4 million for the construction of pipelines, $902,600
for the development of our Sky Ranch property, and $95,400 for the
purchase of equipment. During fiscal 2017, we had sales or
maturities of marketable securities of approximately $9.8
million.
(b)
In
fiscal 2016, we invested $923,800 in our water and wastewater
systems and $285,600 for planning and design of our Sky Ranch
property. We also purchased three farms for approximately $450,300
in order to correct dry-up covenant issues related to water-only
farms in order obtain the release of the escrow funds related to
the Company’s farm sale to Arkansas River Farms,
LLC.
(c)
In
fiscal 2015, we sold our remaining farm assets for approximately
$45.8 million, for a loss of approximately $22.3 million. In
conjunction with the sale, we repaid $4.9 million in mortgage debt
relating to the farms and we invested approximately $3.5 million
into our water systems. Financial results for the farm assets have
been reflected as discontinued operations and all prior periods
have been reclassified.
(d)
In fiscal 2014, in order to protect our farm
assets, we acquired the remaining approximately $2.6 million of the
$9.6 million in notes defaulted on by High Plains A&M, LLC
(“HP A&M”)
.
Additionally, we borrowed $1.75 million, sold
farms for $5.8 million, and invested $3.7 million in our water
systems. Additionally, we recorded an impairment of approximately
$400,000 on land and water rights held for sale, and we recorded a
gain of $1.3 million upon completing the sale of certain farms that
we previously impaired in fiscal 2012.
(e)
In
fiscal 2013, in order to protect our farm assets, we acquired
approximately $7 million of the $9.6 million in HP A&M
defaulted notes. Additionally, we sold 1,500,000 unregistered
shares of Pure Cycle common stock owned by HP A&M for $2.35 per
share, yielding approximately $3.4 million, net of
expenses.
Item 7 – Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Overview
The discussion and analysis below includes certain forward-looking
statements that are subject to risks, uncertainties and other
factors, as described in “Risk Factors” and elsewhere
in this Annual Report on Form 10-K, that could cause our
actual growth, results of operations, performance, financial
position and business prospects and opportunities for this fiscal
year and the periods that follow to differ materially from those
expressed in, or implied by, those forward-looking
statements.
Readers are cautioned that
forward-looking statements contained in this Form 10-K should be
read in conjunction with our disclosure under the heading
“FORWARD-LOOKING STATEMENTS” on page
1.
The following Management’s Discussion and Analysis
(“MD&A”) is intended to help the reader understand
the results of operations and our financial condition and should be
read in conjunction with the accompanying financial statements and
the notes thereto included in
Part II, Item 8
of this Annual Report on Form 10-K.
The following sections focus on the key indicators reviewed by
management in evaluating our financial condition and operating
performance, including the following:
●
Revenue
generated from water and wastewater services;
●
Expenses
associated with developing our water and land assets;
and
●
Cash
available to continue development of our land, water rights and
service agreements.
Our MD&A section includes the following items:
Our
Business
–
a general description of our business,
our services and our business strategy.
Critical Accounting
Policies and Estimates
–
a discussion of our critical
accounting policies that require critical judgments, assumptions
and estimates.
Results of
Operations
–
an
analysis of our results of operations for the
three fiscal years presented in our financial statements. We
present our discussion in the MD&A in conjunction with the
accompanying financial statements.
Liquidity, Capital
Resources and Financial Position
–
an analysis of our cash position and
cash flows, as well as a discussion of our financial
obligations.
Our Business
Pure Cycle Corporation is a Colorado corporation that provides
wholesale water and wastewater services to customers of
governmental entities and commercial and industrial customers and
is in the process of providing finished lots to national home
builders developing single family homes on its Sky Ranch land
holdings.
Our utility services include water production, storage, treatment,
bulk transmission to retail distribution systems, wastewater
collection and treatment, irrigation water treatment and
transmission, construction management, billing and collection and
emergency response. Our land operations include developing finished
lots for home builders and commercial users who develop homes and
businesses on our Sky Ranch property.
Water and Wastewater Utilities
Our utility operations position us as a vertically integrated
wholesale water and wastewater provider, which means we own or
control substantially all assets necessary to provide wholesale
water and wastewater services to our customers. This includes
owning or controlling (i) water rights which we use to provide
domestic, irrigation, and industrial water to our wholesale
customers (we own surface water, groundwater, reclaimed water
rights and storage rights), (ii) infrastructure (such as wells,
diversion structures, pipelines, reservoirs and treatment
facilities) required to withdraw, treat, store and deliver water,
(iii) infrastructure required to collect, treat, store and reuse
wastewater, and (iv) infrastructure required to treat and deliver
reclaimed water for irrigation use.
We currently provide wholesale water and wastewater service
predominately to two local governmental customers. Our wholesale
domestic customers are the Rangeview District and Arapahoe County.
We provide service to Rangeview District’s end-use customers
pursuant to individual Lowry Service and Off-Lowry Service
Agreements, serving 391 water connections and 157 wastewater
connections located in southeastern metropolitan Denver. In
addition to providing domestic water, we provide untreated water to
industrial customers in the oil and gas industry located in our
service areas and adjacent to our service areas for hydraulic
fracturing. Oil and gas operators have leased approximately 135,000
acres within and adjacent to our service areas for the purpose of
exploring oil and gas interests in the Niobrara and other
formations, and this activity had led to increased water
demands.
We plan to utilize our significant water assets along with our
adjudicated reservoir sites to provide wholesale water and
wastewater services to local governmental entities which in turn
will provide residential/commercial water and wastewater services
to communities along the eastern slope of Colorado in the area
generally referred to as the Front Range. Principally, we target
the I-70 corridor, which is located east of downtown Denver and
south of Denver International Airport. This area is predominately
undeveloped and is expected to experience substantial growth over
the next 30 years.
We also plan to
continue to provide water service to commercial and industrial
customers.
Land Development
Our land development services at Sky Ranch include development of
up to 4,400 single-family and multi-family homes, and over 1.6
million square feet of commercial, retail, and light industrial
development. Sky Ranch will develop in multiple phases over a
number of years. Our first phase of 151 acres is platted for 506
detached single-family residential lots. We have entered into
agreements with three national home builders for the sale of all
506 lots, development of which is anticipated to begin in early
2018, with model homes scheduled for construction in the fall of
2018. We expect to phase the development of our initial 506 lots
beginning with delivery of approximately 150 lots in 2018,
delivering an additional 100 lots in mid-2019 and the balance of
the lots to each builder depending on home sales. We estimate that
build out of our initial 506 lots will take between three and four
years.
In June
2017, we entered into purchase and sale agreements (collectively,
the “Purchase and Sale Contracts”) with three separate
home builders pursuant to which we agreed to sell, and each builder
agreed to purchase, a certain number (totaling 506) of
single-family, detached residential lots at the Sky Ranch property.
We will be developing finished lots for each of the three home
builders (which are lots on which homes are ready to be built that
include roads, curbs, wet and dry utilities, storm drains andother
improvements). Each builder is required to purchase water and sewer
taps for the lots from the Rangeview District, the cost of which
depends on the size of the lot, the size of the house, and the
amount of irrigated turf. Pursuant to the Off-Lowry Service
Agreement, we will receive all of the
water tap fees and wastewater tap fees and 90% of
the monthly service fees and usage fees for wastewater services
received
by the Rangeview District from customers at Sky
Ranch. We will also receive
98% of the
usage fees for water services received by the Rangeview District
from customers at Sky Ranch, after deduction, in most instances, of
the royalty to the Land Board related to the use of the Rangeview
Water Supply.
The closing of the transactions contemplated by each Purchase and
Sale Contract is subject to customary closing conditions,
including, among others, the builder’s completion to its
satisfaction of a title review and other due diligence of the
property, the accuracy of the representations and warranties made
by us in the Purchase and Sale Contract, and a commitment by the
title company to issue to the builder a title policy, subject to
certain conditions. Within three business days of the execution of
each Purchase and Sale Contract, each builder paid an earnest money
deposit. Each builder had a 60-day due diligence period during
which it had the right to terminate the Purchase and Sale Contract
and receive a full refund of its earnest money deposit. The
initial due diligence period was extended; however, on
November 10, 2017, each builder completed its due diligence period
and agreed to continue with its respective Purchase and Sale
Contract. Pursuant to certain Purchase and Sale Contracts, the
builder is required to make an additional earnest money deposit or
deposits after the due diligence period and/or final approval of
the entitlements for the property. The earnest money deposit or
deposits will be applied to the payment of the purchase price of
the lots at closing in accordance with a specified takedown
schedule or be paid to us in the event of certain defaults by a
builder. Pursuant to each Purchase and Sale Contract, we must
obtain final approval of the entitlements for the property by
August 2018 (which date we may extend by six months).
We are obligated pursuant to the Purchase and Sale Contracts, or
separate Lot Development Agreements (the “Lot Development
Agreements” and, together with the Purchase and Sale
Contracts, the “Builder Contracts”), to construct
infrastructure and other improvements, such as roads, curbs and
gutters, park amenities, sidewalks, street and traffic signs, water
and sanitary sewer mains and stubs, storm water management
facilities, and lot grading improvements for delivery of finished
lots to each builder. Pursuant to the Builder Contracts, we must
cause the Rangeview District to install and construct off-site
infrastructure improvements (
i.e.
, drainage and storm water retention ponds, a
wastewater reclamation facility, and wholesale water facilities)
for the provision of water and wastewater service to the property.
In conjunction with our approvals with Arapahoe County for the Sky
Ranch project, we and/or the Rangeview District and the Sky Ranch
Districts are obligated to deposit into an account the anticipated
costs to install and construct substantially all the off-site
infrastructure improvements (which include drainage, wholesale
water and wastewater, and entry roadway), which we estimate will be
approximately $10.2 million.
We estimate the total capital required to develop lots in the first
phase (506 lots) of Sky Ranch is approximately $27.8 million, and
estimate lots sales to home builders to generate $35 million
providing a margin on lots of approximately $7.2 million. Utility
revenues are derived from tap fees (which vary depending on lot
size, house size, and amount of irrigated turf) and usage fees
(which are monthly water and wastewater fees). Our current Sky
Ranch water tap fees are $26,650 (per SFE), and wastewater taps
fees are $4,659 (per SFE).
We have begun design and preliminary engineering for our second
phase which will include approximately 320 acres of residential
development and 160 acres of commercial, retail, and industrial
development along the Interstate-70 frontage. We expect to have
multiple phases being developed concurrently and would expect the
full development of the Sky Ranch project to occur over 10 –
14 years, depending on demand.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates
and assumptions about future events that affect the amounts
reported in the financial statements and accompanying notes. Future
events and their effects cannot be determined with absolute
certainty. Therefore, the determination of estimates requires the
exercise of judgment. Actual results inevitably will differ from
those estimates, and such differences may be material to the
financial statements.
The most significant accounting estimates inherent in the
preparation of our financial statements include estimates
associated with the timing of revenue recognition, the impairment
of water assets and other long-lived assets, fair value estimates
and share-based compensation. Below is a summary of these critical
accounting policies.
Revenue Recognition
Our revenues consist mainly of monthly service fees, tap fees,
construction fees, and consulting fees. As further described in
Note 2 –
Summary of Significant
Accounting Policies
to the
accompanying financial statements, proceeds from tap sales and
construction fees are deferred upon receipt and recognized in
income based on whether we own or do not own the facilities
constructed with the proceeds. We recognize tap and construction
fees derived from agreements for which we construct infrastructure
owned by others as revenue, along with the associated costs of
construction, pursuant to the percentage-of-completion method. The
percentage-of-completion method requires management to estimate the
percent of work that is completed on a particular project, which
could change materially throughout the duration of the construction
period and result in significant fluctuations in revenue recognized
during the reporting periods throughout the construction process.
During the fiscal year ended August 31, 2017, we recognized
$203,200 in tap fee revenues associated with the Wild Pointe
acquisition. We did not recognize any tap revenues during the
fiscal years ended August 31, 2016 or 2015.
Tap and construction fees derived from agreements for which we own
the infrastructure are recognized as revenue ratably over the
estimated service life of the assets constructed with said fees.
Although the cash is received up-front and most construction will
be completed within one year of receipt of the proceeds, revenue
recognition may occur over 30 years or more. Management is required
to estimate the service life, and currently the service life is
based on the estimated useful accounting life of the assets
constructed with the tap fees. The useful accounting life of the
asset is based on management’s estimation and may differ from
the actual life of the asset or the actual service life of the tap
due to a variety of factors. This is deemed a reasonable
recognition life of the revenues because the depreciation of the
assets constructed generating those revenues will therefore be
matched with the revenues.
Monthly water usage fees, monthly wastewater service fees, and
consulting fees are recognized in income each month as
earned.
Pursuant to the O&G Lease and the Rangeview Lease, we received
up-front payments which were recognized as other income on a
straight-line basis over the initial term or extension of term, as
applicable, of the leases. The up-front payments we received
subsequent to year end pursuant to the Bison Lease will be
recognized as other income on a straight-line basis over the
initial term of the Bison Lease.
Impairment of Water Assets and Other Long-Lived Assets
We review our long-lived assets for impairment whenever management
believes events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. We measure
recoverability of assets to be held and used by a comparison of the
carrying amount of an asset to estimated future undiscounted net
cash flows we expect to be generated by the eventual use of the
asset. If such assets are considered to be impaired and therefore
the costs of the assets deemed to be unrecoverable, the impairment
to be recognized would be the amount by which the carrying amount
of the assets exceeds the estimated fair value of the
assets.
Our water assets will be utilized in the provision of water
services which inevitably will encompass many housing and economic
cycles. Our service capacities are quantitatively estimated based
on an average single family home consuming approximately 0.2 acre
feet of water per year. Average water deliveries are approximately
0.4 acre feet; however, approximately 50% or 0.2 acre feet are
returned and available for reuse. Our water supplies are legally
decreed to us through the water court. The water court decree
allocates a specific amount of water (subject to continued
beneficial use) which historically has not changed. Thus,
individual housing and economic cycles typically do not have an
impact on the number of connections we can serve with our supplies
or the amount of water legally decreed to us relating to these
supplies.
We report assets to be disposed of at the lower of the carrying
amount or fair value less costs to sell.
Our Water Rights –
We
determine the undiscounted cash flows for our Denver-based assets
by estimating tap sales to potential new developments in our
service areas and along the Front Range, using estimated future tap
fees less estimated costs to provide water services, over an
estimated development period. Actual new home development in our
service areas and the Front Range, actual future tap fees, and
actual future operating costs inevitably will vary significantly
from our estimates, which could have a material impact on our
financial statements as well as our results of operations. We
performed an impairment analysis as of August 31, 2017, and
determined there were no material changes and that our Denver-based
assets are not impaired and their costs are deemed recoverable. Our
impairment analysis is based on development occurring within areas
in which we have agreements to provide water services utilizing
water rights owned by us (e.g., Sky Ranch and the Lowry Range) as
well as in surrounding areas, including the Front Range and the
I-70 corridor. Our combined Rangeview Water Supply and Sky Ranch
water assets have a carrying value of $34.6 million as of August
31, 2017. Based on the carrying value of our water rights, the
long-term and uncertain nature of any development plans, current
tap fees of $24,974 and estimated gross margins, we estimate that
we would need to add approximately 2,300 new water connections
(requiring 4% of our portfolio) to generate net revenues sufficient
to recover the costs of our Rangeview Water Supply and Sky Ranch
water. If tap fees increase 5%, we would need to add approximately
2,200 new water taps (requiring 3.8% of our portfolio) to recover
the costs of our Rangeview Water Supply and Sky Ranch water. If tap
fees decrease 5%, we would need to add approximately 2,400 new
water taps (requiring 4.2% of our portfolio) to recover the costs
of our Rangeview Water Supply and Sky Ranch
water.
Although the timing of actual new home development throughout the
Front Range will impact our estimated tap sale projections, it will
not alter our water ownership, our service obligations to existing
properties or the number of SFEs we can service.
Fair Value Estimates
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or most advantageous market. We generally use a fair
value hierarchy that has three levels of inputs, both observable
and unobservable, with use of the lowest possible level of input to
determine fair value.
See
Note 3 –
Fair Value Measurements
to the accompanying financial
statements.
Share-based Compensation
We estimate the fair value of share-based payment awards made to
key employees and directors on the date of grant using the
Black-Scholes option-pricing model. We then expense the fair value
over the vesting period of the grant using a straight-line expense
model. The fair value of share-based payments requires management
to estimate/calculate various inputs such as the volatility
of the underlying stock, the expected dividend rate, the estimated
forfeiture rate and an estimated life of each option. We do not
expect any forfeiture of option grants; therefore, the compensation
expense has not been reduced for estimated forfeitures. These
assumptions are based on historical trends and estimated future
actions of option holders and may not be indicative of actual
events which may have a material impact on our financial
statements. For further details on share-based compensation
expense, see Note 8 –
Shareholders’
Equity
to the accompanying
financial statements.
Results of Operations
Executive Summary
The results of our operations for the fiscal years ended August 31,
2017, 2016 and 2015 were as follows:
Table G - Summary of Results of Operations
|
|
|
|
|
|
|
Fiscal
Years Ended August 31,
|
2017-2016
|
2016-2015
|
|
|
|
|
|
|
|
|
Millions
of gallons of water delivered
|
94.6
|
33.9
|
97.5
|
60.7
|
179
%
|
(63.6
)
|
-65
%
|
Water
revenues generated
|
$
825,100
|
$
221,000
|
$
970,000
|
$
604,100
|
273
%
|
$
(749,000
)
|
-77
%
|
Water
tap fee revenue
|
217,500
|
14,300
|
14,300
|
203,200
|
1421%
|
-
|
-
|
Water
delivery operating costs incurred
|
|
|
|
|
|
|
|
(excluding depreciation and depletion)
|
$
332,400
|
$
264,400
|
$
464,900
|
$
68,000
|
26
%
|
$
(200,500
)
|
-43
%
|
Water delivery gross margin %
|
60
%
|
-20
%
|
52
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Wastewater
treatment revenues
|
$
45,100
|
$
43,700
|
$
50,100
|
$
1,400
|
3
%
|
$
(6,400
)
|
-13
%
|
Wastewater
treatment operating costs incurred
|
$
28,600
|
$
29,200
|
$
66,700
|
$
(600
)
|
-2
%
|
$
(37,500
)
|
-56
%
|
Wastewater treatment gross margin %
|
37
%
|
33
%
|
-33
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
$
98,600
|
$
131,700
|
$
120,700
|
$
(33,100
)
|
-25
%
|
$
11,000
|
9
%
|
Other
income costs incurred
|
$
61,900
|
$
68,500
|
$
55,200
|
$
(6,600
)
|
-10
%
|
$
13,300
|
24
%
|
Other income gross margin %
|
37
%
|
48
%
|
54
%
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
$
2,201,700
|
$
1,849,700
|
$
1,939,400
|
$
352,000
|
19
%
|
$
(89,700
)
|
-5
%
|
|
|
|
|
|
|
|
|
(Loss)
income from continuing operations
|
$
(1,678,900
)
|
$
(1,230,300
)
|
$
(575,100
)
|
$
(448,600
)
|
36
%
|
$
(655,200
)
|
114
%
|
Loss
from discontinued operations
|
$
(32,000
)
|
$
(80,300
)
|
$
(22,552,800
)
|
$
48,300
|
-60
%
|
$
22,472,500
|
-100
%
|
Net
loss
|
$
(1,710,900
)
|
$
(1,310,600
)
|
$
(23,127,900
)
|
$
(400,300
)
|
31
%
|
$
21,817,300
|
-94
%
|
Changes in Revenues and Gross Margin
We generate revenues from water and wastewater services. Water and
wastewater revenues are generated from (i) monthly wholesale water
usage fees and wastewater service fees, (ii) one-time water and
wastewater tap fees and construction fees, and (iii) consulting
fees.
Water and Wastewater Revenues –
Our water deliveries increased 179% in fiscal 2017
compared to fiscal 2016 and decreased 65% in fiscal 2016 compared
to fiscal 2015. Water revenues increased 273% in fiscal 2017
compared to fiscal 2016 and decreased 77% in fiscal 2016 compared
to fiscal 2015. The changes in deliveries and sales were primarily
due to the changes in demand for water to be used for oil and gas
activities – namely, fracking wells drilled into the Niobrara
Formation. Additionally, during fiscal 2017, we acquired the
service rights for the Wild Pointe water system, which increased
our revenue by $268,800 from fiscal 2016. The following table
details the sources of our water sales, the number of kgal (1,000
gallons) sold, and the average price per kgal for fiscal 2017,
fiscal 2016, and fiscal 2015.
Table H - Water Revenue Summary
|
|
|
|
|
Customer
Type
|
|
|
|
|
|
|
|
|
|
On-Site
|
$
174.6
|
26,996.1
|
$
6.47
|
$
149.1
|
26,620.8
|
$
5.60
|
$
137.3
|
20,821.7
|
$
6.59
|
Export-Commercial
|
106.4
|
10,020.0
|
10.62
|
71.3
|
7,216.2
|
9.88
|
50.0
|
4,158.4
|
12.02
|
Wild
Pointe
|
65.6
|
11,388.4
|
5.76
|
-
|
-
|
-
|
-
|
-
|
-
|
Industrial/Fracking
|
478.5
|
46,146.2
|
10.37
|
0.6
|
58.2
|
10.31
|
782.7
|
72,557.6
|
10.79
|
|
$
825.1
|
94,550.7
|
$
8.73
|
$
221.0
|
33,895.2
|
$
6.52
|
$
970.0
|
97,537.7
|
$
9.94
|
Our
gross margin on delivering water (not including depletion charges)
was 59% in fiscal 2017, negative 20% in fiscal 2016 and 52% during
fiscal 2015. The changes in our gross margins were due to changes
in demand related to water sales to the fracking industry and our
ability to offset the ECCV system costs with increased water
deliveries in fiscal 2017 and fiscal 2015.
Our wastewater fees increased 3% in fiscal 2017 compared to fiscal
2016 and decreased 13% in fiscal 2016 compared to fiscal 2015.
Wastewater fee fluctuations result from demand changes from our
only customer.
We sold 10 water taps during fiscal 2017, which generated revenues
of approximately $203,200 that are included in water tap fee sales
in the statement of comprehensive loss. We did not sell any
wastewater taps during fiscal 2017. We did not sell any water or
wastewater taps during fiscal 2016 or 2015.
Other income consisted principally of consulting fees of $98,600,
$131,700, and $85,800 for the fiscal years ended August 31, 2017,
2016, and 2015, respectively, which are recognized upon the
rendering of our services. Our consulting fees decreased 25% in
fiscal 2017 compared to fiscal 2016 and increased 54% in fiscal
2016 compared to fiscal 2015. The decrease in fees during fiscal
2017 is due to a reduction in the amount of consulting billings
from water systems we managed in fiscal 2017 compared to fiscal
2016. The increase in fees in fiscal 2016 was the result of an
increase in the number of water systems we managed in fiscal 2016
compared to fiscal 2015. During the fiscal year ended August 31,
2015, we also received income related to a cost-sharing arrangement
from our industrial water sales related to the fracking industry in
the amount of $34,900. Our margins have fluctuated as we allocated
additional staff costs to system management.
General and Administrative Expenses
Table I details significant items, and changes, included in our
General and Administrative Expenses (“G&A
Expenses”) as well as the impact that share-based
compensation has on our G&A Expenses for the fiscal years ended
August 31, 2017, 2016 and 2015, respectively.
|
|
|
|
|
|
|
Fiscal
Years Ended August 31,
|
2017-2016
|
2016-2015
|
|
|
|
|
|
|
|
|
Significant
G&A Expense items:
|
|
|
|
|
|
|
|
Salary and salary-related expenses
|
$
1,389,700
|
$
1,084,300
|
$
1,234,100
|
$
305,400
|
28
%
|
$
(149,800
)
|
-12
%
|
Professional fees
|
237,000
|
250,900
|
291,400
|
(13,900
)
|
-6
%
|
(40,500
)
|
-14
%
|
Fees paid to directors including insurance
|
131,100
|
134,400
|
140,400
|
(3,300
)
|
-2
%
|
(6,000
)
|
-4
%
|
Insurance
|
29,900
|
35,900
|
31,600
|
(6,000
)
|
-17
%
|
4,300
|
14
%
|
Public entity related expenses
|
134,700
|
109,500
|
83,200
|
25,200
|
23
%
|
26,300
|
32
%
|
Consulting fees
|
11,200
|
5,700
|
18,300
|
5,500
|
96
%
|
(12,600
)
|
-69
%
|
Property taxes
|
7,500
|
9,200
|
7,400
|
(1,700
)
|
-18
%
|
1,800
|
24
%
|
All other components of G&A combined
|
260,700
|
219,800
|
133,000
|
40,900
|
19
%
|
86,800
|
65
%
|
G&A
Expenses as reported
|
2,201,800
|
1,849,700
|
1,939,400
|
352,100
|
19
%
|
(89,700
)
|
-5
%
|
Share-based
compensation
|
(233,200
)
|
(219,900
)
|
(240,000
)
|
(13,300
)
|
6
%
|
20,100
|
-8
%
|
G&A
Expenses less share-based compensation
|
$
1,968,600
|
$
1,629,800
|
$
1,699,400
|
$
338,800
|
21
%
|
$
(69,600
)
|
-4
%
|
|
|
|
|
|
|
|
|
Note
- salary and salary-related expenses excluding share-based
compensation:
|
|
|
|
|
|
|
|
Salary and salary-related expenses
|
$
1,156,500
|
$
864,400
|
$
994,100
|
$
292,100
|
34
%
|
$
(129,700
)
|
-13
%
|
Salary and Salary-Related Expenses
– Salary and salary-related expenses
increased by 28% during fiscal 2017 as compared to fiscal 2016 and
decreased by 12% during fiscal 2016 as compared to fiscal 2015. The
increase in fiscal 2017 compared to fiscal 2016 was the result of
the increase from seven to 11 employees, as a result of the
development of our Sky Ranch property and the addition of the Wild
Pointe water system. The decrease in fiscal 2016 compared to fiscal
2015 was the result of us paying lower bonuses, offset by the
addition of one operator, during fiscal 2016. As noted on the
bottom line of Table I, salary and salary-related expenses
excluding share-based compensation expenses increased 34% during
fiscal 2017 compared to fiscal 2016 and decreased 13% during fiscal
2016 compared to fiscal 2015. Share-based compensation expense
increased 6% during fiscal 2017 compared to fiscal 2016 as a result
of an increase in the number of members on the board of directors.
Share-based compensation expenses decreased 8% during fiscal 2016
compared to fiscal 2015 as a result of the complete recognition of
options issued to management during fiscal 2013, which occurred
over a period of less than 12 months during fiscal
2016.
Professional Fees (mainly legal and accounting fees)
– Professional fees decreased 6%
and 14% during fiscal 2017 compared to fiscal 2016 and fiscal 2016
compared to fiscal 2015, respectively. The decreases were primarily
the result of decreases in general legal fees in both fiscal 2017
and fiscal 2016 compared to fiscal 2016 and fiscal 2015,
respectively.
Fees Paid to Our Board of Directors
– Fees for our board in fiscal 2017 include
$55,600 for premiums related to our directors and officers
insurance policy (this amount increased by $1,200 from fiscal
2016). The remaining fiscal 2017 fees of $74,500 represent amounts
accrued to our board members for annual service, meeting attendance
fees and travel expenses, which were lower than in fiscal 2016 due
to a decrease in the number of board meetings held in 2017. Fees
for our board in fiscal 2016 include $54,400 for premiums related
to our directors and officers insurance policy (this amount
increased by $4,000 from fiscal 2015). The remaining fiscal 2016
fees of $80,000 represent amounts accrued to our board members for
annual service, meeting attendance fees and travel expenses, which
were somewhat lower than in fiscal 2015 due to a decrease in the
number of board meetings held in 2016. Fees for our board in fiscal
2015 include $50,500 for premiums related to our directors and
officers insurance policy (this amount increased by $1,000 from
fiscal 2014). The remaining fiscal 2015 fees of $89,900 represent
amounts accrued to our board members for annual service, meeting
attendance fees and travel expenses, which were higher than in
fiscal 2014 due to changing from expensing annual director fees
when paid to expensing annual director fees ratably throughout the
calendar year.
Insurance –
We maintain
policies for general liability insurance, workers’
compensation insurance, and casualty insurance to protect our
assets. Insurance expense fluctuates based on the number of
employees and premiums associated with insuring our water
systems.
Public Entity Expenses
–
Costs associated with being a corporation and costs associated with
being a publicly traded entity consist primarily of XBRL and Edgar
conversion fees, stock exchange fees, and press releases. These
costs fluctuate from year to year.
Consulting Fees –
Consulting fees for fiscal 2017 consisted of
$6,300 for information technology and other services and $4,900 for
valuation services. Consulting fees for fiscal 2016 consisted of
$5,000 for board advisory services and $700 related to the
development of the Sky Ranch water agreements. Consulting fees for
fiscal 2015 consisted of $10,000 for board advisory services,
$3,800 related to developing Sky Ranch, and $4,500 related to the
development of the Sky Ranch Districts.
Property Taxes
– Our
property taxes relate to our Sky Ranch and Rangeview properties and
were approximately $7,500 in fiscal 2017. These taxes are based on
estimated taxes paid in arrears and vary slightly from year to year
based on actual assessments.
Other G&A Expenses
–
Other G&A expenses include typical operating expenses related
to the maintenance of our office, business development, and travel,
and funding provided to the Rangeview District and the Sky Ranch
Districts. Other G&A increased 19% and 65% during fiscal 2017
compared to fiscal 2016 and fiscal 2016 compared to fiscal 2015,
respectively. The changes were primarily the result of the timing
of various expenses.
Other Income and Expense Items
|
|
|
|
|
|
|
For the
Fiscal Years Ended August 31,
|
2017-2016
|
2016-2015
|
|
|
|
|
|
|
|
|
Other
income items:
|
|
|
$
19
|
|
|
|
|
Oil and gas lease income, net
|
$
18,800
|
$
360,800
|
$
645,700
|
$
(342,000
)
|
-95
%
|
$
(284,900
)
|
-44
%
|
Oil and gas royalty income, net
|
$
186,600
|
$
343,600
|
$
412,600
|
$
(157,000
)
|
-46
%
|
$
(69,000
)
|
-17
%
|
Interest income
|
$
257,500
|
$
241,300
|
$
21,300
|
$
16,200
|
7
%
|
$
220,000
|
1033
%
|
Other
|
$
(10,500
)
|
$
3,900
|
$
22,100
|
$
(14,400
)
|
-369
%
|
$
(18,200
)
|
-82
%
|
The $18,800, $360,800, and $645,700 of oil and gas lease payments
recognized in fiscal 2017, fiscal 2016, and fiscal 2015,
respectively, primarily represent the deferred recognition of the
up-front payments received in March 2011 and February 2014, upon
the signing of the O&G Lease and Surface Use Agreement and
related extension. The amounts also represent the up-front payments
received for the Rangeview Lease. On March 10, 2011 we received an
up-front payment of $1,243,400 for the purpose of exploring for,
developing, producing and marketing oil and gas on 634 acres of
mineral estate we own at our Sky Ranch property. The oil and gas
rights under the remaining approximately 300 acres at Sky Ranch
were already owned by a third party. We deferred immediate
recognition of the up-front payment and began recognizing the
up-front payment in income over the initial three-year term of the
O&G Lease beginning March 10, 2011. During February 2014, we
received an additional payment of $1,243,400 to extend the initial
term of the O&G Lease by an additional two years through
February 2016. The income received for the extension was recognized
in income over the two-year extension term of the O&G
Lease.
The oil and gas royalty income represents amounts received pursuant
to the O&G Lease. The amount for fiscal 2015 includes royalties
from oil production from commencement of each well through August
15, 2015, which represents approximately six months of production.
The amounts for fiscal 2017 and 2016 include royalties of each well
from August 16th through August 15th, during each year,
respectively. The first well (referred to as “Sky
Ranch” in the chart below) generated oil and gas royalty
revenue of approximately $147,300, $266,600 and $321,800, 20% gross
(net of taxes), based on the Company’s 3/8
ths
interest of the total production of
this 1,280-acre pooled mineral estate during the fiscal years ended
August 31, 2017, 2016 and 2015, respectively. This 10,000-foot
horizontal well recorded production of approximately 33,600, 80,400
and 105,000 barrels of oil for the fiscal years ended August 31,
2017, 2016 and 2015, respectively. The second well (referred to as
“Property” in the chart below) generated oil and gas
royalty revenue of approximately
$41,300,
$77,000 and $90,800, 20% gross (net of taxes), based on the
Company’s 1/8
ths
interest of the total production of
this 1,280-acre pooled mineral estate during the fiscal years ended
August 31, 2017, 2016 and 2015, respectively. This 10,000-foot
horizontal well recorded production of
approximately
33,800,
73,400
and 88,600 barrels of oil for the fiscal years ended August 31,
2017, 2016 and 2015, respectively.
The following charts
detail well production and oil and gas royalties during fiscal
2015, fiscal 2016, and fiscal 2017.
Interest income represents interest earned on the temporary
investment of capital in cash equivalents or available-for-sale
securities, interest accrued on the notes receivable from the
Rangeview District and the Sky Ranch District, and interest accrued
on the Special Facilities construction proceeds receivable from
Arapahoe County.
The
increase from fiscal 2015 compared to fiscal 2016 and fiscal 2017
is due to the receipt of interest on investments related to the
proceeds from the sale of our farms.
Other represents income we received for various easements and the
construction of infrastructure for the oil and gas industry, which
is partially offset by other non-operational expenses.
Discontinued Operations
For additional information about our discontinued operations, see
Note 2
–
Summary of Significant Account Policies
to the accompanying
financial statements.
The following table provides the components of discontinued
operations:
Table K - Discontinued Operations Statements of
Operations
|
|
|
|
|
|
Fiscal years ended August 31,
|
|
|
|
|
Farm
revenues
|
$
6,848
|
$
267,472
|
$
1,127,155
|
Farm
expenses
|
(1,298
)
|
(77,132
)
|
(126,279
)
|
Gross profit
|
5,550
|
190,340
|
1,000,876
|
|
|
|
|
General
and administrative expenses
|
(46,942
)
|
(313,389
)
|
(760,192
)
|
Operating (loss) profit
|
(41,392
)
|
(123,049
)
|
240,684
|
Finance
charges
|
9,367
|
38,428
|
21,710
|
(Loss)
gain on sale of farm assets
|
-
|
4,273
|
(22,108,145
)
|
Interest
expense (1)
|
-
|
-
|
(390,505
)
|
Interest
imputed on the Tap Participation
|
|
|
|
Fee payable to HP A&M (2)
|
-
|
-
|
(23,816
)
|
Taxes
|
|
|
(292,729
)
|
Loss from discontinued operations
|
$
(32,025
)
|
$
(80,348
)
|
$
(22,552,801
)
|
(1)
Interest
expense represents interest accrued related to notes we had on our
farm assets prior to the sale. All notes associated with the farms
have been paid off, and thus we no longer incur interest on such
notes.
(2)
Imputed
interest represents an estimate of the interest accrued on the Tap
Participation Fee payable to HP A&M, which was eliminated as a
result of the settlement with HP A&M during the three months
ended February 28, 2015. As a result, we stopped accruing interest
related to the Tap Participation Fee on that date.
We anticipate continued expenses through the end of calendar 2018
related to the discontinued operations. We will continue to receive
revenues for leased agricultural land and incur expenses related to
the remaining agricultural land we own and for the purpose of
collecting outstanding receivables. We intend to sell the remaining
farms that we acquired during fiscal 2016 in due
course.
Liquidity, Capital Resources and Financial Position
At August 31, 2017, our working capital, defined as current assets
less current liabilities, was $26.2 million, which includes $5.6
million in cash and cash equivalents. We believe that as of the
date of the filing of this annual report on Form 10-K and as of
August 31, 2017, we have sufficient working capital to fund our
operations for the next 12 months.
ECCV Capacity Operating System
Pursuant to a 1982 contractual right, the Rangeview District may
purchase water produced from the ECCV Land Board system, which is
comprised of eight wells and more than 10 miles of buried water
pipeline located on the Lowry Range. In May 2012, in order to
increase the delivery capacity and reliability of these wells, in
our capacity as the Rangeview District’s service provider and
the Export Water Contractor (as defined in the Lease among us, the
Rangeview District and the Land Board), we entered into an
agreement to operate and maintain the ECCV facilities, allowing us
to utilize the system to provide water to commercial and industrial
customers, including customers providing water for drilling and
hydraulic fracturing of oil and gas wells. Our costs associated
with the use of the ECCV system are a flat monthly fee of $8,000
per month from January 1, 2013 through December 31, 2020, and will
decrease to $3,000 per month from January 1, 2021 through April
2032. Additionally, we pay a fee per 1,000 gallons of water
produced from ECCV’s system, which is included in the water
usage fees charged to customers. In addition, the ECCV system costs
us approximately $1,900 per month to maintain.
South Metropolitan Water Supply Authority and WISE
SMWSA is a municipal water authority in the State of Colorado
organized to pursue the acquisition and development of new water
supplies on behalf of its members, including the Rangeview
District. Pursuant to the SMWSA Participation Agreement with the
Rangeview District, we agreed to provide funding to the Rangeview
District in connection with its membership in the SMWSA. During the
fiscal years ended August 31, 2017, 2016 and 2015, we provided
$198,200, $113,600, and $78,600, respectively, of funding to the
Rangeview District pursuant to the SMWSA Participation Agreement.
In July 2013, the Rangeview District together with nine other SMWSA
members formed an entity to enable its members to participle in
WISE and entered into an agreement that specifies each
member’s pro rata share of WISE and the members’ rights
and obligations with respect to WISE. On December 31, 2013,
SMWA, Denver Water and Aurora Water entered into the WISE
Partnership Agreement, which provides for the purchase of certain
infrastructure (pipelines, water storage facilities, water
treatment facilities, and other appurtenant facilities) to deliver
water to and among the 10 members of the SMWA, Denver Water and
Aurora Water. We have entered into the WISE Financing Agreement,
which obligates us to fund the Rangeview District’s cost of
participating in WISE. In exchange for funding the Rangeview
District’s obligations in WISE, we will have the sole right
to use and reuse the Rangeview District’s 7% share of the
WISE water and infrastructure to provide water service to the
Rangeview District’s customers and to receive the revenue
from such service. Upon completion of the WISE infrastructure in
2017, we expect to be entitled to approximately 3 million
gallons per day of transmission pipeline capacity and 500 acre feet
per year of water. In addition to the funding we have provided to
the Rangeview District pursuant to the SMWSA Participation
Agreement, to date we have provided approximately $3.1 million of
financing to the Rangeview District to fund its obligation to
finance the purchase of infrastructure for WISE and the
construction of a connection to the WISE system in accordance with
the WISE Financing Agreement. We anticipate that we will be
spending approximately $645,500 in this system during fiscal 2018
and $4.6 million during the next four years to fund the Rangeview
District’s purchase of its share of the water transmission
line and additional facilities, water and related assets for
WISE.
Summary Cash Flows Table
Table L - Summary Cash Flows
|
|
|
|
|
|
|
For the
Fiscal Years Ended August 31,
|
|
|
|
|
|
|
|
|
|
|
Cash
(used in) provided by:
|
|
|
|
|
|
|
|
Operating acitivites
|
$
(1,052,900
)
|
$
(270,700
)
|
$
(974,100
)
|
$
(782,200
)
|
-289
%
|
$
703,400
|
-72
%
|
Investing activities
|
$
1,933,800
|
$
(32,119,000
)
|
$
42,531,700
|
$
34,052,800
|
-106
%
|
$
(74,650,700
)
|
-176
%
|
Financing activities
|
$
(2,400
)
|
$
(2,000
)
|
$
(6,218,200
)
|
$
(400
)
|
-20
%
|
$
6,216,200
|
-100
%
|
Changes in Operating Activities –
Operating activities include revenues we receive
from the sale of wholesale water and wastewater services, costs
incurred in the delivery of those services, G&A Expenses, and
depletion/depreciation expenses.
Cash used in operations in fiscal 2017 increased by $782,200, which
was primarily the result of an increase in salary and salary
related expenses and consulting expenses as compared to fiscal
2016. Cash used in operations in fiscal 2016 decreased by $703,400
compared to fiscal 2015, which was primarily the result of
receiving the remaining escrow from the sale of our farms of
approximately $1.3 million. We will continue to provide wholesale
domestic water and wastewater services to customers in our service
areas, and we will continue to operate and maintain our water and
wastewater systems with our own employees.
Changes in Investing Activities
–
Investing activities in fiscal 2017 consisted of
investments in our water and wastewater systems of approximately
$2.5 million, pipelines of approximately $4.4 million
(approximately $300 thousand was expended for the pipeline in
fiscal 2016 and was reclassified from construction in progress to
fixed assets when the pipeline was placed into service), the
development of our Sky Ranch land of approximately $900,000, and
new equipment of approximately $100,000. The investments in new
assets were offset by the sale of marketable securities of
approximately $9.8 million.
Investing activities in fiscal 2016 consisted of
the investments in our water and wastewater systems and land of
approximately $1.2 million, the purchase of equipment of
approximately $472,300, and the net investment of approximately $30
million into U.S. treasuries and certificates of
deposit.
Investing activities in fiscal 2015 consisted of
the sale of our farms, which generated proceeds of approximately
$44.6 million, and the addition of approximately $2.1 million in
water assets, which primarily consisted of the investment in WISE
of approximately $2.5 million ($1.4 million acquired through the
WISE Financing Agreement) and the addition of pipelines and other
water infrastructure of approximately $1
million.
Changes in Financing Activities
–
Financing activities in fiscal 2017 and 2016
consisted only of payments to our contingent liability holders of
approximately $2,400 and $2,000, respectively. Financing activities
in fiscal 2015 consisted primarily of payments on our promissory
notes of $8.9 million (which includes funding of the WISE Financing
Agreement entered into in December 2014) and the issuance of
approximately $2.7 million in new promissory
notes.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements consist entirely of the
contingent portion of the Comprehensive Amendment Agreement No. 1
(the “CAA”) which is $673,000, as described in Note 5
–
Participating Interests in
Export Water
to the
accompanying financial statements. The contingent liability is not
reflected on our balance sheet because the obligation to pay the
CAA is contingent on sales of Export Water, the amounts and timing
of which are not reasonably determinable.
Recently Adopted and Issued Accounting Pronouncements
See Note 2 –
Summary of Significant
Accounting Policies
to the
accompanying financial statements for recently adopted and issued
accounting pronouncements.
Total Contractual Cash Obligations
Table M - Contractual Cash Obligations
|
|
|
|
|
|
|
|
|
More
than 5 years
|
Operating
lease obligations (a)
|
$
12,000
|
$
12,000
|
|
|
(a)
|
Participating
Interests in Export Water (b)
|
344,000
|
|
|
|
(b)
|
WISE
participation (c)
|
5,220,000
|
649,100
|
3,542,500
|
1,032,300
|
(c)
|
Total
|
$
5,576,000
|
$
661,100
|
$
3,542,500
|
$
1,032,300
|
$-
|
(a)
Our
only operating lease is related to our office space. We occupy
2,500 square feet at a cost of $3,000, per month, at the address
shown on the cover of this Form 10-K. We lease these premises
pursuant to a two-year operating lease agreement which expires in
December 2018 with a third party.
(b)
The
participating interests liability is payable to the CAA holders
upon the sale of Export Water; therefore, the timing of the
payments is uncertain and not reflected in the above table by
period.
(c)
Projections
for WISE participation have only been provided for the next five
fiscal years. The timing and amount of payments beyond five years
is uncertain and not reflected in the above table by
period.
Item 7A – Quantitative and Qualitative Disclosures About
Market Risk
General
We have limited exposure to market risks from instruments that may
impact our balance sheets, statements of comprehensive loss, and
statements of cash flows. Such exposure is due primarily to
changing interest rates.
Interest Rates
The primary objective for our investment activities is to preserve
principal while maximizing yields without significantly increasing
risk. This is accomplished by investing in diversified short-term
interest bearing investments. As of August 31, 2017, we are holding
$20.2 million in marketable securities consisting of certificates
of deposit and U.S. treasury notes. We have no investments
denominated in foreign country currencies; therefore, our
investments are not subject to foreign currency exchange rate
risk.
Item 8 – Consolidated Financial Statements and
Supplementary Data
Index to Consolidated Financial Statements and Supplementary
Data
|
|
Page
|
Reports of Independent Registered Public Accounting
Firm
|
F-1
|
Consolidated Balance Sheets
|
F-3
|
Consolidated Statements of Comprehensive Loss
|
F-4
|
Consolidated Statements of Shareholders’ Equity
|
F-5
|
Consolidated Statements of Cash Flows
|
F-6
|
Notes to Consolidated Financial Statements
|
F-7
|
Report of Independent Registered Public Accounting
Firm
To the
Shareholders and Board of Directors of Pure Cycle
Corporation:
We have audited the accompanying balance sheet of Pure Cycle
Corporation (the “Company”) as of August 31, 2017, and
the related statements of comprehensive loss, shareholders' equity,
and cash flows for the year then ended August 31, 2017. We also
have audited the Company’s internal control over financial
reporting as of August 31, 2017, based on criteria established in
the 2013 Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO"). The Company’s management is responsible
for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying “Management’s Annual
Report on Internal Control over Financial Reporting.” Our
responsibility is to express an opinion on these financial
statements and an opinion on the Company's internal control over
financial reporting based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit
of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable
basis for our opinions.
A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures ofthe
company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Pure
Cycle Corporation as of August 31, 2017, and the results of its
operations and its cash flows for the year ended August 31, 2017 in
conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control
over financial reporting as of August 31, 2017, based on criteria
established in the 2013 Internal Control – Integrated
Framework issued by COSO.
/s/
Crowe Horwath LLP
Denver,
Colorado
November
15,
2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of Directors and Shareholders
Pure Cycle Corporation
We have audited the accompanying consolidated balance sheet of Pure
Cycle Corporation as of August 31, 2016, and the related
consolidated statements of comprehensive loss, shareholders'
equity, and cash flows for each of the years in the two-year period
ended August 31, 2016. Pure Cycle Corporation's management is
responsible for these financial statements. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Pure Cycle Corporation as of August 31, 2016, and the
results of its operations and its cash flows for each of the years
in the two-year period ended August 31, 2016 in conformity with
accounting principles generally accepted in the United States of
America.
/s/ GHP HORWATH, P.C
Denver, Colorado
October 27, 2016
PURE
CYCLE CORPORATION
CONSOLIDATED
BALANCE SHEETS
ASSETS:
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$
5,575,823
|
$
4,697,288
|
Short-term
investments
|
20,055,345
|
23,176,450
|
Trade
accounts receivable, net
|
663,762
|
181,006
|
Sky
Ranch receivable
|
215,504
|
171,924
|
Prepaid
expenses
|
503,100
|
350,819
|
Assets
of discontinued operations
|
110,748
|
229,940
|
Total
current assets
|
27,124,282
|
28,807,427
|
|
|
|
Long-term
investments
|
187,975
|
6,853,276
|
Investments
in water and water systems, net
|
34,575,713
|
28,321,926
|
Land
and mineral interests
|
6,248,371
|
5,345,800
|
Notes
receivable - related parties, including accrued
interest
|
776,364
|
628,446
|
Other
assets
|
424,226
|
472,392
|
Assets
of discontinued operations held for sale
|
450,641
|
450,347
|
Total
assets
|
$
69,787,572
|
$
70,879,614
|
|
|
|
LIABILITIES:
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
492,410
|
160,390
|
Accrued
liabilities
|
380,852
|
242,624
|
Deferred
revenues
|
55,800
|
55,800
|
Deferred
oil and gas lease payment
|
-
|
19,000
|
Liabilities
of discontinued operations
|
11,165
|
4,394
|
Total
current liabilities
|
940,227
|
482,208
|
|
|
|
Deferred
revenues, less current portion
|
999,688
|
1,055,491
|
Participating
Interests in Export Water Supply
|
341,558
|
343,966
|
Total
liabilities
|
2,281,473
|
1,881,665
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
Preferred
stock:
|
|
|
Series
B - par value $.001 per share, 25 million shares
authorized;
|
433
|
433
|
432,513
shares issued and outstanding (liquidation preference of
$432,513)
|
|
|
Common
stock:
|
|
|
Par
value 1/3 of $.01 per share, 40 million shares
authorized;
|
|
|
23,754,098
and 23,754,098 shares issued and outstanding,
respectively
|
79,185
|
79,185
|
Collateral
stock
|
–
|
–
|
Additional
paid in capital
|
171,431,486
|
171,198,241
|
Accumulated
other comprehensive income (loss)
|
(11,105
)
|
3,122
|
Accumulated
deficit
|
(103,993,900
)
|
(102,283,032
)
|
Total
shareholders' equity
|
67,506,099
|
68,997,949
|
Total
liabilities and shareholders' equity
|
$
69,787,572
|
$
70,879,614
|
See
accompanying Notes to Financial
Statements
PURE
CYCLE CORPORATION
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
For the Fiscal Years Ended August 31,
|
|
|
|
|
Revenues:
|
|
|
|
Metered water usage
|
$
825,056
|
$
220,997
|
$
969,989
|
Wastewater treatment fees
|
45,106
|
43,712
|
50,076
|
Special facility funding recognized
|
41,508
|
41,508
|
41,508
|
Water tap fees recognized
|
217,515
|
14,294
|
14,294
|
Other income
|
98,602
|
131,650
|
120,702
|
Total revenues
|
1,227,787
|
452,161
|
1,196,569
|
|
|
|
|
Expenses:
|
|
|
|
Water service operations
|
(332,449
)
|
(264,424
)
|
(464,940
)
|
Wastewater service operations
|
(28,615
)
|
(29,187
)
|
(66,745
)
|
Other
|
(61,860
)
|
(68,478
)
|
(55,173
)
|
Depletion and depreciation
|
(380,382
)
|
(166,670
)
|
(172,546
)
|
Total cost of revenues
|
(803,306
)
|
(528,759
)
|
(759,404
)
|
Gross
margin
|
424,481
|
(76,598
)
|
437,165
|
|
|
|
|
General
and administrative expenses
|
(2,201,744
)
|
(1,849,743
)
|
(1,939,395
)
|
Depreciation
|
(353,939
)
|
(253,434
)
|
(174,717
)
|
Operating loss
|
(2,131,202
)
|
(2,179,775
)
|
(1,676,947
)
|
|
|
|
|
Other
income (expense):
|
|
|
|
Oil and gas lease income, net
|
18,765
|
360,765
|
645,720
|
Oil and gas royalty income, net
|
186,595
|
343,620
|
412,627
|
Interest income
|
257,488
|
241,279
|
21,334
|
Other
|
(10,489
)
|
3,852
|
22,120
|
Loss
from continuing operations
|
(1,678,843
)
|
(1,230,259
)
|
(575,146
)
|
Loss
from discontinued operations, net of taxes
|
(32,025
)
|
(80,348
)
|
(22,552,801
)
|
Net loss before taxes
|
(1,710,868
)
|
(1,310,607
)
|
(23,127,947
)
|
Taxes
|
–
|
–
|
–
|
Net loss
|
$
(1,710,868
)
|
$
(1,310,607
)
|
$
(23,127,947
)
|
Unrealized holding (losses) gains
|
(14,227
)
|
3,122
|
–
|
Total comprehensive loss
|
$
(1,725,095
)
|
$
(1,307,485
)
|
$
(23,127,947
)
|
|
|
|
|
Basic and diluted net loss per common share -
|
|
|
|
Loss from continuing operations
|
$
(0.07
)
|
$
(0.06
)
|
$
(0.03
)
|
Loss from discontinued operations
|
*
|
*
|
$
(0.93
)
|
Net loss
|
$
(0.07
)
|
$
(0.06
)
|
$
(0.96
)
|
|
|
|
|
Weighted average common shares outstanding –
|
|
|
|
basic and diluted
|
23,754,098
|
23,781,041
|
24,041,114
|
|
|
|
|
*
Amount is less than $.01 per share
|
|
|
|
See accompanying
Notes to Financial Statements
PURE
CYCLE CORPORATION
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
|
|
|
|
Accumulated Other
Comprehensice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
1, 2014 balance:
|
432,513
|
433
|
24,037,598
|
80,130
|
168,794,396
|
-
|
-
|
(77,844,478
)
|
91,030,481
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
239,986
|
-
|
-
|
-
|
239,986
|
Exercise
of options
|
-
|
-
|
16,500
|
55
|
48,770
|
-
|
-
|
-
|
48,825
|
Reduction
in TPF due to remedies under
|
|
|
|
|
|
|
|
|
|
the Arkansas River Agreement
|
-
|
-
|
-
|
-
|
3,301,203
|
-
|
-
|
-
|
3,301,203
|
Collateral
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,407,000
)
|
-
|
(1,407,000
)
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(23,127,947
)
|
(23,127,947
)
|
August
31, 2015 balance:
|
432,513
|
433
|
24,054,098
|
80,185
|
172,384,355
|
-
|
(1,407,000
)
|
(100,972,425
)
|
70,085,548
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
219,886
|
-
|
-
|
-
|
219,886
|
Collateral
stock retired
|
-
|
-
|
(300,000
)
|
(1,000
)
|
(1,406,000
)
|
-
|
1,407,000
|
-
|
-
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,310,607
)
|
(1,310,607
)
|
Unrealized
holding gain on investments
|
-
|
-
|
-
|
-
|
-
|
3,122
|
-
|
-
|
3,122
|
August
31, 2016 balance:
|
432,513
|
433
|
23,754,098
|
79,185
|
171,198,241
|
3,122
|
-
|
(102,283,032
)
|
68,997,949
|
Share-based
compensation
|
|
|
|
|
233,245
|
|
|
|
233,245
|
Net
loss
|
|
|
|
|
|
|
|
(1,710,868
)
|
(1,710,868
)
|
Unrealized
holding gain on investments
|
|
|
|
|
|
(14,227
)
|
|
|
(14,227
)
|
August
31, 2017 balance:
|
432,513
|
$
433
|
23,754,098
|
$
79,185
|
$
171,431,486
|
$
(11,105
)
|
$
-
|
$
(103,993,900
)
|
$
67,506,099
|
See
accompanying Notes to Financial Statements
F-5
PURE
CYCLE CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
For the fiscal Years Ended August 31,
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
Net
loss
|
$
(1,710,868
)
|
$
(1,310,607
)
|
$
(23,127,947
)
|
Adjustments
to reconcile net loss to net cash provided by
|
|
|
|
(used
in) operating activities:
|
|
|
|
Share-based
compensation expense
|
233,245
|
219,886
|
239,986
|
Depreciation,
depletion and other non-cash items
|
734,324
|
420,104
|
347,263
|
Investment
in Well Enhancement and Recovery Systems LLC
|
10,488
|
10,675
|
4,577
|
Interest
income and other non-cash items
|
(14,647
)
|
(41,114
)
|
(419
)
|
Interest
added to receivable from related parties
|
(34,755
)
|
(29,099
)
|
(15,493
)
|
Changes
in operating assets and liabilities:
|
|
|
|
Trade
accounts receivable
|
(482,756
)
|
(23,161
)
|
918,252
|
Prepaid
expenses
|
(152,281
)
|
(122,733
)
|
43,472
|
Note
receivable - related parties
|
(156,743
)
|
(31,633
)
|
(105,208
)
|
Accounts
payable and accrued liabilities
|
477,538
|
(269,428
)
|
(848,669
)
|
Income
taxes
|
-
|
(292,729
)
|
292,729
|
Deferred
revenue
|
(55,803
)
|
(55,802
)
|
(64,226
)
|
Deferred
income - oil and gas lease
|
(19,000
)
|
(360,765
)
|
(645,720
)
|
Net
cash used in operating activities from continuing
operations
|
(1,171,258
)
|
(1,886,406
)
|
(22,961,403
)
|
Net
cash provided by operating activities from discontinued
operations
|
118,379
|
1,615,677
|
21,987,337
|
Net
cash used in operating activities
|
(1,052,879
)
|
(270,729
)
|
(974,066
)
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
Investments
in water, water systems and land
|
(2,486,403
)
|
(1,209,416
)
|
(2,101,253
)
|
Investments
in Sky Ranch pipeline
|
(4,368,196
)
|
|
|
Ivestments
in Sky Ranch land development
|
(902,600
)
|
|
|
Sales
and maturities of marketable securities
|
9,786,406
|
2,840,000
|
-
|
Purchase
of short-term investments
|
-
|
(25,970,721
)
|
-
|
Purchase
of long-term investments
|
-
|
(6,855,189
)
|
-
|
Purchase
of property and equipment
|
(95,385
)
|
(472,310
)
|
(17,186
)
|
Net
cash provided by (used in) investing activities from continuing
operations
|
1,933,822
|
(31,667,636
)
|
(2,118,439
)
|
Net
cash provided by (used in) investing activities from discontinued
operations
|
-
|
(451,347
)
|
44,650,149
|
Net
cash provided by (used in) investing activities
|
1,933,822
|
(32,118,983
)
|
42,531,710
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
Proceeds
from exercise of options
|
-
|
-
|
48,825
|
Payment
to contingent liability holders
|
(2,408
)
|
(2,041
)
|
(8,621
)
|
Net
cash (used in) provided by financing activities from continuing
operations
|
(2,408
)
|
(2,041
)
|
40,204
|
Net
cash used in financing activities from discontinued
operations
|
-
|
-
|
(6,258,365
)
|
Net
cash used in financing activities
|
(2,408
)
|
(2,041
)
|
(6,218,161
)
|
|
|
|
|
Net
change in cash and cash equivalents
|
878,535
|
(32,391,753
)
|
35,339,483
|
Cash
and cash equivalents - beginning of year
|
4,697,288
|
37,089,041
|
1,749,558
|
Cash
and cash equivalents - end of year
|
$
5,575,823
|
$
4,697,288
|
$
37,089,041
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
|
|
|
|
Retirement
of collateral stock
|
$
-
|
$
1,407,000
|
$
-
|
Reduction
in Tap Participation Fee Liability and HP&AM
|
|
|
|
receivable,
collateral stock, and mineral interests received
|
|
|
|
as
a result of settlement of the Arkansas River Agreement
|
$
-
|
$
-
|
$
1,894,203
|
Assets
acquired through WISE funding obligation
|
$
-
|
$
-
|
$
1,381,004
|
See
accompanying Notes to Financial Statements
F-6
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
NOTE 1 – ORGANIZATION
Pure Cycle Corporation (the “Company”) was incorporated
in Delaware in 1976 and reincorporated in Colorado in 2008. The
Company owns assets in the Denver, Colorado metropolitan area. The
Company is currently using its water assets located in the Denver
metropolitan area to provide wholesale water and wastewater
services to customers located in the Denver metropolitan
area.
The Company provides a full line of wholesale water and wastewater
services which includes designing and constructing water and
wastewater systems as well as operating and maintaining such
systems. The Company’s business focus is to provide wholesale
water and wastewater services, predominately to local governmental
entities, which provide services to their end-use customers
throughout the Denver metropolitan area as well as along the
Colorado Front Range.
In addition to the Company’s water and wastewater operations,
the Company is developing 931 acres of land owned by the Company
along Denver’s I-70 corridor as a master planned community
known as Sky Ranch.
As of August 31, 2017, the Company had $26.2 million of working
capital, which included $5.6 million of cash and cash
equivalents.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Principles of Consolidation
The consolidated financial statements of the Company include the
accounts of Pure Cycle Corporation and its majority-owned and
controlled subsidiaries. Intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Estimates are
used to account for certain items such as share-based compensation,
deferred tax asset valuation, and the useful lives of assets, etc.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with original maturities of three months or less. The
Company’s cash equivalents are comprised entirely of money
market funds maintained at a reputable financial institution. At
various times during the fiscal year ended August 31, 2017, the
Company’s main operating account exceeded federally insured
limits. The Company has never suffered a loss due to such excess
balance.
Investments
M
anagement
determines the appropriate classification of its investments in
certificates of deposit and treasury securities at the time of
purchase and reevaluates such determinations each reporting
period.
Certificates of deposit and debt securities are classified as
held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. The Company has
$188,000 of investments classified as held-to-maturity at August
31, 2017, which represent certificates of deposit and U.S. treasury
notes with maturity dates after August 31, 2018. Securities that
the Company does not have the positive intent or ability to hold to
maturity, including certificates of deposit, debt securities and
any investments in equity securities, are classified as
available-for-sale. Securities classified as available-for-sale are
marked-to-market at each reporting period. Changes in value on such
securities are recorded as a component of
Accumulated other
comprehensive income (loss).
The cost of securities sold is based on the
specific identification method. The Company’s certificates of
deposit and treasury securities mature at various dates through
July 2018.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
Concentration of Credit Risk and Fair Value
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash
equivalents and investments. From time to time, the Company places
its cash in money market instruments, certificates of deposit and
U.S. government treasury obligations. To date, the Company has not
experienced significant losses on any of these
investments.
The
following methods and assumptions were used to estimate the fair
value of each class of financial instrument for which it is
practicable to estimate that value.
Cash and Cash Equivalents –
The Company’s cash
and cash equivalents are reported using the values as reported by
the financial institution where the funds are held. These
securities primarily include balances in the Company’s
operating and savings accounts. The carrying amount of cash and
cash equivalents approximate fair value.
Trade Accounts Receivable –
The Company records
accounts receivable net of allowances for uncollectible
accounts.
Investments –
The carrying amounts of investments
approximate fair value. Investments are described further in Note 3
–
Fair Value
Measurements.
Accounts Payable –
The carrying amounts of accounts
payable approximate fair value due to the relatively short period
to maturity for these instruments.
Long-Term Financial Liabilities
–
The Comprehensive Amendment
Agreement No. 1 (the “CAA”) is comprised of a recorded
balance and an off-balance sheet or “contingent”
obligation associated with the Company’s acquisition of its
“Rangeview Water Supply” (defined in
Note 4 –
Water and
Land Assets
). The amount payable is a fixed amount but is
repayable only upon the sale of “Export Water” (defined
in Note 4 –
Water
and Land Assets
). Because of the uncertainty of the sale of
Export Water, the Company has determined that the recorded balance
of the CAA does not have a determinable fair value. The CAA is
described further in Note 5 –
Participating Interests in Export
Water
.
Notes Receivable – Related Parties
–
The market value of the notes
receivable – related parties: Rangeview Metropolitan District
(the “Rangeview District”) and Sky Ranch Metropolitan
District No. 5 are not practical to estimate due to the related
party nature of the underlying transactions.
Off-Balance Sheet Instruments –
The Company’s
off-balance sheet instruments consist entirely of the contingent
portion of the CAA. Because repayment of this portion of the CAA is
contingent on the sale of Export Water, which is not reasonably
estimable, the Company has determined that the contingent portion
of the CAA does not have a determinable fair value. See further
discussion in Note 5 –
Participating Interests in Export
Water
.
Cash Flows
The Company did not have any debt during the fiscal years ended
August 31, 2017 and 2016, and therefore did not pay any interest
during the fiscal years ended August 31, 2017 and 2016. The Company
paid $441,400 in interest during the fiscal year ended August 31,
2015.
The Company did not pay any income taxes during the fiscal year
ended August 31, 2017. In the fiscal year ended August 31, 2016,
the Company paid $292,700 for alternative minimum tax the Company
owed as a result of the sale of the Company’s farm assets.
The Company did not pay any income taxes during the fiscal year
ended August 31, 2015.
Trade Accounts Receivable
The Company records accounts receivable net of allowances for
uncollectible accounts. Excluded from trade accounts receivable are
balances due from discontinued operations. The Company has not
recorded an allowance for uncollectible accounts in receivables
from continuing operations for either of the periods ended August
31, 2017 or 2016. The allowance for uncollectible accounts was
determined based on specific review of all past due
accounts.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying
amount of an asset to future undiscounted net cash flows expected
to be generated by the eventual use of the asset. If such assets
are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less
costs to sell.
Capitalized Costs of Water and Wastewater Systems and Depreciation
and Depletion Charges
Costs to construct water and wastewater systems that meet the
Company’s capitalization criteria are capitalized as
incurred, including interest, and depreciated on a straight-line
basis over their estimated useful lives of up to 30 years. The
Company capitalizes design and construction costs related to
construction activities, and it capitalizes certain legal,
engineering and permitting costs relating to the adjudication and
improvement of its water assets.
The Company depletes its water assets that are being utilized on
the basis of units produced (i.e., thousands of gallons sold)
divided by the total volume of water adjudicated in the water
decrees.
Tap Participation Fee Liability and Imputed Interest
Expense
Pursuant
to the Asset Purchase Agreement dated May 10, 2006 (the "Arkansas
River Agreement") between the Company and HP A&M (formerly a
significant shareholder), the Company was obligated to pay HP
A&M a defined percentage of a defined number of water tap fees
the Company receives after the date of the Arkansas River Agreement
(the "Tap Participation Fee" or "TPF"). Prior to September 1, 2014,
the Company and HP A&M had a dispute regarding certain defaults
of HP A&M relating to the agreement. In 2014 and 2015,
the Company settled its claims against HP A&M relating to the
defaults. As a result of the settlement, during the year
ended August 31 2015, the remaining TPF liability of approximately
$3.3 million, was eliminated, which, due to the related party
nature of the transaction, was accounted for as an increase in
equity of approximately $3.3 million.
Revenue Recognition
The Company generates revenues through one line of business. Its
revenues are derived through its wholesale water and wastewater
business, which is described below.
The Company generates revenues through its wholesale water and
wastewater business predominately from three sources: (i) monthly
wholesale water usage fees and wastewater service fees, (ii)
one-time water and wastewater tap fees and construction fees, and
(iii) consulting fees. Because these items are separately
delivered, the Company accounts for each of the items separately,
as described below.
i)
Monthly wholesale
water and wastewater service fees
–
Monthly wholesale water usage charges
are assessed to the Company’s customers based on actual
metered usage each month plus a base monthly service fee assessed
per single family equivalent (“SFE”) unit served. One
SFE is a customer, whether residential, commercial or industrial,
that imparts a demand on the Company’s water or wastewater
systems similar to the demand of a family of four persons living in
a single family house on a standard sized lot. One SFE is assumed
to have a water demand of approximately 0.4 acre feet per year and
to contribute wastewater flows of approximately 300 gallons per
day. Water usage pricing uses a tiered pricing structure. The
Company recognizes wholesale water usage revenues upon delivering
water to its customers or its governmental customers’ end-use
customers, as applicable.
Revenues recognized
by the Company from the sale of “Export Water” and
other portions of its “Rangeview Water Supply” off the
Lowry Range are shown gross of royalties to the State of Colorado
Board of Land Commissioners (the “Land Board”).
Revenues recognized by the Company from the sale of water on the
Lowry Range are shown net of royalties paid to the Land Board and
amounts retained by the Rangeview District.
See further description of “Export
Water,” the “Lowry Range,” and the
“Rangeview Water Supply” in Note 4 –
Water and Land
Assets
under “Rangeview
Water Supply and Water System.”
The
Company recognizes wastewater processing revenues monthly based on
a flat monthly fee and actual usage charges. The monthly wastewater
service fees are shown net of amounts retained by the Rangeview
District. Amounts recognized for water and wastewater services
during the fiscal years ended August 31, 2017, 2016 and 2015 are
presented in the statements of comprehensive loss. Costs of
delivering water and providing wastewater service to customers are
recognized as incurred.
The Company delivered 94.6
million,
33.9 million and 97.5 million gallons of water to customers during
the fiscal years ended August 31, 2017, 2016 and 2015,
respectively.
ii)
Water and wastewater
tap fees and construction fees
–
Tap
fees, also called system development fees, are received in advance,
are non-refundable and are typically used to fund construction of
certain facilities and defray the acquisition costs of obtaining
water rights and constructing facilities to deliver water.
Construction fees are fees used by the Company to construct assets
that are typically required to be constructed by developers or home
builders and are separate from tap fees.
Proceeds
from tap fees and construction fees are deferred upon receipt and
recognized in income either upon completion of construction of
infrastructure or ratably over time, depending on whether the
Company owns the infrastructure constructed with the proceeds or a
customer owns the infrastructure constructed with the
proceeds.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
Tap
and construction fees derived from agreements in which the Company
will not own the assets constructed with the fees are recognized as
revenue using the percentage-of-completion method. Costs of
construction of the assets when the Company will not own the assets
are recorded as construction costs.
Tap
and construction fees derived from agreements for which the Company
will own the infrastructure are recognized as revenues ratably over
the estimated accounting service life of the facilities
constructed, starting at completion of construction, which could be
in excess of 30 years. Costs of construction of the assets when the
Company will own the assets are capitalized and depreciated over
their estimated economic lives.
From
time to time, the Company enters into water service agreements to
provide water service to customers. The Company owns the facilities
which store, treat, and deliver the water and amortizes the cost of
these facilities over their useful lives. The Company recognized
$217,500 of tap fee revenue for the year ended August 31, 2017 and
$14,300 of tap fee revenue in each of the two fiscal years ended
August 31, 2016, and 2015. The Company recognized $41,500 of
“Special Facilities” funding as revenue in each of the
three fiscal years ended August 31, 2017, 2016, and 2015. As of
August 31, 2017, the Company has deferred recognition of $1.1
million of tap and construction revenue from customer agreements,
which will be recognized as revenue ratably through
2036.
iii)
Consulting fees
– Consulting fees are fees the
Company receives, typically on a monthly basis, from municipalities
and area water providers along the I-70 corridor, for contract
operations services. The Company recogizes consulting fees
monthly, based on a flat monthly fee plus charges for additional
work performed.
Royalty and Other Obligations
Revenues from the sale of Export Water are shown gross of royalties
payable to the Land Board. Revenues from the sale of water on the
Lowry Range are shown net of the royalties to the Land Board and
the amounts retained by the Rangeview District.
Oil and Gas Lease Payments
As further described in Note 4 –
Water and Land Assets
below, on March 10, 2011, the Company
entered into a three-year Paid-Up Oil and Gas Lease (the
“O&G Lease”) and a Surface Use and Damage Agreement
(the “Surface Use Agreement”) with Anadarko E&P
Company, L.P. (“Anadarko”), which subsequently sold the
O&G Lease to a wholly-owned subsidiary of ConocoPhillips
Company, for the purpose of exploring for, developing, producing
and marketing oil and gas on approximately 634 acres of mineral
estate owned by the Company at its Sky Ranch property. The Company
received a payment of $1,243,400 during February 2014 to extend the
O&G Lease an additional two years through February 2016, which
was recognized as income on a straight-line basis over two years
(the extension term of the O&G Lease). In addition, during the
fiscal year ended August 31, 2015, the Company received an up-front
payment of $72,000, for the purpose of exploring for, developing,
producing, and marketing oil and gas on 40 acres of mineral estate
the Company owns adjacent to the Lowry Range (the “Rangeview
Lease”). The Company recognizes the up-front payments on a
straight-line basis over the terms of the respective leases. During
the fiscal years ended August 31, 2017, 2016 and 2015, the Company
recognized $19,000, $360,800, and $645,700, respectively, of income
related to the up-front payments received pursuant to these
leases.
As of August 31, 2017, the Company recognized the remaining $19,000
of income related to the Rangeview Lease. Subsequent to August 31,
2017, the Company entered into a Paid-Up Oil and Gas Lease with
Bison Oil and Gas, LLP, for the purpose of exploring for,
developing, producing, and marketing oil and gas on the 40 acres of
mineral estate the Company owns adjacent to the Lowry Range (the
“Bison Lease”). Pursuant to the Bison Lease, on
September 20, 2017, the Company received an up-front payment of
$167,200, which will be recognized as income on a straight-line
basis over three years (the term of the Bison Lease).
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
During
the three months ended February 28, 2015, two wells were drilled
within the Company’s mineral interest. Beginning in March
2015, both wells were placed into service and began producing oil
and gas and accruing royalties to the Company. In May 2015, certain
gas collection infrastructure was extended to the property to allow
the collection of gas from the wells and accrual of royalties
attributable to gas production.
During
the fiscal years ended August 31, 2017, 2016 and 2015, the Company
received $186,600, $343,600 and $412,600, respe
ctively, in
royalties attributable to these two wells. The Company
classifies income from lease and royalty payments as
Other income
in the statement of
comprehensive loss as the Company does not consider these
arrangements to be an operating business
activity.
Share-based Compensation
The Company maintains a stock option plan for the benefit of its
employees and directors. The Company records share-based
compensation costs which are measured at the grant date based on
the fair value of the award and are recognized as expense over the
applicable vesting period of the stock award using the
straight-line method. The Company has adopted the alternative
transition method for calculating the tax effects of share-based
compensation which allows for a simplified method of calculating
the tax effects of employee share-based compensation. Because the
Company has a full valuation allowance on its deferred tax assets,
the granting and exercise of stock options during the fiscal years
ended August 31, 2016 and 2015 had no impact on the income tax
provisions.
The Company recognized $233,200, $219,900, and $240,000 of
share-based compensation expenses during the
fiscal
years ended August 31, 2017, 2016 and 2015,
respectively.
Income Taxes
The Company uses a “more-likely-than-not” threshold for
the recognition and de-recognition of tax positions, including any
potential interest and penalties relating to tax positions taken by
the Company. The Company does not have any significant unrecognized
tax benefits as of August 31, 2017.
The Company files income tax returns with the Internal Revenue
Service and the State of Colorado. The tax years that remain
subject to examination are fiscal 2013 through fiscal 2016. The
Company does not believe there will be any material changes in its
unrecognized tax positions over the next 12 months.
The Company’s policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income
tax expense. At August 31, 2017, the Company did not have any
accrued interest or penalties associated with any unrecognized tax
benefits, nor was any interest expense recognized during the fiscal
years ended August 31, 2017, 2016 or 2015.
Discontinued Operations
In August 2015, the Company sold approximately 14,600 acres of
irrigated farm land and related Arkansas River water rights for
proceeds of approximately $44.7 million, which were substantially
all of the assets comprising the Company’s agricultural
segment. Pursuant to the terms of the purchase and sale agreement,
the Company continued to manage and receive the lease income until
December 31, 2015. As a consequence of the sale, the operating
results and the assets and liabilities of the discontinued
operations, which formerly comprised the agricultural segment, are
presented separately in the Company’s financial statements.
Summarized financial information for the discontinued agricultural
business is shown below. Prior period balances have been
reclassified to present the operations of the agricultural business
as a discontinued operation.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
Discontinued Operations Statements of Operations
|
|
|
|
|
|
Fiscal years ended August 31,
|
|
|
|
|
Farm
revenues
|
$
6,800
|
$
267,500
|
$
1,127,200
|
Farm
expenses
|
(1,300
)
|
(77,100
)
|
(126,300
)
|
Gross profit
|
5,500
|
190,400
|
1,000,900
|
|
|
|
|
General
and administrative expenses
|
(46,900
)
|
(313,400
)
|
(760,200
)
|
Operating (loss) profit
|
(41,400
)
|
(123,000
)
|
240,700
|
Finance
charges
|
9,400
|
38,400
|
21,700
|
(Loss)
gain on sale of farm assets
|
-
|
4,300
|
(22,108,200
)
|
Interest
expense (1)
|
-
|
-
|
(390,500
)
|
Interest
imputed on the Tap Participation
|
|
|
|
Fee payable to HP A&M (2)
|
-
|
-
|
(23,800
)
|
Taxes
|
|
|
(292,700
)
|
Loss from discontinued operations, net of taxes
|
$
(32,000
)
|
$
(80,300
)
|
$
(22,552,800
)
|
(1) Interest
expense represents interest accrued related to notes the Company
had on its farm assets prior to the sale. All notes associated with
the farms have been paid off, and thus the Company no longer incurs
interest on such notes.
(2)
Imputed
interest represents an estimate of the interest accrued on the Tap
Participation Fee payable to High Plains A&M, LLC (“HP
A&M”), which was eliminated as a result of the settlement
with HP A&M during the three months ended February 28, 2015. As
a result, the Company no longer accrues interest related to the Tap
Participation Fee.
The Company anticipates continued expenses through the end of
calendar 2018 related to the discontinued operations. The Company
will continue to incur expenses related to the remaining
agricultural land the Company continues to own and for the purpose
of collecting outstanding receivables.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
The individual assets and liabilities of the discontinued
agricultural business are combined in the captions “Assets of
discontinued operations” and “Liabilities of
discontinued operations” in the consolidated balance sheets.
The carrying amounts of the major classes of assets and liabilities
included part of the discontinued business are presented in the
following table:
Discontinued Operations Balance Sheets
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
Trade
accounts receivable
|
$
110,700
|
$
227,100
|
Land
held for sale (1)
|
450,600
|
450,300
|
Prepaid
expenses
|
-
|
2,900
|
Total
assets
|
$
561,300
|
$
680,300
|
|
|
|
Liabilities:
|
|
|
Accrued
liabilities
|
11,200
|
4,400
|
Total
liabilities
|
$
11,200
|
$
4,400
|
(1)
Land Held
for Sale.
During the fiscal
quarter ended November 30, 2015, the Company purchased three farms
totaling 700 acres for approximately $451,000. The farms were
acquired to correct dry-up covenant issues related to water only
farms to obtain the release of the escrow funds related to the
Company’s farm sale to Arkansas River Farms, LLC. The Company
intends to sell the farms in due course and has classified the
farms as long-term assets.
Loss per Common Share
Loss per common share is computed by dividing net loss by the
weighted average number of shares outstanding during each period.
Common stock options and warrants aggregating 465,600, 338,100, and
312,100 common share equivalents as of August 31, 2017, 2016 and
2015, respectively, have been excluded from the calculation of loss
per common share as their effect is anti-dilutive.
Recently Issued Accounting Pronouncements
The Company continually assesses any new accounting pronouncements
to determine their applicability. When it is determined that a new
accounting pronouncement affects the Company’s financial
reporting, the Company undertakes a study to determine the
consequence of the change to its financial statements and ensure
that there are proper controls in place to ascertain that the
Company’s financial statements properly reflect the
change.
New pronouncements assessed by the Company recently
are discussed below:
In May
2014, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2014-09,
Revenue from Contracts with
Customers
,
(Topic
606)
that requires recognition of revenue to depict the
transfer of promised goods or services to customers in an amount
that reflects the consideration to which we expect to be entitled
in exchange for those goods or services. The FASB has also issued
several updates to ASU 2014-09. The standard supersedes U.S. GAAP
guidance on revenue recognition and requires the use of more
estimates and judgments than the present standards. It also
requires additional disclosures.
The Company is
continuing to study the impacts of this standard and its
amendments, including impacts on tap fee and other up-front revenue
payments and how impacts if any will be initially reflected at the
adoption date. The Company does not expect that revenue
recognition from on-going water sale and delivery fees and
waste water disposal fees, or consulting service contracts,
will be significantly affected but these matters are
continuing to be assessed
. The new standard is effective for
annual reporting periods beginning after December 31, 2017,
including interim reporting periods within that reporting period.
Earlier adoption is permitted.
In
August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements - Going
Concern (Subtopic 205-40): Disclosure of Uncertainties about an
Entity’s Ability to Continue as a Going Concern
. ASU
2014-15 describes how an entity’s management should assess,
considering both quantitative and qualitative factors, whether
there are conditions and events that raise substantial doubt about
an entity’s ability to continue as a going concern within one
year after the date that the financial statements are issued, which
represents a change from the existing literature that requires
consideration about an entity’s ability to continue as a
going concern within one year after the balance sheet date. The
standard is effective for the Company on September 1, 2016. The
adoption of ASU 2014-15 did not have a material impact on the
Company’s financial statements.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
In
April 2014, the FASB issued ASU No. 2014-08,
Presentation of Financial Statements (Topic
205) and Property, Plant, and Equipment (Topic
360):
Reporting
Discontinued Operations and Disclosures of Disposals of Components
of an Entity
. ASU 2014-08 changes the presentation and
disclosure requirements for discontinued operations. The update was
adopted by the Company in fiscal year 2016.
NOTE 3 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or most advantageous market. The Company uses a fair
value hierarchy that has three levels of inputs, both observable
and unobservable, with use of the lowest possible level of input to
determine fair value.
Level 1 — Valuations for assets and liabilities traded in
active exchange markets, such as The NASDAQ Stock Market. The
Company had no Level 1 assets or liabilities as of August 31, 2017
or August 31, 2016.
Level 2 — Valuations for assets and liabilities obtained from
readily available pricing sources via independent providers for
market transactions involving similar assets or liabilities.
The Company ha
d 56 and 36 Level 2
as
sets as of August 31, 2017 and 2016, respectively, which
consist of certificates of deposit and U.S. treasury
notes.
Level 3 — Valuations for assets and liabilities that are
derived from other valuation methodologies, including discounted
cash flow models and similar techniques, and not based on market
exchange, dealer, or broker-traded transactions. Level 3 valuations
incorporate certain assumptions and projections in determining the
fair value assigned to such assets or liabilities. The Company had
one Level 3 liability, the contingent portion of the CAA, as of
August 31, 2017 and 2016. The Company has determined that the
contingent portion of the CAA does not have a determinable fair
value (see Note 5).
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
The Company maintains policies and procedures to value instruments
using what management believes to be the best and most relevant
data available.
Level 2 Asset – Available for Sale Securities.
The Company’s available for sale
securities are the Company’s only financial asset measured at
fair value on a recurring basis.
The fair value of the
available for sale securities is based on the values reported by
the financial institutions where the funds are held.
These securities include only
federally insured certificates of deposit and U.S.
treasuries.
The following table provides information on the assets and
liabilities measured at fair value on a recurring basis as
of
August 31, 2017
:
|
|
|
Fair Value Measurement Using:
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
Accumulated Unrealized Gains and
|
|
|
|
|
|
|
|
Certificates
of deposit
|
$
12,673,700
|
$
12,694,500
|
$
-
|
$
12,673,700
|
$
-
|
$
(20,800
)
|
U.S.
treasuries
|
7,381,700
|
7,372,000
|
-
|
7,381,700
|
-
|
9,700
|
Subtotal
|
$
20,055,400
|
$
20,066,500
|
$
-
|
$
20,055,400
|
$
-
|
$
(11,100
)
|
Long-term
investments
|
188,000
|
188,000
|
-
|
188,000
|
-
|
-
|
Total
|
$
20,243,400
|
$
20,254,500
|
$
-
|
$
20,243,400
|
$
-
|
$
(11,100
)
|
The following table provides information on the assets and
liabilities measured at fair value on a recurring basis as of
August 31, 2016:
|
|
|
Fair Value Measurement Using:
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
Accumulated Unrealized Gains and
|
|
|
|
|
|
|
|
Certificates
of deposit
|
$
6,050,500
|
$
6,054,700
|
$
-
|
$
6,050,500
|
$
-
|
$
(4,200
)
|
U.S.
treasuries
|
17,125,900
|
17,115,200
|
-
|
17,125,900
|
-
|
10,700
|
Subtotal
|
$
23,176,400
|
$
23,169,900
|
$
-
|
$
23,176,400
|
$
-
|
$
6,500
|
Long-term
investments
|
6,853,300
|
6,856,700
|
-
|
6,853,300
|
-
|
(3,400
)
|
Total
|
$
30,029,700
|
$
30,026,600
|
$
-
|
$
30,029,700
|
$
-
|
$
3,100
|
NOTE 4 – WATER AND LAND ASSETS
Investment in Water and Water Systems
The Company’s water and water systems consist of the
following approximate costs and accumulated depreciation and
depletion as of August 31:
|
|
|
|
|
Accumulated
Depreciation and Depletion
|
|
Accumulated
Depreciation and Depletion
|
Rangeview
water supply
|
$
14,529,600
|
$
(10,600
)
|
$
14,444,600
|
$
(9,400
)
|
Sky
Ranch water rights and other costs
|
6,725,000
|
(436,300
)
|
6,607,400
|
(334,500
)
|
Fairgrounds
water and water system
|
2,899,900
|
(974,800
)
|
2,899,900
|
(886,800
)
|
Rangeview
water system
|
1,639,000
|
(207,000
)
|
1,624,800
|
(152,800
)
|
Water
supply – other
|
4,058,900
|
(401,300
)
|
3,703,000
|
(297,800
)
|
Wild
Pointe service rights
|
1,631,700
|
(213,000
)
|
-
|
-
|
Sky
Ranch pipeline
|
4,700,000
|
(39,200
)
|
|
|
Construction
in progress
|
673,800
|
-
|
723,500
|
-
|
Totals
|
36,857,900
|
(2,282,200
)
|
30,003,200
|
(1,681,300
)
|
Net
investments in water and water systems
|
$
34,575,700
|
|
$
28,321,900
|
|
Depletion and Depreciation
The Company recorded $1,300, $500, and $7,000 of depletion charges
during the fiscal years ended August 31, 2017, 2016 and 2015,
respectively. During the fiscal years ended August 31, 2017 and
2016, this related entirely to the Rangeview Water Supply (defined
below).
The Company recorded $733
,000,
$419,600, and $340,300 of depreciation expense in each of the
fiscal years ended August 31, 2017, 2016 and 2015, respectively.
These figures include depreciation for other equipment not included
in the table above.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
Rangeview Water Supply and Water System
The “Rangeview Water Supply” consists of 26,985 acre
feet and is a combination of tributary surface water and
groundwater rights along with certain storage rights associated
with the Lowry Range, a 27,000-acre property owned by the Land
Board located 16 miles southeast of Denver, Colorado. Approximately
$14.5 million of Investments in Water and Water Systems on the
Company’s balance sheet as of August 31, 2017, represents the
costs of assets acquired or facilities constructed to extend water
service to customers located on and off the Lowry Range. The
recorded costs of the Rangeview Water Supply include payments to
the sellers of the Rangeview Water Supply, design and construction
costs and certain direct costs related to improvements to the asset
including legal and engineering fees.
The Company acquired the Rangeview Water Supply beginning in 1996
when:
(i)
The
Rangeview District entered into the 1996 Amended and Restated Lease
Agreement with the Land Board, which owns the Lowry
Range;
(ii)
The
Company entered into the Agreement for Sale of Export Water with
the Rangeview District;
(iii)
The
Company entered into the 1996 Service Agreement with the Rangeview
District for the provision of water service to the Rangeview
District’s customers on the Lowry Range; and
(iv)
In
1997, the Company entered into the Wastewater Service Agreement
with the Rangeview District for the provision of wastewater service
to the Rangeview District’s customers on the Lowry
Range.
In July 2014, the Company, the Rangeview District and the Land
Board entered into the 2014 Amended and Restated Lease (the
“Lease”), which superseded the original 1996 lease, and
the Company and the Rangeview District entered into an Amended and
Restated Service Agreement. Collectively, the foregoing agreements,
as amended, are referred to as the “Rangeview Water
Agreements.”
Pursuant to the Rangeview Water Agreements, the Company owns 11,650
acre feet of water consisting of 10,000 acre feet of groundwater
and 1,650 acre feet of average yield surface water which can be
exported off the Lowry Range to serve area users (referred to as
“Export Water”). The 1,650 acre feet of surface rights
are subject to completion of documentation by the Land Board
related to the Company’s exercise of its right to substitute
an aggregate gross volume of 165,000 acre feet of its groundwater
for 1,650 acre feet per year of adjudicated surface water and to
use this surface water as Export Water. Additionally, assuming
completion of the substitution of groundwater for surface water,
the Company has the exclusive right to provide water and wastewater
service, through 2081, to all water users on the Lowry Range and
the right to develop an additional 13,685 acre feet of groundwater
and 1,650 acre feet of adjudicated surface water to serve customers
either on or off the Lowry Range. The Rangeview Water Agreements
also provide for the Company to use surface reservoir storage
capacity in providing water service to customers both on and off
the Lowry Range.
Services on the Lowry Range –
Pursuant to the Rangeview Water Agreements, the
Company designs, finances, constructs, operates and maintains the
Rangeview District’s water and wastewater systems to provide
service to the Rangeview District’s customers on the Lowry
Range. The Company will operate both the water and the wastewater
systems during the contract period, and the Rangeview District owns
both systems. After 2081, ownership of the water system will revert
to the Land Board, with the Rangeview District retaining ownership
of the wastewater system.
Rates and charges for all water and wastewater services on the
Lowry Range, including tap fees and usage or monthly fees, are
governed by the terms of the Rangeview Water Agreements. Rates and
charges are required to be less than the average of similar rates
and charges of three surrounding municipal water and wastewater
service providers, which are reassessed annually. Pursuant to the
Rangeview Water Agreements the Land Board receives a royalty of 10%
or 12% of gross revenues from the sale or disposition of the water
depending on the nature and location of the purchaser of the water,
except that the royalty on tap fees shall be 2% (other than taps
sold for Sky Ranch which are exempt). The Company also is required
to pay the Land Board a minimum annual water production fee, which
will offset future royalty obligations. The Company and the Land
Board are working cooperatively to clarify the calculation of the
minimum annual production fee. Pursuant to the Company’s
determination, the Company has made payments of $45,600 for each of
the past two years. The Company does not anticipate any
modification to the minimum fee to be material. The Rangeview
District retains 2% of the remaining gross revenues and the Company
receives 98% of the remaining gross revenues after the Land Board
royalty. The Land Board does not receive a royalty on wastewater
fees. The Company receives 100% of the Rangeview District’s
wastewater tap fees and 90% of the Rangeview District’s
wastewater usage fees (the Rangeview District retains the other
10%).
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
Export Water –
The
Company owns the Export Water and intends to use it to provide
wholesale water and wastewater services to customers off the Lowry
Range, including customers of the Rangeview District and other
governmental entities and industrial and commercial customers. The
Company will own all wholesale facilities required to extend water
and wastewater services using its Export Water. The Company
anticipates contracting with third parties for the construction of
these facilities. If the Company sells Export Water, the Company is
required to pay royalties to the Land Board ranging from 10% to 12%
of gross revenues, except that the royalty on tap fees shall be 2%
(other than taps sold for Sky Ranch which are
exempt).
Water Supply -
Other
–
The
WISE Partnership Agreement (as defined below) provides for the
purchase of certain infrastructure (i.e., pipelines, water storage
facilities, water treatment facilities, and other appurtenant
facilities) to deliver water to and among the 10 members of the
SMWA, Denver Water and Aurora Water. Certain infrastructure has
been constructed and other infrastructure will be constructed over
the next several years. During fiscal 2017, the Company
invested approximately $350,000 in
infrastructure.
The Arapahoe County Fairgrounds Water and Water System
The Company owns 321 acre feet of groundwater purchased pursuant to
its agreement with Arapahoe County. The Company plans to use this
water in conjunction with its Rangeview Water Supply in providing
water to areas outside the Lowry Range. The $2.9 million of
capitalized costs includes the costs to construct various Wholesale
and Special Facilities, including a new deep water well, a
500,000-gallon water tank and pipelines to transport water to the
Arapahoe County fairgrounds.
Service to Customers Not on the Lowry Range
Sky Ranch -
In 2010, the
Company purchased approximately 931 acres of undeveloped land known
as Sky Ranch. The property includes the rights to approximately 830
acre feet of water. The Company plans to use this water in
conjunction with its Rangeview Water Supply to provide water
service to the Rangeview District’s customers at Sky Ranch.
The $11.4 million of capitalized costs includes the costs to
acquire the water rights and to construct various facilities,
including an eight-mile pipeline, to extend service to customers at
Sky Ranch.
Total consideration for the land and water included the $7.0
million purchase price, plus direct costs and fees of $554,100. The
Company allocated the total acquisition cost to the land and water
rights based on estimates of each asset’s respective fair
value.
In
June 2017, the Company completed and placed into service its Sky
Ranch pipeline, connecting its Sky Ranch water system to
Rangeview's water system for approximately $4.7
million.
Wild Pointe -
On December 15,
2016, the Rangeview District, acting by and through its Water
Activity enterprise, and Elbert & Highway 86 Commercial
Metropolitan District, a quasi-municipal corporation and political
subdivision of the State of Colorado, acting by and through its
Water Enterprise (the “Elbert 86 District”), entered
into a Water Service Agreement (the “Wild Pointe Service
Agreement”). Subject to the conditions set forth in the Wild
Pointe Service Agreement and the terms of the Company’s
engagement by Rangeview as Rangeview’s exclusive service
provider, the Company acquired, among other things, the exclusive
right to provide water services to residential and commercial
customers in the Wild Pointe development, located in unincorporated
Elbert County, Colorado, in exchange for $1,600,000 in cash.
Pursuant to the terms of the Wild Pointe Service Agreement, the
Company, in its capacity as Rangeview’s service provider, is
responsible for providing water services to all users of water
services within the boundaries and service area of the Elbert 86
District and for operating and maintaining the Elbert 86
District’s water system. In exchange, the Company receives
100% of system development (or tap) fees from new customers and 98%
of all other fees and charges, including monthly water service
revenues, remitted to the Rangeview District by the Elbert 86
District pursuant to the Wild Pointe Service Agreement. The Elbert
86 District’s water system currently provides water service
to approximately 130 existing SFE water connections in Wild
Pointe.
O&G Leases
In 2011, the Company entered into the O&G Lease and the Surface
Use Agreement with Anadarko. Pursuant to the O&G Lease, the
Company received an up-front payment of $1,243,400 from Anadarko
for the purpose of exploring for, developing, producing and
marketing oil and gas on 634 acres of mineral estate owned by the
Company at its Sky Ranch property. The Company also received $9,000
in surface use and damage payments. In December 2012, the O&G
Lease was purchased by a wholly-owned subsidiary of ConocoPhillips
Company. The Company received an additional payment of $1,243,400
during February 2014 to extend the O&G Lease an additional two
years through February 2016. The O&G Lease is now held by
production, entitling the Company to royalties based on
production.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
In September 2017, subsequent to fiscal year end, the Company
entered into a three-year Paid-Up Oil and Gas Lease with Bison Oil
and Gas, LLP, for the purpose of exploring for, developing,
producing and marketing oil and gas on 40 acres of mineral estate
owned by the Company adjacent to the Lowry Range.
Land and Mineral
Interests
As part
of the 2010 Sky Ranch acquisition the Company acquired 931 acres of
land which is valued at approximately $4.8 million.
Additionally, in fiscal 2015, as part of the settlement with HP
A&M, the Company was assigned 75% mineral interests in the
Arkansas River land. Together with the 25% mineral interests the
Company owned prior to the settlement, the Company now holds
approximately 13,900 acres of mineral interests. The Company has
valued its mineral interests at approximately
$1,425,500.
NOTE 5 – PARTICIPATING INTERESTS IN EXPORT WATER
The Company acquired its Rangeview Water Supply through various
amended agreements entered into in the early 1990s. The acquisition
was consummated with the signing of the CAA in 1996. Upon entering
into the CAA, the Company recorded an initial liability of $11.1
million, which represented the cash the Company received from the
participating interest holders that was used to purchase the
Company’s Export Water (described in greater detail in Note 4
–
Water and Land
Assets
). The Company agreed to
remit a total of $31.8 million of proceeds received from the sale
of Export Water to the participating interest holders in return for
their initial $11.1 million investment. The obligation for the
$11.1 million was recorded as debt, and the remaining $20.7 million
contingent liability was not reflected on the Company’s
balance sheet because the obligation to pay this is contingent on
the sale of Export Water, the amounts and timing of which are not
reasonably determinable.
The CAA obligation is non-interest bearing, and if the Export Water
is not sold, the parties to the CAA have no recourse against the
Company. If the Company does not sell the Export Water, the holders
of the Series B Preferred Stock are also not entitled to payment of
any dividend and have no contractual recourse against the
Company.
As the proceeds from the sale of Export Water are received and the
amounts are remitted to the external CAA holders, the Company
allocates a ratable percentage of this payment to the principal
portion (the Participating Interests in Export Water
Supply
liability account), with the balance of the
payment being charged to the contingent obligation portion. Because
the original recorded liability, which was $11.1 million, was 35%
of the original total liability of $31.8 million, approximately 35%
of each payment remitted to the CAA holders is allocated to the
recorded liability account. The remaining portion of each payment,
or approximately 65%, is allocated to the contingent obligation,
which is recorded on a net revenue basis.
From time to time, the Company repurchased various portions of the
CAA obligations, which retained their original priority. The
Company did not make any CAA acquisitions during the fiscal years
ended August 31, 2017 or 2016. In July 2014, the Land Board
relinquished its approximately $2.4 million of CAA interests to the
Company as part of a settlement of the 2011 lawsuit filed by the
Company and the Rangeview District against the Land
Board.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
As a
result of the acquisitions and the relinquishment by the Land
Board, the Company is currently allocated approximately 88% of the
total proceeds from the sale of Export Water after payment of the
Land Board royalty. Additionally, as a result of the
acquisitions, the relinquishment by the Land Board, and the
consideration from the cumulative sales of Export Water, as
detailed in the table below, the remaining potential third-party
obligation at August 31, 2017, is approximately $1
million
:
|
Export Water Proceeds
Received
|
Initial Export Water
Proceeds to Pure Cycle
|
Total Potential
Third-party Obligation
|
Participating
Interests Liability
|
|
Original
balances
|
$
-
|
$
218,500
|
$
31,807,700
|
$
11,090,600
|
$
20,717,100
|
Activity from inception until August 31, 2014:
|
|
|
|
|
Acquisitions
|
-
|
28,042,500
|
(28,042,500
)
|
(9,790,000
)
|
(18,252,500
)
|
Relinquishment
|
-
|
2,386,400
|
(2,386,400
)
|
(832,100
)
|
(1,554,300
)
|
Option
payments - Sky Ranch
|
|
|
|
|
|
and
The Hills at Sky Ranch
|
110,400
|
(42,300
)
|
(68,100
)
|
(23,800
)
|
(44,300
)
|
Arapahoe
County tap fees (1)
|
533,000
|
(373,100
)
|
(159,900
)
|
(55,800
)
|
(104,100
)
|
Export
Water sale payments
|
410,500
|
(305,900
)
|
(104,600
)
|
(36,300
)
|
(68,300
)
|
Balance at August
31, 2015
|
1,053,900
|
29,926,100
|
1,046,200
|
352,600
|
693,600
|
Fiscal 2016 activity:
|
207,900
|
(183,200
)
|
(24,700
)
|
(8,600
)
|
(16,100
)
|
Balance at August
31, 2016
|
1,261,800
|
29,742,900
|
1,021,500
|
344,000
|
677,500
|
Fiscal 2017 activity:
|
|
|
|
|
|
Export
Water sale payments
|
58,100
|
(51,200
)
|
(6,900
)
|
(2,400
)
|
(4,500
)
|
Balance at August
31, 2017
|
$
1,319,900
|
$
29,691,700
|
$
1,014,600
|
$
341,600
|
$
673,000
|
(1)
The
Arapahoe County tap fees are less $34,522 in royalties paid to the
Land Board.
The CAA includes contractually established priorities which call
for payments to CAA holders in order of their priority. This means
the first payees receive their full payment before the next
priority level receives any payment and so on until full repayment.
Of
the next approximately $6.7 million of Export Water payouts, which
at current levels would occur over several years, the Company will
receive approximately $5.9 million of revenue. Thereafter,
the Company will be entitled to all but approximately $650,000 of
the proceeds from the sale of Export Water after deduction of the
Land Board royalty.
NOTE 6 – ACCRUED LIABILITIES
At August 31, 2017, the Company had accrued liabilities of
$381,000, of which $265,000 was for accrued compensation, $27,000
was for estimated property taxes, $48,500 was for professional fees
and the remaining $40,500 was related to operating
payables.
At August 31, 2016, the Company had accrued liabilities of
$242,600, of which $160,000 was for accrued compensation, $5,700
was for estimated property taxes, $48,000 was for professional fees
and the remaining $28,900 was related to operating
payables.
NOTE 7 – LONG-TERM OBLIGATIONS AND OPERATING
LEASE
As of August 31, 2017 and 2016, the Company had no
debt.
The Participating Interests in Export Water Supply are obligations
of the Company that have no scheduled maturity dates. Therefore,
these liabilities are not disclosed in tabular format. However, the
Participating Interests in Export Water Supply are described in
Note 5 –
Participating Interests in
Export Water
.
WISE Partnership
During December 2014, the Company, through the Rangeview District,
consented to the waiver of all contingencies set forth in the
Amended and Restated WISE Partnership – Water Delivery
Agreement, dated December 31, 2013 (the “WISE Partnership
Agreement”), among the City and County of Denver acting
through its Board of Water Commissioners (“Denver
Water”), the City of Aurora acting by and through its Utility
Enterprise (“Aurora Water”), and the South Metro WISE
Authority (“SMWA”). The SMWA was formed by the
Rangeview District and nine other governmental or
quasi-governmental water providers pursuant to the South Metro WISE
Authority Formation and Organizational Intergovernmental Agreement,
dated December 31, 2013 (the “SM IGA”), to enable the
members of SMWA to participate in the regional water supply project
known as the Water Infrastructure Supply Efficiency partnership
(“WISE”) created by the WISE Partnership Agreement. The
SM IGA specifies each member’s pro rata share of WISE and the
members’ rights and obligations with respect to WISE. The
WISE Partnership Agreement provides for the purchase of certain
infrastructure (i.e., pipelines, water storage facilities, water
treatment facilities, and other appurtenant facilities) to deliver
water to and among the 10 members of the SMWA, Denver Water and
Aurora Water. Certain infrastructure has been constructed and other
infrastructure will be constructed over the next several
years. During fiscal 2017, the Company invested approximately
$350,000 in infrastructure.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
By consenting to the waiver of the contingencies set forth in the
WISE Partnership Agreement, pursuant to the terms of the
Rangeview/Pure Cycle WISE Project Financing and Service Agreement
(the “WISE Financing Agreement”) between the Company
and the Rangeview District, the Company has an agreement to fund
the Rangeview District’s participation in WISE effective as
of December 22, 2014. The Company’s cost of funding the
Rangeview District’s purchase of its share of existing
infrastructure and future infrastructure for WISE and funding
operations and water deliveries related to WISE is projected to be
approximately $5.2 million over the next five years. See further
discussion in Note 14
–
Related Party
Transactions.
Operating Lease
Effective January 2016, the Company entered into an operating lease
for approximately 2,500 square feet of office and warehouse space.
The lease has a two-year term with payments of $3,000 per
month.
NOTE 8 – SHAREHOLDERS’ EQUITY
Preferred Stock
The Company’s non-voting Series B Preferred Stock has a
preference in liquidation of $1.00 per share less any dividends
previously paid. Additionally, the Series B Preferred Stock is
redeemable at the discretion of the Company for $1.00 per share
less any dividends previously paid. In the event that the
Company’s proceeds from sale or disposition of Export Water
rights exceed $36,026,232, the Series B Preferred Stock holders
will receive the next $432,513 of proceeds in the form of a
dividend.
Equity Compensation Plan
The Company maintains the 2014 Equity Incentive Plan (the
“2014 Equity Plan”), which was approved by shareholders
in January 2014 and became effective April 12, 2014. Executives,
eligible employees, consultants and non-employee directors are
eligible to receive options and stock grants pursuant to the 2014
Equity Plan. Pursuant to the 2014 Equity Plan, options to purchase
shares of stock and restricted stock awards can be granted with
exercise prices, vesting conditions and other performance criteria
determined by the Compensation Committee of the Board. The Company
has reserved 1.6 million shares of common stock for issuance under
the 2014 Equity Plan. Awards to purchase 62,000 shares of the
Company’s common stock have been made under the 2014 Equity
Plan. Prior to the effective date of the 2014 Equity Plan, the
Company granted stock awards to eligible participants under its
2004 Incentive Plan (the “2004 Incentive Plan”), which
expired April 11, 2014. No additional awards may be granted
pursuant to the 2004 Incentive Plan; however, awards outstanding as
of April 11, 2014, will continue to vest and expire and may be
exercised in accordance with the terms of the 2004 Incentive
Plan.
The Company estimates the fair value of share-based payment awards
on the date of grant using the Black-Scholes option-pricing model
(“Black-Scholes model”). Using the Black-Scholes model,
the value of the portion of the award that is ultimately expected
to vest is recognized as a period expense over the requisite
service period in the statement of comprehensive loss. Option
forfeitures are to be estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ
from those estimates. The Company does not expect any forfeiture of
its option grants and therefore the compensation expense has not
been reduced for estimated forfeitures. During fiscal year 2017,
15,000 options expired. During fiscal year 2016, 10,000 options
expired. The Company attributes the value of share-based
compensation to expense using the straight-line single option
method for all options granted.
The Company’s determination of the estimated fair value of
share-based payment awards on the date of grant is affected by the
following variables and assumptions:
●
The
grant date exercise price – is the closing market price
of the Company’s common stock on the date of
grant;
●
Estimated
option lives – based on historical experience with
existing option holders;
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
●
Estimated
dividend rates – based on historical and anticipated
dividends over the life of the option;
●
Life
of the option – based on historical experience, option grants
have lives of between 8 and 10 years;
●
Risk-free
interest rates – with maturities that approximate the
expected life of the options granted;
●
Calculated
stock price volatility – calculated over the expected
life of the options granted, which is calculated based on the
weekly closing price of the Company’s common stock over a
period equal to the expected life of the option; and
●
Option
exercise behaviors – based on actual and projected
employee stock option exercises and forfeitures.
In January 2017, the Company granted its non-employee directors
options to purchase a combined 32,500 shares of the Company’s
common stock pursuant to the 2014 Equity Plan. All of the options
vest one year after the date of grant, and expire 10 years after
the date of grant. The Company calculated the fair value of the
options granted during January 2017 at approximately $112,700,
using the Black-Scholes model with the following variables:
weighted average exercise price of $5.10 (which was the closing
sales price of the Company’s common stock on the date of
grant); estimated option lives of 10 years; weighted average risk
free interest rate of 2.42%; weighted average stock price
volatility of 57.56%; and an estimated forfeiture rate of 0%. The
$112,700 of stock-based compensation is being expensed monthly over
the vesting periods.
In October 2016, the Company granted its President an option to
purchase 50,000 shares of the Company’s common stock pursuant
to the 2014 Equity Plan. The option vests one-third one year from
the date of grant, one-third two years from the date of grant, and
one-third three years from the date of grant. The option expires 10
years from the date of grant. The Company calculated the fair value
of this option at approximately $188,300 using the Black-Scholes
model with the following variables: weighted average exercise price
of $5.61 (which was the closing sales price of the Company’s
common stock on the date of grant); estimated option life of 10
years; estimated dividend rate of 0%; weighted average risk-free
interest rate of 1.79%; weighted average stock price volatility of
57.85%; and an estimated forfeiture rate of 0%. The $188,300 of
stock-based compensation as being expensed monthly over the vesting
period. In September 2016, the Company granted employee options to
purchase 60,000 shares of the Company’s common stock pursuant
to the 2014 Equity Plan. The options vest one-third one year from
the date of grant, one-third two years from the date of grant, and
one-third three years from the date of grant. The options expire 10
years from the date of grant. The Company calculated the fair value
of these options at approximately $222,500 using the Black-Scholes
model with the following variables: weighted average exercise price
of $5.56 (which was the closing sales price of the Company’s
common stock on the date of grant); estimated option life of 10
years; estimated dividend rate of 0%; weighted average risk-free
interest rate of 1.560%; weighted average stock price volatility of
57.81%; and an estimated forfeiture rate of 0%. The $222,500 of
stock-based compensation as being expensed monthly over the vesting
period.
In January 2016, the Company granted its non-employee directors
options to purchase a combined 36,000 shares of the Company’s
common stock pursuant to the 2014 Equity Plan. Options for 26,000
shares vest one year after the date of grant and options for 10,000
shares vest one half one year after the date of grant and one half
two years after the date of grant. All of the options expire 10
years after the date of grant. The Company calculated the fair
value of the options granted during January 2016 at approximately
$104,100, using the Black-Scholes model with the following
variables: weighted average exercise price of $4.26 (which was the
closing sales price of the Company’s common stock on the date
of grant); estimated option lives of 10 years; weighted average
risk free interest rate of 2.06%; weighted average stock price
volatility of 58.26%; and an estimated forfeiture rate of 0%. The
$104,100 of stock-based compensation is being expensed monthly over
the vesting periods.
In January 2015, the Company granted its non-employee directors
options to purchase a combined 26,000 shares of the Company’s
common stock pursuant to the 2014 Equity Plan. The options vest one
year after the date of grant and expire 10 years after the date of
grant. The Company calculated the fair value of the options granted
during January 2015 at approximately $72,000, using the
Black-Scholes model with the following variables: weighted average
exercise price of $4.17 (which was the closing sales price of the
Company’s common stock on the date of grant); estimated
option lives of 10 years; weighted average risk free interest rate
of 1.77%; weighted average stock price volatility of 57.45%; and an
estimated forfeiture rate of 0%. The $72,000 of stock-based
compensation is being expensed monthly over the vesting
periods.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
During the fiscal year ended August 31, 2015, 16,500 options were
exercised. No options were exercised during the fiscal year ended
August 31, 2017 or 2016.
The following table summarizes the stock option activity for the
combined 2004 Incentive Plan and 2014 Equity Plan for the fiscal
year ended August 31, 2017:
|
|
Weighted-Average
Exercise Price
|
Weighted-Average
Remaining Contractual Term
|
Approximate
Aggregate Intrinsic Value
|
Outstanding
at August 31, 2016
|
338,000
|
$
4.77
|
|
|
Granted
|
142,500
|
$
5.47
|
|
|
Exercised
|
-
|
$
-
|
|
|
Forfeited
or expired
|
(15,000
)
|
$
7.88
|
|
|
Outstanding
at August 31, 2017
|
465,500
|
$
4.88
|
6.30
|
$
1,007,740
|
|
|
|
|
|
Options
exercisable at August 31, 2017
|
318,000
|
$
4.63
|
4.98
|
$
1,358,140
|
The following table summarizes the activity and value of non-vested
options as of and for the fiscal year ended August 31,
2017:
|
|
Weighted-Average
Grant Date Fair Value
|
Non-vested
options outstanding at August 31, 2016
|
36,000
|
$
2.89
|
Granted
|
142,500
|
3.67
|
Vested
|
(31,000
)
|
2.92
|
Forfeited
|
-
|
-
|
Non-vested
options outstanding at August 31, 2017
|
147,500
|
$
3.64
|
All non-vested options are expected to vest. The total fair value
of options vested during the fiscal years ended August 31, 2017,
2016 and 2015 was $90,500 $216,900, and $280,700, respectively. The
weighted average grant date fair value of options granted during
the fiscal years ended August 31, 2017, 2016 and 2015 was $3.67,
$2.89, and $2.78, respectively.
Share-based compensation expense for the fiscal years ended August
31, 2017, 2016 and 2015, was $233,200, $219,900, and $240,000,
respectively.
At August 31, 2017, the Company had unrecognized expenses relating
to non-vested options that are expected to vest totaling
$335,800.
The
weighted-average period over which these options are expected to
vest is less than three years. The Company has not recorded any
excess tax benefits to additional paid in
capital.
Warrants
As of August 31, 2017, the Company had outstanding warrants to
purchase 92 shares of common stock at an exercise price of $1.80
per share. These warrants expire six months from the earlier
of:
(i)
The
date all of the Export Water is sold or otherwise disposed
of,
(ii)
The
date the CAA is terminated with respect to the original holder of
the warrant, or
(iii)
The
date on which the Company makes the final payment pursuant to
Section 2.1(r) of the CAA.
No warrants were exercised during fiscal 2017, 2016 or
2015.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
NOTE 9 – SIGNIFICANT CUSTOMERS
Pursuant to the Rangeview Water Agreements and an Export Service
Agreement entered into with the Rangeview District dated June 16,
2017, the Company provides water and wastewater services on the
Rangeview District’s behalf to the Rangeview District’s
customers. Sales to the Rangeview District accounted for 25%, 67%
and 19% of the Company’s total water and wastewater revenues
for the fiscal years ended August 31, 2017, 2016 and 2015,
respectively. The Rangeview District had one significant customer,
the Ridgeview Youth Services Center. The Rangeview District’s
significant customer accounted for 21%, 55%, and 16% of the
Company’s total water and wastewater revenues for the fiscal
years ended August 31, 2017, 2016 and 2015,
respectively.
Revenues from two other customers directly and indirectly
represented approximately
55%, 1%,
and 75% of the Company’s water and
wastewater revenues for the fiscal years ended August 31, 2017,
2016 and 2015, respectively. Of the two customers, one
customer represented 25%, nil, and nil of the Company's water and
wastewater revenues for the fiscal years ended August 31, 2017,
2016, and 2015, respectively, and the other customer represented
30%, 1%, and 75% of the Company's water and wastewater revenues for
the fiscal years ended August 31, 2017, 2016, and 2015,
respectively.
The Company had accounts receivable from the Rangeview District
which accounted for 50% and 74% of the Company’s trade
receivables balances at August 31, 2017 and 2016, respectively. Of
the trade receivables from the Rangeview District, approximately
50% is related to water tap sales and 50% is related to water and
wastewater service sales. The Company had accounts receivable from
one other customer of approximately 46% and 16% at August 31, 2017
and 2016, respectively. Accounts receivable from the Rangeview
District’s largest customer accounted for 19% and 63% of the
Company’s water and wastewater trade receivables as of August
31, 2017 and 2016, respectively.
NOTE 10 – INCOME TAXES
Deferred income taxes reflect the tax effects of net operating loss
carryforwards and temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant
components of the Company’s deferred tax assets as of August
31 are as follows:
|
For the
Fiscal Years Ended August 31,
|
|
|
|
Deferred
tax assets:
|
|
|
Net operating loss carryforwards
|
$
2,893,600
|
$
2,393,200
|
Deferred revenue
|
316,400
|
344,300
|
Depreciation and depletion
|
289,200
|
247,400
|
Other
|
88,000
|
65,600
|
Valuation allowance
|
(3,587,200
)
|
(3,050,500
)
|
Net deferred tax asset
|
$
-
|
$
-
|
The Company has recorded a valuation allowance against the deferred
tax assets as it is more likely than not that all or some portion
of specific deferred tax assets will not be realized, primarily due
to the fact that the Company has generated a cumulative net loss
position over the past three fiscal years.
Income taxes computed using the federal statutory income tax rate
differs from our effective tax rate primarily due to the following
for the fiscal years ended August 31:
|
For the
Fiscal Years Ended August 31,
|
|
|
|
|
Expected
benefit from federal taxes at statutory rate of 34%
|
$
(571,500
)
|
$
(420,300
)
|
$
(195,500
)
|
State
taxes, net of federal benefit
|
(55,500
)
|
(40,700
)
|
(19,000
)
|
Permanent
and other differences
|
90,300
|
84,500
|
91,900
|
Change
in valuation allowance
|
536,700
|
376,500
|
122,600
|
Total
income tax expense / (benefit)
|
$
-
|
$
-
|
$
-
|
At August 31, 2017, the Company has $7.9
million
of net operating loss carryforwards available for income tax
purposes, which expire between fiscal 2032 and
2037.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
No net operating loss carryforwards expired during the fiscal years
ended August 31, 2017, 2016 or 2015.
NOTE 11 – 401(k) PLAN
The Company maintains a Pure Cycle Corporation 401(k) Profit
Sharing Plan (the “Plan”), a defined contribution
retirement plan for the benefit of its employees. The Plan is
currently a salary deferral only plan, and at this time the Company
does not match employee contributions. The Company pays the annual
administrative fees of the Plan, and the Plan participants pay the
investment fees. The Plan is open to all employees, age 21 or
older, who have been employees of the Company for at least six
months. During the fiscal years ended August 31, 2017, 2016 and
2015, the Company paid fees of $ 4,200, $5,000 and $3,800,
respectively, for the administration of the Plan.
NOTE 12 – LITIGATION LOSS CONTINGENCIES
The Company has historically been involved in various claims,
litigation and other legal proceedings that arise in the ordinary
course of its business. The Company records an accrual for a loss
contingency when its occurrence is probable and damages can be
reasonably estimated based on the anticipated most likely outcome
or the minimum amount within a range of possible outcomes. The
Company makes such estimates based on information known about the
claims and experience in contesting, litigating and settling
similar claims. Disclosures are also provided for reasonably
possible losses that could have a material effect on the
Company’s financial position, results of operations or cash
flows.
NOTE 13 – SEGMENT REPORTING
Prior to the sale of the Company’s agricultural assets and
the residual operations through December 31, 2015, the Company
operated primarily in two lines of business: (i) the wholesale
water and wastewater business and (ii) the agricultural
farming business. The Company has discontinued its agricultural
farming operations. Currently the Company operates its wholesale
water and wastewater services segment as its only line of business.
The wholesale water and wastewater services business includes
selling water service to customers, which is then provided by the
Company using water rights owned or controlled by the Company and
developing infrastructure to divert, treat and distribute that
water and collect, treat and reuse wastewater. As part of the
Company’s Sky Ranch development, the company is entering into
contracts for the sale of lots, see Note 16 -
Subsequent Event
for further
discussion. The Company anticipates that the real estate
sales will be a separate segment in fiscal 2018. As of and
for the year ended August 31, 2017, there were no real estate
revenues, or profit, and carrying cost of the real estate is less
than 10% of the Company’s total assets. Oil and gas
royalties and licenses, are a passive activity, and not an
operating business activity, and therefore, are not classified as a
segment.
NOTE 14 – RELATED PARTY TRANSACTIONS
On December 16, 2009, the Company entered into a Participation
Agreement with the Rangeview District, whereby the Company agreed
to provide funding to the Rangeview District in connection with the
Rangeview District joining the South Metro Water Supply Authority
(“SMWSA”). The Company provided funding of $198,200,
$113,600 and $78,600 for the fiscal years ended August 31, 2017,
2016, and 2015, respectively.
Through the WISE Financing Agreement, to date the Company has made
payments totaling $3,114,100 to purchase certain rights to use
existing water transmission and related infrastructure acquired by
the WISE project and to construct the connection to the WISE
system. The amounts are included in Investments in Water and Water
Systems on the Company’s balance sheet as of August 31, 2017.
The Company anticipates spending the following over the next five
fiscal years to fund the Rangeview District’s purchase of its
share of the water transmission line and additional facilities,
water and related assets for WISE and to fund operations and water
deliveries related to WISE:
|
|
For the
Fiscal Years Ended August 31,
|
|
|
|
|
|
|
Operations
|
$
51,800
|
$
51,800
|
$
51,800
|
$
51,800
|
$
51,800
|
Water
Delivery
|
232,000
|
348,000
|
493,000
|
738,000
|
897,000
|
Capital
|
338,100
|
1,555,400
|
74,200
|
-
|
-
|
Other
|
23,600
|
86,600
|
23,600
|
68,300
|
83,200
|
|
$
645,500
|
$
2,041,800
|
$
642,600
|
$
858,100
|
$
1,032,000
|
The Company has outstanding loans of $991,900 to the Rangeview
District and Sky Ranch Districts (defined below), which are related
parties, as discussed below:
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
The
Rangeview District is a quasi-municipal corporation and political
subdivision of Colorado formed in 1986 for the purpose of providing
water and wastewater service to the Lowry Range and other approved
areas. The Rangeview District is governed by an elected board
of directors. Eligible voters and persons eligible to serve as a
director of Rangeview must own an interest in property within the
boundaries of Rangeview. The Company owns certain rights and real
property interests which encompass the current boundaries of
Rangeview. Sky Ranch
District
Nos. 1, 3, 4 and 5 are quasi-municipal corporations and political
subdivisions of Colorado formed for the purpose of providing
service to the Company’s Sky Ranch property (the “Sky
Ranch Districts”)
. The current directors
of the Rangeview District and Sky Ranch Districts consist of
three employees of the Company and two independent board
members.
The Rangeview District
In 1995, the Company extended a loan to the Rangeview District. The
loan provided for borrowings of up to $250,000, is unsecured, and
bears interest based on the prevailing prime rate plus 2% (6.25% at
August 31, 2017). The maturity date of the loan is December 31,
2020. Beginning in January 2014, the Rangeview District and the
Company entered into a funding agreement that allows the Company to
continue to provide funding to the Rangeview District for
day-to-day operations and accrue the funding into a note that bears
interest at a rate of 8% per annum and remains in full force and
effect for so long as the Lease remains in effect.
The $776,400 balance of the notes
receivable at August 31, 2017, includes borrowings of $393,400 and
accrued interest of $383,000. The $628,500 balance of the notes
receivable at August 31, 2016, includes borrowings of $260,200 and
accrued interest of $368,300.
Sky Ranch Metropolitan District Nos. 1, 3, 4 and 5
The Company has been providing funding to the Sky Ranch Districts.
Each year, beginning in 2012, the Company has entered into an
Operation Funding Agreement with one of the Sky Ranch Districts
obligating the Company to advance funding to the Sky Ranch District
for the operation and maintenance expenses for the then current
calendar year. All payments are subject to annual appropriations by
the Sky Ranch District in its absolute discretion. The advances by
the Company accrue interest at a rate of 8% per annum from the date
of the advance.
In November 2014, but effective as of January 1, 2014, the
Company entered into a Facilities Funding and Acquisition Agreement
with a Sky Ranch District obligating the Company to either finance
district improvements or to construct improvements on behalf of the
Sky Ranch District subject to reimbursement. Improvements subject
to this agreement are determined pursuant to a mutually agreed upon
budget. Each year in September, the parties are to mutually
determine the improvements required for the following year and
finalize a budget by the end of October. Each advance or
reimbursable expense accrues interest at a rate of 8% per annum. No
payments are required by the Sky Ranch Districts unless and until
the Sky Ranch Districts issue bonds in an amount sufficient to
reimburse the Company for all or a portion of the advances and
costs incurred.
The $215,500 balance of the receivable at August 31, 2017, includes
advances of $195,000 and accrued interest of $20,500. Upon the Sky
Ranch District’s ratification of payment, the amount was
reclassified to short-term and was recorded as part of Notes
receivable – related parties. Subsequent to fiscal year end,
the Sky Ranch District paid the outstanding note receivable to the
Company.
Nelson Pipeline Constructors LLC
On October 12, 2016, the Audit Committee of the Company’s
board of directors approved accepting a bid submitted by Nelson
Pipeline Constructors LLC to construct a pipeline connecting its
Sky Ranch water system to Rangeview’s water system for
approximately $4.2 million (the “Nelson Bid”). Nelson
Pipeline Constructors LLC is a wholly owned subsidiary of Nelson
Infrastructure Services LLC, a company in which Patrick J. Beirne
owns a 50% interest. In addition, Mr. Beirne, a director of Pure
Cycle, is Chairman and Chief Executive Officer of each of Nelson
Pipeline Constructors LLC and Nelson Infrastructure Services LLC.
Since Mr. Nelson is the 50% owner of the parent company of Nelson
Pipeline Constructors LLC, Mr. Nelson’s interest in the
transaction is approximately $2.1 million without taking into
account any profit or loss from the Nelson Bid. Pursuant to the
Company’s policies for review and approval of related party
transactions, the Nelson Bid was reviewed and approved by the Audit
Committee and by the board of directors, with Mr. Beirne
abstaining.
PURE
CYCLE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
August
31, 2017, 2016 and 2015
NOTE 15 – UNAUDITED QUARTERLY FINANCIAL DATA
Quarterly results of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands, except per share data)
|
Total
revenues
|
$
199
|
$
237
|
$
134
|
$
658
|
$
126
|
$
76
|
$
101
|
$
149
|
Gross
margin
|
54
|
68
|
(33
)
|
336
|
(7
)
|
(44
)
|
(34
)
|
8
|
Operating
loss
|
(464
)
|
(455
)
|
(631
)
|
(581
)
|
(472
)
|
(557
)
|
(533
)
|
(618
)
|
Discontinued
operations
|
(19
)
|
(3
)
|
(11
)
|
1
|
(3
)
|
(29
)
|
(61
)
|
13
|
Net
loss
|
$
(338
)
|
$
(317
)
|
$
(554
)
|
$
(501
)
|
$
(97
)
|
$
(271
)
|
$
(422
)
|
$
(521
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
|
|
|
|
|
|
loss per share
|
$
(0.01
)
|
$
(0.01
)
|
$
(0.02
)
|
$
(0.02
)
|
*
|
$
(0.01
)
|
$
(0.02
)
|
$
(0.03
)
|
*
Amount is less than $.01 per share
|
|
|
|
|
|
|
|
|
The following item had a significant impact on the Company’s
net income (loss):
●
In
fiscal 2017, the Company sold approximately $478,500 ($80,300,
$141,500 and $256,700 in 2017 fiscal Q1, Q2 and Q4, respectively)
in water related to oil and gas activities as compared to nil in
fiscal 2016.
NOTE 16 – SUBSEQUENT EVENT
In June 2017, The Company entered into purchase and sale agreements
(collectively, the “Purchase and Sale Contracts”) with
three separate home builders pursuant to which the Company agreed
to sell, and each builder agreed to purchase, a certain number
(totaling 506) of single-family, detached residential lots at the
Sky Ranch property. Each builder is required to purchase water and
sewer taps for the lots from the Rangeview District.
The closing of the transactions contemplated by each Purchase and
Sale Contract is subject to customary closing conditions,
including, among others, the builder’s completion to its
satisfaction of a title review and other due diligence of the
property, the accuracy of the representations and warranties made
by the Company in the Purchase and Sale Contract, and a commitment
by the title company to issue to the builder a title policy,
subject to certain conditions. Each builder had a 60-day due
diligence period during which it had the right to terminate the
Purchase and Sale Contract and receive a full refund of its earnest
money deposit. The initial due diligence period was
extended. Subsequent to year end, on November 10, 2017, each
builder completed its due diligence period and agreed to continue
with its respective Purchase and Sale Contract.
The Company is obligated, pursuant to the Purchase and Sale
Contracts, or separate Lot Development Agreements (the “Lot
Development Agreements” and, together with the Purchase and
Sale Contracts, the “Builder Contracts”), to construct
infrastructure and other improvements, such as roads, curbs and
gutters, park amenities, sidewalks, street and traffic signs, water
and sanitary sewer mains and stubs, storm water management
facilities, and lot grading improvements for delivery of finished
lots to each builder. Pursuant to the Builder Contracts, the
Company must cause the Rangeview District to install and construct
off-site infrastructure improvements (
i.e.
, drainage and storm water retention ponds, a
wastewater reclamation facility, and wholesale water facilities)
for the provision of water and wastewater service to the property.
In conjunction with approvals with Arapahoe County for the Sky
Ranch project, The Company and/or the Rangeview District and the
Sky Ranch Districts are obligated to deposit into an account the
anticipated costs to install and construct substantially all the
off-site infrastructure improvements (which include drainage,
wholesale water and wastewater, and entry roadway), which is
estimated to be approximately $10.2 million.
The
Company estimates that the development of the finished lots for the
first phase (506 lots) of Sky Ranch will require an estimated total
capital of approximately $27.8 million and estimates lot sales to
home builders will generate approximately $35 million providing a
projected margin on lots of approximately $7.2
million.
The cost of developing lots together with the
sale of finished lots are expected to occur over several quarters
and the timing of cash flows will include certain milestone
deliveries, including but not limited to completion of governmental
approvals, installation of improvements, and completion of lot
deliveries. Utility revenues are derived from tap fees (which
vary depending on lot size, house size, and amount of irrigated
turf) and usage fees (which are monthly water and wastewater fees).
The current Sky Ranch water tap fees are $26,650 (per SFE), and
wastewater taps fees are $4,659 (per SFE).
Item 9 – Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
As
discussed in our Current Report on Form 8-K filed on January 17,
2017, GHP Horwath, P.C. (“GHP”) resigned as our
independent registered public accounting firm. GHP resigned because
the partners and employees of GHP joined Crowe Horwath LLP
(“Crowe”). On January 16, 2017, the Audit Committee of
our board of directors engaged Crowe to serve as the independent
registered public accounting firm for the Company effective as of
that date.
During
the fiscal years ended August 31, 2015 and 2016 and through January
13, 2017, we did not have any disagreements with GHP on any matter
of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if
not resolved to GHP’s satisfaction, would have caused GHP to
make reference thereto in its reports on our financial statements
for the relevant periods. During the fiscal years ended August 31,
2015 and 2016 and through January 13, 2017, there were no
reportable events, as defined in Item 304(a)(1)(v) of Regulation
S-K.
Item 9A – Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) of the Exchange Act) that are designed to
ensure that information required to be disclosed in our reports
filed or submitted to the SEC under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified by the SEC’s rules and forms, and that information
is accumulated and communicated to management, including the
principal executive and financial officer as appropriate, to allow
timely decisions regarding required disclosures. The President and
Chief Financial Officer (one person) evaluated the effectiveness of
disclosure controls and procedures as of August 31, 2017, pursuant
to Rule 13a-15(b) under the Exchange Act. Based on that evaluation,
the President and Chief Financial Officer concluded that, as of the
end of the period covered by this report, the Company’s
disclosure controls and procedures were effective. A system of
controls, no matter how well designed and operated, cannot provide
absolute assurance that the objectives of the system of controls
are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within a company have been detected.
(b)
Management’s Report on Internal Control Over Financial
Reporting
Management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule
13a-15(f) under the Exchange Act. The Exchange Act defines internal
control over financial reporting as a process designed by, or under
the supervision of, our executive and principal financial officers
and effected by our board of directors, management and other
personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP and
includes those policies and procedures that:
●
Pertain
to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of our
assets;
●
Provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP,
and that our receipts and expenditures are being made only in
accordance with authorizations of our management and our directors;
and
●
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial
statements.
All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies or
procedures may deteriorate.
Management assessed the effectiveness of our internal control over
financial reporting as of August 31, 2017. In making this
assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control – Integrated
Framework (“2013 COSO Framework”). Based on our
assessment, we determined that, as of August 31, 2017, our internal
control over financial reporting was effective based on those
criteria.
(c)
R
eport of the Independent Registered Public
Accounting Firm
The
effectiveness of our internal control over financial reporting as
of August 31, 2017, has been audited by Crowe Horwath LLP, an
independent registered public accounting firm, as stated in its
attestation report which is included in Item 8
–
Consolidated
Financial Statements and Supplementary Data
of this Annual
Report on Form 10-K.
(d)
Changes in Internal Controls
No changes were made to our internal control over financial
reporting during our most recently completed fiscal quarter that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B – Other Information
Effective as of June 16, 2017, we entered into the Export
Service Agreement (defined herein as the “Off-Lowry Service
Agreement”) with the Rangeview District. This agreement
confirms the prior understanding of the parties that we are the
Rangeview District’s exclusive provider of water and
wastewater services for customers located outside of its Lowry
Range service area. Pursuant to the Off-Lowry Service Agreement, we
design, construct, operate and maintain the Rangeview
District’s water and wastewater systems and the systems of
other communities that have service contracts with the Rangeview
District to provide wholesale water and wastewater services to the
Rangeview District’s customers that are not on the Lowry
Range (currently, Wild Pointe Ranch and Sky Ranch).
In
accordance with the terms of the Off-Lowry Service Agreement, the
Rangeview District will pay us 100% of
water tap fees and 98% of water usage fees
received
by the Rangeview District for such services after
deducting any royalties to the Land Board, if applicable. In
addition, the Rangeview District will pay us 100% of wastewater tap
fees and 90% of monthly service and usage fees for wastewater
services received by the Rangeview District from customers off the
Lowry Range.
We are
obligated to provide such services in a commercially reasonable
manner consistent with prudent water and wastewater provider
practices in Colorado, as applicable, to meet the demands of the
Rangeview District’s customers. The Off-Lowry Service
Agreement remains in effect until all service obligations of
Rangeview to customers located outside of the Lowry Range expire or
are otherwise terminated.
PART III
Item 10 – Directors, Executive Officers and Corporate
Governance
Our board of directors has adopted a Code of Business Conduct and
Ethics applicable to all of our directors, officers and employees,
which is available on our website at
www.purecyclewater.com
.
We intend to disclose any amendments to or waivers from the
provisions of our Code of Business Conduct and Ethics that are
applicable to our principal executive officer, principal financial
officer or principal accounting officer and that relate to any
element of the SEC’s definition of code of ethics by posting
such information on our website, in a press release, or on a
Current Report on Form 8-K.
Information required by this item will be contained in, and is
incorporated herein by reference to, our definitive Proxy Statement
pursuant to Regulation 14A promulgated under the Exchange Act for
the Annual Meeting of Shareholders to be held in January 2018,
which is expected to be filed on or about December
8,
2017 (the “Proxy
Statement”).
Item 11 – Executive Compensation
The information required by this item will be included in, and is
incorporated herein by reference to, our Proxy
Statement.
Item 12 – Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
The information required by this item will be included in, and is
incorporated herein by reference to, our Proxy
Statement.
Item 13 – Certain Relationships and Related Transactions
and Director Independence
The information required by this item will be included in, and is
incorporated herein by reference to, our Proxy
Statement.
Item 14 – Principal Accountant Fees and
Services
The information required by this item will be included in, and is
incorporated herein by reference to, our Proxy
Statement.
PART IV
Item 15 – Exhibits and Financial Statement
Schedules
(a)
|
Documents filed as part of this Form 10-K
|
(1)
|
Financial Statements
See “Index to Consolidated Financial Statements and
Supplementary Data” in
Part
II, Item 8
of this Form 10-K.
|
(2)
|
Financial Statement Schedules
All schedules are omitted either because they are not required or
the required information is shown in the consolidated financial
statements or notes thereto.
|
(3)
|
Exhibits
The exhibits listed on the accompanying “Exhibit Index”
are filed or incorporated by reference as part of this Form 10-K,
unless otherwise indicated.
|
Item 16 – Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PURE
CYCLE CORPORATION
|
|
|
|
|
|
|
|
|
|
/s/
Mark
W. Harding
|
|
|
|
|
Mark
W. Harding, President and Chief Financial Officer
|
|
|
|
|
November
15, 2017
|
|
|
|
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
/s/ Mark W. Harding
|
|
President,
Chief Financial Officer and Director
|
|
November 15, 2017
|
Mark W. Harding
|
|
(Principal Executive Officer, Principal Financial and Accounting
Officer)
|
|
|
|
|
|
|
|
/s/ Harrison H. Augur
|
|
|
|
|
Harrison H. Augur
|
|
Chairman, Director
|
|
November 15, 2017
|
|
|
|
|
|
/s/ Patrick J. Beirne
|
|
|
|
|
Patrick J. Beirne
|
|
Director
|
|
November 15, 2017
|
|
|
|
|
|
/s/ Arthur G. Epker III
|
|
|
|
|
Arthur G. Epker III
|
|
Director
|
|
November 15, 2017
|
|
|
|
|
|
/s/ Richard L. Guido
|
|
|
|
|
Richard L. Guido
|
|
Director
|
|
November 15, 2017
|
|
|
|
|
|
/s/ Peter C. Howell
|
|
|
|
|
Peter C. Howell
|
|
Director
|
|
November 15, 2017
|
EXHIBIT INDEX
Exhibit
Number
|
Description
|
|
Articles of
Incorporation of the Company. Incorporated by reference to Appendix
B to the Proxy Statement on Schedule 14A filed on December 14,
2007.
|
|
Bylaws
of the Company. Incorporated by reference to Appendix C to the
Proxy Statement on Schedule 14A filed on December 14,
2007.
|
|
Specimen Stock
Certificate. Incorporated by reference to Exhibit 4.1 to Quarterly
Report on Form 10 Q for the fiscal quarter ended February 28,
2015.
|
|
2004
Incentive Plan, effective April 12, 2004. Incorporated by reference
to Exhibit F to the Proxy Statement for the Annual Meeting held on
April 12, 2004. **
|
|
Wastewater Service
Agreement, dated January 22, 1997, by and between the Company and
the Rangeview Metropolitan District. Incorporated by reference to
Exhibit 10.3 to the Annual Report on Form 10-KSB for the fiscal
year ended August 31, 1998.
|
|
Comprehensive
Amendment Agreement No. 1, dated April 11, 1996, by and among Inco
Securities Corporation, the Company, the Bondholders, Gregory M.
Morey, Newell Augur, Jr., Bill Peterson, Stuart Sundlun, Alan C.
Stormo, Beverlee A. Beardslee, Bradley Kent Beardslee, Robert
Douglas Beardslee, Asra Corporation, International Properties,
Inc., and the Land Board. Incorporated by reference to Exhibit 10.7
to the Quarterly Report on Form 10-QSB for the period ended May 31,
1996.
|
|
Agreement for Sale
of Export Water dated April 11, 1996 by and between the Company and
the Rangeview Metropolitan District. Incorporated by reference to
Exhibit 10.3 to the Quarterly Report on Form 10-QSB for the fiscal
quarter ended May 31, 1996.
|
|
Bargain and Sale
Deed among the Land Board, the Rangeview Metropolitan District and
the Company dated April 11, 1996. Incorporated by reference to
Exhibit 10.18 to Amendment No. 1 to Registration Statement on Form
SB-2, filed on June 7, 2004, Registration No.
333-114568.
|
|
Agreement for
Water Service dated August 3, 2005 among the Company, Rangeview
Metropolitan District and Arapahoe County incorporated by reference
to Exhibit 10.24 to the Current Report on Form 8-K filed on August
4, 2005.
|
|
Amendment No. 1 to
Agreement for Water Service dated August 25, 2008, between the
Company and Arapahoe County. Incorporated by reference to Exhibit
10.36 to the Annual Report on Form 10-K for the fiscal year ended
August 31, 2008.
|
|
Paid-Up Oil and
Gas Lease dated March 14, 2011, between the Company and Anadarko
E&P Company, L.P. Incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed on March 15,
2011.
|
|
Surface Use and
Damage Agreement dated March 14, 2011, between the Company and
Anadarko E&P Company, L.P. Incorporated by reference to Exhibit
10.2 to the Current Report on Form 8-K filed on March 15,
2011.
|
|
2014
Equity Incentive Plan, effective April 12, 2014. Incorporated by
reference to Appendix A to the Proxy Statement for the Annual
Meeting held on January 15, 2014. **
|
|
Description
|
|
2014
Amended and Restated Lease Agreement, dated July 10, 2014, by and
between the Land Board, the Rangeview Metropolitan District, and
the Company. Incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K filed on July 14, 2014.
|
|
2014
Amended and Restated Service Agreement, dated July 10, 2014, by and
between the Company and the Rangeview Metropolitan District.
Incorporated by reference to Exhibit 10.5 to the Current Report on
Form 8-K filed on July 14, 2014.
|
|
Rangeview/Pure
Cycle WISE Project Financing and Service Agreement, effective as of
December 22, 2014. Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed on December 30, 2014.
|
|
South
Metro WISE Authority Formation and Organizational Intergovernmental
Agreement, dated December 31, 2013. Incorporated by reference to
Exhibit 10.2 to Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 2014.
|
|
Amended and
Restated WISE Partnership – Water Delivery Agreement, dated
December 31, 2013, among the City and County of Denver acting
through its Board of Water Commissioners, the City of Aurora acting
by and through its Utility Enterprise, and South Metro WISE
Authority. Incorporated by reference to Exhibit 10.3 to Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30,
2014.
|
|
Agreement for
Purchase and Sale of Western Pipeline Capacity, dated November 19,
2014, among the Rangeview Metropolitan District and certain members
of the South Metro WISE Authority. Incorporated by reference to
Exhibit 10.4 to Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 2014.
|
|
Water
Service Agreement by and between Rangeview Metropolitan District,
acting by and through its Water Activity Enterprise, and Elbert
& Highway 86 Commercial Metropolitan District, acting by and
through its Water Enterprise, dated as of December 15, 2016.
Incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed on December 19, 2016.
|
10.18
|
Export
Service Agreement, effective as of June 16, 2017, between the
Company and the Rangeview Metropolitan District. *
|
|
Description
|
10.19
|
Contract for
Purchase and Sale of Real Estate, dated June 27, 2017, by and
between PCY Holdings, LLC, and Richmond American Homes of Colorado,
Inc., as amended by First Amendment to Contract for Purchase and
Sale of Real Estate, dated August 28, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Second Amendment to Contract for Purchase and Sale of
Real Estate, dated August 29, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Third Amendment to Contract for Purchase and Sale of
Real Estate, dated September 8, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Fourth Amendment to Contract for Purchase and Sale of
Real Estate, dated September 20, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Fifth Amendment to Contract for Purchase and Sale of
Real Estate, dated October 6, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Sixth Amendment to Contract for Purchase and Sale of
Real Estate, dated October 11, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Seventh Amendment to Contract for Purchase and Sale of
Real Estate, dated October 18, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Eighth Amendment to Contract for Purchase and Sale of
Real Estate, dated October 20, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Ninth Amendment to Contract for Purchase and Sale of
Real Estate, dated October 20, 2017, by and between PCY
Holdings, LLC, and Richmond American Homes of Colorado, Inc., as
amended by Tenth Amendment to Contract for Purchase and Sale of
Real Estate, dated November 3, 2017, by and between PCY Holdings,
LLC, and Richmond American Homes of Colorado, Inc. *
|
10.20
|
Contract for
Purchase and Sale of Real Estate, dated June 27, 2017, by and
between PCY Holdings, LLC, and Taylor Morrison of Colorado, Inc.,
as amended by First Amendment to Contract for Purchase and Sale of
Real Estate, dated August 24, 2017, by and between PCY
Holdings, LLC, and Taylor Morrison of Colorado, Inc., as amended by
Second Amendment to Contract for Purchase and Sale of Real Estate,
dated September 19, 2017, by and between PCY Holdings, LLC,
and Taylor Morrison of Colorado, Inc., as amended by Third
Amendment to Contract for Purchase and Sale of Real Estate, dated
October 6, 2017, by and between PCY Holdings, LLC, and Taylor
Morrison of Colorado, Inc., as amended by Fourth Amendment to
Contract for Purchase and Sale of Real Estate, dated
October 13, 2017, by and between PCY Holdings, LLC, and Taylor
Morrison of Colorado, Inc., as amended by Fifth Amendment to
Contract for Purchase and Sale of Real Estate, dated
October 18, 2017, by and between PCY Holdings, LLC, and Taylor
Morrison of Colorado, Inc., as amended by Sixth Amendment to
Contract for Purchase and Sale of Real Estate, dated
October 20, 2017, by and between PCY Holdings, LLC, and Taylor
Morrison of Colorado, Inc., as amended by Seventh Amendment to
Contract for Purchase and Sale of Real Estate, dated
October 20, 2017, by and between PCY Holdings, LLC, and Taylor
Morrison of Colorado, Inc., as amended by Eighth Amendment to
Contract for Purchase and Sale of Real Estate, dated November 3,
2017, by and between PCY Holdings, LLC, and Taylor Morrison of
Colorado, Inc., as amended by Ninth Amendment to Contract for
Purchase and Sale of Real Estate, dated November 7, 2017, by and
between PCY Holdings, LLC, and Taylor Morrison of Colorado, Inc.
*
|
10.21
|
Contract for
Purchase and Sale of Real Estate, dated June 29, 2017, by and
between PCY Holdings, LLC, and KB Home Colorado Inc., as amended by
First Amendment to Contract for Purchase and Sale of Real Estate,
dated August 28, 2017, by and between PCY Holdings, LLC, and
KB Home Colorado Inc., as amended by Second Amendment to Contract
for Purchase and Sale of Real Estate, dated September 15,
2017, by and between PCY Holdings, LLC, and KB Home Colorado Inc.,
as amended by Third Amendment to Contract for Purchase and Sale of
Real Estate, dated September 28, 2017, by and between PCY
Holdings, LLC, and KB Home Colorado Inc., as amended by Fourth
Amendment to Contract for Purchase and Sale of Real Estate, dated
October 9, 2017, by and between PCY Holdings, LLC, and KB Home
Colorado Inc., as amended by Fifth Amendment to Contract for
Purchase and Sale of Real Estate, dated October 18, 2017, by
and between PCY Holdings, LLC, and KB Home Colorado Inc., as
amended by Sixth Amendment to Contract for Purchase and Sale of
Real Estate, dated October 20, 2017, by and between PCY
Holdings, LLC, and KB Home Colorado Inc., as amended by Seventh
Amendment to Contract for Purchase and Sale of Real Estate, dated
October 31, 2017, by and between PCY Holdings, LLC, and KB
Home Colorado Inc., as amended by Eighth Amendment to Contract for
Purchase and Sale of Real Estate, dated November 3, 2017, by and
between PCY Holdings, LLC, and KB Home Colorado Inc., as amended by
Ninth Amendment to Contract for Purchase and Sale of Real Estate,
dated November 7, 2017, by and between PCY Holdings, LLC, and KB
Home Colorado Inc. *
|
|
Description
|
|
Letter
of GHP Horwath, P.C., dated January 13, 2017. Incorporated by
reference to Exhibit 16.1 to the Current Report on Form 8 K filed
on January 17, 2017.
|
|
Subsidiaries
*
|
|
Consent of Crowe
Horwath LLP *
|
|
Consent of GHP
Horwath, P.C. *
|
|
Certification
under Section 302 of the Sarbanes-Oxley Act of 2002. *
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. ***
|
101.INS
|
XBRL Instance Document.
|
101.SCH
|
XBRL Taxonomy Extension Schema Document. *
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
*
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document. *
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
*
|
_______________________________
**
Indicates
management contract or compensatory plan or arrangement in which
directors or executive officers are eligible to
participate.
EXPORT SERVICE AGREEMENT
between
PURE CYCLE CORPORATION
and
RANGEVIEW METROPOLITAN DISTRICT,
ACTING BY AND THROUGH ITS WATER ACTIVITY ENTERPRISE
ARTICLE I Definitions
|
2
|
1.1
|
Lowry Range
|
2
|
1.2
|
New Service Agreement
|
2
|
1.3
|
Operating Expenses
|
3
|
1.4
|
Rules and Regulations
|
3
|
1.5
|
Schedule of Service
|
3
|
1.6
|
Wastewater User
|
3
|
1.7
|
Wastewater System
|
3
|
1.8
|
Water User
|
3
|
1.9
|
Water System
|
3
|
ARTICLE II Contract Service Provider
|
3
|
2.1
|
Exclusivity
|
3
|
2.2
|
Service Provider
|
3
|
2.3
|
Additional Consideration
|
4
|
ARTICLE III Representations and Covenants
|
4
|
3.1
|
Lease
|
4
|
3.2
|
New Service Agreements
|
4
|
3.3
|
Conflicts of Interest
|
4
|
3.4
|
Rangeview Administrative Functions
|
4
|
ARTICLE IV Agreements and Service
|
5
|
4.1
|
Customers
|
5
|
4.2
|
Construction
|
5
|
4.3
|
Water Quality
|
6
|
4.4
|
Wastewater System
|
6
|
4.5
|
Rules and Regulations of Rangeview
|
6
|
ARTICLE V Coordination of Lease Assets
|
7
|
ARTICLE VI Ownership, Operation, and Maintenance of
Facilities
|
7
|
ARTICLE VII Obligations of Service Provider
|
7
|
7.1
|
Water System and Wastewater System
|
7
|
7.2
|
Control
|
7
|
7.3
|
Phased Development
|
7
|
7.4
|
Administration
|
7
|
7.5
|
Records
|
7
|
7.6
|
Services
|
8
|
7.7
|
Compliance with Laws
|
8
|
7.8
|
Personnel
|
8
|
7.9
|
Permits and Licenses
|
8
|
7.1
|
Taxes
|
9
|
7.11
|
Financing
|
9
|
7.12
|
Reporting
|
9
|
7.13
|
Accounting
|
9
|
7.14
|
Schedule of Service
|
9
|
ARTICLE VIII Billing and Rates
|
10
|
8.1
|
Rates
|
10
|
8.2
|
Billing
|
10
|
8.3
|
Renegotiation
|
10
|
8.4
|
Reserves
|
11
|
8.5
|
Reports and Audits
|
12
|
ARTICLE IX Management of Water
|
13
|
ARTICLE X Rights-of-Way
|
13
|
10.1
|
Rights-of-Way
|
13
|
10.2
|
Fees for Rights-of-Way
|
13
|
10.3
|
Condemnation of Land
|
14
|
ARTICLE XI Indemnification
|
14
|
ARTICLE XII Insurance and Bonds
|
14
|
12.1
|
Insurance
|
14
|
12.2
|
Bonds
|
14
|
12.3
|
Bond of Contractors
|
14
|
ARTICLE XIII Term, Default and Termination
|
15
|
13.1
|
Term
|
15
|
13.2
|
Default and Remedies
|
15
|
13.3
|
Service Provider Right of Termination
|
16
|
13.4
|
Termination of New Service Agreement
|
16
|
13.5
|
Compliance with Regulations
|
16
|
13.6
|
Multi-Fiscal Year Obligation
|
16
|
ARTICLE XIV General Provisions
|
16
|
14.1
|
Assignment
|
16
|
14.2
|
Third Party Beneficiaries
|
17
|
14.3
|
Notice
|
17
|
14.4
|
Construction
|
17
|
14.5
|
Entire Agreement
|
17
|
14.6
|
Authority
|
17
|
14.7
|
Copies
|
18
|
14.8
|
Counterparts
|
18
|
14.9
|
Amendment
|
18
|
14.1
|
Compliance with Law
|
18
|
14.11
|
Binding Effect
|
18
|
14.12
|
Severability
|
18
|
14.13
|
Duty of Good Faith and Fair Dealing; Regular
Consultation
|
18
|
14.14
|
Further Assurance
|
18
|
14.15
|
Governing Law
|
18
|
14.16
|
Arbitration
|
18
|
14.17
|
Litigation and Attorneys’ Fees
|
19
|
14.18
|
No Waiver of Governmental Immunity
|
19
|
14.19
|
Force Majeure
|
19
|
Exhibit
A
Schedule of
Services
EXPORT SERVICE AGREEMENT
THIS
EXPORT SERVICE AGREEMENT (the “Agreement”) is entered
into as of the 16 day of June 2017, by and between PURE CYCLE
CORPORATION, a Colorado corporation (“Service
Provider”), and RANGEVIEW METROPOLITAN DISTRICT, a
quasi-municipal corporation and political subdivision of the State
of Colorado, acting by and through its water activity enterprise
(“Rangeview”).
RECITALS
A.
Rangeview is a
special district organized pursuant to Title 32 of the
Colorado Revised Statutes with the power, among others, to supply
water for domestic and other public and private purposes and to
provide complete sanitary sewage collection, transmission,
treatment and disposal services. Rangeview’s water activity
enterprise was established by resolution of the district adopted at
a public meeting of its board of directors on September 11,
1995, and effective as of the date of its adoption.
B.
Service Provider is
a corporation involved in the acquisition and development of water
and wastewater facilities and systems.
C.
Rangeview, Service
Provider, and the State of Colorado, acting through the State Board
of Land Commissioners (the “Land Board”), are parties
to Lease Number S-37280, most recently amended and restated on
July 10, 2014 (the “Lease”), pursuant to which
Rangeview and Service Provider have certain water rights as defined
in the Lease.
D.
Service Provider
and Rangeview are parties to a Service Agreement dated
April 11, 1996, most recently amended and restated on July 10,
2014 (the “Lowry Service Agreement”), pursuant to which
Rangeview granted Service Provider the exclusive right as its agent
to provide water services to surface tenants, occupants,
developers, landowners and all other water users on the Lowry Range
(as defined below), subject to the terms and conditions set forth
in the Lease.
E.
Service Provider
and Rangeview are parties to a Wastewater Service Agreement dated
January 22, 1997 (the “Lowry Wastewater Service
Agreement”), pursuant to which Rangeview granted Service
Provider the exclusive right as its agent to provide wastewater
service to persons and entities who own real property on the Lowry
Range and in all other property included in Rangeview’s
service area with Service Provider’s prior written consent
and agreement to provide such properties with wastewater
service.
F.
Service Provider
owns certain water rights, including water rights and water storage
rights it purchased pursuant to the Lease, water rights located in
Arapahoe County, and water rights pursuant to the WISE Project
Financing and Service Agreement between Service Provider and
Rangeview dated November 10, 2014 (the “WISE
Agreement”) relating to the Water Infrastructure Supply
Efficiency Partnership known as “WISE”, and may acquire
additional water rights for use as it deems desirable.
G.
Rangeview has
acquired and anticipates acquiring rights to provide water and/or
wastewater service to governmental entities, including cities,
towns, and special districts, and property owners, who may or may
not have sufficient water supplies, financial capabilities, design,
engineering, construction, or operational capabilities to construct
Water Systems or Wastewater Systems (each as defined below) and who
may require services that Service Provider is capable of
providing.
H.
Rangeview is
desirous of expanding its relationship with Service Provider in
exchange for Service Provider’s commitment to provide water
and wastewater service, as applicable, to customers pursuant to
this Agreement and has determined that it is in the best interest
of Rangeview to enter into this Agreement with Service Provider for
the following reasons, among others:
(1)
Service Provider
has a long-term relationship with Rangeview and is the service
provider for the Lowry Range;
(2)
It is more
efficient and economical to have only one service provider with
respect to Rangeview’s development of Water and Wastewater
Systems to provide water and wastewater service for customers on
and off the Lowry Range;
(3)
It is desirable to
limit the number of parties jointly using and expanding the Water
and Wastewater Systems; and
(4)
Service Provider
has expertise in the development and financing of water and
wastewater facilities and systems.
I.
The parties desire
to enter into this Agreement to provide the terms and conditions
under which Service Provider will act as Rangeview’s contract
service provider to design, permit, finance, construct, operate and
maintain Water Systems to provide water service to Water Users and
Wastewater Systems to provide wastewater service to Wastewater
Users.
AGREEMENT
In
consideration of the foregoing, the covenants and agreements set
forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
As used
in this Agreement, the following terms shall have the meanings set
forth in this Agreement or as referenced below:
1.1
Lowry Range
. “Lowry
Range” shall mean the approximately 24,567.21 acres in
Arapahoe County, Colorado as more particularly described in the
Lease.
1.2
New Service Agreement
.
“New Service Agreement” shall mean the agreement(s) set
forth on the Schedule of Service that provides for the extension of
(i) water services to one or more specified Water Users and/or
(ii) wastewater services to one or more specified Wastewater
Users.
1.3
Operating Expenses
.
“Operating Expenses” shall mean all actual maintenance
and operating costs incurred by Rangeview in discharging
Rangeview’s obligations to provide water service to Water
Users and wastewater services to Wastewater Users.
1.4
Rules and Regulations
.
“Rules and Regulations” shall mean the rules and
regulations of Rangeview as adopted and amended from time to
time.
1.5
Schedule of Service
.
“Schedule of Service” shall mean
Exhibit A
attached hereto, as it may be
amended from time to time by the parties.
1.6
Wastewater User
.
“Wastewater User” shall mean any user receiving service
from a Wastewater System pursuant to this Agreement.
1.7
Wastewater System
.
“Wastewater System” shall mean the wastewater
transmission, treatment and disposal facilities, including re-use
and land application facilities, and all other components of a
wastewater system or systems to provide wastewater service to
Wastewater Users.
1.8
Water User
. “Water
User” shall mean any user of potable or non-potable water
provided pursuant to this Agreement.
1.9
Water System
.
“Water System” shall mean wells, intake lines, pumps,
treatment facilities, transmission systems, storage facilities and
all other components of a water supply system or systems to provide
water to Water Users.
ARTICLE II
Contract Service
Provider
2.1
Exclusivity
. Service Provider
shall have the sole and exclusive right to be Rangeview’s
water and wastewater service provider. The parties acknowledge that
if Rangeview acquires additional water, such water shall be subject
to the provisions of this Agreement. Further, if Rangeview acquires
additional water or wastewater service rights, such water or
wastewater service rights shall be subject to the terms of this
Agreement unless determined otherwise after compliance with
Section 4.1 and Section 14.16.
2.2
Service Provider
.
During the term of this Agreement, Rangeview hereby grants to
Service Provider the sole and exclusive right as its contract
service provider to (a) market, lease, license, sell or otherwise
transfer, and withdraw and treat in and through the Water Systems
covered by this Agreement any water supplies owned or controlled by
Rangeview; (b) collect wastewater from Wastewater Users and to
market, lease, license, sell or otherwise transfer, and treat such
wastewater in and through the Wastewater Systems covered by this
Agreement; (c) design, permit, finance, construct, operate and
maintain Water Systems and Wastewater Systems to provide water
services to Water Users and wastewater services to Wastewater
Users, respectively; and (d) provide other requested water and
wastewater provider services as required by Rangeview. To the
extent, if any, that the terms of this Agreement are contrary to,
or inconsistent with, the terms of the Lease relating to assets
covered under the Lease, the provisions of the Lease shall control
and govern the conduct of the parties. Rangeview hereby grants to
Service Provider the sole and exclusive right and license to
market, lease, license, sell or otherwise transfer and to collect,
withdraw and treat in and through (i) the Water Systems
covered by this Agreement any water supplies owned or controlled by
Service Provider and (ii) the Wastewater Systems covered by
this Agreement any wastewater owned or controlled by Service
Provider.
2.3
Additional Consideration
. Any
additional consideration paid by Service Provider in exchange for
the exclusive rights granted hereunder with respect to a particular
New Service Agreement shall be set forth on the Schedule of
Service. Rangeview acknowledges that Service Provider has paid
Rangeview the amount(s) set forth on the Schedule of Service in
exchange for the exclusive rights granted hereunder.
ARTICLE III
Representations and
Covenants
3.1
Lease
. Rangeview
represents and warrants that all terms and conditions of the Lease
have been complied with by it. Rangeview shall not enter into any
amendments to the Lease that affect Service Provider’s rights
and/or obligations under this Agreement without Service
Provider’s prior written approval. Rangeview agrees that it
will comply with the terms of the Lease, including paying all rents
and royalties due under the Lease, and maintain it in effect during
the term of this Agreement. It shall not be a breach of this
covenant if Rangeview’s failure to maintain the Lease in
effect is due to a breach of this Agreement or the Lease by Service
Provider.
3.2
New Service Agreements
.
Rangeview represents and warrants that all terms and conditions of
each New Service Agreement set forth on the Schedule of Service
have been complied with by it. Rangeview shall not enter into any
amendments to a New Service Agreement that affect Service
Provider’s rights and/or obligations under this Agreement
without Service Provider’s prior written approval. Rangeview
agrees that it will comply with the terms of each New Service
Agreement and maintain it in effect during the term of this
Agreement. It shall not be a breach of this covenant if
Rangeview’s failure to maintain a New Service Agreement in
effect is due to a breach of this Agreement or a New Service
Agreement by Service Provider.
3.3
Conflicts of Interest
. The
parties hereto acknowledge that certain members of the board of
directors of Rangeview are officers, directors or employees of
Service Provider and may have conflicts of interest with regard to
this transaction. Rangeview represents and warrants that such board
members have, pursuant to § 24-18-110, C.R.S., filed all
necessary disclosure statements with Rangeview and the Colorado
Secretary of State. Service Provider represents and warrants that
the members of Service Provider’s board of directors who also
serve on the Rangeview board of directors have fully disclosed such
interests to the disinterested board members of Service Provider
prior to obtaining board approval of this Agreement and those
members with potential conflicts have abstained from voting on this
Agreement.
3.4
Rangeview Administrative
Functions
. Rangeview shall
be responsible for performing at its sole expense all functions and
reporting obligations imposed upon it as a local government entity
and political subdivision of the State of Colorado. Such functions
include without limitation, compliance with budget, audit,
election, open meetings, public records, conflict of interest
disclosure and management laws, and Article X, Section 20 of
the Colorado Constitution. Rangeview shall further be solely
responsible for performing customer relations functions, adopting
and amending the Rules and Regulations, including establishing
rates, fees and charges imposed by it upon Water and Wastewater
Users, and supervising tap sales. Rangeview shall have primary
responsibility for the administration and enforcement of the Rules
and Regulations, design standards, easements and service and main
extension agreements, but shall coordinate with Service Provider in
the performance of these functions.
ARTICLE IV
4.1
Customers
. Rangeview or
Service Provider, as the contract service provider, may negotiate
and enter into agreements to lease, license, sell or otherwise
transfer and withdraw, collect or treat any water or wastewater
available to Rangeview to provide water or wastewater service
subject to the terms of this Agreement. Rangeview further agrees
that Service Provider may, at its option, negotiate and enter into
agreements to lease, license, sell or otherwise transfer, withdraw,
collect or treat any water or wastewater available to Service
Provider to provide water or wastewater service subject to the
terms of this Agreement. Each party shall make available to the
other copies of any such agreements twenty-one (21) days prior to
execution (a draft being acceptable if finals are not available).
The receiving party shall review such information for the sole
purposes of determining whether (i) such contract is commercially
reasonable, (ii) such contract is in compliance with prudent water
provider practice in Colorado, and (iii) such contract is in
compliance with this Agreement. The receiving party shall be deemed
to have consented to the contract unless, within fourteen (14) days
of the date of delivery of the contract, it delivers to the other
party a notice specifically stating the reasons that it objects to
such contract based on the criteria stated in this section 4.1.
Disputes, if any, as to matters under this Section will be
submitted to arbitration pursuant to Section 14.16, and a
hearing shall be held within fourteen (14) days of selection of an
arbitrator or arbitrators, as applicable. Any undisputed contract
shall become a New Service Agreement and shall be added to the
Schedule of Service. Whether a disputed contract becomes a New
Service Agreement that is added to the Schedule of Service will be
resolved pursuant to Section 14.16.
4.2
Construction
.
Service Provider shall be responsible for designing, permitting,
financing, and managing the construction of each Water System and
Wastewater System owned by Rangeview, pursuant to Rangeview’s
Rules and Regulations to provide water or wastewater service to
meet the demands of Water Users and Wastewater Users, as
applicable, and shall do so in a commercially reasonable time and
manner consistent with (i) prudent water or wastewater service
provider practices in Colorado, (ii) the terms of any applicable
New Service Agreement, and (iii) the terms of any other applicable
agreement to which Rangeview and Service Provider are parties, and
subject to the receipt of all necessary governmental approvals.
Upon receiving a written request for water or wastewater service
from a Water User or Wastewater User, Rangeview shall give Service
Provider written notice of such request. Within thirty (30) days
after receipt of all information necessary to establish the service
needs of the Water or Wastewater User, Rangeview and Service
Provider shall establish a construction schedule identifying the
scope of improvements and the timing of construction for such User
(“Construction Schedule”). Upon execution of an
agreement which secures the commitment of such Water or Wastewater
User to purchase taps or receive water and/or wastewater service,
as applicable, which agreement shall indicate, if applicable, that
Rangeview’s commitment for service is subject to the
completion of the improvements identified in the Construction
Schedule, Service Provider shall design, permit, finance, and
manage the construction of the identified improvements pursuant to
Rangeview’s Rules and Regulations and pursuant to the time
frame set forth in the Construction Schedule. Once construction is
completed, Service Provider will provide Rangeview with copies of
the plans for the improvements as built. Service Provider shall
cause the Water System and/or Wastewater System to be completed in
a workmanlike manner and in compliance with the plans approved by
Rangeview, which approval will not be unreasonably withheld or
delayed. Service Provider shall make available to Rangeview copies
of any and all construction contracts and related documents
concerning the Water System or Wastewater System. Twenty-one (21)
days prior to the execution of any construction contract related to
either System in excess of One Million Dollars ($1,000,000),
Service Provider shall provide Rangeview with a copy of such
contract (a draft being acceptable if finals are not available) and
information regarding how the improvements will be financed and how
such financing obligation will be paid. Rangeview shall review such
information for the sole purposes of determining whether such
contract is commercially reasonable and in compliance with
governing laws and consistent with prudent water or wastewater
service provider practices in Colorado, as applicable, and whether
the project is fiscally viable. Rangeview shall be deemed to have
consented to the contract unless, within fourteen (14) days of the
date of delivery of the contract, it delivers to Service Provider a
notice specifically stating the reasons for its determination that
the proposed contract is not commercially reasonable, is not in
compliance with governing laws or with prudent water or wastewater
service provider practices in Colorado, as applicable, or the
project is not fiscally viable. Disputes, if any, as to matters
under this Section will be submitted to arbitration pursuant to
Section 14.16, and a hearing shall be held within fourteen (14)
days of selection of an arbitrator or arbitrators, as
applicable.
4.3
Water Quality
.
Service Provider shall cause the Water System to be designed to
comply with applicable requirements of the Colorado Primary
Drinking Water Regulations, 5CCR 1002-11 or such other similar or
successor laws (the “Primary Drinking Water
Regulations”) in effect at the time the Water System is
constructed. In addition, Service Provider shall operate and
maintain the Water System, and to the extent necessary, modify or
upgrade the Water System, such that the water provided through the
Water System complies with the Primary Drinking Water Regulations;
provided, however, that it shall not be a default of this Section
if at any time the water fails to comply with the requirements of
the Primary Drinking Water Regulations, Service Provider cures such
noncompliance within thirty (30) days of learning of such
noncompliance, or if more than thirty (30) days is reasonably
required to cure such noncompliance, Service Provider commences to
correct the problem within thirty (30) days and thereafter
prosecutes the same to completion with reasonable
diligence.
4.4
Wastewater System.
Service Provider shall cause the Wastewater System to be designed,
and shall operate and maintain the Wastewater System, in compliance
with applicable regulatory requirements. It shall not be a default
of this Section if the Service Provider cures such noncompliance
within thirty (30) days of learning of such noncompliance, or if
more than thirty (30) days is reasonably required to cure such
noncompliance, Service Provider commences to correct the problem
within thirty (30) days and thereafter prosecutes the same to
completion with reasonable diligence.
4.5
Rules and Regulations of
Rangeview
. All construction,
operation, and maintenance of the Water System and Wastewater
System shall be performed in accordance with the Rules and
Regulations.
ARTICLE V
Coordination of Lease
Assets
Rangeview and
Service Provider hold certain rights to water, storage, and
infrastructure capacities pursuant to the terms and conditions of
the Lease, and the parties shall coordinate the use of any Lease
assets subject to the party’s respective rights to such
assets and subject to the provisions of the Lease
ARTICLE VI
Ownership, Operation, and
Maintenance of Facilities
Rangeview shall own
the Water System and Wastewater System, except as otherwise
specified in a New Service Agreement. Service Provider shall
operate, maintain, repair, replace and administer the Water System
and the Wastewater System in a commercially reasonable manner
consistent with prudent water or wastewater service provider
practices in Colorado, as applicable, and in accordance with this
Agreement and any applicable New Service Agreement.
ARTICLE VII
Obligations of Service
Provider
7.1
Water System and Wastewater
System
. At its cost,
Service Provider shall provide a Water System for Water Users and a
Wastewater System for Wastewater Users in a commercially reasonable
manner consistent with prudent water or wastewater service provider
practices in Colorado, as applicable, in order to meet the demands
of Water Users and Wastewater Users. In addition, Service Provider
shall install meters, in accordance with the Rules and Regulations,
capable of measuring the quantity of water delivered to Water
Users.
7.2
Control
. Service Provider
shall have the responsibility for and control over the details and
means for providing the services hereunder subject to the
requirement that the services be provided in a commercially
reasonable time and manner consistent with prudent water or
wastewater service provider practices in Colorado, as applicable,
and in accordance with this Agreement and the Rules and
Regulations.
7.3
Phased Development
.
Service Provider may phase the installation of the Water System and
Wastewater System in accordance with the needs of Water Users and
Wastewater Users. Service Provider shall have no obligation
whatsoever to install or create access to a Water System or
Wastewater System in advance of the need for such facilities, such
need to be based upon commercially reasonable standards for similar
development projects and the existence of agreements with Water
Users or Wastewater Users, as applicable, providing for payment for
such services.
7.4
Administration
.
Service Provider shall operate, maintain and administer the Water
System and Wastewater System, including, but not limited to issuing
taps on behalf of Rangeview and billing all charges for water and
wastewater services in accordance with Article VIII and any
applicable New Service Agreements.
7.5
Records
. Service Provider
shall keep and maintain accurate files of all contracts concerning
the Water System and Wastewater System and all other records
necessary to the orderly administration and operation of the Water
System and Wastewater System which are required to be kept by
local, state or federal statutes, ordinances or regulations.
Service Provider shall provide to Rangeview a copy of each executed
contract concerning the Water System or Wastewater System within
five business days.
7.6
Services
. Service Provider
shall employ or contract with such qualified engineers, operators,
and administrative and other personnel as it deems appropriate, to
perform the duties of operating the Water System and Wastewater
System, including the following:
(a)
cooperating with
Rangeview and other state, county, local and federal authorities in
providing such tests, performing such activities, and maintaining
such records as are necessary to maintain compliance with
appropriate governmental standards;
(b)
supervising the
connection of lines to private development and recording such
connections for billing proposes in accordance with Section
8.2;
(c)
coordinating
construction with various utility companies to ensure minimum
interference with the Water System and Wastewater
System;
(d)
performing all
maintenance and repairs, or otherwise providing for the services of
contractors, necessary to maintain and continue the efficient
operation of the Water System and Wastewater System;
and
(e)
providing for
emergency preparedness to provide response to emergencies,
including, but not limited to line breaks, freeze-ups,
obstructions, backups, mechanical problems, violations of water or
effluent treatment standards, and the interruption of services from
other causes.
To the
extent Service Provider engages contractors, it shall require such
contractors to maintain bonds (or other acceptable sureties or
guaranties) and insurance, including workers’ compensation
insurance, in compliance with applicable laws and the Rules and
Regulations. Such bonds and insurance shall name Rangeview, and any
third party reasonably requested by Rangeview, as additional
insured.
7.7
Compliance with Laws
.
Service Provider shall comply with the Rules and Regulations and
all applicable government statutes, regulations, ordinances,
permits and orders, and, if applicable, Colo. Rev. Stat.
§24-91-103, 103.5 and 103.6, in its performance under this
Agreement.
7.8
Personnel
. Service Provider
shall engage Certified Water Professionals holding appropriate
levels of certification to act as Certified Operator(s) in
Responsible Charge for the Water System and the Wastewater System
in accordance with and as those terms are defined in Regulation No.
100 of the Colorado Department of Public Health and Environment or
any successor requirements of the State of Colorado.
7.9
Permits and Licenses
.
Service Provider shall, at its own expense, apply for and obtain
all necessary building, occupancy, well and other permits, licenses
and authorizations which may be required by any governmental entity
that has jurisdiction over the operations to be performed by
Service Provider pursuant to this Agreement. Rangeview shall
cooperate with and provide such reasonable assistance to Service
Provider, as Service Provider may request in obtaining such
authorizations. All well permits shall be in the name of the owner
of the water rights for whom the well permits are filed, and
Service Provider shall demonstrate it has the lawful authority to
use the water rights.
7.10
Taxes
. Service Provider
shall be solely responsible for and shall pay all taxes, fees,
charges and assessments, if any, in connection with work or the
materials on facilities it will own which are to be utilized in
accomplishing the activities of Service Provider pursuant to this
Agreement.
7.11
Financing
. Service Provider
shall be responsible for financing its obligations hereunder with
the funds it receives pursuant to this Agreement or from such other
sources as it deems desirable subject to Section 4.2 hereof and the
terms of any applicable New Service Agreement.
7.12
Reporting
. In addition to
the reports required pursuant to Section 8.5, Service Provider
agrees to provide Rangeview with annual budgets and business plans
with respect to the Water System and Wastewater System and such
other information as Rangeview may reasonably request in order to
assure itself that the demands of Water Users and Wastewater Users
are being adequately provided for and to assist Rangeview in its
long-term planning efforts. Service Provider shall also supply
Rangeview with such information as Rangeview may reasonably require
to comply with its obligations to state, county, local and federal
authorities, including, for example, the results of tests on the
quality of the water and information concerning compliance with
health and safety regulations.
7.13
Accounting
. Service Provider
shall prepare and maintain records reflecting or recording costs of
service, both for capital development and for operations and
administration expenses, for the Water System and the Wastewater
System, in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for state and
local governments as prescribed by the Governmental Accounting
Standards Board, as now or hereafter constituted, or if GAAP is no
longer available or appropriate, in accordance with other generally
accepted water and wastewater utility cost accounting standards
designated by the parties. Such records shall be available during
normal business hours for inspection and copying by Rangeview.
Service Provider shall ensure that any contract or other
arrangement it makes with a third person to perform capital
development or operations and administration functions assumed by
Service Provider hereunder expressly imposes this same requirement
upon such person for the benefit of Rangeview. Disputes, if any, as
to the appropriate cost accounting standards to be followed will be
submitted to arbitration pursuant to
Section 14.16.
7.14
Schedule of Service
. To
the extent Rangeview has obligations under a New Service Agreement
related to the services to be performed by Service Provider under
this Agreement, Service Provider agrees to provide the services
hereunder in conformance with the applicable terms of the New
Service Agreement, and Service Provider shall not take any action
or omit to take any action that would cause Rangeview to be in
breach of any New Service Agreement.
ARTICLE VIII
8.1
Rates
. Unless otherwise
established in a New Service Agreement, Rangeview shall establish
tap fees, usage charges, service charges, and other rates, fees and
charges to be imposed upon Water Users and Wastewater Users in
accordance with the Rules and Regulations.
(a)
Unless otherwise
provided in a New Service Agreement, (i) Service Provider
shall read the meters and bill the Water Users for water services
provided hereunder, including all tap fees, usage charges, and
service charges, and (ii) Service Provider shall bill the
Wastewater Users for wastewater services hereunder, including all
system development fees and service charges; in each case on behalf
of Rangeview and in accordance with the Rules and Regulations. The
bills shall provide that payment shall be made by Water Users and
Wastewater Users to Rangeview at an address designated by
Rangeview.
(b)
Rangeview shall be
responsible for collection efforts on delinquent accounts and will
establish and maintain policies and procedures encouraging prompt
and vigorous collection of delinquent accounts.
(c)
After
deducting the amount required to be paid or accrued to pay the
royalties required for water governed under the Lease, Rangeview
shall pay Service Provider on or before the 15
th
day of each month
one hundred percent (100%) of tap fees and ninety-eight percent
(98%) of all remaining amounts collected by Rangeview from Water
Users in the previous month. To the extent necessary to enable
Rangeview to determine royalties due under the Lease, Service
Provider shall provide Rangeview with a written report to enable
Rangeview to distinguish which payments are for water governed
under the Lease and of such bills, which are to Title 32 water
districts or similar municipal entities supplying water for public
use (“Public Entities”).
(d)
Rangeview shall pay
Service Provider on or before the 15
th
day of each month
100% of wastewater system development fees and ninety percent (90%)
of all remaining amounts collected by Rangeview from Wastewater
Users in the previous month.
(e)
Each payment by
Rangeview for system development fees pursuant to Sections 8.2(c)
and (d) above shall be accompanied by a written report from
Rangeview stating the service address or other description of the
licensed premises for which the water and/or wastewater system
development fees were paid, the number of equivalent taps licensed
for each premise, and the amount of the system development fees
collected for each licensed premise.
8.3
Renegotiation
. The
parties acknowledge that the administrative and operating costs of
Rangeview and Service Provider with respect to the water and
wastewater service to be provided to Water Users and Wastewater
Users are unknown. Therefore, notwithstanding the provisions of
Section 8.2, if the percentage of water and wastewater fees and
charges allocable to each party pursuant to Section 8.2 are
insufficient to cover the respective parties’ costs relating
to the provision of water service or wastewater service, as
applicable, pursuant to this Agreement, including, in each case,
without limitation, the proportionate share of each party’s
reasonable general, legal, administrative, engineering, regulatory
compliance, and long-term planning costs attributable to provision
of water service or wastewater service, as applicable, Service
Provider and Rangeview shall negotiate in good faith, within ninety
(90) days after the insufficiency is reasonably claimed by either
party, an amendment to Section 8.2 which provides each party
with sufficient revenues from this Agreement to cover its costs
related to the provision of water or wastewater service, as
applicable, or amend the rate structure so that additional rate
revenues are generated. During any period of renegotiation, each
party shall continue to perform its obligations under this
Agreement. Disputes as to an appropriate amendment to provide
either party with sufficient rate revenues under Section 8.2
or to amend the rate structure in the Rules and Regulations will be
settled by arbitration pursuant to Section 14.16 of this
Agreement.
(a)
Rangeview shall
utilize the revenues retained by it pursuant to Section 8.2(c) and
(d) and, any other revenues retained by it, (i) to pay proper and
necessary expenses related to the functions of Rangeview, (ii) to
establish a fund for Rangeview’s budget for the following
calendar year, (iii) to establish an operating reserve fund in an
amount consistent with prudent water service provider practices in
Colorado and conforming with applicable statutory requirements, and
(iv) to establish any operating reserve required by any New
Service Agreement. The operating reserve funds shall be
continuously maintained and may be utilized by Rangeview solely for
paying lawful obligations relating to the provision of water and
wastewater service to Water Users and Wastewater Users. The
obligations of Rangeview with respect to the budget and operating
reserve fund required by subsection (ii) and (iii) above are
not cumulative with any budget and operating reserve fund
requirements included in other agreements between the parties with
respect to water and/or wastewater services, including, but not
limited to the Lowry Service Agreement and the Lowry Wastewater
Service Agreement. Thus, Rangeview need not establish duplicate
budget funds and need only establish one operating reserve fund for
the highest percentage of Operating Expenses required by any
agreement between the parties. The obligations of Rangeview
pursuant to subsection (iv) are exclusive to and allocated
pursuant to the revenues derived from this Agreement and shall not
affect and shall not be reduced or limited by reserves or funds
accumulated by Rangeview under subsections (ii) or (iii)
or derived from or required by other agreements entered into
by Rangeview for purposes that are outside of the terms of this
Agreement.
(b)
Service Provider
agrees that if and to the extent at any time monies are not
available to Rangeview to fund the operating reserve which
Rangeview is required to maintain pursuant to a New Service
Agreement or if monies in such operating reserve are withdrawn (for
a purpose permitted by a New Service Agreement) such that the
amount of the operating reserve drops below the amount which
Rangeview is required to maintain pursuant to a New Service
Agreement and such operating reserve cannot reasonably be expected
to be reestablished from anticipated income to Rangeview within one
year, then within thirty (30) days of receipt of notice from
Rangeview of such fact, Service Provider shall deliver funds to
Rangeview sufficient to replenish the operating reserve fund to the
level required pursuant to the New Service Agreement.
Notwithstanding the fact that the operating reserve can reasonably
be expected to be reestablished within one year, if this Service
Agreement terminates during such one-year period, Service Provider
agrees to deliver funds to Rangeview sufficient to replenish the
operating reserve fund to the level required pursuant to a New
Service Agreement at the time this Agreement terminates. If Service
Provider has given notice to Rangeview pursuant to Section 13.4 of
Service Provider’s election to terminate this Agreement, any
use by Rangeview of the reserve fund in a manner which would cause
Service Provider to be required to replenish the fund pursuant to
the foregoing sentence because the termination date of this
Agreement will occur sooner than the date on which the reserves are
reasonably expected to be reestablished shall require the prior
written consent of Service Provider, which consent shall not be
withheld to the extent it is necessary to make such expenditure at
that time.
(c)
Any dispute as to
the necessity of an expenditure or whether the operating reserve
fund can reasonably be expected to be reestablished from
anticipated income within one year shall be submitted to
arbitration pursuant to Section 14.16 of this
Agreement.
(d)
Service Provider
shall, in consideration of reasonable industry practice, accumulate
or make provisions for an adequate capital reserves for repair and
replacement of the Water System and Wastewater System. Service
Provider shall establish a methodology for calculating the
appropriate capital reserve amount. Upon termination of this
Agreement, all amounts accumulated for capital reserves shall be
transferred to and become the property of Rangeview.
(a)
Within twenty-five
(25) days after the end of each calendar year, or within such other
time period as may be set forth in the New Service Agreements,
during the term of this Agreement, Service Provider shall deliver a
report to Rangeview which specifies the quantity of water per New
Service Agreement (including any recharged or stored water)
delivered by Service Provider and the amount of such water removed
from any aquifer and such other information as may be necessary in
order to enable Rangeview to comply with its reporting
obligations.
(b)
Service Provider
shall prepare and keep full, complete, and proper books, records
and accounts of all water (including any recharged or stored water)
sales or dispositions and shall document such transactions as may
be required by law. Said books, records, and accounts of Service
Provider shall be open at all reasonable times, upon three (3) days
prior written notice, to the inspection of Rangeview and its
representatives, and upon ten (10) days prior written notice,
Service Provider shall cooperate and produce such documents as may
be required by a lawful request presented to Rangeview pursuant to
the Colorado Open Records Act. Rangeview may, upon no less than
fourteen (14) days’ prior written notice to Service Provider,
cause a partial or complete audit to be made at Rangeview’s
expense by an auditor selected by Rangeview of the entire records
and operations of Service Provider for a five (5) year period
preceding the date of the audit relating to water use pursuant to
this Agreement. Within fourteen (14) days following receipt of such
a notice, Service Provider shall make available to the auditor the
books and records the auditor reasonably deems necessary or
desirable for the purpose of making the audit. If the results of
the audit reveal a deficiency in the amounts paid by Rangeview to a
third party as a result of inaccurate reports provided by Service
Provider to Rangeview, then Service Provider shall refund the
revenues it received from Rangeview under Section 8.2 which
should have been paid by Rangeview to such third party, together
with interest thereon at the rate of two percent (2%) per month
from the date or dates such amounts should have been paid to the
third party. If such inaccuracies resulted in a deficiency to the
third party in excess of two percent (2%) of the amounts previously
computed by Rangeview for the period covered by the audit, then
Service Provider shall also pay the actual cost of the
audit.
(c)
Rangeview shall
prepare and keep full, complete, and proper books, records and
accounts of all collections with respect to water (including any
recharged or stored water) sales or dispositions and shall document
such transactions as may be required by law. Said books, records,
and accounts of Rangeview shall be open at all reasonable times to
the inspection of Service Provider and its representatives who may
also, at Service Provider’s expense, audit, copy or extract
all or a portion of said books, records, and accounts for a period
of five (5) years after the date such books, records and
accounts are made. Service Provider may, upon fourteen (14)
days’ prior written notice to Rangeview, cause a partial or
complete audit to be made at Service Provider’s expense, by
an auditor selected by Service Provider, of the entire records and
operations of Rangeview relating to water revenue collections
pursuant to this Agreement. Within fourteen (14) days following
receipt of such a notice, Rangeview shall make available to the
auditor the books and records the auditor deems necessary or
desirable for the purpose of making the audit. Any deficiency in
the payment of amounts due Service Provider pursuant to Section 8.2
determined by such audit shall be immediately due and payable by
Rangeview together with interest thereon at the rate of two percent
(2%) per month from the date or dates such amounts should have been
paid. If such deficiency is in excess of two percent (2%) of the
amounts previously computed by Rangeview for the period covered by
the audit, then Rangeview shall also pay the actual cost of the
audit, at the time the deficiency is paid.
ARTICLE IX
All use
of water by Service Provider hereunder, including any re-use or
successive use, shall be done in a commercially reasonable manner
consistent with prudent water service provider practices in
Colorado in accordance with the decrees adjudicating such water and
in accordance with applicable New Service Agreements.
ARTICLE X
10.1
Rights-of-Way
.
Rangeview shall use its best efforts to obtain licenses within
public rights-of-way and easements reasonably necessary to perform
the services contemplated by this Agreement. To the extent
rights-of-way on or under the Lowry Range are reasonably necessary
to enable Service Provider to perform the services contemplated by
this Agreement, Service Provider shall notify Rangeview, and
Rangeview shall file a request for the right-of-way with the Land
Board in accordance with the Lease. Upon grant of a right-of-way by
the Land Board, Rangeview shall promptly notify Service Provider
and, to the extent necessary to enable Service Provider to perform
its services hereunder, Rangeview shall grant a license to Service
Provider to use the rights-of-way granted by the Land
Board.
10.2
Fees for Rights-of-Way
.
Service Provider shall pay the costs (including, if applicable,
legal and engineering fees) associated with obtaining licenses
within public rights-of-way or easements necessary for the Water
System.
10.3
Condemnation of Land
. Upon
Service Provider’s request, Rangeview agrees to consider and
use best efforts to utilize its governmental powers of condemnation
if such condemnation is reasonably necessary to enable Service
Provider to perform the services contemplated by this Agreement.
Rangeview agrees to grant Service Provider a right-of-way, easement
or license in such condemned property in such form as is reasonable
and appropriate for the services to be conducted or facilities to
be constructed on the property. Service Provider shall be
responsible for the costs associated with Rangeview’s
condemnation of such land. Nothing in this section 10.3 shall be
construed as a delegation of Rangeview’s governmental powers
to Service Provider, and Rangeview shall retain sole judicial and
legislative discretion in regard to such matters.
ARTICLE XI
As
between Service Provider and Rangeview, each party shall indemnify
and hold harmless the other, to the extent permitted by law,
against and from all liabilities, claims and demands, settlement or
litigation expenses, and related attorneys’ fees (i) for
personal injury or property damage arising out of, or caused by,
any act or omission of such party, its contractors, agents or
employees or (ii) relating to liens or claims of right to
enforce liens arising from actions of such party, its contractors
and agents. The party whose actions caused such liens to arise
shall promptly cause any such lien to be removed notwithstanding
the fact that such party may believe that there is a valid defense
to any such claim. Such party shall retain the right to pursue any
claims against the person filing the lien after any such lien is
removed.
ARTICLE XII
12.1
Insurance
. Service Provider
shall at all times carry insurance in amounts and with carriers
acceptable to Rangeview for workers’ compensation coverage
fully covering all persons engaged in the performance of this
Agreement in accordance with Colorado law, and for public liability
insurance covering death and bodily injury with limits of not less
than $1,500,000 for one person and $5,000,000 for any one accident
or disaster, and property damage coverage with limits of not less
than $500,000, which insurance shall name Rangeview and any other
party reasonably requested by Rangeview as additional
insureds.
12.2
Bonds
. No operations are
to be commenced until Service Provider has arranged for good and
sufficient bonds, or other acceptable sureties or guaranties,
consistent with any applicable governmental requirements, including
the Rules and Regulations, and listing Rangeview and any other
required parties as a coinsured, in an amount prescribed by the
applicable governmental requirements to secure the payment for
damages, losses or expenses caused by Service Provider as a result
of its operations.
12.3
Bond of Contractors
. Bonds
provided by contractors for construction activities to Service
Provider shall list Rangeview and any other required parties as
coinsureds. As long as such bonds otherwise comply with Section
12.2 above and list Rangeview and all other required parties as
coinsureds, the contractors shall not be required to obtain any
other bonds for Rangeview.
ARTICLE XIII
Term, Default and
Termination
13.1
Term
. This Agreement
shall commence on the date first entered above and, unless sooner
terminated pursuant to this Article, shall expire on the day that
the last New Service Agreement set forth on the Schedule of Service
expires.
13.2
Default and
Remedies.
(a)
The following
events shall constitute events of default under this
Agreement:
(i)
The institution by
or against a party of proceedings under any bankruptcy law or
insolvency act or for dissolution, or the appointment of a receiver
or trustee for all or substantially all of the property of a party,
which proceeding is not dismissed or receivership or trusteeship is
not vacated within sixty (60) days after such institution or
appointment; provided, however, that if a party seeks to dissolve
pursuant to C.R.S. § 32-1-701,
et seq
., as amended, and (i) it
notifies the other party in writing concurrently with filing the
application for dissolution, and (ii) the plan for dissolution
shall include provisions for continuation of this Agreement with a
responsible party acceptable to the other party being substituted
as a party to this Agreement, and such substituted party assumes
all obligations and rights of the dissolving party hereunder, then
such dissolution shall not be a default;
(ii)
The
taking of the Lease or any part thereof upon execution or other
process of law directed against Rangeview or the subjection of the
Lease or any part thereof to attachment at the instance of any
creditor or claimant against Rangeview, which attachment is not
discharged or disposed of within sixty (60) days after the levy
thereof;
(iii)
The
material default in the performance of any material term, covenant
or condition in this Agreement which default shall continue and not
be cured for a period of thirty (30) days after written notice
specifically setting forth the nature of the default has been given
by the non-defaulting party to the defaulting party, or if more
than thirty (30) days is reasonably required to cure such
matter complained of, if the defaulting party shall fail to
commence to correct the same within said thirty (30) day
period and shall thereafter fail to prosecute the same to
completion with reasonable diligence.
(b)
If an event of
default shall occur, then the non-defaulting party may, at its
option, without any prejudice to any other remedies it may have,
proceed to protect and enforce its rights against the defaulting or
breaching party by mandamus or such other suit, action or special
proceedings in equity or at law, in any court of competent
jurisdiction, including an action for damages or specific
performance, or by self-help. In the event of any litigation or
other proceeding to enforce any of the terms, covenants or
conditions hereof, the prevailing party in such litigation or other
proceeding shall obtain, as part of its judgment or award, its
reasonable attorneys’ fees and costs.
(c)
If either party
shall act or fail to act in a manner which would constitute an
event of default under any New Service Agreement (as that term may
be defined or described in any New Service Agreement) or if
Rangeview is in default pursuant to Section 13.2(a)(ii),
immediately, with the passage of time, with notice, or any of the
foregoing, the non-defaulting party may, at its option, without
prejudice to any other remedies it may have, cure such event of
default and seek reimbursement from the defaulting party for any
costs and damages associated therewith or offset such costs and
damages from any amounts owed to the defaulting party under this
Agreement or otherwise without waiting for the thirty-day period
provided for in Section 13.2(a)(iii) or the sixty-day period
provided for in Section 13.2(a)(ii) to run.
(d)
If an event of
default shall occur and after the non-defaulting party proceeds in
accordance with Section 13.2(b) or (c), the non-defaulting party
shall be permitted to terminate this Agreement upon sixty (60) days
advance written notice to the defaulting party only if: (i)
monetary damages are not paid by the defaulting party when due or
(ii) the defaulting party refuses to perform its obligations
hereunder.
13.3
Service Provider Right of
Termination
. Service Provider
may terminate this Agreement at any time without cause upon giving
one year’s prior written notice to Rangeview. During the
one-year period, Service Provider shall continue to discharge all
of its obligations under this Agreement and shall be entitled to
the benefits of this Agreement, unless Rangeview, at its option,
requires Service Provider to discontinue providing services
hereunder prior to the expiration of the one-year notice
period.
13.4
Termination of New Service
Agreement
. If
Rangeview’s rights under a New Service Agreement expire or
are terminated, the New Service Agreement shall be deleted from the
Schedule of Service and shall no longer be part of the rights and
obligations under this Agreement. This Agreement shall remain in
full force and effect as to all New Service Agreements remaining on
the Schedule of Service.
13.5
Compliance with
Regulations
. The parties
understand and agree that compliance with all applicable federal
and state regulations must take place at all times. In the event of
any termination of this Agreement, with or without cause, the
parties shall cooperate to ensure that there is no gap or break in
the compliance with all applicable regulations in the provision of
service to Water Users and Wastewater Users during the transition
of service, including the payment of all applicable rates, fees and
charges by Water Users and Wastewater Users and as required by
Section 8.2.
13.6
Multi-Fiscal Year
Obligation
. Nothing in this
Agreement shall be interpreted or construed as constituting a
multiple fiscal year obligation of Rangeview as defined in Article
X, Section 20 of the Colorado Constitution.
ARTICLE XIV
14.1
Assignment
. Servicer Provider
may assign its interest in this Agreement, but only upon terms
expressly approved in writing by Rangeview, which approval may not
be unreasonably withheld. Rangeview shall not be deemed to be
unreasonable in withholding consent if it is unable to obtain any
consent required under a New Service Agreement. Any attempted
assignment in contravention of this Section shall be null and void.
Notwithstanding the foregoing, Servicer Provider may contract with
third parties to perform portions of its obligations under this
Agreement and such action on Servicer Provider’s part shall
not be deemed an assignment of its interest in this
Agreement.
14.2
Third Party
Beneficiaries
. It is not the
intent of the parties, nor shall it be the effect of this
Agreement, to vest rights of any nature or form in individuals or
entities not executing this Agreement as a party.
14.3
Notice
. All notices
required by this Agreement shall be in writing and shall be
delivered to the person to whom the notice is directed, in person,
by courier service or by United States mail as a certified item,
return receipt requested, addressed to the address stated below.
Notices delivered in person or by courier service shall be deemed
given when delivered to the person to whom the notice is directed.
Notices delivered by mail shall be deemed given on the date of
delivery as indicated on the return receipt. The parties may change
the stated address by giving ten (10) days’ written notice of
such change pursuant to this Section.
If to
Rangeview:
Rangeview
Metropolitan District
141
Union Boulevard, Suite 150
Lakewood, CO
80228
Attention:
Manager
If to
Service Provider:
Pure
Cycle Corporation
34501
E. Quincy Ave., Box 10, Bldg. 34
Watkins, Colorado
80137
Attention:
President
14.4
Construction
. Where
required for proper interpretation, words in the singular shall
include the plural, and the masculine gender shall include the
neuter and the feminine, and vice versa, as is appropriate. The
article and section headings are for convenience and are not a
substantive portion of the Agreement. The Agreement shall be
construed as if it were equally drafted in all aspects by all
parties.
14.5
Entire Agreement
. This
Agreement, including the items referenced herein or to be attached
in accordance with the provisions of this Agreement, constitutes
the entire agreement among the parties pertaining to the subject
matter of this Agreement and supersedes all prior and
contemporaneous agreements and understandings of the parties as to
the subject matter of this Agreement. No representation, warranty,
covenant, agreement or condition not expressed in this Agreement
shall be binding upon the parties or shall change or restrict the
provisions of this Agreement.
14.6
Authority
. Each of the
parties represents and warrants that it has all requisite power,
corporate and otherwise, to execute, deliver and perform its
obligations pursuant to this Agreement, that the execution,
delivery and performance of this Agreement and the documents to be
executed and delivered pursuant to this Agreement have been duly
authorized by it, and that upon execution and delivery, this
Agreement and all documents to be executed and delivered pursuant
to this Agreement will constitute its legal, valid and binding
obligation, enforceable against it in accordance with their
terms.
14.7
Copies
. Numerous copies
of this Agreement have been executed by the parties. Each such
executed copy shall have the full force and effect of an original,
executed Agreement.
14.8
Counterparts
. This
Agreement may be executed in one or more counterparts, all of which
together shall constitute one and the same instrument.
14.9
Amendment
. This Agreement
shall not be amended except by a writing executed by both
parties.
14.10
Compliance with Law
.
Rangeview and Service Provider covenant and agree that during the
continuance of this Agreement, they shall comply fully with all
provisions, terms, and conditions of all laws whether state or
federal, and orders issued thereunder, which may be in effect
during the continuance hereof.
14.11
Binding Effect
. The
benefits and terms and obligations of this Agreement shall extend
to and be binding upon the successors or permitted assigns of the
respective parties hereto.
14.12
Severability
. If
any clause or provision of this Agreement is illegal, invalid or
unenforceable under present or future laws effective during the
term of this Agreement, then, and in that event, it is the
intention of the parties hereto that the remainder of this
Agreement shall not be affected thereby. It is also agreed that in
lieu of each clause or provision of this Agreement that is illegal,
invalid or unenforceable, there shall be added as a part of this
Agreement a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.
14.13
Duty of Good Faith and Fair Dealing;
Regular Consultation
. The parties
acknowledge and agree that each party has a duty of good faith and
fair dealing in its performance of this Agreement. Service Provider
will advise Rangeview of its activities no less than annually
during the term of this Agreement and will respond to reasonable
requests of Rangeview for additional information on Service
Provider’s activities.
14.14
Further Assurance
. Each
of the parties hereto, at any time and from time to time, will
execute and deliver such further instruments and take such further
action as may reasonably be requested by the other party hereto, in
order to cure any defects in the execution and delivery of, or to
comply with or accomplish the covenants and agreements contained in
this Agreement and/or any other agreements or documents related
thereto.
14.15
Governing Law
. This
Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado and applicable federal
law.
14.16
Arbitration
. Any controversy
or claim arising out of or relating to the computation of amounts
due pursuant to Section 8.2 under this Agreement and all other
controversies or claims which the parties have expressly agreed
herein shall be submitted to arbitration, shall be settled by
arbitration in accordance with the Commercial Rules of the American
Arbitration Association, including discovery, experts, evidence and
hearings. Judgment upon the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof. Arbitration
shall be instituted on written demand of any party setting forth
the issues to be arbitrated. The party responding to the
arbitration demand shall respond to the demand within ten (10)
days, after which the parties shall proceed to select an arbitrator
within ten (10) days; provided however, that if the parties are
unable to agree on a single arbitrator within such ten (10) days,
the arbitration shall be by majority decision of a panel of three
arbitrators, at least two of whom shall have experience and
expertise in water rights or water utility matters, who may, but
need not, be affiliated with the American Arbitration Association.
Within ten (10) days, each party shall appoint one arbitrator, who
together shall appoint the third. If a party fails to appoint an
arbitrator within ten (10) days, an arbitrator shall be appointed
for such party by the American Arbitration Association upon the
request of another party. Arbitration shall be concluded and an
award entered within sixty (60) days of the completion of selection
of the arbitration panel, unless a shorter period is set forth
elsewhere in this Agreement.
14.17
Litigation and Attorneys’
Fees
. Except as
provided in Section 14.16 above, in the event of claims,
disputes or other disagreements between the parties which the
parties are not able to resolve amicably, either party may bring
suit in a court of competent jurisdiction seeking resolution of the
matter. The prevailing party in any arbitration or suit shall be
entitled to recover its reasonable attorneys’ fees and costs
from the other party.
14.18
No Waiver of Governmental
Immunity
. Nothing in this
Agreement shall be interpreted or construed as constituting a
waiver of the immunity granted to Rangeview pursuant to the
Colorado Governmental Immunity Act, C.R.S. § 24-10-101,
et seq
., as
amended.
14.19
Force Majeure
.
Should either party be unable to perform any obligation required of
it under this Agreement, other than the payment of money, because
of any cause beyond its control (including, but not limited to war,
insurrection, riot, civil commotion, shortages, strikes, lockout,
fire, earthquake, calamity, windstorm, flood, material shortages,
failure of any suppliers, freight handlers, transportation vendors
or like activities, or any other force majeure), then such
party’s performance of any such obligation shall be suspended
for such period as the party is unable to perform such
obligation.
IN
WITNESS WHEREOF, the parties hereto have executed this Service
Agreement on the date first written above.
Rangeview
:
RANGEVIEW METROPOLITAN DISTRICT,
acting by and through its water enterprise
By:
/s/ Mark
Harding
Attest By:
/s/ Scott
Lehman
Mark
Harding,
President
Scott Lehman, Secretary
STATE
OF COLORADO )
)
ss.
COUNTY
OF ARAPAHOE )
The
foregoing instrument was acknowledged before me this 16th day of
June 2017, by Mark Harding as President, and Scott Lehman as
Secretary of RANGEVIEW METROPOLITAN DISTRICT,
a quasi-municipal
corporation and political subdivision of the state of
Colorado.
Witness
my hand and official seal.
My
commission expires: November 17, 2020
/s/ James D.
Ewing
Notary
Service Provider
: PURE CYCLE
CORPORATION, a Colorado corporation
By:
/s/ Mark
Harding
Mark
Harding, President
STATE
OF COLORADO )
)
ss.
COUNTY
OF ARAPAHOE )
The
foregoing instrument was acknowledged before me this 16th day of
June 2017, by Mark Harding as President of Pure Cycle Corporation,
a Colorado corporation.
Witness
my hand and official seal.
My
commission expires: November 17, 2020
/s/ James D.
Ewing
Notary
Exhibit A
Schedule of Services
(as of
June 16, 2017)
1.
Service Area
– Elbert County/Wild Pointe Ranch
Water
Service Agreement by and between Rangeview Metropolitan District,
acting by and through its Water Activity Enterprise, and Elbert
& Highway 86 Commercial Metropolitan District, acting by and
through its Wild Pointe Water Activity Enterprise, effective as of
December 15, 2016 (the “Wild Pointe Service
Agreement”).
b.
Additional
Consideration
:
Service
Provider paid Rangeview $1,600,000 in cash in exchange for the
exclusive right to provide water services to customers in Wild
Pointe Ranch in accordance with the Wild Pointe Service
Agreement.
None
2.
Service Area
– Sky Ranch Development
Water
and Wastewater Service Agreement for the Sky Ranch Development by
and between Rangeview Metropolitan District, acting by and through
its Water Activity Enterprise, and PCY Holdings, LLC, dated June
16, 2017 regarding the Sky Ranch Development.
b.
Additional
Consideration
:
None
None
PCY HOLDINGS, LLC
and
RICHMOND AMERICAN HOMES OF COLORADO, INC.
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky
Ranch)
Table of Contents
1
|
Purchase and Sale
|
2
|
2
|
Purchase Price. Purchase Price Calculation
|
2
|
3
|
Payment of Purchase Price
|
3
|
4
|
Seller’s Title
|
3
|
5
|
Seller Obligations
|
7
|
6
|
Pre-Closing Conditions
|
12
|
7
|
Closing
|
13
|
8
|
Closings; Closing Procedures
|
13
|
9
|
Seller’s Delivery of Title
|
16
|
10
|
Due Diligence Period; Acceptance of Property; Release and
Disclaimer
|
17
|
11
|
Seller’s Representations
|
24
|
12
|
Purchaser’s Obligations
|
26
|
13
|
Excusable Delay
|
29
|
14
|
Cooperation
|
29
|
15
|
Fees
|
29
|
16
|
Water and Sewer Taps; Fees
|
29
|
17
|
Reimbursements and Credits
|
31
|
18
|
Name and Logo
|
32
|
19
|
Renderings
|
32
|
20
|
District
|
32
|
21
|
Soil Hauling
|
33
|
22
|
Specially Designated Nationals and Blocked Persons
List
|
33
|
|
|
|
23
|
Assignment
|
34
|
24
|
Survival
|
34
|
25
|
Condemnation
|
34
|
26
|
Brokers
|
35
|
27
|
Default and Remedies
|
35
|
28
|
General Provisions
|
36
|
DEFINITIONS
“
Alternative
Service
” shall have the meaning set forth in Section
5(b).
“
Architectural
Review Committee
” shall have the meaning set forth in
Section 12(d).
“
Authorities
”
and “
Authority
” shall have the
meaning set forth in the Recitals.
“
BMPs
”
shall have the meaning set forth in Section 28(x).
“
Board
”
shall have the meaning set forth in Section 16(b).
“
CDs
”
shall have the meaning set forth in Section 5(a)(i).
“
Closed
”
shall have the meaning set forth in Section 7.
“
Closing
Date
” shall have the meaning set forth in Section
8(b).
“
Closing
”
shall have the meaning set forth in Section 7.
“
Communication
Improvements
” shall have the meaning set forth in
Section 20.
“
Communications
”
shall have the meaning set forth in Section 28(j).
“
Completion
Notice
” shall have the meaning set forth in Section
5(b).
“
Confidential
Information
” shall have the meaning set forth in
Section 28(bb).
“
Continuation
Notice
” shall have the meaning set forth in Section
10(a).
“
Contract
”
shall have the meaning set forth in the Recitals.
“
County
Records
” shall have the meaning set forth in Section
5(a)(i).
“
County
”
shall have the meaning set forth in the Recitals.
“
Dedications
”
shall have the meaning set forth in Section 17.
“
Deferred
Purchase Price
” shall have the meaning set forth in
Section 2(a).
“
Deposit
”
shall have the meaning set forth in Section 3(a).
“
Design
Guidelines
” shall have the meaning set forth in
Section 12(d).
“
Development
”
shall have the meaning set forth in the Recitals.
“
District
Improvements
” shall have the meaning set forth in
Section 16(b).
“
District
”
shall have the meaning set forth in Section 9(d).
“
Due
Diligence Period
” shall have the meaning set forth in
Section 10(a).
“
Easement
”
shall have the meaning set forth in Section 20.
“
Effective
Date
” shall have the meaning set forth in the
Recitals.
“
Entitlements
”
shall have the meaning set forth in Section 5(a)(i).
“
Environmental
Claim
” shall have the meaning set forth in Section
10(h).
“
Environmental
Laws
” shall have the meaning set forth in Section
10(g).
“
EPA
”
shall have the meaning set forth in Section 10(c).
“
Escalator
”
shall have the meaning set forth in Section 2(b).
“
Existing
Entitlement Documents
” shall have the meaning set
forth in Section 5(a)(i).
“
Feasibility
Review
” shall have the meaning set forth in Section
10(a).
“
Filing
”
and “
Filings
” shall have the
meaning set forth in the Recitals.
“
Final
Approval
” shall have the meaning set forth in Section
5(a)(ii).
“
Final
Lotting Diagram
” shall have the meaning set forth in
Section 1.
“
Final
Plat
” shall have the meaning set forth in Section
5(a)(i).
“
Final
Subdivision Documents
” shall have the meaning set
forth in Section 5(a)(i).
“
Finished
Lot Improvements
” shall have the meaning set forth in
the Recitals.
“
First
Closing
” shall have the meaning set forth in Section
1.
“
Force
Majeure
” shall have the meaning set forth in Section
13.
“
General
Assignment
” shall have the meaning set forth in
Section 8(d)(iii)(9).
“
Good
Funds
” shall have the meaning set forth in Section
2(a).
“
Government
Warranty Period
” shall have the meaning set forth in
Exhibit C.
“
Governmental
Fees
” shall have the meaning set forth in Section
17.
“
Governmental
Warranty
” shall have the meaning set forth in Exhibit
C.
“
Hazardous
Materials
” shall have the meaning set forth in Section
10(g).
“
Homebuyer
Disclosure
” shall have the meaning set forth in
Section 12(e).
“
House
Plans
” shall have the meaning set forth in Section
12(d)(i).
“
Infrastructure
Improvements
” shall have the meaning set forth in
Section 17.
“
Initial
Purchase Price
” shall have the meaning set forth in
Section 2(a).
“
Lien
Affidavit
” shall have the meaning set forth in Section
4(a).
“
Lot
”
and “
Lots
” shall have the
meaning set forth in the Recitals.
“
Lot
Development Agreement
” shall have the meaning set
forth in the Recitals.
“
Lotting
Diagram
” shall have the meaning set forth in the
Recitals.
“
Master
Commitment
” shall have the meaning set forth in
Section 4(a).
“
Master
Covenants
” shall have the meaning set forth in Section
4(d).
“
Master
Declaration
” shall have the meaning set forth in
Section 4(d).
“
Metro
District Payments
” shall have the meaning set forth in
Section 16(b).
“
New
Exception Objection
” shall have the meaning set forth
in Section 4(b).
“
New
Exception Review Period
” shall have the meaning set
forth in Section 4(b).
“
New
Exceptions
” shall have the meaning set forth in
Section 4(b).
“
NOI
”
shall have the meaning set forth in Section 28(x).
“
Non-Government
Warranty Period
” shall have the meaning set forth in
Exhibit C, Section 5(b).
“
Non-Government
Warranty
” shall have the meaning set forth in Exhibit
C, Section 5(b).
“
Non-Seller
Caused Exceptions
” shall have the meaning set forth in
Section 4(b).
“
NORM
”
shall have the meaning set forth in Section 10(c).
“
OFAC
”
shall have the meaning set forth in Section 22.
"
Offsite
Infrastructure Improvements
" shall have the meaning set
forth in Section 5(b).
“
Other
New Exceptions
” shall have the meaning set forth in
Section 4(b).
“
Overex
”
shall have the meaning set forth in Section 10(e).
“
Permissible
New Exceptions
” shall have the meaning set forth in
Section 4(b).
“
Permitted
Exceptions
” shall have the meaning set forth in
Section 9.
“
PIF
Percentage
” shall have the meaning set forth in
Section 9(e).
“
Property
”
shall have the meaning set forth in the Recitals.
“
Public
Improvement Fee
” or “PIF” shall have the
meaning set forth in Section 9(e).
“
Public
Improvements
” shall have the meaning set forth in
Exhibit C, Section 5(a).
“
Punch-List
Items
” shall have the meaning set forth in Section
5(b).
“
Purchase
Price
” shall have the meaning set forth in Section
2.
“
Purchaser
Parties
” shall have the meaning set forth in Section
10(i).
“
Purchaser’s
Geotechnical Reports
” shall have the meaning set forth
in Section 10(e).
“
Purchaser’s
SWPPP
” shall have the meaning set forth in Section
28(x).
“
Purchaser
”
shall have the meaning set forth in the Recitals.
“
Rangeview
”
shall have the meaning set forth in Section 16(a).
“
Representatives
”
shall have the meaning set forth in Section 28(bb).
“
SDF
”
shall have the meaning set forth in Section
16(c)(iii).
“
SDP
Criteria
” shall have the meaning set forth in Section
12(d).
“
Second
Closing
” shall have the meaning set forth in Section
1.
“
Seller
Caused Exception
” shall have the meaning set forth in
Section 4(b).
“
Seller
Cure Period
” shall have the meaning set forth in
Section 4(b).
“
Seller
Documents
” shall have the meaning set forth in Section
10(a).
“
Seller
Party
” or “
Seller Parties
” shall
have the meaning set forth in Section 10(h).
“
Seller’s
Actual Knowledge
” shall have the meaning set forth in
Section 11(h).
“
Seller’s
Condition Precedent
” shall have the meaning set forth
in Section 6(a).
“
Seller’s
Representations
” shall have the meaning set forth in
Section 11.
“
Seller
”
shall have the meaning set forth in the Recitals.
“
Sidewalks
”
shall have the meaning set forth in Exhibit C, Section
4.
“
Sky
Ranch
” shall have the meaning set forth in the
Recitals.
"
Substantially
Complete
" or "
Substantial Completion
" shall
have the meaning set forth in Section 5(b).
“
Survey
”
shall have the meaning set forth in Section 4(a).
“
SWPPP
”
shall have the meaning set forth in Section 28(x).
“
Takedown
1 Building Permit Required Improvement Deadline
” shall
have the meaning set forth in Section 8(b).
“
Takedown
1 Closing Date
” shall have the meaning set forth in
Section 8(b).
“
Takedown
1 Lots
” shall have the meaning set forth in the
Recitals.
“
Takedown
2 Closing Date
” shall have the meaning set forth in
Section 8(b).
“
Takedown
2 Closing
” shall have the meaning set forth in Section
8(b).
“
Takedown
2 Lots
” shall have the meaning set forth in the
Recitals.
“
Takedown
Commitment
” shall have the meaning set forth in
Section 4(b).
“
Takedown
”
shall have the meaning set forth in the Recitals.
“
Tap
Purchase Agreement
” shall have the meaning set forth
in Section 16(a).
“
Title
Company
” shall have the meaning set forth in Section
4(a).
“
Title
Objections
” shall have the meaning set forth in
Section 4(a).
“
Tree
Lawns
” shall have the meaning set forth in Exhibit C,
Section 4.
CONTRACT FOR PURCHASE
AND SALE OF REAL ESTATE
THIS
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE (this "
Contract
" or
“Agreement”) is entered into as of the last date of the
signatures hereto (the "
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
WHEREAS, Seller is
developing a master planned residential community to be known as
"
Sky
Ranch
" which is located in Arapahoe County, Colorado
(“
County
”).
The Sky Ranch master planned residential community may also be
referred to herein as the "
Development
".
The preliminary concept map for Phase A of the Development is
depicted on
Exhibit A
attached hereto. The Development is being platted in several
subdivision filings and developed in phases. Each subdivision
filing is hereinafter sometimes respectively referred to as a
“
Filing
”
and collectively as “
Filings
”.
WHEREAS, Seller
desires to sell to Purchaser, and Purchaser desires to purchase and
obtain from Seller, approximately 190 platted single family
detached residential lots (individually referred to as a
"
Lot
" and
collectively as the "
Lots
") in
the Development which will be finished in accordance with this
Contract and which will be used for the construction of single
family residential dwellings upon the terms and conditions set
forth in this Contract.
WHEREAS, Seller is
selling platted residential lots within the Development to multiple
homebuilders, including Purchaser. The Lots to be sold by Seller
and acquired by Purchaser that are located within the Development
shall be hereinafter collectively referred to as the "
Property
."
The Lots will be conveyed at one or more Closings as more
particularly provided herein and each such Closing may be referred
to herein as a “
Takedown.
”
The Lots which are to be conveyed at the first Closing shall be
sometimes hereinafter collectively referred to as the "
Takedown 1
Lots
"; and, the Lots which are to be conveyed at the second
Closing shall be sometimes hereinafter collectively referred to as
the "
Takedown 2
Lots
".
WHEREAS, as of the
Effective Date, the Lots have not been subdivided pursuant to a
recorded final subdivision plat. The number and location of the
Lots to be acquired by Purchaser are generally depicted on the
preliminary concept map for Phase A of the Development attached
hereto as
Exhibit A
(the
"
Lotting
Diagram
"). The precise number, dimension and location of the
Lots will be established at the time the subdivision plat for such
Lots is approved by the County and/or any other relevant
governmental authority (collectively, the "
Authorities
"
and each an “
Authority
”).
As of the Effective Date, the parties anticipate that Purchaser
will acquire approximately 190 Lots that are approximately 50 feet
wide by approximately 110 feet deep for the construction of single
family detached homes.
WHEREAS, following
Purchaser’s acquisition of Lots, Seller will construct
certain infrastructure improvements for the Lots as described on
Exhibit
C
attached hereto (the "
Finished Lot
Improvements
") pursuant to a lot development agreement
executed by Seller and Purchaser in the form set forth on
Exhibit
F
("
Lot Development
Agreement
").
1.
Purchase and
Sale
. The Property
shall be purchased at two (2) Closings. Subject to the terms and
conditions of this Contract, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase from Seller, on or before the
dates set forth in
Section
6(b)
below, the Lots in each
Takedown, as generally depicted on the Lotting Diagram and as
follows:
At the
Takedown 1 Closing (“
First
Closing
”), one-hundred (100) Lots;
At the
Takedown 2 Closing (“
Second
Closing
”), ninety (90) Lots.
Notwithstanding the
foregoing, however, the parties acknowledge and agree that the
Parties shall negotiate during the Due Diligence Period to reach
agreement on a mutually acceptable site plan for the Lots
(“
Final Lotting
Diagram
”) and that the exact number and location of
the Lots within each Takedown are subject to adjustment based upon
the approval by the Authorities of the Final Plat (as hereinafter
defined) that includes the Lots to be acquired by Purchaser at each
Takedown. The precise number, dimension (subject to the provisions
of this Contract), location and legal description of the Lots will
be established at the time the Final Plat for such Lots is approved
by the County and/or any other Authority, and upon approval of each
such Final Plat the parties shall execute an amendment to this
Contract setting forth the legal description of those Lots included
in the approved Final Plat.
2.
Purchase Price
.
The
purchase price to be paid by Purchaser to Seller for each Lot (the
"
Purchase
Price
") shall consist of the Initial Purchase Price (as
hereinafter defined) and the Deferred Purchase Price (as
hereinafter defined). The Purchase Price for each Lot shall be
calculated as provided in the following Section 2(a) and shall be
subject to adjustment as provided in Section 2(b)
below:
(a)
Purchase Price Payments
. For
each Lot the Purchase Price shall be the sum of the
“
Initial Purchase
Price
” of Fifteen Thousand and 00/100 Dollars
($15,000.00) paid by Purchaser to Seller by wire transfer or other
immediately available and collectible funds ("
Good
Funds
"), and the “
Deferred Purchase
Price
” of Fifty Four Thousand and 00/100 Dollars
($54,000.00) paid by Purchaser to Seller for a total of Sixty Nine
Thousand and 00/100 Dollars ($69,000.00) per Lot (subject to
adjustment as hereinafter provided in Section 2(b) of this
Agreement). The Deferred Purchase Price for the Lots acquired by
Purchaser at the First Closing shall be secured by a letter of
credit delivered by Purchaser into escrow at the First Closing, and
the Deferred Purchase Price for the Lots acquired by Purchaser at
the Second Closing shall be secured by a letter of credit delivered
by Purchaser into escrow at the Second Closing, as more
particularly described in Section 5(c) below.
(b)
Purchase Price Escalator
. The
portion of the Purchase Price of each Lot not paid at the First
Closing will increase by an amount equal to the amount of simple
interest that would accrue thereon for the period elapsing between
the date that the First Closing occurs until the date such amount
is paid, at a per annum rate equal to two and one-half percent
(2.5%) (the “
Escalator
”).
By way of example and for clarification purposes only, if the
Initial Purchase Price of a Lot at the Closing of the Takedown 1
Lots is $15,000, then at a subsequent Closing occurring 12 months
(365 days) following the date of the closing of the Takedown 1
Lots, the Purchase Price for a Lot at such subsequent Closing will
be $15,375, which is calculated as follows: $15,000 + ($15,000 x
.025) = $15,375.
3.
Payment of Purchase
Price
. The Purchase
Price for each of the Lots, as determined pursuant to
Section
2
above, shall be payable as
follows:
(a)
Earnest Money Deposit
. Within
three (3) business days following the Effective Date, Purchaser
shall deliver to the Title Company (as defined in
Section
4(a)
hereof) an earnest money
deposit in the amount of $100,000.00 (the “
Initial
Deposit
”. At the end of the Due Diligence Period and
within three (3) business days following the delivery of the
Continuation Notice (as hereinafter defined), Purchaser shall
deliver to the Title Company an additional $110,000 (the
“
Additional
Deposit
”). The Initial Deposit and the Additional
Deposit and all interest earned thereon shall be referred to herein
as the "
Deposit
."
The Title Company will act as escrow agent and invest the Deposit
in a federally insured institution at the highest money market rate
available. The Deposit shall be paid in Good Funds. One-half of the
Deposit will be applied to the Closing Purchase Price Payment for
the Takedown 1 Lots and one-half of the Deposit will be applied to
the Closing Purchase Price Payment for the Takedown 2 Lots. If this
Contract is terminated prior to the expiration of the Due Diligence
Period for any reason, the Initial Deposit shall be refunded to
Purchaser. If this Contract is terminated prior to the Deposit
being fully applied to the Purchase Price at the last Closing, the
unapplied portion of the Deposit shall be paid to Seller, except in
the case of a termination of this Contract pursuant to a provision
that expressly entitles Purchaser to a refund of the Deposit as
provided elsewhere herein.
(b)
Initial Purchase Price
. That
portion of the Purchase Price for each Lot that is identified as
the Initial Purchase Price and calculated as provided in Section 2
above shall be paid by Purchaser to Seller in Good Funds at the
Closing that is applicable to the Lot.
(c)
Deferred Purchase Price
. That
portion of the Purchase Price for each Lot that is identified as
the Deferred Purchase Price in Section 2 above is due and payable
by Purchaser to Seller, as provided in and pursuant to the terms of
the Lot Development Agreement (as hereinafter
defined).
(a)
Preliminary Title Commitment
.
Within ten (10) business days after the Effective Date, Seller
shall furnish to Purchaser, at Seller’s expense, a current
commitment for a Title Policy (as defined below) for the Property
(the "
Master
Commitment
") issued by Land Title Guarantee Company
("
Title
Company
") and underwritten by First American Title Insurance
Company, together with copies of the instruments listed in the
schedule of exceptions in the Master Commitment. If the Master
Commitment contains any exceptions from coverage which are
unacceptable to Purchaser, then Purchaser shall object to the
condition of the Master Commitment in writing within forty-five
(45) days of Purchaser’s receipt of the Master Commitment
together with copies of all documents constituting exceptions to
title (the "
Title
Objections
"). Upon receipt of the Title Objections, Seller
may, at its option and at its sole cost and expense, clear the
title to the Property of the Title Objections within twenty (20)
days of receipt of the Title Objections. In the event Seller fails,
or elects not to clear the title to the Property of the Title
Objections on or before the date that is ten (10) days before the
expiration of the Due Diligence Period, the Purchaser, as its sole
remedy, may elect before the expiration of the Due Diligence Period
either: (i) to terminate this Contract, in which event the Initial
Deposit shall be promptly returned to Purchaser, Purchaser shall
deliver to Seller all information and materials received by
Purchaser from Seller pertaining to the Property and any
non-confidential and non-proprietary information otherwise obtained
by Purchaser pertaining to the Property, and thereafter the parties
shall have no further rights or obligations under this Contract
except as otherwise provided in
Section
12(c)
below; or (ii) to
waive such objections and proceed with the transactions
contemplated by this Contract, in which event Purchaser shall be
deemed to have approved the title matters as to which its Title
Objections have been waived. If Purchaser fails to provide the
Title Objections prior to the expiration of the sixty (60) day
period required by this
Section
4
(a)
, Purchaser shall be deemed
to have elected to waive its objections as described in the
preceding clause. If Purchaser fails to notify Seller of its
election to terminate this Contract or waive it objections,
Purchaser shall be deemed to have elected to waive its objections
to any title matter that Seller has failed or elected not to cure.
Seller shall release at or prior to the applicable Closing any
monetary lien that Seller caused or created against the Property
with respect to that portion of the Property to be acquired at a
particular Closing other than non-delinquent real estate taxes and
assessments and Permitted Exceptions, and such monetary liens shall
not constitute Permitted Exceptions (as hereinafter defined). At
each Closing, without the need for Purchaser to object to the same
in Purchaser’s Title Objections, Seller shall execute and
deliver the Title Company's standard form mechanic's lien affidavit
(the “
Lien
Affidavit
”), and to the extent required by the Title
Company a commercially reasonable indemnity agreement (the
“
Title Company
Indemnity
”), in connection with the standard printed
exception for liens arising against the Lots purchased at the
Closing for work or materials ordered or contracted for by Seller,
and any information regarding such work reasonably requested by
Title Company, provided, however, if the Purchaser determines
during the Due Diligence Period that the Title Company refuses or
is unwilling to delete the standard printed exception for liens as
part of extended coverage despite Seller’s offer to execute
and deliver the Lien Affidavit and Title Company Indemnity, then
Purchaser will have the right to terminate this Contract on or
before the expiration of the Due Diligence Period whereupon the
Deposit will be returned to Purchaser, or Purchaser may proceed
with the Closing in which event the Title Policy will contain and
the Lots will be conveyed subject to the standard printed exception
for liens unless the Title Company thereafter agrees to delete such
lien exception, however, the Purchaser has no further termination
right if the Title Company does not agree to do so. Seller shall
request that the Takedown Commitment (as hereinafter defined)
provide for the deletion of the other standard printed exceptions
from the Title Policy as part of extended coverage (provided that
Seller's only obligation with respect thereto shall be to provide a
copy of Seller’s existing survey ("
Survey
"), if
any, of the land that contains the Lots, obtain and furnish a plat
certification issued by a licensed surveyor, to execute the Title
Company’s standard form seller-owner final affidavit and
agreement as reasonably modified by Seller and as to Seller’s
acts only if such affidavit is required by the Title Company for
the purpose of deleting any exception for parties in possession
(“
Owner’s
Affidavit
”), and to execute the Title Company's Lien
Affidavit and Title Company Indemnity with respect to Seller's
acts, in form and substance reasonably acceptable to Seller).
Seller has no obligation to provide a new Survey or to update any
existing Survey.
(b)
Subsequently Disclosed
Exceptions
. Not less than fifteen (15) days prior to the
applicable Closing, Purchaser may request that the Title Company
issue an updated title commitment for that portion of the Property
to be acquired at such Closing (each a "
Takedown
Commitment
"), together with copies of any additional
instruments listed in the schedule of exceptions which are not
reflected in the Master Commitment furnished pursuant to
Section
4
(a)
above or in any prior
Takedown Commitment. Additional items disclosed by a Takedown
Commitment or by an amendment to the Master Commitment that affect
title to the subject Property are referred to as
“
New
Exceptions
”. New Exceptions affecting title to the
subject Property that are allowed by the provisions of this
Contract are referred to as “
Permissible New
Exceptions
” and all other New Exceptions are referred
to as “
Other New
Exceptions
”. Purchaser has no right to object to any
Permissible New Exception. Other New Exceptions which do not
materially adversely affect title, as reasonably determined by
Purchaser, or use of a Lot shall also be Permissible New
Exceptions. Purchaser shall have a period of seven (7) days from
the date of its receipt of such Takedown Commitment or amendment to
the Master Commitment and a copy of the New Exceptions (the
"
New
Exception Review Period
") to review and to approve or
disapprove any Other New Exceptions. If the Other New Exception is
unacceptable to Purchaser, Purchaser shall object to the Other New
Exception in writing within seven (7) days from the date of
Purchaser’s receipt of the Takedown Commitment, together with
a copy of the New Exceptions (the "
New Exception
Objection
"). Upon receipt of the New Exception Objection,
Seller shall cure the New Exception Objection (by deletion,
insuring over or endorsement) to the extent that such Other New
Exception was caused or created by Seller and is not otherwise
permitted by this Contract ("
Seller Caused
Exception
"). If the New Exception Objection relates to an
Other New Exception that was not caused by Seller
(“
Non-Seller Caused
Exception
”), Seller may, at its sole discretion, cure
the New Exception Objection, within fifteen (15) days of receipt of
the New Exception Objection (“
Seller Cure
Period
”) and the applicable Closing Date will be
extended to accommodate the Seller Cure Period. In the event Seller
fails, or elects not to cure a Non-Seller Caused Exception within
such fifteen (15) day period, the Purchaser, as its sole remedy,
may elect within five (5) days after the end of the Seller Cure
Period either: (i) to terminate this Contract as to the Lots
affected by such New Exception, in which event the prorata portion
of the unapplied Deposit for such Lots shall be refunded to
Purchaser and the parties shall have no further rights or
obligations under this Contract as to such Lots; or (ii) to
waive such objection and proceed with the acquisition of the Lots
in such Takedown, in which event Purchaser shall be deemed to have
approved the New Exception. If Purchaser fails to notify Seller of
its election to terminate this Contract as to the applicable Lots
in accordance with the foregoing sentences within five (5) days
after the expiration of the Seller Cure Period (i) Purchaser shall
be deemed to have elected to waive its objections as described in
the preceding sentences (ii), and all such items shall be
deemed to be Permitted Exceptions.
(c)
Permitted Exceptions; Additional
Easements
. Seller shall convey title to the Lots included in
each Takedown of the Property to Purchaser at the Closing for such
Takedown subject to the Permitted Exceptions described in
Section
9
hereof. Prior to each such
Closing, Seller shall have the right, subject to the limitations
set forth below and in
Exhibit
B
, to utilize the reservation of rights set forth on
Exhibit B
hereof, to convey
additional easements as Permissible New Exceptions to utility and
cable service providers, governmental or quasi-governmental
Authorities, metropolitan, water and sanitation districts,
homeowners associations or property owners associations or other
entities that serve the Development or adjacent property for
construction of utilities and other facilities to support the
Development or such adjacent property, including but not limited to
sanitary sewer, water lines, electric, cable, broad-band and
telephone transmission, storm drainage and construction access
easements across the Property not yet acquired by Purchaser,
allowing Seller or its assignees the right to install and maintain
sanitary sewer, water lines, cable television, broad-band,
electric, telephone and other utilities on the Property and on the
adjacent property owned by Seller and/or its affiliates, and
further, to accommodate storm drainage from the adjacent property.
Such easements shall require the restoration of any surface damage
or disturbance caused by the exercise of such easements, shall not
be located within the building envelope of any Lot, shall not
materially detract from the value, use or enjoyment of (i) the
Lots affected or the remaining portion of the Property on which
such easements are to be located, or (ii) any adjoining
property of Purchaser.
(d)
Master Covenants
. Prior to the
Takedown 1 Closing, Seller shall, subject to the limitations set
forth below, prepare covenants, conditions and restrictions for the
Development or the portion thereof in which the Property is located
(the "
Master
Declaration
") incorporating architectural and design
standards and guidelines, use limitations and restrictions and
which may establish an owners association or provide that the
District shall administer the Master Declaration, among other
matters, together with such supplemental declarations as may have
been or may be recorded to subject the Property to the provisions
of the Master Declaration (collectively, the "
Master
Covenants
"). Seller shall provide a draft of the Master
Covenants in substantially the form to be recorded to Purchaser for
Purchaser’s review within thirty (30) days after the
Effective Date. If the Master Covenants contain any provisions
which are unacceptable to Purchaser in Purchaser’s sole
discretion, Purchaser shall object to such provisions with
particularity in writing within ten (10) days of receipt of the
draft Master Covenants. Upon receipt of such objection, Seller may,
at its option, modify the objectionable provisions of the Master
Covenants within ten (10) days of receipt of such objection from
Purchaser. In the event Seller fails or elects in its discretion
not to modify the objectionable provisions of the Master Covenants
within such ten (10) day period, Purchaser shall have the right as
its sole remedy to elect either: (i) to terminate this Contract, in
which event the Initial Deposit shall be promptly returned to
Purchaser, Purchaser shall deliver to Seller all information and
materials received by Purchaser from Seller pertaining to the
Property and any non-confidential and non-proprietary information
otherwise obtained by Purchaser pertaining to the Property, and
thereafter the parties shall have no further rights or obligations
under this Contract except as otherwise provided in
Section
12(c)
below; or (ii) to waive
any objections to the Master Covenants and proceed with the
transactions contemplated by this Contract, in which event
Purchaser shall be deemed to have approved the Master Covenants as
to which its objections have been waived. If Purchaser fails to
provide written notice to Seller of its objection to the Master
Covenants within ten (10) days of receipt of the draft Master
Covenants as required by this
Section
4
(d)
, Purchaser shall be deemed
to have elected to waive its objections as described in the
preceding clause and the Master Covenants shall be deemed to be
Permitted Exceptions. Seller shall be permitted to revise the
Master Covenants at any time before the First initial Closing under
this Contract without the consent of Purchaser, provided that any
such revisions have no material adverse effect on the Lots acquired
or to be acquired by Purchaser.
(e)
Title Policy
. Within a
reasonable time after each Closing, Seller, at its expense, shall
cause the Title Company to deliver a Form 2006 ALTA extended
coverage owner’s policy of title insurance
(“
Title
Policy
”), insuring Purchaser’s title to the
Property conveyed at such Closing, pursuant to the applicable
Takedown Commitment and subject only to the Permitted Exceptions,
together with such endorsements as Purchaser may request and which
the Title Company agrees to issue during the Due Diligence Period.
Such Title Policy shall include extended coverage subject to the
provisions of Section 4(a) hereof. Seller shall pay the premium for
the basic policy at such Closing and Purchaser shall pay any
additional premium for extended coverage if available. The Title
Policy shall provide insurance in an amount equal to the Purchase
Price for all Lots purchased at such Closing. At each Closing,
Seller shall offer to execute and deliver a Lien Affidavit and an
Owner’s Affidavit, and shall obtain and furnish a plat
certification issued by a licensed surveyor, both as provided in
Section 4(a)
above.
Purchaser shall pay any fees charged by the Title Company to delete
the standard pre-printed exceptions. Purchaser shall pay for the
premiums for any endorsements requested by Purchaser, except that
Seller shall pay for any endorsements that Seller agrees to provide
in order to cure a Title Objection.
5.
Seller
Obligations
. Seller shall have
the following obligations:
(a)
Entitlements
.
(i)
Existing Entitlements
. The
County previously approved the following entitlements for the
Property (collectively, the “
Existing
Entitlement Documents
”): a Preliminary Plat and a
Preliminary Development Plan. Seller shall provide a copy of the
Existing Entitlement Documents to Purchaser as part of the Seller
Documents.
(ii)
Platting and Entitlements
.
Seller shall be responsible, at Seller's sole cost and expense, for
preparing and processing in a commercially reasonable manner and
timeframe, and diligently pursuing and obtaining Final Approval (as
defined below) from the County and any other appropriate Authority
and recording in the records of the Clerk and Recorder of the
County (the "
County
Records
"), as may be required, of the following for each
respective Takedown: (i) a specific development plan that includes
the Property (“
SDP
”);
(ii) an administrative site plan (“
ASP
”)
and final subdivision plat or plats for each Filing within the
Property (each a "
Final
Plat
"); (iii) the public improvement construction plans
relating to such Final Plat ("
CDs
"); and
(iv) the development or subdivision improvement agreement
associated with such Final Plat and other similar documentation
required by the Authorities in connection with approval of such
Final Plat (collectively, such documents are referred to, with
respect to each Takedown, as the "
Final Subdivision
Documents
" and together with the Existing Entitlement
Documents, collectively, the "
Entitlements
"
for such Takedown). The Final Subdivision Documents shall
substantially comply with the Final Lotting Diagram, and shall
provide that each of the Lots are approximately 50 feet wide by
approximately 110 feet deep, with a building envelope on not less
than 40’ wide (after taking into consideration applicable
setbacks), and the Final Subdivision Documents shall not impose new
or additional requirements upon Buyer the cost of which is expected
to exceed $3,000 for any Lot. Seller shall use commercially
reasonable efforts to have the Entitlements for each Takedown,
respectively, to be approved by the Authorities and recorded as
necessary in the County Records with applicable governmental or
third-party appeal or challenge periods applicable to an approval
decision of the Board of Commissioners or Planning Commission
having expired without any appeal then-pending (“
Final
Approval
”). Seller shall use commercially reasonable
efforts to obtain Final Approval of the Entitlements for the
Takedown 1 Lots on or before nine (9) months after the expiration
of the Diligence Period (or any extensions thereof). If Final
Approval of the Entitlements for the Takedown 1 Lots has not been
achieved as aforesaid on or before nine (9) months after the
expiration of the Diligence Period (or any extensions thereof),
then Seller, in its discretion, shall have the right to extend the
date for obtaining such Final Approval for a period not to exceed
six (6) months after the initial nine (9) month period. If Seller
extends the time period for obtaining such Final Approval for the
Takedown 1 Lots, then during such extended time period Seller shall
continue to use commercially reasonable efforts to obtain Final
Approval of such Entitlements, and failing which, Seller shall not
be in default of its obligations under this Contract, but the
Purchaser may as its sole remedy hereunder terminate this Contract
as to such Takedown and any remaining Takedowns by written notice
to Seller, delivered within ten (10) business days after the end of
the time period as extended for obtaining such Final Approval, in
which case each party shall thereupon be relieved of all further
obligations and liabilities under this Contract, except as
otherwise provided herein, and the Deposit shall be returned to
Purchaser. Failure to give notice as described above shall be an
irrevocable waiver of Purchaser’s right to terminate this
Contract due to Seller’s failure to obtain Final Approval of
the Entitlements for the Takedown 1 Lots. The timing for Final
Approval of the Entitlements for Takedowns after Takedown 1 is as
set forth in Section 6(b)(i) hereof. During the approval process,
Seller shall keep Purchaser reasonably informed of the process and
the anticipated results therefrom. Purchaser, at no material cost
to Purchaser (other than costs incurred to obtain services that
could reasonably be performed or provided in-house), shall
reasonably cooperate with Seller in Seller’s efforts to
obtain Final Approval of the Entitlements by the
County.
(iii)
Lot Minimums for each Takedown
.
The Final Plat(s) for the Property and the Lots are anticipated to
be in a form which is substantially consistent, with the Final
Lotting Diagram, subject to changes made necessary by the
Authorities and/or final engineering decisions which are necessary
to properly engineer, design, and install the improvements in
accordance with the requirements of the County and other applicable
Authorities.
(iv)
Recordation of Final Plat
. At
or before each Closing, Seller shall have caused to be recorded the
Final Plat that includes the Lots that are to be purchased at that
Closing. Seller shall be responsible for providing to the County
the bond or other financial assurance that is required by the
County to record each Final Plat.
(b)
Offsite Infrastructure
. Seller
shall cause Rangeview and/or the District to install and construct
in a commercially reasonable manner, and diligently pursue to
substantial completion the offsite infrastructure improvements that
are identified and described on
Exhibit D
attached hereto and incorporated herein by this reference
(collectively, the "
Offsite
Infrastructure Improvements
"). The Offsite Infrastructure
Improvements will be completed in a good, workmanlike and lien-free
manner, in accordance with the CDs, applicable laws, codes,
regulations and governmental requirements for the Development and
the requirements of this Agreement. Seller shall or shall cause
Rangeview and/or the District, using commercially reasonable
efforts, to have the Offsite Infrastructure Improvements
Substantially Complete in accordance with the Schedule set forth on
Exhibit
D
, subject to Force Majeure, which schedule will
substantially conform to the timing set forth in clause (10) of
Section 5(c)(ii) below. Rangeview will be constructing a new
wastewater reclamation facility (“
WWRF
”)
for the Development. Seller shall provide evidence to Purchaser
that Rangeview has received the necessary authorizations from the
Water Quality Control Division of the Colorado Department of Public
Health and Environment and from the County to construct the WWRF,
and has awarded a contract for the construction of the WWRF.
Without limiting the generality of the foregoing, Purchaser
specifically acknowledges and agrees that the WWRF currently
planned as an Offsite Infrastructure Improvement will not be
Substantially Complete on or before the date that Purchaser obtains
its first building permit for a Lot. Therefore, Seller shall
provide, at Seller’s sole cost, a temporary alternative
service for the processing of wastewater sufficient for the
issuance of building permits and certificates of occupancy
consisting of two sequential batch reactor basins with a combined
volume of 500,0000 gallons, along with appurtenant facilities to
mitigate the development of odors, that Rangeview’s engineer
will certify as having been constructed in accordance with approved
plans and specifications (the “
Alternative
Service
”). The Alternative Service shall be
operational on the date that Purchaser obtains its first building
permit for a Lot, and shall continue in operation until such time
as the WWRF is Substantially Complete. Funding for the Alternative
Service shall be included in an Offsite Infrastructure Escrow
Agreement. Seller will give Purchaser written notice
(“
Completion
Notice
”) when each Offsite Infrastructure Improvement
is Substantially Complete. During the construction process, Seller
shall keep Purchaser reasonably informed of the progress of the
construction of the Offsite Infrastructure. The term "
Substantially
Complete
" or "
Substantial
Completion
" means that the improvements have been completed
in accordance with the CD’s subject to certain limitations
and other provisions set forth in Section 4.5.1 of the Lot
Development Agreement. Seller and/or Rangeview shall be responsible
for obtaining final acceptance by the County and any other
applicable Authority having jurisdiction in accordance with the
requirements of the County or other Authority. As an addition to
Purchaser’s Condition Precedent, Seller or Rangeview shall on
or before the First Closing (i) have substantially completed the
CDs for the Offsite Infrastructure Improvements; (ii) have obtained
development permits for the Offsite Infrastructure Improvements;
(iii) have let the contracts for installation of the Offsite
Infrastructure Improvements and (iv) have deposited funds into a
controlled disbursement account pursuant to one or more agreements
(each an “
Offsite
Infrastructure Escrow Agreement
” and in the plural
“
Offsite
Infrastructure Escrow Agreements
”) equal to the
contracted cost to Substantially Complete the Offsite
Infrastructure Improvements which Seller and/or Rangeview shall
have the right to draw upon to pay for such Offsite Infrastructure
Improvements as constructed. The form of the Offsite Infrastructure
Escrow Agreement shall be subject to Purchaser’s review and
approval during the Due Diligence Period and if Purchaser is not
satisfied with such agreement for any reason, then
Purchaser’s sole remedy shall be to terminate this Contract
under Section 10(a) and if Purchaser does not so terminate this
Contract then the Offsite Infrastructure Escrow Agreement(s) shall
be deemed approved. At Closing the Purchaser shall become a party
by joinder to the Offsite Infrastructure Escrow Agreements solely
with respect to remedies for a Seller default in timely completing
the Offsite Infrastructure Improvements (Seller and Purchaser agree
that the Offsite Infrastructure Escrow Agreement will provide
Purchaser the first right to step-in and complete the Off-site
Infrastructure Improvements. In the event that Seller does not
complete any Offsite Infrastructure Improvements by the required
date (subject to Force Majeure), the Purchaser and all other
purchasers of Lots in the Development shall have the right as their
remedy to withdraw the necessary funds out of such escrow to cause
completion of the applicable Offsite Infrastructure Improvements.
Seller shall deliver such Offsite Infrastructure Escrow Agreements
to Purchaser within 15 days following the Effective Date. Seller is
not obligated to install any amenities related to the Community
Park as part of the Offsite Infrastructure or the Finished Lot
Improvements, but Seller and Purchaser agree to use good faith
efforts during the Due Diligence Period to establish the timing,
financing other relevant details pertaining to the installation of
amenities on the Community Park.
(c)
Finished Lot Improvements/Lot
Development Agreement
.
(i)
At the First
Closing, Purchaser and Seller shall enter into the Lot Development
Agreement in the form attached as
Exhibit F
of
this Contract obligating Seller to construct and install the
Finished Lot Improvements as described on
Exhibit C
attached hereto.
(ii)
The Lot
Development Agreement includes, without limitation, provisions that
provide for the following: (1) phased completion of the Offsite
Infrastructure Improvements and the Finished Lot Improvements
consisting of two phases with respect to the Takedown 1 Lots and
two subsequent phases with respect to the Takedown 2 Lots for a
total of four phases; (2) the payment of the Deferred Purchase
Price by Purchaser as follows: For each phase, one-half of the
Deferred Purchase Price for the Lots in that phase shall be paid to
Seller upon substantial completion and construction acceptance by
Rangeview of that portion of the Finished Lot Improvements
consisting of the water, sanitary sewer and storm sewer
infrastructure that is necessary to serve the Lots in that phase,
and the remaining one-half of the Deferred Purchase Price for the
Lots in that phase shall be paid to Seller upon substantial
completion of the balance of Finished Lot Improvements that serve
that phase to the extent necessary to obtain building permits; (3)
Seller’s and/or the District’s obligation to post
surety as required by the County in connection with such phases;
(4) provisions regarding Seller’s and/or the District’s
agreements with the contractors who will construct the Finished Lot
Improvements; (5) Seller’s and/or the District’s
warranty obligations, as provided on
Exhibit C
;
(6) Seller’s obligation to obtain lien waivers and to
discharge mechanics liens related to construction of the Finished
Lot Improvements; (7) Purchaser step-in rights in the event of a
Seller and/or District default (as defined in the Lot Development
Agreement); (8) a license from Purchaser to permit construction of
the Finished Lot Improvements and performance of other related
activities on the Lots; (9) Seller’s obligation to pay
construction costs in excess of the Deferred Purchase Price; and
(10) a schedule providing for the first phase to be Substantially
Completed ten (10) months after the First Closing, with the second
phase to be Substantially Completed nine (9) months after
Substantial Completion of the first phase, with the third phase to
be Substantially Completed nine (9) months after the Second Closing
and the fourth phase to be Substantially Completed nine (9) months
after Substantial Completion of the third phase, all subject to
Force Majeure, and all subject to the terms and conditions of Lot
Development Agreement. The Seller, Purchaser, other
builder(s) affected by any improvements to be constructed under the
Lot Development Agreement that serve or benefit the Lots and other
property that is to be acquired by such other builder(s)
(“
Joint
Improvements
”) and the Title Company will at Closing
execute a “
Joint Improvements
Memorandum
” that describes the rights and obligations
of Seller, Purchaser, such other builder(s) and Title Company and
such document will supplement the Lot Development Agreement
regarding the installation and construction of any Joint
Improvements. The form of the Joint Improvements Memorandum shall
be agreed upon during the Inspection Period and attached to the Lot
Development Agreement as Exhibit J thereto. If such Joint
Improvements Memorandum is not agreed upon during the Due Diligence
Period, then the Purchaser shall as its sole remedy, has the right
to terminate the Contract prior to the expiration of the Due
Diligence Period, in which event the Initial Deposit shall be
returned to Purchaser as provided in Section 10(a)
hereof.
(iii)
After obtaining
Final Approval of all necessary Entitlements for the applicable
Lots, Seller acting as the constructing party under the Lot
Development Agreement shall commence and diligently pursue
completion or cause to be completed for the Lots being purchased
and acquired by Purchaser at each Closing, subject to Force
Majeure, the Finished Lot Improvements in accordance with the
phasing, provisions and schedules of the Lot Development Agreement
and all applicable laws, codes, regulations and governmental
requirements for the Lots. Seller will notify Purchaser when
each phase of the Finished Lot Improvements have been Substantially
Completed. Seller’s failure to comply with the foregoing
covenant shall not constitute a default hereunder unless and until
such failure shall constitute an event of default (as defined in
the Lot Development Agreement) under the Lot Development
Agreement.
(iv)
In order to secure
Purchaser’s obligation following each Closing to pay the
Deferred Purchase Price in accordance with the terms of this
Contract and the payment schedule set forth in the Lot Development
Agreement as described in Section 5(c) of this Contract, at each
Closing, Purchaser shall deliver to Title Company, acting as escrow
agent, a letter of credit issued by HomeAmerican Mortgage
Corporation in the form attached hereto as
Exhibit G
(the “
Letter of
Credit
”) and in an amount equal to the sum of the
Deferred Purchase Price for all of the Lots acquired by Purchaser
at such Closing, plus the estimated Escalator thereon in an amount
equal to $1,350.00 per Lot acquired at the Second Closing with
respect to the Letter of Credit delivered at the Second Closing.
Title Company shall hold and maintain the Letter of Credit pursuant
to this Agreement in an escrow account established by Title Company
for the benefit of Seller and Purchaser. The Letter of Credit for
each Closing shall remain in place until the final payment of the
Deferred Purchase Price applicable to such Closing has been made to
the Seller following Substantial Completion of the Finished Lot
Improvements which serve the Lots acquired by Purchaser at such
Closing. If the Letter of Credit is scheduled to expire prior to
the Substantial Completion of all of such Lots, and Purchaser has
not renewed the Letter of Credit at least fifteen (15) days prior
to the expiration date thereof, Title Company is authorized and
directed to draw down the full amount of the Letter of Credit and
deposit such funds in escrow to be used solely for the payment of
any unpaid Deferred Purchase Price. The Letter of Credit may
provide that it shall be reduced from time to time to the extent of
payments of the Deferred Purchase Price in Good Funds are made by
Purchaser for Finished Lot Improvements in accordance with the
terms, including the payment schedule, set forth in the Lot
Development Agreement and Section 5(c) of this Agreement. The
Letter of Credit for each Closing shall be returned to Purchaser,
together with an executed reduction certificate reducing the face
amount thereof to $0.00, upon payment in full of the Deferred
Purchaser Price for all of the Lots in such Closing. Failure by
Purchaser to pay any portion of the Deferred Purchase Price when
the same shall become due and payable, provided that at such
failure continues for a period of ten days after the delivery of
written notice thereof from Seller to Purchaser, shall entitle
Seller to enforce the collection of the delinquent Deferred
Purchase Price by drawing upon the Letter of Credit or having the
Title Company draw upon the Letter of Credit, and in either event
the funds so drawn shall be paid to Seller as payment of any unpaid
Deferred Purchase Price and such failure to pay shall be deemed
cured. If Seller or Title Company is unable to draw upon the Letter
of Credit, Seller may protect and enforce its rights under this
Agreement pertaining to payment of the Deferred Purchase Price by
(i) such suit, action, or special proceedings as Seller shall deem
appropriate, including, without limitation, any proceedings for the
specific performance of any covenant or agreement contained in this
Agreement and the Lot Development Agreement or the enforcement of
any other appropriate legal or equitable remedy, or for the
recovery of actual damages (excluding consequential, punitive
damages or similar damages) caused by Purchaser’s failure to
pay the Deferred Purchase Price, including reasonable attorneys'
fees, and (ii) enforcing Seller’s lien rights under the Lot
Development Agreement. Seller’s remedies are non-exclusive.
The foregoing provisions regarding the Letter of Credit as security
for payment of the Deferred Purchase Price shall be included in the
Lot Development Agreement in the form of escrow
instructions.
6.
Pre-Closing
Conditions
.
(a)
Seller’s Conditions
.
Seller’s obligations to close the First Closing hereunder are
contingent upon satisfaction of the following condition
("
Seller's Condition
Precedent
"): (i) that Purchaser and other homebuilders are
under contract to purchase at least 200 of the residential lots in
the Development, and close the initial purchase of lots under some
or all of such purchase and sale agreements as determined by Seller
simultaneously. If for any reason,
other than Seller’s fault or
exercise of its discretion, Seller's Condition Precedent is not
satisfied on or before the date of the First Closing, Seller may
terminate this Contract (in which event the Deposit shall be
returned to Purchaser), or elect, by written notice to Purchaser at
least ten (10) days before the First Closing, to waive the
condition and proceed to Closing for the applicable Lots for the
applicable Takedown, or elect to extend the applicable deadline and
the Closing for the applicable Lots for a period of time not to
exceed 60 days by giving written notice to Purchaser on or before
the respective deadlines set forth above for the applicable
Takedown, during which time Seller shall use commercially
reasonably efforts to cause such conditions to be
satisfied.
(b)
Purchaser’s Conditions
.
It shall be a condition precedent to Purchaser’s obligation
to close each Takedown, that the following conditions
(“
Purchaser’s
Conditions Precedent
”) have been
satisfied:
(i)
Final Approval of
the Entitlements (which Entitlements shall be as required by
Section 5(a) of this Agreement) for each respective Takedown by the
County and all other applicable Authorities and recordation of the
Final Plat thereof and such other Entitlements in the County
Records as may be required by the County on or before the
applicable Closing Date, as the same may be extended.
(ii)
Seller’s
representations and warranties set forth herein shall be materially
true and correct as of each Closing;
(iii)
The Title Company
shall be committed to issue to Purchaser the applicable Title
Policy with the endorsements as Purchaser may request and the Title
Company agrees in writing to issue prior to the expiration of the
Due Diligence Period, subject only to the Permitted Exceptions
accepted by Purchaser in accordance with the provisions of this
Contract.
(iv)
Purchaser obtaining
AMC Approval on or before the expiration of the Due Diligence
Period. The delivery of a Continuation Notice to Seller shall be
deemed to include AMC Approval;
(v)
Seller’s
delivery to Purchaser of satisfactory approval, in writing, of
Purchaser’s House Plans as provided in Section 12(d)(i) of
this Contract; and
(vi)
Purchaser shall
have received letters from the appropriate Authorities that the
Lots have water and sewer tap commitments sufficient for
Purchaser’s intended build-out of the Lots, subject to the
payment of tap fees and contingent upon completion of the necessary
water and sewer infrastructure.
If the
Purchaser’s Conditions Precedent are not satisfied on or
before each respective Closing Date of other applicable date
specified above, Purchaser may: (1) waive the unfulfilled
Purchaser’s closing condition, (2) extend the applicable
Closing Date for up to thirty (30) days to allow more time for
Seller to satisfy the unfulfilled Purchaser’s Condition
Precedent, or (3) as its sole remedy hereunder terminate this
Contract as to such Takedown and any remaining Takedowns by written
notice to Seller, delivered on or before two (2) business days
after the applicable Closing Date, in which case each party shall
thereupon be relieved of all further obligations and liabilities
under this Contract, except as otherwise provided herein, and the
Deposit made by Purchaser that has not been applied to the Purchase
Price for Lots already acquired by Purchaser shall be returned to
Purchaser. If Purchaser elects to extend the Closing Date under (2)
and the unsatisfied Purchaser’s Condition Precedent is not
satisfied as of the last day of the thirty (30) day extension
period, then Purchaser shall, as its sole remedy, elect to waive or
terminate under (1) or (3). Failure to give notice as described
above shall be an irrevocable waiver of Purchaser’s right to
terminate this Contract as to the affected Takedown pursuant to
this
Section
6
(a)
.
(c)
Moratorium
. After the Effective
Date and prior to each Closing, if any state, county, city, public
school district, or other Authority declares or effects any
moratorium or other limitation (“
Moratorium
”) on: (a) the issuance
permits for the construction of infrastructure to serve the Lots,
building permits for the construction of houses or Certificates of
Occupancy for those houses; (b) the purchase of sewer and/or water
taps; or (c) the processing of any engineering, architecture or
other plans or documents necessary for the construction of
residential units or infrastructure improvements to serve such
residential units, which Moratorium is applicable to the Lots,
then, in such event, Purchaser shall have the right to terminate
this Contract by delivery of written notice of termination to the
Seller. In the event of such termination by Purchaser, that portion
of the Deposit then on deposit shall be refunded to
Purchaser.
7.
Closing
. "
Closing
"
shall mean the delivery to the Title Company of all applicable
documents and funds required to be delivered pursuant to
Section 8
hereof
and unconditional authorization of the Title Company to disburse,
deliver and record the same. The purchase of Lots at the closing of
a Takedown shall be deemed to be "
Closed
" when
the documents and funds required to be delivered pursuant to
Section 8
hereinafter have been delivered to the Title Company, and the Title
Company agrees to unconditionally to disburse, deliver and record
the same.
8.
Closings;
Closing Procedures
(a)
On each respective
Closing Date, Purchaser shall purchase the number of Lots that
Purchaser is obligated to acquire hereunder in the applicable
Takedown.
(b)
Closing Dates
. The date of the
First Closing of the purchase and sale of the Takedown 1 Lots shall
be the date that is ten (10) days after the date that Final
Approval of the Entitlements is obtained. Such date of Closing is
herein referred to as the "
Takedown 1 Closing
Date
." The date of the Second Closing of the purchase and
sale of the Takedown 2 Lots (the "
Takedown 2
Closing
") shall be the date that eighteen (18) months after
the Takedown 1 Closing Date or such other date to which Seller and
Purchaser may mutually agree. Such date of Closing is herein
referred to as the "
Takedown 2 Closing
Date
." The term "
Closing
Date
" may be used to refer to each of the Takedown 1 Closing
Date and the Takedown 2 Closing Date. If Purchaser desires to
accelerate any of the Closing Dates, Purchaser may request that a
Closing Date be accelerated, and if Seller is willing to do so in
its sole and absolute discretion, the parties will work together to
prepare a mutually acceptable amendment to this Contract and the
Lot Development Agreement to accommodate such request. Seller shall
have the right to extend the Takedown 1 Closing Date for up to 60
days in order to satisfy Seller’s Condition Precedent as
provided in Section 6(a) of this Contract.
(c)
Closing Place and Time
. Each
Closing shall be held at 11:00 a.m. on the applicable Closing Date
at the offices of the Title Company or at such other time and place
as Seller and Purchaser may mutually agree.
(d)
Closing Procedures
. Each
purchase and sale transaction shall be consummated in accordance
with the following procedures:
(i)
All documents to be
recorded and funds to be delivered hereunder shall be delivered to
the Title Company to hold, deliver, record and disburse in
accordance with closing instructions approved by Purchaser and
Seller;
(ii)
At each Closing,
Seller shall deliver or cause to be delivered in accordance with
the closing instructions the following:
(1)
A special warranty
deed conveying the applicable portion of the Property to be
acquired at such Closing to Purchaser. The special warranty deed
shall contain a reservation of easements, minerals, mineral rights
and water and water rights, as well as other rights, as set forth
on
Exhibit B
. The special
warranty deed shall also be subject to non-delinquent general real
property taxes for the year of such Closing and subsequent years,
District assessments and the Permitted Exceptions.
(2)
Payment (from the
proceeds of such Closing or otherwise) sufficient to satisfy any
encumbrance relating to the portion of the Property being acquired
at such Closing, required to be paid by Seller at or before the
time of Closing.
(3)
A tax certificate
or other evidence sufficient to enable the Title Company to ensure
the payment of all general real property taxes and installments of
District assessments then due and payable for the portion of the
Property being acquired at such Closing.
(4)
An affidavit, in a
form sufficient to comply with applicable laws, stating that Seller
is not a foreign person or a foreign corporation subject to the
Foreign Investment in Real Property Tax Act, and therefore not
subject to its withholding requirements.
(5)
A certification or
affidavit to comply with the reporting and withholding requirements
for sales of Colorado properties by non-residents (Colorado
Department of Revenue Form DR-1083).
(6)
A Lien Affidavit
and Title Company Indemnity.
(7)
A partial
assignment of declarant rights or builder rights under the Master
Covenants, assigning only the following declarant rights (to the
extent such rights are not automatically granted to Purchaser as a
“builder” by the terms of the Master Covenants) from
Seller to Purchaser: to maintain sales offices, construction
offices, management offices, model homes and signs advertising the
Development and/or Lots, and such other rights to which the parties
may mutually agree.
(8)
The Tap Purchase
Agreement (as defined herein).
(9)
A general
assignment to Purchaser in the form attached hereto as
Exhibit E
("
General
Assignment
") with respect to the applicable
Lots.
(10)
An Owner’s
Affidavit.
(11)
The Lot Development
Agreement and the Joint Improvements Memorandum executed by
Seller.
(12)
The Offsite
Infrastructure Escrow Agreement(s) executed by Seller
.
(13)
Such other
documents as may be required to be executed by Seller pursuant to
this Contract or the closing instructions.
(iii)
At each Closing,
Purchaser shall deliver or cause to be delivered in accordance with
the closing instructions the following:
(1)
The Purchase Price
payable at such Closing, computed in accordance with
Section
2
above, for the Lots being
acquired at such Closing, such payment to be made in Good
Funds.
(2)
The Tap Purchase
Agreement.
(3)
The Lot Development
Agreement and the Joint Improvements Memorandum executed by
Purchaser.
(4)
The Offsite
Infrastructure Escrow Agreement(s) executed by
Purchaser.
(5)
All other documents
required to be executed by Purchaser pursuant to the terms of this
Contract or the closing instructions.
(6)
Payment of any
amounts due pursuant to
Section
16
hereof.
(iv)
At each Closing,
Purchaser and Seller shall each deliver an executed settlement
statement, which shall set forth all prorations, disbursements of
the Purchase Price and expenses applicable to such
Closing;
(v)
The following
adjustments and prorations shall be made between Purchaser and
Seller as of each Closing:
(1)
Real property taxes
and installments of District assessments, if any, for the
applicable portion of the Property for the year in which the
Closing occurs shall be prorated based upon the most recent known
rates, mill levy and assessed valuations; and such proration shall
be final.
(2)
Seller shall pay
real property taxes and District assessments for years prior to the
year in which the Closing occurs.
(3)
Purchaser shall pay
any and all recording costs and documentary fees required for the
recording of the deed.
(4)
Seller shall pay
the base premium for the Title Policy and for any endorsement
Seller agrees to provide to cure a Title Objection, and Purchaser
shall pay the premium for any other endorsements requested by
Purchaser in accordance with
Section
4
above, including an extended
coverage endorsement.
(5)
Each party shall
pay one-half (1/2) of any closing or escrow charges of the Title
Company.
(6)
All other costs and
expenses not specifically provided for in this Contract shall be
allocated between Purchaser and Seller in accordance with the
customary practice of commercial real estate transactions in
Arapahoe County, Colorado.
(vi)
Possession of the
applicable portion of the Property being acquired at each Closing
shall be delivered to Purchaser at such Closing, subject to the
Permitted Exceptions.
9.
Seller’s Delivery of
Title
. At each Closing,
Seller shall convey title to the applicable portion of the
Property, together with the following items, to the extent that
they have been approved, or are deemed to have been approved by
Purchaser pursuant to the terms of this Contract (collectively, the
"
Permitted
Exceptions
"):
(a)
all easements,
agreements, covenants, restrictions, rights-of-way and other
matters of record that affect title to the Property as disclosed by
the Master Commitment or any Takedown Commitment, or otherwise, to
the extent that such matters are approved or deemed approved by
Purchaser in accordance with
Section
4 above or
otherwise approved by Purchaser (unless otherwise identified herein
as an obligation, fee or encumbrance to be assumed by Purchaser or
which is otherwise identified herein as a Purchaser obligation
which survives such Closing, the foregoing items, however, shall
not include any mortgages, deeds of trust, mechanic’s liens
or judgment liens arising by, through or under Seller, which
monetary liens Seller shall cause to be released or fully insured
over by the Title Company, to the extent they affect any portion of
the Property, on or prior to the date that such portion of the
Property is conveyed to Purchaser);
(b)
the Entitlements,
including without limitation, the Final Plat applicable to the
Property being acquired at such Closing and all easements and other
terms, agreements, provisions, conditions and obligations as shown
thereon;
(c)
the Master
Covenants;
(d)
the inclusion of
the Property into the Sky Ranch Metropolitan District No. 5 (the
"
District
")
and such other special improvement districts or metropolitan
districts as may be disclosed by the Master Commitment or any
Takedown Commitment delivered to Purchaser pursuant to this
Contract;
(e)
a Public
Improvement Fee Covenant with respect to construction and
installation of eligible public improvements on the Property, which
imposes a public improvement fee equal to a percentage (the
“
PIF
Percentage
”) of all sales that occur on the Property
that is one percentage point less than the total sales tax imposed
on taxable sales occurring in that portion of the City of Aurora,
Colorado located within the boundaries of the County and the PIF
Percentage of the cost of building materials (the "
Public Improvement
Fee
" or "
PIF
"). The
PIF will be collected by (i) all sellers or providers of goods or
services who engage in any PIF sales transactions within those
portions of the Development subject to the PIF Covenant from the
purchaser or recipient of such goods or services and (ii) by all
homebuilders, and then will be paid over to the PIF collection
agent. The PIF collection agent will receive and remit the Public
Improvement Fee to the Seller or District. PIF sales shall not
include the sale of residential improvements or any goods incident
to the sale of residential improvements.
(f)
a reservation of
water and mineral rights as set forth on
Exhibit B
hereof;
(g)
applicable zoning
and governmental regulations and ordinances;
(h)
title exceptions,
encumbrances, or other matters arising by, through or under
Purchaser;
(i)
items apparent upon
an inspection of the Property or shown or that would be shown on an
accurate and current survey of the Property; and
(j)
any Permissible New
Exception and any other document required or permitted to be
recorded against the Property in the County Records pursuant to the
terms of this Contract.
10.
Due Diligence Period; Acceptance of
Property; Release and Disclaimer
.
(a)
Feasibility Review
. Within five
(5) business days following the Effective Date, Seller shall
deliver or make available (at Seller’s office or via
electronic file share) to Purchaser the following listed items to
the extent in Seller’s actual possession; if an item listed
below is not in Seller’s possession and not delivered or made
available to Purchaser, but is otherwise readily available to
Seller, then Purchaser may make written request to Seller to
provide such item, and Seller will use its reasonable efforts to
obtain and deliver or make such item available to Purchaser, but
Seller will have no obligation otherwise to obtain any item not in
Seller’s possession: (i) any environmental reports, soil
reports and certifications pertaining to the Lots, (ii) a copy of
any subdivision plat for the Property, (iii) engineering and
construction plans pertaining to the Lots, (iv) grading, drainage,
hydrology and other engineering reports and plans and engineering
and constructions plans for offsite improvements that are required
to obtain building permits/certificates of occupancies for
single-family detached residences constructed on the Lots; (v) any
PUD, Development Agreement, Site Development Plans and other
approvals pertaining to the Lots particularly and the Development
generally; (vi) any Special District Service Plans; (vii) any
existing ALTA or other boundary Survey of the Property; and (viii)
copies of any subdivision bonds or guarantees applicable to the
Lots (collectively, the "
Seller
Documents
"). Purchaser shall have a period expiring sixty
(60) calendar days following the Effective Date of this Contract
within which to review the same (the "
Due Diligence
Period
"). During the Due Diligence Period, Purchaser shall
have an opportunity to review and inspect the Property, all Seller
Documents and any and all factors deemed relevant by Purchaser to
its proposed development and the feasibility of Purchaser’s
intended uses of the Property, including without limitation
architectural approvals, in Purchaser’s sole and absolute
discretion (the "
Feasibility
Review
"). The Feasibility Review shall be deemed to have
been completed to Purchaser’s satisfaction only if Purchaser
gives written notice to Seller of its election to continue this
Contract ("
Continuation
Notice
") prior to the expiration of the Due Diligence
Period. If Purchaser fails to timely give a Continuation Notice or
if Purchaser gives a notice of its election to terminate, this
Contract shall automatically terminate, the Initial Deposit shall
be promptly returned to Purchaser, Purchaser shall deliver to
Seller all information and materials received by Purchaser from
Seller pertaining to the Property and any non-confidential and
non-proprietary information otherwise obtained by Purchaser
pertaining to the Property, and thereafter the parties shall have
no further rights or obligations under this Contract except as
otherwise provided in
Section
24
below.
(i)
Asset Management Committee
Approval
. On or before the expiration of the Due Diligence
Period, Purchaser shall have obtained the written approval of the
Board of Directors of M.D.C. Holdings, Inc. ("
MDC
") or MDC’s Asset Management
Committee (“
AMC
Approval
”), to issue a Continuation Notice for the
transaction contemplated hereunder, and if Purchaser delivers a
Continuation Notice or otherwise elects not to terminate this
Agreement on or before the expiration of the Due Diligence Period,
then Purchaser will be deemed to have obtained such approval and
satisfied this condition to Builder’s obligation to
Close;
(b)
Approval of Property
. If
Purchaser gives a Continuation Notice on or before the expiration
of the Due Diligence Period, except as otherwise provided in this
Section
10
, Purchaser shall be deemed
to have approved the Property, the Development and the feasibility
of Purchaser’s intended uses of the Lots (subject to the
terms and conditions of
Section
5(b)
and
Section 5(c)
hereof). Such
approval shall be deemed to include, but shall not be limited to,
Purchaser’s approval of the following as to the
Property:
(i)
The ability of
applicable utility companies to provide utility services to the
Property, including the quality, sizing and cost of such
services;
(ii)
The soil and
environmental conditions of the Property;
(iii)
All Seller
Documents delivered to Purchaser pursuant to this
Contract;
(iv)
All of the
Permitted Exceptions;
(v)
The financial
condition and other factors relevant to the operation of the
District;
(vi)
Any property
owners’ association to be established pursuant to the terms
of the Master Covenants; and
(vii)
Fitness for
Purchaser’s intended use, accessibility of roads, and the
condition and suitability for improvement and sale of the Lots,
subject to Seller’s obligations under this
Contract.
(c)
Radon
. Purchaser acknowledges
that radon gas and naturally occurring radioactive materials
(“
NORM
”)
each naturally occurs in many locations in Colorado. The Colorado
Department of Public Health and Environment and the United States
Environmental Protection Agency (the "
EPA
") have
detected elevated levels of naturally occurring radon gas in
residential structures in many areas of Colorado, including the
County and all of the other counties along the front range of
Colorado. The EPA has raised concerns with respect to adverse
effects on human health from long-term exposure to high levels of
radon and recommends that radon levels be tested in all Residences.
Purchaser acknowledges that Seller neither claims nor possesses any
special expertise in the measurement or reduction of radon or NORM.
Purchaser further acknowledges that Seller has not undertaken any
evaluation of the presence or risks of radon or NORM with respect
to the Property nor has it made any representation or given any
other advice to Purchaser as to acceptable levels or possible
health hazards of radon and NORM. SELLER HAS MADE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE
PRESENCE OR ABSENCE OF RADON, NORM OR OTHER ENVIRONMENTAL
POLLUTANTS WITHIN THE PROPERTY OR THE RESIDENCES TO BE CONSTRUCTED
ON THE LOTS OR THE SOILS BENEATH OR ADJACENT TO THE PROPERTY OR THE
RESIDENCES TO BE CONSTRUCTED ON THE LOTS PRIOR TO, ON OR AFTER THE
CLOSING DATE. Purchaser, on behalf of itself and its successors and
assigns, hereby releases the Seller from any and all liability and
claims with respect to radon gas. Every home sales contract entered
in to by Purchaser with respect to subsequent sales of Lots shall
include any disclosures with respect to radon as required by
applicable Colorado law.
(d)
Soils
. Purchaser acknowledges
that soils within the State of Colorado consist of both expansive
soils and low-density soils, and certain areas contain potential
heaving bedrock associated with expansive, steeply dipping bedrock,
which will adversely affect the integrity of a dwelling unit
constructed on a Lot if the dwelling unit and the Lot on which it
is constructed are not properly maintained. Expansive soils
contain clay mineral, which have the characteristic of changing
volume with the addition or subtraction of moisture, thereby
resulting in swelling and/or shrinking soils. The addition of
moisture to low-density soils causes a realignment of soil grains,
thereby resulting in consolidation and/or collapse of the soils.
Purchaser agrees that it shall obtain a current geotechnical
report for the Property and an individual lot soils report for each
Lot containing design recommendations from a licensed geotechnical
engineer for all structures to be placed upon the Lot. Purchaser
shall require all homes to have engineered footing and foundations
consistent with results of the individual lot soils report for each
Lot and shall take reasonable action as shall be necessary to
ensure that the homes to be constructed upon the Lots shall be done
in accordance with proper design and construction techniques.
Purchaser shall also provide a copy of the geotechnical report for
the Property and the individual lot soils report for each Lot to
Seller within seven (7) days after Seller’s request for the
same, and agrees in the event that this Contract terminates for any
reason Purchaser shall use reasonable efforts to assign, without
liability or recourse to Purchaser, at Seller’s request, the
geotechnical report for the Property and the individual lot soils
report for each Lot to any subsequent homebuilder who enters into a
purchase and sale agreement with Seller to purchase all of a
portion of the Lots. SELLER HAS MADE NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE PRESENCE OR ABSENCE
OF EXPANSIVE SOILS, LOW-DENSITY SOILS OR DIPPING BEDROCK UPON THE
PROPERTY AND PURCHASER SHALL UNDERTAKE SUCH INVESTIGATION AS SHALL
BE REASONABLE AND PRUDENT TO DETERMINE THE EXISTENCE OF THE SAME.
Purchaser shall provide all disclosures required by C.R.S. Section
6-6.5-101 in every home sales contract entered in to by Purchaser
with respect to subsequent sales of a Lot to a homebuyer.
Purchaser, on behalf of itself and its successors and assigns,
hereby releases the Seller from any and all liability and claims
with respect to expansive and low-density soils and dipping bedrock
located within the Property.
(e)
Over Excavation
. The Finished
Lot Improvements required for each Lot do not include any
“over excavation” or comparable preparation or
mitigation of the soil (the “
Overex
”)
on the Property and Purchaser shall have sole responsibility at
Purchaser’s sole expense with respect to the Overex and shall
have the right (pursuant to a license agreement to be provided by
Seller) to enter such Lots for the purposes of performing the
Overex; provided, however, that such entry shall be performed in a
manner that does not materially interfere with or result in a
material delay or an increase in the costs or any expenses in the
construction of the Finish Lot Improvements, and provided further
that Purchaser shall promptly repair any portion of the Lots and
adjacent property that is materially damaged by Purchaser or its
agents, designees, employees, contractors, or subcontractors in
performing the Overex. Purchaser shall obtain, at its cost, a
current geotechnical report for the Property and an individual lot
soils report for each Lot containing design recommendations from a
licensed geotechnical engineer for all structures to be placed upon
the Lot (“
Purchaser’s
Geotechnical Reports
”) shall not rely upon any
geotechnical or soils report furnished by Seller, and Seller shall
have no responsibility or liability with respect to the Overex,
Purchaser’s Geotechnical Reports or any matters related
thereto. The parties shall reasonably cooperate in coordinating
Purchaser’s completion of the Overex so that the Overex can
be properly sequenced with Seller’s completion of the
Finished Lot Improvements. In no event shall the Seller be liable
to Purchaser for any delay or costs or damages incurred by
Purchaser with respect to such Overex, even if caused by any delay
in installation of Finished Lot Improvements sequenced ahead of the
Overex. THE PARTIES ACKNOWLEDGE AND AGREE THAT SELLER IS NOT
PERFORMING ANY OVER-EXCAVATION OF THE LOTS AND THAT SELLER SHALL
HAVE NO LIABILITY WHATSOEVER WITH RESPECT TO OR ARISING OUT OF ANY
OVER-EXCAVATION OF THE LOTS OR EXPANSIVE SOILS PRESENT ON THE LOTS
AND SELLER EXPRESSLY DISCLAIMS ANY LIABILITY WITH RESPECT TO ANY
OVER-EXCAVATION OF THE LOTS AND EXPANSIVE SOILS PRESENT ON THE
LOTS.
(f)
No Reliance on Documents
.
Except as expressly stated in this Contract and/or expressly set
forth in the documents executed by Seller at Closing, Seller makes
no representation or warranty as to the truth, accuracy or
completeness of any materials, data or information (including,
without limitation, the Seller Documents) delivered by Seller or
its brokers or agents to Purchaser in connection with the
transaction contemplated hereby. Except as otherwise provided in
this Contract and/or expressly set forth in the documents executed
by Seller at Closing, all materials, data and information delivered
by Seller to Purchaser in connection with the transaction
contemplated hereby are provided to Purchaser as a convenience only
and any reliance on or use of such materials, data or information
by Purchaser shall be at the sole risk of Purchaser, except as
otherwise expressly stated herein. The Seller Parties shall not be
liable to Purchaser for any inaccuracy in or omission from any such
reports. Purchaser hereby represents to Seller that, to the extent
Purchaser deems the same to be necessary or advisable for its
purposes, and without waiving the right to rely upon the covenants,
agreements, representations and warranties expressly contained in
this Agreement and/or expressly set forth in the documents executed
by Seller at Closing: (i) Purchaser has performed or will perform
an independent inspection and investigation of the Lots and has
also investigated or will investigate the operative or proposed
governmental laws, ordinances and regulations to which the Lots may
be subject, and (ii) Purchaser shall acquire the Lots solely upon
the basis of its own or its experts' independent inspection and
investigation, including, without limitation, (a) the quality,
nature, habitability, merchantability, use, operation, value,
fitness for a particular purpose, marketability, adequacy or
physical condition of the Lots or any aspect or portion thereof,
including, without limitation, appurtenances, access, landscaping,
parking facilities, electrical, plumbing, sewage, and utility
systems, facilities and appliances, soils, geology and groundwater,
(b) the dimensions or sizes of the Lots, (c) the development or
income potential, or rights of or relating to, the Lots, (d) the
zoning or other legal status of the Lots or any other public or
private restrictions on the use of the Lots, (e) the compliance of
the Lots with any and all applicable codes, laws, regulations,
statutes, ordinances, covenants, conditions and restrictions, (f)
the ability of Purchaser to obtain any necessary governmental
permits for Purchaser's intended use or development of the Lots,
(g) the presence or absence of Hazardous Materials on, in, under,
above or about the Lots or any adjoining or neighboring property,
(h) the condition of title to the Lots, or (i) the economics of, or
the income and expenses, revenue or expense projections or other
financial matters, relating to the Lots, except as provided in any
express representations/warranties and/or covenants contained in
this Contract.
(g)
As Is
. Except for
Seller’s Representations (as defined in
Section 11
hereof) and
Seller’s performance of its obligations under this Contract,
Purchaser acknowledges and agrees that it is purchasing the
Property based on its own inspection and examination thereof, and
Seller shall sell and convey to Purchaser and Purchaser shall
accept the property on an “AS IS, WHERE IS, WITH ALL FAULTS,
LIABILITIES, AND DEFECTS, LATENT OR OTHERWISE, KNOWN OR
UNKNOWN” basis in an "AS IS" physical condition and in an "AS
IS" state of repair (subject to the Finished Lot Improvements
obligation set forth in
Section
5(b)
hereof). Except as
expressly contained in this Contract, the special warranty deed to
be delivered at each Closing and Seller’s Representations, to
the extent not prohibited by law the Purchaser hereby waives, and
Seller disclaims all warranties of any type or kind whatsoever with
respect to the Property, whether express or implied, direct or
indirect, oral or written, including, by way of description, but
not limitation, those of habitability, fitness for a particular
purpose, and use. Without limiting the generality of the foregoing,
Purchaser expressly acknowledges that, except as otherwise provided
in this Contract, the Seller’s Representations, the special
warranty deed to be delivered at each Closing, Seller makes no
representations or warranties concerning, and hereby expressly
disclaims any representations or warranties concerning the
following: (i) The value, nature, quality or condition of the
Property; (ii) Any restrictions related to development of the
Property; (iii) The applicability of any governmental requirements;
(iv) The suitability of the Property for any purpose whatsoever;
(v) The presence in, on, under or about the Property of any
Hazardous Material or any other condition of the Property which is
actionable under any Environmental Law (as such terms are defined
in this
Section
10
; (vi) Compliance of the
Property or any operation thereon with the laws, rules, regulations
or ordinances of any applicable governmental body; or (vii) The
presence or absence of, or the potential adverse health, economic
or other effects arising from, any magnetic, electrical or
electromagnetic fields or other conditions caused by or emanating
from any power lines, telephone lines, cables or other facilities,
or any related devices or appurtenances, upon or in the vicinity of
the Property.
EXCEPT
FOR REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE
EXPRESSLY SET FORTH IN THIS CONTRACT OR OTHERWISE PROVIDED IN THIS
CONTRACT, INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS OF SELLER
UNDER THE LOT DEVELOPMENT AGREEMENT AND THE OFFSITE INFRASTRUCTURE
AGREEMENT, AND AND/OR EXPRESSLY SET FORTH IN THE CLOSING DOCUMENTS,
SELLER SHALL NOT BE LIABLE TO PURCHASER FOR ANY CONSTRUCTION
DEFECT, ERRORS, OMISSIONS, OR ON ACCOUNT OF SOILS CONDITIONS OR ANY
OTHER CONDITION AFFECTING THE PROPERTY, INCLUDING, BUT NOT LIMITED
TO, THOSE MATTERS DESCRIBED ABOVE AND PURCHASER HEREBY FULLY
RELEASES SELLER, ITS PARTNERS, EMPLOYEES, OFFICERS, DIRECTORS,
REPRESENTATIVES, ATTORNEYS AND AGENTS (BUT NOT INCLUDING ANY THIRD
PARTY PROFESSIONAL SERVICE PROVIDERS [E.G., ENGINEERS, ETC.],
CONTRACTORS OR SIMILAR FIRMS OR PERSONS) FROM ANY AND ALL CLAIMS
AGAINST ANY OF THEM FOR ANY COST, LOSS, LIABILITY, DAMAGE, EXPENSE,
DEMAND, ACTION OR CAUSE OF ACTION (INCLUDING, WITHOUT LIMITATION,
ANY RIGHTS OF CONTRIBUTION) ARISING FROM OR RELATED TO ANY
CONSTRUCTION DEFECTS, ERRORS, OMISSIONS, OR OTHER CONDITIONS
AFFECTING THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, THOSE
MATTERS DESCRIBED ABOVE AND INCLUDING ANY ALLEGED NEGLIGENCE OF
SELLER.
As used
herein, "
Hazardous
Materials
" shall mean, collectively, any chemical, material,
substance or waste which is or hereafter becomes defined or
included in the definitions of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutant" or "contaminant," or words of similar
import, under any Environmental Law, and any other chemical,
material, substance, or waste, exposure to, disposal of, or the
release of which is now or hereafter prohibited, limited or
regulated by any governmental or regulatory authority or otherwise
poses an unacceptable risk to human health or the
environment.
As used
herein, "
Environmental
Laws
" shall mean all applicable local, state and federal
environmental rules, regulations, statutes, laws and orders, as
amended from time to time, including, but not limited to, all such
rules, regulations, statutes, laws and orders regarding the
storage, use and disposal of Hazardous Materials and regarding
releases or threatened releases of Hazardous Materials to the
environment.
(h)
Release
. Purchaser agrees that,
subject to the Seller’s Representations, Seller shall not be
responsible or liable to Purchaser for any defects, errors or
omissions, or on account of geotechnical or soils conditions or on
account of any other conditions affecting the Property, because
Purchaser is purchasing the Property AS IS, WHERE-IS, and WITH ALL
FAULTS. Purchaser hereby fully releases Seller, Seller’s
affiliates, divisions and subsidiaries and their respective
managers, members, partners, officers, directors, shareholders,
affiliates, representatives, employees, consultants and agents (the
“
Seller
Parties
” and each as a “
Seller
Party
”) from, and irrevocably waives its right to
maintain, any and all claims and causes of action that it or they
may now have or hereafter acquire against the Seller Parties for
any cost, loss, liability, damage, expense, demand, action or cause
of action arising from or related to any defects, errors, omissions
or other conditions affecting the Property, except to the extent
that such loss or other liability results from a breach of this
Contract, including the Seller’s Representations. Purchaser
hereby waives any Environmental Claim (as defined in this Section)
which it now has or in the future may have against Seller, provided
however, such waiver shall not apply to activities to be performed
by the Seller in accordance with the applicable Lot Development
Agreement. The foregoing release and waiver shall be given full
force and effect according to each of its express terms and
provisions, including, but not limited to, those relating to
unknown and suspected claims, damages and causes of action. The
foregoing release and waiver shall not apply to any cost, loss,
liability, damage, expense, demand, action or cause of action
arising from or related to (i) fraud or other intentional
misconduct of any Seller Party, or (ii) any claims against
contractors or subcontractors (excluding Seller and its affiliates)
for construction defects in the Finished Lot
Improvements.
As used
herein, "
Environmental
Claim
" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of
noncompliance or violation, whether written or oral, by any person,
organization or agency alleging potential liability, including
without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property
damages, including diminution of the market value of the Property
or any part thereof, personal injuries or penalties arising out of,
based on or resulting from the presence or release into the
environment of any Hazardous Materials at any location, or
resulting from circumstances forming the basis of any violation or
alleged violation of any Environmental Laws, and any and all claims
by any person, organization or agency seeking damages,
contribution, indemnification, costs, recovery, compensation or
injunctive relief resulting from the presence or release of any
Hazardous Materials.
(i)
Indemnification
. Purchaser
shall indemnify, defend (with counsel reasonably selected by
Purchaser with Seller approval) and hold harmless the Seller
Parties of, from and against any and all claims, demands,
liabilities, losses, expenses, damages, costs and reasonable
attorneys’ fees that any of the Seller Parties may at any
time incur by reason of or arising out of: (i) any work performed
in connection with or arising out of Purchaser’s activities,
or Purchaser’s acts or omissions with respect to any Overex
work, (ii) Purchaser’s failure to perform its work on the
Property in accordance with applicable laws, and (iii) personal
injuries or property damages occurring after a Closing by reason of
or arising out of the geologic, soils or groundwater conditions on
the Lots (such conditions being collectively referred to herein as
“
On-Lot Soil
Conditions
”, (iv) Purchaser’s development,
construction, use, ownership, management, marketing or sale
activities associated with the initial home construction on the
Lots (including, without limitation, land development, grading,
excavation, trenching, soils compaction and construction on the
Lots performed by or on behalf of Purchaser, including, but not
limited to, by all subcontractors and consultants engaged by
Purchaser), (v)
Intentionally
Deleted
(vi) the design, engineering, structural integrity
or construction of any homes constructed by Purchaser on the Lots
after a Closing, or (vii) any claim asserted by Purchaser’s
homebuyers or their successors in interest alleging construction
defects related to any Overex work performed by Purchaser. The
foregoing indemnity obligation of Purchaser includes acts and
omissions of Purchaser and all agents, consultants and other
parties acting for or on behalf of Purchaser (“
Purchaser
Parties
”). Purchaser is not required by this
indemnification provision to indemnify the Seller against (A) any
claims arising out of or relating to Off-Lot Soil Conditions
(defined below) (B) Seller's failure to perform its obligations
under this Contract or under any of the Closing documents, (C)
Seller's breach of an express warranty or representation set forth
in this Contract or in any of the Closing Documents, or (D) claims
arising directly from the decisions of Seller acting in its
capacity as declarant under the Declaration. Seller shall
indemnify, defend (with counsel reasonably selected by Seller with
Purchaser approval) and hold harmless the Purchaser Parties of,
from and against any and all claims, demands, liabilities, losses,
expenses, damages, costs and reasonable attorneys’ fees that
any of the Purchaser Parties may at any time incur by reason of or
arising out of either personal injuries or property damages
occurring after a Closing by reason of or arising out of the
geologic, soils or groundwater conditions on the Development other
than the On-Lot Soil Conditions (such conditions being collectively
referred to herein as “
Off-Lot Soil
Conditions
”). Seller covenants with Purchaser that
Seller has and will include geologic, soils and groundwater
provisions in the indemnities Seller obtains from other builders
within the Development at least as protective of Seller as provided
in this Section.
(j)
The provisions of
this
Section
10
shall survive
each Closing and the delivery of each respective deed to the
Purchaser. Notwithstanding anything to the contrary contained in
the foregoing provisions of this Section 10, the provisions of
Sections 10(d) through 10(i), inclusive, will not, under any
circumstances, be construed or interpreted as releasing Seller
from, and Purchaser hereby reserves, any claim arising out of (a)
the express representations of Seller contained in any Closing
document or in this Agreement, including, without limitation, the
Seller’s Representations, (b) Seller’s breach of its
obligations under the Lot Development Agreement and the Offsite
Infrastructure Escrow Agreements.
11.
Seller’s
Representations
. Seller hereby
represents and warrants to Purchaser as follows (the following
Subsections (a) through (i) collectively referred to herein as
"
Seller’s
Representations
"):
(a)
Litigation
. To Seller’s
Actual Knowledge (as defined in this
Section 11
), there is no
pending or threatened litigation which could materially adversely
affect the Property.
(b)
Bankruptcy
. There are no
attachments, levies, executions, assignments for the benefit of
creditors, receiverships, conservatorships, or voluntary or
involuntary proceedings in bankruptcy, or any other debtor relief
actions contemplated by Seller or filed by Seller, or to
Seller’s knowledge, pending in any current judicial or
administrative proceeding against Seller.
(c)
Non-Foreign Person
. Seller is
not a "foreign person" as that term is defined in Section 1445
of the Internal Revenue Code of 1986, as amended, and applicable
regulations.
(d)
Condemnation
. Seller has
received no written notice of any pending or threatened
condemnation or eminent domain proceedings which may affect the
Property or any part thereof.
(e)
Execution and Delivery
. The
execution, delivery and performance of this Contract by Seller does
not and will not result in a breach of, or constitute a default
under, any indenture, loan or credit agreement, mortgage, deed of
trust or other agreement to which Seller is a party. The
individual(s) executing this Agreement and the instruments
referenced herein on behalf of Seller have the legal power, right
and actual authority to bind Seller to the terms hereof and
thereof.
(f)
Default
. To Seller’s
Actual Knowledge, Seller has not defaulted under any covenant,
restriction or contract affecting the Property, nor has Seller
caused by its act or omission an event to occur which would with
the passage of time constitute a breach or default under such
covenant, restriction or contract.
(g)
Violation of Law
. To
Seller’s Actual Knowledge, Seller has not received any
written notice of non-compliance, addressed to Seller, from a
regulatory agency that has jurisdiction over the Property with
respect to any federal, state or local laws, codes, ordinances or
regulations relating to the Property.
(h)
Rights
. Seller has not granted
to any party, other than Purchaser hereunder, any option, contract,
right of refusal or other agreement with respect to a purchase or
sale of the Property. To Seller’s actual knowledge, there are
no leases, occupancy agreements, easements, licenses or other
agreements which grant third-parties any possessory or usage rights
to all or any part of the Property, except as disclosed in the
Master Commitment, and Takedown Commitment or the Seller
Documents.
(i)
Environmental
. To
Seller’s Actual Knowledge, neither Seller nor any third party
has used Hazardous Materials on, from, or affecting the Property in
any manner which violates federal, state, or local laws,
ordinances, rules, regulations, or policies governing the use,
storage, treatment, transportation, manufacture, refinement,
handling, production, or disposal of Hazardous Material, except as
may be disclosed in the Seller Documents,.
For
purposes of the foregoing, the phrase "
Seller’s
Actual Knowledge
" shall mean the current, actual, personal
knowledge of Mark Harding as President of Seller, without any duty
of investigation or inquiry and without imputation of any other
person’s knowledge. The fact that reference is made to the
personal knowledge of the above identified individual shall not
render such individual personally liable for any breach of any of
the foregoing representations and warranties; rather,
Purchaser’s sole recourse in the event of any such breach
shall be against Seller, and Purchaser hereby waives any claim or
cause of action against the above identified individual arising
from Seller’s Representations. In the event that any
information contained in the Seller Documents conflicts with
Seller’s Representations set forth in this Section, the
Seller Documents shall govern and control and such inconsistency
shall not constitute a breach by Seller of its Seller’s
Representations herein. Seller and Purchaser shall notify the other
in writing immediately if any Seller’s Representation become
untrue or misleading in light of information obtained by Seller or
Purchaser after the Effective Date. In the event that Purchaser has
actual knowledge that any of Seller’s Representations are
untrue or misleading, or of a breach of any of Seller’
Representations prior to the Closing, without the duty of further
inquiry, Purchaser shall be deemed to have waived any right of
recovery, and Seller shall not have any liability in connection
therewith.
Seller’s
Representations shall survive each respective Closing for a period
of six (6) months, except to the extent if any representation that
is known by Purchaser or is contained in materials made available
to Purchaser that makes Seller’s Representations untrue as of
such Closing Date and in any such instance Seller’s
Representations shall not survive Closing.
Seller
makes no promises, representations or warranties regarding the
construction, installation or operation of any amenities within the
Development, including without limitation, club houses, swimming
pools and sports courts. To the extent that any development plans,
site plans, rendering, drawings, marketing information or other
materials related to the Development include, depict or imply the
inclusion of any amenities in the Development, they are included
only to illustrate possible amenities for the Development that may
or may not be built and Purchaser shall not rely upon any such
materials regarding the construction, installation or operation of
any amenities within the Development.
12.
Purchaser’s
Obligations
. Purchaser shall
have the following obligations, each of which shall survive each
respective Closing and, where noted, termination of this Contract.
Notwithstanding any contrary provision set forth in this Contract,
Seller shall have the right to enforce said obligations by means of
any legal or equitable proceedings including, but not limited to,
suit for actual damages and equitable relief:
(a)
Master Covenants
. Purchaser
shall comply with all obligations applicable to Purchaser under the
Master Covenants.
(b)
Compliance with Laws
. With
respect to Purchaser’s entry onto the Property and following
each Closing, Purchaser shall comply with and abide by all laws,
ordinances, statutes, covenants, rules and regulations, building
codes, permits, association documents and other recorded
instruments (as they are from time to time amended, supplemented or
changed) which regulate any activities relating to
Purchaser’s use, ownership, construction, sale or
investigation of any Lot or any improvements thereon.
(c)
Entry Prior to Closing
. From
and after the Effective Date of this Contract until the Closing
Date or earlier termination of this Contract, and so long as no
default by Purchaser exists under this Contract, Purchaser and its
agents, employees and representatives shall be entitled to enter
upon the Property for purposes of conducting soil and other
engineering tests and to inspect and survey any of the Property. If
the Property is altered or disturbed in any manner in connection
with any of Purchaser’s activities, Purchaser shall
immediately return the Property to substantially the condition
existing prior to such activities. Purchaser shall promptly refill
holes dug and otherwise repair any damage to the Property as a
result of its activities. Purchaser and its agents shall not have
the right to conduct any invasive testing (e.g., borings, drilling,
soil/water sampling, etc.), except standard geotech preliminary
investigation, on the Lots, including, without limitation, any
so-called "Phase II" environmental testing, without first obtaining
Seller's written consent (and providing Seller at least seventy-two
(72) hours' prior written notice), which consent may be withheld by
Seller in its reasonable discretion and shall be subject to any
terms and conditions imposed by Seller in its reasonable
discretion. In the event that Purchaser fails to obtain Seller's
written consent prior to any invasive testing, in addition to and
without limiting any other obligations Purchaser may have under
this Section, Purchaser shall be fully responsible and liable for
all costs of remediation with respect to any materials disturbed in
any manner that requires remediation or that are removed in
connection with such invasive testing and including, but not
limited to, costs for disposal of materials removed during any
invasive testing. Purchaser shall not permit any lien to attach to
the Property or any portion of the Property as a result of the
activities. Purchaser shall indemnify, defend and hold Seller, its
officers, directors, shareholders, employees, agents and
representatives harmless from and against any and all
mechanics’ and materialmen’s liens, claims (including,
without limitation, personal injury, death and property damage
claims), damages, losses, obligations, liabilities, costs and
expenses including, without limitation, reasonable attorneys’
fees incurred by Seller, its officers, directors, shareholders,
employees, agents and representatives or their property arising out
of any breach of the provisions of this Section 12(c) by Purchaser,
its agents, employees or representatives. The foregoing indemnity
obligation of Purchaser includes acts and omissions of Purchaser
and all agents, consultants and other parties acting for or on
behalf of Purchaser. Purchaser shall maintain in effect during its
inspection of the Property commercial general liability coverage
for bodily injury and property damage in the amount of at least
$2,000,000.00 combined single limit, and automobile liability
coverage for bodily injury and property damage in the amount of at
least $2,000,000.00 combined single limit, and the policy or
policies of insurance shall be issued by a reputable insurance
company or companies which are qualified to do business in the
State of Colorado and shall name Seller as an additional insured.
In addition, before entering upon the Property, Purchaser shall
provide Seller with valid certificates indicating such insurance is
in effect. The foregoing indemnity shall not apply to claims due to
(i) Hazardous Materials or conditions that are not placed on the
Property or caused by Purchaser or its agents, (ii) pre-existing
matters, (iii) or Seller’s actions or inactions. The
indemnity and agreement set forth in this
Section 12(c)
shall
survive the expiration or termination of this Contract for any
reason.
(d)
Architectural Approval
. In
order to assure that homes constructed by Purchaser are compatible
with the other residential construction in the Development and meet
certain architectural, design, and landscaping criteria and
guidelines included in the approved SDP applicable to the Property
(the “
SDP
Criteria
”) and are otherwise acceptable to Seller, all
construction and landscaping on the Lots shall be subject to the
prior review and approval of Seller. The Master Covenants will
provide for the formation of an architectural review committee
(“
Architectural
Review Committee
”) and for the promulgation and
adoption of design guidelines (“
Design
Guidelines
”) to be applied by the Architectural Review
Committee. However, the Master Covenants and/or the Design
Guidelines will provide for an exemption from obtaining
Architectural Review Committee approval for the Seller and any
other person whose House Plans (as hereinafter defined) has been
reviewed and approved by the Seller.
(i)
Purchaser shall
submit to Seller the Purchaser’s elevations, floor plans,
typical landscape plans, exterior color palettes for homes and
other buildings, structures and improvements to be located on the
Lots (“
House
Plans
”) within 20 days following the Effective Date of
this Contract. Seller will review the House Plans and Seller shall
deliver notice to Purchaser of the Seller’s preliminary
approval or disapproval of the House Plans within ten (10) business
days after receipt of the House Plans, with such approval not to be
unreasonably withheld, conditioned or delayed. If Seller fails to
so notify Purchaser of preliminary approval or disapproval within
such 10-business day period, the Purchaser shall provide Seller
with written notice of the same and Seller shall notify Purchaser
within three (3) business days of its approval of disapproval. If
Seller fails to approve or disapprove within such 3-business day
period, the House Plans shall be deemed preliminarily approved. In
the event of disapproval, Purchaser shall revise and resubmit the
House Plans to the Seller for reconsideration, addressing the
matters disapproved by the Seller, and the procedure set forth
above shall be repeated until the House Plans are approved by the
Seller. Seller will use reasonable efforts to confirm that
Purchaser’s House Plans, as approved by Seller, are
compatible with the SDP Criteria. Upon County approval of the SDP,
Seller will conduct a second review of the House Plans for
compliance and compatibility with the SDP Criteria. If the House
Plans do not materially comply with the County-approved SDP
Criteria applicable to the Property, Seller will notify Purchaser.
If Purchaser and Seller are unable to agree upon mutually
acceptable revisions to the House Plans so that they comply with
the SDP Criteria, then Purchaser may terminate this Contract, in
which event the Deposit shall be promptly returned to Purchaser,
Purchaser shall deliver to Seller all information and materials
received by Purchaser from Seller pertaining to the Property and
any non-confidential and non-proprietary information otherwise
obtained by Purchaser pertaining to the Property, and thereafter
the parties shall have no further rights or obligations under this
Contract except those that expressly survive termination of this
Contract. After Seller approves the Purchaser’s House Plans,
and before Purchaser commences construction of homes on the Lots,
Purchaser shall submit to Seller any material changes in the
approved House Plans. Seller shall review the material changes for
general consistency and compatibility with the standards and
criteria set forth in the SDP Criteria and the Master Covenants and
if Seller approves such changes, Seller shall notify Purchaser
within ten (10) business days of its approval, not to be
unreasonably withheld, conditioned or delayed.
(ii)
Purchaser shall
obtain Seller approval of House Plans before commencing
construction on a Lot. Purchaser shall perform all construction,
development and landscaping in accordance with the approved House
Plans and in conformity with the Master Covenants and SDP Criteria
and all other requirements, rules, regulations of any local
jurisdictional authority. Purchaser and Seller acknowledge that the
County will not conduct architectural review nor issue approval of
Purchaser’s house plans, but rather requires the building
permit applicant to comply with the SDP Criteria. Seller’s
approval of Purchaser’s House Plans is only intended as a
review for compatibility with other residential construction in the
Development and the SDP Criteria and does not constitute a
representation or warranty that Purchaser’s House Plans
comply with SDP Criteria and Purchaser shall be responsible for
confirming such compliance.
(e)
Disclosures to Homebuyers
.
Purchaser shall include in each contract for the sale of any Home
constructed by Purchaser in the Development all disclosures
required by applicable laws, including, but not limited to the
Special District Disclosure, Common Interest Community Disclosure,
Mineral Disclosure and Source of Potable Water Disclosure, and any
other disclosure that applicable laws require to be made to each
homebuyer regarding expansive/low-density soils, radon and other
matters (“
Homebuyer
Disclosures
”). Purchaser shall furnish to Seller upon
request a copy of Purchaser’s disclosures to homebuyers which
includes the Homebuyer Disclosures.
13.
Force
Majeure
.
A delay in or failure to perform any obligations required of Seller
or Purchaser under this Contract shall not constitute a default to
the extent such delay or failure is caused by Force Majeure and all
times for performance shall be extended by the number of days of
Force Majeure. "
Force
Majeure
" shall be limited to acts of God, war, terrorism,
fire, flood, earthquake, hurricane, weather conditions, strike,
delay or unavailability of labor or materials, delay or
unavailability of utilities, delays in obtaining governmental
approvals to the extent not caused by the party seeking approval,
moratoria, injunctions, orders or directives of any court or
governmental body, or other actions of third parties (but not
including financial inability) which, despite the exercise of
reasonable diligence, the party required to perform is unable to
prevent, avoid or remove. Force Majeure does not apply to the
failure of a party to make a payment when due and payable under the
terms of this Contract.
14.
Cooperation
. Purchaser shall
reasonably cooperate with and require its agents, employees,
subcontractors and other representatives to cooperate with all
other parties involved in construction within the Development,
including, where applicable, the granting of a nonexclusive license
to enter upon the Property conveyed to Purchaser. Purchaser shall
execute any and all documentation reasonably required by Seller or
the Authorities to effectuate any desired modification or change in
connection with Seller’s activities in the Development
including, without limitation, amendments or restatements of the
Master Covenants, or any Final Plat; provided, however, Purchaser
shall not be obligated to execute any such documentation if, in
Purchaser’s reasonable judgment, it will materially adversely
affect the fair market value of the Property or Purchaser’s
ability to construct or to sell its proposed homes within the
Property, or if in Purchaser’s reasonable judgment, it will
materially increase the cost of such construction, interfere with
or delay such construction.
15.
Fees
. Subject to the
provisions of Sections 16 and 17 below:
(a)
FHA/VA
. Seller shall not be
required to obtain any approvals pursuant to FHA, VA or other
governmental programs relating to the Lots or the financing of
improvements thereon.
(b)
Utility Company Refunds
. Any
refunds from utility providers relating to construction deposits
for the Property shall be the exclusive property of Seller.
Purchaser shall cooperate with Seller in turning over any such
funds and directing those funds to Seller.
16.
Water and Sewer Taps; Fees; and
District Matters
.
(a)
Rangeview Metropolitan
District
. The water and sewer service provider for the Lots
is the Rangeview Metropolitan District (“
Rangeview
”)
and Purchaser shall be required to purchase water and sewer taps
for the Lots from Rangeview. During the Due Diligence Period,
Purchaser shall negotiate in good faith to reach agreement with
Rangeview on terms and provisions of a Tap Purchase Agreement (the
"
Tap
Purchase Agreement
") in which Rangeview agrees to sell to
Purchaser, and Purchaser agrees to purchase from Rangeview, a water
and sewer tap for each Lot in accordance with an agreed-upon
purchase schedule, but in no event later than the issuance of a
building permit for a Lot. If Rangeview and Purchaser agree upon a
Tap Purchase Agreement before the expiration of the Due Diligence
Period, they shall prepare and execute an amendment to this
Contract to set forth and attach to this Contract the agreed-upon
Tap Purchase Agreement and execute the Tap Purchase Agreement on or
before the date of the First Closing. If Rangeview and Purchaser
are unable to agree on a Tap Purchase Agreement before the
expiration of the Due Diligence Period, the Initial Deposit shall
be promptly returned to Purchaser, Purchaser shall deliver to
Seller all information and materials received by Purchaser from
Seller pertaining to the Property and any non-confidential and
non-proprietary information otherwise obtained by Purchaser
pertaining to the Property, and thereafter the parties shall have
no further rights or obligations under this Contract except as
otherwise provided in
Section 24
below. The combined
cost to purchase a water tap and sewer will be dependent on Lot
size, house square footage, number of floors, driveway lanes,
outdoor irrigated square footage, and xeriscape square footage. For
example, based on Rangeview’s rates and charges as of the
Effective Date, a 5,500 square foot lot with a 2,400 square foot
house 2 story 2 car garage with 1,500 square feet of grass would
have a computed water/sewer tap fee of $25,500.
(b)
Sky Ranch Metropolitan District No.
1
. The Property is included within the boundaries of the Sky
Ranch Metropolitan District No. 1 (“
District
”).
Persons affiliated with Seller have been elected or appointed to
the board of directors (“
Board
”)
of the District and Rangeview and serve in that capacity. Purchaser
shall not qualify any persons affiliated with Purchaser as its
representative to serve on the Board of the District or Rangeview
and this prohibition shall survive the Closing and delivery of
deeds hereunder until no person affiliated with Seller serves on
the Board. The District has been formed for purposes that include,
but are not limited to financing, owning, maintaining and/or
managing certain tracts and infrastructure improvements
(“
District
Improvements
”) to serve the Development, including the
Lots. Purchaser acknowledges that: (i) the construction of District
Improvements shall be without compensation or reimbursement to
Purchaser; and (ii) any reimbursements, credits, payments, or other
amounts payable by the District or Rangeview on account of the
construction of District Improvements or any other matters related
thereto (“
Metro District
Payments
”) shall remain the property of the Seller and
shall not be conveyed to or otherwise be claimed by Purchaser. Upon
request of Seller, the District or Rangeview, Purchaser will
execute any and all documents that may be reasonably required to
confirm Purchaser’s waiver of any right to Metro District
Payments. The provisions of this Section are material in
determining the Purchase Price, and the Purchase Price would have
been higher but for the provisions of this Section. This Section
shall survive Closing
.
(c)
Fees
.
(i)
Seller shall
pay any and all of the following to the extent imposed by any
Authority in connection with the Property conveyed to Purchaser:
(i) any parks and recreation fees (including park dedication
requirements and/or cash-in-lieu payments related to the Property
as part of the platting thereof); (ii) drainage fees; and (iii)
fees for payment-in-lieu of school land dedications.
(ii)
Following Closing,
Purchaser shall pay all costs and expenses for all water meter
fees, sewer fees, connection fees, facility fees or assessments,
PIF fees, building and other permit costs, and any other costs or
fees that may be imposed by the District, Rangeview or any
Authority relating to the construction, use or occupancy of the
homes to be constructed on the Lots. Without limiting the
foregoing, and except for the fees to be paid by Seller pursuant to
Section 16(c)(i) above, Purchaser shall pay any and all of the
following to the extent imposed in connection with the Property
conveyed to Purchaser: (i) any infrastructure (facility) fee,
including, without limitation, any transportation/road fee, which
may be imposed either by the County, the District or other
Authority; (ii) any impact fees and payment-in-lieu of land
dedication fees imposed for roads or other facilities that are
payable at issuance of a building permit for a home constructed on
a Lot; and (iii) any excise fees.
(iii)
As of the Effective
Date, the District does not levy a system development fee
(“
SDF
”)
against property within the District. If the District at any time
before a Closing adopts a SDF, then at the Closing the Purchaser
shall pay the District’s SDF applicable to the Lots acquired
at such Closing. In order to offset Purchaser’s payment of
the District’s SDF for a Lot at a Closing, Purchaser shall
receive a credit against the Purchase Price paid by Purchaser for
such Lot at such Closing equal to the amount of the
District’s SDF paid by Purchaser for the Lot. If
representatives of Seller constitute a majority of the board of the
District and the Seller controlled board adopts and levies any new
SDF after a Closing, Seller shall pay such SDF levied against any
Lot that has been acquired by Purchaser for so long as Purchaser
owns such Lot.
(iv)
The covenants set
forth in this
Section
16
shall survive each
respective Closing and shall represent a continuing obligation
until the complete satisfaction or payment thereof.
17.
Reimbursements and
Credits
. Purchaser shall
have no right to any reimbursements and/or cost-sharing agreements
pursuant to any agreements entered into between Seller or any of
Seller’s affiliates and third parties which may or may not
affect the Property. In addition, Purchaser acknowledges that
Seller, its affiliates or one (1) or more metropolitan district(s)
have installed or may install certain infrastructure improvements
("
Infrastructure
Improvements
") and/or donate, dedicate and/or convey certain
rights, improvements and/or real property ("
Dedications
")
to the County or other Authority which benefit all or any part of
the Property, together with adjacent properties, and which entitle
Seller or its affiliates and/or the Property or any part thereof to
certain reimbursements by the County or other Authority or credits
by the County or other Authority for open space fees, school impact
fees, capital expansion fees, transportation/road fees, traffic
impact fees and other governmental fees which would otherwise be
required to be paid to the County or other governmental or
quasi-governmental entity by the owner of the Property or any part
thereof from time to time ("
Governmental
Fees
"). In the event Purchaser is entitled to a credit or
waiver of Governmental Fees by the County and/or other governmental
or quasi-governmental entity as a result of the Infrastructure
Improvements and/or Dedications, then, in such event, Purchaser
shall pay to or reimburse Seller and/or its designated affiliates
in an amount equal to such credited or waived Governmental Fees at
the same time that the Governmental Fees would otherwise be payable
by Purchaser or its assignees to the County or other Authority but
for the construction of the Infrastructure Improvements and/or the
Dedications by Seller, its affiliates and/or metropolitan
district(s), excluding in all events the fees to be paid by Seller
pursuant to Section 16(c)(i) above. In addition, Purchaser
acknowledges that Seller or its affiliate(s) may have negotiated or
may negotiate with the County or other Authority for reimbursements
to Seller or its affiliates. Purchaser acknowledges that certain
Governmental Fees which may be paid by Purchaser to the County or
other Authority may be reimbursed to Seller and/or its affiliates
pursuant to the terms of said agreement. The obligations and
covenants set forth in this
Section
17
shall survive the Closing of
the purchase and sale of the Property and shall represent a
continuing obligation of Purchaser until complete satisfaction
thereof. Purchaser shall be released from the obligations in this
Section 17
to the
extent such obligations are assumed in writing by a subsequent
owner of all or a portion of the Property and a copy of such
written assumption is furnished to Seller. Each special warranty
deed conveying the applicable portion of the Property at each
Closing shall contain the foregoing reimbursement
covenant.
18.
Name and Logo
;
Sales
Activity
.
(a)
The name and logo
of "Sky Ranch" are wholly owned by Seller. Purchaser agrees that it
shall not use or allow the use of the name "Sky Ranch" or any logo,
symbol or other words or phrases which are names or trademarks used
or registered by Seller or any of its affiliates in any manner to
name, designate, advertise, sell or develop the Property or in
connection with the operation or business located or to be located
upon the Property without the prior written consent of Seller,
which consent may be withheld for any reason. Any consent to the
use of such names or logos may be conditioned upon Purchaser
entering into a license agreement with Seller, as applicable, at no
additional cost to Purchaser. Notwithstanding the foregoing,
however, Purchaser shall have a non-exclusive, royalty-free license
for so long as Purchaser is building and selling homes in the
Development, without the need for any further consent or approval
by Seller, to use the name and logo of "Sky Ranch" in connection
with the use, marketing, sales, development and operation of the
Property, provided that Purchaser shall comply with any
requirements that Seller promulgates with respect to such
usage.
(b)
Following Closing,
Purchaser may conduct sales activities (a) from a sales trailer
placed on the Development by Purchaser in a reasonable location
approved by Seller, subject to relocation at Purchaser’s cost
if necessary to accommodate ongoing development and sales
activities, or (b) from any other site owned or leased by
Purchaser.
19.
Renderings
. All renderings,
plans or drawings of the Property or the Development locating
landscaping, trees and any improvements are artists’
conceptions only and may not accurately reflect their actual
location. Purchaser waives any claims based upon any inaccuracy in
the location of such items as depicted on the renderings, plans or
drawings.
20.
Communications
Improvements
. Seller may, but
is not obligated to, enter into an agreement with a service
provider for the development and installation of Communication
Improvements in all or any portion of the Development.
“
Communications
Improvements
” means any equipment, property and
facilities, if used or useful in connection with the delivery,
deployment, provision or modification of (a) broadband Internet
access service; (b) monitoring service, for the benefit of
governmental entities, quasi-governmental entities, or utilities,
regarding the usage of electricity, gas, water and other resources;
(c) video programming or content, including Internet protocol
television (a/k/a “IPTV”) service; (d) voice over
Internet protocol (a/k/a “VoIP”) service; (e)
telecommunications services, including voice; (f) any other service
or services delivered by means of the Internet or otherwise
delivered by means of digital signals; and (g) any other service or
services based on technology that is similar to or is a
technological extension of any of the foregoing
(“
Service
”).
Communications Improvements do not include any equipment,
facilities or property located or in the home of a person who
receives services from the service provider, such as, but not
limited to routers, wireless access points, in-house wiring,
set-top boxes, game consoles, gateways and other equipment under
the control of the owner or occupant of the home. Seller may grant
to such service provider one or more permanent, non-exclusive,
perpetual, assignable and recordable easements (collectively
referred to as the “
Easement
”)
to access and use the Property and other property within the
Development, as necessary, appropriate or desirable, to lay,
install, construct, reconstruct, modify, operate, maintain, repair,
enhance, upgrade, regulate, remove, replace and otherwise use the
Communications Improvements. So long as any such Easement does not
materially interfere with Purchaser’s ability to construct
its intended single family homes on the Lots, Purchaser shall not
object to and shall cooperate with Seller in connection with the
installation and operation of the Communications
Improvements.
21.
Soil Hauling
. Purchaser shall
be responsible for relocating from the Property all surplus soil
generated during Purchaser's construction of structures on the
Property. At the option of Seller in its sole discretion, the
surplus soil shall be transported at Purchaser’s expense to a
site designated by Seller within the Development, provided that
Seller has designated and made such a site available to Purchaser
at the time Purchaser is ready to transport surplus soils. If and
to the extent that Seller establishes a stock pile site within the
Development, Seller may modify any such stock pile locations from
time to time in Seller’s discretion (but Purchaser shall not
have any obligation to relocate any soil Purchaser previously
delivered to the prior designated stock pile site). At
Seller’s request, Purchaser shall supply copies of any
reports or field assessments identifying the material
characteristics of the excess soil prior to accepting such soil for
fill purposes. Notwithstanding the foregoing, in the event that
Seller does not establish a stock pile site or elects not to accept
any surplus soils from Purchaser, then Purchaser shall, at its sole
expense, find a purchaser or taker or otherwise transport and
dispose of such surplus soil upon such terms as it shall desire,
but such surplus soil must still be removed from the Property and
may not be stockpiled on the Property or within the Development
after construction has been completed.
22.
Specially Designated Nationals and
Blocked Persons List
. Purchaser
represents and warrants to Seller that Purchaser and all persons
and entities owning (directly or indirectly) an ownership interest
in Purchaser are currently in compliance with and shall at all
times prior to the Closing of this transaction remain in compliance
with the regulations of the Office of Foreign Assets Control
("
OFAC
") of
the United States Department of the Treasury (including those named
on OFAC’s Specially Designated and Blocked Persons List) and
any statute, executive order (including the September 24, 2001,
Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit or Support Terrorism), or
other governmental action relating thereto. Seller represents and
warrants to Purchaser that Seller and all persons and entities
owning (directly or indirectly) an ownership interest in Seller are
currently in compliance with and shall at all times prior to the
Closing of this transaction remain in compliance with the
regulations of the OFAC (including those named on OFAC’s
Specially Designated and Blocked Persons List) and any statute,
executive order (including the September 24, 2001, Executive Order
Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit or Support Terrorism), or other
governmental action relating thereto.
(a)
Seller's Assignment
. Seller may
assign its rights and obligations under this Contract with respect
to the Lots not yet Closed without the consent of, but with prior
notice to, Purchaser: (i) to any entity that acquires all or
substantially all of the Seller’ interests in such Lots which
Seller reasonably believes has the financial ability and experience
to perform Seller’s obligations under this Contract; or (ii)
to an entity that controls, is controlled by, or under common
control with, Seller.
(b)
Purchaser's Assignment
. The
obligations of the Purchaser under this Contract are personal in
nature, and neither this Contract nor any rights, interests, or
obligations of Purchaser under this Contract may be transferred or
assigned without the prior written consent of Seller, except that
Purchaser may assign its rights or obligations under this
Agreement, without the prior written consent of Seller, to (i) any
affiliate of Purchaser, or (ii) any third-party from which
Purchaser has a contractual right to acquire the Lots pursuant to
an option agreement or similar arrangement with such third-party,
but Purchaser shall not be released from any obligations
hereunder.
24.
Survival
. All covenants and
agreements of either party which are intended to be performed in
whole or in part after any Closing or termination of this Contract,
and all representations, warranties and indemnities by either party
to the other under this Contract shall survive such Closing or
termination of this Contract and shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that Seller’s
Representations pursuant to this Contract shall survive each
respective Closing for a period of nine (9) months, and any action
by Purchaser based on a breach of any of such Seller’s
Representations must be brought within such nine (9) month
period.
25.
Condemnation
. If a condemnation
action is filed or either party receives written notice from any
competent condemning authority of intent to condemn which directly
affects any Lot or Lots which Purchaser has a right to purchase,
either party may at its sole discretion by written notice to the
other party within ten (10) days following receipt of such
condemnation notice terminate this Contract as to the Lots subject
to the condemnation action and receive a refund of a prorata
portion of the Deposit with respect to those Lots only, and the
parties shall have no further rights or obligations with respect to
those Lots. If the right to terminate is not exercised by either
party, this Contract shall remain in full force and effect with
respect to the Lot in question and upon exercise of the right to
purchase the Lot, the Closing shall proceed in accordance with the
terms of this Contract. Any condemnation award shall be paid to the
party who is the owner of the affected Lot at the time the award is
determined by the condemning authority.
26.
Brokers
. Each Party does
hereby represent that it has not engaged any broker, finder, or
real estate agent in connection with the transactions contemplated
by this Contract. Each party agrees to and does hereby indemnify
and hold the other harmless from any and all fees, brokerage and
other commissions or costs (including reasonable attorneys’
fees), liabilities, losses, damages or claims which may result from
any broker, agent or finder, licensed or otherwise, claiming
through, under or by reason of the conduct of either of them
respectively in connection with the purchase of the Lots by
Purchaser.
27.
Default and
Remedies
. Time is of the
essence hereof. If any amount received as a Deposit hereunder or
any other payment due hereunder is not paid by Purchaser, honored
or tendered when due and payable, or if each Closing is not
consummated as required in accordance with this Contract, or if any
other covenant, agreement, obligation or condition hereunder is not
performed or waived as herein provided within five (5) days (or
such longer period as required under this Contract) after the party
failing to perform the same has received written notice of such
failure, there shall be the following remedies:
(a)
Purchaser’s Default
. If
Purchaser is in default under this Contract, Seller may terminate
this Contract, in which event the Deposit shall be forfeited and
retained on behalf of Seller, and both parties shall, except as
otherwise provided herein, thereafter be released from all
obligations hereunder. It is agreed that, except as otherwise
provided in this subpart (a) and in subparts (c) and (d) below
and except with respect to the indemnification by Purchaser in
Sections 10,
12
and
26
above, such payments and things of value are LIQUIDATED DAMAGES and
are SELLER’S SOLE AND ONLY REMEDY for Purchaser’s
failure to perform the obligations of this Contract prior to the
Closing. Except as otherwise provided in this Contract, Seller
expressly waives the remedies of specific performance and
additional damages with respect to a default by Purchaser.
Notwithstanding the foregoing or any other contrary provision of
this Contract, any and all provisions of this Contract pursuant to
which Purchaser agrees to indemnify, hold harmless and defend
Seller from and against any losses, costs, claims, causes of action
or liabilities of any kind or nature, or pursuant to which
Purchaser waives any rights or claims that it may have against
Seller, shall survive any termination of this Contract, and shall
be and remain fully enforceable against Purchaser in accordance
with the terms of this Contract and applicable laws.
(b)
Seller’s Default
. If
Seller is in default under this Contract, Purchaser may elect AS
ITS SOLE AND EXCLUSIVE REMEDY either: (i) to treat this
Contract as canceled, in which case the unapplied Deposit shall be
returned to Purchaser, and Purchaser shall have the right to
recover, as damages, all out-of-pocket expenses incurred by it in
negotiating this Contract and in inspecting, analyzing or otherwise
performing its rights and obligations pursuant to this Contract,
but in no event will the amount of such damages exceed Fifty
Thousand Dollars ($50,000.00); or (ii) Purchaser may elect to treat
this Contract as being in full force and effect and Purchaser shall
have a right to specific performance, provided that any such action
for specific performance must be commenced within sixty (60) days
after the expiration of the applicable notice and cure period
provided herein, and, in the event specific performance is not
available, than Purchaser may pursue the remedy set forth in clause
(i) above. Seller shall not be liable for and Purchaser shall not
be entitled to recover exemplary, punitive, special, indirect,
consequential, lost profits or any other damages (except for
recovery of out-of-pocket expenses as set forth in clause (i)
above).
(c)
Indemnity
. Notwithstanding any
contrary provision of this Contract, any and all provisions of this
Contract pursuant to which a party agrees to indemnify, hold
harmless and defend the other party from and against any losses,
costs, claims, causes of action or liabilities of any kind or
nature, or pursuant to which a party waives any rights or claims
that it may have against the other party, shall survive any
termination of this Contract, and shall be and remain fully
enforceable against a party in accordance with the terms of this
Contract and applicable laws.
(d)
Award of Costs and Fees
.
Anything to the contrary herein notwithstanding, in the event of
any litigation arising out of this Contract related to an action
for specific performance brought by either party as permitted in
accordance with the terms of this Contract, the court shall award
the substantially prevailing party all reasonable costs and
expenses, including attorneys’ fees, incurred by the
substantially prevailing party in the litigation or other
proceedings.
(e)
Post-Closing Defaults
. With
respect to post-closing defaults, the parties agree that the
non-defaulting party shall be entitled to exercise all remedies
available at law or in equity, except that damages shall be limited
to actual out-of-pocket costs and expenses incurred. The foregoing
does not limit or control the remedies as are to be separately
provided in the Lot Development Agreement.
28.
General
Provisions
. The parties
hereto further agree as follows:
(a)
Time of the Essence
. Time is of
the essence under this Contract. In computing any period of time
under this Contract, the date of the act or event from which the
designated period of time begins to run shall not be included. The
last day of the period so computed shall be included unless it is a
Saturday, Sunday, or federal legal holiday, in which event the
period shall run until the end of the next day which is not a
Saturday, Sunday, or federal legal holiday.
(b)
Governing Law
. This Contract
shall be governed by and construed in accordance with the laws of
the State of Colorado.
(c)
Severability
. Should any
provisions of this Contract or the application thereof, to any
extent, be held invalid or unenforceable, the remainder of this
Contract and the application thereof, other than those provisions
which shall have been held invalid or unenforceable, shall not be
affected thereby and shall continue in full force and effect and
shall be enforceable to the fullest extent permitted at law or in
equity.
(d)
Entire Contract
. This Contract
embodies the entire agreement between the parties hereto concerning
the subject matter hereof and supersedes all prior conversations,
proposals, negotiations, understandings and agreements, whether
written or oral.
(e)
Exhibits
. All schedules,
exhibits and addenda attached to this Contract and referred to
herein shall for all purposes be deemed to be incorporated in this
Contract by this reference and made a part hereof.
(f)
Further Acts
. Each of the
parties hereto covenants and agrees with the other, upon reasonable
request from the other, from time to time, to execute and deliver
such additional documents and instruments and to take such other
actions as may be reasonably necessary to give effect to the
provisions of this Contract.
(g)
Compliance
. The performance by
the parties of their respective obligations provided for in this
Contract shall comply with all applicable laws and the rules and
regulations of all governmental agencies, municipal, county, state
and federal, having jurisdiction in the premises.
(h)
Amendment
. This Contract shall
not be amended, altered, changed, modified, supplemented or
rescinded in any manner except by a written agreement executed by
both parties.
(i)
Authority
. Each of the parties
hereto represents to the other that each such party has full power
and authority to execute, deliver and, subject to Purchaser
obtaining AMC Approval, perform this Contract, that the individuals
executing this Contract on behalf of said party are fully empowered
and authorized to do so, that this Contract constitutes a valid and
legally binding obligation of such party enforceable against such
party in accordance with its terms, that such execution, delivery
and performance will not contravene any legal or contractual
restriction binding upon such party or any of its assets and that
there is no legal action, proceeding or investigation of any kind
now pending or to the knowledge of each such party threatened
against or affecting such party or affecting the execution,
delivery or performance of this Contract. Each of the parties
hereto represents to the other that each such party is a duly
organized, legal entity and is validly existing in good standing
under the laws of the jurisdiction of its formation.
(j)
Notices
. All notices,
statements, demands, requirements, or other communications and
documents (collectively, "
Communications
")
required or permitted to be given, served, or delivered by or to
either party or any intended recipient under this Contract shall be
in writing and shall be deemed to have been duly given (i) on
the date and at the time of delivery if delivered personally to the
party to whom notice is given at the address specified below; or
(ii) on the date and at the time of delivery or refusal of
acceptance of delivery if delivered or attempted to be delivered by
an overnight courier service to the party to whom notice is given
at the address specified below; or (iii) on the date of
delivery or attempted delivery shown on the return receipt if
mailed to the party to whom notice is to be given by first-class
mail, sent by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as specified
below; or (iv) on the date and at the time shown on the
facsimile or electronic mail message if telecopied or sent
electronically to the number or address specified below (provided,
however, any notice of default to Purchaser may not be sent by
electronic mail and must be sent by one of the other methods of
delivery set forth above):
To
Seller:
PCY Holdings, LLC
Attention: Mark
Harding
34501
E. Quincy Ave.
Bldg.
34, Box 10
Watkins, Colorado
80137
Telephone: (303)
292-3456
Facsimile: (303)
292-3475
E-mail:
mharding@purecyclewater.com
with a
copy to:
Fox
Rothschild LLP
1225
17
th
Street, Suite 2200
Denver,
CO 80202
Attention: Rick
Rubin, Esq.
Telephone: (303)
292-1200
Email:
rrubin@foxrothschild.com
To
Purchaser: Linda
Purdy
Richmond American
Homes of Colorado, Inc.
4350
South Monaco Street
Denver,
Colorado 80237
Telephone:
(720)-977-3847
Facsimile.: (720)
977-4707
Email:
linda.purdy@mdch.com
with a
copy
to:
M.D.C.
Holdings, Inc.
4350
South Monaco Street
Denver,
Colorado 80237
Attn:
Drew Rippey
Telephone: (720)
977-3213
Telecopier No.
(720) 482-8558
Email:
Drew.Rippey@mdch.com
M.D.C.
Holdings, Inc.
4350 S.
Monaco Street
Denver,
CO 80237
Attn:
Linda Zimmerman Skultety
Senior
Paralegal – Real Estate
Telephone:
720-977-3254
Fax:
303-488-4954
Email:
Linda.Skultety@mdch.com
If to
Title Company:
Land
Title Guarantee Company
Attn:
Tom Blake
3033 E.
1
st
Ave.
#600
Denver,
Colorado 80206
Fax#: 303-393-4959
Direct: 303-331-6237
Email:
tblake@ltgc.com
(k)
Place of Business
. This
Contract arises out of the transaction of business in the State of
Colorado by the parties hereto.
(l)
Counterparts; Facsimile
Signature
. This Contract may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one (1) and the same
instrument, and either of the parties hereto may execute this
Contract by signing any such counterpart. This Contract may
be executed and delivered by facsimile or by electronic mail in
portable document format (.pdf) or similar means and delivery of
the signature page by such method will be deemed to have the same
effect as if the original signature had been delivered to the other
party.
(m)
Captions; Interpretation
. The
section captions and headings used in this Contract are inserted
herein for convenience of reference only and shall not be deemed to
define, limit or construe the provisions hereof. Purchaser and
Seller acknowledge that each is a sophisticated builder or
developer, as applicable, and that each has had an opportunity to
review, comment upon and negotiate the provisions of this Contract,
and thus the provisions of this Contract shall not be construed
more favorably or strictly for or against either party. Purchaser
and Seller each acknowledges having been advised, and having had
the opportunity, to consult legal counsel in connection with this
Contract and the transactions contemplated by this
Contract.
(n)
Number and Gender
. When
necessary for proper construction hereof, the singular of any word
used herein shall include the plural, the plural shall include the
singular and the use of any gender shall be applicable to all
genders.
(o)
Waiver
. Any one (1) or more
waivers of any covenant or condition by a party hereto shall not be
construed as a waiver of a subsequent breach of the same covenant
or condition nor a consent to or approval of any act requiring
consent to or approval of any subsequent similar act.
(p)
Binding Effect
. Subject to the
restrictions on assignment contained herein, this Contract shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(q)
Recordation
. Purchaser shall
not cause or allow this Contract or any memorandum or other
evidence thereof to be recorded in the County Records or become a
public record without Seller’s prior written consent, which
consent may be withheld at Seller’s sole discretion. If
Purchaser records this Contract, then Purchaser shall be in default
of its obligations under this Contract.
(r)
No Beneficiaries
. No third
parties are intended to benefit by the covenants, agreements,
representations, warranties or any other terms or conditions of
this Contract.
(s)
Relationship of Parties
.
Purchaser and Seller acknowledge and agree that the relationship
established between the parties pursuant to this Contract is only
that of a seller and a purchaser of single-family lots. Neither
Purchaser nor Seller is, nor shall either hold itself out to be,
the agent, employee, joint venturer or partner of the other
party.
(t)
Interstate Land Sales Full Disclosure
Act and Colorado Subdivision Developers Act Exemptions
. It
is acknowledged and agreed by the parties that the sale of the
Property will be exempt from the provisions of the federal
Interstate Land Sales Full Disclosure Act under the exemption
applicable to sale or lease of property to any person who acquires
such property for the purpose of engaging in the business of
constructing residential, commercial or industrial buildings or for
the purpose of resale of such property to persons engaged in such
business. Purchaser hereby represents and warrants to Seller that
it is acquiring the Property for such purposes. It is further
acknowledged by the parties that the sale of the Property will be
exempt under the provisions of the Colorado Subdivision Developers
Act under the exemption applicable to transfers between developers.
Purchaser represents and warrants to Seller that Purchaser is
acquiring the Property for the purpose of participating as the
owner of the Property in the development, promotion and sale of the
Property and portions thereof.
(u)
Special Taxing District
Disclosure
. In accordance with the provisions of
C.R.S. §38-35.7-101(1), Seller provides the following
disclosure to Purchaser:
SPECIAL TAXING
DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS
PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE
PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS
MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND TAX TO SUPPORT
THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN
THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS
WITHOUT SUCH AN INCREASE IN MILL LEVIES. PURCHASERS SHOULD
INVESTIGATE THE SPECIAL TAXING DISTRICTS IN WHICH THE PROPERTY IS
LOCATED BY CONTACTING THE COUNTY TREASURER, BY REVIEWING THE
CERTIFICATE OF TAXES DUE FOR THE PROPERTY, AND BY OBTAINING FURTHER
INFORMATION FROM THE BOARD OF COUNTY COMMISSIONERS, THE COUNTY
CLERK AND RECORDER, OR THE COUNTY ASSESSOR
.
(v)
Common Interest Community
Disclosure
. In accordance with the provisions of
C.R.S. §38-35.7-102(1), Seller provides the following
disclosure to Purchaser:
IF SELLER ELECTS TO
FORM A HOMEOWNERS ASSOCIATION UNDER THE MASTER COVENANTS FOR THE
DEVELOPMENT, THEN
THE PROPERTY IS,
OR WILL BE PRIOR TO EACH RESPECTIVE CLOSING, LOCATED WITHIN A
COMMON INTEREST COMMUNITY AND IS, OR WILL BE PRIOR TO SUCH CLOSING,
SUBJECT TO THE DECLARATION FOR SUCH COMMUNITY. THE OWNER OF THE
PROPERTY WILL BE REQUIRED TO BE A MEMBER OF THE OWNER’S
ASSOCIATION FOR THE COMMUNITY AND WILL BE SUBJECT TO THE BYLAWS AND
RULES AND REGULATIONS OF THE ASSOCIATION. THE DECLARATION, BYLAWS,
AND RULES AND REGULATIONS WILL IMPOSE FINANCIAL OBLIGATIONS UPON
THE OWNER OF THE PROPERTY, INCLUDING AN OBLIGATION TO PAY
ASSESSMENTS OF THE ASSOCIATION. IF THE OWNER DOES NOT PAY THESE
ASSESSMENTS, THE ASSOCIATION COULD PLACE A LIEN ON THE PROPERTY AND
POSSIBLY SELL IT TO PAY THE DEBT. THE DECLARATION, BYLAWS, AND
RULES AND REGULATIONS OF THE COMMUNITY MAY PROHIBIT THE OWNER FROM
MAKING CHANGES TO THE PROPERTY WITHOUT AN ARCHITECTURAL REVIEW BY
THE ASSOCIATION (OR A COMMITTEE OF THE ASSOCIATION) AND THE
APPROVAL OF THE ASSOCIATION. PURCHASERS OF PROPERTY WITHIN THE
COMMON INTEREST COMMUNITY SHOULD INVESTIGATE THE FINANCIAL
OBLIGATIONS OF MEMBERS OF THE ASSOCIATION. PURCHASERS SHOULD
CAREFULLY READ THE DECLARATION FOR THE COMMUNITY AND THE BYLAWS AND
RULES AND REGULATIONS OF THE ASSOCIATION
.
(w)
Source of Water Disclosure
. In
accordance with the provisions of C.R.S. §38-35.7-104,
Seller provides the following disclosure to Purchaser:
THE
SOURCE OF POTABLE WATER FOR THIS REAL ESTATE IS:
A
WATER PROVIDER, WHICH CAN BE CONTACTED AS FOLLOWS:
NAME:
Rangeview
Metropolitan District
ADDRESS:
c/o
Special District Management Services, Inc.
141
Union Blvd., Suite 150
WEB
SITE:
www.rangviewmetro.org
SOME
WATER PROVIDERS RELY, TO VARYING DEGREES, ON NONRENEWABLE GROUND
WATER. YOU MAY WISH TO CONTACT YOUR PROVIDER TO DETERMINE THE
LONG-TERM SUFFICIENCY OF THE PROVIDER’S WATER
SUPPLIES.
(x)
STORM WATER POLLUTION PREVENTION
PLAN
.
Seller has
previously filed a Notice of Intent ("
NOI
") and/or
prepared a Stormwater Pollution Prevention Plan ("
SWPPP
") to
satisfy its stormwater obligations arising from its work on the
Property. Seller covenants that prior to each Closing Date and
until Closing of the Lots, Seller and/or its contractor shall
comply with the SWPPP with respect to all of the Lots owned by
Seller, and shall comply with all local, state and federal
environmental obligations (including stormwater) associated with
the development of the Lots. Seller shall indemnify and hold
Purchaser harmless from all claims and causes of action arising
from breach of the foregoing covenants of Seller to the extent
there is an uncured notice of violation issued with respect to any
Lot prior to conveyance of the Lot to Purchaser. From and after
conveyance of Lots, and until such time as such Lots are subject to
Purchaser’s SWPPP (as hereafter defined), Purchaser shall be
solely responsible for complying with the SWPPP, maintaining all
required best management practices (
“BMPs
”), and conducting and
documenting all required inspections. Purchaser shall also comply
with all local state and federal environmental obligations
(including stormwater) associated with its ownership or development
of the Lots conveyed to Purchaser by Seller. Such obligations
include, without limitation, (i) complying with the SWPPP or the
Purchaser’s SWPPP, as applicable, (ii) maintaining all
required BMPs, and (iii) conducting and documenting all required
inspections. Purchaser covenants and Seller acknowledges that, with
respect to Lots acquired by Purchaser, Purchaser shall, within ten
(10) days after conveyance of such Lots, at its sole cost and
expense (subject to Seller’s prior written approval) submit
its own notice of intent for a new stormwater pollution prevention
plan (the “
Purchaser’s
SWPPP
”). Subsequent to the applicable Closing Date,
Purchaser shall comply with the Purchaser’s SWPPP with
respect to all of the Lots then owned by Purchaser, and shall
comply with all local, state and federal environmental obligations
(including stormwater) associated with its ownership or development
of all such Lots. Purchaser shall indemnify and hold Seller
harmless from all third party claims and causes of action solely
arising from breach of the foregoing covenants of
Purchaser.
(y)
Oil, Gas, Water and Mineral
Disclosure
. THE SURFACE ESTATE OF THE PROPERTY MAY BE OWNED
SEPARATELY FROM THE UNDERLYING MINERAL ESTATE, AND TRANSFER OF THE
SURFACE ESTATE MAY NOT NECESSARILY INCLUDE TRANSFER OF THE MINERAL
ESTATE OR WATER RIGHTS.
THIRD
PARTIES MAY OWN OR LEASE INTERESTS IN OIL, GAS, OTHER MINERALS,
GEOTHERMAL ENERGY OR WATER ON OR UNDER THE SURFACE OF THE PROPERTY,
WHICH INTERESTS MAY GIVE THEM RIGHTS TO ENTER AND USE THE SURFACE
OF THE PROPERTY TO ACCESS THE MINERAL ESTATE, OIL, GAS OR
WATER.
SURFACE
USE AGREEMENT. THE USE OF THE SURFACE ESTATE OF THE PROPERTY TO
ACCESS THE OIL, GAS OR MINERALS MAY BE GOVERNED BY A SURFACE USE
AGREEMENT, A MEMORANDUM OR OTHER NOTICE OF WHICH MAY BE RECORDED
WITH THE COUNTY CLERK AND RECORDER.
OIL AND
GAS ACTIVITY. OIL AND GAS ACTIVITY THAT MAY OCCUR ON OR ADJACENT TO
THE PROPERTY MAY INCLUDE, BUT IS NOT LIMITED TO, SURVEYING,
DRILLING, WELL COMPLETION OPERATIONS, STORAGE, OIL AND GAS, OR
PRODUCTION FACILITIES, PRODUCING WELLS, REWORKING OF CURRENT WELLS,
AND GAS GATHERING AND PROCESSING FACILITIES.
ADDITIONAL
INFORMATION. PURCHASER IS ENCOURAGED TO SEEK ADDITIONAL INFORMATION
REGARDING OIL AND GAS ACTIVITY ON OR ADJACENT TO THE PROPERTY,
INCLUDING DRILLING PERMIT APPLICATIONS. THIS INFORMATION MAY BE
AVAILABLE FROM THE COLORADO OIL AND GAS CONSERVATION
COMMISSION.
(z)
Property Tax Disclosure
Summary
. PURCHASER SHOULD NOT RELY ON SELLER’S CURRENT
PROPERTY TAXES AS THE AMOUNT OF PROPERTY TAXES THAT PURCHASER MAY
BE OBLIGATED TO PAY IN THE YEAR SUBSEQUENT TO PURCHASE. A CHANGE IN
OWNERSHIP OR PROPERTY IMPROVEMENTS TRIGGERS REASSESSMENTS OF THE
PROPERTY THAT COULD RESULT IN HIGHER PROPERTY TAXES. IF PURCHASER
HAS ANY QUESTIONS CONCERNING VALUATION, CONTACT THE COUNTY PROPERTY
APPRAISER’S OFFICE FOR INFORMATION.
(aa)
Waiver of Jury Trial
. TO THE
EXTENT PERMITTED BY LAW, THE PARTIES HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO THE PROVISIONS OF THIS
CONTRACT.
(bb)
Confidentiality
.
Purchaser and Seller agree that,
prior to each respective Closing, and thereafter if such Closing
does not occur, all information relating to the Property that is
the subject of such Closing, any reports, studies, data and
summaries developed by Purchaser, and any information relating to
the business of either party (together, the "
Confidential
Information
") shall be kept confidential as provided in this
section. Without the prior written consent of the other party,
prior to the applicable Closing, the Confidential Information shall
not be disclosed by Purchaser, Seller or their Representatives (as
hereinafter defined) in any manner whatsoever, in whole or in part,
except (1) to their Representatives who need to know the
Confidential Information for the purpose of evaluating the Property
and who are informed by Seller or Purchaser as applicable of the
confidential nature thereof; (2) as may be necessary for
Seller, Purchaser or their Representatives to comply with
applicable laws, including, without limitation, governmental
regulatory, disclosure, tax and reporting requirements (including,
without limitation, any applicable reporting requirements for
publically traded companies); to comply with other requirements and
requests of regulatory and supervisory authorities and
self-regulatory organizations having jurisdiction over Seller,
Purchaser or their Representatives; to comply with regulatory or
judicial processes; or to satisfy reporting procedures and
inquiries of credit rating agencies in accordance with customary
practices of Seller, Purchaser or their affiliates; and (3) to
lenders and investors for the transaction. As used herein,
"
Representatives
"
shall mean: Seller’s and Purchaser’s managers, members,
directors, officers, employees, affiliates, investors, brokers,
agents or other representatives, including, without limitation,
attorneys, accountants, contractors, consultants, engineers,
lenders, investors and financial advisors. Seller, at its election,
may issue an oral or written press release or public disclosure of
the existence or the terms of this Contract without the consent of
the Purchaser. "
Confidential
Information
" shall not be deemed to include any information
or document which (I) is or becomes generally available to the
public other than as a result of a disclosure by Seller, Purchaser
or their Representatives in violation of this Contract,
(II) becomes available from a source other than Seller,
Purchaser or any affiliates of Seller or Purchaser or their agents
or Representatives, or (III) is developed by Seller or
Purchaser or their Representatives without reliance upon and
independently of otherwise Confidential Information. In addition to
any other remedies available to a party for breach of this Section,
the non-breaching party shall have the right to seek equitable
relief, including, without limitation, injunctive relief or
specific performance, against the breaching party or its
Representatives, in order to enforce the provisions of this
section. The provisions of this section shall survive the
termination of this Contract, or the applicable Closing, for one
(1) year.
(cc)
Survival
. Obligations to be
performed subsequent to a Closing shall survive each
Closing.
[Remainder of page intentionally left blank]
IN
WITNESS WHEREOF, Seller and Purchaser have executed this Contract
effective as of the day and year first above written.
SELLER:
|
PCY
HOLDINGS, LLC,
a
Colorado limited liability company
|
|
|
|
|
By:
/s/ Mark
Harding
Name:
Mark Harding
Title:
President
Date:
June 23, 2017
|
PURCHASER:
|
RICHMOND
AMERICAN HOMES OF COLORADO, INC. a Delaware
corporation
|
By:
|
/s/
Linda M. Purdy
|
Name:
Linda M. Purdy
|
Title:
Vice President
|
Date:
June 27, 2017
|
LIST OF EXHIBITS
EXHIBIT
A:
CONCEPTUAL
DEVELOPMENT PLAN AND LOTTING DIAGRAM
EXHIBIT
B:
RESERVATIONS AND COVENANTS
EXHIBIT
C:
FINISHED LOT IMPROVEMENTS
EXHIBIT
D:
OFFSITE INFRASTRUCTURE IMPROVEMENTS
EXHIBIT
E:
FORM OF GENERAL
ASSIGNMENT
EXHIBIT
F:
LOT DEVELOPMENT AGREEMENT
EXHIBIT
G:
FORM OF LETTER OF CREDIT
EXHIBIT A
CONCEPTUAL DEVELOPMENT PLAN AND LOTTING DIAGRAM
EXHIBIT B
RESERVATIONS AND COVENANTS
Reservation of Easements
. For a
period of twenty-five (25) years following the date hereof, Grantor
expressly reserves unto itself, its successors and assigns,
easements for construction of utilities and other facilities to
support the development of the properties commonly known as "Sky
Ranch," including but not limited to sanitary sewer, water lines,
electric, cable, broad-band and telephone transmission, storm
drainage and construction access easements across the Property
allowing Grantor or its assignees the right to install and maintain
sanitary sewer, water lines, cable television, broad-band,
electric, and telephone utilities on the Property and on its
adjacent property, and further, to accommodate storm drainage from
its adjacent property. Such easements shall not allow above-grade
surface installation of facilities and shall require the
restoration of any surface damage or disturbance caused by the
exercise of such easements, shall not be located within the
building envelope of any Lot or otherwise interfere with the use of
a Lot for construction of Grantee’s homes, shall not
materially detract from the value, use or enjoyment of (i) the
remaining portion of the Property on which such easements are to be
located, or (ii) any adjoining property of Grantee, and shall
not require any reduction in allowed density for the Property or
reconfiguration of planned lots or the building envelope on a lot.
If possible, such easements shall be located within the boundaries
of existing easement areas. Grantor, at its sole expense, shall
immediately restore the land and improvements thereon to their
prior condition to the extent of any damage incurred due to
Grantor’s utilization of the easements herein
reserved.
Reservation of Minerals and Mineral
Rights
. To the extent owned by Grantor, Grantor herein
expressly excepts and reserves unto itself, its successors and
assigns, all right, title and interest in and to all minerals and
mineral rights, including bonuses, rents, royalties, royalty
interests and other benefits that may be payable as a result of any
oil, gas, gravel, minerals or mineral rights on, in, under or that
may be produced from the Property, including, but not limited to,
all gravel, sand, oil, gas and other liquid hydrocarbon substances,
casinghead gas, coal, carbon dioxide, helium, geothermal resources,
and all other naturally occurring elements, compounds and
substances, whether similar or dissimilar, organic or inorganic,
metallic or non-metallic, in whatever form and whether occurring,
found, extracted or removed in solid, liquid or gaseous state, or
in combination, association or solution with other mineral or
non-mineral substances, provided that Grantor expressly waives all
rights to use or damage the surface of the Property to exercise the
rights reserved in this paragraph and, without limiting such
waiver, Grantor’s activities in extracting or otherwise
dealing with the minerals and mineral rights shall not cause
disturbance or subsidence of the surface of the Property or any
improvements on the Property.
Reservation of Water and Water
Rights
. To the extent owned by Grantor, Grantor herein
expressly excepts and reserves unto itself, its successors and
assigns, all water and water rights, ditches and ditch rights,
reservoirs and reservoir rights, streams and stream rights, water
wells and well rights, whether tributary, non-tributary or not
non-tributary, including, but not limited to, all right, title and
interest under C.R.S. 37-90-137 on, underlying, appurtenant to or
now or historically used on or in connection with the Property,
whether appropriated, conditionally appropriated or unappropriated,
and whether adjudicated or unadjudicated, including, without
limitation, all State Engineer filings, well registration
statements, well permits, decrees and pending water court
applications, if any, and all water well equipment or other
personalty or fixtures currently used for the supply, diversion,
storage, treatment or distribution of water on or in connection
with the Property, and all water and ditch stock relating thereto;
provided that Grantor expressly waives all rights to use or damage
the surface of the Property to exercise the rights reserved in this
paragraph and, without limiting such waiver, Grantor’s
activities in dealing with the water and water rights herein
reserved shall not cause disturbance or subsidence of the surface
of the Property or any improvements on the Property.
Reimbursements and Credits
.
Grantee shall have no right to any reimbursements and/or
cost-sharing agreements pursuant to any agreements entered into
between Grantor or any of Grantor’s affiliates and third
parties which may or may not affect the Property. In addition,
Grantee acknowledges that Grantor, its affiliates or one (1) or
more metropolitan district(s) have installed or may install certain
infrastructure improvements ("Infrastructure Improvements") and/or
donate, dedicate and/or convey certain rights, improvements and/or
real property ("Dedications") to Arapahoe County
(“County”) or other governmental authority
(“Authority”) which benefit all or any part of the
Property, together with adjacent properties, and which entitle
Grantor or its affiliates and/or the Property or any part thereof
to certain reimbursements by the County or other Authority or
credits by the County or other Authority for open space fees,
school impact fees, capital expansion fees, transportation/road
fees, traffic impact fees and other governmental fees which would
otherwise be required to be paid to the County or other Authority
by the owner of the Property or any part thereof from time to time
("Governmental Fees"). In the event Grantee is entitled to a credit
or waiver of Governmental Fees by the County and/or other Authority
as a result of the Infrastructure Improvements and/or Dedications,
then, in such event, Grantee shall pay to or reimburse Grantor
and/or its designated affiliates in an amount equal to such
credited or waived Governmental Fees at the same time that the
Governmental Fees would otherwise be payable by Grantee or its
assignees to the County or other Authority but for the construction
of the Infrastructure Improvements and/or the Dedications by
Grantor, its affiliates and/or metropolitan district(s), but
excluding (i) any parks and recreation fees (including park
dedication requirements and/or cash-in-lieu payments related to the
Property as part of the platting thereof); (ii) drainage fees; and
(iii) fees for payment-in-lieu of school land dedications. In
addition, Grantee acknowledges that Grantee or its affiliate(s) may
have negotiated or may negotiate with the County or other Authority
for reimbursements to Grantor or its affiliates. Grantee
acknowledges that certain Governmental Fees which may be paid by
Grantee to the County or other Authority may be reimbursed to
Grantor and/or its affiliates pursuant to the terms of said
agreement.
The
obligations and covenants set forth herein shall be binding on
Grantee, its successors and assigns, and any subsequent owners of
the Property, except that homeowners shall have no obligation for
any reimbursements provided herein.
EXHIBIT C
FINISHED LOT IMPROVEMENTS
1.
"
Finished Lot Improvements
"
means the following improvements on, to or with respect to the Lots
or in public streets or tracts in the locations as required by all
approving Authorities to obtain building permits for home
improvements for the Lots, and substantially in accordance with the
CDs:
(a)
overlot grading
together with corner pins for each Lot installed in place, graded
to match the specified Lot drainage template within the CDs (but
not any Overex) and any retaining walls required by
CDs;
(b)
water and sanitary
sewer mains and other required installations in connection
therewith identified in the CDs, valve boxes and meter pits,
substantially in accordance with the CDs approved by the approving
Authorities, together with appropriate markers;
(c)
storm sewer mains,
inlets and other associated storm drainage improvements pertaining
to the Lots in the public streets as shown on the CDs;
(d)
curb, gutter,
asphalt, sidewalks, street striping, street signage, traffic signs,
traffic signals (if any are required by the approving Authorities),
and other street improvements, in the private and/or public streets
as shown on the CDs; Seller will either have applied a final lift
of asphalt or in Seller’s discretion posted sufficient
financial guarantees as required by the County for the Lots to
qualify for issuance of building permits in lieu of such final lift
of asphalt, provided that Seller shall timely complete such final
lift of asphalt so as not to delay issuance of certificates of
occupancy for homes constructed by Purchaser;
(e)
sanitary sewer
service stubs if required by the Authorities, connected to the
foregoing sanitary sewer mains, installed into each respective Lot
(to a point beyond any utility easements), together with
appropriate markers of the ends of such stubs, as shown on the
CDs;
(f)
water service
stubs connected to the foregoing water mains installed into each
Lot (to a point beyond any utility easements), together with
appropriate markers of the ends of such stubs, as shown on the
CDs;
(g)
Lot fill in
compliance with the geotechnical engineer’s recommendation,
and with respect to any filled area or compacted area, provide from
a Colorado licensed professional soils engineer a HUD Data Sheet
79G Certification (or equivalent) and a certification that the
compaction and moisture content recommendations of the soils
engineer were followed and that the grading of the respective Lots
complies with the approved grading plans, with overlot grading
completed in conformance with the approving Authorities approved
grading plans within a +/- 0.2’ tolerance of the approved
grading plans; however, the Finished Lot Improvements do not
include any Overex as provided in Section 10(e) of this
Contract;
(h)
all storm water
management facilities as shown in the CDs.
2.
Dry Utilities
. Electricity,
natural gas, and telephone service will be installed by local
utility companies. The installations may not be completed at the
time of a Closing, and are not part of the Finish Lot Improvements;
provided, however, that: (i) with respect to electric distribution
lines and street lights, Seller will have signed an agreement with
the electric utility service provider and paid all costs and fees
for the installation of electric distribution lines and facilities
to serve the Lots, and all sleeves necessary for electric, gas,
telephone and/or cable television service to the Lots will be
installed; (ii) with respect to gas distribution lines, Seller will
have signed an agreement with the gas utility service provider and
paid all costs and fees for the installation of gas distribution
lines and facilities to serve the Lots; and (iii) Seller will seek
to coordinate the activities of the utility service provider with
development of the Property for the timely installation of such
utilities. Seller will take commercially reasonable efforts to
assist Purchaser in coordinating with these utility companies to
provide final electric, gas, telephone and cable television service
to the residences on the Lots, however, Purchaser must activate
such services through an end user contract. Purchaser acknowledges
that in some cases the telephone and cable companies may not have
pulled the main line through the conduit if no closings of
residences have occurred. Notwithstanding the foregoing, if dry
utilities have not been installed upon substantial completion of
the Finished Lot Improvements, Seller shall be obligated to have
contracted for same and paid all costs and fees payable for such
installation. Unless Seller has contracted for such installation
and paid such costs before the Effective Date, Seller will give
Purchaser notice when such contracts have been entered and such
costs paid. With respect to any Finished Lot Improvements that are
required by the subdivision improvement agreement applicable to the
Lots but which are not addressed as part of the Finished Lot
Improvements, and any other improvements which are not required for
the issuance of building permits but which are required by the
Authorities so that dwellings and other improvements constructed by
Purchaser on the Lots are eligible for the issuance of certificates
of occupancy for homes, Seller shall complete such other
improvements, to the extent required by the County, so as not to
delay the issuance of certificates of occupancy for residences
constructed by Purchaser on the Lots.
3.
Offsite Infrastructure
. The
Finished Lot Improvements do not include (a) the Offsite
Infrastructure, which is addressed separately in Section 5 of the
Agreement, but it does include such other offsite improvements as
are necessary to obtain certificates of occupancy for homes
constructed on the Lots, provided that as aforesaid Seller shall
only be obligated to complete such improvements within a timeframe
so as not to delay issuance of such certificates of occupancy, or
(b) common area landscaping which will be installed when required
by the County or other applicable Authority so as not to delay the
issuance of building permits or certificates of occupancy for
residences constructed by Purchaser on the Lots, but (subject to
the foregoing requirements of this section 3(b)) such landscaping
will be installed with respect to each Takedown not later than 6
months after the issuance of the first certificate of occupancy in
such Takedown.
4.
Tree Lawns/Sidewalks
.
Notwithstanding anything in this Contract to the contrary, Seller
shall have no obligation to construct, install, maintain or pay for
the maintenance, construction and installation of (i) any
landscaping or irrigation for such landscaping behind the curb on
any Lot that is to be maintained by the owner of such lot
(collectively, “
Tree
Lawns
”), but Seller shall be responsible for
constructing and installing the detached sidewalks and ramps
(collectively, “
Sidewalks
”)
that are located immediately adjacent to any Lot or on a tract as
required by the approved CDs, County, or any other Authority and/or
applicable laws as provided in this Contract. Purchaser shall be
responsible for installing any other lead walks, pathways, and
driveways and any other flatwork on the Lots. Purchaser shall
install all Tree Lawns on or adjacent to the Lots in accordance
with all applicable CDs, requirements, regulations, laws,
development codes and building codes of all
Authorities.
5.
Warranty
.
(a)
Government Warranty
Period
.
The Authorities
require warranty periods (each a “
Government Warranty
Period
”) after the final completion that is applicable
to those Finished Lots Improvements that are dedicated to or owned,
and accepted for maintenance by the Authorities (the
“
Public
Improvements
”). In the event defects in the Public
Improvements to which a governmental warranty (each a
“
Governmental
Warranty
”) applies become apparent during the
applicable Government Warranty Period, then Seller shall coordinate
the repairs with the applicable Authorities and cause the service
provider(s) who performed the work or supplied the materials in
which the defect(s) appear to complete such repairs or, if such
service providers fail to correct such defects, otherwise cause
such defects to be repaired to the satisfaction of the Authorities.
Any costs and expenses incurred pursuant to a Government Warranty
in connection with any repairs or warranty work performed during
the Government Warranty Period (including, but not limited to, any
costs or expenses incurred to enforce any warranties against any
service providers) shall be borne by Seller, unless such defect was
caused by Purchaser or its contractors, subcontractors, employees,
or agents, in which event Purchaser shall pay all such costs and
expenses to the extent such defect was caused by Purchaser or its
contractors, subcontractors, employees, or agents.
(b)
Non-Government Warranty
Period
.
Seller
warrants (“
Non-Government
Warranty
”) to Purchaser that each Finished Lot
Improvement, other than the Public Improvements, shall have been
constructed in accordance with the CDs for one (1) year from the
date of Final Completion of the Improvement (the
“
Non-Government
Warranty Period
”). If Purchaser delivers written
notice to Seller of breach of the Non-Government Warranty during
the Non-Government Warranty Period, then Seller shall coordinate
the corrections with Purchaser and cause the service provider(s)
who performed the work or supplied the materials in which the
breach of Non-Government Warranty appears to complete such
corrections or, if such service providers fail to make such
corrections, otherwise cause such corrections to be made to the
reasonable satisfaction of Purchaser. Any costs and expenses
incurred in connection with a breach of the Non-Government Warranty
shall be borne by Seller (including, but not limited to, any costs
or expenses incurred to enforce any warranties against service
providers), unless such breach was caused by Purchaser or its
contractors, subcontractors, employees, or agents, in which event
Purchaser shall pay all such costs and expenses to the extent the
breach was caused by Purchaser or its contractors, subcontractors,
employees, or agents.
(c)
EXCEPT AS EXPRESSLY
PROVIDED IN THIS SECTION 5, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND TO PURCHASER IN RELATION TO THE FINISHED LOT
IMPROVEMENTS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY
IMPLIED WARRANTY OF HABITABILITY, MERCHANTABILITY, OR FITNESS FOR
ANY PARTICULAR PURPOSE, AND EXPRESSLY DISCLAIMS ALL OF THE SAME AND
SHALL HAVE NO OBLIGATION TO REPAIR OR CORRECT AND SHALL HAVE NO
LIABILITY OR RESPONSIBILITY WITH RESPECT TO ANY DEFECT IN
IMPROVEMENTS FOR WHICH NO CLAIM IS ASSERTED DURING THE APPLICABLE
WARRANTY PERIOD OR AS OTHERWISE PROVIDED BY LAW.
EXHIBIT D
OFFSITE INFRASTRUCTURE IMPROVEMENTS
EXHIBIT E
FORM OF GENERAL ASSIGNMENT
GENERAL
ASSIGNMENT
Reference is hereby
made to that certain Purchase and Sale Agreement dated as of
_______________, 201__ (the "Agreement"), pursuant to which PCY
Holdings, LLC, a Colorado limited liability company ("Seller"), has
agreed to sell to Richmond American Homes of Colorado, Inc., a
Delaware corporation ("Purchaser"), the Property as described in
the Agreement.
For
good and valuable consideration, the receipt of which is hereby
acknowledged, Seller hereby assigns and transfers to Purchaser on a
non-exclusive basis, Seller's right, title and interest in the
following as the same relate solely to the Property, and to the
extent the same are assignable: (i) all subdivision agreements,
development agreements, and entitlements; (ii) all construction
plans and specifications; (iii) all construction warranties; and
(iv) all development rights benefiting the Property.
SELLER:
PCY
HOLDINGS, LLC,
a
Colorado limited liability company
Name:
____________________________
Title:
_____________________________
EXHIBIT F
LOT DEVELOPMENT AGREEMENT
Sky Ranch
(Richmond)
THIS
LOT DEVELOPMENT AGREEMENT (this “
LDA
”)
is made as of the ___ day of _________, 20____ (the
“
Effective
Date
”), by and between PCY Holdings, LLC, a Colorado
limited liability company (“
Developer
”),
and Richmond American Homes of Colorado, Inc., a Delaware
corporation (“
Builder
,”).
Developer and Builder are sometimes individually referred to as a
“
Party
”
and collectively referred to as the “
Parties
.”
RECITALS
A.
Developer, owns
certain real property located in Arapahoe County (the
“
County
”),
Colorado which Developer is developing as part of the Sky Ranch
master planned residential community (“
Development
”).
The preliminary concept map for Phase A of the Development
(“
Concept
Plan
”) is depicted on
Exhibit A
attached hereto (the “
Property
”).
The Development is being subdivided in several subdivision filings
and developed in phases. The Builder Lots in each phase are
generally depicted on the Concept Plan.
B.
Concurrently with
the execution of this LDA, pursuant to the terms of a separate
Contract for Purchase and Sale of Real Estate by and between
Developer, as seller, and Builder, as purchaser, as amended (the
“
Contract
”),
Builder is acquiring from Developer a portion of the Property
consisting of approximately 100 single family residential building
lots, and will be acquiring an additional 90 lots within the
Property (collectively, the “
Builder
Lots
”) pursuant to the Contract at a closing that will
occur subsequent to the execution of this LDA. The number and
location of the Builder Lots to be acquired by Builder under the
terms of the Contract, the number and location of the Takedown 1
Lots and the Takedown 2 Lots and the development phasing for the
Builder Lots consisting of four phases are generally depicted on
the Concept Plan attached as
Exhibit
A
.
C.
Pursuant to the
Contract, Developer has agreed to construct or cause to be
constructed the Improvements, as hereinafter defined. The
“
Improvements
”
are those infrastructure improvements described in the plans and
specifications identified in
Exhibit B
attached hereto as Developer causes such plans to be finalized and
approved by the applicable Approving Authorities
(“
Plans
”).
At such time as the Plan have been so approved,
Exhibit B
will be replaced by a new list of the final approved Plans by
amendment to this Agreement (“
Revised Exhibit
B
”). The Improvements do not include any Offsite
Infrastructure Improvements that are being funded by Seller
pursuant to the Offsite Infrastructure Escrow Agreement, as defined
in the Contract.
D.
As required by the
terms of the Contract, Builder has agreed (i) to pay the Initial
Purchase Price (as defined in the Contracts) for the Builder Lots
that the Builder acquires at a Closing; and (ii) pay that
portion of the Purchase Price for the Builder Lots defined as the
Deferred Purchase Price (as defined in the Contract) in accordance
with the terms and provisions of this LDA as the Improvements are
completed and as more particularly set forth herein.
E.
The Parties now
desire to enter into this LDA in order to set forth the terms and
conditions under which the Improvements will be constructed by
Developer and provide for the payment of the Improvements, together
with such other matters as are set forth hereinafter.
AGREEMENT
NOW
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Developer and Builder
agree as follows:
1.
Incorporation of Recitals;
Definitions.
The Parties hereby acknowledge and agree to the
Recitals set forth above, which are incorporated herein by this
reference. Unless otherwise defined herein, all capitalized terms
used in this LDA and not defined in this LDA shall have the same
meaning as set forth in the Contract.
2.
Definitions.
Unless otherwise
defined herein, all capitalized terms used in this LDA and not
defined in this LDA shall have the same meaning as set forth in the
Contract.
3.
Responsibilities of Developer and
Builder
.
3.1
Generally
. Developer shall
construct, or cause to be constructed, the Improvements in the
manner set forth hereinafter. Developer shall coordinate,
administer and oversee (a) the preparation and filing of all
applications, filings, submittals, plans and specifications,
budgets, timetables and other documents pertaining to construction
and installation of the Improvements and (b) the construction and
installation of the Improvements. Developer will engage or cause to
be engaged consultants, contractors and subcontractors who will be
responsible for the construction of the Improvements and suppliers
who will be responsible for supplying labor, materials, equipment,
services and other work in connection with the construction of the
Improvements (“
Service
Provider(s)
”), pursuant to the Construction Contracts
(as hereinafter defined).
3.2
Comply with Legal Requirements
.
Developer will comply with all terms and conditions of applicable
law in performing their obligations under this LDA. Developer will
provide to each Builder copies of all notices filed by the
Developer with the County, and all other applicable governmental or
quasi-governmental entities or agencies (the “
Approving
Authorities
”) related to the Improvements and shall,
within five (5) business days of receipt thereof, provide notice to
each Builder (together with copies of all notices received by
Developer) of any notice received by Developer alleging any failure
to comply with any applicable laws, ordinances, rules, regulations,
or lawful orders of public authorities bearing on the construction
of the Improvements.
3.3
Bonds and Assurances
.
Developer, as part of the Costs, shall provide to all applicable
Approving Authorities any bonds, assurance agreements, or other
financial assurances required with respect to the construction of
the Improvements. Developer shall, as part of the Costs, provide to
all Approving Authorities all warranties, bonds and other financial
assurances required to obtain permits for, and the preliminary and
final acceptance and approval of, the Improvements. Builder shall
take all commercially reasonable actions and execute all documents
reasonably requested by Developer in its efforts to obtain releases
of all such warranties, bonds, and other financial assurances upon
final acceptance of the Improvements by the Approving
Authorities.
3.4
Taxes, Fees and Permits
.
Developer or the Service Providers shall pay all applicable sales,
use, and other similar taxes pertaining to the construction of the
Improvements, and shall secure and pay for all approvals,
easements, assessments, charges, permits and governmental fees,
licenses and inspections necessary for proper construction and
completion of the Improvements, subject to the terms of the
Contract and except as provided otherwise in this LDA. Developer
and the Service Providers shall not defer the payment of any use
taxes pertaining to the Improvements except as may be authorized
under law or agreement with the applicable taxing
authorities.
3.5
Dedications
. Developer and each
Builder upon whose property the Improvements are located shall
timely make all conveyances and dedications of the Improvements as
to any Improvements owned by such Party if and as required by the
Approving Authorities, free and clear of all liens and
encumbrances.
3.6
Indemnity
. Developer shall
indemnify, defend and hold harmless the Builder and its owners,
employees, members, managers, directors, officers, agents,
affiliates, successors and assigns (each a “
Builder
Indemnitee
” and collectively, the “
Builder
Indemnitees
”) for, from and against all claims,
demands, liabilities, losses, damages (exclusive of special,
consequential, punitive, consequential and lost profits damages),
costs and expenses, including but not limited to court costs and
reasonable attorneys’ fees, arising out of (a) Off-Lot Soils
Conditions, or (b) material damage caused by Developer’s
negligence or willful misconduct in the performance of the
construction of the Improvements. Notwithstanding the foregoing,
Developer shall not be obligated under this LDA to indemnify the
Builder Indemnitees to the extent such liabilities result from the
negligence or willful misconduct of any Builder Indemnitee. Builder
shall indemnify, defend and hold harmless Developer and its
respective owners, affiliates, employees, members, managers,
directors, officers, agents, successors and assigns (each an
“
Developer
Indemnitee
” and collectively, the “
Developer
Indemnitees
”) for, from and against all claims,
demands, liabilities, losses, damages, costs and expenses,
including but not limited to court costs and reasonable
attorneys’ fees, arising out of or relating to (a) On-Lot
Soils Conditions, (b) Builder’s development, construction,
use, ownership, management, marketing or sale activities associated
with the initial home construction on the Lots (including, without
limitation, land development, grading, excavation, trenching, soils
compaction and construction on the Lots performed by or on behalf
of Builder); (c)
Intentionally
Deleted
; (d) any change subsequent to the Effective Date in
the Entitlements to the extent that the change was caused,
requested or made by Builder or the design of any residences
(“
Homes
”)
constructed on the Builder Lots other than claims arising out of
Developer’s negligence or willful misconduct in the
performance of Developer’s obligations under this LDA; or (e)
homeowner claims asserting or relating to any implied warranty of
habitability, merchantability, or fitness for any particular
purpose in connection with Builder’s construction of one or
more Homes on the Builder Lots. Notwithstanding the foregoing,
Builder shall not, as to any Builder Lot, be obligated under this
LDA to indemnify, defend or hold harmless Developer Indemnitees
from claims arising out of development, construction, use,
ownership, management, marketing or sales activities associated
with the initial construction of homes on Builder Lots which occurs
after Builder conveys such Builder Lot if such successor is
reasonably approved by Developer and gives Developer a substitute
indemnity that is equivalent to the indemnity provided by the
Builder under this Section 3.6 and such successor is financially
sound as reasonably determined by Developer. Developer covenants
with Builder that Developer has and will include geologic, soils
and groundwater provisions in the indemnities Developer obtains
from other builders within the Development that are at least as
protective of Developer as those provided in Sections 3.6 and 4.7
of this Agreement. Obligations under this Section shall
survive the termination or expiration of this LDA.
3.7
Insurance
. Developer shall
procure and maintain, and shall cause the Service Providers to
procure and maintain, the insurance described in
Exhibit C
attached hereto during the construction of the Improvements and any
warranty work performed on the Improvements.
3.8
Independent Contractor
.
Developer is an independent contractor and neither Developer nor
its employees are entitled to worker’s compensation benefits
or unemployment insurance benefits through any Builder as a result
of performing under the LDA. The Developer is responsible for and
obligated to pay all assessable federal and state income tax on
amounts earned or paid under this LDA.
4.
Construction of
Improvements
.
4.1
Plans and Specifications
.
Developer shall (i) diligently finalize, process and obtain
approval of the Plans for the Improvements from the applicable
Approving Authorities to the extent required by such entities, and
(ii) apply to the utility service provider for the preparation of
dry utility plans (“
Utility
Plans
”). Upon receipt of the approved Plans for the
Improvements and the Utility Plans for the dry utilities from the
utility service provider, Developer will furnish a copy of such
Utility Plans to the Builder. After replacement of
Exhibit B
by
the Revised Exhibit B, if Developer elects to amend the Plans in a
manner that will result in a Material Change (defined below), then
Developer shall provide written notice of the Material Change (a
“
Notice of Material
Change
”) to Builder if the Builder Lots are affected
by the change. The Notice of Material Change shall describe the
modification to the Plans requested by Developer. Builder shall
have five (5) business days after receipt of the Notice of Material
Change to provide written notice to the Developer if it objects to
the proposed Material Change (a “
Notice of Material
Change Objection
”), which shall describe revisions to
the Material Change that would render it acceptable to Builder. If
Builder fails to give a timely Notice of Material Change Objection
to Developer, the Material Change shall be deemed approved by
Builder. If Developer performs any Material Change without first
providing Builder with a Notice of Material Change, or after
Receiving a Notice of Material Change Objection, which objection
has not been resolved in accordance with the following provisions,
then Developer shall assume responsibility for the cost of
correcting any such change, as well as the time impacts for making
such correction. Within five (5) business days after delivery to
Developer of a Notice of Material Change Objection, said Developer
and the Builder shall meet to approve or reject the Material
Change. If Developer and Builder cannot reach an acceptable
resolution regarding the Notice of Material Change Objection, the
dispute shall be resolved pursuant to the arbitration provision set
forth in
Section 7
below. For
purposes of this
Section
4.1
, a “
Material
Change
” shall consist only of the following changes to
the approved Plans for the Improvements to be installed for the
benefit of the Property which have previously been approved by the
applicable Approving Authorities:
4.1.1
Reduction of the
total number of Builder Lots available for the construction of
residences by more than 10%.
4.1.2
With respect to
those certain Lots identified in
Exhibit H
attached hereto and incorporated herein by this reference, material
adverse impact on the ability to serve basements with nine (9) foot
foundation wall heights with gravity flow sanitary sewer service on
the Builder Lots.
4.1.3
Changes greater
than one half (1/2) of one (1) foot to the proposed finish grade
elevation for any of the Builder Lots.
4.2
Construction Standard
.
Developer shall cause the applicable Improvements to be constructed
in accordance with the Construction Standard and shall obtain
preliminary and final acceptance thereof by all Approving
Authorities. As used herein, the term “
Construction
Standard
” means construction and installation of the
Improvements in a good, workmanlike and lien-free manner and in
substantial conformity with the Plans (as may be modified pursuant
to the terms hereof), the applicable requirements of the Approving
Authorities, and the “Finished Lot Standard” set forth
on
Exhibit D
attached hereto. The Construction Standard does not include any
so-called “over excavation” or comparable preparation
or mitigation of the soil (hereinafter defined as the
“
Overex
”)
on the Builder Lots and Builder has sole responsibility with
respect to any Overex that the Builder determines to undertake on
the Builder Lots. The terms and provision of Section 10(e) (Over
Excavation) of the Contract are hereby incorporated herein by this
reference. The Parties shall reasonably cooperate in coordinating
the Builder’s completion of the Overex so that the Overex can
be properly sequenced with Developer’s completion of the
Improvements. In no event shall Developer be liable to Builder for
any delay, costs or damages incurred with respect to such Overex,
even if caused by any delay in installation of Improvements
sequenced ahead of the Overex, and all timeframes shall be deemed
extended appropriately in the event of any delay in completing such
Overex in accordance with the Construction Schedule (as hereinafter
defined).
4.3
Construction Contracts for
Work
. Developer and contractors of Developer shall contract
for all of the work and materials comprising the applicable
Improvements. Developer shall have the right to bid, pursue,
negotiate, agree to and execute contracts and agreements with
Service Providers for the work and materials comprising the
Improvements (each a “
Construction
Contract
” and collectively, the “
Construction
Contracts
”), based upon forms that Developer deems
necessary or appropriate in its commercially reasonable discretion;
provided, however, that Developer shall deliver written notice to
Builder after it shall enter into any Construction Contract, which
notice shall identify the Service Provider(s). Developer shall
attempt to cause each Construction Contract, in addition to other
matters, to (i) allow for the automatic assignment, without need
for further action, of all of Developer’s rights (including,
without limitation, the warranty and indemnity provisions thereof)
to Builder on a non-exclusive basis in the event of replacement of
Developer pursuant to the terms of this LDA, and identify Builder
as an intended third-party beneficiaries of the Construction
Contract, (ii) require the Service Provider to name the Builder as
additional insureds on all required insurance maintained by the
Service Provider for a period expiring not sooner than final
acceptance of the Improvements by the applicable Approving
Authority for which such Service Provider furnished materials or
work, (iii) require the Service Providers to provide a
warranty on materials and labor supplied by such Service Provider
for a period coterminous with the warranty period required by the
applicable Approving Authorities for Improvements to be dedicated
to an Approving Authority, but in no event less than one (1) year
for any Improvement, (iv) require the Service Provider to perform
its work in accordance with the Construction Standard, (v) require
the Service Provider to indemnify, defend, and hold harmless
Developer from all claims and causes of action arising from the
negligent acts or omissions or intentional misconduct of the
Service Provider or its employees or agents, (vi) permit retainage
in an amount of at least five percent (5%) of the amounts payable
to the Service Provider, until the work to be completed pursuant to
such contract has been substantially completed and, if applicable,
granted initial acceptance by the applicable Approving Authority;
(vii) provide the Developer the right, but not the obligation, to
pay subcontractors and suppliers of the Service Provider directly
or by joint check, and (viii) provide for no limitation on remedies
against the Service Provider for a default except the prohibition
of recovery of punitive damages. Upon receipt of written request
from Builder, Developer shall deliver a copy of each Construction
Contract to such Builder.
4.4
Commencement and Completion
Dates
. Developer shall cause construction of the
Improvements to be commenced and completed as follows:
4.4.1
Commencement; Construction Schedule;
Completion
. The Improvements will be completed in phases
consisting of two phases with respect to the Takedown 1 Lots and
two subsequent phases with respect to the Takedown 2 Lots for a
total of four phases (each a “
Phase
”). Developer shall commence
and complete each component of the Improvements in each Phase in
accordance with the construction schedule set forth on
Exhibit E
attached hereto (the “
Construction
Schedule
”), and cause Substantial Completion of the
Improvements in each Phase to occur on or before the applicable
deadline therefor as set forth in the Construction Schedule (the
“
Substantial
Completion Deadline
”); provided, however, subject to
Section 4.4.2
below. The Construction Schedule will provide for the first Phase
(“
Phase
1
”) to be substantially completed ten (10) months
after the First Closing, with the second Phase (“
Phase
2
”) to be substantially completed nine (9) months
after substantial completion of Phase 1, with the third Phase
(“
Phase
3
”) to be substantially completed nine (9) months
after the Second Closing and the fourth Phase (“
Phase
4
”) to be substantially completed nine (9) months
after substantial completion of Phase 3, all subject to
Section 4.4.2
below. Developer may cause Improvements to be constructed and
installed as Developer deems necessary, in the Developer’s
commercially reasonable discretion, to coordinate such Improvements
with the development of portions of the Development other than the
Property; or cause Improvements to be constructed and installed in
accordance with scheduling requirements of the County and other
Approving Authorities. Notwithstanding anything to the contrary,
the Developer shall have no obligation to install landscaping
during the months of October through April.
4.4.2
Force Majeure
. Notwithstanding
any contrary provision of this LDA, the completion dates and all
interim milestones (if any) set forth on the Construction Schedule,
the Substantial Completion Deadline, and the time for performance
of Developer’s other obligations under the Construction
Schedule or this LDA shall be extended by a period of time equal to
any period that such performance or progress in construction of the
Improvements is delayed due to any Dispute, as defined below, acts
or failure to act of any Approving Authority, strike, riot, act of
war, act of terrorism, act of violence, weather, act of God, or any
other act, occurrence or non-occurrence beyond Developer’s
reasonable control (each, an “
Uncontrollable
Event
”).
4.5
Substantial
Completion
.
4.5.1
Definition of Substantial
Completion
. “
Substantial
Completion
” of the Improvements (or applicable
component thereof) shall be deemed to have occurred when all of the
following have occurred with respect to the Improvements (or
applicable component thereof):
(a)
Subject to
Section
4.5.1
(c)
below, Developer has
substantially completed or corrected all punchlist items provided
by the Approving Authorities and the Builders affecting the
Improvements (or applicable component thereof) in accordance with
Section
4.5.2
below so that
Builder is not precluded from obtaining from the Approving
Authorities building permits for houses constructed, or to be
constructed (or certificates of occupancy therefor), on any Builder
Lots solely as a result of such punchlist items (or applicable
component thereof) not being complete, and Developer has obtained
lien releases reasonably acceptable to Builder from all contractors
performing work related to the Improvements;
(b)
Subject to
Section
4.5.1
(c)
below, the Improvements (or
applicable component thereof) have been installed pursuant to the
Construction Standard and shall be substantially complete so that
Builder is not precluded from obtaining from the Approving
Authorities building permits for houses constructed, or to be
constructed (or certificates of occupancy therefor), on any Builder
Lots solely as a result of such Improvements (or applicable
component thereof) not being complete;
(c)
Any
Improvements (or applicable component thereof) that are intended to
be dedicated to or accepted by an Approving Authority shall have
been inspected and preliminarily accepted by the applicable
Approving Authority (subject to the Government Warranty Period (as
defined below)); except that those Improvements that are (x) to be
phased, if any, as set forth in the Entitlements, or (y) not
necessary or required by the Approving Authority to occur prior to
issuance of a building permit or certificate of occupancy for Homes
on the Lots, (collectively, the “
Additional
Improvements
”), will not be required to achieve
Substantial Completion, but Developer shall nevertheless be
required to complete construction and obtain acceptance of such
Additional Improvements by the applicable Approving Authority after
Substantial Completion at such time as is required by the
applicable Approving Authorities and so that Builder is not
precluded from obtaining from the Approving Authorities building
permits or certificate of occupancy for houses constructed, or to
be constructed, on any Builder Lots solely as a result of such
Additional Improvements (or applicable component thereof) not being
complete.
(d)
No mechanics’
or materialmen’s liens shall have then been filed against any
of the Builder Lots with respect to the Improvements and lien
waivers have been obtained from the Service Providers that
constructed the Improvements (or applicable portion thereof), or
the Developer has obtained a bond to insure over any such
mechanics’ or materialmen’s liens.
(e)
With respect to any
Improvements that are required by the Construction Standard or that
are required by the subdivision improvement agreement applicable to
the Builder Lots but which are not addressed as part of the
Construction Standard or the Finished Lot Standard, and any other
Improvements which are not required for the issuance of building
permits but which are required by the Approving Authorities so that
Homes and other improvements constructed by Builder on the Builder
Lots are eligible for the issuance of certificates of occupancy for
homes, the Developer shall complete or cause the completion of such
other Improvements, to the extent required by the Approving
Authorities, so as not to delay the issuance of certificates of
occupancy for Homes constructed by Builder on the Builder
Lots.
(a)
Notice to Builder
. Developer
shall notify Builder in writing when Substantial Completion of the
Improvements (or applicable component thereof) on the Builder Lots
has been achieved, except for minor punch-list work which does not
affect the ability to obtain building permits or certificates of
occupancy, as applicable, for Homes on the Lots, and the date(s)
and time(s) the Approving Authorities will inspect such
Improvements (or applicable component thereof). Within ten (10)
days after receipt by Builder of such notice from the Developer,
Developer and Builder shall jointly inspect the Improvements (or
applicable component thereof) on the Builder Lots and produce a
punchlist (“
Builder
Punchlist
”). The Builder Punchlist may not contain any
items other than incomplete Improvements or components thereof,
deficient or defective construction of the Improvements or
components thereof, or failure to construct the Improvements or
components thereof in accordance with the Construction Standard.
Builder shall not be able to object or provide Builder Punchlist
items for any portion of the Improvements previously inspected by
the Builder. If the Parties are unable to agree upon a Builder
Punchlist within five (5) days after the joint inspection described
above, then any dispute related to such punchlist shall be
submitted to the expedited dispute resolution procedures in
accordance with
Section
7
below. Developer will give Builder notice of the date and
time of inspections of the Improvements by the Approving
Authorities and Builder may attend such inspections. Developer will
attempt to provide Builder with copies of any inspection reports or
punchlists received from the Approving Authorities in connection
with the inspection of the Improvements, and Developer shall be
responsible to correct punchlist items from the Approving Authority
and items set forth on the Builder Punchlist. Notwithstanding
anything to the contrary including any Builder Punchlist, if an
Approving Authority grants preliminary approval or construction
acceptance to any of the Improvements, or if the engineer issues a
certification with respect to the grading, fill and compaction in
accordance with item (g) of
Exhibit D
,
then it shall conclusively be presumed that such Improvement or
work was completed in accordance with the Construction Standard,
subject to completion of the punchlist items provided by the
Approving Authority. If an item is not identified as incomplete on
the Builder Punchlist, then it shall conclusively be presumed that
such Improvement was completed in accordance with the Construction
Standard, and thereafter the Builder and not Developer shall be
responsible for repairing damage to such Improvement occurring
after completion of the Builder Punchlist work unless such damage
is determined either by agreement of the parties or pursuant to
Section 7
of this
LDA to be the result of a design or construction defect. Disputes
regarding Builder Punchlist items and matters will be resolved
pursuant to the expedited dispute resolution procedures set forth
in
Section 7
of
this LDA.
(b)
Correction of Punchlist Items
.
Developer shall cause any punchlist items to be corrected within
the time required by the County or other applicable Approving
Authorities, or such shorter time as may be required pursuant to
the Construction Schedule.
(c)
Interim Inspections
. Upon
reasonable prior notice, each Builder may inspect the construction
of the Improvements on the Builder Lots; provided, however, such
inspection shall be (i) at the sole risk of Builder, (ii) such
inspection shall be non-invasive and shall be performed in a manner
that does not interfere with or result in a delay in the
construction of the Improvements, and (iii) Builder shall indemnify
Developer for any damage resulting from such
inspection.
4.6.1
Notice of Default
. If
Developer: (a) breaches its obligation under this LDA to complete
or cause the completion of any Improvement in accordance with the
Plans or Construction Schedule (as extended by any Uncontrollable
Event); (b) otherwise breaches any material obligation under this
LDA; (c) fails to comply with any material provision of its
Construction Contracts with Service Providers beyond any applicable
express notice or cure periods; or (d) files a petition for relief
in bankruptcy or makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay its debts
generally as they become due (each a “
Bankruptcy
Event
”), then the Builder may deliver written notice
of the breach to Developer (a “
Notice of
Default
”). Each of the events set forth in Subsections
(a) through (d) inclusive of the preceding sentence shall be herein
referred to as a “
Constructing Party
Default
.” For any Constructing Party Default other
than a Bankruptcy Event, the Developer shall have thirty (30) days
after Developer’s receipt of the Notice of Default from the
Builder to cure the Constructing Party Default (the
“
Cure
Period
”); provided, however, if the nature of the
Constructing Party Default is such that it cannot reasonably be
cured within thirty (30) days, the Cure Period shall be deemed
extended for a reasonable period of time (not to exceed an
additional sixty (60) days) so long as Developer commenced in good
faith and with due diligence to cause such Constructing Party
Default to be remedied. If Developer does not cause the cure of the
Constructing Party Default within the Cure Period (as may be
extended pursuant to the preceding sentence, and subject to
Uncontrollable Events), or if a Bankruptcy Event occurs (either, an
“
Event of
Default
”), then the Builder may elect to appoint
either itself or another qualified third party (which may include
another builder under contract with Developer to purchase lots
within the Development, provided that such builder agrees to, and
accepts, such appointment) (“
Substitute
Constructing Party
”) to assume and take over the
construction of the Improvements by providing written notice to
Developer of its election (the “
Assumption
Notice
”). Substitute Constructing Party’s
assumption of the construction of the Improvements shall not
include the assumption of any liability for acts or omissions
occurring prior to the Assumption Notice, or payment of any
“Constructing Party Cost Overruns” (as defined below)
incurred prior to the Assumption Notice, which Constructing Party
Cost Overruns shall remain the sole responsibility of the
Developer, or receipt of any cost savings prior to the Assumption
Notice; provided, however, that the Substitute Constructing Party
shall be entitled to an administrative fee in an amount equal to
two percent (2%) of the remaining Costs (as defined below) actually
paid, which administrative fee shall be included in the
Constructing Party Cost Overruns. The Builder’s election to
appoint a Substitute Constructing Party to assume and take over the
construction of the Improvements and to exercise and enforce the
rights and obligations set forth in Section 4.6.2 below shall
thereafter be the Builder’s sole and exclusive
remedy.
4.6.2
Assumption Right
. If Builder
delivers an Assumption Notice, then: (i) Developer shall cooperate
to allow the Substitute Constructing Party to take over and
complete the incomplete Improvements, including the execution and
delivery to the Substitute Constructing Party of such agreements,
documents or instruments as may be reasonably necessary to assign
to the Substitute Constructing Party all Construction Contracts
with third parties pertaining to the Improvements; (ii) Developer
shall remain responsible for all Constructing Party Cost Overruns
(as hereinafter defined), but Developer shall be relieved of all
further obligations under this LDA with respect to the completion
of the incomplete Improvements subsequent to such assumption;
(iii) Developer shall remain liable for its negligence or
willful misconduct, and any indemnification obligations specified
herein incurred prior to the date of such assumption; and (v)
Substitute Constructing Party shall assume and perform all
obligations under all Contracts for Improvements which Substitute
Constructing Party will complete to the extent such obligations are
to be performed after the date of delivery of the Assumption
Notice. Upon delivery of an Assumption Notice, Substitute
Constructing Party shall be obligated to complete the Improvements
and pay the Costs incurred thereafter by Substitute Constructing
Party to complete the Improvements. If a Substitute Constructing
Party assumes the obligation to construct the Improvements, the
Builder’s obligation for the payment of costs under Section
6.1 which are due and payable after the date of the Assumption
Notice shall be suspended and thereafter terminated if the
Substitute Constructing Party achieves Substantial Completion of
any unfinished Improvements, and the Substitute Constructing Party
shall be entitled to recover the Constructing Party Cost Overruns
incurred by the Substitute Constructing Party from the Developer.
In the event of an Assumption Notice, the Substitute Constructing
Party shall indemnify, defend and hold harmless the Developer and
its members, managers, shareholders, employees, directors,
officers, agents, affiliates, successors and assigns for, from and
against all claims, demands, liabilities, losses, damages
(exclusive of special, consequential, punitive, speculative or lost
profits damages), costs and expenses, including but not limited to
court costs and reasonable attorneys’ fees, that accrue after
the date of the Assumption Notice and arise out of the Substitute
Constructing Party’s completion of the Improvements, and this
indemnity shall not apply to any claims, demands, liabilities,
losses, damages, costs, expenses, acts or omissions arising or
accruing before the date of the Assumption Notice. The obligations
under this Section shall survive the termination or expiration of
this LDA.
4.6.3
Appointment of Substitute Constructing
Party
. For purposes of exercising the self-help remedies set
forth in this
Section
4.6
with respect to an Event of
Default, Builder may elect to appoint either itself or another
Substitute Constructing Party (which may include another builder
under contract with Developer to purchase lots within the
Development, provided that such builder agrees to, and accepts,
such appointment) who shall then have the right and authority to
act pursuant to the self-help provisions of this
Section
4.6
(“
Designated
Builder
”). If the cure of an Event of Default requires
the construction or completion of Improvements that serve both the
Builder Lots and other lots that are owned by another homebuilder
that is under contract with Developer for the completion of such
Improvements (the “
Joint
Improvements
”), then the Builder shall, at
Builder’s election, have the first right and option (ahead of
all other builders within the Development) to step in and act on
behalf of all such builders pursuant to the self-help provisions of
this
Section 4.6
with respect to the Joint Improvements (“
Builder’s
Step-In Option
”). Builder may exercise the Builder
Step-In Option by giving notice to Developer and the other builders
within fifteen (15) days following the Event of Default
(“
Builder’s
Step-In Deadline
”). If Builder does not exercise
Builder’s Step-in Option prior to the Builder Step-In
Deadline, then the other builders shall have the right to exercise
an option to step-in and select a Substitute Contracting Party to
act on behalf of all such builders pursuant to the self-help
provisions of this
Section
4.6
with respect to the Joint Improvements by giving notice
to Developer and the other builders within fifteen (15) days
following the expiration of Builder’s Step-In Deadline. The
Developer, builder, the other builders(s) affected by any joint
improvements and the Title Company will at Closing execute a
“
Joint Improvements
Memorandum
” that describes the rights and obligations
of Developer, Builder, such other builder(s) and Title Company and
such document will supplement this Lot Development Agreement
regarding the installation and construction of any Joint
Improvements. The form of the Joint Improvements Memorandum shall
be agreed upon during the Inspection Period under the Contract and
attached to this Lot Development Agreement as
Exhibit J
.
4.7
Over-Excavation of Lots
. The
Parties acknowledge that the Improvements shall not include Overex
of the Lots. Builder, with respect to its Builder Lots shall, at
its sole cost, cause the Overex to be performed, and shall have the
right to enter such Builder Lots for the purposes of performing the
Overex; provided, however, that such entry shall be performed in a
manner that does not materially interfere with or result in a
material delay or an increase in the Costs or any expenses in the
construction of the Improvements, and provided further that Builder
shall promptly repair any portion of the Builder Lots and adjacent
property that is materially damaged by Builder or its agents,
designees, employees, contractors, or subcontractors in performing
the Overex. THE PARTIES ACKNOWLEDGE AND AGREE THAT DEVELOPER IS NOT
PERFORMING ANY OVER-EXCAVATION OF THE BUILDER LOTS AND THAT THE
DEVELOPER SHALL HAVE NO LIABILITY WHATSOEVER WITH RESPECT TO OR
ARISING OUT OF ANY OVER-EXCAVATION OF THE BUILDER LOTS OR EXPANSIVE
SOILS PRESENT ON THE BUILDER LOTS AND DEVELOPER EXPRESSLY DISCLAIMS
ANY LIABILITY WITH RESPECT TO ANY OVER-EXCAVATION OF THE LOTS AND
EXPANSIVE SOILS PRESENT ON THE BUILDER LOTS. BUILDER SHALL
INDEMNIFY, DEFEND AND HOLD HARMLESS DEVELOPER AND ITS SHAREHOLDERS,
EMPLOYEES, DIRECTORS, OFFICERS, AGENTS, AFFILIATES, SUCCESSORS AND
ASSIGNS FOR, FROM AND AGAINST ALL CLAIMS, DEMANDS, LIABILITIES,
LOSSES, DAMAGES (EXCLUSIVE OF SPECIAL, CONSEQUENTIAL, PUNITIVE,
SPECULATIVE OR LOST PROFITS DAMAGES), COSTS AND EXPENSES, INCLUDING
BUT NOT LIMITED TO COURT COSTS AND REASONABLE ATTORNEYS’
FEES, ARISING OUT OF BUILDER’S OVER-EXCAVATION OR OTHER SOIL
MITIGATION OR BUILDER’S ELECTION NOT TO PERFORM SOILS
MITIGATION, ON OR PERTAINING TO THE BUILDER LOTS. THE PROVISIONS OF
THIS SECTION 4.7 SHALL EXPRESSLY SURVIVE THE EXPIRATION OR
TERMINATION OF THIS LDA.
4.8
Warranty Periods
.
4.8.1
Government Warranty Period
. The
Approving Authorities may require a warranty period after the
Substantial Completion of the Improvements (a “
Government Warranty
Period
”). In the event defects in the Improvements to
which a governmental warranty applies become apparent during the
Government Warranty Period, then Developer shall coordinate the
repairs with the applicable Approving Authorities and cause the
Service Provider(s) who performed the work or supplied the
materials in which the defect(s) appear to complete such repairs
or, if such Service Providers fail to correct such defects,
otherwise cause such defects to be repaired to the satisfaction of
the Approving Authorities. Any costs and expenses incurred in
connection with any repairs or warranty work performed during the
Government Warranty Period (including, but not limited to, any
costs or expenses incurred to enforce any warranties against any
Service Providers) shall be borne by Developer and shall be
included in the Constructing Party Cost Overruns, unless such
defect or damage was caused by Builder or its contractors,
subcontractors, employees, or agents, in which event Builder shall
pay all such costs and expenses to the extent caused by Builder or
its contractors, subcontractors, employees, or agents. Any damage
to an Improvement that was not listed on the Builder Punchlist
shall be presumed to have been caused by Builder or its
contractors, subcontractors, employees, or agents, unless the
Builder conclusively proves that the damage was caused as the
result of a design or construction defect in the original
construction by Developer as determined by agreement of the parties
or as determined pursuant to the Expedited Dispute procedure in
Section 7, below.
4.8.2
Non-Government Warranty Period
.
Developer warrants (“
Non-Government
Warranty
”) to Builder that each Improvement to which a
Governmental Warranty Period does not apply shall have been
constructed in accordance with the Plans for one (1) year from the
date of Substantial Completion of the Improvement (the
“
Non-Government
Warranty Period
”). If Builder delivers written notice
to Developer of breach of the Non-Government Warranty during the
Non-Government Warranty Period, then Developer shall coordinate the
corrections with the Builder and cause the Service Provider(s) who
performed the applicable work or supplied the applicable materials
to complete such corrections or, if such Service Providers fail to
make such corrections, otherwise cause such corrections to be made.
Any costs and expenses incurred in connection with a breach of the
Non-Government Warranty shall be borne by Developer (including, but
not limited to, any costs or expenses incurred to enforce any
warranties against Service Providers), and shall be included in the
Constructing Party Cost Overruns, unless such breach was caused by
Builder or its contractors, subcontractors, employees, or agents,
in which event the Builder shall pay all such costs and expenses to
the extent caused by Builder or its contractors, subcontractors,
employees, or agents. Any damage to an Improvement that was not
listed on the Builder Punchlist shall be presumed to have been
caused by Builder or its contractors, subcontractors, employees, or
agents, unless Builder conclusively proves that the damage was
caused as the result of a design or construction defect in the
original construction by Developer. EXCEPT AS EXPRESSLY PROVIDED IN
SECTION 4.8.1 OR
4.8.2
, THE DEVELOPER PARTIES MAKE NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND TO BUILDER IN RELATION TO THE IMPROVEMENTS,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF HABITABILITY, MERCHANTABILITY, OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND EXPRESSLY DISCLAIMS ALL OF THE SAME AND
SHALL HAVE NO OBLIGATION TO REPAIR OR CORRECT ANY DEFECT IN
IMPROVEMENTS FOR WHICH NO CLAIM IS ASSERTED DURING THE APPLICABLE
WARRANTY PERIOD. The preceding sentence does not affect, alter or
modify any Service Provider’s obligations to repair or
correct any defects in Improvements and shall not be construed as a
limitation on the Builder’s statutory rights or remedies
which may not be modified by contract.
4.9
License for Construction
. Each
Party hereby grants to Developer or the Substitute Constructing
Party (as applicable) and the Service Providers a temporary,
non-exclusive license to enter upon the parcel within the Property
owned by such Party as reasonably necessary for the installation of
the Improvements, rough grading of the Builder Lots, stubbing of
utilities and/or the performance of Developer’s (or
Substitute Constructing Party’s, as applicable)
responsibilities under this LDA. Each Party further agrees to grant
such separate written rights of entry and/or licenses in or upon
the parcel owned by such Party as may be reasonably necessary for
installation of the Improvements, rough grading of the Builder Lots
and stubbing of utilities. No rights of entry and/or licenses over
any portion of the Property may be exercised or used by a Party in
any fashion that would unreasonably interfere with or adversely
impact any other Party’s development of its parcel. The
rights under this Section or any instruments delivered hereunder
shall terminate upon the expiration of all Government Warranty
Periods.
4.10
Liens
. Developer shall pay, or
cause to be paid, when due, all liens and claims for labor and/or
materials furnished to the Builder Lots pursuant to this LDA to
prevent the filing or recording by any third party of any
mechanics’, materialmen’s or other lien, stop notice or
bond claim or any attachments, levies or garnishments (collectively
“
Liens
”)
involving the Improvements. Developer will, within forty-five (45)
calendar days after written notice from Builder or after Developer
otherwise become aware of such Liens, terminate the effect of any
Liens by filing or recording an appropriate release or bond if so
requested by Builder. If a Builder requests a Developer to file and
obtain any such release or bond and Developer fails to do so within
forty-five (45) calendar days of such request (which 45-day period
may be extended by Developer to 60 days provided that Developer has
proceeded in good faith and with diligence and not achieved the
filing or recording of an appropriate release or bond by the end of
the 45-day period), Builder may obtain such bond or secure such
release on behalf of Developer, and Developer shall reimburse
Builder for all costs and fees related thereto within thirty (30)
days after receipt of written request therefor.
4.11
Tree Lawns/Sidewalks
.
Notwithstanding anything in this LDA to the contrary, Developer
shall have no obligation to construct, install, maintain or pay for
the maintenance, construction and installation of (i) any
landscaping or irrigation for such landscaping behind the curb on
any Builder Lot that is to be maintained by the owner of such lot
(collectively, “
Tree
Lawns
”), but Developer shall be responsible for
constructing and installing the detached sidewalks and ramps
(collectively, “
Sidewalks
”)
that are located immediately adjacent to any Builder Lot or on a
tract as required by the approved Plans, County, or any other
Approving Authority and/or applicable laws as provided in this LDA.
Builders shall be responsible for installing any other lead walks,
pathways, and driveways and any other flatwork on the Builder Lots.
Builder shall install all Tree Lawns on or adjacent to its Builder
Lots in accordance with all applicable Plans, requirements,
regulations, laws, development codes and building codes of all
Approving Authorities and such Tree Lawns shall not be considered
part of the Improvements.
4.12
Soil Hauling
. Builder shall be
responsible for relocating from the Builder Lots all surplus soil
generated during Builder’s construction of structures on the
Builder Lots. At the option of the Seller under the Contract, in
its sole discretion, the surplus soil shall be transported at
Builder’s expense to a site designated by Seller within the
Development. If and to the extent that Seller establishes stock
pile site within the Property, Seller may modify any such stock
pile locations from time to time in Seller’s discretion. At
Seller’s request, Builder shall supply copies of any reports
or field assessments identifying the material characteristics of
the excess soil prior to accepting such soil for fill purposes.
Notwithstanding the foregoing, in the event that Seller does not
establish a stock pile site or elects not to accept any surplus
soils from Builder, then Builder shall, at its sole expense, find a
purchaser or taker or otherwise transport and dispose of such
surplus soil upon such terms as it shall desire, but such surplus
soil must still be removed from the Property and may not be
stockpiled on the Property or within the Development after
construction has been completed.
5.
Costs of
Improvements
.
5.1
Definition of Costs
. As used
herein, the term “
Costs
”
shall mean all hard and soft costs incurred in connection with the
design (including all engineering expenses), construction and
installation of the Improvements, including, but not limited to,
costs of labor, materials and suppliers, engineering, design and
consultant fees and costs, blue printing services, construction
staking, demolition, soil amendments or compaction, any processing,
plan check or permit fees for the Improvements, engineering
services required to obtain a permit for and complete the
Improvements, costs of compliance with all applicable laws, costs
of insurance required by this LDA, costs of any financial
assurances, any corrections, changes or additions to work required
by the Approving Authorities or necessitated by site conditions,
municipal, state and county taxes imposed in connection with
construction of the Improvements, any warranty work, and any other
costs incurred in connection with the performance of the
obligations of Developer or the Substitute Constructing Party (as
applicable) hereunder to complete the Improvements.
5.2
Budget
. Attached hereto as
Exhibit
F
is an estimate of the Costs to construct the Improvements
(the “
Budget
”).
The Costs identified on the Budget are referred to herein as
“
Budgeted
Costs
.” Builders shall pay or cause to be paid
pursuant to
Article 6
below a share of
the Budgeted Costs. The costs identified on the Budget are referred
to herein as (“
Budgeted
Costs
”). As consideration for the Developer’s
performance under this LDA and the construction of the
Improvements, Builder shall pay the Deferred Purchase Price which
is equal to (i) a share of the Budgeted Costs in the amount of
Fifty Four Thousand Dollars
($
54,000.00
)
per Builder Lot plus the Escalator
(which based on a total of 190 Builder Lots is equal to
$10,260,000.00 plus the Escalator), and (ii) the Builder Cost
Overruns, as defined below (collectively, the “
Maximum Builder
Costs
”).
5.3
Cost Overruns
. Notwithstanding
anything in this LDA to the contrary, the Developer shall pay (i)
all costs for changes to the Plans or Improvements required by any
Approving Authority or to correct any error or defect in the Plans
that cause the Costs to exceed the Budgeted Costs, (ii) the costs
of all other changes to the Plans or Improvements requested by the
Developer that cause the Costs to exceed the Budgeted Costs, and
(iii) all other costs and charges that cause the Costs to exceed
the Budged Costs (with the exception of Builder Cost Overruns)
(collectively, the “
Constructing Party
Cost Overruns
”). The Builder shall immediately pay all
costs of changes to the Plans or Improvements requested by Builder
that causes the Costs to exceed the Budgeted Costs
(“
Builder Cost
Overruns
”) and Builder shall not have any
responsibility for Constructing Party Cost Overruns unless such
Constructing Party Cost Overruns occur as a result of
Builder’s breach of its obligations under this
LDA.
5.4
Accounting
. Developer shall
keep good and accurate books and records in sufficient detail to
allow the Costs to be calculated, which books and records shall be
made available for review (upon reasonable prior written notice) by
the Parties. Within thirty (30) days after Substantial Completion
of the Improvements, the Developer shall deliver to Builder a
reasonably detailed final accounting of the Costs.
5.5
Progress Reports
. Developer
shall, no less frequently than once per month, provide Builder with
a progress report setting forth the amount of Costs expended to
date, a list of Improvements completed, to date, and an estimate by
a project manager of Developer of the status of overall completion
of the Improvements, in such form as Developer deems reasonably
appropriate (“
Progress
Report
”).
6.
Payment of Costs
.
6.1
Payment
.
6.1.1
Payment
. Pursuant to the terms
of the Contract, Builder shall pay to Developer, as Seller, part of
the Purchase Price in cash at each closing (the “
Initial Purchase
Price
”), and pay in accordance with the terms of this
LDA a deferred portion of the Purchase Price (“
Deferred Purchase
Price
”) equal to the Maximum Builder Costs (including
Builder Cost Overruns, if any) which represents Builder’s
share of the Budgeted Costs of the Improvements. After Builder pays
the Initial Purchase Price, Builder has no responsibility for
payment of any funds in excess of the Maximum Builder Costs. The
Deferred Purchase Price is payable to Developer in installments
based upon completion of the Improvements that serve each phase of
the Builder Lots as follows:
(a)
Takedown 1 Lots – Phase
1
. Phase 1 consists of approximately 50 Lots that are a part
of the Takedown 1 Lots as identified on the Concept Plan (the
“
Phase 1
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 1 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 1 in the amount of $1,350,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 1 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,350,000.00 plus the
Escalator.
(b)
Takedown 1 Lots – Phase
2
. Phase 2 consists of approximately 50 Lots that are a part
of the Takedown 1 Lots as identified on the Concept Plan (the
“
Phase 2
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 2 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 2 in the amount of $1,350,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 2 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,350,000.00 plus the
Escalator.
(c)
Takedown 2 Lots – Phase
3
. Phase 3 consists of approximately 45 Lots that are a part
of the Takedown 2 Lots as identified on the Concept Plan (the
“
Phase 3
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 3 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 3 in the amount of $1,215,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 3 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,215,000.00 plus the
Escalator.
(d)
Takedown 2 Lots – Phase
4
. Phase 4 consists of approximately 45 Lots that are a part
of the Takedown 2 Lots as identified on the Concept Plan (the
“
Phase 4
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 4 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 4 in the amount of $1,215,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 4 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,215,000.00 plus the
Escalator.
(e)
Escalator
. All payments of the
Deferred Purchase Price shall be subject to the Escalator as
provided in Section 2(b) of the Contract.
(f)
Invoice
. After Substantial
Completion is achieved as described above, Builder shall pay the
applicable portion of the Deferred Purchase within five (5)
business days after an invoice for payment is delivered to Builder
by Developer.
(g)
Definition of Wet Utilities
.
The Wet Utilities that serve each Phase of the Builder Lots that
will trigger the Builder’s payment obligation upon
Substantial Completion thereof are identified on
Exhibit
G
.
(h)
Security for Payment of Deferred
Purchase Price - Letter of Credit
. In order to secure
Builder’s obligation following each Closing to pay the
Deferred Purchase Price in accordance with the terms of the
Contract and the payment obligations set forth above in this
Section 6.1, at each Closing, Builder shall deliver to Title
Company, acting as escrow agent, a letter of credit issued by
HomeAmerican Mortgage Corporation in the form attached to the
Contract as
Exhibit
G
and to this LDA as
Exhibit I
(the “
Letter of
Credit
”) and in an amount equal to the sum of the
Deferred Purchase Price for all of the Lots acquired by Builder at
such Closing plus the estimated Escalator thereon in an amount
equal to $1,350.00 per Lot acquired at the Second Closing with
respect to the Letter of Credit delivered at the Second Closing.
Title Company shall hold and maintain the Letter of Credit pursuant
to this LDA and the Contract in an escrow account established by
Title Company for the benefit of Developer and Builder (pursuant to
the terms of an escrow agreement to be agreed upon by Developer,
Builder and Title Company during the Due Diligence Period). The
Letter of Credit for each Closing shall remain in place until the
final payment of the Deferred Purchase Price applicable to such
Closing has been made to the Developer following Substantial
Completion of the Improvements which serve the Lots acquired by
Builder at such Closing. If the Letter of Credit is scheduled to
expire prior to the Substantial Completion of all of such Lots, and
Builder has not renewed the Letter of Credit at least fifteen (15)
days prior to the expiration date thereof, Title Company is
authorized and directed to draw down the full amount of the Letter
of Credit and deposit such funds in escrow to be used solely for
the payment of any unpaid Deferred Purchase Price. The Letter of
Credit may provide that it shall be reduced from time to time to
the extent of payments of the Deferred Purchase Price in Good Funds
made by Purchaser for Improvements in accordance with the terms,
including the payment schedule, set forth in this LDA and the
Contract. The Letter of Credit for each Closing shall be returned
to Builder, together with an executed reduction certificate
reducing the face amount thereof to $0.00, upon payment in full of
the Deferred Purchaser Price in Good Funds for all of the Lots in
such Closing. Failure by Builder to pay any portion of the Deferred
Purchase Price when the same shall become due and payable, provided
that at such failure continues for a period of ten days after the
delivery of written notice thereof from Developer to Builder, shall
entitle Developer to enforce the collection of the delinquent
Deferred Purchase Price by drawing upon the Letter of Credit or
having the Title Company draw upon the Letter of Credit, and in
either event the funds so drawn shall be paid to Developer as
payment of any unpaid Deferred Purchase Price and such failure to
pay shall be deemed cured. If Developer or Title Company is unable
to draw upon the Letter of Credit, Developer may protect and
enforce its rights under this LDA pertaining to payment of the
Deferred Purchase Price by (i) such suit, action, or special
proceedings as Developer shall deem appropriate, including, without
limitation, any proceedings for the specific performance of any
covenant or agreement contained in this LDA or the Contract or the
enforcement of any other appropriate legal or equitable remedy, or
for the recovery of actual damages (excluding consequential,
punitive damages or similar damages) caused by Builder’s
failure to pay the Deferred Purchase Price, including reasonable
attorneys' fees, and (ii) enforcing Developer’s lien rights
set forth in this LDA. Developer’s remedies are
non-exclusive.
7.
Expedited Dispute
Resolution
.
7.1
Disputes Related to Material Changes,
Draw Requests and Punchlist Items
. Notwithstanding anything
to the contrary herein, disputes related to Material Changes, any
Builder Punchlist item or matter, objections to Construction
Contracts, determination of Substantial Completion or the amount of
or responsibility for Constructing Party Cost Overruns or Builder
Cost Overruns (“
Expedited
Disputes
”) shall all be resolved by an independent,
impartial third party qualified to resolve such disputes as
determined by the Parties involved in the Expedited Dispute
(“
Informal
Arbitrator
”). If such Parties cannot agree on an
Informal Arbitrator, then the Parties involved shall select one (1)
registered engineer and the Builder shall select one (1) registered
engineer and the engineers so selected by such Parties shall
promptly select an independent, impartial third party qualified to
act as the Informal Arbitrator and resolve the Expedited Dispute.
Within five (5) business days after a Party delivers a Dispute
Notice, the Developer and the Builder shall deliver to the Informal
Arbitrator a written statement of how such Party believes the
Expedited Dispute should be resolved, together with reasonable
supporting documentation of such position (“
Resolution
Notice
”). Within ten (10) business days after receipt
of Resolution Notices from both such Parties, the Informal
Arbitrator shall approve one (1) of the Parties’ Resolution
Notice and shall deliver written notice of such approval to each
Party. The decision of the Informal Arbitrator shall be binding on
all Parties with respect to the applicable Expedited Dispute. All
Parties shall timely cooperate with the Informal Arbitrator in
rendering his or her decision. The party that is not the prevailing
party in the resolution of any Expedited Dispute shall promptly pay
the Informal Arbitrator’s fee, and the prevailing
party’s other fees and costs of any such expedited dispute
resolution process and reasonable attorney’s fees. The term
“prevailing party” means the party who successfully
obtains substantially all of the relief sought by such party or is
successful in denying substantially all of the relief sought by the
other party. The Parties acknowledge that there is a benefit to the
Parties in having work done as expeditiously as possible and that
there is a need for a streamlined method of making decisions
described in this Section so that work is not delayed. A Party and
shall not be entitled to recover from any other Party exemplary,
punitive, special, indirect, consequential or any other damages
other than actual damages (unless the Informal Arbitrator finds
intentional abuse or frustration of the arbitration process) in
connection with an Expedited Dispute.
7.2
Standards of Conduct
. The
Parties agree that with respect to all aspects of the expedited
dispute resolution process contained herein they will conduct
themselves in a manner intended to assure the integrity and
fairness of that process. To that end, if an Expedited Dispute is
submitted to expedited dispute resolution process, the Parties
agree that they will not contact or communicate with the Informal
Arbitrator who was appointed with respect to any Expedited Dispute
either
ex parte
or outside
of the contacts and communications contemplated by this
Article
7
, and the Parties
further agree that they will cooperate in good faith in the
production of evidence in a prompt and efficient manner to permit
the review and evaluation thereof by the other
Parties.
8.
Progress Meetings
. From and
after the date of this LDA and until Substantial Completion of the
Improvements, the Parties shall cause their designated
representatives to meet within five (5) business days following a
request from a Party regarding the status of construction of the
Improvements, scheduling and coordination issues, engineering and
design issues, and other similar issues. Any Party may change its
designated representative under this LDA at any time by written
notice to the other parties. The initial designated representative
for each Party for the purpose of this Section shall be the
individual listed on each Party’s respective signature page
attached hereto. All inquiries, requests, instructions,
authorizations, and other communications with respect to the
matters covered by this LDA shall be made to such representatives.
Any Party may without further or independent inquiry, assume and
rely at all times that the representatives of the other parties
designated hereunder have the power and authority to make decisions
on behalf of such other parties, to communicate such decisions to
the other Party and to bind such Party by his acts and deeds,
unless otherwise notified in writing by the Party designating the
representative. Any Party may change its representative under this
LDA at any time by written notice to the other
Parties.
9.
Builder’s Stormwater Permit
Responsibilities
. During any Overex construction activities
performed on the Builder Lots by Builder and following Substantial
Completion of the Improvements and prior to Builder engaging in any
construction activities upon the Builder Lots, Builder shall obtain
from the Colorado Department of Public Health, Water Quality
Control Division, a Colorado Construction Stormwater Discharge
Permit issued to Builder with respect to the Builder Lots. No fewer
than five (5) business days prior to the initiation of Overex or
construction activities on any Builder Lot, Builder shall deliver a
copy of at least one (1) of the following documents to
Developer:
9.1.1
Such valid Colorado
Construction Stormwater Discharge Permit for the Builder
Lots;
9.1.2
A signed notice of
reassignment of permit coverage (State of Colorado
Form COR030000 or current equivalent), that transfers any
pre-existing permit coverage for the Builder Lots; or
9.1.3
A signed State of
Colorado modification form to add the Builder Lots if Builder has
an existing site permit with the State of Colorado within the
Property.
To the
extent required by the County, Builder shall also obtain a
Stormwater Quality Permit issued to Builder by the County for the
Builder Lots. Builder shall be responsible to obtain and maintain
any State of Colorado dewatering permits if required for
Builder’s further construction within the Builder Lots. If
requested by Developer, Builder shall execute a Notice of Property
Conveyance and Change in Responsibility for the Colorado Discharge
Permit held by Developer or an affiliated entity with respect to
the Property. In all cases, Builder shall obtain from the Colorado
Department of Public Health & Environment Water Quality Control
Division, a Notice of Property Conveyance and Change in
Responsibility on a form acceptable to the Colorado Department of
Public Health & Environment Water Quality Control Division
executed by Builder, for the Colorado Stormwater Discharge Permit
held by Developer with respect to the Builder Lots prior to any
construction by Builder on the Builder Lots.
9.2
Developer’s Stormwater Permit
responsibilities
. Developer shall obtain and comply with all
necessary permits related to stormwater and erosion control from
all Approving Authorities, in relation to the construction, repair,
and maintenance of the Improvements.
10.
Notices and Communications
. All
notices, statements, demands, requirements, approvals or other
communications and documents (“
Communications
”)
required or permitted to be given, served, or delivered by or to
any Party or any intended recipient under this LDA shall be in
writing and shall be given to the addresses set forth in this
Section
10
(“
Notice
Address
”). Communications to a Party shall be deemed
to have been duly given (i) on the date and at the time of
delivery if delivered personally to the Party to whom notice is
given at such Party’s Notice Address; or (ii) on the date and
at the time of delivery or refusal of acceptance of delivery if
delivered or attempted to be delivered by an overnight courier
service to the Party to whom notice is given at such Party’s
Notice Address; or (iii) on the date of delivery or attempted
delivery shown on the return receipt if mailed to the Party to whom
notice is to be given by first-class mail, sent by registered or
certified mail, return receipt requested, postage prepaid and
properly addressed to such Party at such Party’s Notice
Address; or (iv) on the date and at the time shown on the
facsimile or electronic mail message if telecopied or sent
electronically to the number or address designated in such
Party’s Notice Address and receipt of such telecopy or
electronic mail message is electronically confirmed (provided,
however, any notice of default from Developer to Builder may not be
delivered by electronic mail message and must be delivered by
facsimile or other delivery method set forth above). The Notice
Addresses for the Developer and Builder are as
follows:
To
Developer:
PCY
Holdings, LLC
Attention: Mark
Harding
34501
E. Quincy Ave.
Bldg.
34, Box 10
Watkins, Colorado
80137
Telephone: (303)
292-3456
Facsimile: (303)
292-3475
E-mail:
mharding@purecyclewater.com
with a
copy to:
Fox
Rothschild LLP
1225
17
th
Street, Suite 2200
Denver,
CO 80202
Attention: Rick
Rubin, Esq.
Telephone: (303)
292-1200
Email:
rrubin@foxrothschild.com
To
Builder:
Linda
Purdy
Richmond American
Homes of Colorado, Inc.
4350
South Monaco Street
Denver,
Colorado 80237
Telephone:
(720)-977-3847
Facsimile.: (720)
977-4707
Email:
linda.purdy@mdch.com
with a
copy to:
M.D.C.
Holdings, Inc.
4350
South Monaco Street
Denver,
Colorado 80237
Attn:
Drew Rippey
Telephone: (720)
977-3213
Telecopier No.
(720) 482-8558
Email:
Drew.Rippey@mdch.com
M.D.C.
Holdings, Inc.
4350 S.
Monaco Street
Denver,
CO 80237
Attn: Linda
Zimmerman Skultety
Senior
Paralegal – Real Estate
Telephone:
720-977-3254
Fax:
303-488-4954
Email:
Linda.Skultety@mdch.com
If to
Title Company:
Land
Title Guarantee Company
Attn:
Tom Blake
3033 E.
1st Ave. #600
Denver,
Colorado 80206
Fax#:
303-393-4959
Direct:
303-331-6237
Email:
tblake@ltgc.com
11.
Attorneys’ Fees
. Except
as provided in
Section
7.1
, should any action be
brought in connection with this LDA, including, without limitation,
actions based on contract, tort or statute, the prevailing Party in
such action shall be awarded all costs and expenses incurred in
connection with such action, including reasonable attorneys’
fees. The provisions of this Section shall survive the expiration
or termination of this LDA.
12.
Further Acts
. Each of the
Parties hereto shall execute and deliver all such documents and
perform all such acts as reasonably necessary, from time to time,
to carry out the matters contemplated by this LDA.
13.
No Partnership; Third Parties
.
It is not intended by this LDA to, and nothing contained in this
LDA shall, create any partnership, joint venture or other
arrangement among the Parties hereto. No term or provision of this
LDA is intended to, or shall, be for the benefit of any person,
firm, organization or corporation not a Party hereto, and no such
other person, firm, organization or corporation shall have any
right or cause of action hereunder.
14.
Entire Agreement; Headings for
Convenience Only; Not to be Construed Against Drafter; No Implied
Waiver
. This LDA and all other written agreements among the
Parties constitute the entire agreement among the Parties hereto
pertaining to the subject matter hereof. No change or addition is
to be made to this LDA except by written amendment executed by the
Parties. The headings, captions and titles contained in this LDA
are intended for convenience of reference only and are of no
meaning in the interpretation or effect of this LDA. This LDA shall
not be construed more strictly against one (1) Party than another
merely by virtue of the fact that it may have been initially
drafted by one (1) of the Parties or its counsel, since all Parties
have contributed substantially and materially to the preparation
hereof. No failure by a Party to insist upon the strict performance
of any term, covenant or provision contained in this LDA, no
failure by a Party to exercise any right or remedy under this LDA,
and no acceptance of full or partial payment owed to a Party during
the continuance of any default by the other Party(ies), shall
constitute a waiver of any such term, covenant or provision, or a
waiver of any such right or remedy, or a waiver of any such default
unless such waiver is made in writing by the Party to be bound
thereby. Any waiver of a breach of a term or a condition of this
LDA shall not prevent a subsequent act, which would have originally
constituted a default under this LDA, from having all the force and
effect of a default.
15.
Governing Law
. This LDA is
entered into in Colorado and shall be construed and interpreted
under the law of the State of Colorado without giving effect to
principles of conflicts of law which would result in the
application of any law other than the law of the State of
Colorado.
16.
Severability
. If any provision
of this LDA is declared void or unenforceable, such provision shall
be severed from this LDA and shall not affect the enforceability of
the remaining provisions of this LDA.
17.
Assignment; Binding Effect
.
This LDA shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and permitted
assigns. Neither Builder or Developer may assign any of its rights
or obligations under this LDA without the prior written consent of
the other Party(ies), which consent may be withheld in each
Party’s sole and absolute discretion; provided, however,
that:
17.1
Builder may assign,
without consent, its rights under this LDA in full, but not in
part: (i) to a third party which acquires all of Builder’s
Builder Lots, or (ii) to an entity that controls, is controlled by,
or under common control with, Builder; provided further, however
that Developer approves the form of assignment, which approval
shall be in Developer’s reasonable discretion;
and
17.2
Developer may
assign, without consent (but with prior notice to Builder), its
rights under this LDA: (i) to an entity that controls, is
controlled by, or under common control with, Developer; (ii) to any
entity that acquires all or substantially all of the
Developer’s interests in the Builder Lots which Seller
reasonably believes has the financial ability and experience to
perform Seller’s obligations under this LDA.
18.
Counterparts; Copies of
Signatures
. This LDA may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one (1) and the same instrument.
The signature pages from one (1) or more counterparts may be
removed from such counterparts and such signature pages all
attached to a single instrument so that the signatures of all
Parties may be physically attached to a single document. This LDA
may be executed and delivered by facsimile or by electronic mail in
portable document format (.pdf) or similar means and delivery of
the signature page by such method will be deemed to have the same
effect as if the original signature had been delivered to the other
party. Upon execution of this LDA by Developer and Builder,
Developer shall provide a fully executed copy of this LDA to
Builder for its records.
19.
Time of the Essence
. Time is of
the essence for performance or satisfaction of all requirements,
conditions, or other provisions of this LDA, subject to any
specific time extensions set forth herein.
20.
Computation of Time Periods
.
All time periods referred to in this LDA shall include all
Saturdays, Sundays and holidays, unless the period of time
specifies business days. If the date to perform any act or give a
notice with respect to this LDA shall fall on a Saturday, Sunday or
national or state holiday, the act or notice may be timely
performed on the next succeeding day which is not a Saturday,
Sunday or a national or state holiday.
21.
Remedies
.
21.1
Except as
hereinafter provided with regard to Expedited Disputes and the
self-help remedy under Section 4.6, if any Party is in default of
any of its obligations under this LDA beyond any applicable notice
or cure periods, the other Party(ies) may avail itself to any
rights and remedies available at law and equity, but may only
recover its actual, out-of-pocket damages (excluding any
incidental, consequential, speculative, punitive or lost profits
damages) incurred as a result of such default. For Expedited
Disputes, the sole and exclusive remedy of the Parties is set forth
in Section 7 of this LDA, and for Developer Defaults, the sole and
exclusive remedy of the Parties is set forth in Section 4.6 of this
LDA.
21.2
In addition to the
remedies permitted under
Section 21.1
, any claim by
Developer against Builder for breach of Builder’s obligation
hereunder to pay of any portion of the Deferred Purchase Price,
together with simple interest at the rate of 12% per annum from the
date such payment is due and payable, and all costs and expenses
including reasonable attorneys' fees awarded to Developer in
enforcing any payment in any suit or proceeding under this LDA,
shall constitute a lien ("
Lien
")
against the applicable Phase of Builder Lots to which the payment
pertains until paid, effective upon the recording of a notice of
lien with respect thereto in the Office of the Clerk and Recorder
of the County; provided, however, that any such Lien shall be
subject and subordinate to (i) liens for taxes and other public
charges which by applicable law are expressly made superior, and
(ii) all liens recorded in the Office of the Clerk and Recorder of
the County prior to the date of recordation of said notice of lien.
All liens recorded subsequent to the recordation of the notice of
lien described herein shall be junior and subordinate to the Lien.
The notice of lien will be signed and acknowledged by Developer and
will contain the following: (a) a statement of all amounts due and
payable; (b) a description sufficient for identification of the
applicable Phase of Builder Lots to which the notice relates; (c)
the name of the Builder as owner of such Builder Lots; and (d) the
name and address of the Developer causing the notice to be
recorded. Developer has the right to enforce the Lien by
foreclosing the Lien against the applicable Phase of Builder Lots
under the prevailing Colorado law relating to the foreclosure of
realty mortgages. Upon the timely curing by the defaulting Builder
of any default for which a notice of lien was recorded, the
Developer shall record an appropriate release of such notice of
lien and Lien. The sale or transfer of a Builder Lot by Builder
does not affect the Lien.
22.
Jury Waiver
. TO THE EXTENT
PERMITTED BY LAW, THE PARTIES HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVE,
RELINQUISH AND FOREVER FORGO THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THE PROVISIONS OF THIS LDA.
[SIGNATURE PAGE
FOLLOWS]
(Sky
Ranch Lot Development Agreement)
F-23
IN
WITNESS WHEREOF, the Parties have executed this LDA as of the
Effective Date first set forth above.
DEVELOPER:
PCY
HOLDINGS. LLC,
a
Colorado limited liability company
By:
___________________________________
Name:
___________________________________
Title:
___________________________________
Designated
Representative:
______________________________________________________
(Sky
Ranch Lot Development Agreement)
F-24
BUILDER:
Richmond American
Homes of Colorado, Inc.,
a
Delaware corporation
By:
___________________________________
Name:
___________________________________
Title:
___________________________________
Builder’s Builder
Lots
:
______________________________________________________
______________________________________________________
______________________________________________________
Designated
Representative:
_____________________________________________________
(Sky
Ranch Lot Development Agreement)
F-25
List of Exhibits
Exhibit
A:
|
Concept
Plan, Takedowns, Phases - Description of Property
|
Exhibit
B:
|
List of
Plans
|
Exhibit
C:
|
Required
Insurance
|
Exhibit
D:
|
Finished
Lot Standard
|
Exhibit
E:
|
Construction
Schedule
|
Exhibit
F:
|
Initial
Budget
|
Exhibit
G:
|
Wet
Utilities - Phased
|
|
|
|
|
|
|
|
|
|
|
|
|
(Sky
Ranch Lot Development Agreement)
F-26
Exhibit
A
to
Lot
Development Agreement
(Description
of Property for Each Applicable Phase)
(Sky
Ranch Lot Development Agreement)
Exhibit
B
to
Lot
Development Agreement
(List
of Plans for Each Applicable Phase)
Improvements to be Constructed by
Developer
[List
specific work to be performed]
(Sky
Ranch Lot Development Agreement)
Exhibit
C
to
Lot
Development Agreement
(Required
Insurance)
Developer
or the Substitute Constructing Party (as applicable) shall maintain
the amounts and types of insurance described below and shall cause
the Service Providers to maintain such coverages from insurance
companies licensed to do business in the State of Colorado having a
Best’s Insurance Report Rating of A/VI or better covering the
risks described below:
A.
Commercial General
Liability Insurance (including premises, operations, products,
completed operations, and contractual liability coverages) in an
amount not less than One Million Dollars ($1,000,000.00) per
occurrence, One Million Dollars ($1,000,000.00) personal injury and
advertising injury, and Two Million Dollars ($2,000,000.00) General
Aggregate.
B.
Automobile
Liability Insurance for all motor vehicles operated by or for
Developer or Substitute Constructing Party, including owned, hired,
and non-owned autos, with minimum Combined Single Limit for Bodily
Injury and Property Damage of One Million Dollars ($1,000,000.00)
for each occurrence.
C.
Workers
Compensation Insurance for all employees of Developer or Substitute
Constructing Party as required by law, to cover the applicable
statutory limits in the State of Colorado and employer’s
liability insurance with limits of liability of not less than One
Million Dollars ($1,000,000.00) for bodily injury by accident (each
accident) and One Million Dollars ($1,000,000.00) for bodily injury
by disease (each employee).
D.
With respect to
Service Providers that provide professional services (e.g.,
engineers), professional liability insurance, including prior acts
coverage sufficient to cover any and all claims arising out of the
services, or a retroactive date no later than the date of
commencement of the services, with limits of not less than One
Million Dollars ($1,000,000.00) per claim and Two Million Dollars
($2,000,000.00) annual aggregate. The professional liability
insurance shall be maintained continuously during the term of the
LDA and so long as the insurance is commercially reasonably
available, for a period not less than the Government Warranty
Period. The professional liability insurance required by this
paragraph shall not contain any exclusions or limitations
applicable to residential projects.
The
following general requirements shall apply to all insurance
policies described in this Exhibit.
1.
All liability
insurance policies, except workers compensation insurance, shall be
written on an occurrence basis.
2.
All insurance
policies required hereunder except Workers Compensation and
Employers Liability shall: (i) name the Parties as
“additional insureds” utilizing an ACORD form or
equivalent acceptable to Developer or Substitute Constructing Party
(as applicable), excluding, however, insurance policies of Service
Providers who provide professional services whose insurance
policies do not permit the designation of additional insureds;
(ii) be issued by an insurer authorized in the State of
Colorado; and (iii) provide that such policies shall not be
canceled or not renewed, nor shall any material change be made to
the policy without at least thirty (30) days’ prior
written notice to the Parties. Each additional insured endorsement
(or each policy, by reasonably acceptable endorsement) shall
contain a primary insurance clause providing that the coverage
afforded to the additional insureds is primary and that any other
insurance or self-insurance available to any of the additional
insureds is non-contributing. A waiver of subrogation endorsement
for the workers’ compensation coverage shall be provided in
favor of the Parties.
3.
The liability
insurance policies shall provide that such insurance shall be
primary on a non-contributory basis.
4.
Service Providers
shall provide Developer or Substitute Constructing Party (as
applicable) with certificates, or copies of insurance policies if
request by the Developer, evidencing the insurance coverages
required by this Exhibit in the certificate form described in
Item 2
of this
Exhibit, prior to the commencement of any activity or operation
which could give rise to a loss to be covered by such insurance.
Replacement certificates shall be sent to Developer or Substitute
Constructing Party (as applicable), as policies are renewed,
replaced, or modified.
5.
The foregoing
insurance coverage must be maintained in force at all times during
the construction of the Improvements.
(Sky
Ranch Lot Development Agreement)
Exhibit
D
to
Lot
Development Agreement
(Finished
Lot Standard)
“
Finished
Lot Standard
” means the following improvements on, to
or with respect to the Builder Lots or in public streets or tracts
in the locations as required by all Approving Authorities, and
substantially in accordance with the Plans:
(a)
overlot grading
together with corner pins for each Builder Lot installed in place,
graded to match the specified Builder Lot drainage template within
the Plans (but not any Overex) and any retaining walls required by
the Plans;
(b)
water and sanitary
sewer mains and other required installations in connection
therewith identified in the Plans, valve boxes and meter pits,
substantially in accordance with the Plans approved by the
Approving Authorities, together with appropriate
markers;
(c)
storm sewer mains,
inlets and other associated storm drainage improvements pertaining
to the Builder Lots in the public streets as shown on the
Plans;
(d)
curb, gutter,
asphalt, sidewalks, street striping, street signage, traffic signs,
traffic signals (if any are required by the Approving Authorities),
and other street improvements, in the private and/or public streets
as shown on the Plans;
(e)
sanitary sewer
service stubs if required by the Approving Authorities, connected
to the foregoing sanitary sewer mains, installed into each
respective Builder Lot (to a point beyond any utility easements),
together with appropriate markers of the ends of such stubs, as
shown on the Plans;
(f)
water service
stubs connected to the foregoing water mains installed into each
Builder Lot (to a point beyond any utility easements), together
with appropriate markers of the ends of such stubs, as shown on the
Plans;
(g)
Lot fill in
compliance with the geotechnical engineer’s recommendation,
and with respect to any filled area or compacted area, provide from
a Colorado licensed professional soils engineer a HUD Data Sheet
79G Certification (or equivalent) and a certification that the
compaction and moisture content recommendations of the soils
engineer were followed and that the grading of the respective Lots
complies with the approved grading plans, with overlot grading
completed in conformance with the approving Authorities approved
grading plans within a +/- 0.2’ tolerance of the approved
grading plans; however, the Finished Lot Standard does not include
any Overex;
(h)
all storm water
management facilities as shown in the Plans; and
Electricity,
natural gas, and telephone service will be installed by local
utility companies. The installations may not be completed at the
time of a Closing, and are not part of the Finish Lot Standard;
provided, however, that: (i) with respect to electric distribution
lines and street lights, Developer will have signed an agreement
with the electric utility service provider and paid all costs and
fees for the installation of electric distribution lines and
facilities to serve the Builder Lots, and all sleeves necessary for
electric, gas, telephone and/or cable television service to the
Builder Lots will be installed; (ii) with respect to gas
distribution lines, Developer will have signed an agreement with
the gas utility service provider and paid all costs and fees for
the installation of gas distribution lines and facilities to serve
the Builder Lots. Developer will take commercially reasonable
efforts to assist Builder in coordinating with these utility
companies to provide final electric, gas, telephone and cable
television service to the residences on the Builder Lots, however,
Builder must activate such services through an end user contract.
Builder acknowledges that in some cases the telephone and cable
companies may not have pulled the main line through the conduit if
no closings of residences have occurred. Notwithstanding the
foregoing, if dry utilities have not been installed upon
substantial completion of the Improvements required by the Finished
Lot Standard, Developer shall be obligated to have contracted for
same and paid all costs and fees payable for such installation.
Unless Developer has contracted for such installation and paid such
costs before the Effective Date, Developer will give Builder notice
when such contracts have been entered and such costs
paid.
The
Improvements do not include (a) the Offsite Infrastructure, which
is addressed separately in Section 5 of the Agreement, but it does
include such other offsite improvements as are necessary to obtain
certificates of occupancy for homes constructed on the Lots,
provided that as aforesaid Seller shall only be obligated to
complete such improvements within a timeframe so as not to delay
issuance of such certificates of occupancy, or (b) common area
landscaping which will be installed when required by the County or
other applicable Authority so as not to delay the issuance of
building permits or certificates of occupancy for residences
constructed by Purchaser on the Lots.
The
Finished Lot Standard does not include Tree Lawns, which is
addressed separately in Section 4.11 of this LDA.
(Sky
Ranch Lot Development Agreement)
Exhibit
E
to
Lot
Development Agreement
Construction
Schedule
[To be
determined]
(Sky
Ranch Lot Development Agreement)
Exhibit
F
to
Lot
Development Agreement
Budget
[To be
determined]
Exhibit
G
to
Lot
Development Agreement
Wet
Utilities
(Sky
Ranch Lot Development Agreement)
Exhibit
H
to
Lot
Development Agreement
Lots
Having Basements
(Sky
Ranch Lot Development Agreement)
Exhibit
I
to
Lot
Development Agreement
Form of
Letter of Credit
(Sky Ranch Lot
Development Agreement)
(Sky
Ranch Lot Development Agreement)
(Sky Ranch Lot
Development Agreement)
(Sky Ranch Lot
Development Agreement)
(Sky
Ranch Lot Development Agreement)
Exhibit
J
Joint
Improvements Agreement
[To be
determined]
(Sky
Ranch Lot Development Agreement)
EXHIBIT G
FORM OF LETTER OF CREDIT
(Sky Ranch Lot
Development Agreement)
G-1
(
Sky
Ranch Lot Development Agreement)
G-2
(Sky Ranch Lot
Development Agreement)
G-3
(Sky Ranch Lot
Development Agreement)
G-4
(Sky Ranch Lot Development
Agreement)
G-5
FIRST AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
THIS
FIRST AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “Amendment”) is made as of the date the last of
the Parties executes and dates this Amendment (“Effective
Date”), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company (“Seller”), and RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
(“Purchaser”). Seller and Purchaser may be referred to
collectively as the “Parties.”
R E C I T A L S
A. Seller
and Purchaser previously entered into a Contract for Purchase and
Sale of Real Estate effectively dated June 27, 2017 (the
“Contract”) for approximately 190 platted single-family
detached residential lots in the Sky Ranch master planned
residential community in the County of Arapahoe, State of
Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to August 30, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
Name:
Mark Harding
Title:
President
Date:
August 28, 2017
PURCHASER:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
Name:
Linda M. Purdy
Title:
Vice President
Date:
August 28, 2017
SIGNATURE
PAGE TO FIRST AMENDMENT
SECOND AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL
ESTATE
(Sky Ranch)
THIS
SECOND AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “Amendment”) dated August 29, 2017 by and between
RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware corporation
(“Purchaser’’) and PCY HOLDINGS, LLC, a Colorado
limited liability company (the “Seller”).
EXPLANATORY STATEMENT
A. Seller
and Purchaser entered into a Contract for Purchase and Sale of Real
Estate with an effective date of June 27, 2017, as amended (the
“Purchase Agreement”), for the purchase and sale of
real property located in Arapahoe County, Colorado, as more
particularly described in the Purchase Agreement.
B. Seller
and Purchaser desire to amend certain terms and conditions of the
Purchase Agreement, all as more fully set forth in this
Amendment.
NOW,
THEREFORE, in consideration of the foregoing Explanatory Statement,
the covenants and agreements set forth below and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as
follows:
1.
Explanatory
Statement
. The Explanatory Statement of this Amendment forms
an integral part of this Amendment and is hereby incorporated by
reference. Initially capitalized terms used in this Amendment shall
have the meaning ascribed to them in the Purchase Agreement, unless
the context clearly requires otherwise.
2.
Amendments
.
2.1
Section
10.(a) Due Diligence Period
. Section 10.(a) of the Purchase
Agreement is hereby amended to reflect that the Due Diligence
Period shall expire on September 8, 2017.
3.
Miscellaneous
.
3.1
Binding
Effect
. This Amendment shall be binding on and inure to the
benefit of the parties hereto, and their respective successors and
assigns.
3.2
Governing
Law
. This Amendment shall be construed, interpreted and
enforced in accordance with Colorado law, without regard to
principles of conflict of laws.
3.3
Time
of the Essence
. Time shall be of the essence with respect to
this Amendment.
3.4
Counterparts
.
This Amendment may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which shall
constitute one and the same agreement.
3.5
Severability
.
If any provision of this Amendment, or the application thereof to
any person or circumstances, shall, for any reason and to any
extent, be or become invalid or unenforceable, the remainder of
this Amendment and the application of such provision to other
persons or circumstances shall not be affected thereby, but rather
shall be enforced to the greatest extent possible.
3.6
Ratification
.
The provisions of the Purchase Agreement are hereby affirmed and
ratified, and remain in full force and effect, as herein
amended.
IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
Name:
Mark Harding
Title:
President
PURCHASER:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
Vice
President
THIRD AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
THIRD AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of October 20, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A. Seller
and Purchaser previously entered into a Contract for Purchase and
Sale of Real Estate effectively dated June 27, 2017 (as amended,
the "
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to further amend the terms and conditions of
the Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
.
The recitals set forth above are true and correct and are
incorporated herein in their entirety by this
reference.
2.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to
September 20,
2017
.
3.
Construction
.
Each of the Parties acknowledges that they, and their respective
counsel, substantially participated in the negotiation, drafting
and editing of this Amendment. Accordingly, the Parties agree that
the provisions of this Amendment shall not be construed or
interpreted for or against any Party hereto based on
authorship.
4.
Authority
.
Each Party represents and warrants that is has the power and
authority to execute this Amendment and that there are no third
party approvals required to execute this Amendment or to comply
with the terms or provisions contained herein.
5.
Headings
.
The section headings used herein shall have absolutely no legal
significance and are used solely for convenience of
reference.
6.
Ratified
and Confirmed
. The Contract, except as modified by this
Amendment, is hereby ratified and confirmed and shall remain in
full force and effect in accordance with its original terms and
provisions. In the case of any conflict between the terms of this
Amendment and the provisions of the Contract, the provisions of
this Amendment shall control
7.
Counterparts
.
This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, and both of which together shall be
deemed to constitute one and the same instrument. Each of the
Parties shall be entitled to rely upon a counterpart of this
Amendment executed by the other Party and sent via facsimile or
e-mail transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
Name:
Mark Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
Name:
Linda M. Purdy
Title:
Vice President
SIGNATURE
PAGE TO THIRD AMENDMENT
FOURTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
FOURTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of September 20, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A. Seller
and Purchaser previously entered into a Contract for Purchase and
Sale of Real Estate effectively dated June 27, 2017 (as amended,
the "
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
.
The recitals set forth above are true and correct and are
incorporated herein in their entirety by this
reference.
2.
Continuation
Notice
. Upon mutual execution hereof by both Seller and
Purchaser, this Amendment shall constitute Purchaser’s
Continuation Notice as defined in Section 10(a) of the
Contract.
3.
Identification
of Lots
. The Takedown 1 Lots and Takedown 2 Lots are
identified on Schedule 1, attached hereto and incorporated herein
by reference.
4.
Building
Envelope Depth
. The second sentence in Section 5(a)(ii) of
the Contract is hereby amended to provide that the Final
Subdivision Documents shall allow for a building envelope depth for
each Lot that is not less than seventy (70) feet (after taking into
consideration applicable setbacks).
5.
Final
Approval of Entitlements
.
a.
The fifth and sixth
sentences in Section 5(a)(ii) of the Contract are hereby deleted in
their entirety and replaced with the following: “In the event
Seller is unable to obtain Final Approval of the Entitlements for
the Takedown 1 Lots on or before nine (9) months after expiration
of the Due Diligence Period (or any extensions thereof) then Seller
or Purchaser, in their discretion, shall have the right to extend
the date for obtaining such Final Approval for a period not to
exceed six (6) months. If Seller or Purchaser extends the time
period for obtaining such Final Approval for the Takedown 1 Lots,
then during such extended time period, Seller shall continue to use
commercially reasonable efforts to obtain Final Approval of such
Entitlements, and failing which, Seller shall not be in default of
its obligations under this Contract, but Purchaser may as it sole
remedy hereunder terminate this Contract as to such Takedown
and any remaining
Takedowns
by written notice to Seller, delivered within ten
(10) business days after the end of the time period as extended for
obtaining such Final Approval, in which case each party shall
thereupon be relieved of all further obligations and liabilities
under this Contract, except as otherwise provided herein, and the
Deposit shall be returned to Purchaser.”
b.
The eighth sentence
in Section 5(a)(ii) of the Contract is hereby deleted in its
entirety and replaced with the following: “In the event
Seller is unable to obtain Final Approval of the Entitlements for
the Takedown 2 Lots on or before nine (9) months after the First
Closing, then Seller or Purchaser, in their discretion, shall have
the right to extend the date for obtaining such Final Approval for
a period not to exceed six (6) months. If Seller or Purchaser
extends the time period for obtaining such Final Approval for the
Takedown 2 Lots, then during such extended time period, Seller
shall continue to use commercially reasonable efforts to obtain
Final Approval of such Entitlements, and failing which, Seller
shall not be in default of its obligations under this Contract, but
Purchaser may as it sole remedy hereunder terminate this Contract
as to such Takedown by written notice to Seller, delivered within
ten (10) business days after the end of the time period as extended
for obtaining such Final Approval, in which case each party shall
thereupon be relieved of all further obligations and liabilities
under this Contract, except as otherwise provided herein, and the
then-current amount of the Deposit shall be returned to
Purchaser.
6.
Offsite
Infrastructure
.
a.
Section 5(b) of
the Contract (and Section 4.5.1 of the form Lot Development
Agreement) are hereby revised to reflect that the definition of the
terms “Substantially Complete” and “Substantial
Completion” shall include the requirement that Seller has
executed all utility extension contracts and paid all necessary
fees so that all dry utilities serving the Property can be
installed within 120 days following Substantial Completion of the
Improvements; provided Seller shall have no liability if such
utilities are not timely installed, so long as it has executed said
contracts and paid such fees.
b.
With respect to
the Alternative Service and the WWRF under Section 5(m) of the
Contract, Seller will meet and confer with Purchaser’s third
party consultants and reasonably necessary regarding their review
of and evaluation of such wastewater facilities.
7.
Purchaser’s
Conditions
.
Section
6(b) of the Contract is hereby amended to add the following
Purchaser’s Conditions Precedent:
(vii)
To the extent such permits, if any, are required for the
development of the Property, Seller shall have obtained any such
required wetland permits and permits required under Section 404 of
the Clean Water Act
(viii)
As a Purchaser’s Condition Precedent to the Takedown 2
Closing only, the Alternative Service shall be completed in
accordance with the requirements of all applicable Authorities, and
the Alternative Service shall be fully operational.
(ix)
At each Closing, the Seller shall certify to Purchaser that all
necessary offsite easements have been properly
granted.
8.
Seller’s
Conditions
. Section 6(a)(i) of the Contract is hereby
amended to read as follows: As of the date of the First Closing,
Seller is under contract to sell at least an aggregate total of 200
residential lots within the Development to Purchaser and other
homebuilders, and as of the date of the First Closing either (a)
one other homebuilder has previously closed on its initial purchase
of lots under its purchase and sale agreement, or (b) Purchaser and
one other homebuilder simultaneously close their initial purchases
of lots under their purchase and sale agreements, or (c) there are
no material conditions to an initial closing that remain to be
satisfied under another homebuilder’s purchase and sale
agreement.
9.
District
Deficits
. Section 16(c) of the PSA is hereby revised to add
the following subsection (v) thereto:
(v)
For the avoidance
of doubt, and notwithstanding anything to the contrary contained in
this Section 16: So long as representatives of Seller or its
affiliates hold the majority of the director positions on the
District board of directors and Purchaser is the holder of record
title to any of the Lots but in no event longer than 4 years after
the date of the First Closing: (1) Seller shall be obligated to
fund all operating deficits of the District; and (2) Seller shall
promptly upon receipt of any invoice from Purchaser for an amount
paid by Purchaser for that portion of the mill levy that is
assessed by the District for debt service, as reflected in the
service plan, that exceeds fifty (50) mills (the
“
Mill
Levy Cap
”). Notwithstanding the foregoing, the Mill
Levy Cap may be increased or decreased as to all taxable property
in the District to reflect any legislation implementing changes in
the ratio of actual valuation to assessed valuation for residential
real property, pursuant to Article X, Section 3(1)(b) of the
Colorado Constitution, so that, to the extent possible, the actual
tax revenues generated by the District imposed mill levy, as
adjusted, are neither diminished nor enhanced as a result of such
changes (“
Gallagher
Adjustment
”). For purposes of the foregoing, a change
in the ratio of actual valuation shall be deemed to be a change in
the method of calculating assessed valuation. This provision shall
survive the Closing and be enforceable by Purchaser by all legal
and equitable means, including without limitation specific
performance.
10.
Marketing
Sales Activities
. From and after the First Closing,
Purchaser may construct and maintain upon portions of the
Development owned by Purchaser such facilities, activities, and
things as, in Purchaser’s reasonable opinion, may be
required, convenient, or incidental to the construction or sale of
Lots and single family homes located thereon. Such permitted
facilities, activities, and things shall include, without
limitation, business offices, signs, flags (whether hung from flag
poles or attached to a structure), model Lots,
model homes, parking lots,
sales offices,
sales trailers, construction offices, construction trailers,
holding or sponsoring special events, and exterior lighting
features or displays, subject to compliance with all laws. This
provision shall survive closing.
11.
Transaction
Documents
. The term “
Transaction
Documents
” shall collectively refer to the
following:
a.
the Lot
Development Agreement;
b.
the Joint
Improvement Memorandum;
c.
the Construction
Disbursement Agreement;
d.
the Tap Purchase
Agreement;
e.
the escrow
agreement referenced in Section 6.1(h) of the Lot Development
Agreement (the “
LOC Escrow
Agreement
”);
g.
the Declaration of
Covenants Imposing and Implementing the Sky Ranch Public
Improvement Fee (the “
PIF
Covenant
”); and
h.
a development
agreement for the financing and construction of the Community Park
referenced in section 5(b) of the Agreement (the
“
Community
Park Development Agreement
”).
The
Contract is hereby amended to provide that Purchaser shall have up
to and including the date that is twenty-one (21) days following
the Effective Date of this Amendment (the “
Transaction
Documents Negotiation Period
”)
, to continue negotiating in
good faith with Seller in an effort to finalize and agree upon the
form of the Transaction Documents. If Purchaser and Seller are
unable to finalize and agree-upon the form of the Transaction
Documents prior to expiration of the Transaction Documents
Negotiation Period, Purchaser may terminate this Contract upon
written notice delivered to Seller within three (3) business days
following expiration of the Transaction Documents Negotiation
Period, in which event the Deposit shall be returned to Purchaser
and the Parties shall thereafter be relieved of all obligations
under the Contract (except those that expressly survive
termination). If Purchaser does not so terminate the Contract prior
to the deadline set forth above, Purchaser shall be deemed to have
waived such right to terminate, and the Parties shall proceed to
Closing subject to all other terms and conditions of the
Contract.
12.
Construction
.
Each of the Parties acknowledges that they, and their respective
counsel, substantially participated in the negotiation, drafting
and editing of this Amendment. Accordingly, the Parties agree that
the provisions of this Amendment shall not be construed or
interpreted for or against any Party hereto based on
authorship.
13.
Authority
.
Each Party represents and warrants that is has the power and
authority to execute this Amendment and that there are no third
party approvals required to execute this Amendment or to comply
with the terms or provisions contained herein.
14.
Headings
.
The section headings used herein shall have absolutely no legal
significance and are used solely for convenience of
reference.
15.
Ratified
and Confirmed
. The Contract, except as modified by this
Amendment, is hereby ratified and confirmed and shall remain in
full force and effect in accordance with its original terms and
provisions. In the case of any conflict between the terms of this
Amendment and the provisions of the Contract, the provisions of
this Amendment shall control
16.
Counterparts
.
This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, and both of which together shall be
deemed to constitute one and the same instrument. Each of the
Parties shall be entitled to rely upon a counterpart of this
Amendment executed by the other Party and sent via facsimile or
e-mail transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
Name:
Mark Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
Name:
Linda M. Purdy
Title:
Vice President
SCHEDULE 1
Legal Description of Takedown 1 Lots and Takedown 2
Lots
Takedown 1
Lots:
Takedown 2
Lots
FIFTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
FIFTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of October 6, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A. Seller
and Purchaser previously entered into a Contract for Purchase and
Sale of Real Estate effectively dated June 27, 2017 (as amended,
the "
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
.
The recitals set forth above are true and correct and are
incorporated herein in their entirety by this
reference.
2.
Continuation
Notice
. Upon mutual execution hereof by both Seller and
Purchaser, this Amendment shall constitute Purchaser’s
Continuation Notice as defined in Section 10(a) of the
Contract.
3.
Identification
of Lots
. The Takedown 1 Lots and Takedown 2 Lots are
identified on Schedule 1, attached hereto and incorporated herein
by reference.
4.
Building
Envelope Depth
. The second sentence in Section 5(a)(ii) of
the Contract is hereby amended to provide that the Final
Subdivision Documents shall allow for a building envelope depth for
each Lot that is not less than seventy (70) feet (after taking into
consideration applicable setbacks).
5.
Final
Approval of Entitlements
.
a.
The fifth and sixth
sentences in Section 5(a)(ii) of the Contract are hereby deleted in
their entirety and replaced with the following: “In the event
Seller is unable to obtain Final Approval of the Entitlements for
the Takedown 1 Lots on or before nine (9) months after expiration
of the Due Diligence Period (or any extensions thereof) then Seller
or Purchaser, in their discretion, shall have the right to extend
the date for obtaining such Final Approval for a period not to
exceed six (6) months. If Seller or Purchaser extends the time
period for obtaining such Final Approval for the Takedown 1 Lots,
then during such extended time period, Seller shall continue to use
commercially reasonable efforts to obtain Final Approval of such
Entitlements, and failing which, Seller shall not be in default of
its obligations under this Contract, but Purchaser may as it sole
remedy hereunder terminate this Contract as to such Takedown
and any remaining
Takedowns
by written notice to Seller, delivered within ten
(10) business days after the end of the time period as extended for
obtaining such Final Approval, in which case each party shall
thereupon be relieved of all further obligations and liabilities
under this Contract, except as otherwise provided herein, and the
Deposit shall be returned to Purchaser.”
b.
The eighth sentence
in Section 5(a)(ii) of the Contract is hereby deleted in its
entirety and replaced with the following: “In the event
Seller is unable to obtain Final Approval of the Entitlements for
the Takedown 2 Lots on or before nine (9) months after the First
Closing, then Seller or Purchaser, in their discretion, shall have
the right to extend the date for obtaining such Final Approval for
a period not to exceed six (6) months. If Seller or Purchaser
extends the time period for obtaining such Final Approval for the
Takedown 2 Lots, then during such extended time period, Seller
shall continue to use commercially reasonable efforts to obtain
Final Approval of such Entitlements, and failing which, Seller
shall not be in default of its obligations under this Contract, but
Purchaser may as it sole remedy hereunder terminate this Contract
as to such Takedown by written notice to Seller, delivered within
ten (10) business days after the end of the time period as extended
for obtaining such Final Approval, in which case each party shall
thereupon be relieved of all further obligations and liabilities
under this Contract, except as otherwise provided herein, and the
then-current amount of the Deposit shall be returned to
Purchaser.
6.
Offsite
Infrastructure
.
a.
Section 5(b) of
the Contract (and Section 4.5.1 of the form Lot Development
Agreement) are hereby revised to reflect that the definition of the
terms “Substantially Complete” and “Substantial
Completion” shall include the requirement that Seller has
executed all utility extension contracts and paid all necessary
fees so that all dry utilities serving the Property can be
installed within 120 days following Substantial Completion of the
Improvements; provided Seller shall have no liability if such
utilities are not timely installed, so long as it has executed said
contracts and paid such fees.
b.
With respect to the
Alternative Service and the WWRF under Section 5(b) of the
Contract, and the Water System Improvements, Wholesale Water, Sewer
and Irrigation Lines, and Drainage System Improvements referenced
in Exhibit A of the Construction Disbursement Agreement (together
with the Alternative Service and WWRF, collectively, the
“
Water and Wastewater
Facilities,
” Seller will meet and confer with
Purchaser’s third party consultants (the “
Water Consultants
”) as reasonably
necessary regarding their review of and evaluation of such Water
and Wastewater Facilities. If Purchaser determines, in its
reasonable discretion, based upon the professional opinion of the
Water Consultants, that the plans for the Water and Wastewater
Facilities are unacceptable, Purchaser, as its sole remedy, may
terminate this Contract upon written notice delivered to Seller
within fourteen (14) days after the Effective Date of this
Amendment, in which event the Deposit shall be returned to
Purchaser and the Parties shall thereafter be relieved of all
obligations under the Contract (except those that expressly survive
termination). If Purchaser does not so terminate the Contract prior
to the deadline set forth above, Purchaser shall be deemed to have
waived such right to terminate, and the Parties shall proceed to
Closing subject to all other terms and conditions of the
Contract.
7.
Purchaser’s
Conditions
.
Section
6(b) of the Contract is hereby amended to add the following
Purchaser’s Conditions Precedent:
(vii)
To the extent such
permits, if any, are required for the development of the Property,
Seller shall have obtained any such required wetland permits and
permits required under Section 404 of the Clean Water
Act.
(viii) As
a Purchaser’s Condition Precedent to the Takedown 2 Closing
only, the Alternative Service shall be completed in accordance with
the requirements of all applicable Authorities, and the Alternative
Service shall be fully operational.
(ix)
At each Closing,
all necessary offsite easements shall have been properly granted
and shall be free of monetary liens, and fee title to the real
property on which the water and sewer plants, and parks and open
space, are located shall have been conveyed to the applicable
authority free of monetary liens, and in accordance with the terms
of the Project Documents.
(x)
At each Closing,
Seller shall have applied for a grading permit for the Lots
acquired by Purchaser at such Closing and shall have taken all
actions required to obtain the issuance of such grading permit from
the applicable Authority.
8.
Seller’s
Conditions
. Section 6(a)(i) of the Contract is hereby
amended to read as follows: As of the date of the First Closing,
Seller is under contract to sell at least an aggregate total of 200
residential lots within the Development to Purchaser and other
homebuilders, and as of the date of the First Closing either (a)
one other homebuilder has previously closed on its initial purchase
of lots under its purchase and sale agreement, or (b) Purchaser and
one other homebuilder simultaneously close their initial purchases
of lots under their purchase and sale agreements, or (c) there are
no material conditions to an initial closing that remain to be
satisfied under another homebuilder’s purchase and sale
agreement.
9.
District
Deficits
. Section 16(c) of the PSA is hereby revised to add
the following subsection (v) thereto:
(v)
For the avoidance
of doubt, and notwithstanding anything to the contrary contained in
this Section 16: So long as representatives of Seller or its
affiliates hold the majority of the director positions on the board
of directors of any special improvement district or metropolitan
district to which the Property is subject other than Rangeview
Metropolitan District (collectively, the “Metro
Districts”), and Purchaser is the holder of record title to
any of the Lots, but in no event longer than 4 years after the date
of the Substantial Completion of the first phase of Lots referenced
in section 5(c)(ii), above: (1) Seller shall be obligated to fund
all deficits of the Metro Districts; (2) Seller shall promptly upon
receipt of any invoice from Purchaser for an amount paid by
Purchaser for that portion of the mill levy that is assessed by the
District for debt service, as reflected in the service plan, that
exceeds fifty (50) mills (the “
Mill Levy
Cap
”). Notwithstanding the foregoing, the Mill Levy
Cap may be increased or decreased as to all taxable property in the
District to reflect any legislation implementing changes in the
ratio of actual valuation to assessed valuation for residential
real property, pursuant to Article X, Section 3(1)(b) of the
Colorado Constitution, so that, to the extent possible, the actual
tax revenues generated by the District imposed mill levy, as
adjusted, are neither diminished nor enhanced as a result of such
changes (“
Gallagher
Adjustment
”). For purposes of the foregoing, a change
in the ratio of actual valuation shall be deemed to be a change in
the method of calculating assessed valuation; (3) after the
Effective Date, Seller shall not cause, agree to or acquiesce to
any change, modification, alteration, termination or extension to
any of the documents which govern the Metro Districts, if the same
would have a material impact on Purchaser or its Lots without the
prior written consent of Purchaser, which will not be unreasonably
withheld; and (4) if at any time Purchaser is required to pay any
amounts to the Metro Districts other than the mill
levies
as
set forth above and the system development fees addressed in
Section 16 of the Contract and except for assessments and/or
charges for covenant control and common area and amenity
maintenance, repair and operations, then Seller shall pay such
amounts on behalf of Purchaser or reimburse Purchaser within thirty
(30) days of demand for such amounts if then paid by Purchaser.
This provision shall survive the Closing and be enforceable by
Purchaser by all legal and equitable means, including without
limitation specific performance.
10.
Marketing
Sales Activities
. From and after the First Closing,
Purchaser may construct and maintain upon portions of the
Development owned by Purchaser such facilities, activities, and
things as, in Purchaser’s reasonable opinion, may be
required, convenient, or incidental to the construction or sale of
Lots and single family homes located thereon. Such permitted
facilities, activities, and things shall include, without
limitation, business offices, signs, flags (whether hung from flag
poles or attached to a structure), model Lots, model homes, parking
lots, sales offices, sales trailers, construction offices,
construction trailers, holding or sponsoring special events, and
exterior lighting features or displays, subject to compliance with
all laws (collectively “
Marketing Activities
”). In
addition, from and after the First Closing, Purchaser shall have
the right to place signage on those portions of the Development
owned by Seller that have been identified by Seller as appropriate
locations for such signage, and subject to reasonable rules and
regulations established by Seller for the homebuilders within the
Development. If, following the Effective Date of this Amendment,
the Seller establishes a signage program for the Development, the
Parties will meet and agree in good faith upon the terms of such
program, and the Parties will enter into an amendment to the
Contract to reflect the terms of such program. This provision shall
survive closing.
11.
Project
Documents
. The term “
Project
Documents
” shall collectively refer to the
following:
a.
the Lot
Development Agreement;
b.
the Joint
Improvement Memorandum;
c.
the Construction
Disbursement Agreement;
d.
the Tap Purchase
Agreement;
e.
the escrow
agreement referenced in Section 6.1(h) of the Lot Development
Agreement (the “
LOC Escrow
Agreement
”);
g.
the Declaration of
Covenants Imposing and Implementing the Sky Ranch Public
Improvement Fee (the “
PIF
Covenant
”); and
h.
a development
agreement for the financing and construction of the Community Park
referenced in section 5(b) of the Agreement (the
“
Community
Park Development Agreement
”).
The
Contract is hereby amended to provide that Purchaser shall have up
to and including the date that is twenty-one (21) days following
the Effective Date of this Amendment (the “
Project Documents
Negotiation Period
”)
, to continue negotiating in
good faith with Seller in an effort to finalize and agree upon the
form of the Project Documents. If Purchaser and Seller are unable
to finalize and agree-upon the form of the Project Documents prior
to expiration of the Project Documents Negotiation Period,
Purchaser may terminate this Contract upon written notice delivered
to Seller within three (3) business days following expiration of
the Project Documents Negotiation Period, in which event the
Deposit shall be returned to Purchaser and the Parties shall
thereafter be relieved of all obligations under the Contract
(except those that expressly survive termination). If Purchaser
does not so terminate the Contract prior to the deadline set forth
above, Purchaser shall be deemed to have waived such right to
terminate, and the Parties shall proceed to Closing subject to all
other terms and conditions of the Contract.
12.
Construction
.
Each of the Parties acknowledges that they, and their respective
counsel, substantially participated in the negotiation, drafting
and editing of this Amendment. Accordingly, the Parties agree that
the provisions of this Amendment shall not be construed or
interpreted for or against any Party hereto based on
authorship.
13.
Authority
.
Each Party represents and warrants that is has the power and
authority to execute this Amendment and that there are no third
party approvals required to execute this Amendment or to comply
with the terms or provisions contained herein.
14.
Headings
.
The section headings used herein shall have absolutely no legal
significance and are used solely for convenience of
reference.
15.
Ratified
and Confirmed
. The Contract, except as modified by this
Amendment, is hereby ratified and confirmed and shall remain in
full force and effect in accordance with its original terms and
provisions. In the case of any conflict between the terms of this
Amendment and the provisions of the Contract, the provisions of
this Amendment shall control
16.
Counterparts
.
This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, and both of which together shall be
deemed to constitute one and the same instrument. Each of the
Parties shall be entitled to rely upon a counterpart of this
Amendment executed by the other Party and sent via facsimile or
e-mail transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By:
/s/ Mark
Harding
Name:
Mark Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
By:
/s/ Linda M.
Purdy
Name:
Linda M. Purdy
Title:
Vice President
SCHEDULE 1
Legal Description of Takedown 1 Lots and Takedown 2
Lots
Takedown 1
Lots:
Takedown 2
Lots
SIXTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
SIXTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of October 20, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A. Seller and
Purchaser previously entered into a Contract for Purchase and Sale
of Real Estate effectively dated June 27, 2017 (as amended, the
"
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to further amend the terms and conditions of
the Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
.
The recitals set forth above are true and correct and are
incorporated herein in their entirety by this
reference.
2.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to
October 18,
2017
.
3.
Construction
.
Each of the Parties acknowledges that they, and their respective
counsel, substantially participated in the negotiation, drafting
and editing of this Amendment. Accordingly, the Parties agree that
the provisions of this Amendment shall not be construed or
interpreted for or against any Party hereto based on
authorship.
4.
Authority
.
Each Party represents and warrants that is has the power and
authority to execute this Amendment and that there are no third
party approvals required to execute this Amendment or to comply
with the terms or provisions contained herein.
5.
Headings
.
The section headings used herein shall have absolutely no legal
significance and are used solely for convenience of
reference.
6.
Ratified
and Confirmed
. The Contract, except as modified by this
Amendment, is hereby ratified and confirmed and shall remain in
full force and effect in accordance with its original terms and
provisions. In the case of any conflict between the terms of this
Amendment and the provisions of the Contract, the provisions of
this Amendment shall control
7.
Counterparts
.
This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, and both of which together shall be
deemed to constitute one and the same instrument. Each of the
Parties shall be entitled to rely upon a counterpart of this
Amendment executed by the other Party and sent via facsimile or
e-mail transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By:
/s/ Mark
Harding
Name:
Mark Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
By:
/s/ Linda M.
Purdy
Name:
Linda M. Purdy
Title:
Vice President
SIGNATURE
PAGE TO SIXTH AMENDMENT
SEVENTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
SEVENTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of October 20, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A. Seller and
Purchaser previously entered into a Contract for Purchase and Sale
of Real Estate effectively dated June 27, 2017 (as amended, the
"
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to further amend the terms and conditions of
the Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
.
The recitals set forth above are true and correct and are
incorporated herein in their entirety by this
reference.
2.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to
October 20,
2017
.
3.
Construction
.
Each of the Parties acknowledges that they, and their respective
counsel, substantially participated in the negotiation, drafting
and editing of this Amendment. Accordingly, the Parties agree that
the provisions of this Amendment shall not be construed or
interpreted for or against any Party hereto based on
authorship.
4.
Authority
.
Each Party represents and warrants that is has the power and
authority to execute this Amendment and that there are no third
party approvals required to execute this Amendment or to comply
with the terms or provisions contained herein.
5.
Headings
.
The section headings used herein shall have absolutely no legal
significance and are used solely for convenience of
reference.
6.
Ratified
and Confirmed
. The Contract, except as modified by this
Amendment, is hereby ratified and confirmed and shall remain in
full force and effect in accordance with its original terms and
provisions. In the case of any conflict between the terms of this
Amendment and the provisions of the Contract, the provisions of
this Amendment shall control
7.
Counterparts
.
This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, and both of which together shall be
deemed to constitute one and the same instrument. Each of the
Parties shall be entitled to rely upon a counterpart of this
Amendment executed by the other Party and sent via facsimile or
e-mail transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By:
/s/ Mark
Harding
Name:
Mark Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
By:
/s/ Linda M.
Purdy
Name:
Linda M. Purdy
Title:
Vice President
SIGNATURE
PAGE TO SEVENTH AMENDMENT
EIGHTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
EIGHTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of October 20, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A. Seller and
Purchaser previously entered into a Contract for Purchase and Sale
of Real Estate effectively dated June 27, 2017 (as amended, the
"
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to further amend the terms and conditions of
the Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
.
The recitals set forth above are true and correct and are
incorporated herein in their entirety by this
reference.
2.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to
October 31,
2017
.
3.
Construction
.
Each of the Parties acknowledges that they, and their respective
counsel, substantially participated in the negotiation, drafting
and editing of this Amendment. Accordingly, the Parties agree that
the provisions of this Amendment shall not be construed or
interpreted for or against any Party hereto based on
authorship.
4.
Authority
.
Each Party represents and warrants that is has the power and
authority to execute this Amendment and that there are no third
party approvals required to execute this Amendment or to comply
with the terms or provisions contained herein.
5.
Headings
.
The section headings used herein shall have absolutely no legal
significance and are used solely for convenience of
reference.
6.
Ratified
and Confirmed
. The Contract, except as modified by this
Amendment, is hereby ratified and confirmed and shall remain in
full force and effect in accordance with its original terms and
provisions. In the case of any conflict between the terms of this
Amendment and the provisions of the Contract, the provisions of
this Amendment shall control
7.
Counterparts
.
This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, and both of which together shall be
deemed to constitute one and the same instrument. Each of the
Parties shall be entitled to rely upon a counterpart of this
Amendment executed by the other Party and sent via facsimile or
e-mail transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By:
/s/ Mark
Harding
Name:
Mark Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
By:
/s/ Linda M.
Purdy
Name:
Linda M. Purdy
Title:
Vice President
SIGNATURE
PAGE TO EIGHTH AMENDMENT
NINETH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
NINETH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of October 20, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A. Seller and
Purchaser previously entered into a Contract for Purchase and Sale
of Real Estate effectively dated June 27, 2017 (as amended, the
"
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to further amend the terms and conditions of
the Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
.
The recitals set forth above are true and correct and are
incorporated herein in their entirety by this
reference.
2.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to
November 3,
2017
.
3.
Construction
.
Each of the Parties acknowledges that they, and their respective
counsel, substantially participated in the negotiation, drafting
and editing of this Amendment. Accordingly, the Parties agree that
the provisions of this Amendment shall not be construed or
interpreted for or against any Party hereto based on
authorship.
4.
Authority
.
Each Party represents and warrants that is has the power and
authority to execute this Amendment and that there are no third
party approvals required to execute this Amendment or to comply
with the terms or provisions contained herein.
5.
Headings
.
The section headings used herein shall have absolutely no legal
significance and are used solely for convenience of
reference.
6.
Ratified
and Confirmed
. The Contract, except as modified by this
Amendment, is hereby ratified and confirmed and shall remain in
full force and effect in accordance with its original terms and
provisions. In the case of any conflict between the terms of this
Amendment and the provisions of the Contract, the provisions of
this Amendment shall control
7.
Counterparts
.
This Amendment may be executed in counterparts, each of which shall
be deemed to be an original, and both of which together shall be
deemed to constitute one and the same instrument. Each of the
Parties shall be entitled to rely upon a counterpart of this
Amendment executed by the other Party and sent via facsimile or
e-mail transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By:
/s/ Mark
Harding
Name:
Mark Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
By:
/s/ Linda M.
Purdy
Name:
Linda M. Purdy
Title:
Vice President
SIGNATURE
PAGE TO NINETH AMENDMENT
TENTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
TENTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this "
Amendment
")
is made as of November 3, 2017 ("
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware
corporation ("
Purchaser
").
Seller and Purchaser may be referred to collectively as the
"
Parties
."
R E C I T A L S
A.
Seller and
Purchaser previously entered into a Contract for Purchase and Sale
of Real Estate effectively dated June 27, 2017 (as amended, the
"
Contract
")
for approximately 190 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B.
Purchaser and
Seller now desire to further amend the terms and conditions of the
Contract as set forth below. Capitalized terms used but not
otherwise defined in this Amendment will have the same meanings
given to such terms in the Contract.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Purchaser
and Seller hereby agree as follows:
1.
Recitals
. The recitals set
forth above are true and correct and are incorporated herein in
their entirety by this reference.
2.
Due Diligence Period
. The
expiration of the Due Diligence Period, as defined in Section 10(a)
of the Contract, is hereby extended to
November 10, 2017
.
3.
Construction
. Each of the
Parties acknowledges that they, and their respective counsel,
substantially participated in the negotiation, drafting and editing
of this Amendment. Accordingly, the Parties agree that the
provisions of this Amendment shall not be construed or interpreted
for or against any Party hereto based on authorship.
4.
Authority
. Each Party
represents and warrants that is has the power and authority to
execute this Amendment and that there are no third party approvals
required to execute this Amendment or to comply with the terms or
provisions contained herein.
5.
Headings
. The section headings
used herein shall have absolutely no legal significance and are
used solely for convenience of reference.
6.
Ratified and Confirmed
. The
Contract, except as modified by this Amendment, is hereby ratified
and confirmed and shall remain in full force and effect in
accordance with its original terms and provisions. In the case of
any conflict between the terms of this Amendment and the provisions
of the Contract, the provisions of this Amendment shall
control
7.
Counterparts
. This Amendment
may be executed in counterparts, each of which shall be deemed to
be an original, and both of which together shall be deemed to
constitute one and the same instrument. Each of the Parties shall
be entitled to rely upon a counterpart of this Amendment executed
by the other Party and sent via facsimile or e-mail
transmission.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the Effective Date.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By:
/s/ Mark
Harding
Name:
Mark
Harding
Title:
President
PURCHASER
:
RICHMOND AMERICAN
HOMES OF COLORADO, INC., a Delaware corporation
By:
/s/ Linda M.
Purdy
Name:
Linda M.
Purdy
Title:
Vice
President
SIGNATURE
PAGE TO TENTH AMENDMENT
PCY HOLDINGS, LLC
and
TAYLOR MORRISON OF COLORADO, INC.
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky
Ranch)
1
|
Purchase
and Sale
|
2
|
2
|
Purchase
Price. Purchase Price Calculation
|
2
|
3
|
Payment
of Purchase Price
|
3
|
4
|
Seller’s
Title
|
3
|
5
|
Seller
Obligations
|
7
|
6
|
Pre-Closing
Conditions
|
12
|
7
|
Closing
|
13
|
8
|
Closings;
Closing Procedures
|
14
|
9
|
Seller’s
Delivery of Title
|
17
|
10
|
Due
Diligence Period; Acceptance of Property; Release and
Disclaimer
|
18
|
11
|
Seller’s
Representations
|
25
|
12
|
Purchaser’s
Obligations
|
26
|
13
|
Excusable
Delay
|
29
|
14
|
Cooperation
|
29
|
15
|
Fees
|
29
|
16
|
Water
and Sewer Taps; Fees
|
29
|
17
|
Reimbursements
and Credits
|
31
|
18
|
Name
and Logo
|
32
|
19
|
Renderings
|
32
|
20
|
District
|
32
|
21
|
Soil
Hauling
|
33
|
22
|
Specially
Designated Nationals and Blocked Persons List
|
33
|
|
|
|
23
|
Assignment
|
33
|
24
|
Survival
|
34
|
25
|
Condemnation
|
34
|
26
|
Brokers
|
34
|
27
|
Default
and Remedies
|
34
|
28
|
General
Provisions
|
36
|
DEFINITIONS
“
Architectural
Review Committee
” shall have the meaning set forth in
Section 12(d).
“
Authorities
”
and “
Authority
” shall have the
meaning set forth in the Recitals.
“
BMPs
”
shall have the meaning set forth in Section 28(x).
“
Board
”
shall have the meaning set forth in Section 16(b).
“
CDs
”
shall have the meaning set forth in Section 5(a)(i).
“
Closed
”
shall have the meaning set forth in Section 7.
“
Closing
Date
” shall have the meaning set forth in Section
8(b).
“
Closing
”
shall have the meaning set forth in Section 7.
“
Communication
Improvements
” shall have the meaning set forth in
Section 20.
“
Communications
”
shall have the meaning set forth in Section 28(j).
“
Completion
Notice
” shall have the meaning set forth in Section
5(b).
“
Confidential
Information
” shall have the meaning set forth in
Section 28(bb).
“
Continuation
Notice
” shall have the meaning set forth in Section
10(a).
“
Contract
”
shall have the meaning set forth in the Recitals.
“
County
Records
” shall have the meaning set forth in Section
5(a)(i).
“
County
”
shall have the meaning set forth in the Recitals.
“
Dedications
”
shall have the meaning set forth in Section 17.
“
Deferred
Purchase Price
” shall have the meaning set forth in
Section 2(a).
“
Deposit
”
shall have the meaning set forth in Section 3(a).
“
Design
Guidelines
” shall have the meaning set forth in
Section 12(d).
“
Development
”
shall have the meaning set forth in the Recitals.
“
District
Improvements
” shall have the meaning set forth in
Section 16(b).
“
District
”
shall have the meaning set forth in Section 9(d).
“
Due
Diligence Period
” shall have the meaning set forth in
Section 10(a).
“
Easement
”
shall have the meaning set forth in Section 20.
“
Effective
Date
” shall have the meaning set forth in the
Recitals.
“
Entitlements
”
shall have the meaning set forth in Section 5(a)(i).
“
Environmental
Claim
” shall have the meaning set forth in Section
10(h).
“
Environmental
Laws
” shall have the meaning set forth in Section
10(g).
“
EPA
”
shall have the meaning set forth in Section 10(c).
“
Escalator
”
shall have the meaning set forth in Section 2(b).
“
Existing
Entitlement Documents
” shall have the meaning set
forth in Section 5(a)(i).
“
FDP
Criteria
” shall have the meaning set forth in Section
12(d).
“
Feasibility
Review
” shall have the meaning set forth in Section
10(a).
“
Filing
”
and “
Filings
” shall have the
meaning set forth in the Recitals.
“
Final
Approval
” shall have the meaning set forth in Section
5(a)(i).
“
Final
Lotting Diagram
” shall have the meaning set forth in
Section 1.
“
Final
Plat
” shall have the meaning set forth in Section
5(a)(i).
“
Final
Subdivision Documents
” shall have the meaning set
forth in Section 5(a)(i).
“
Finished
Lot Improvements
” shall have the meaning set forth in
the Recitals.
“
First
Closing
” shall have the meaning set forth in Section
1.
“
Force
Majeure
” shall have the meaning set forth in Section
13.
“
General
Assignment
” shall have the meaning set forth in
Section 8(d)(iii)(9).
“
Good
Funds
” shall have the meaning set forth in Section
2(a).
“
Government
Warranty Period
” shall have the meaning set forth in
Exhibit C.
“
Governmental
Fees
” shall have the meaning set forth in Section
17.
“
Governmental
Warranty
” shall have the meaning set forth in Exhibit
C.
“
Hazardous
Materials
” shall have the meaning set forth in Section
10(g).
“
Homebuyer
Disclosure
” shall have the meaning set forth in
Section 12(e).
“
House
Plans
” shall have the meaning set forth in Section
12(d)(i).
“
Infrastructure
Improvements
” shall have the meaning set forth in
Section 17.
“
Initial
Purchase Price
” shall have the meaning set forth in
Section 2(a).
“
Lien
Affidavit
” shall have the meaning set forth in Section
4(a).
“
Lot
”
and “
Lots
” shall have the
meaning set forth in the Recitals.
“
Lot
Development Agreement
” shall have the meaning set
forth in the Recitals.
“
Lotting
Diagram
” shall have the meaning set forth in the
Recitals.
“
Master
Commitment
” shall have the meaning set forth in
Section 4(a).
“
Master
Covenants
” shall have the meaning set forth in Section
4(d).
“
Master
Declaration
” shall have the meaning set forth in
Section 4(d).
“
Metro
District Payments
” shall have the meaning set forth in
Section 16(b).
“
New
Exception Objection
” shall have the meaning set forth
in Section 4(b).
“
New
Exception Review Period
” shall have the meaning set
forth in Section 4(b).
“
New
Exceptions
” shall have the meaning set forth in
Section 4(b).
“
NOI
”
shall have the meaning set forth in Section 28(x).
“
Non-Government
Warranty Period
” shall have the meaning set forth in
Exhibit C, Section 3(b).
“
Non-Government
Warranty
” shall have the meaning set forth in Exhibit
C, Section 3(b).
“
Non-Seller
Caused Exceptions
” shall have the meaning set forth in
Section 4(b).
“
NORM
”
shall have the meaning set forth in Section 10(c).
“
OFAC
”
shall have the meaning set forth in Section 22.
"
Offsite
Infrastructure Improvements
" shall have the meaning set
forth in Section 5(b).
“
Other
New Exceptions
” shall have the meaning set forth in
Section 4(b).
“
Overex
”
shall have the meaning set forth in Section 10(e).
“
Permissible
New Exceptions
” shall have the meaning set forth in
Section 4(b).
“
Permitted
Exceptions
” shall have the meaning set forth in
Section 9.
“
PIF
Percentage
” shall have the meaning set forth in
Section 9(e).
“
Property
”
shall have the meaning set forth in the Recitals.
“
Public
Improvement Fee
” or “PIF” shall have the
meaning set forth in Section 9(e).
“
Public
Improvements
” shall have the meaning set forth in
Exhibit C, Section 3(a).
“
Punch-List
Items
” shall have the meaning set forth in Section
5(b).
“
Purchase
Price
” shall have the meaning set forth in Section
2.
“
Purchaser
Parties
” shall have the meaning set forth in Section
10(i).
“
Purchaser’s
Geotechnical Reports
” shall have the meaning set forth
in Section 10(e).
“
Purchaser’s
SWPPP
” shall have the meaning set forth in Section
28(x).
“
Purchaser
”
shall have the meaning set forth in the Recitals.
“
Rangeview
”
shall have the meaning set forth in Section 16(a).
“
Representatives
”
shall have the meaning set forth in Section 28(bb).
“
SDF
”
shall have the meaning set forth in Section
16(c)(iii).
“
Second
Closing
” shall have the meaning set forth in Section
1.
“
Seller
Caused Exception
” shall have the meaning set forth in
Section 4(b).
“
Seller
Cure Period
” shall have the meaning set forth in
Section 4(b).
“
Seller
Documents
” shall have the meaning set forth in Section
10(a).
“
Seller
Party
” or “
Seller Parties
” shall
have the meaning set forth in Section 10(h).
“
Seller’s
Actual Knowledge
” shall have the meaning set forth in
Section 11(h).
“
Seller’s
Condition Precedent
” shall have the meaning set forth
in Section 6(a).
“
Seller’s
Representations
” shall have the meaning set forth in
Section 11.
“
Seller
”
shall have the meaning set forth in the Recitals.
“
SFD
45’ Lots
” shall have the meaning set forth in
the Recitals.
“
Sidewalks
”
shall have the meaning set forth in Exhibit C, Section
2.
“
Sky
Ranch
” shall have the meaning set forth in the
Recitals.
"
Substantially
Complete
" or "
Substantial Completion
" shall
have the meaning set forth in Section 5(b).
“
Survey
”
shall have the meaning set forth in Section 4(a).
“
SWPPP
”
shall have the meaning set forth in Section 28(x).
“
Takedown
1 Closing Date
” shall have the meaning set forth in
Section 8(b).
“
Takedown
1 Lots
” shall have the meaning set forth in the
Recitals.
“
Takedown
2 Closing Date
” shall have the meaning set forth in
Section 8(b).
“
Takedown
2 Closing
” shall have the meaning set forth in Section
8(b).
“
Takedown
2 Lots
” shall have the meaning set forth in the
Recitals.
“
Takedown
Commitment
” shall have the meaning set forth in
Section 4(b).
“
Takedown
”
shall have the meaning set forth in the Recitals.
“
Tap
Purchase Agreement
” shall have the meaning set forth
in Section 16(a).
“
Title
Company
” shall have the meaning set forth in Section
4(a).
“
Title
Objections
” shall have the meaning set forth in
Section 4(a).
“
Tree
Lawns
” shall have the meaning set forth in Exhibit C,
Section 2.
CONTRACT FOR PURCHASE
AND SALE OF REAL ESTATE
THIS
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE (this "
Contract
")
is entered into as of the last date of the signatures hereto (the
"
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and TAYLOR MORRISON OF COLORADO, INC., a Colorado corporation
("
Purchaser
").
WHEREAS, Seller is
developing a master planned residential community to be known as
"
Sky
Ranch
" which is located in Arapahoe County, Colorado
(“
County
”).
The Sky Ranch master planned residential community may also be
referred to herein as the "
Development
".
The preliminary concept map for Phase A of the Development is
depicted on
Exhibit A
attached hereto. The Development is being platted in several
subdivision filings and developed in phases. Each subdivision
filing is hereinafter sometimes respectively referred to as a
“
Filing
”
and collectively as “
Filings
”.
WHEREAS, Seller
desires to sell to Purchaser, and Purchaser desires to purchase and
obtain from Seller, approximately 161 platted single family
detached residential lots (individually referred to as a
"
Lot
" and
collectively as the "
Lots
") in
the Development which will be finished in accordance with this
Contract and which will be used for the construction of single
family residential dwellings upon the terms and conditions set
forth in this Contract.
WHEREAS, Seller is
selling platted residential lots within the Development to multiple
homebuilders, including Purchaser. The Lots to be sold by Seller
and acquired by Purchaser that are located within the Development
shall be hereinafter collectively referred to as the "
Property
."
The Lots will be conveyed at one or more Closings as more
particularly provided herein and each such Closing may be referred
to herein as a “
Takedown.
”
The Lots which are to be conveyed at the first Closing shall be
sometimes hereinafter collectively referred to as the "
Takedown 1
Lots
"; the Lots which are to be conveyed at the second
Closing shall be sometimes hereinafter collectively referred to as
the "
Takedown 2
Lots
"; and the Lots which are to be conveyed at the third
Closing shall be sometimes hereinafter collectively referred to as
the "
Takedown 3
Lots
".
WHEREAS, as of the
Effective Date, the Lots have not been subdivided pursuant to a
recorded final subdivision plat. The number and location of the
Lots to be acquired by Purchaser are generally depicted on the
preliminary concept map for Phase A of the Development attached
hereto as
Exhibit A
(the
"
Lotting
Diagram
"). The precise number, dimension and location of the
Lots will be established at the time the subdivision plat for such
Lots is approved by the County and/or any other relevant
governmental authority (collectively, the "
Authorities
"
and each an “
Authority
”).
As of the Effective Date, the parties anticipate that Purchaser
will acquire approximately 161 Lots that are approximately 45 feet
wide by approximately 110 feet deep for the construction of single
family detached homes (“
SFD 45’
Lots
”).
WHEREAS, following
Purchaser’s acquisition of Lots, Seller will construct
certain infrastructure improvements for the Lots as described on
Exhibit C
attached hereto
(the "
Finished Lot
Improvements
") pursuant to a lot development agreement
executed by Seller and Purchaser in the form set forth on
Exhibit F
("
Lot Development
Agreement
").
. The
Property shall be purchased at three (3) Closings. Subject to the
terms and conditions of this Contract, Seller agrees to sell to
Purchaser, and Purchaser agrees to purchase from Seller, on or
before the dates set forth in
Section
6(b)
below, the Lots in each
Takedown, as generally depicted on the Lotting Diagram and as
follows:
At the
Takedown 1 Closing (“
First
Closing
”), fifty (50) SFD 45’ Lots;
At the
Takedown 2 Closing (“
Second
Closing
”), fifty (50) SFD 45’ Lots;
At the
Takedown 3 Closing (“
Third
Closing
”), sixty-one (61) SFD 45’
Lots.
Notwithstanding the
foregoing, however, the parties acknowledge and agree that the
Parties shall negotiate during the Due Diligence Period to reach
agreement on a mutually acceptable site plan for the Lots
(“
Final Lotting
Diagram
”) and that the exact number and location of
the Lots within each Takedown are subject to adjustment based upon
the approval by the Authorities of the Final Plat (as hereinafter
defined) that includes the Lots to be acquired by Purchaser at each
Takedown. The precise number, dimension (subject to the provisions
of this Contract), location and legal description of the Lots will
be established at the time the Final Plat for such Lots is approved
by the County and/or any other Authority, and upon approval of each
such Final Plat the parties shall execute an amendment to this
Contract setting forth the legal description of those Lots included
in the approved Final Plat.
2.
Purchase Price
.
The
purchase price to be paid by Purchaser to Seller for each Lot (the
"
Purchase
Price
") shall consist of the Initial Purchase Price (as
hereinafter defined) and the Deferred Purchase Price (as
hereinafter defined). The Purchase Price for each Lot shall be
calculated as provided in the following Section 2(a) and shall be
subject to adjustment as provided in Section 2(b)
below:
(a)
Purchase Price Payments
. For
each Lot the Purchase Price shall be the sum of the
“
Initial Purchase
Price
” of Twenty Thousand and 00/100 Dollars
($20,000.00) paid by Purchaser to Seller by wire transfer or other
immediately available and collectible funds ("
Good
Funds
"), and the “
Deferred Purchase
Price
” of Forty Seven Thousand Five Hundred and 00/100
Dollars ($47,500.00) paid by Purchaser to Seller in Good Funds, for
a total of Sixty Seven Thousand Five Hundred and 00/100 Dollars
($67,500.00) per Lot (subject to adjustment as hereinafter provided
in Section 2(b) of this Agreement). The Deferred Purchase Price for
the Lots acquired by Purchaser at the First Closing shall be
secured by a letter of credit delivered by Purchaser into escrow at
the First Closing, the Deferred Purchase Price for the Lots
acquired by Purchaser at the Second Closing shall be secured by a
letter of credit delivered by Purchaser into escrow at the Second
Closing, and the Deferred Purchase Price for the Lots acquired by
Purchaser at the Third Closing shall be secured by a letter of
credit delivered by Purchaser into escrow at the Third Closing, as
more particularly described in Section 5(c) below.
(b)
Purchase Price Escalator
. The
Purchase Price of each Lot that is acquired at the Second Closing
of the Takedown 2 Lots and the Third Closing of the Takedown 3 Lots
will increase by an amount equal to the amount of simple interest
that would accrue thereon for the period elapsing between the date
that the First Closing occurs until the date the applicable Closing
occurs, at a per annum rate equal to two and one-half percent
(2.5%) (the “
Escalator
”).
By way of example and for clarification purposes only, if the
Purchase Price of a Lot at the Closing of the Takedown 1 Lots is
$67,500, then at a subsequent Closing occurring 12 months (365
days) following the date of the closing of the Takedown 1 Lots, the
Purchase Price for a Lot at such subsequent Closing will be
$69,187.50, which is calculated as follows: $67,500 + ($67,500 x
.025) = $69,187.50, $20,500 shall be payable as the Initial
Purchase Price for the Lots acquired at that subsequent
Closing.
3.
Payment of Purchase
Price
. The Purchase
Price for each of the Lots, as determined pursuant to
Section
2
above, shall be payable as
follows:
(a)
Earnest Money Deposit
. Within
three (3) business days following the Effective Date, Purchaser
shall deliver to the Title Company (as defined in
Section
4(a)
hereof) an earnest money
deposit in the amount of $250,000.00. The Title Company will act as
escrow agent and invest the earnest money deposit in a federally
insured institution at the highest money market rate available. The
earnest money deposit and all interest earned thereon shall be
referred to herein as the "
Deposit
."
The Deposit shall be paid in Good Funds. The Deposit will be
applied to the Initial Purchase Price for the Takedown 3 Lots. If
this Contract is terminated prior to the expiration of the Due
Diligence Period for any reason, the Deposit shall be refunded to
Purchaser. If this Contract is terminated after the Due Diligence
Period and prior to the Deposit being fully applied to the Purchase
Price at the last Closing, the Deposit shall be paid to Seller,
except in the case of a termination of this Contract pursuant to a
provision that expressly entitles Purchaser to a refund of the
Deposit as provided elsewhere herein.
(b)
Initial Purchase Price
. That
portion of the Purchase Price for each Lot that is identified as
the Initial Purchase Price and calculated as provided in Section 2
above shall be paid by Purchaser to Seller in Good Funds at the
Closing that is applicable to the Lot.
(c)
Deferred Purchase Price
. That
portion of the Purchase Price for each Lot that is identified as
the Deferred Purchase Price in Section 2 above is due and payable
by Purchaser to Seller, as provided in and pursuant to the terms of
the Lot Development Agreement.
(a)
Preliminary Title Commitment
.
Within ten (10) business days after the Effective Date, Seller
shall furnish to Purchaser, at Seller’s expense, a current
commitment for a Title Policy (as defined below) for the Property
(the "
Master
Commitment
") issued by Land Title Guarantee Company
("
Title
Company
") as agent for First American Title Insurance
Company, together with copies of the instruments listed in the
schedule of exceptions in the Master Commitment. If the Master
Commitment contains any exceptions from coverage which are
unacceptable to Purchaser, then Purchaser shall object to the
condition of the Master Commitment in writing within forty-five
(45) days of Purchaser’s receipt of the Master Commitment
together with copies of all documents constituting exceptions to
title (the "
Title
Objections
"). Upon receipt of the Title Objections, Seller
may, at its option and at its sole cost and expense, clear the
title to the Property of the Title Objections within twenty (20)
days of receipt of the Title Objections. In the event Seller fails,
or elects not to clear the title to the Property of the Title
Objections on or before the date that is ten (10) days before the
expiration of the Due Diligence Period, the Purchaser, as its sole
remedy, may elect before the expiration of the Due Diligence Period
either: (i) to terminate this Contract, in which event the Deposit
shall be promptly returned to Purchaser, Purchaser shall deliver to
Seller all information and materials received by Purchaser from
Seller pertaining to the Property and any non-confidential and
non-proprietary information otherwise obtained by Purchaser
pertaining to the Property, and thereafter the parties shall have
no further rights or obligations under this Contract except as
otherwise provided in
Section
12(c)
below; or (ii) to
waive such objections and proceed with the transactions
contemplated by this Contract, in which event Purchaser shall be
deemed to have approved the title matters as to which its Title
Objections have been waived. If Purchaser fails to provide the
Title Objections prior to the expiration of the sixty (60) day
period required by this
Section
4
(a)
, Purchaser shall be deemed
to have elected to waive its objections as described in the
preceding clause. If Purchaser fails to notify Seller of its
election to terminate this Contract or waive it objections,
Purchaser shall be deemed to have elected to waive its objections
to any title matter that Seller has failed or elected not to cure.
Seller shall release at or prior to the applicable Closing any
monetary lien that Seller caused or created against the Property
with respect to that portion of the Property to be acquired at a
particular Closing other than non-delinquent real estate taxes and
assessments and Permitted Exceptions, and such monetary liens shall
not constitute Permitted Exceptions (as hereinafter defined). At
each Closing, without the need for Purchaser to object to the same
in Purchaser’s Title Objections, Seller shall execute and
deliver the Title Company's standard form mechanic's lien affidavit
(the “
Lien
Affidavit
”) in connection with the standard printed
exception for liens arising against the Lots purchased at the
Closing for work or materials ordered or contracted for by Seller,
and to the extent required by the Title Company a commercially
reasonable indemnity agreement (the “
Title Company
Indemnity
”), provided, however, if Purchaser
determines during the Due Diligence Period that the Title Company
refuses or is unwilling to delete the standard printed exception
for liens as part of extended coverage despite Seller’s offer
to execute and deliver the Lien Affidavit and Title Company
Indemnity, then Purchaser will have the right to terminate this
Contract on or before the expiration of the Due Diligence Period
whereupon the Deposit will be returned to Purchaser, or Purchaser
may proceed with the Closing in which event the Title Policy will
contain, and the Lots will be conveyed subject to, the standard
printed exception for liens unless the Title Company thereafter
agrees thereafter to delete such lien exception, however, the
Purchaser shall have no further termination rights if the Title
Company does not agree to do so. If the Title Company agrees during
the Due Diligence Period to delete the standard printed exception
for liens as part of extended coverage and thereafter the Title
Company refuses to delete the exception for liens based on
Seller’s offer to execute and deliver the Lien Affidavit and
Title Company Indemnity, then such exception shall be deemed a
Non-Seller Caused Exception (as hereinafter defined) to which
Purchaser shall have the right to object pursuant to
Section 4(b)
. Seller shall
request that the Takedown Commitment (as hereinafter defined)
provide for the deletion of the other standard printed exceptions
from the Title Policy (provided that Seller's only obligation with
respect thereto shall be to provide a copy of Seller’s
existing survey ("
Survey
"), if
any, of the land that contains the Lots, obtain and furnish a plat
certification issued by a licensed surveyor, to execute the Title
Company’s standard form seller-owner final affidavit and
agreement as reasonably modified by Seller and as to Seller’s
acts only if such affidavit is required by the Title Company for
the purpose of deleting any exception for parties in possession
(“
Owner’s
Affidavit
”), and to execute the Title Company's Lien
Affidavit with respect to Seller's acts, in form and substance
reasonably acceptable to Seller). Seller has no obligation to
provide a new Survey or to update any existing Survey.
(b)
Subsequently Disclosed
Exceptions
. Not less than fifteen (15) days prior to the
applicable Closing, Purchaser may request that the Title Company
issue an updated title commitment for that portion of the Property
to be acquired at such Closing (each a "
Takedown
Commitment
"), together with copies of any additional
instruments listed in the schedule of exceptions which are not
reflected in the Master Commitment furnished pursuant to
Section
4
(a)
above or in any prior
Takedown Commitment. Additional items disclosed by a Takedown
Commitment or by an amendment to the Master Commitment that affect
title to the subject Property are referred to as
“
New
Exceptions
”. New Exceptions affecting title to the
subject Property that are allowed by the provisions of this
Contract are referred to as “
Permissible New
Exceptions
” and all other New Exceptions are referred
to as “
Other New
Exceptions
”. Purchaser has no right to object to any
Permissible New Exception. Other New Exceptions which do not
materially adversely affect title or use of a Lot shall also be
Permissible New Exceptions. Purchaser shall have a period of seven
(7) days from the date of its receipt of such Takedown Commitment
or amendment to the Master Commitment and a copy of the New
Exceptions (the "
New Exception
Review Period
") to review and to approve or disapprove any
Other New Exceptions. If the Other New Exception is unacceptable to
Purchaser, Purchaser shall object to the Other New Exception in
writing within seven (7) days from the date of Purchaser’s
receipt of the Takedown Commitment, together with a copy of the New
Exceptions (the "
New Exception
Objection
"). Upon receipt of the New Exception Objection,
Seller shall cure the New Exception Objection (by deletion,
insuring over or endorsement) to the extent that such Other New
Exception was caused or created by Seller and is not otherwise
permitted by this Contract ("
Seller Caused
Exception
"). If the New Exception Objection relates to an
Other New Exception that was not caused by Seller
(“
Non-Seller Caused
Exception
”), Seller may, at its sole discretion, cure
the New Exception Objection, within fifteen (15) days of receipt of
the New Exception Objection (“
Seller Cure
Period
”) and the applicable Closing Date will be
extended to accommodate the Seller Cure Period. In the event Seller
fails, or elects not to cure a Non-Seller Caused Exception within
such fifteen (15) day period, the Purchaser, as its sole remedy,
may elect within five (5) days after the end of the Seller Cure
Period either: (i) to terminate this Contract as to the Lots
affected by such New Exception, in which event the prorata portion
of the Deposit for such Lots shall be refunded to Purchaser and the
parties shall have no further rights or obligations under this
Contract as to such Lots; or (ii) to waive such objection and
proceed with the acquisition of the Lots in such Takedown, in which
event Purchaser shall be deemed to have approved the New Exception.
If Purchaser fails to notify Seller of its election to terminate
this Contract as to the applicable Lots in accordance with the
foregoing sentences within five (5) days after the expiration of
the Seller Cure Period (i) Purchaser shall be deemed to have
elected to waive its objections as described in the preceding
sentences (ii), and all such items shall be deemed to be
Permitted Exceptions.
(c)
Permitted Exceptions; Additional
Easements
. Seller shall convey title to the Lots included in
each Takedown of the Property to Purchaser at the Closing for such
Takedown subject to the Permitted Exceptions described in
Section
9
hereof. Prior to each such
Closing, Seller shall have the right, subject to the limitations
set forth below and in
Exhibit
B
and provided Seller shall advise and provide copies of
same to Purchaser promptly after Seller becomes aware of same, to
convey additional easements as Permissible New Exceptions to
utility and cable service providers, governmental or
quasi-governmental Authorities, metropolitan, water and sanitation
districts, homeowners associations or property owners associations
or other entities that serve the Development or adjacent property
for construction of utilities and other facilities to support the
Development or such adjacent property, including but not limited to
sanitary sewer, water lines, electric, cable, broad-band and
telephone transmission, storm drainage and construction access
easements across the Property not yet acquired by Purchaser,
allowing Seller or its assignees the right to install and maintain
sanitary sewer, water lines, cable television, broad-band,
electric, telephone and other utilities on the Property and on the
adjacent property owned by Seller and/or its affiliates, and
further, to accommodate storm drainage from the adjacent property.
Such easements shall require the restoration of any surface damage
or disturbance caused by the exercise of such easements, shall not
be located within the building envelope of any Lot, shall not
materially detract from the value, use or enjoyment of (i) the
Lots affected or the remaining portion of the Property on which
such easements are to be located, or (ii) any adjoining
property of Purchaser.
(d)
Master Covenants
. Prior to the
Takedown 1 Closing, Seller shall, subject to the limitations set
forth below, prepare covenants, conditions and restrictions for the
Development or the portion thereof in which the Property is located
(the "
Master
Declaration
") incorporating architectural and design
standards and guidelines, use limitations and restrictions and
which may establish an owners association or provide that the
District shall administer the Master Declaration, among other
matters, together with such supplemental declarations as may have
been or may be recorded to subject the Property to the provisions
of the Master Declaration (collectively, the "
Master
Covenants
"). Seller shall provide a draft of the Master
Covenants in substantially the form to be recorded to Purchaser for
Purchaser’s review within thirty (30) days after the
Effective Date. If the Master Covenants contain any provisions
which are unacceptable to Purchaser in Purchaser’s reasonable
discretion, Purchaser shall object to such provisions with
particularity in writing within ten (10) days of receipt of the
draft Master Covenants. Upon receipt of such objection, Seller may,
at its option, modify the objectionable provisions of the Master
Covenants within ten (10) days of receipt of such objection from
Purchaser. In the event Seller fails or elects in its discretion
not to modify the objectionable provisions of the Master Covenants
within such ten (10) day period, Purchaser shall have the right as
its sole remedy to elect either: (i) to terminate this Contract, in
which event the Deposit shall be promptly returned to Purchaser,
Purchaser shall deliver to Seller all information and materials
received by Purchaser from Seller pertaining to the Property and
any non-confidential and non-proprietary information otherwise
obtained by Purchaser pertaining to the Property, and thereafter
the parties shall have no further rights or obligations under this
Contract except as otherwise provided in
Section
12(c)
below; or (ii) to waive
any objections to the Master Covenants and proceed with the
transactions contemplated by this Contract, in which event
Purchaser shall be deemed to have approved the Master Covenants as
to which its objections have been waived. If Purchaser fails to
provide written notice to Seller of its objection to the Master
Covenants within ten (10) days of receipt of the draft Master
Covenants as required by this
Section
4
(d)
, Purchaser shall be deemed
to have elected to waive its objections as described in the
preceding clause and the Master Covenants shall be deemed to be
Permitted Exceptions. Seller shall be permitted to revise the
Master Covenants at any time before the First initial Closing under
this Contract without the consent of Purchaser, provided that any
such revision has no material adverse effect on the Lots acquired
or to be acquired by Purchaser.
(e)
Title Policy
. Within a
reasonable time after each Closing, Seller, at its expense, shall
cause the Title Company to deliver a Form 2006 ALTA extended
coverage owner’s policy of title insurance
(“
Title
Policy
”), insuring Purchaser’s title to the
Property conveyed at such Closing, pursuant to the applicable
Takedown Commitment and subject only to the Permitted Exceptions,
together with such endorsements as Purchaser may request and which
the Title Company agrees to issue during the Due Diligence Period,
and shall pay the premium for the basic policy at such Closing. The
Title Policy shall provide insurance in an amount equal to the
Purchase Price for all Lots purchased at such Closing. At each
Closing, Seller shall offer to execute and deliver a Lien Affidavit
and an Owner’s Affidavit, and shall obtain and furnish a plat
certification issued by a licensed surveyor, both as provided in
Section 4(a)
above.
Purchaser shall pay any fees charged by the Title Company to delete
the standard pre-printed exceptions. Purchaser shall pay for the
premiums for any endorsements requested by Purchaser, except that
Seller shall pay for any endorsements that Seller agrees to provide
in order to cure a Title Objection.
5.
Seller
Obligations
. Seller shall have
the following obligations:
(a)
Entitlements
.
(i)
Existing Entitlements
. The
County previously approved the following entitlements for the
Property (collectively, the “
Existing
Entitlement Documents
”): a Preliminary Plat and a
Preliminary Development Plan. Seller shall provide a copy of the
Existing Entitlement Documents to Purchaser as part of the Seller.
Documents.
(ii)
Platting and Entitlements
.
Seller shall be responsible, at Seller's sole cost and expense, for
preparing and processing in a commercially reasonable manner and
timeframe, and diligently pursuing and obtaining Final Approval (as
defined below) from the County and any other appropriate Authority
and recording in the records of the Clerk and Recorder of the
County (the "
County
Records
"), as may be required, the following: (i) a specific
development plan that includes the Property (“
SDP
”);
(ii) an administrative site plan (“
ASP
”)
and final subdivision plat or plats for each Filing within the
Property (each a "
Final
Plat
"); (iii) the public improvement construction plans for
all onsite and offsite public improvements relating to such Final
Plat ("
CDs
"); and
(iv) the development or subdivision improvement agreement
associated with such Final Plat and other similar documentation
required by the Authorities in connection with approval of such
Final Plat and CDs (collectively, such documents are referred to,
with respect to each Takedown, as the "
Final Subdivision
Documents
" and together with the Existing Entitlement
Documents, collectively, the "
Entitlements
"
for such Takedown). The Final Subdivision Documents shall
substantially comply with the Final Lotting Diagram, and shall
provide that the Property contains approximately 161 Lots with each
of the Lots being approximately 45 feet wide by approximately 110
feet deep with a building envelope that is not less than 35’
wide (after taking into consideration applicable setbacks), and the
Final Subdivision Documents shall not impose new or additional
requirements upon Buyer the cost of which is expected to exceed
$3,000 for any Lot or limit or materially adversely affect the use
of any Lot for the construction of a residence thereon. Seller
shall use commercially reasonable efforts to have the Entitlements
for each Takedown, respectively, approved by the Authorities and
recorded as necessary in the County Records with applicable
governmental or third-party appeal or challenge periods applicable
to an approval decision of the Board of Commissioners or Planning
Commission having expired without any appeal then-pending
(“
Final
Approval
”). Seller shall use commercially reasonably
efforts to obtain Final Approval of the Entitlements on or before
nine (9) months after the expiration of the Diligence Period (or
any extensions thereof). If Final Approval of the Entitlements
applicable to the Takedown 1 Lots has not been achieved as
aforesaid on or before nine (9) months after the Effective Date,
then Seller, in its discretion, shall have the right to extend the
date for obtaining such Final Approval for a period not to exceed
six (6) months after the initial nine (9) month period by providing
written notice to Purchaser prior to the expiration of such nine
(9) month period. If Seller shall not secure such Final Approval of
the Takedown 1 Lots by the expiration of the initial nine (9) month
period and shall fail to exercise such extension, each party shall
thereupon be relieved of all further obligations and liabilities
under this Contract, except as otherwise provided herein, and the
Deposit shall be returned to Purchaser. If Seller extends the time
period for obtaining Final Approval of the Takedown 1 Lots, then
during such extended time period Seller shall use commercially
reasonable efforts to obtain Final Approval of such Entitlements,
and failing which, Seller shall not be in default of its
obligations under this Contract (unless Seller failed to use
commercially reasonable efforts to obtain Final Approval of such
Entitlements), but this Contract shall terminate in which case each
party shall thereupon be relieved of all further obligations and
liabilities under this Contract, except as otherwise provided
herein, and the Deposit shall be returned to Purchaser. The timing
for Final Approval of the Entitlements for Takedowns after Takedown
1 is as set forth in Section 6(b)(i) hereof. During the approval
process, Seller shall keep Purchaser reasonably informed of the
process and the anticipated results therefrom and provide Purchaser
with copies of the Final Subdivision Documents as submitted to the
County and other reasonable documentation relating to same.
Purchaser, at no material cost to Purchaser (other than costs
incurred to obtain services that could reasonably be performed or
provided in-house), shall cooperate with Seller in Seller’s
efforts to obtain Final Approval of the Entitlements by the
County.
(iii)
Lot Minimums for each Takedown
.
The Final Plat(s) for the Property and the Lots are anticipated to
be in a form which is substantially consistent, with the Final
Lotting Diagram, subject to changes made necessary by the
Authorities and/or final engineering decisions which are necessary
to properly engineer, design, and install the improvements in
accordance with the requirements of the County and other applicable
Authorities.
(iv)
Recordation of Final Plat
. At
or before each Closing, Seller shall have caused to be recorded the
Final Plat that includes the Lots that are to be purchased at that
Closing. Seller shall be responsible for providing to the County
the bond or other financial assurance that is required by the
County to record each Final Plat.
(b)
Offsite Infrastructure
. Seller
shall cause Rangeview and/or the District to install and construct
in a commercially reasonable manner, and diligently pursue to
substantial completion the offsite infrastructure improvements that
are identified and described on
Exhibit D
attached hereto and incorporated herein by this reference
(collectively, the "
Offsite
Infrastructure Improvements
"). The Offsite Infrastructure
Improvements will be completed in a good, workmanlike and lien-free
manner, in accordance with the CDs, applicable laws, codes,
regulations and governmental requirements for the Development and
the requirements of this Agreement. Seller shall or shall cause
Rangeview and/or the District to use commercially reasonable
efforts to have the Offsite Infrastructure Improvements
Substantially Complete in accordance with the Schedule set forth on
Exhibit
D
, subject to Force Majeure, which schedule will
substantially conform to the timing set forth in clause (10) of
Section 5(c)(ii) below. Rangeview will be constructing a new
wastewater reclamation facility (“
WWRF
”)
for the Development. As an addition to Purchaser’s Conditions
Precedent, Seller shall provide evidence to Purchaser that
Rangeview has received the necessary authorizations from the Water
Quality Control Division of the Colorado Department of Public
Health and Environment and from the County to construct the WWRF,
and has awarded a contract for the construction of the WWRF (such
authorizations and contract collectively, the “
WWRF
Authorizations
”). Without limiting the generality of
the foregoing, Purchaser specifically acknowledges and agrees that
the wastewater treatment plant currently planned as an Offsite
Infrastructure Improvement will not be Substantially Complete on or
before the date that Purchaser obtains its first building permit
for a Lot. Therefore, Seller shall provide as part of the Offsite
Infrastructure Improvements, at Seller’s sole cost, a
temporary alternative service for the processing of wastewater
sufficient for the issuance of building permits and certificates of
occupancy consisting of two sequential batch reactor basins with a
combined volume of 500,0000 gallons, along with appurtenant
facilities to mitigate the development of odors, that
Rangeview’s engineer will certify as having been constructed
in accordance with approved plans and specifications (the
“
Alternative
Service
”). The Alternative Service shall be
Substantially Complete and operational on or before the date
required for Substantial Completion of the other Offsite
Infrastructure Improvements set forth on
Exhibit D
so
that Purchaser can obtain building permits for the Lots, and shall
continue in operation until such time as the wastewater treatment
plant is Substantially Complete. Seller shall deposit into escrow
the costs to construct and operate the Alternative Service pursuant
to an Offsite Infrastructure Escrow Agreement. Seller will give
Purchaser written notice (“
Completion
Notice
”) when each Offsite Infrastructure Improvement
is Substantially Complete. During the construction process, Seller
shall keep Purchaser reasonably informed of the progress of the
construction of the Offsite Infrastructure. The term "
Substantially
Complete
" or "
Substantial
Completion
" means that the improvements have been completed
in accordance with the CD’s therefor and all other
requirements of this Agreement, Seller has requested or applied for
construction acceptance by the County or any other applicable
Authority having jurisdiction, Seller shall have posted all
financial assurances required by the County or any other applicable
Authority having jurisdiction to commence the warranty period, the
improvements may be used for their intended purpose, and Purchaser
will not be precluded from obtaining building permits for homes on
each of the Lots (thereafter Seller shall complete the improvements
so that Purchaser will not be precluded from obtaining the issuance
of certificates of occupancy following completion of homes as a
result of the degree of completion of the improvements). Seller
and/or Rangeview shall be responsible for obtaining final
acceptance by the County and any other applicable Authority having
jurisdiction in accordance with the requirements of the County or
other Authority. As an addition to Purchaser’s Conditions
Precedent, Seller shall on or before the First Closing (i) have
obtained Final Approval of the applicable Authorities of the CDs
for the Offsite Infrastructure Improvements; (ii) have obtained
development permits for the Offsite Infrastructure Improvements;
(iii) have executed the contracts for installation of the Offsite
Infrastructure Improvements providing for a guaranteed maximum
price, and (iv) have deposited funds into a controlled disbursement
account pursuant to one or more agreements (each an
“
Offsite
Infrastructure Escrow Agreement
” and in the plural
“
Offsite
Infrastructure Escrow Agreements
”) equal to the
contracted cost to Substantially Complete the Offsite
Infrastructure Improvements, which Seller and/or Rangeview shall
have the right to draw upon to pay for such Offsite Infrastructure
Improvements as constructed. The form of the Offsite Infrastructure
Escrow Agreement shall be subject to Purchaser’s review and
approval during the Due Diligence Period and if Purchaser is not
satisfied with such agreement for any reason, then
Purchaser’s sole remedy shall be to terminate this Agreement
under Section 10(a) and if Purchaser does not so terminate the
Agreement then the Offsite Infrastructure Escrow Agreement shall be
deemed approved. At Closing the Purchaser may become a party by
joinder to the Offsite Infrastructure Escrow Agreement solely with
respect to remedies for a Seller default in timely completing the
Offsite Infrastructure Improvements, including a step right if
Seller does not timely complete such improvements. Seller and
Purchaser agree that the Offsite Infrastructure Escrow Agreement
will provide that Richmond American Homes of Colorado (to the
extent that it has joined such Offsite Infrastructure Escrow
Agreement) shall have the first right to step-in and complete the
Offsite Infrastructure Improvements. In the event that Seller does
not complete any Offsite Infrastructure Improvements by the
required date (subject to Force Majeure), the Purchaser and all
other purchasers of Lots in the Development shall have the right as
their remedy to withdraw the necessary funds out of such escrow to
cause completion of the applicable Offsite Infrastructure
Improvements. Seller shall deliver the form of the Offsite
Infrastructure Escrow Agreement to Purchaser within 15 days
following the Effective Date. Seller is not obligated to install
any amenities related to the Community Park as part of the Offsite
Infrastructure or the Finished Lot Improvements, but Seller and
Purchaser agree to use good faith efforts during the Due Diligence
Period to establish the timing, financing and other relevant
details pertaining to the installation of amenities on the
Community Park.
(c)
Finished Lot Improvements/Lot
Development Agreement
.
(i)
At the First
Closing, Purchaser and Seller shall enter into an agreement the
Lot Development
Agreement
in the form attached as
Exhibit F
of
this Contract obligating Seller to construct and install the
Finished Lot Improvements as described on
Exhibit C
attached hereto.
(ii)
The Lot Development
Agreement includes, without limitation, provisions that provide for
the following: (1) phased completion of the Offsite Infrastructure
Improvements and the Finished Lot Improvements consisting of two
phases with respect to the Takedown 1 Lots and two subsequent
phases with respect to the Takedown 2 Lots for a total of four
phases; (2) the payment of the Deferred Purchase Price by Purchaser
as follows: For each phase, one-half of the Deferred Purchase Price
for the Lots in that phase shall be paid to Seller upon substantial
completion and construction acceptance by Rangeview of that portion
of the Finished Lot Improvements consisting of the water, sanitary
sewer and storm sewer infrastructure that is necessary to serve the
Lots in that phase, and the remaining one-half of the Deferred
Purchase Price for the Lots in that phase shall be paid to Seller
upon substantial completion of the balance of Finished Lot
Improvements that serve that phase to the extent necessary to
obtain building permits; (3) Seller’s and/or the
District’s obligation to post surety as required by the
County in connection with such phases; (4) provisions regarding
Seller’s and/or the District’s agreements with the
contractors who will construct the Finished Lot Improvements; (5)
Seller’s and/or the District’s warranty obligations, as
provided on
Exhibit C
;
(6) Seller’s obligation to obtain lien waivers and to
discharge mechanics liens related to construction of the Finished
Lot Improvements; (7) Purchaser step-in rights in the event of a
Seller and/or District default (as defined in the Lot Development
Agreement); (8) a license from Purchaser to permit construction of
the Finished Lot Improvements and performance of other related
activities on the Lots; (9) Seller’s obligation to pay
construction costs in excess of the Deferred Purchase Price; and
(10) a schedule providing for the first phase to be Substantially
Completed ten (10) months after the First Closing, with the second
phase to be Substantially Completed nine (9) months after
substantial completion of the first phase, with the third phase to
be Substantially Completed nine (9) months after the Second Closing
and the fourth phase to be Substantially Completed nine (9) months
after Substantial Completion of the third phase, all subject to
Force Majeure, and all subject to the terms and conditions of Lot
Development Agreement. The Seller, Purchaser, other builder(s)
affected by any improvements to be constructed under the Lot
Development Agreement that serve or benefit the Lots and other
property that is to be acquired by such other builder(s)
(“
Joint
Improvements
”) and the Title Company will at Closing
execute a “
Joint Improvements
Memorandum
” that describes the rights and obligations
of Seller, Purchaser, such other builder(s) and Title Company and
such document will supplement the Lot Development Agreement
regarding the installation and construction of any Joint
Improvements, including step-in rights consistent with the Offsite
Infrastructure Escrow Agreement. The form of the Joint Improvements
Memorandum shall be agreed upon during the Due Diligence Period and
attached to the Lot Development Agreement as Exhibit J thereto. If
such Joint Improvements Memorandum is not agreed upon during the
Due Diligence Period, then the Purchaser shall as its sole remedy,
has the right to terminate the Contract.
(iii)
After obtaining
Final Approval of all necessary Entitlements for the applicable
Lots, Seller acting as the constructing party under the Lot
Development Agreement shall commence and diligently pursue
completion or cause to be completed for the Lots being purchased
and acquired by Purchaser at each Closing, subject to Force
Majeure, the Finished Lot Improvements in accordance with the
phasing, provisions and schedules of the Lot Development Agreement
and all applicable laws, codes, regulations and governmental
requirements for the Lots. Seller will notify Purchaser when
each phase of the Finished Lot Improvements have been Substantially
Completed. Seller’s failure to comply with the foregoing
covenant shall not constitute a default hereunder unless and until
such failure shall constitute an event of default (as defined in
the Lot Development Agreement) under the Lot Development
Agreement.
(iv)
In order to secure
Purchaser’s obligation following each Closing to pay the
Deferred Purchase Price in accordance with the terms of this
Contract and the payment schedule set forth in the Lot Development
Agreement as described in Section 5(c) of this Contract, at each
Closing, Purchaser shall deliver to Title Company, acting as escrow
agent, a letter of credit issued by ____________________________ in
the form attached hereto as
Exhibit G
(the “
Letter of
Credit
”) and in an amount equal to the sum of the
Deferred Purchase Price for all of the Lots acquired by Purchaser
at such Closing plus, for the Takedown 2 Lots and the Takedown 3
Lots, the Escalator thereon calculated pursuant to Section 2(b).
Title Company shall hold and maintain the Letter of Credit pursuant
to the Lot Development Agreement in an escrow account established
by Title Company for the benefit of Seller and Purchaser. The
Letter of Credit for each Closing shall remain in place until the
final payment of the Deferred Purchase Price applicable to such
Closing has been made to the Seller following Substantial
Completion of the Finished Lot Improvements which serve the Lots
acquired by Purchaser at such Closing. If the Letter of Credit is
scheduled to expire prior to the Substantial Completion of all of
such Lots, and Purchaser has not renewed the Letter of Credit at
least fifteen (15) days prior to the expiration date thereof, Title
Company is authorized and directed to draw down the full amount of
the Letter of Credit and deposit such funds in escrow to be used
solely for the payment of any unpaid Deferred Purchase Price. The
Letter of Credit may provide that it may be reduced from time to
time to the extent of payments of the Deferred Purchase Price made
by Purchaser for Finished Lot Improvements in accordance with the
terms, including the payment schedule, set forth in the Lot
Development Agreement and Section 5(c) of this Agreement. The
Letter of Credit for each Closing shall be returned to Purchaser,
together with an executed reduction certificate reducing the face
amount thereof to $0.00, upon payment in full of the Deferred
Purchaser Price for all of the Lots in such Closing. Failure by
Purchaser to pay any portion of the Deferred Purchase Price when
the same shall become due and payable, provided that at such
failure continues for a period of ten (10) days after the delivery
of written notice thereof from Seller to Purchaser, shall entitle
Seller to enforce the collection of the delinquent Deferred
Purchase Price by drawing upon the Letter of Credit or having the
Title Company draw upon the Letter of Credit, and in either event
the funds so drawn shall be paid to Seller as payment of any unpaid
Deferred Purchase Price and such failure to pay shall be deemed
cured. If Seller or Title Company is unable to draw upon the Letter
of Credit, Seller may protect and enforce its rights under this
Agreement pertaining to payment of the Deferred Purchase Price by
(i) such suit, action, or special proceedings as Seller shall deem
appropriate, including, without limitation, any proceedings for the
specific performance of any covenant or agreement contained in this
Agreement and the Lot Development Agreement or the enforcement of
any other appropriate legal or equitable remedy, or for the
recovery of actual damages (excluding consequential, punitive
damages or similar damages) caused by Purchaser’s failure to
pay the Deferred Purchase Price, including reasonable attorneys'
fees, and (ii) enforcing Seller’s lien rights under the Lot
Development Agreement. Seller’s remedies are non-exclusive.
The foregoing provisions regarding the Letter of Credit as security
for payment of the Deferred Purchase Price shall be included in the
Lot Development Agreement in the form of escrow
instructions.
6.
Pre-Closing
Conditions
.
(a)
Seller’s Conditions
.
Seller’s obligations to close hereunder are contingent upon
satisfaction of the following condition ("
Seller's Condition
Precedent
"): (i) that Purchaser and other homebuilders are
under contract to purchase at least 200 of the residential lots in
the Development, and close the initial purchase of lots under some
or all of such purchase and sale agreements as determined by Seller
simultaneously. Seller agrees to use commercially reasonable, good
faith efforts to timely satisfy the Seller’s Condition
Precedent. If for any reason other than Seller’s fault or
exercise of its discretion, Seller’s Condition Precedent is
not satisfied on or before the date of the First Closing, Seller
may terminate this Contract (in which event the Deposit shall be
returned to Purchaser), or elect, by written notice to Purchaser at
least ten (10) days before the First Closing, to waive the
condition and proceed to Closing for the applicable Lots for the
applicable Takedown, or elect to extend the date of the applicable
deadline and the Closing for the applicable Lots for a period of
time not to exceed 60 days by giving written notice to Purchaser on
or before the Takedown 1 Closing Date, during which time Seller
shall use commercially reasonable efforts to cause such condition
to be satisfied. If Seller elects to extend the Takedown 1 Closing
Date and the Seller’s Condition Precedent is not satisfied as
of the last day of the 60-day extension period for any reason other
than Seller’s fault or exercise of its discretion, then
Seller shall elect within five (5) business days after the end of
such extension period to either terminate this Contract (in which
event the Deposit shall be returned to Purchaser), or elect to
waive the condition and proceed to Closing for the applicable Lots.
Failure to give notice as described above shall be an irrevocable
waiver of Seller’s right to terminate this Contract as to the
affected Takedown pursuant to this
Section 6(a)
.
(b)
Purchaser’s Conditions
.
It shall be a condition precedent to Purchaser’s obligation
to close each Takedown, that the following conditions
(“
Purchaser’s
Conditions Precedent
”) have been
satisfied:
(i)
Final Approval of
the Entitlements for each respective Takedown by the County and all
other applicable Authorities and recordation of the Final Plat
thereof and such other Entitlements in the County Records as may be
required by the County on or before the applicable Closing Date, as
the same may be extended.
(ii)
Seller’s
representations and warranties set forth herein shall be materially
true and correct as of each Closing.
(iii)
The Title Company
shall be irrevocably and unconditionally committed (subject only to
Purchaser’s obligation to pay the portion of the Title Policy
premium for which Purchaser is responsible under this Contract and
satisfaction of any Title Company requirements applicable to
Purchaser) to issue to Purchaser the applicable Title Policy with
the endorsements as Purchaser may request and the Title Company
agrees in writing to issue prior to the expiration of the Due
Diligence Period, subject only to the Permitted Exceptions accepted
by Purchaser in accordance with the provisions of this
Contract.
(iv)
The
Purchaser’s Condition Precedent in
Section 5(b)
regarding Offsite
Infrastructure Improvements has been satisfied.
(v)
The
Purchaser’s Condition Precedent in
Section 5(b)
regarding the WWRF
Authorizations has been satisfied.
(vi)
The Joint
Improvements Memorandum shall have been fully executed by all
required parties.
If the
Purchaser’s Conditions Precedent are not satisfied on or
before each respective Closing Date, Purchaser may: (1) waive the
unfulfilled Purchaser’s closing condition, (2) extend the
applicable Closing Date for up to thirty (30) days to allow more
time for Seller to satisfy the unfulfilled Purchaser’s
Condition Precedent, or (3) as its sole remedy hereunder terminate
this Contract as to such Takedown and any remaining Takedowns by
written notice to Seller, delivered on or before two (2) business
days after the applicable Closing Date, in which case each party
shall thereupon be relieved of all further obligations and
liabilities under this Contract, except as otherwise provided
herein, and the Deposit made by Purchaser that has not been applied
to the Purchase Price for Lots already acquired by Purchaser shall
be returned to Purchaser. If Purchaser elects to extend the Closing
Date under (2) and the unsatisfied Purchaser’s Condition
Precedent is not satisfied as of the last day of the thirty (30)
day extension period, then Purchaser shall, as its sole remedy,
elect to waive or terminate under (1) or (3). Failure to give
notice as described above shall be an irrevocable waiver of
Purchaser’s right to terminate this Contract as to the
affected Takedown pursuant to this
Section 6(b)
. If Purchaser
terminates or is deemed to terminate the Contract pursuant to this
paragraph, Seller may negate such termination by giving notice to
Purchaser that Seller has elected to extend the applicable Closing
Date by thirty (30) days for the purpose of continuing its efforts
to satisfy the unfulfilled Purchaser’s Condition Precedent,
so long a such notice is given within one (1) business day after
Purchaser’s termination, and Purchaser shall again have a
termination right pursuant to this Section if such condition is not
satisfied during the extended period.
7.
Closing
. "
Closing
"
shall mean the delivery to the Title Company of all applicable
documents and funds required to be delivered pursuant to
Section 8
hereof
and unconditional authorization of the Title Company to disburse,
deliver and record the same. The purchase of Lots at the closing of
a Takedown shall be deemed to be "
Closed
" when
the documents and funds required to be delivered pursuant to
Section 8
hereinafter have been delivered to the Title Company, and the Title
Company agrees to unconditionally to disburse, deliver and record
the same.
8.
Closings; Closing
Procedures
.
(a)
On each respective
Closing Date, Purchaser shall purchase the number of Lots that
Purchaser is obligated to acquire hereunder in the applicable
Takedown.
(b)
Closing Dates
. The date of the
First Closing of the purchase and sale of the Takedown 1 Lots shall
be the date that is the later of ten (10) days after the date that
Final Approval of the Entitlements is obtained. Such date of
Closing is herein referred to as the "
Takedown 1 Closing
Date
." The date of the Second Closing of the purchase and
sale of the Takedown 2 Lots shall be the date that is twelve (12)
months after the date that the First Closing occurs or such other
date to which Seller and Purchaser may mutually agree. Such date of
Closing is herein referred to as the "
Takedown 2 Closing
Date
." The date of the Third Closing of the purchase and
sale of the Takedown 3 Lots shall be the date that is twelve (12)
months after the date that the Second Closing occurs or such other
date as Seller and Purchaser may mutually agree. Such date of
Closing is herein referred to as the "
Takedown 3 Closing
Date
." The term "
Closing
Date
" may be used to refer to each of the Takedown 1 Closing
Date, the Takedown 2 Closing Date and the Takedown 3 Closing Date.
If Purchaser desires to accelerate any of the Closing Dates,
Purchaser may request that a Closing Date be accelerated, and if
Seller is willing to do so in its sole and absolute discretion, the
parties will work together to prepare a mutually acceptable
amendment to this Contract to accommodate such request. Seller
shall have the right to extend the Takedown 1 Closing Date for up
to 60 days in order to satisfy Seller’s Condition Precedent
as provided in Section 6(a) of this Contract.
(c)
Closing Place and Time
. Each
Closing shall be held at 11:00 a.m. on the applicable Closing Date
at the offices of the Title Company or at such other time and place
as Seller and Purchaser may mutually agree.
(d)
Closing Procedures
. Each
purchase and sale transaction shall be consummated in accordance
with the following procedures:
(i)
All documents to be
recorded and funds to be delivered hereunder shall be delivered to
the Title Company to hold, deliver, record and disburse in
accordance with closing instructions approved by Purchaser and
Seller;
(ii)
At each Closing,
Seller shall deliver or cause to be delivered in accordance with
the closing instructions the following:
(1)
A special warranty
deed conveying the applicable portion of the Property to be
acquired at such Closing to Purchaser. The special warranty deed
shall contain a reservation of easements, minerals, mineral rights
and water and water rights, as well as other rights, as set forth
on
Exhibit B
. The special
warranty deed shall also be subject to non-delinquent general real
property taxes for the year of such Closing and subsequent years,
District assessments and the Permitted Exceptions.
(2)
Payment (from the
proceeds of such Closing or otherwise) sufficient to satisfy any
encumbrance relating to the portion of the Property being acquired
at such Closing, required to be paid by Seller at or before the
time of Closing.
(3)
A tax certificate
or other evidence sufficient to enable the Title Company to ensure
the payment of all general real property taxes and installments of
District assessments then due and payable for the portion of the
Property being acquired at such Closing.
(4)
An affidavit, in a
form sufficient to comply with applicable laws, stating that Seller
is not a foreign person or a foreign corporation subject to the
Foreign Investment in Real Property Tax Act, and therefore not
subject to its withholding requirements.
(5)
A certification or
affidavit to comply with the reporting and withholding requirements
for sales of Colorado properties by non-residents (Colorado
Department of Revenue Form DR-1083).
(6)
A Lien
affidavit.
(7)
A partial
assignment of declarant rights or builder rights under the Master
Covenants, assigning only the following declarant rights (to the
extent such rights are not automatically granted to Purchaser as a
“builder” by the terms of the Master Covenants) from
Seller to Purchaser: to maintain sales offices, construction
offices, management offices, model homes and signs advertising the
Development and/or Lots, and such other rights to which the parties
may mutually agree.
(8)
The Tap Purchase
Agreement (as defined herein).
(9)
A general
assignment to Purchaser in the form attached hereto as
Exhibit E
("
General
Assignment
") with respect to the applicable
Lots.
(10)
An Owner’s
Affidavit.
(11)
The Lot Development
Agreement and the Joint Improvements Memorandum executed by
Seller.
(12)
The Offsite
Infrastructure Escrow Agreement executed by Seller.
(13)
Such other
documents as may be required to be executed by Seller pursuant to
this Contract or the closing instructions.
(iii)
At each Closing,
Purchaser shall deliver or cause to be delivered in accordance with
the closing instructions the following:
(1)
The Purchase Price
payable at such Closing, computed in accordance with
Section
2
above, for the Lots being
acquired at such Closing, such payment to be made in Good
Funds.
(2)
The Tap Purchase
Agreement.
(3)
The Lot Development
Agreement and the Joint Improvements Memorandum executed by
Purchaser.
(4)
The Offsite
Infrastructure Escrow Agreement executed by Purchaser.
(5)
All other documents
required to be executed by Purchaser pursuant to the terms of this
Contract or the closing instructions.
(6)
Payment of any
amounts due pursuant to
Section
16
hereof.
(iv)
At each Closing,
Purchaser and Seller shall each deliver an executed settlement
statement, which shall set forth all prorations, disbursements of
the Purchase Price and expenses applicable to such
Closing;
(v)
The following
adjustments and prorations shall be made between Purchaser and
Seller as of each Closing:
(1)
Real property taxes
and installments of District assessments, if any, for the
applicable portion of the Property for the year in which the
Closing occurs shall be prorated based upon the most recent known
rates, mill levy and assessed valuations; and such proration shall
be final.
(2)
Seller shall pay
real property taxes and District assessments for years prior to the
year in which the Closing occurs.
(3)
Purchaser shall pay
any and all recording costs and documentary fees required for the
recording of the deed.
(4)
Seller shall pay
the base premium for the Title Policy and for any endorsement
Seller agrees to provide to cure a Title Objection, and Purchaser
shall pay the premium for any other endorsements requested by
Purchaser in accordance with
Section
4
above, including an extended
coverage endorsement.
(5)
Each party shall
pay one-half (1/2) of any closing or escrow charges of the Title
Company.
(6)
All other costs and
expenses not specifically provided for in this Contract shall be
allocated between Purchaser and Seller in accordance with the
customary practice of commercial real estate transactions in
Arapahoe County, Colorado.
(vi)
Possession of the
applicable portion of the Property being acquired at each Closing
shall be delivered to Purchaser at such Closing, subject to the
Permitted Exceptions.
9.
Seller’s Delivery of
Title
. At each Closing,
Seller shall convey title to the applicable portion of the
Property, together with the following items, to the extent that
they have been approved, or are deemed to have been approved by
Purchaser pursuant to the terms of this Contract (collectively, the
"
Permitted
Exceptions
"):
(a)
all easements,
agreements, covenants, restrictions, rights-of-way and other
matters of record that affect title to the Property as disclosed by
the Master Commitment or any Takedown Commitment, or otherwise, to
the extent that such matters are approved or deemed approved by
Purchaser in accordance with
Section
4
above or otherwise approved
by Purchaser (unless otherwise identified herein as an obligation,
fee or encumbrance to be assumed by Purchaser or which is otherwise
identified herein as a Purchaser obligation which survives such
Closing, the foregoing items, however, shall not include any
mortgages, deeds of trust, mechanic’s liens or judgment liens
arising by, through or under Seller, which monetary liens Seller
shall cause to be released or fully insured over by the Title
Company, to the extent they affect any portion of the Property, on
or prior to the date that such portion of the Property is conveyed
to Purchaser);
(b)
the Entitlements,
including without limitation, the Final Plat applicable to the
Property being acquired at such Closing and all easements and other
terms, agreements, provisions, conditions and obligations as shown
thereon;
(c)
the Master
Covenants;
(d)
the inclusion of
the Property into the Sky Ranch Metropolitan District No. 5 (the
"
District
")
and such other special improvement districts or metropolitan
districts as may be disclosed by the Master Commitment or any
Takedown Commitment delivered to Purchaser pursuant to this
Contract;
(e)
A Public
Improvement Fee Covenant with respect to construction and
installation of eligible public improvements on the Property, which
imposes a public improvement fee equal to a percentage (the
“
PIF
Percentage
”) of all sales that occur on the Property
that is one percentage point less than the total sales tax imposed
on taxable sales occurring in that portion of the City of Aurora,
Colorado located within the boundaries of the County and the PIF
Percentage of the cost of building materials (the "
Public Improvement
Fee
" or "
PIF
"). The
PIF will be collected by (i) all sellers or providers of goods or
services who engage in any PIF sales transactions within those
portions of the Development subject to the PIF Covenant from the
purchaser or recipient of such goods or services and (ii) by all
homebuilders, and then will be paid over to the PIF collection
agent. The PIF collection agent will receive and remit the Public
Improvement Fee to the Seller or District. PIF sales shall not
include the sale of residential improvements or any goods incident
to the sale of residential improvements.
(f)
A reservation of
water and mineral rights as set forth on
Exhibit B
hereof;
(g)
applicable zoning
and governmental regulations and ordinances;
(h)
title exceptions,
encumbrances, or other matters arising by, through or under
Purchaser;
(i)
items apparent upon
an inspection of the Property or shown or that would be shown on an
accurate and current survey of the Property; and
(j)
any Permissible New
Exception and any other document required or permitted to be
recorded against the Property in the County Records pursuant to the
terms of this Contract.
10.
Due Diligence Period; Acceptance of
Property; Release and Disclaimer
.
(a)
Feasibility Review
. Within five
(5) business days following the Effective Date, Seller shall
deliver or make available (via electronic file share if available
in electronic form, otherwise at Seller’s office) to
Purchaser the following listed items to the extent in
Seller’s actual possession; if an item listed below is not in
Seller’s possession and not delivered or made available to
Purchaser, but is otherwise readily available to Seller, then
Purchaser may make written request to Seller to provide such item,
and Seller will use its reasonable efforts to obtain and deliver or
make such item available to Purchaser, but Seller will have no
obligation otherwise to obtain any item not in Seller’s
possession: (i) any environmental reports, soil reports and
certifications pertaining to the Lots, (ii) a copy of any
subdivision plat for the Property, (iii) engineering and
construction plans pertaining to the Lots, (iv) biological,
grading, drainage, hydrology and other engineering reports and
plans and engineering and constructions plans for offsite
improvements that are required to obtain building
permits/certificates of occupancies for single-family detached
residences constructed on the Lots; (v) any PUD, Development
Agreement, Site Development Plans and other approvals pertaining to
the Lots particularly and the Development generally; (vi) any
Special District Service Plans; (vii) any existing ALTA or other
boundary Survey of the Property; and (viii) copies of any
subdivision bonds or guarantees applicable to the Lots
(collectively, the "
Seller
Documents
"). Purchaser shall have a period expiring sixty
(60) calendar days following the Effective Date of this Contract
within which to review the same (the "
Due Diligence
Period
"). During the Due Diligence Period, Purchaser shall
have an opportunity to review and inspect the Property, all Seller
Documents and any and all factors deemed relevant by Purchaser to
its proposed development and the feasibility of Purchaser’s
intended uses of the Property in Purchaser’s sole and
absolute discretion (the "
Feasibility
Review
"). The Feasibility Review shall be deemed to have
been completed to Purchaser’s satisfaction only if Purchaser
gives written notice to Seller of its election to continue this
Contract ("
Continuation
Notice
") prior to the expiration of the Due Diligence
Period. If Purchaser fails to timely give a Continuation Notice or
if Purchaser gives a notice of its election to terminate, this
Contract shall automatically terminate, the Deposit shall be
promptly returned to Purchaser, Purchaser shall deliver to Seller
all information and materials received by Purchaser from Seller
pertaining to the Property and any non-confidential and
non-proprietary information otherwise obtained by Purchaser
pertaining to the Property and any information otherwise obtained
by Purchaser, and thereafter the parties shall have no further
rights or obligations under this Contract except as otherwise
provided in
Section
24
below. Seller
will reasonably cooperate with Purchaser, at Purchaser’s cost
and at no cost and with no liability to Seller, (i) to assist
Purchaser in obtaining an updated or recertification of any of the
Seller Documents, (ii) to assist Purchaser in obtaining
reliance letters from any of the preparers of the Documents, and
(iii) to assist Purchaser in obtaining any consents that may
be required so that Purchaser may receive the benefits after
Closing of any agreements comprising the Seller Documents that
confer a benefit and are reasonably necessary for the
Purchaser’s proper and efficient development of the Property
for residential use, to the extent such are obtainable by
Purchaser.
(b)
Approval of Property
. If
Purchaser gives a Continuation Notice on or before the expiration
of the Due Diligence Period, except as otherwise provided in this
Section
10
, Purchaser shall be deemed
to have approved the Property, the Development and the feasibility
of Purchaser’s intended uses of the Lots (subject to the
terms and conditions of
Section 5
and
Section 6
hereof). Such
approval shall be deemed to include, but shall not be limited to,
Purchaser’s approval of the following as to the
Property:
(i)
The ability of
applicable utility companies to provide utility services to the
Property, including the quality, sizing and cost of such
services;
(ii)
The soil and
environmental conditions of the Property;
(iii)
All Seller
Documents delivered to Purchaser pursuant to this
Contract;
(iv)
All of the
Permitted Exceptions;
(v)
The financial
condition and other factors relevant to the operation of the
District;
(vi)
Any property
owners’ association to be established pursuant to the terms
of the Master Covenants; and
(vii)
Fitness for
Purchaser’s intended use, accessibility of roads, and the
condition and suitability for improvement and sale of the Lots,
subject to Seller’s obligations under this
Contract.
(c)
Radon
. Purchaser acknowledges
that radon gas and naturally occurring radioactive materials
(“
NORM
”)
each naturally occurs in many locations in Colorado. The Colorado
Department of Public Health and Environment and the United States
Environmental Protection Agency (the "
EPA
") have
detected elevated levels of naturally occurring radon gas in
residential structures in many areas of Colorado, including the
County and all of the other counties along the front range of
Colorado. The EPA has raised concerns with respect to adverse
effects on human health from long-term exposure to high levels of
radon and recommends that radon levels be tested in all Residences.
Purchaser acknowledges that Seller neither claims nor possesses any
special expertise in the measurement or reduction of radon or NORM.
Purchaser further acknowledges that Seller has not undertaken any
evaluation of the presence or risks of radon or NORM with respect
to the Property nor has it made any representation or given any
other advice to Purchaser as to acceptable levels or possible
health hazards of radon and NORM. SELLER HAS MADE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE
PRESENCE OR ABSENCE OF RADON, NORM OR OTHER ENVIRONMENTAL
POLLUTANTS WITHIN THE PROPERTY OR THE RESIDENCES TO BE CONSTRUCTED
ON THE LOTS OR THE SOILS BENEATH OR ADJACENT TO THE PROPERTY OR THE
RESIDENCES TO BE CONSTRUCTED ON THE LOTS PRIOR TO, ON OR AFTER THE
CLOSING DATE. Purchaser, on behalf of itself and its successors and
assigns, hereby releases the Seller from any and all liability and
claims with respect to radon gas. Every home sales contract entered
in to by Purchaser with respect to subsequent sales of Lots shall
include any disclosures with respect to radon as required by
applicable Colorado law.
(d)
Soils
. Purchaser acknowledges
that soils within the State of Colorado consist of both expansive
soils and low-density soils, and certain areas contain potential
heaving bedrock associated with expansive, steeply dipping bedrock,
which will adversely affect the integrity of a dwelling unit
constructed on a Lot if the dwelling unit and the Lot on which it
is constructed are not properly maintained. Expansive soils
contain clay mineral, which have the characteristic of changing
volume with the addition or subtraction of moisture, thereby
resulting in swelling and/or shrinking soils. The addition of
moisture to low-density soils causes a realignment of soil grains,
thereby resulting in consolidation and/or collapse of the soils.
Purchaser agrees that it shall obtain a current geotechnical
report for the Property and an individual lot soils report for each
Lot containing design recommendations from a licensed geotechnical
engineer for all structures to be placed upon the Lot. Purchaser
shall require all homes to have engineered footing and foundations
consistent with results of the individual lot soils report for each
Lot and shall take reasonable action as shall be necessary to
ensure that the homes to be constructed upon the Lots shall be done
in accordance with proper design and construction techniques.
Purchaser shall also provide a copy of the geotechnical report for
the Property and the individual lot soils report for each Lot to
Seller within seven (7) days after Seller’s request for the
same, and agrees in the event that this Contract terminates for any
reason Purchaser shall use reasonable efforts to assign, without
liability or recourse to Purchaser, at Seller’s request, the
geotechnical report for the Property and the individual lot soils
report for each Lot to any subsequent homebuilder who enters into a
purchase and sale agreement with Seller to purchase all of a
portion of the Lots. SELLER HAS MADE NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE PRESENCE OR ABSENCE
OF EXPANSIVE SOILS, LOW-DENSITY SOILS OR DIPPING BEDROCK UPON THE
PROPERTY AND PURCHASER SHALL UNDERTAKE SUCH INVESTIGATION AS SHALL
BE REASONABLE AND PRUDENT TO DETERMINE THE EXISTENCE OF THE SAME.
Purchaser shall provide all disclosures required by C.R.S. Section
6-6.5-101 in every home sales contract entered in to by Purchaser
with respect to subsequent sales of a Lot to a homebuyer.
Purchaser, on behalf of itself and its successors and assigns,
hereby releases the Seller from any and all liability and claims
with respect to expansive and low-density soils and dipping bedrock
located within the Property.
(e)
Over Excavation
. The Finished
Lot Improvements required for each Lot do not include any
“over excavation” or comparable preparation or
mitigation of the soil (the “
Overex
”)
on the Property and Purchaser shall have sole responsibility at
Purchaser’s sole expense with respect to the Overex and shall
have the right (pursuant to a license agreement to be provided by
Seller) to enter such Lots for the purposes of performing the
Overex; provided, however, that such entry shall be performed in a
manner that does not materially interfere with or result in a
material delay or an increase in the costs or any expenses in the
construction of the Finish Lot Improvements, and provided further
that Purchaser shall promptly repair any portion of the Lots and
adjacent property that is materially damaged by Purchaser or its
agents, designees, employees, contractors, or subcontractors in
performing the Overex. Purchaser shall obtain, at its cost, a
current geotechnical report for the Property and an individual lot
soils report for each Lot containing design recommendations from a
licensed geotechnical engineer for all structures to be placed upon
the Lot (“
Purchaser’s
Geotechnical Reports
”) shall not rely upon any
geotechnical or soils report furnished by Seller, and Seller shall
have no responsibility or liability with respect to the Overex,
Purchaser’s Geotechnical Reports or any matters related
thereto. The parties shall reasonably cooperate in coordinating
Purchaser’s completion of the Overex so that the Overex can
be properly sequenced with Seller’s completion of the
Finished Lot Improvements. In no event shall the Seller be liable
to Purchaser for any delay or costs or damages incurred by
Purchaser with respect to such Overex, even if caused by any delay
in installation of Finished Lot Improvements sequenced ahead of the
Overex. THE PARTIES ACKNOWLEDGE AND AGREE THAT SELLER IS NOT
PERFORMING ANY OVER-EXCAVATION OF THE LOTS AND THAT SELLER SHALL
HAVE NO LIABILITY WHATSOEVER WITH RESPECT TO OR ARISING OUT OF ANY
OVER-EXCAVATION OF THE LOTS OR EXPANSIVE SOILS PRESENT ON THE LOTS
AND SELLER EXPRESSLY DISCLAIMS ANY LIABILITY WITH RESPECT TO ANY
OVER-EXCAVATION OF THE LOTS AND EXPANSIVE SOILS PRESENT ON THE
LOTS. PURCHASER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER
AND ITS SHAREHOLDERS, EMPLOYEES, DIRECTORS, OFFICERS, AGENTS,
AFFILIATES, SUCCESSORS AND ASSIGNS FOR, FROM AND AGAINST ALL
CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES (EXCLUSIVE OF
SPECIAL, CONSEQUENTIAL, PUNITIVE, SPECULATIVE OR LOST PROFITS
DAMAGES), COSTS AND EXPENSES, INCLUDING BUT NOT LIMITED TO COURT
COSTS AND REASONABLE ATTORNEYS’ FEES, ARISING OUT OF ANY
EXPANSIVE SOILS, OVER-EXCAVATION OR OTHER SOIL MITIGATION OR
PURCHASER’S ELECTION NOT TO PERFORM SOILS MITIGATION, ON OR
PERTAINING TO PURCHASER’S LOTS. THE PROVISIONS OF THIS
SECTION SHALL EXPRESSLY SURVIVE THE EXPIRATION OR TERMINATION OF
THIS CONTRACT.
(f)
No Reliance on Documents
.
Except as expressly stated in this Contract and/or expressly set
forth in the documents executed by Seller at Closing, Seller makes
no representation or warranty as to the truth, accuracy or
completeness of any materials, data or information (including,
without limitation, the Seller Documents) delivered by Seller or
its brokers or agents to Purchaser in connection with the
transaction contemplated hereby. Except as otherwise provided in
this Contract and/or expressly set forth in the documents executed
by Seller at Closing, all materials, data and information delivered
by Seller to Purchaser in connection with the transaction
contemplated hereby are provided to Purchaser as a convenience only
and any reliance on or use of such materials, data or information
by Purchaser shall be at the sole risk of Purchaser, except as
otherwise expressly stated herein. The Seller Parties shall not be
liable to Purchaser for any inaccuracy in or omission from any such
reports. Purchaser hereby represents to Seller that, to the extent
Purchaser deems the same to be necessary or advisable for its
purposes, and without waiving the right to rely upon the covenants,
agreements, representations and warranties expressly contained in
this Agreement and/or expressly set forth in the documents executed
by Seller at Closing: (i) Purchaser has performed or will perform
an independent inspection and investigation of the Lots and has
also investigated or will investigate the operative or proposed
governmental laws, ordinances and regulations to which the Lots may
be subject, and (ii) Purchaser shall acquire the Lots solely upon
the basis of its own or its experts' independent inspection and
investigation, including, without limitation, (a) the quality,
nature, habitability, merchantability, use, operation, value,
fitness for a particular purpose, marketability, adequacy or
physical condition of the Lots or any aspect or portion thereof,
including, without limitation, appurtenances, access, landscaping,
parking facilities, electrical, plumbing, sewage, and utility
systems, facilities and appliances, soils, geology and groundwater,
(b) the dimensions or sizes of the Lots, (c) the development or
income potential, or rights of or relating to, the Lots, (d) the
zoning or other legal status of the Lots or any other public or
private restrictions on the use of the Lots, (e) the compliance of
the Lots with any and all applicable codes, laws, regulations,
statutes, ordinances, covenants, conditions and restrictions, (f)
the ability of Purchaser to obtain any necessary governmental
permits for Purchaser's intended use or development of the Lots,
(g) the presence or absence of Hazardous Materials on, in, under,
above or about the Lots or any adjoining or neighboring property,
(h) the condition of title to the Lots, or (i) the economics of, or
the income and expenses, revenue or expense projections or other
financial matters, relating to the Lots, except as provided in any
express representations/warranties and/or covenants contained in
this Contract.
(g)
As Is
. Except for
Seller’s Representations (as defined in
Section 11
hereof) and
Seller’s performance of its obligations under this Contract,
Purchaser acknowledges and agrees that it is purchasing the
Property based on its own inspection and examination thereof, and
Seller shall sell and convey to Purchaser and Purchaser shall
accept the property on an “AS IS, WHERE IS, WITH ALL FAULTS,
LIABILITIES, AND DEFECTS, LATENT OR OTHERWISE, KNOWN OR
UNKNOWN” basis in an "AS IS" physical condition and in an "AS
IS" state of repair (subject to the Finished Lot Improvements
obligation set forth in
Section
(iv)
hereof). Except as
expressly contained in this Contract, the special warranty deed to
be delivered at each Closing and Seller’s Representations, to
the extent not prohibited by law the Purchaser hereby waives, and
Seller disclaims all warranties of any type or kind whatsoever with
respect to the Property, whether express or implied, direct or
indirect, oral or written, including, by way of description, but
not limitation, those of habitability, fitness for a particular
purpose, and use. Without limiting the generality of the foregoing,
Purchaser expressly acknowledges that, except as otherwise provided
in this Contract, the Seller’s Representations, the special
warranty deed to be delivered at each Closing, Seller makes no
representations or warranties concerning, and hereby expressly
disclaims any representations or warranties concerning the
following: (i) The value, nature, quality or condition of the
Property; (ii) Any restrictions related to development of the
Property; (iii) The applicability of any governmental requirements;
(iv) The suitability of the Property for any purpose whatsoever;
(v) The presence in, on, under or about the Property of any
Hazardous Material or any other condition of the Property which is
actionable under any Environmental Law (as such terms are defined
in this
Section
10
; (vi) Compliance of the
Property or any operation thereon with the laws, rules, regulations
or ordinances of any applicable governmental body; or (vii) The
presence or absence of, or the potential adverse health, economic
or other effects arising from, any magnetic, electrical or
electromagnetic fields or other conditions caused by or emanating
from any power lines, telephone lines, cables or other facilities,
or any related devices or appurtenances, upon or in the vicinity of
the Property.
EXCEPT
FOR REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AS ARE
EXPRESSLY SET FORTH IN THIS CONTRACT OR OTHERWISE PROVIDED IN THIS
CONTRACT AND/OR EXPRESSLY SET FORTH IN THE CLOSING DOCUMENTS,
SELLER SHALL NOT BE LIABLE TO PURCHASER FOR ANY CONSTRUCTION
DEFECT, ERRORS, OMISSIONS, OR ON ACCOUNT OF SOILS CONDITIONS OR ANY
OTHER CONDITION AFFECTING THE PROPERTY, INCLUDING, BUT NOT LIMITED
TO, THOSE MATTERS DESCRIBED ABOVE AND PURCHASER AND ANYONE CLAIMING
BY, THROUGH OR UNDER PURCHASER, HEREBY FULLY RELEASES SELLER, ITS
PARTNERS, EMPLOYEES, OFFICERS, DIRECTORS, REPRESENTATIVES,
ATTORNEYS AND AGENTS (BUT NOT INCLUDING ANY THIRD PARTY
PROFESSIONAL SERVICE PROVIDERS [E.G., ENGINEERS, ETC.], CONTRACTORS
OR SIMILAR FIRMS OR PERSONS) FROM ANY AND ALL CLAIMS AGAINST ANY OF
THEM FOR ANY COST, LOSS, LIABILITY, DAMAGE, EXPENSE, DEMAND, ACTION
OR CAUSE OF ACTION (INCLUDING, WITHOUT LIMITATION, ANY RIGHTS OF
CONTRIBUTION) ARISING FROM OR RELATED TO ANY CONSTRUCTION DEFECTS,
ERRORS, OMISSIONS, OR OTHER CONDITIONS AFFECTING THE PROPERTY,
INCLUDING, BUT NOT LIMITED TO, THOSE MATTERS DESCRIBED ABOVE AND
INCLUDING ANY ALLEGED NEGLIGENCE OF SELLER.
As used
herein, "
Hazardous
Materials
" shall mean, collectively, any chemical, material,
substance or waste which is or hereafter becomes defined or
included in the definitions of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutant" or "contaminant," or words of similar
import, under any Environmental Law, and any other chemical,
material, substance, or waste, exposure to, disposal of, or the
release of which is now or hereafter prohibited, limited or
regulated by any governmental or regulatory authority or otherwise
poses an unacceptable risk to human health or the
environment.
As used
herein, "
Environmental
Laws
" shall mean all applicable local, state and federal
environmental rules, regulations, statutes, laws and orders, as
amended from time to time, including, but not limited to, all such
rules, regulations, statutes, laws and orders regarding the
storage, use and disposal of Hazardous Materials and regarding
releases or threatened releases of Hazardous Materials to the
environment.
(h)
Release
. Purchaser agrees that,
subject to the Seller’s Representations, Seller shall not be
responsible or liable to Purchaser for any defects, errors or
omissions, or on account of geotechnical or soils conditions or on
account of any other conditions affecting the Property, because
Purchaser is purchasing the Property AS IS, WHERE-IS, and WITH ALL
FAULTS. Purchaser, or anyone claiming by, through or under
Purchaser, hereby fully releases Seller, Seller’s affiliates,
divisions and subsidiaries and their respective managers, members,
partners, officers, directors, shareholders, affiliates,
representatives and employees (the “
Seller
Parties
” and each as a “
Seller
Party
”) from, and irrevocably waives its right to
maintain, any and all claims and causes of action that it or they
may now have or hereafter acquire against the Seller Parties for
any cost, loss, liability, damage, expense, demand, action or cause
of action arising from or related to any defects, errors, omissions
or other conditions affecting the Property, except to the extent
that such loss or other liability results from a breach of the
Seller’s Representations. Purchaser hereby waives any
Environmental Claim (as defined in this Section) which it now has
or in the future may have against Seller, provided however, such
waiver shall not apply to activities to be performed by the Seller
in accordance with the applicable Lot Development Agreement. The
foregoing release and waiver shall be given full force and effect
according to each of its express terms and provisions, including,
but not limited to, those relating to unknown and suspected claims,
damages and causes of action. The foregoing release and waiver
shall not apply to any cost, loss, liability, damage, expense,
demand, action or cause of action arising from or related to (i)
fraud or other intentional misconduct of any Seller Party, or (ii)
any claims against contractors or subcontractors for construction
defects in the Finished Lot Improvements.
As used
herein, "
Environmental
Claim
" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of
noncompliance or violation, whether written or oral, by any person,
organization or agency alleging potential liability, including
without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property
damages, including diminution of the market value of the Property
or any part thereof, personal injuries or penalties arising out of,
based on or resulting from the presence or release into the
environment of any Hazardous Materials at any location, or
resulting from circumstances forming the basis of any violation or
alleged violation of any Environmental Laws, and any and all claims
by any person, organization or agency seeking damages,
contribution, indemnification, costs, recovery, compensation or
injunctive relief resulting from the presence or release of any
Hazardous Materials.
(i)
Indemnification
. Purchaser
shall indemnify, defend (with counsel reasonably selected by
Purchaser with Seller approval) and hold harmless the Seller
Parties of, from and against any and all claims, demands,
liabilities, losses, expenses, damages, costs and reasonable
attorneys’ fees that any of the Seller Parties may at any
time incur by reason of or arising out of: (i) any work performed
in connection with or arising out of Purchaser’s activities,
or Purchaser’s acts or omissions with respect to any Overex
work, (ii) Purchaser’s failure to perform its work on the
Property in accordance with applicable laws, and (iii) either
personal injuries or property damage occurring after the Closing by
reason of or arising out of the geologic, soils or groundwater
conditions on the Property acquired by Purchaser, (iv)
Purchaser’s or its successor’s development,
construction, use, ownership, management, marketing or sale
activities associated with the Lots (including, without limitation,
land development, grading, excavation, trenching, soils compaction
and construction on the Lots performed by or on behalf of Purchaser
(including, but not limited to, by all subcontractors and
consultants engaged by Purchaser); (v) the soils, subsurface
geologic, groundwater conditions or the movement of any home
constructed on the Lots after a Closing; (vi) the design,
engineering, structural integrity or construction of any homes
constructed on the Lots after a Closing; or (vii) any claim
asserted by Purchaser’s homebuyers or their successors in
interest. The foregoing indemnity obligation of Purchaser includes
acts and omissions of Purchaser and all agents, consultants and
other parties acting for or on behalf of Purchaser
(“
Purchaser
Parties
”). Notwithstanding the foregoing, Purchaser is
not required by this indemnification provision to indemnify the
Seller against (i) Seller's failure to perform its obligations
under this Contract or under any of the Closing documents, (ii)
Seller's breach of an express warranty or representation set forth
in this Contract or in any of the Closing Documents, or (iii)
claims arising directly from the decisions of Seller acting in its
capacity as declarant under the Declaration; and further provided
that Purchaser is not required to indemnify consultants,
contractors and subcontractors who contract with Seller and who
perform services or supply labor, materials, equipment, and other
work relating to geotechnical or soils conditions on the Lots that
is necessary for the Lots to satisfy the requirements set forth
herein.
(j)
The
provisions of this
Section
10
shall survive each Closing
and the delivery of each respective deed to the
Purchaser.
11.
Seller’s
Representations
. Seller hereby
represents and warrants to Purchaser as follows (the following
Subsections (a) through (j) collectively referred to herein as
"
Seller’s
Representations
"):
(a)
Organization
. Seller is a
corporation duly organized and validly existing under the laws of
the State of Colorado.
(b)
Litigation
. To Seller’s
Actual Knowledge (as defined in this
Section 11
), there is no
pending or threatened litigation which could materially adversely
affect the Property.
(c)
Bankruptcy
. There are no
attachments, levies, executions, assignments for the benefit of
creditors, receiverships, conservatorships, or voluntary or
involuntary proceedings in bankruptcy, or any other debtor relief
actions contemplated by Seller or filed by Seller, or to
Seller’s knowledge, pending in any current judicial or
administrative proceeding against Seller.
(d)
Non-Foreign Person
. Seller is
not a "foreign person" as that term is defined in Section 1445
of the Internal Revenue Code of 1986, as amended, and applicable
regulations.
(e)
Condemnation
. Seller has
received no written notice of any pending or threatened
condemnation or eminent domain proceedings which may affect the
Property or any part thereof.
(f)
Execution and Delivery
. The
execution, delivery and performance of this Contract by Seller does
not and will not result in a breach of, or constitute a default
under, any indenture, loan or credit agreement, mortgage, deed of
trust or other agreement to which Seller is a party. The
individual(s) executing this Agreement and the instruments
referenced herein on behalf of Seller have the legal power, right
and actual authority to bind Seller to the terms hereof and
thereof.
(g)
Default
. To Seller’s
Actual Knowledge, Seller has not defaulted under any covenant,
restriction or contract affecting the Property, nor has Seller
caused by its act or omission an event to occur which would with
the passage of time constitute a breach or default under such
covenant, restriction or contract.
(h)
Violation of Law
. To
Seller’s Actual Knowledge, Seller has not received any
written notice of non-compliance, addressed to Seller, from a
regulatory agency that has jurisdiction over the Property with
respect to any federal, state or local laws, codes, ordinances or
regulations relating to the Property.
(i)
Rights
. Seller has not granted
to any party, other than Purchaser hereunder, any option, contract,
right of refusal or other agreement with respect to a purchase or
sale of the Property. To Seller’s actual knowledge, there are
no leases, occupancy agreements, easements, licenses or other
agreements which grant third-parties any possessory or usage rights
to all or any part of the Property, except as disclosed in the
Master Commitment, and Takedown Commitment or the Seller
Documents.
(j)
Environmental
. To
Seller’s Actual Knowledge, neither Seller nor any third party
has used Hazardous Materials on, from, or affecting the Property in
any manner which violates federal, state, or local laws,
ordinances, rules, regulations, or policies governing the use,
storage, treatment, transportation, manufacture, refinement,
handling, production, or disposal of Hazardous Material, except as
may be disclosed in the Seller Documents.
For
purposes of the foregoing, the phrase "
Seller’s
Actual Knowledge
" shall mean the current, actual, personal
knowledge of Mark Harding as President of Seller, without any duty
of investigation or inquiry and without imputation of any other
person’s knowledge. The fact that reference is made to the
personal knowledge of the above identified individual shall not
render such individual personally liable for any breach of any of
the foregoing representations and warranties; rather,
Purchaser’s sole recourse in the event of any such breach
shall be against Seller, and Purchaser hereby waives any claim or
cause of action against the above identified individual arising
from Seller’s Representations. Seller and Purchaser shall
notify the other in writing immediately if any Seller’s
Representation becomes untrue or misleading in light of information
obtained by Seller or Purchaser after the Effective Date. In the
event that Purchaser elects to close and Purchaser has actual
knowledge (meaning the current, actual, personal knowledge of Tom
Hennessy, without any duty of investigation or inquiry and without
imputation of any other person’s knowledge) that any of
Seller’s Representations are untrue or misleading, or of a
breach of any of Seller’ Representations prior to the
Closing, without the duty of further inquiry, Purchaser shall be
deemed to have waived any right of recovery with respect to the
matter actually known by Purchaser, and Seller shall not have any
liability in connection therewith.
Seller’s
Representations shall survive each respective Closing for a period
of six (6) months, except that any claim for which legal action is
filed within such time period shall survive until resolution of
such action, and except to the extent of any matter that is waived
by Purchaser pursuant to the previous paragraph (and any such
matter waived pursuant to the previous paragraph shall not survive
Closing).
Seller
makes no promises, representations or warranties regarding the
construction, installation or operation of any amenities within the
Development, including without limitation, club houses, swimming
pools and sports courts. To the extent that any development plans,
site plans, rendering, drawings, marketing information or other
materials related to the Development include, depict or imply the
inclusion of any amenities in the Development, they are included
only to illustrate possible amenities for the Development that may
or may not be built and Purchaser shall not rely upon any such
materials regarding the construction, installation or operation of
any amenities within the Development.
12.
Purchaser’s
Obligations
. Purchaser shall
have the following obligations, each of which shall survive each
respective Closing and, where noted, termination of this Contract.
Notwithstanding any contrary provision set forth in this Contract,
Seller shall have the right to enforce said obligations by means of
any legal or equitable proceedings including, but not limited to,
suit for actual damages and equitable relief:
(a)
Master Covenants
. Purchaser
shall comply with all obligations applicable to Purchaser under the
Master Covenants.
(b)
Compliance with Laws
. With
respect to Purchaser’s entry onto the Property and following
each Closing, Purchaser shall comply with and abide by all laws,
ordinances, statutes, covenants, rules and regulations, building
codes, permits, association documents and other recorded
instruments (as they are from time to time amended, supplemented or
changed) which regulate any activities relating to
Purchaser’s use, ownership, construction, sale or
investigation of any Lot or any improvements thereon.
(c)
Entry Prior to Closing
. From
and after the Effective Date of this Contract until the Closing
Date or earlier termination of this Contract, and so long as no
default by Purchaser exists under this Contract, Purchaser and its
agents, employees and representatives shall be entitled to enter
upon the Property for purposes of conducting soil and other
engineering tests and to inspect and survey any of the Property. If
the Property is altered or disturbed in any manner in connection
with any of Purchaser’s activities, Purchaser shall
immediately return the Property to substantially the condition
existing prior to such activities. Purchaser shall promptly refill
holes dug and otherwise to repair any damage to the Property as a
result of its activities. Purchaser and its agents shall not have
the right to conduct any invasive testing (e.g., borings, drilling,
soil/water sampling, etc.), except standard geotech preliminary
investigation, on the Lots, including, without limitation, any
so-called "Phase II" environmental testing, without first obtaining
Seller's written consent (and providing Seller at least seventy-two
(72) hours' prior written notice), which consent may be withheld by
Seller in its reasonable discretion and shall be subject to any
terms and conditions imposed by Seller in its reasonable
discretion. In the event that Purchaser fails to obtain Seller's
written consent prior to any invasive testing, in addition to and
without limiting any other obligations Purchaser may have under
this Section, Purchaser shall be fully responsible and liable for
all costs of remediation with respect to any materials disturbed in
any manner that requires remediation or that are removed in
connection with such invasive testing and including, but not
limited to, costs for disposal of materials removed during any
invasive testing. Purchaser shall not permit any lien to attach to
the Property or any portion of the Property as a result of the
activities. Purchaser shall indemnify, defend and hold Seller, its
officers, directors, shareholders, employees, agents and
representatives harmless from and against any and all
mechanics’ and materialmen’s liens, claims (including,
without limitation, personal injury, death and property damage
claims), damages, losses, obligations, liabilities, costs and
expenses including, without limitation, reasonable attorneys’
fees incurred by Seller, its officers, directors, shareholders,
employees, agents and representatives or their property arising out
of any breach of the provisions of this Section 12(c) by Purchaser,
its agents, employees or representatives. The foregoing indemnity
obligation of Purchaser includes acts and omissions of Purchaser
and all agents, consultants and other parties acting for or on
behalf of Purchaser. Purchaser shall maintain in effect during its
inspection of the Property commercial general liability coverage
for bodily injury and property damage in the amount of at least
$2,000,000.00 combined single limit, and automobile liability
coverage for bodily injury and property damage in the amount of at
least $2,000,000.00 combined single limit, and the policy or
policies of insurance shall be issued by a reputable insurance
company or companies which are qualified to do business in the
State of Colorado and shall name Seller as an additional insured.
In addition, before entering upon the Property, Purchaser shall
provide Seller with valid certificates indicating such insurance is
in effect. The foregoing indemnity shall not apply to claims due to
(i) Hazardous Materials or conditions that are not placed on the
Property or caused by Purchaser or its agents, (ii) pre-existing
matters, (iii) or Seller’s actions or inactions. The
indemnity and agreement set forth in this
Section 12(c)
shall
survive the expiration or termination of this Contract for any
reason.
(d)
Architectural Approval
. In
order to assure that homes constructed by Purchaser are compatible
with the other residential construction in the Development and the
architectural, design, and landscaping criteria and guidelines
included in the approved Final Development Plan applicable to the
Property (the “
FDP
Criteria
”) and are otherwise acceptable to Seller, all
construction and landscaping on the Lots shall be subject to the
prior review and approval of Seller. The Master Covenants will
provide for the formation of an architectural review committee
(“
Architectural
Review Committee
”) and for the promulgation and
adoption of design guidelines (“
Design
Guidelines
”) to be applied by the Architectural Review
Committee. The Master Covenants and/or the Design Guidelines will
provide for an exemption from obtaining Architectural Review
Committee approval for the Seller and any other person whose House
Plans (as hereinafter defined) has been reviewed and approved by
the Seller.
(i)
Purchaser shall
submit to Seller the Purchaser’s elevations, floor plans,
typical landscape plans, exterior color palettes for homes and
other buildings, structures and improvements to be located on the
Lots (“
House
Plans
”) within 20 days following delivery of the Final
Development Plan to Purchaser. Seller will review the House Plans
and Seller shall deliver notice to Purchaser of the Seller’s
approval or disapproval of the House Plans within ten (10) business
days after receipt of the House Plans, with such approval not to be
unreasonably withheld, conditioned or delayed, so long as such
plans substantially comply and are generally consistent and
compatible with the FDP Criteria. If Seller fails to so notify
Purchaser of approval or disapproval within such 10-business day
period, the Purchaser shall provide Seller with written notice of
the same and Seller shall notify Purchaser within five (5) business
days of its approval or disapproval. If Seller fails to approve or
disapprove within such 5-business day period, the House Plans shall
be deemed approved and/or an appropriate exemption shall be given
to Purchaser. In the event of disapproval, Purchaser shall revise
and resubmit the House Plans to the Seller for reconsideration,
addressing the matters disapproved by the Seller, and the procedure
set forth above shall be repeated until the House Plans are
approved by the Seller. After Seller approves the Purchaser’s
House Plans, and before Purchaser commences construction of Homes
on the Lots, Purchaser shall submit to Seller any material changes
in the approved House Plans. Seller shall review the material
changes for general consistency and compatibility with the
standards and criteria set forth in the FDP Criteria and if Seller
approves such changes, Seller shall notify Purchaser within ten
(10) business days of its approval, not to be unreasonably
withheld, conditioned or delayed.
(ii)
Purchaser shall
obtain Seller approval of House Plans before commencing
construction on a Lot. Purchaser shall perform all construction,
development and landscaping in accordance with the approved House
Plans and in conformity with the FDP Criteria and all other
requirements, rules, regulations of any local jurisdictional
authority. Purchaser and Seller acknowledge that the County will
not conduct architectural review nor issue approval of
Purchaser’s house plans, but rather requires the building
permit applicant to comply with the FDP Criteria. Seller’s
approval of Purchaser’s House Plans is only intended as a
review for compatibility with other residential construction in the
Development and the FDP Criteria and does not constitute a
representation or warranty that Purchaser’s House Plans
comply with FDP Criteria and Purchaser shall be responsible for
confirming such compliance.
(e)
Disclosures to Homebuyers
.
Purchaser shall include in each contract for the sale of any Home
constructed by Purchaser in the Development all disclosures
required by applicable laws, including, but not limited to the
Special District Disclosure, Common Interest Community Disclosure,
Mineral Disclosure and Source of Potable Water Disclosure, and any
other disclosure that applicable laws require to be made to each
homebuyer regarding expansive/low-density soils, radon and other
matters (“
Homebuyer
Disclosures
”). Purchaser shall furnish to Seller upon
request a copy of Purchaser’s disclosures to homebuyers which
includes the Homebuyer Disclosures.
13.
Force
Majeure
.
A delay in or failure to perform any obligations required of Seller
or Purchaser under this Contract shall not constitute a default to
the extent such delay or failure is caused by Force Majeure and all
times for performance shall be extended by the number of days of
Force Majeure. "
Force
Majeure
" shall be limited to acts of God, war, terrorism,
fire, flood, earthquake, hurricane, weather conditions, strike,
delay or unavailability of labor or materials, delay or
unavailability of utilities, delays in obtaining governmental
approvals to the extent not caused by the party seeking approval,
moratoria, injunctions, orders or directives of any court or
governmental body, or other actions of third parties (but not
including financial inability) which, despite the exercise of
reasonable diligence, the party required to perform is unable to
prevent, avoid or remove. Force Majeure does not apply to the
failure of a party to make a payment when due and payable under the
terms of this Contract.
14.
Cooperation
. Purchaser shall
reasonably cooperate with and require its agents, employees,
subcontractors and other representatives to cooperate with all
other parties involved in construction within the Development,
including, where applicable, the granting of a nonexclusive license
to enter upon the Property conveyed to Purchaser. Purchaser shall
execute any and all documentation reasonably required by Seller or
the Authorities to effectuate any desired modification or change in
connection with Seller’s activities in the Development
including, without limitation, amendments or restatements of the
Master Covenants, or any Final Plat; provided, however, Purchaser
shall not be obligated to execute any such documentation if it will
materially adversely affect the fair market value of the Property
or Purchaser’s ability to construct or to sell its proposed
homes within the Property, or if it will materially increase the
cost of such construction, interfere with or delay such
construction.
15.
Fees
. Subject to the
provisions of Sections 16 and 17 below:
(a)
FHA/VA
. Seller shall not be
required to obtain any approvals pursuant to FHA, VA or other
governmental programs relating to the Lots or the financing of
improvements thereon.
(b)
Utility Company Refunds
. Any
refunds from utility providers relating to construction deposits
for the Property shall be the exclusive property of Seller.
Purchaser shall cooperate with Seller in turning over any such
funds and directing those funds to Seller.
16.
Water and Sewer Taps; Fees; and
District Matters
.
(a)
Rangeview Metropolitan
District
. The water and sewer service provider for the Lots
is the Rangeview Metropolitan District (“
Rangeview
”)
and Purchaser shall be required to purchase water and sewer taps
for the Lots from Rangeview. During the Due Diligence Period,
Purchaser shall negotiate in good faith to reach agreement with
Rangeview on terms and provisions of a Tap Purchase Agreement (the
"
Tap
Purchase Agreement
") in which Rangeview agrees to sell to
Purchaser, and Purchaser agrees to purchase from Rangeview, a water
and sewer tap for each Lot in accordance with an agreed-upon
purchase schedule, but in no event later than the issuance of a
building permit for a Lot. If Rangeview and Purchaser agree upon a
Tap Purchase Agreement before the expiration of the Due Diligence
Period, they shall prepare and execute an amendment to this
Contract to set forth and attach to this Contract the agreed-upon
Tap Purchase Agreement and execute the Tap Purchase Agreement on or
before the date of the First Closing. If Rangeview and Purchaser
are unable to agree on a Tap Purchase Agreement before the
expiration of the Due Diligence Period, the Deposit shall be
promptly returned to Purchaser, Purchaser shall deliver to Seller
all information and materials received by Purchaser from Seller
pertaining to the Property and any non-confidential and
non-proprietary information otherwise obtained by Purchaser
pertaining to the Property, and thereafter the parties shall have
no further rights or obligations under this Contract except as
otherwise provided in
Section 24
below. The combined
cost to purchase a water tap and sewer will be dependent on Lot
size, house square footage, number of floors, driveway lanes,
outdoor irrigated square footage, and xeriscape square footage. For
example, based on Rangeview’s rates and charges as of the
Effective Date, a 5,500 square foot lot with a 2,400 square foot
house 2 story 2 car garage with 1,500 square feet of grass would
have a computed water/sewer tap fee of $25,500.
(b)
Sky Ranch Metropolitan District No.
1
. The Property is included within the boundaries of the Sky
Ranch Metropolitan District No. 1 (“
District
”).
The Property is included within the boundaries of the District and
the service area of Rangeview. Persons affiliated with Seller have
been elected or appointed to the board of directors
(“
Board
”)
of the District and Rangeview and serve in that capacity. Purchaser
shall not qualify any persons affiliated with Purchaser as its
representative to serve on the Board of the District or Rangeview
and this prohibition shall survive the Closing and delivery of
deeds hereunder until no person affiliated with Seller serves on
the Board. The District has been formed for purposes that include,
but are not limited to financing, owning, maintaining and/or
managing certain tracts and infrastructure improvements
(“
District
Improvements
”) to serve the Development, including the
Lots. Purchaser acknowledges that: (i) the construction of District
Improvements shall be without compensation or reimbursement to
Purchaser; and (ii) any reimbursements, credits, payments, or other
amounts payable by the District or Rangeview on account of the
construction of District Improvements or any other matters related
thereto (“
Metro District
Payments
”) shall remain the property of the Seller and
shall not be conveyed to or otherwise be claimed by Purchaser. Upon
request of Seller, the District or Rangeview, Purchaser will
execute any and all documents that may be reasonably required to
confirm Purchaser’s waiver of any right to Metro District
Payments. The provisions of this Section are material in
determining the Purchase Price, and the Purchase Price would have
been higher but for the provisions of this Section. This Section
shall survive Closing.
(c)
Fees
.
(i)
Seller shall pay
any and all of the following to the extent imposed by any Authority
in connection with the Property conveyed to Purchaser: (i) any
parks and recreation fees (including park dedication requirements
and/or cash-in-lieu payments related to the Property as part of the
platting thereof); (ii) drainage fees; (iii) fees for
payment-in-lieu of school land dedications
(ii)
Following Closing,
Purchaser shall pay all costs and expenses for all water meter
fees, sewer fees, connection fees, facility fees or assessments,
PIF fees, building and other permit costs, and any other costs or
fees that may be imposed by any Authority relating to the
construction, use or occupancy of the homes to be constructed on
the Lots. Without limiting the foregoing, and except for the fees
to be paid by Seller pursuant to Section 16(c)(i) above, Purchaser
shall pay any and all of the following to the extent imposed in
connection with the Property conveyed to Purchaser: (i) system
development fees; (iii) any infrastructure (facility) fee,
including, without limitation, any transportation/road fee, which
may be imposed either by the County, the District or other
Authority; (iv) any impact fees and payment-in-lieu of land
dedication fees imposed for roads or other facilities that are
payable at issuance of a building permit for a home constructed on
a Lot; and (v) any excise fees.
(iii)
As of the Effective
Date, the District does not levy a system development fee
(“
SDF
”)
against property within the District. If the District at any time
before a Closing adopts a SDF, then at the Closing the Purchaser
shall pay the District’s SDF applicable to the Lots acquired
at such Closing. In order to offset Purchaser’s payment of
the District’s SDF for a Lot at a Closing, Purchaser shall
receive a credit against the Purchase Price paid by Purchaser for
such Lot at such Closing equal to the amount of the
District’s SDF paid by Purchaser for the Lot. [
RANGEVIEW’S TAP FEES
ARE CALLED SYSTEM DEVELOPMENT FEES
]
(iv)
The covenants set
forth in this
Section
16
shall survive each
respective Closing and shall represent a continuing obligation
until the complete satisfaction or payment thereof.
17.
Reimbursements and
Credits
. Purchaser shall
have no right to any reimbursements and/or cost-sharing agreements
pursuant to any agreements entered into between Seller or any of
Seller’s affiliates and third parties which may or may not
affect the Property. In addition, Purchaser acknowledges that
Seller, its affiliates or one (1) or more metropolitan district(s)
have installed or may install certain infrastructure improvements
("
Infrastructure
Improvements
") and/or donate, dedicate and/or convey certain
rights, improvements and/or real property ("
Dedications
")
to the County or other Authority which benefit all or any part of
the Property, together with adjacent properties, and which entitle
Seller or its affiliates and/or the Property or any part thereof to
certain reimbursements by the County or other Authority or credits
by the County or other Authority for park fees, open space fees,
school impact fees, capital expansion fees and other governmental
fees which would otherwise be required to be paid to the County or
other governmental or quasi-governmental entity by the owner of the
Property or any part thereof from time to time ("
Governmental
Fees
"). In the event Purchaser is entitled to a credit or
waiver of Governmental Fees by the County and/or other governmental
or quasi-governmental entity as a result of the Infrastructure
Improvements and/or Dedications, then, in such event, Purchaser
shall pay to or reimburse Seller and/or its designated affiliates
in an amount equal to such credited or waived Governmental Fees at
the same time that the Governmental Fees would otherwise be payable
by Purchaser or its assignees to the County or other Authority but
for the construction of the Infrastructure Improvements and/or the
Dedications by Seller, its affiliates and/or metropolitan
district(s). In addition, Purchaser acknowledges that Seller or its
affiliate(s) may have negotiated or may negotiate with the County
or other Authority for reimbursements to Seller or its affiliates.
Purchaser acknowledges that certain Governmental Fees which may be
paid by Purchaser to the County or other Authority may be
reimbursed to Seller and/or its affiliates pursuant to the terms of
said agreement. The obligations and covenants set forth in this
Section
17
shall survive the Closing of
the purchase and sale of the Property and shall represent a
continuing obligation of Purchaser until complete satisfaction
thereof. Purchaser shall be released from the obligations in this
Section 17
to the
extent such obligations are assumed in writing by a subsequent
owner of all or a portion of the Property and a copy of such
written assumption is furnished to Seller. Each special warranty
deed conveying the applicable portion of the Property at each
Closing shall contain the foregoing reimbursement covenant, which
reimbursement covenant shall expressly state that it automatically
terminates as to any Lot upon issuance of a certificate of
occupancy for a home constructed on the Lot and conveyance of the
Lot to a homebuyer.
18.
Name and
Logo
.
The name and logo of "Sky Ranch" are wholly owned by Seller.
Purchaser agrees that it shall not use or allow the use of the name
"Sky Ranch" or any logo, symbol or other words or phrases which are
names or trademarks used or registered by Seller or any of its
affiliates in any manner to name, designate, advertise, sell or
develop the Property or in connection with the operation or
business located or to be located upon the Property without the
prior written consent of Seller, which consent may be withheld for
any reason. Any consent to the use of such names or logos may be
conditioned upon Purchaser entering into a license agreement with
Seller, as applicable, at no additional cost to Purchaser.
Notwithstanding the foregoing, however, Purchaser shall have a
non-exclusive, royalty-free license for so long as Purchaser is
building and selling homes in the Development, without the need for
any further consent or approval by Seller, to use the name and logo
of "Sky Ranch" in connection with the use, marketing, sales,
development and operation of the Property, provided that Purchaser
shall comply with any requirements uniformly applicable to all
homebuilders in Sky Ranch that Seller promulgates with respect to
such usage.
19.
Renderings
. All renderings,
plans or drawings of the Property or the Development locating
landscaping, trees and any improvements are artists’
conceptions only and may not accurately reflect their actual
location. Purchaser waives any claims based upon any inaccuracy in
the location of such items as depicted on the renderings, plans or
drawings.
20.
Communications
Improvements
. Seller may, but
is not obligated to, enter into an agreement with a service
provider for the development and installation of Communication
Improvements in all or any portion of the Development.
“
Communications
Improvements
” means any equipment, property and
facilities, if used or useful in connection with the delivery,
deployment, provision or modification of (a) broadband Internet
access service; (b) monitoring service, for the benefit of
governmental entities, quasi-governmental entities, or utilities,
regarding the usage of electricity, gas, water and other resources;
(c) video programming or content, including Internet protocol
television (a/k/a “IPTV”) service; (d) voice over
Internet protocol (a/k/a “VoIP”) service; (e)
telecommunications services, including voice; (f) any other service
or services delivered by means of the Internet or otherwise
delivered by means of digital signals; and (g) any other service or
services based on technology that is similar to or is a
technological extension of any of the foregoing
(“Service”). Communications Improvements do not include
any equipment, facilities or property located or in the home of a
person who receives services from the service provider, such as,
but not limited to routers, wireless access points, in-house
wiring, set-top boxes, game consoles, gateways and other equipment
under the control of the owner or occupant of the home. Seller may
grant to such service provider one or more permanent,
non-exclusive, perpetual, assignable and recordable easements
(collectively referred to as the “
Easement
”)
to access and use the Property and other property within the
Development, as necessary, appropriate or desirable, to lay,
install, construct, reconstruct, modify, operate, maintain, repair,
enhance, upgrade, regulate, remove, replace and otherwise use the
Communications Improvements. So long as any such Easement does not
materially interfere with Purchaser’s ability to construct
its intended single family homes on the Lots, Purchaser shall not
object to and shall cooperate with Seller in connection with the
installation and operation of the Communications
Improvements.
21.
Soil Hauling
. Purchaser shall
be responsible for relocating from the Property all surplus soil
generated during Purchaser's construction of structures on the
Property. At the option of Seller in its sole discretion, the
surplus soil shall be transported at Purchaser’s expense to a
site designated by Seller within the Development, provided that
Seller has designated and made such a site available to Purchaser
at the time Purchaser is ready to transport surplus soils. If and
to the extent that Seller establishes stock pile site within the
Development, Seller may modify any such stock pile locations from
time to time in Seller’s discretion (but Purchaser shall not
have any obligation to relocate any soil Purchaser previously
delivered to the prior designated stock pile site). At
Seller’s request, Purchaser shall supply copies of any
reports or field assessments identifying the material
characteristics of the excess soil prior to accepting such soil for
fill purposes. Notwithstanding the foregoing, in the event that
Seller does not establish a stock pile site or elects not to accept
any surplus soils from Purchaser, then Purchaser shall, at its sole
expense, find a purchaser or taker or otherwise transport and
dispose of such surplus soil upon such terms as it shall desire,
but such surplus soil must still be removed from the Property and
may not be stockpiled on the Property or within the Development
after construction has been completed.
22.
Specially Designated Nationals and
Blocked Persons List
. Purchaser
represents and warrants to Seller that Purchaser and all persons
and entities owning (directly or indirectly) an ownership interest
in Purchaser are currently in compliance with and shall at all
times prior to the Closing of this transaction remain in compliance
with the regulations of the Office of Foreign Assets Control
("
OFAC
") of
the United States Department of the Treasury (including those named
on OFAC’s Specially Designated and Blocked Persons List) and
any statute, executive order (including the September 24, 2001,
Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit or Support Terrorism), or
other governmental action relating thereto. Seller represents and
warrants to Purchaser that Seller and all persons and entities
owning (directly or indirectly) an ownership interest in Seller are
currently in compliance with and shall at all times prior to the
Closing of this transaction remain in compliance with the
regulations of the OFAC (including those named on OFAC’s
Specially Designated and Blocked Persons List) and any statute,
executive order (including the September 24, 2001, Executive Order
Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit or Support Terrorism), or other
governmental action relating thereto.
(a)
Seller's Assignment
. Seller may
assign its rights and obligations in whole or in part under this
Contract without the consent of Purchaser.
(b)
Purchaser's Assignment
. The
obligations of the Purchaser under this Contract are personal in
nature, and neither this Contract nor any rights, interests, or
obligations of Purchaser under this Contract may be transferred or
assigned without the prior written consent of Seller, except that
Purchaser may assign its rights or obligations under this
Agreement, without the prior written consent of Seller, to (i) any
affiliate of Purchaser, or (ii) any third-party from which
Purchaser has a contractual right to acquire the Lots pursuant to
an option agreement or similar arrangement with such third-party,
but Purchaser shall not be released from any obligations
hereunder.
24.
Survival
. All covenants and
agreements of either party which are intended to be performed in
whole or in part after any Closing or termination of this Contract,
and all representations, warranties and indemnities by either party
to the other under this Contract shall survive such Closing or
termination of this Contract and shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that Seller’s
Representations pursuant to this Contract shall survive each
respective Closing for a period of nine (9) months, and any action
by Purchaser based on a breach of any of such Seller’s
Representations must be brought within such nine (9) month
period.
25.
Condemnation
. If a condemnation
action is filed or either party receives written notice from any
competent condemning authority of intent to condemn which directly
affects any Lot or Lots which Purchaser has a right to purchase,
either party may at its sole discretion by written notice to the
other party within ten (10) days following receipt of such
condemnation notice terminate this Contract as to the Lots subject
to the condemnation action and receive a refund of a prorata
portion of the Deposit with respect to those Lots only, and the
parties shall have no further rights or obligations with respect to
those Lots. If the right to terminate is not exercised by either
party, this Contract shall remain in full force and effect with
respect to the Lot in question and upon exercise of the right to
purchase the Lot, the Closing shall proceed in accordance with the
terms of this Contract. Any condemnation award shall be paid to the
party who is the owner of the affected Lot at the time the award is
determined by the condemning authority.
26.
Brokers
. Each Party does
hereby represent that it has not engaged any broker, finder, or
real estate agent in connection with the transactions contemplated
by this Contract. Each party agrees to and does hereby indemnify
and hold the other harmless from any and all fees, brokerage and
other commissions or costs (including reasonable attorneys’
fees), liabilities, losses, damages or claims which may result from
any broker, agent or finder, licensed or otherwise, claiming
through, under or by reason of the conduct of either of them
respectively in connection with the purchase of the Lots by
Purchaser.
27.
Default and
Remedies
. Time is of the
essence hereof. If any amount received as a Deposit hereunder or
any other payment due hereunder is not paid by Purchaser, honored
or tendered when due and payable, or if each Closing is not
consummated as required in accordance with
Section 8
above, or if any
other covenant, agreement, obligation or condition hereunder is not
performed or waived as herein provided within five (5) days (or
such longer period as required under this Contract) after the party
failing to perform the same has received written notice of such
failure, there shall be the following remedies:
(a)
Purchaser’s Default
. If
Purchaser is in default under this Contract, Seller may terminate
this Contract, in which event the Deposit shall be forfeited and
retained on behalf of Seller, and both parties shall, except as
otherwise provided herein, thereafter be released from all
obligations hereunder. It is agreed that, except as otherwise
provided in this subpart (a) and in subparts (c) and (d) below
and except with respect to the indemnification by Purchaser in
Sections 10,
12
and
26
above, such payments and things of value are LIQUIDATED DAMAGES and
are SELLER’S SOLE AND ONLY REMEDY for Purchaser’s
failure to perform the obligations of this Contract prior to the
Closing. Except as otherwise provided in this Contract, Seller
expressly waives the remedies of specific performance and
additional damages with respect to a default by Purchaser.
Notwithstanding the foregoing or any other contrary provision of
this Contract, any and all provisions of this Contract pursuant to
which Purchaser agrees to indemnify, hold harmless and defend
Seller from and against any losses, costs, claims, causes of action
or liabilities of any kind or nature, or pursuant to which
Purchaser waives any rights or claims that it may have against
Seller, shall survive any termination of this Contract, and shall
be and remain fully enforceable against Purchaser in accordance
with the terms of this Contract and applicable laws.
(b)
Seller’s Default
. If
Seller is in default under this Contract, Purchaser may elect AS
ITS SOLE AND EXCLUSIVE REMEDY either: (i) to treat this
Contract as canceled, in which case the Deposit shall be returned
to Purchaser, and Purchaser shall have the right to recover, as
damages, all out-of-pocket expenses incurred by it in negotiating
this Contract and in inspecting, analyzing or otherwise performing
its rights and obligations pursuant to this Contract, but in no
event will the amount of such damages exceed Fifty Thousand Dollars
($50,000.00); or (ii) Purchaser may elect to treat this Contract as
being in full force and effect and Purchaser shall have a right to
specific performance, provided that any such action for specific
performance must be commenced within sixty (60) days after the
expiration of the applicable notice and cure period provided
herein, and, in the event specific performance is not available,
than Purchaser may pursue the remedy set forth in clause (i) above.
Seller shall not be liable for and Purchaser shall not be entitled
to recover exemplary, punitive, special, indirect, consequential,
lost profits or any other damages (except for recovery of
out-of-pocket expenses as set forth in clause (i)
above).
(c)
Indemnity
. Notwithstanding any
contrary provision of this Contract, any and all provisions of this
Contract pursuant to which a party agrees to indemnify, hold
harmless and defend the other party from and against any losses,
costs, claims, causes of action or liabilities of any kind or
nature, or pursuant to which a party waives any rights or claims
that it may have against the other party, shall survive any
termination of this Contract, and shall be and remain fully
enforceable against a party in accordance with the terms of this
Contract and applicable laws.
(d)
Award of Costs and Fees
.
Anything to the contrary herein notwithstanding, in the event of
any litigation arising out of this Contract related to an action
for specific performance brought by either party as permitted in
accordance with the terms of this Contract, the court shall award
the substantially prevailing party all reasonable costs and
expenses, including attorneys’ fees, incurred by the
substantially prevailing party in the litigation or other
proceedings.
(e)
Post-Closing Defaults
. With
respect to post-closing defaults, the parties agree that the
non-defaulting party shall be entitled to exercise all remedies
available at law or in equity, except that damages shall be limited
to actual out-of-pocket costs and expenses incurred. The foregoing
does not limit or control the remedies as are to be separately
provided in the Lot Development Agreement.
28.
General
Provisions
. The parties
hereto further agree as follows:
(a)
Time of the Essence
. Time is of
the essence under this Contract. In computing any period of time
under this Contract, the date of the act or event from which the
designated period of time begins to run shall not be included. The
last day of the period so computed shall be included unless it is a
Saturday, Sunday, or federal legal holiday, in which event the
period shall run until the end of the next day which is not a
Saturday, Sunday, or federal legal holiday.
(b)
Governing Law
. This Contract
shall be governed by and construed in accordance with the laws of
the State of Colorado.
(c)
Severability
. Should any
provisions of this Contract or the application thereof, to any
extent, be held invalid or unenforceable, the remainder of this
Contract and the application thereof, other than those provisions
which shall have been held invalid or unenforceable, shall not be
affected thereby and shall continue in full force and effect and
shall be enforceable to the fullest extent permitted at law or in
equity.
(d)
Entire Contract
. This Contract
embodies the entire agreement between the parties hereto concerning
the subject matter hereof and supersedes all prior conversations,
proposals, negotiations, understandings and agreements, whether
written or oral.
(e)
Exhibits
. All schedules,
exhibits and addenda attached to this Contract and referred to
herein shall for all purposes be deemed to be incorporated in this
Contract by this reference and made a part hereof.
(f)
Further Acts
. Each of the
parties hereto covenants and agrees with the other, upon reasonable
request from the other, from time to time, to execute and deliver
such additional documents and instruments and to take such other
actions as may be reasonably necessary to give effect to the
provisions of this Contract.
(g)
Compliance
. The performance by
the parties of their respective obligations provided for in this
Contract shall comply with all applicable laws and the rules and
regulations of all governmental agencies, municipal, county, state
and federal, having jurisdiction in the premises.
(h)
Amendment
. This Contract shall
not be amended, altered, changed, modified, supplemented or
rescinded in any manner except by a written agreement executed by
both parties.
(i)
Authority
. Each of the parties
hereto represents to the other that each such party has full power
and authority to execute, deliver and perform this Contract, that
the individuals executing this Contract on behalf of said party are
fully empowered and authorized to do so, that this Contract
constitutes a valid and legally binding obligation of such party
enforceable against such party in accordance with its terms, that
such execution, delivery and performance will not contravene any
legal or contractual restriction binding upon such party or any of
its assets and that there is no legal action, proceeding or
investigation of any kind now pending or to the knowledge of each
such party threatened against or affecting such party or affecting
the execution, delivery or performance of this Contract. Each of
the parties hereto represents to the other that each such party is
a duly organized, legal entity and is validly existing in good
standing under the laws of the jurisdiction of its
formation.
(j)
Notices
. All notices,
statements, demands, requirements, or other communications and
documents (collectively, "
Communications
")
required or permitted to be given, served, or delivered by or to
either party or any intended recipient under this Contract shall be
in writing and shall be deemed to have been duly given (i) on
the date and at the time of delivery if delivered personally to the
party to whom notice is given at the address specified below; or
(ii) on the date and at the time of delivery or refusal of
acceptance of delivery if delivered or attempted to be delivered by
an overnight courier service to the party to whom notice is given
at the address specified below; or (iii) on the date of
delivery or attempted delivery shown on the return receipt if
mailed to the party to whom notice is to be given by first-class
mail, sent by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as specified
below; or (iv) on the date and at the time shown on the
facsimile or electronic mail message if telecopied or sent
electronically to the number or address specified
below:
To
Seller:
PCY Holdings, LLC
Attention: Mark
Harding
34501
E. Quincy Ave.
Bldg.
34, Box 10
Watkins, Colorado
80137
Telephone: (303)
292-3456
Facsimile: (303)
292-3475
E-mail:
mharding@purecyclewater.com
with a
copy to:
Fox
Rothschild LLP
1225
17
th
Street, Suite 2200
Denver,
CO 80202
Attention: Rick
Rubin, Esq.
Telephone: (303)
292-1200
Email:
rrubin@foxrothschild.com
To
Purchaser: Taylor Morrison of
Colorado, Inc.
1420
West Canal Court, Suite 170
Littleton, Colorado
80120
Attention: Tom
Hennessy, Division President
Telephone: (303)
325-2426
E-mail:
thennessy@taylormorrison.com
With
copy to Phillip Cross at same address
E-mail:
pcross@taylormorrison.com
with a
copy to: Brier, Irish, Hubbard &
Erhart P.L.C.
2400
East Arizona Biltmore Circle, Suite 1300
Phoenix, AZ
85016
Attn:
Jeff Hubbard
Telephone: (602)
522-0160
Facsimile: (602)
522-3945
E-mail:
jhubbard@bihlaw.com
With
copy to Tony Meier at same address
E-mail:
tmeier@bihlaw.com
If to
Title Company:
Land
Title Guarantee Company
Attn:
Tom Blake
3033 E.
1
st
Ave.
#600
Denver,
Colorado 80206
Fax#: (303)
393-4959
Direct: (303)
331-6237
Email:
tblake@ltgc.com
(k)
Place of Business
. This
Contract arises out of the transaction of business in the State of
Colorado by the parties hereto.
(l)
Counterparts; Facsimile
Signature
. This Contract may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one (1) and the same
instrument, and either of the parties hereto may execute this
Contract by signing any such counterpart. This Contract may
be executed and delivered by facsimile or by electronic mail in
portable document format (.pdf) or similar means and delivery of
the signature page by such method will be deemed to have the same
effect as if the original signature had been delivered to the other
party.
(m)
Captions; Interpretation
. The
section captions and headings used in this Contract are inserted
herein for convenience of reference only and shall not be deemed to
define, limit or construe the provisions hereof. Purchaser and
Seller acknowledge that each is a sophisticated builder or
developer, as applicable, and that each has had an opportunity to
review, comment upon and negotiate the provisions of this Contract,
and thus the provisions of this Contract shall not be construed
more favorably or strictly for or against either party. Purchaser
and Seller each acknowledges having been advised, and having had
the opportunity, to consult legal counsel in connection with this
Contract and the transactions contemplated by this
Contract.
(n)
Number and Gender
. When
necessary for proper construction hereof, the singular of any word
used herein shall include the plural, the plural shall include the
singular and the use of any gender shall be applicable to all
genders.
(o)
Waiver
. Any one (1) or more
waivers of any covenant or condition by a party hereto shall not be
construed as a waiver of a subsequent breach of the same covenant
or condition nor a consent to or approval of any act requiring
consent to or approval of any subsequent similar act.
(p)
Binding Effect
. Subject to the
restrictions on assignment contained herein, this Contract shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(q)
Recordation
. Purchaser shall
not cause or allow this Contract or any memorandum or other
evidence thereof to be recorded in the County Records or become a
public record without Seller’s prior written consent, which
consent may be withheld at Seller’s sole discretion. If
Purchaser records this Contract, then Purchaser shall be in default
of its obligations under this Contract.
(r)
No Beneficiaries
. No third
parties are intended to benefit by the covenants, agreements,
representations, warranties or any other terms or conditions of
this Contract.
(s)
Relationship of Parties
.
Purchaser and Seller acknowledge and agree that the relationship
established between the parties pursuant to this Contract is only
that of a seller and a purchaser of single-family lots. Neither
Purchaser nor Seller is, nor shall either hold itself out to be,
the agent, employee, joint venturer or partner of the other
party.
(t)
Interstate Land Sales Full Disclosure
Act and Colorado Subdivision Developers Act Exemptions
. It
is acknowledged and agreed by the parties that the sale of the
Property will be exempt from the provisions of the federal
Interstate Land Sales Full Disclosure Act under the exemption
applicable to sale or lease of property to any person who acquires
such property for the purpose of engaging in the business of
constructing residential, commercial or industrial buildings or for
the purpose of resale of such property to persons engaged in such
business. Purchaser hereby represents and warrants to Seller that
it is acquiring the Property for such purposes. It is further
acknowledged by the parties that the sale of the Property will be
exempt under the provisions of the Colorado Subdivision Developers
Act under the exemption applicable to transfers between developers.
Purchaser represents and warrants to Seller that Purchaser is
acquiring the Property for the purpose of participating as the
owner of the Property in the development, promotion and sale of the
Property and portions thereof.
(u)
Special Taxing District
Disclosure
. In accordance with the provisions of
C.R.S. §38-35.7-101(1), Seller provides the following
disclosure to Purchaser:
SPECIAL TAXING
DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS
PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE
PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS
MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND TAX TO SUPPORT
THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN
THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS
WITHOUT SUCH AN INCREASE IN MILL LEVIES. PURCHASERS SHOULD
INVESTIGATE THE SPECIAL TAXING DISTRICTS IN WHICH THE PROPERTY IS
LOCATED BY CONTACTING THE COUNTY TREASURER, BY REVIEWING THE
CERTIFICATE OF TAXES DUE FOR THE PROPERTY, AND BY OBTAINING FURTHER
INFORMATION FROM THE BOARD OF COUNTY COMMISSIONERS, THE COUNTY
CLERK AND RECORDER, OR THE COUNTY ASSESSOR
.
(v)
Common Interest Community
Disclosure
. In accordance with the provisions of
C.R.S. §38-35.7-102(1), Seller provides the following
disclosure to Purchaser:
IF SELLER ELECTS TO
FORM A HOMEOWNERS ASSOCIATION UNDER THE MASTER COVENANTS FOR THE
DEVELOPMENT, THEN
THE PROPERTY IS,
OR WILL BE PRIOR TO EACH RESPECTIVE CLOSING, LOCATED WITHIN A
COMMON INTEREST COMMUNITY AND IS, OR WILL BE PRIOR TO SUCH CLOSING,
SUBJECT TO THE DECLARATION FOR SUCH COMMUNITY. THE OWNER OF THE
PROPERTY WILL BE REQUIRED TO BE A MEMBER OF THE OWNER’S
ASSOCIATION FOR THE COMMUNITY AND WILL BE SUBJECT TO THE BYLAWS AND
RULES AND REGULATIONS OF THE ASSOCIATION. THE DECLARATION, BYLAWS,
AND RULES AND REGULATIONS WILL IMPOSE FINANCIAL OBLIGATIONS UPON
THE OWNER OF THE PROPERTY, INCLUDING AN OBLIGATION TO PAY
ASSESSMENTS OF THE ASSOCIATION. IF THE OWNER DOES NOT PAY THESE
ASSESSMENTS, THE ASSOCIATION COULD PLACE A LIEN ON THE PROPERTY AND
POSSIBLY SELL IT TO PAY THE DEBT. THE DECLARATION, BYLAWS, AND
RULES AND REGULATIONS OF THE COMMUNITY MAY PROHIBIT THE OWNER FROM
MAKING CHANGES TO THE PROPERTY WITHOUT AN ARCHITECTURAL REVIEW BY
THE ASSOCIATION (OR A COMMITTEE OF THE ASSOCIATION) AND THE
APPROVAL OF THE ASSOCIATION. PURCHASERS OF PROPERTY WITHIN THE
COMMON INTEREST COMMUNITY SHOULD INVESTIGATE THE FINANCIAL
OBLIGATIONS OF MEMBERS OF THE ASSOCIATION. PURCHASERS SHOULD
CAREFULLY READ THE DECLARATION FOR THE COMMUNITY AND THE BYLAWS AND
RULES AND REGULATIONS OF THE ASSOCIATION
.
(w)
Source of Water Disclosure
. In
accordance with the provisions of C.R.S. §38-35.7-104,
Seller provides the following disclosure to Purchaser:
THE
SOURCE OF POTABLE WATER FOR THIS REAL ESTATE IS:
A
WATER PROVIDER, WHICH CAN BE CONTACTED AS FOLLOWS:
NAME:
Rangeview
Metropolitan District
ADDRESS:
c/o
Special District Management Services, Inc.
141
Union Blvd., Suite 150
WEB
SITE:
www.rangviewmetro.org
SOME
WATER PROVIDERS RELY, TO VARYING DEGREES, ON NONRENEWABLE GROUND
WATER. YOU MAY WISH TO CONTACT YOUR PROVIDER TO DETERMINE THE
LONG-TERM SUFFICIENCY OF THE PROVIDER’S WATER
SUPPLIES.
(x)
STORM WATER POLLUTION PREVENTION
PLAN
.
Seller has
previously filed a Notice of Intent ("
NOI
") and/or
prepared a Stormwater Pollution Prevention Plan ("
SWPPP
") to
satisfy its stormwater obligations arising from its work on the
Property. Seller covenants that prior to each Closing Date and
until Closing of the Lots, Seller and/or its contractor shall
comply with the SWPPP with respect to all of the Lots owned by
Seller, and shall comply with all local, state and federal
environmental obligations (including stormwater) associated with
the development of the Lots. Seller shall indemnify and hold
Purchaser harmless from all claims and causes of action arising
from breach of the foregoing covenants of Seller to the extent
there is an uncured notice of violation issued with respect to any
Lot prior to conveyance of the Lot to Purchaser. From and after
conveyance of Lots, and until such time as such Lots are subject to
Purchaser’s SWPPP (as hereafter defined), Purchaser shall be
solely responsible for complying with the SWPPP, maintaining all
required best management practices (
“BMPs
”), and conducting and
documenting all required inspections. Purchaser shall also comply
with all local state and federal environmental obligations
(including stormwater) associated with its ownership or development
of the Lots conveyed to Purchaser by Seller. Such obligations
include, without limitation, (i) complying with the SWPPP or the
Purchaser’s SWPPP, as applicable, (ii) maintaining all
required BMPs, and (iii) conducting and documenting all required
inspections. Purchaser covenants and Seller acknowledges that, with
respect to Lots acquired by Purchaser, Purchaser shall, within ten
(10) days after conveyance of such Lots, at its sole cost and
expense (subject to Seller’s prior written approval) submit
its own notice of intent for a new stormwater pollution prevention
plan (the “
Purchaser’s
SWPPP
”). Subsequent to the applicable Closing Date,
Purchaser shall comply with the Purchaser’s SWPPP with
respect to all of the Lots then owned by Purchaser, and shall
comply with all local, state and federal environmental obligations
(including stormwater) associated with its ownership or development
of all such Lots. Purchaser shall indemnify and hold Seller
harmless from all third party claims and causes of action solely
arising from breach of the foregoing covenants of
Purchaser.
(y)
Oil, Gas, Water and Mineral
Disclosure
. THE SURFACE ESTATE OF THE PROPERTY MAY BE OWNED
SEPARATELY FROM THE UNDERLYING MINERAL ESTATE, AND TRANSFER OF THE
SURFACE ESTATE MAY NOT NECESSARILY INCLUDE TRANSFER OF THE MINERAL
ESTATE OR WATER RIGHTS.
THIRD
PARTIES MAY OWN OR LEASE INTERESTS IN OIL, GAS, OTHER MINERALS,
GEOTHERMAL ENERGY OR WATER ON OR UNDER THE SURFACE OF THE PROPERTY,
WHICH INTERESTS MAY GIVE THEM RIGHTS TO ENTER AND USE THE SURFACE
OF THE PROPERTY TO ACCESS THE MINERAL ESTATE, OIL, GAS OR
WATER.
SURFACE
USE AGREEMENT. THE USE OF THE SURFACE ESTATE OF THE PROPERTY TO
ACCESS THE OIL, GAS OR MINERALS MAY BE GOVERNED BY A SURFACE USE
AGREEMENT, A MEMORANDUM OR OTHER NOTICE OF WHICH MAY BE RECORDED
WITH THE COUNTY CLERK AND RECORDER.
OIL AND
GAS ACTIVITY. OIL AND GAS ACTIVITY THAT MAY OCCUR ON OR ADJACENT TO
THE PROPERTY MAY INCLUDE, BUT IS NOT LIMITED TO, SURVEYING,
DRILLING, WELL COMPLETION OPERATIONS, STORAGE, OIL AND GAS, OR
PRODUCTION FACILITIES, PRODUCING WELLS, REWORKING OF CURRENT WELLS,
AND GAS GATHERING AND PROCESSING FACILITIES.
ADDITIONAL
INFORMATION. PURCHASER IS ENCOURAGED TO SEEK ADDITIONAL INFORMATION
REGARDING OIL AND GAS ACTIVITY ON OR ADJACENT TO THE PROPERTY,
INCLUDING DRILLING PERMIT APPLICATIONS. THIS INFORMATION MAY BE
AVAILABLE FROM THE COLORADO OIL AND GAS CONSERVATION
COMMISSION.
(z)
Property Tax Disclosure
Summary
. PURCHASER SHOULD NOT RELY ON SELLER’S CURRENT
PROPERTY TAXES AS THE AMOUNT OF PROPERTY TAXES THAT PURCHASER MAY
BE OBLIGATED TO PAY IN THE YEAR SUBSEQUENT TO PURCHASE. A CHANGE IN
OWNERSHIP OR PROPERTY IMPROVEMENTS TRIGGERS REASSESSMENTS OF THE
PROPERTY THAT COULD RESULT IN HIGHER PROPERTY TAXES. IF PURCHASER
HAS ANY QUESTIONS CONCERNING VALUATION, CONTACT THE COUNTY PROPERTY
APPRAISER’S OFFICE FOR INFORMATION.
(aa)
Waiver of Jury Trial
. TO THE
EXTENT PERMITTED BY LAW, THE PARTIES HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO THE PROVISIONS OF THIS
CONTRACT.
(bb)
Confidentiality
.
Purchaser and Seller agree that,
prior to each respective Closing, and thereafter if such Closing
does not occur, all information relating to the Property that is
the subject of such Closing, any reports, studies, data and
summaries developed by Purchaser, and any information relating to
the business of either party (together, the "
Confidential
Information
") shall be kept confidential as provided in this
section. Without the prior written consent of the other party,
prior to the applicable Closing, the Confidential Information shall
not be disclosed by Purchaser, Seller or their Representatives (as
hereinafter defined) in any manner whatsoever, in whole or in part,
except (1) to their Representatives who need to know the
Confidential Information for the purpose of evaluating the Property
and who are informed by Seller or Purchaser as applicable of the
confidential nature thereof; (2) as may be necessary for
Seller, Purchaser or their Representatives to comply with
applicable laws, including, without limitation, governmental
regulatory, disclosure, tax and reporting requirements (including,
without limitation, any applicable reporting requirements for
publically traded companies); to comply with other requirements and
requests of regulatory and supervisory authorities and
self-regulatory organizations having jurisdiction over Seller,
Purchaser or their Representatives; to comply with regulatory or
judicial processes; or to satisfy reporting procedures and
inquiries of credit rating agencies in accordance with customary
practices of Seller, Purchaser or their affiliates; and (3) to
lenders and investors for the transaction. As used herein,
"
Representatives
"
shall mean: Seller’s and Purchaser’s managers, members,
directors, officers, employees, affiliates, investors, brokers,
agents or other representatives, including, without limitation,
attorneys, accountants, contractors, consultants, engineers,
lenders, investors and financial advisors. Seller, at its election,
may issue an oral or written press release or public disclosure of
the existence or the terms of this Contract without the consent of
the Purchaser. "
Confidential
Information
" shall not be deemed to include any information
or document which (I) is or becomes generally available to the
public other than as a result of a disclosure by Seller, Purchaser
or their Representatives in violation of this Contract,
(II) becomes available from a source other than Seller,
Purchaser or any affiliates of Seller or Purchaser or their agents
or Representatives, or (III) is developed by Seller or
Purchaser or their Representatives without reliance upon and
independently of otherwise Confidential Information. In addition to
any other remedies available to a party for breach of this Section,
the non-breaching party shall have the right to seek equitable
relief, including, without limitation, injunctive relief or
specific performance, against the breaching party or its
Representatives, in order to enforce the provisions of this
section. The provisions of this section shall survive the
termination of this Contract, or the applicable Closing, for one
(1) year.
(cc)
Survival
. Obligations to be
performed subsequent to a Closing shall survive each
Closing.
[SIGNATURE PAGE
FOLLOWS]
IN
WITNESS WHEREOF, Seller and Purchaser have executed this Contract
effective as of the day and year first above written.
SELLER:
|
PYC
HOLDINGS, LLC
a
Colorado limited liability company
|
|
|
|
|
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
June 23, 2017
|
PURCHASER:
|
TAYLOR
MORRISON OF COLORADO, INC. a Colorado corporation
|
By:
|
/s/
Phillip R. Cross
|
Name:
Phillip R. Cross
|
Title:
Vice President
|
Date:
June 27, 2017
|
By:
|
/s/
G. Thomas Hennessy
|
Name:
G. Thomas Hennessy
|
Title:
President
|
Date:
June 27, 2017
|
LIST OF EXHIBITS
EXHIBIT
A:
CONCEPTUAL
DEVELOPMENT PLAN AND LOTTING DIAGRAM
EXHIBIT
B:
RESERVATIONS AND COVENANTS
EXHIBIT
C:
FINISHED LOT IMPROVEMENTS
EXHIBIT
D:
OFFSITE INFRASTRUCTURE IMPROVEMENTS
EXHIBIT
E:
FORM OF GENERAL
ASSIGNMENT
EXHIBIT
F:
LOT DEVELOPMENT AGREEMENT
EXHIBIT
G:
FORM OF LETTER OF CREDIT
EXHIBIT A
CONCEPTUAL DEVELOPMENT PLAN AND LOTTING DIAGRAM
EXHIBIT B
RESERVATIONS AND COVENANTS
Reservation of Easements
. For a
period of twenty-five (25) years following the date hereof, Grantor
expressly reserves unto itself, its successors and assigns,
easements for construction of utilities and other facilities to
support the development of the properties commonly known as "Sky
Ranch," including but not limited to sanitary sewer, water lines,
electric, cable, broad-band and telephone transmission, storm
drainage and construction access easements across the Property
allowing Grantor or its assignees the right to install and maintain
sanitary sewer, water lines, cable television, broad-band,
electric, and telephone utilities on the Property and on its
adjacent property, and further, to accommodate storm drainage from
its adjacent property. Such easements shall not allow above-grade
surface installation of facilities and shall require the
restoration of any surface damage or disturbance caused by the
exercise of such easements, shall not be located within the
building envelope of any Lot or otherwise interfere with the use of
a Lot for construction of Grantee’s homes, shall not
materially detract from the value, use or enjoyment of (i) the
remaining portion of the Property on which such easements are to be
located, or (ii) any adjoining property of Grantee, and shall
not require any reduction in allowed density for the Property or
reconfiguration of planned lots or the building envelope on a lot.
If possible, such easements shall be located within the boundaries
of existing easement areas. Grantor, at its sole expense, shall
immediately restore the land and improvements thereon to their
prior condition to the extent of any damage incurred due to
Grantor’s utilization of the easements herein
reserved.
Reservation of Minerals and Mineral
Rights
. To the extent owned by Grantor, Grantor herein
expressly excepts and reserves unto itself, its successors and
assigns, all right, title and interest in and to all minerals and
mineral rights, including bonuses, rents, royalties, royalty
interests and other benefits that may be payable as a result of any
oil, gas, gravel, minerals or mineral rights on, in, under or that
may be produced from the Property, including, but not limited to,
all gravel, sand, oil, gas and other liquid hydrocarbon substances,
casinghead gas, coal, carbon dioxide, helium, geothermal resources,
and all other naturally occurring elements, compounds and
substances, whether similar or dissimilar, organic or inorganic,
metallic or non-metallic, in whatever form and whether occurring,
found, extracted or removed in solid, liquid or gaseous state, or
in combination, association or solution with other mineral or
non-mineral substances, provided that Grantor expressly waives all
rights to use or damage the surface of the Property to exercise the
rights reserved in this paragraph and, without limiting such
waiver, Grantor’s activities in extracting or otherwise
dealing with the minerals and mineral rights shall not cause
disturbance or subsidence of the surface of the Property or any
improvements on the Property.
Reservation of Water and Water
Rights
. To the extent owned by Grantor, Grantor herein
expressly excepts and reserves unto itself, its successors and
assigns, all water and water rights, ditches and ditch rights,
reservoirs and reservoir rights, streams and stream rights, water
wells and well rights, whether tributary, non-tributary or not
non-tributary, including, but not limited to, all right, title and
interest under C.R.S. 37-90-137 on, underlying, appurtenant to or
now or historically used on or in connection with the Property,
whether appropriated, conditionally appropriated or unappropriated,
and whether adjudicated or unadjudicated, including, without
limitation, all State Engineer filings, well registration
statements, well permits, decrees and pending water court
applications, if any, and all water well equipment or other
personalty or fixtures currently used for the supply, diversion,
storage, treatment or distribution of water on or in connection
with the Property, and all water and ditch stock relating thereto;
provided that Grantor expressly waives all rights to use or damage
the surface of the Property to exercise the rights reserved in this
paragraph and, without limiting such waiver, Grantor’s
activities in dealing with the water and water rights herein
reserved shall not cause disturbance or subsidence of the surface
of the Property or any improvements on the Property.
Reimbursements and Credits
.
Grantee shall have no right to any reimbursements and/or
cost-sharing agreements pursuant to any agreements entered into
between Grantor or any of Grantor’s affiliates and third
parties which may or may not affect the Property. In addition,
Grantee acknowledges that Grantor, its affiliates or one (1) or
more metropolitan district(s) have installed or may install certain
infrastructure improvements ("Infrastructure Improvements") and/or
donate, dedicate and/or convey certain rights, improvements and/or
real property ("Dedications") to Arapahoe County
(“County”) or other governmental authority
(“Authority”) which benefit all or any part of the
Property, together with adjacent properties, and which entitle
Grantor or its affiliates and/or the Property or any part thereof
to certain reimbursements by the County or other Authority or
credits by the County or other Authority for park fees, open space
fees, school impact fees, capital expansion fees and other
governmental fees which would otherwise be required to be paid to
the County or other Authority by the owner of the Property or any
part thereof from time to time ("Governmental Fees"). In the event
Grantee is entitled to a credit or waiver of Governmental Fees by
the County and/or other Authority as a result of the Infrastructure
Improvements and/or Dedications, then, in such event, Grantee shall
pay to or reimburse Grantor and/or its designated affiliates in an
amount equal to such credited or waived Governmental Fees at the
same time that the Governmental Fees would otherwise be payable by
Grantee or its assignees to the County or other Authority but for
the construction of the Infrastructure Improvements and/or the
Dedications by Grantor, its affiliates and/or metropolitan
district(s). In addition, Grantee acknowledges that Grantee or its
affiliate(s) may have negotiated or may negotiate with the County
or other Authority for reimbursements to Grantor or its affiliates.
Grantee acknowledges that certain Governmental Fees which may be
paid by Grantee to the County or other Authority may be reimbursed
to Grantor and/or its affiliates pursuant to the terms of said
agreement.
The
obligations and covenants set forth herein shall be binding on
Grantee, its successors and assigns, and any subsequent owners of
the Property, except that homeowners shall have no obligation for
any reimbursements provided herein. The obligation for
reimbursements described herein shall automatically terminate
(without the necessity of recording any document) with respect to
any residential lot as of the date of conveyance of such
residential lot, together with a residence constructed thereon, to
a homebuyer. Any title insurance company may rely on the automatic
termination language set forth above for the purpose of insuring
title to a home.
EXHIBIT C
FINISHED LOT IMPROVEMENTS
1.
"
Finished Lot Improvements
"
means the following improvements on, to or with respect to the Lots
or in public streets or tracts in the locations as required by all
approving Authorities to obtain building permits for home
improvements for the Lots, and substantially in accordance with the
CDs:
(a)
overlot grading
together with corner pins for each Lot installed in place, graded
to match the specified Lot drainage template within the CDs (but
not any Overex);
(b)
water and sanitary
sewer mains and other required installations in connection
therewith identified in the CDs, valve boxes and meter pits,
substantially in accordance with the CDs approved by the approving
Authorities, together with appropriate markers;
(c)
storm sewer mains,
inlets and other associated storm drainage improvements pertaining
to the Lots in the public streets as shown on the CDs;
(d)
curb, gutter,
asphalt, sidewalks, street striping, street signage, traffic signs,
traffic signals (if any are required by the approving Authorities),
and other street improvements, in the private and/or public streets
as shown on the CDs; Seller will either have applied a final lift
of asphalt or in Seller’s discretion posted sufficient
financial guarantees as required by the County for the Lots to
qualify for issuance of building permits in lieu of such final lift
of asphalt;
(e)
sanitary sewer
service stubs if required by the Authorities, connected to the
foregoing sanitary sewer mains, installed into each respective Lot
(to a point beyond any utility easement), together with appropriate
markers of the ends of such stubs, as shown on the
CDs;
(f)
water service
stubs connected to the foregoing water mains installed into each
Lot (to a point beyond any utility easement), together with
appropriate markers of the ends of such stubs, as shown on the
CDs;
(g)
Lot fill in
compliance with the geotechnical engineer’s recommendation,
and with respect to any filled area or compacted area, provide from
a Colorado licensed professional soils engineer a HUD Data Sheet
79G Certification (or equivalent) and a certification that the
compaction and moisture content recommendations of the soils
engineer were followed and that the grading of the respective Lots
complies with the approved grading plans, with overlot grading
completed in conformance with the approving Authorities approved
grading plans within a +/- 0.2’ tolerance of the approved
grading plans; however, the Finished Lot Improvements do not
include any Overex as provided in Section 10(e) of this
Contract;
(h)
all storm water
management facilities as shown in the CDs; and
2.
Dry Utilities
. Electricity,
natural gas, and telephone service will be installed by local
utility companies. The installations may not be completed at the
time of a Closing, and are not part of the Finish Lot Improvements;
provided, however, that: (i) with respect to electric distribution
lines and street lights, Seller will have signed an agreement with
the electric utility service provider and paid all costs and fees
for the installation of electric distribution lines and facilities
to serve the Lots, and all sleeves necessary for electric, gas,
telephone and/or cable television service to the Lots will be
installed; (ii) with respect to gas distribution lines, Seller will
have signed an agreement with the gas utility service provider and
paid all costs and fees for the installation of gas distribution
lines and facilities to serve the Lots. Seller will take
commercially reasonable efforts to assist Purchaser in coordinating
with these utility companies to provide final electric, gas,
telephone and cable television service to the residences on the
Lots, however, Purchaser must activate such services through an end
user contract. Purchaser acknowledges that in some cases the
telephone and cable companies may not have pulled the main line
through the conduit if no closings of residences have occurred.
Notwithstanding the foregoing, if dry utilities have not been
installed upon substantial completion of the Finished Lot
Improvements, Seller shall be obligated to have contracted for same
and paid all costs and fees payable for such installation. Unless
Seller has contracted for such installation and paid such costs
before the Effective Date, Seller will give Purchaser notice when
such contracts have been entered and such costs paid. With respect
to any Finished Lot Improvements that are required by the
subdivision improvement agreement applicable to the Lots but which
are not addressed as part of the Finished Lot Improvements, and any
other improvements which are not required for the issuance of
building permits but which are required by the Authorities so that
dwellings and other improvements constructed by Purchaser on the
Lots are eligible for the issuance of certificates of occupancy for
homes, Seller shall complete such other improvements, to the extent
required by the County, so as not to delay the issuance of
certificates of occupancy for residences constructed by Purchaser
on the Lots.
3.
Offsite Infrastructure
. The
Finished Lot Improvements do not include (a) the Offsite
Infrastructure, which is addressed separately in Section 5 of the
Agreement, but it does include such other offsite improvements as
are necessary to obtain certificates of occupancy for homes
constructed on the Lots, provided that as aforesaid Seller shall
only be obligated to complete such improvements within a timeframe
so as not to delay issuance of such certificates of occupancy, or
(b) common area landscaping which will be installed when required
by the County or other applicable Authority so as not to delay the
issuance of building permits or certificates of occupancy for
residences constructed by Purchaser on the Lots, but (subject to
the foregoing requirements of this section 3(b)) such landscaping
will be installed with respect to each Takedown not later than 6
months after the issuance of the first certificate of occupancy in
such Takedown. [
THIS SECTION PROVIDES A
DEADLINE OF SIX (6) MONTHS AFTER THE FIRST
C.O.
]
4.
Tree Lawns/Sidewalks
.
Notwithstanding anything in this Contract to the contrary, Seller
shall have no obligation to construct, install, maintain or pay for
the maintenance, construction and installation of (i) any
landscaping or irrigation for such landscaping behind the curb on
any Lot that is to be maintained by the owner of such lot
(collectively, “
Tree
Lawns
”), but Seller shall be responsible for
constructing and installing the detached sidewalks and ramps
(collectively, “
Sidewalks
”)
that are located immediately adjacent to any Lot or on a tract as
required by the approved CDs, County, or any other Authority and/or
applicable laws as provided in this Contract. Purchaser shall be
responsible for installing any other lead walks, pathways, and
driveways and any other flatwork on the Lots. Purchaser shall
install all Tree Lawns on or adjacent to the Lots in accordance
with all applicable CDs, requirements, regulations, laws,
development codes and building codes of all
Authorities.
5.
Warranty
.
(a)
Government Warranty
Period
.
The Authorities
require warranty periods (each a “
Government Warranty
Period
”) after the final completion that is applicable
to those Finished Lots Improvements that are dedicated to or owned,
and accepted for maintenance by the Authorities (the
“
Public
Improvements
”). In the event defects in the Public
Improvements to which a governmental warranty (each a
“
Governmental
Warranty
”) applies become apparent during the
applicable Government Warranty Period, then Seller shall coordinate
the repairs with the applicable Authorities and cause the service
provider(s) who performed the work or supplied the materials in
which the defect(s) appear to complete such repairs or, if such
service providers fail to correct such defects, otherwise cause
such defects to be repaired to the satisfaction of the Authorities.
Any costs and expenses incurred pursuant to a Government Warranty
in connection with any repairs or warranty work performed during
the Government Warranty Period (including, but not limited to, any
costs or expenses incurred to enforce any warranties against any
service providers) shall be borne by Seller, unless such defect was
caused by Purchaser or its contractors, subcontractors, employees,
or agents, in which event Purchaser shall pay all such costs and
expenses to the extent such defect was caused by Purchaser or its
contractors, subcontractors, employees, or agents.
(b)
Non-Government Warranty
Period
.
Seller
warrants (“
Non-Government
Warranty
”) to Purchaser that each Finished Lot
Improvement, other than the Public Improvements, shall have been
constructed in accordance with the CDs for one (1) year from the
date of Final Completion of the Improvement (the
“
Non-Government
Warranty Period
”). If Purchaser delivers written
notice to Seller of breach of the Non-Government Warranty during
the Non-Government Warranty Period, then Seller shall coordinate
the corrections with Purchaser and cause the service provider(s)
who performed the work or supplied the materials in which the
breach of Non-Government Warranty appears to complete such
corrections or, if such service providers fail to make such
corrections, otherwise cause such corrections to be made to the
reasonable satisfaction of Purchaser. Any costs and expenses
incurred in connection with a breach of the Non-Government Warranty
shall be borne by Seller (including, but not limited to, any costs
or expenses incurred to enforce any warranties against service
providers), unless such breach was caused by Purchaser or its
contractors, subcontractors, employees, or agents, in which event
Purchaser shall pay all such costs and expenses to the extent the
breach was caused by Purchaser or its contractors, subcontractors,
employees, or agents.
(c)
EXCEPT AS EXPRESSLY
PROVIDED IN THIS SECTION 3, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND TO PURCHASER IN RELATION TO THE FINISHED LOT
IMPROVEMENTS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY
IMPLIED WARRANTY OF HABITABILITY, MERCHANTABILITY, OR FITNESS FOR
ANY PARTICULAR PURPOSE, AND EXPRESSLY DISCLAIMS ALL OF THE SAME AND
SHALL HAVE NO OBLIGATION TO REPAIR OR CORRECT AND SHALL HAVE NO
LIABILITY OR RESPONSIBILITY WITH RESPECT TO ANY DEFECT IN
IMPROVEMENTS FOR WHICH NO CLAIM IS ASSERTED DURING THE APPLICABLE
WARRANTY PERIOD.
EXHIBIT D
OFFSITE INFRASTRUCTURE IMPROVEMENTS
EXHIBIT E
FORM OF GENERAL ASSIGNMENT
GENERAL
ASSIGNMENT
Reference is hereby
made to that certain Purchase and Sale Agreement dated as of
_______________, 2017 (the "Agreement"), pursuant to which Pure
Cycle Corporation, a Colorado corporation ("Seller"), has agreed to
sell to Taylor Morrison of Colorado, Inc., a Colorado corporation
("Purchaser"), the Property as described in the
Agreement.
For
good and valuable consideration, the receipt of which is hereby
acknowledged, Seller hereby assigns and transfers to Purchaser on a
non-exclusive basis, Seller's right, title and interest in the
following as the same relate solely to the Property, and to the
extent the same are assignable: (i) all subdivision agreements,
development agreements, and entitlements; (ii) all plats,
construction plans and specifications; (iii) all construction
warranties; and (iv) all development rights benefiting the
Property.
SELLER:
Pure
Cycle Corporation,
a
Colorado corporation
Name:
____________________________
Title:
_____________________________
EXHIBIT F
LOT DEVELOPMENT AGREEMENT
Sky Ranch
(Taylor Morrison)
THIS
LOT DEVELOPMENT AGREEMENT (this “
LDA
”)
is made as of the ___ day of _________, 20____ (the
“
Effective
Date
”), by and between PCY HOLDINGS, LLC, a Colorado
limited liability company (“
Developer
”),
and TAYLOR MORRISON OF COLORADO, INC., a Colorado corporation
(“
Builder
,”).
Developer and Builder are sometimes individually referred to as a
“
Party
”
and collectively referred to as the “
Parties
.”
RECITALS
A.
Developer, owns
certain real property located in Arapahoe County (the
“
County
”),
Colorado which Developer is developing as part of the Sky Ranch
master planned residential community (“
Development
”).
The preliminary concept map for Phase A of the Development
(“
Concept
Plan
”) is depicted on
Exhibit A
attached hereto (the “
Property
”).
The Development is being subdivided in several subdivision filings
and developed in phases. The Builder Lots in each phase are
generally depicted on the Concept Plan.
B.
Concurrently with
the execution of this LDA, pursuant to the terms of a separate
Contract for Purchase and Sale of Real Estate by and between
Developer, as seller, and Builder, as purchaser, as amended (the
“
Contract
”),
Builder is acquiring from Developer a portion of the Property
consisting of approximately 81 single family residential building
lots, and will be acquiring an additional 80 lots within the
Property (collectively, the “
Builder
Lots
”) pursuant to the Contract at a closing that will
occur subsequent to the execution of this LDA. The number and
location of the Builder Lots to be acquired by Builder under the
terms of the Contract, the number and location of the Takedown 1
Lots and the Takedown 2 Lots and the development phasing for the
Builder Lots consisting of four phases are generally depicted on
the Concept Plan attached as
Exhibit
A
.
C.
Pursuant to the
Contract, Developer has agreed to construct or cause to be
constructed the Improvements, as hereinafter defined. The
“
Improvements
”
are those infrastructure improvements described in the plans and
specifications identified in
Exhibit B
attached hereto as Developer causes such plans to be finalized and
approved by the applicable Approving Authorities
(“
Plans
”).
At such time as the Plan have been so approved,
Exhibit B
will be replaced by a new list of the final approved Plans by
amendment to this Agreement (“
Revised Exhibit
B
”). The Improvements do not include any Offsite
Infrastructure Improvements that are being funded pursuant to the
Offsite Infrastructure Escrow Agreement, as defined in the
Contract.
D.
As required by the
terms of the Contract, Builder has agreed (i) to pay the Initial
Purchase Price (as defined in the Contracts) for the Builder Lots
that the Builder acquires at a Closing; and (ii) pay that
portion of the Purchase Price for the Builder Lots defined as the
Deferred Purchase Price (as defined in the Contract) in accordance
with the terms and provisions of this LDA as the Improvements are
completed and as more particularly set forth herein.
E.
The Parties now
desire to enter into this LDA in order to set forth the terms and
conditions under which the Improvements will be constructed by
Developer and provide for the payment of the Improvements, together
with such other matters as are set forth hereinafter.
AGREEMENT
NOW
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Developer and Builder
agree as follows:
1.
Incorporation of Recitals;
Definitions.
The Parties hereby acknowledge and agree to the
Recitals set forth above, which are incorporated herein by this
reference. Unless otherwise defined herein, all capitalized terms
used in this LDA and not defined in this LDA shall have the same
meaning as set forth in the Contract.
2.
Definitions.
Unless otherwise
defined herein, all capitalized terms used in this LDA and not
defined in this LDA shall have the same meaning as set forth in the
Contract.
3.
Responsibilities of Developer and
Builder
.
(a)
Generally
. Developer shall
construct, or cause to be constructed, the Improvements in the
manner set forth hereinafter. Developer shall coordinate,
administer and oversee (a) the preparation and filing of all
applications, filings, submittals, plans and specifications,
budgets, timetables and other documents pertaining to construction
and installation of the Improvements and (b) the construction and
installation of the Improvements. Developer will engage or cause to
be engaged consultants, contractors and subcontractors who will be
responsible for the construction of the Improvements and suppliers
who will be responsible for supplying labor, materials, equipment,
services and other work in connection with the construction of the
Improvements (“
Service
Provider(s)
”), pursuant to the Construction Contracts
(as hereinafter defined).
(b)
Comply with Legal Requirements
.
Developer will comply with all terms and conditions of applicable
law in performing their obligations under this LDA. Developer will
provide to each Builder copies of all notices filed by the
Developer with the County, and all other applicable governmental or
quasi-governmental entities or agencies (the “
Approving
Authorities
”) related to the Improvements and shall,
within five (5) business days of receipt thereof, provide notice to
each Builder (together with copies of all notices received by
Developer) of any notice received by Developer alleging any failure
to comply with any applicable laws, ordinances, rules, regulations,
or lawful orders of public authorities bearing on the construction
of the Improvements.
(c)
Bonds and Assurances
.
Developer, as part of the Costs, shall provide to all applicable
Approving Authorities any bonds, assurance agreements, or other
financial assurances required with respect to the construction of
the Improvements. Developer shall, as part of the Costs, provide to
all Approving Authorities all warranties, bonds and other financial
assurances required to obtain permits for, and the preliminary and
final acceptance and approval of, the Improvements. Builder shall
take all commercially reasonable actions and execute all documents
reasonably requested by Developer in its efforts to obtain releases
of all such warranties, bonds, and other financial assurances upon
final acceptance of the Improvements by the Approving
Authorities.
(d)
Taxes, Fees and Permits
.
Developer or the Service Providers shall pay all applicable sales,
use, and other similar taxes pertaining to the construction of the
Improvements, and shall secure and pay for all approvals,
easements, assessments, charges, permits and governmental fees,
licenses and inspections necessary for proper construction and
completion of the Improvements, subject to the terms of the
Contract and except as provided otherwise in this LDA. Developer
and the Service Providers shall not defer the payment of any use
taxes pertaining to the Improvements except as may be authorized
under law or agreement with the applicable taxing
authorities.
(e)
Dedications
. Developer and each
Builder upon whose property the Improvements are located shall
timely make all conveyances and dedications of the Improvements as
to any Improvements owned by such Party if and as required by the
Approving Authorities, free and clear of all liens and
encumbrances.
(f)
Indemnity
. Developer shall
indemnify, defend and hold harmless the Builder and its owners,
employees, members, managers, directors, officers, agents,
affiliates, successors and assigns (each a “
Builder
Indemnitee
” and collectively, the “
Builder
Indemnitees
”) for, from and against all claims,
demands, liabilities, losses, damages (exclusive of special,
consequential, punitive, consequential and lost profits damages),
costs and expenses, including but not limited to court costs and
reasonable attorneys’ fees, arising out of material damage
caused by Developer’s gross negligence or willful misconduct
in the performance of the construction of the Improvements.
Notwithstanding the foregoing, Developer shall not be obligated
under this LDA to indemnify the Builder Indemnitees to the extent
such liabilities result from the negligence or willful misconduct
of any Builder Indemnitee, or for any claims arising out of
geologic, soils, ground water or other physical conditions
affecting the Lots, or underdrains systems installed according to
Plans reviewed and approved by a Builder. Builder shall indemnify,
defend and hold harmless Developer and its respective owners,
affiliates, employees, members, managers, directors, officers,
agents, successors and assigns (each an “
Developer
Indemnitee
” and collectively, the “
Developer
Indemnitees
”) for, from and against all claims,
demands, liabilities, losses, damages, costs and expenses,
including but not limited to court costs and reasonable
attorneys’ fees, arising out of or relating to (i)
Builder’s or its successor’s development, construction,
use, ownership, management, marketing or sales activities
associated with the Lots and the Property (including, without
limitation, land development, grading, excavation, trenching, and
soils compaction, and construction on the Builder Lots performed by
or on behalf of a Builder); (ii) the soils, subsurface geologic,
groundwater or other physical conditions present on or affecting
the Builder Lots; (iii) any change subsequent to the Effective Date
in the Entitlements to the extent that the change was caused,
requested or made by Builder or the design of any residences
(“
Homes
”)
constructed on the Builder Lots other than claims arising solely
out of Developer’s gross negligence or willful misconduct in
the performance of Developer’s obligations under this LDA;
(iv) homeowner claims asserting or relating to any implied warranty
of habitability, merchantability, or fitness for any particular
purpose in connection with Builder’s construction of one or
more Homes on the Builder Lots; or (v) Improvements and other work
completed or deemed completed in accordance with the Construction
Standard except for warranty claims properly and timely asserted
pursuant to Section 4.8 of this LDA. Notwithstanding the foregoing,
Builders shall not be obligated under this LDA to indemnify, defend
or hold harmless Developer from claims arising solely out of a
successor’s development, construction, use, ownership,
management, marketing or sales activities associated with the
Builder Lots and the Property if such successor is approved by
Developer and gives Developer a substitute indemnity that is
equivalent to the indemnity provided by the Builder under this
Section 3.6 and such successor is financially sound as reasonably
determined by Developer. Obligations under this Section shall
survive the termination or expiration of this LDA.
(g)
Insurance
. Developer shall
procure and maintain, and shall cause the Service Providers to
procure and maintain, the insurance described in
Exhibit C
attached hereto during the construction of the Improvements and any
warranty work performed on the Improvements.
(h)
Independent Contractor
.
Developer is an independent contractor and neither Developer nor
its employees are entitled to worker’s compensation benefits
or unemployment insurance benefits through any Builder as a result
of performing under the LDA. The Developer is responsible for and
obligated to pay all assessable federal and state income tax on
amounts earned or paid under this LDA.
4.
Construction of
Improvements
.
(a)
Plans and Specifications
.
Developer shall (i) diligently finalize, process and obtain
approval of the Plans for the Improvements from the applicable
Approving Authorities to the extent required by such entities, and
(ii) apply to the utility service provider for the preparation of
dry utility plans (“
Utility
Plans
”). Upon receipt of the approved Plans for the
Improvements and the Utility Plans for the dry utilities from the
utility service provider, Developer will furnish a copy of such
Utility Plans to the Builder. After replacement of
Exhibit B
by
the Revised Exhibit B, if Developer elects to amend the Plans in a
manner that will result in a Material Change (defined below), then
Developer shall provide written notice of the Material Change (a
“
Notice of Material
Change
”) to Builder if the Builder Lots are affected
by the change. The Notice of Material Change shall describe the
modification to the Plans requested by Developer. Builder shall
have five (5) business days after receipt of the Notice of Material
Change to provide written notice to the Developer if it objects to
the proposed Material Change (a “
Notice of Material
Change Objection
”), which shall describe revisions to
the Material Change that would render it acceptable to Builder. If
Builder fails to give a timely Notice of Material Change Objection
to Developer, the Material Change shall be deemed approved by
Builder. If Developer performs any Material Change without first
providing Builder with a Notice of Material Change, or after
Receiving a Notice of Material Change Objection, which objection
has not been resolved in accordance with the following provisions,
then Developer shall assume responsibility for the cost of
correcting any such change, as well as the time impacts for making
such correction. Within five (5) business days after delivery to
Developer of a Notice of Material Change Objection, said Developer
and the Builder shall meet to approve or reject the Material
Change. If Developer and Builder cannot reach an acceptable
resolution regarding the Notice of Material Change Objection, the
dispute shall be resolved pursuant to the arbitration provision set
forth in
Section 7
below. For
purposes of this
Section
(a)
, a “
Material
Change
” shall consist only of the following changes to
the approved Plans for the Improvements to be installed for the
benefit of the Property which have previously been approved by the
applicable Approving Authorities:
(i)
Reduction of the
total number of Builder Lots available for the construction of
residences by more than 10%.
(ii)
Material adverse
impact on the ability to serve basements with eight (8) foot
foundation wall heights with gravity flow sanitary sewer service on
the Builder Lots.
(iii)
Changes greater
than one half (1/2) of one (1) foot to the proposed finish grade
elevation for any of the Builder Lots.
(b)
Construction Standard
.
Developer shall cause the applicable Improvements to be constructed
in accordance with the Construction Standard and shall obtain
preliminary and final acceptance thereof by all Approving
Authorities. As used herein, the term “
Construction
Standard
” means construction and installation of the
Improvements in a good, workmanlike and lien-free manner and in
substantial conformity with the Plans (as may be modified pursuant
to the terms hereof), the applicable requirements of the Approving
Authorities, and the “Finished Lot Standard” set forth
on
Exhibit D
attached hereto. The Construction Standard does not include any
so-called “over excavation” or comparable preparation
or mitigation of the soil (hereinafter defined as the
“
Overex
”)
on the Builder Lots and Builder has sole responsibility with
respect to any Overex that the Builder determines to undertake on
the Builder Lots. The terms and provision of Section 10(e) (Over
Excavation) of the Contract are hereby incorporated herein by this
reference. The Parties shall reasonably cooperate in coordinating
the Builder’s completion of the Overex so that the Overex can
be properly sequenced with Developer’s completion of the
Improvements. In no event shall Developer be liable to Builder for
any delay, costs or damages incurred with respect to such Overex,
even if caused by any delay in installation of Improvements
sequenced ahead of the Overex, and all timeframes shall be deemed
extended appropriately in the event of any delay in completing such
Overex in accordance with the Construction Schedule (as hereinafter
defined).
(c)
Construction Contracts for
Work
. Developer and contractors of Developer shall contract
for all of the work and materials comprising the applicable
Improvements. Developer shall have the right to bid, pursue,
negotiate, agree to and execute contracts and agreements with
Service Providers for the work and materials comprising the
Improvements (each a “
Construction
Contract
” and collectively, the “
Construction
Contracts
”), based upon forms that Developer deems
necessary or appropriate in its commercially reasonable discretion;
provided, however, that Developer shall deliver written notice to
Builder after it shall enter into any Construction Contract, which
notice shall identify the Service Provider(s). Developer shall
attempt to cause each Construction Contract, in addition to other
matters, to (i) allow for the automatic assignment, without need
for further action, of all of Developer’s rights (including,
without limitation, the warranty and indemnity provisions thereof)
to Builder on a non-exclusive basis in the event of replacement of
Developer pursuant to the terms of this LDA, and identify Builder
as an intended third-party beneficiaries of the Construction
Contract, (ii) require the Service Provider to name the Builder as
additional insureds on all required insurance maintained by the
Service Provider for a period expiring not sooner than final
acceptance of the Improvements by the applicable Approving
Authority for which such Service Provider furnished materials or
work, (iii) require the Service Providers to provide a
warranty on materials and labor supplied by such Service Provider
for a period coterminous with the warranty period required by the
applicable Approving Authorities for Improvements to be dedicated
to an Approving Authority, but in no event less than one (1) year
for any Improvement, (iv) require the Service Provider to perform
its work in accordance with the Construction Standard, (v) require
the Service Provider to indemnify, defend, and hold harmless
Developer from all claims and causes of action arising from the
negligent acts or omissions or intentional misconduct of the
Service Provider or its employees or agents, (vi) permit retainage
in an amount of at least five percent (5%) of the amounts payable
to the Service Provider, until the work to be completed pursuant to
such contract has been substantially completed and, if applicable,
granted initial acceptance by the applicable Approving Authority;
(vii) provide the Developer the right, but not the obligation, to
pay subcontractors and suppliers of the Service Provider directly
or by joint check, and (viii) provide for no limitation on remedies
against the Service Provider for a default except the prohibition
of recovery of punitive damages. Upon receipt of written request
from Builder, Developer shall deliver a copy of each Construction
Contract to such Builder.
(d)
Commencement and Completion
Dates
. Developer shall cause construction of the
Improvements to be commenced and completed as follows:
(i)
Commencement; Construction Schedule;
Completion
. The Improvements will be completed in phases
consisting of two phases with respect to the Takedown 1 Lots and
two subsequent phases with respect to the Takedown 2 Lots for a
total of four phases (each a “
Phase
”). Developer shall commence
and complete each component of the Improvements in each Phase in
accordance with the construction schedule set forth on
Exhibit E
attached hereto (the “
Construction
Schedule
”), and cause Substantial Completion of the
Improvements in each Phase to occur on or before the applicable
deadline therefor as set forth in the Construction Schedule (the
“
Substantial
Completion Deadline
”); provided, however, subject to
Section 4.4.2
below. The Construction Schedule will provide for the first Phase
(“
Phase
1
”) to be substantially completed ten (10) months
after the First Closing, with the second Phase (“
Phase
2
”) to be substantially completed nine (9) months
after substantial completion of Phase 1, with the third Phase
(“
Phase
3
”) to be substantially completed nine (9) months
after the Second Closing and the fourth Phase (“
Phase
4
”) to be substantially completed nine (9) months
after substantial completion of Phase 3, all subject to
Section 4.4.2
below. Developer may cause Improvements to be constructed and
installed as Developer deems necessary, in the Developer’s
commercially reasonable discretion, to coordinate such Improvements
with the development of portions of the Development other than the
Property; or cause Improvements to be constructed and installed in
accordance with scheduling requirements of the County and other
Approving Authorities. Notwithstanding anything to the contrary,
the Developer shall have no obligation to install landscaping
during the months of October through April.
(ii)
Force Majeure
. Notwithstanding
any contrary provision of this LDA, the completion dates and all
interim milestones (if any) set forth on the Construction Schedule,
the Substantial Completion Deadline, and the time for performance
of Developer’s other obligations under the Construction
Schedule or this LDA shall be extended by a period of time equal to
any period that such performance or progress in construction of the
Improvements is delayed due to any Dispute, as defined below, acts
or failure to act of any Approving Authority, strike, riot, act of
war, act of terrorism, act of violence, weather, act of God, or any
other act, occurrence or non-occurrence beyond Developer’s
reasonable control (each, an “
Uncontrollable
Event
”).
(e)
Substantial
Completion
.
(i)
Definition of Substantial
Completion
. “
Substantial
Completion
” of the Improvements (or applicable
component thereof) shall be deemed to have occurred when all of the
following have occurred with respect to the Improvements (or
applicable component thereof):
(1)
Developer has
substantially completed or corrected all punchlist items provided
by the Approving Authorities and the Builders affecting the
Improvements (or applicable component thereof) in accordance with
Section
(ii)
below so that
Builder is not precluded from obtaining from the Approving
Authorities building permits for houses constructed, or to be
constructed, on any Builder Lots solely as a result of such
punchlist items (or applicable component thereof) not being
complete, and Developer has obtained lien releases reasonably
acceptable to Builder from all contractors performing work related
to the Improvements;
(2)
The Improvements
(or applicable component thereof) have been installed pursuant to
the Construction Standard and shall be substantially complete so
that Builder is not precluded from obtaining from the Approving
Authorities building permits for houses constructed, or to be
constructed, on any Builder Lots solely as a result of such
Improvements (or applicable component thereof) not being
complete;
(3)
Any Improvements
(or applicable component thereof) that are intended to be dedicated
to or accepted by an Approving Authority shall have been inspected
and preliminarily accepted by the applicable Approving Authority
(subject to the Government Warranty Period (as defined below));
except that those Improvements that are (x) to be phased, if any,
as set forth in the Entitlements, or (y) not necessary or required
by the Approving Authority to occur prior to issuance of a building
permit or certificate of occupancy for Homes on the Lots, including
but not limited to certain landscape and park improvements (the
“
Additional
Improvements
”) will not be required to achieve
Substantial Completion, but Developer shall nevertheless be
required to complete construction and obtain acceptance of such
Additional Improvements by the applicable Approving Authority after
Substantial Completion at such time as is required by the
applicable Approving Authorities and so that Builder is not
precluded from obtaining from the Approving Authorities building
permits or certificate of occupancy for houses constructed, or to
be constructed, on any Builder Lots solely as a result of such
Additional Improvements (or applicable component thereof) not being
complete.
(4)
No mechanics’
or materialmen’s liens shall have then been filed against any
of the Builder Lots with respect to the Improvements and lien
waivers have been obtained from the Service Providers that
constructed the Improvements (or applicable portion thereof), or
the Developer has obtained a bond to insure over any such
mechanics’ or materialmen’s liens.
(5)
With respect to any
Improvements that are required by the Construction Standard or that
are required by the subdivision improvement agreement applicable to
the Builder Lots but which are not addressed as part of the
Construction Standard or the Finished Lot Standard, and any other
Improvements which are not required for the issuance of building
permits but which are required by the Approving Authorities so that
Homes and other improvements constructed by Builder on the Builder
Lots are eligible for the issuance of certificates of occupancy for
homes, the Developer shall complete or cause the completion of such
other Improvements, to the extent required by the Approving
Authorities, so as not to delay the issuance of certificates of
occupancy for Homes constructed by Builder on the Builder
Lots.
(1)
Notice to Builder
. Developer
shall notify Builder in writing when Substantial Completion of the
Improvements (or applicable component thereof) on the Builder Lots
has been achieved, except for minor punch-list work which does not
affect the ability to obtain building permits or certificates of
occupancy, as applicable, for Homes on the Lots, and the date(s)
and time(s) the Approving Authorities will inspect such
Improvements (or applicable component thereof). Within ten (10)
days after receipt by Builder of such notice from the Developer,
Developer and Builder shall jointly inspect the Improvements (or
applicable component thereof) on the Builder Lots and produce a
punchlist (“
Builder
Punchlist
”). The Builder Punchlist may not contain any
items other than incomplete Improvements or components thereof,
deficient or defective construction of the Improvements or
components thereof, or failure to construct the Improvements or
components thereof in accordance with the Construction Standard.
Builder shall not be able to object or provide Builder Punchlist
items for any portion of the Improvements previously inspected by
the Builder. If the Parties are unable to agree upon a Builder
Punchlist within five (5) days after the joint inspection described
above, then any dispute related to such punchlist shall be
submitted to the expedited dispute resolution procedures in
accordance with
Section
7
below. Developer will give Builder notice of the date and
time of inspections of the Improvements by the Approving
Authorities and Builder may attend such inspections. Developer will
attempt to provide Builder with copies of any inspection reports or
punchlists received from the Approving Authorities in connection
with the inspection of the Improvements, and Developer shall be
responsible to correct punchlist items from the Approving Authority
and items set forth on the Builder Punchlist. Notwithstanding
anything to the contrary including any Builder Punchlist, if an
Approving Authority grants preliminary approval or construction
acceptance to any of the Improvements, or if the engineer issues a
certification with respect to the grading, fill and compaction in
accordance with item (g) of
Exhibit D
,
then it shall conclusively be presumed that such Improvement or
work was completed in accordance with the Construction Standard,
subject to completion of the punchlist items provided by the
Approving Authority. If an item is not identified as incomplete on
the Builder Punchlist, then it shall conclusively be presumed that
such Improvement was completed in accordance with the Construction
Standard, and thereafter the Builder and not Developer shall be
responsible for repairing damage to such Improvement occurring
after completion of the Builder Punchlist work unless such damage
is determined either by agreement of the parties or pursuant to
Section 7
of this
LDA to be the result of a design or construction defect. Disputes
regarding Builder Punchlist items and matters will be resolved
pursuant to the expedited dispute resolution procedures set forth
in
Section 7
of
this LDA.
(2)
Correction of Punchlist Items
.
Developer shall cause any punchlist items to be corrected within
the time required by the County or other applicable Approving
Authorities, or such shorter time as may be required pursuant to
the Construction Schedule.
(3)
Interim Inspections
. Upon
reasonable prior notice, each Builder may inspect the construction
of the Improvements on the Builder Lots; provided, however, such
inspection shall be (i) at the sole risk of Builder, (ii) such
inspection shall be non-invasive and shall be performed in a manner
that does not interfere with or result in a delay in the
construction of the Improvements, and (iii) Builder shall indemnify
Developer for any damage resulting from such
inspection.
(i)
Notice of Default
. If
Developer: (a) breaches its obligation under this LDA to complete
or cause the completion of any Improvement in accordance with the
Plans or Construction Schedule (as extended by any Uncontrollable
Event); (b) otherwise breaches any material obligation under this
LDA; (c) fails to comply with any material provision of its
Construction Contracts with Service Providers beyond any applicable
express notice or cure periods; or (d) files a petition for relief
in bankruptcy or makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay its debts
generally as they become due (each a “
Bankruptcy
Event
”), then the Builder may deliver written notice
of the breach to Developer (a “
Notice of
Default
”). Each of the events set forth in Subsections
(a) through (d) inclusive of the preceding sentence shall be herein
referred to as a “
Constructing Party
Default
.” For any Constructing Party Default other
than a Bankruptcy Event, the Developer shall have thirty (30) days
after Developer’s receipt of the Notice of Default from the
Builder to cure the Constructing Party Default (the
“
Cure
Period
”); provided, however, if the nature of the
Constructing Party Default is such that it cannot reasonably be
cured within thirty (30) days, the Cure Period shall be deemed
extended for a reasonable period of time (not to exceed an
additional sixty (60) days) so long as Developer commenced in good
faith and with due diligence to cause such Constructing Party
Default to be remedied. If Developer does not cause the cure of the
Constructing Party Default within the Cure Period (as may be
extended pursuant to the preceding sentence, and subject to
Uncontrollable Events), or if a Bankruptcy Event occurs (either, an
“
Event of
Default
”), then the Builder may elect to appoint
either itself or another qualified third party (which may include
another builder under contract with Developer to purchase lots
within the Development, provided that such builder agrees to, and
accepts, such appointment) (“
Substitute
Constructing Party
”) to assume and take over the
construction of the Improvements by providing written notice to
Developer of its election (the “
Assumption
Notice
”). Substitute Constructing Party’s
assumption of the construction of the Improvements shall not
include the assumption of any liability for acts or omissions
occurring prior to the Assumption Notice, or payment of any
“Constructing Party Cost Overruns” (as defined below)
incurred prior to the Assumption Notice, which Constructing Party
Cost Overruns shall remain the sole responsibility of the
Developer, or receipt of any cost savings prior to the Assumption
Notice; provided, however, that the Substitute Constructing Party
shall be entitled to an administrative fee in an amount equal to
two percent (2%) of the remaining Costs (as defined below) actually
paid, which administrative fee shall be included in the
Constructing Party Cost Overruns. The Builder’s election to
appoint a Substitute Constructing Party to assume and take over the
construction of the Improvements and to exercise and enforce the
rights and obligations set forth in Section 4.6.2 below shall
thereafter be the Builder’s sole and exclusive
remedy.
(ii)
Assumption Right
. If Builder
delivers an Assumption Notice, then: (i) Developer shall cooperate
to allow the Substitute Constructing Party to take over and
complete the incomplete Improvements, including the execution and
delivery to the Substitute Constructing Party of such agreements,
documents or instruments as may be reasonably necessary to assign
to the Substitute Constructing Party all Construction Contracts
with third parties pertaining to the Improvements; (ii) Developer
shall remain responsible for all Constructing Party Cost Overruns
(as hereinafter defined), but Developer shall be relieved of all
further obligations under this LDA with respect to the completion
of the incomplete Improvements subsequent to such assumption;
(iii) Developer shall remain liable for its gross negligence
or willful misconduct, and any indemnification obligations
specified herein incurred prior to the date of such assumption; and
(v) Substitute Constructing Party shall assume and perform all
obligations under all Contracts for Improvements which Substitute
Constructing Party will complete to the extent such obligations are
to be performed after the date of delivery of the Assumption
Notice. Upon delivery of an Assumption Notice, Substitute
Constructing Party shall be obligated to complete the Improvements
and pay the Costs incurred thereafter by Substitute Constructing
Party to complete the Improvements. If a Substitute Constructing
Party assumes the obligation to construct the Improvements, the
Builder’s obligation for the payment of costs under Section
6.1 which are due and payable after the date of the Assumption
Notice shall be suspended and thereafter terminated if the
Substitute Constructing Party achieves Substantial Completion of
any unfinished Improvements. In the event of an Assumption Notice,
the Substitute Constructing Party shall indemnify, defend and hold
harmless the Developer and its members, managers, shareholders,
employees, directors, officers, agents, affiliates, successors and
assigns for, from and against all claims, demands, liabilities,
losses, damages (exclusive of special, consequential, punitive,
speculative or lost profits damages), costs and expenses, including
but not limited to court costs and reasonable attorneys’
fees, that accrue after the date of the Assumption Notice and arise
out of the Substitute Constructing Party’s completion of the
Improvements, and this indemnity shall not apply to any claims,
demands, liabilities, losses, damages, costs, expenses, acts or
omissions arising or accruing before the date of the Assumption
Notice. The obligations under this Section shall survive the
termination or expiration of this LDA.
(iii)
Appointment of Substitute Constructing
Party
. For purposes of exercising the self-help remedies set
forth in this
Section
(f)
with respect to an Event of
Default, Builder may elect to appoint either itself or another
Substitute Constructing Party (which may include another builder
under contract with Developer to purchase lots within the
Development, provided that such builder agrees to, and accepts,
such appointment) who shall then have the right and authority to
act pursuant to the self-help provisions of this
Section
(f)
(“
Designated
Builder
”). If the cure of an Event of Default requires
the construction or completion of Improvements that serve both the
Builder Lots and other lots that are owned by another homebuilder
that is under contract with Developer for the completion of such
Improvements (the “
Joint
Improvements
”), then Richmond American Homes of
Colorado (“
Richmond
”)(to
the extent that it has purchased lots in the Development from
Developer) shall, at it’s election, have the first right and
option (ahead of all other builders within the Development) to step
in and act on behalf of all such builders pursuant to the self-help
provisions of this
Section
4.6
with respect to the Joint Improvements
(“
Builder’s
Step-In Option
”). Richmond may exercise the Builder
Step-In Option by giving notice to Developer and the other builders
within fifteen (15) days following the Event of Default
(“
Builder’s
Step-In Deadline
”). If Richmond does not exercise
Builder’s Step-in Option prior to the Builder Step-In
Deadline, then the other builders shall have the right to exercise
an option to step-in and select a Substitute Contracting Party to
act on behalf of all such builders pursuant to the self-help
provisions of this
Section
4.6
with respect to the Joint Improvements by giving notice
to Developer and the other builders within fifteen (15) days
following the expiration of Builder’s Step-In Deadline. The
Developer, Builder, the other builders(s) affected by any joint
improvements and the Title Company will at Closing execute a
“
Joint Improvements
Memorandum
” that describes the rights and obligations
of Developer, Builder, such other builder(s) and Title Company and
such document will supplement this Lot Development Agreement
regarding the installation and construction of any Joint
Improvements. The form of the Joint Improvements Memorandum shall
be agreed upon during the Inspection Period under the Contract and
attached to this Lot Development Agreement as
Exhibit
I
.
(g)
Over-Excavation of Lots
. The
Parties acknowledge that the Improvements shall not include Overex
of the Lots. Builder, with respect to its Builder Lots shall, at
its sole cost, cause the Overex to be performed, and shall have the
right to enter such Builder Lots for the purposes of performing the
Overex; provided, however, that such entry shall be performed in a
manner that does not materially interfere with or result in a
material delay or an increase in the Costs or any expenses in the
construction of the Improvements, and provided further that Builder
shall promptly repair any portion of the Builder Lots and adjacent
property that is materially damaged by Builder or its agents,
designees, employees, contractors, or subcontractors in performing
the Overex. THE PARTIES ACKNOWLEDGE AND AGREE THAT DEVELOPER IS NOT
PERFORMING ANY OVER-EXCAVATION OF THE BUILDER LOTS AND THAT THE
DEVELOPER SHALL HAVE NO LIABILITY WHATSOEVER WITH RESPECT TO OR
ARISING OUT OF ANY OVER-EXCAVATION OF THE BUILDER LOTS OR EXPANSIVE
SOILS PRESENT ON THE BUILDER LOTS AND DEVELOPER EXPRESSLY DISCLAIMS
ANY LIABILITY WITH RESPECT TO ANY OVER-EXCAVATION OF THE LOTS AND
EXPANSIVE SOILS PRESENT ON THE BUILDER LOTS. BUILDER SHALL
INDEMNIFY, DEFEND AND HOLD HARMLESS DEVELOPER AND ITS SHAREHOLDERS,
EMPLOYEES, DIRECTORS, OFFICERS, AGENTS, AFFILIATES, SUCCESSORS AND
ASSIGNS FOR, FROM AND AGAINST ALL CLAIMS, DEMANDS, LIABILITIES,
LOSSES, DAMAGES (EXCLUSIVE OF SPECIAL, CONSEQUENTIAL, PUNITIVE,
SPECULATIVE OR LOST PROFITS DAMAGES), COSTS AND EXPENSES, INCLUDING
BUT NOT LIMITED TO COURT COSTS AND REASONABLE ATTORNEYS’
FEES, ARISING OUT OF ANY EXPANSIVE SOILS, OVER-EXCAVATION OR OTHER
SOIL MITIGATION OR BUILDER’S ELECTION NOT TO PERFORM SOILS
MITIGATION, ON OR PERTAINING TO THE BUILDER LOTS. THE PROVISIONS OF
THIS SECTION 4.7 SHALL EXPRESSLY SURVIVE THE EXPIRATION OR
TERMINATION OF THIS LDA.
(h)
Warranty Periods
.
(i)
Government Warranty Period
. The
Approving Authorities may require a warranty period after the
Substantial Completion of the Improvements (a “
Government Warranty
Period
”). In the event defects in the Improvements to
which a governmental warranty applies become apparent during the
Government Warranty Period, then Developer shall coordinate the
repairs with the applicable Approving Authorities and cause the
Service Provider(s) who performed the work or supplied the
materials in which the defect(s) appear to complete such repairs
or, if such Service Providers fail to correct such defects,
otherwise cause such defects to be repaired to the satisfaction of
the Approving Authorities. Any costs and expenses incurred in
connection with any repairs or warranty work performed during the
Government Warranty Period (including, but not limited to, any
costs or expenses incurred to enforce any warranties against any
Service Providers) shall be borne by Developer and shall be
included in the Constructing Party Cost Overruns, unless such
defect or damage was caused by Builder or its contractors,
subcontractors, employees, or agents, in which event Builder shall
pay all such costs and expenses to the extent caused by Builder or
its contractors, subcontractors, employees, or agents. Any damage
to an Improvement that was not listed on the Builder Punchlist
shall be presumed to have been caused by Builder or its
contractors, subcontractors, employees, or agents, unless the
Builder conclusively proves that the damage was caused as the
result of a design or construction defect in the original
construction by Developer as determined by agreement of the parties
or as determined in a legal proceeding pursuant to the Expedited
Dispute procedure in Section 7, below.
(ii)
Non-Government Warranty Period
.
Developer warrants (“
Non-Government
Warranty
”) to Builder that each Improvement to which a
Governmental Warranty Period does not apply shall have been
constructed in accordance with the Plans for one (1) year from the
date of Substantial Completion of the Improvement (the
“
Non-Government
Warranty Period
”). If Builder delivers written notice
to Developer of breach of the Non-Government Warranty during the
Non-Government Warranty Period, then Developer shall coordinate the
corrections with the Builder and cause the Service Provider(s) who
performed the applicable work or supplied the applicable materials
to complete such corrections or, if such Service Providers fail to
make such corrections, otherwise cause such corrections to be made.
Any costs and expenses incurred in connection with a breach of the
Non-Government Warranty shall be borne by Developer (including, but
not limited to, any costs or expenses incurred to enforce any
warranties against Service Providers), and shall be included in the
Constructing Party Cost Overruns, unless such breach was caused by
Builder or its contractors, subcontractors, employees, or agents,
in which event the Builder shall pay all such costs and expenses to
the extent caused by Builder or its contractors, subcontractors,
employees, or agents. Any damage to an Improvement that was not
listed on the Builder Punchlist shall be presumed to have been
caused by Builder or its contractors, subcontractors, employees, or
agents, unless Builder conclusively proves that the damage was
caused as the result of a design or construction defect in the
original construction by Developer. EXCEPT AS EXPRESSLY PROVIDED IN
SECTION 4.8.1 OR
4.8.2
, THE DEVELOPER PARTIES MAKE NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND TO BUILDER IN RELATION TO THE IMPROVEMENTS,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF HABITABILITY, MERCHANTABILITY, OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND EXPRESSLY DISCLAIMS ALL OF THE SAME AND
SHALL HAVE NO OBLIGATION TO REPAIR OR CORRECT ANY DEFECT IN
IMPROVEMENTS FOR WHICH NO CLAIM IS ASSERTED DURING THE APPLICABLE
WARRANTY PERIOD. The preceding sentence does not affect, alter or
modify any Service Provider’s obligations to repair or
correct any defects in Improvements and shall not be construed as a
limitation on the Builder’s statutory rights or remedies
which may not be modified by contract.
(i)
License for Construction
. Each
Party hereby grants to Developer or the Substitute Constructing
Party (as applicable) and the Service Providers a temporary,
non-exclusive license to enter upon the parcel within the Property
owned by such Party as reasonably necessary for the installation of
the Improvements, rough grading of the Builder Lots, stubbing of
utilities and/or the performance of Developer’s (or
Substitute Constructing Party’s, as applicable)
responsibilities under this LDA. Each Party further agrees to grant
such separate written rights of entry and/or licenses in or upon
the parcel owned by such Party as may be reasonably necessary for
installation of the Improvements, rough grading of the Builder Lots
and stubbing of utilities. No rights of entry and/or licenses over
any portion of the Property may be exercised or used by a Party in
any fashion that would unreasonably interfere with or adversely
impact any other Party’s development of its parcel. The
rights under this Section or any instruments delivered hereunder
shall terminate upon the expiration of all Government Warranty
Periods.
(j)
Liens
. Developer shall pay, or
cause to be paid, when due, all liens and claims for labor and/or
materials furnished to the Builder Lots pursuant to this LDA to
prevent the filing or recording by any third party of any
mechanics’, materialmen’s or other lien, stop notice or
bond claim or any attachments, levies or garnishments (collectively
“
Liens
”)
involving the Improvements. Developer will, within sixty (60)
calendar days after written notice from Builder or after Developer
otherwise become aware of such Liens, terminate the effect of any
Liens by filing or recording an appropriate release or bond if so
requested by Builder. If a Builder requests a Developer to file and
obtain any such release or bond and Developer fails to do so within
sixty (60) calendar days of such request, Builder may obtain such
bond or secure such release on behalf of Developer, and Developer
shall reimburse Builder for all costs and fees related thereto
within thirty (30) days after receipt of written request
therefor.
(k)
Tree Lawns/Sidewalks
.
Notwithstanding anything in this LDA to the contrary, Developer
shall have no obligation to construct, install, maintain or pay for
the maintenance, construction and installation of (i) any
landscaping or irrigation for such landscaping behind the curb on
any Builder Lot that is to be maintained by the owner of such lot
(collectively, “
Tree
Lawns
”), but Developer shall be responsible for
constructing and installing the detached sidewalks and ramps
(collectively, “
Sidewalks
”)
that are located immediately adjacent to any Builder Lot or on a
tract as required by the approved Plans, County, or any other
Approving Authority and/or applicable laws as provided in this LDA.
Builders shall be responsible for installing any other lead walks,
pathways, and driveways and any other flatwork on the Builder Lots.
Builder shall install all Tree Lawns on or adjacent to its Builder
Lots in accordance with all applicable Plans, requirements,
regulations, laws, development codes and building codes of all
Approving Authorities and such Tree Lawns shall not be considered
part of the Improvements.
(l)
Soil Hauling
. Builder shall be
responsible for relocating from the Builder Lots all surplus soil
generated during Builder’s construction of structures on the
Builder Lots. At the option of the Seller under the Contract, in
its sole discretion, the surplus soil shall be transported at
Builder’s expense to a site designated by Seller within the
Development. If and to the extent that Seller establishes stock
pile site within the Property, Seller may modify any such stock
pile locations from time to time in Seller’s discretion. At
Seller’s request, Builder shall supply copies of any reports
or field assessments identifying the material characteristics of
the excess soil prior to accepting such soil for fill purposes.
Notwithstanding the foregoing, in the event that Seller does not
establish a stock pile site or elects not to accept any surplus
soils from Builder, then Builder shall, at its sole expense, find a
purchaser or taker or otherwise transport and dispose of such
surplus soil upon such terms as it shall desire, but such surplus
soil must still be removed from the Property and may not be
stockpiled on the Property or within the Development after
construction has been completed.
5.
Costs of
Improvements
.
(a)
Definition of Costs
. As used
herein, the term “
Costs
”
shall mean all hard and soft costs incurred in connection with the
design (including all engineering expenses), construction and
installation of the Improvements, including, but not limited to,
costs of labor, materials and suppliers, engineering, design and
consultant fees and costs, blue printing services, construction
staking, demolition, soil amendments or compaction, any processing,
plan check or permit fees for the Improvements, engineering
services required to obtain a permit for and complete the
Improvements, costs of compliance with all applicable laws, costs
of insurance required by this LDA, costs of any financial
assurances, any corrections, changes or additions to work required
by the Approving Authorities or necessitated by site conditions,
municipal, state and county taxes imposed in connection with
construction of the Improvements, any warranty work, and any other
costs incurred in connection with the performance of the
obligations of Developer or the Substitute Constructing Party (as
applicable) hereunder to complete the Improvements.
(b)
Budget
. Attached hereto as
Exhibit
F
is an estimate of the Costs to construct the Improvements
(the “
Budget
”).
The Costs identified on the Budget are referred to herein as
“
Budgeted
Costs
.” Builders shall pay or cause to be paid
pursuant to
Article 6
below a share of
the Budgeted Costs. As consideration for the Developer’s
performance under this LDA and the construction of the
Improvements, Builder shall pay the Deferred Purchase Price which
is equal to (i) a share of the Budgeted Costs in the amount of
Forty Seven Thousand Five Hundred Dollars
($
47,500.00
)
per Builder Lot plus the Escalator
(which based on a total of 161 Builder Lots is equal to
$7,674,500.00 plus the Escalator), and (ii) the Builder Cost
Overruns, as defined below (collectively, the “
Maximum Builder
Costs
”).
(c)
Cost Overruns
. Notwithstanding
anything in this LDA to the contrary, the Developer shall pay (i)
all costs for changes to the Plans or Improvements required by any
Approving Authority or to correct any error or defect in the Plans
that cause the Costs to exceed the Budgeted Costs, and (ii) the
costs of all other changes to the Plans or Improvements requested
by the Developer that cause the Costs to exceed the Budgeted Costs
(collectively, the “
Constructing Party
Cost Overruns
”). The Builder shall pay all costs of
changes to the Plans or Improvements requested by Builder that
causes the Costs to exceed the Budgeted Costs (“
Builder Cost
Overruns
”) and Builder shall not have any
responsibility for Constructing Party Cost Overruns unless such
Constructing Party Cost Overruns occur as a result of
Builder’s breach of its obligations under this
LDA.
(d)
Accounting
. Developer shall
keep good and accurate books and records in sufficient detail to
allow the Costs to be calculated, which books and records shall be
made available for review (upon reasonable prior written notice) by
the Parties. Within thirty (30) days after Substantial Completion
of the Improvements, the Developer shall deliver to Builder a
reasonably detailed final accounting of the Costs.
(e)
Progress Reports
. Developer
shall, no less frequently than once per month, provide Builder with
a progress report setting forth the amount of Costs expended to
date, a list of Improvements completed, to date, and an estimate by
a project manager of Developer of the status of overall completion
of the Improvements, in such form as Developer deems reasonably
appropriate (“
Progress
Report
”).
6.
Payment of Costs
.
(a)
Payment
.
(i)
Payment
. Pursuant to the terms
of the Contract, Builder shall pay to Developer, as Seller, part of
the Purchase Price in cash at each closing (the “
Initial Purchase
Price
”), and pay in accordance with the terms of this
LDA a deferred portion of the Purchase Price (“
Deferred Purchase
Price
”) equal to the Maximum Builder Costs (including
Builder Cost Overruns, if any) which represents Builder’s
share of the Budgeted Costs of the Improvements. After Builder pays
the Initial Purchase Price, Builder has no responsibility for
payment of any funds in excess of the Maximum Builder Costs. The
Deferred Purchase Price is payable to Developer in installments
based upon completion of the Improvements that serve each phase of
the Builder Lots as follows:
(1)
Takedown 1 Lots – Phase
1
. Phase 1 consists of approximately 41 Lots that are a part
of the Takedown 1 Lots as identified on the Concept Plan (the
“
Phase 1
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 1 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 1 in the amount of $1,900,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 1 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,900,000.00 plus the
Escalator.
(2)
Takedown 1 Lots – Phase
2
. Phase 2 consists of approximately 41 Lots that are a part
of the Takedown 1 Lots as identified on the Concept Plan (the
“
Phase 2
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 2 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 2 in the amount of $1,900,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 2 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,900,000.00 plus the
Escalator.
(3)
Takedown 2 Lots – Phase
3
. Phase 3 consists of approximately 41 Lots that are a part
of the Takedown 2 Lots as identified on the Concept Plan (the
“
Phase 3
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 3 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 3 in the amount of $1,900,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 3 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,900,000.00 plus the
Escalator.
(4)
Takedown 2 Lots – Phase
4
. Phase 4 consists of approximately 42 Lots that are a part
of the Takedown 2 Lots as identified on the Concept Plan (the
“
Phase 4
Lots
”). Upon Substantial Completion of the Wet
Utilities that serve the Phase 4 Lots in accordance with Section
4.5 above, Builder shall pay the Developer a portion of the
Deferred Purchase Price for Phase 4 in the amount of $1,900,000.00
plus the Escalator. Upon Substantial Completion of the Improvements
that serve the Phase 4 Lots in accordance with Section 4.5 above,
Builder shall pay the Developer the balance of the Deferred
Purchase Price in the amount of $1,900,000.00 plus the
Escalator.
(5)
Escalator
. All payments of the
Deferred Purchase Price shall be subject to the Escalator as
provided in Section 2(b) of the Contract.
(6)
Invoice
. After Substantial
Completion is achieved as described above, Builder shall pay the
applicable portion of the Deferred Purchase within five (5)
business days after an invoice for payment is delivered to Builder
by Developer.
(7)
Definition of Wet Utilities
.
The Wet Utilities that serve each Phase of the Builder Lots that
will trigger the Builder’s payment obligation upon
Substantial Completion thereof are identified on
Exhibit
G
.
(8)
Security for Payment of Deferred
Purchase Price - Letter of Credit
. In order to secure
Builder’s obligation following the each Closing to pay the
Deferred Purchase Price in accordance with the terms of the
Contract and the payment obligations set forth above in this
Section 6.1, at each Closing, Builder shall deliver to Title
Company, acting as escrow agent, a letter of credit issued by
_____________________ in the form attached to the Contract as
Exhibit
H
(the “
Letter of
Credit
”) and in an amount equal to the sum of the
Deferred Purchase Price for all of the Lots acquired by Builder at
such Closing plus the estimated Escalator thereon in an amount
equal to $_________.00 with respect to the Letter of Credit
delivered at the First Closing and $_________.00 with respect to
the Letter of Credit delivered at the Second Closing, and
$_________.00 with respect to the Letter of Credit delivered at the
Third Closing. Title Company shall hold and maintain the Letter of
Credit pursuant to this LDA and the Contract in an escrow account
established by Title Company for the benefit of Developer and
Builder(pursuant to the terms of an escrow agreement to be agreed
upon by Developer, Builder and Title Company during the Due
Diligence Period). The Letter of Credit for each Closing shall
remain in place until the final payment of the Deferred Purchase
Price applicable to such Closing has been made to the Developer
following Substantial Completion of the Finished Lot Improvements
which serve the Lots acquired by Builder at such Closing. If the
Letter of Credit is scheduled to expire prior to the Substantial
Completion of all of such Lots, and Builder has not renewed the
Letter of Credit at least fifteen (15) days prior to the expiration
date thereof, Title Company is authorized and directed to draw down
the full amount of the Letter of Credit and deposit such funds in
escrow to be used solely for the payment of any unpaid Deferred
Purchase Price. The Letter of Credit may provide that it may be
reduced from time to time to the extent of payments of the Deferred
Purchase Price in Good Funds made by Purchaser for Finished Lot
Improvements in accordance with the terms, including the payment
schedule, set forth in this LDA and the Contract. The Letter of
Credit for each Closing shall be returned to Builder, together with
an executed reduction certificate reducing the face amount thereof
to $0.00, upon payment in full of the Deferred Purchaser Price in
Good Funds for all of the Lots in such Closing. Failure by Builder
to pay any portion of the Deferred Purchase Price when the same
shall become due and payable, provided that at such failure
continues for a period of ten days after the delivery of written
notice thereof from Developer to Builder, shall entitle Developer
to enforce the collection of the delinquent Deferred Purchase Price
by drawing upon the Letter of Credit or having the Title Company
draw upon the Letter of Credit, and in either event the funds so
drawn shall be paid to Developer as payment of any unpaid Deferred
Purchase Price and such failure to pay shall be deemed cured. If
Developer or Title Company is unable to draw upon the Letter of
Credit, Developer may protect and enforce its rights under this LDA
pertaining to payment of the Deferred Purchase Price by (i) such
suit, action, or special proceedings as Developer shall deem
appropriate, including, without limitation, any proceedings for the
specific performance of any covenant or agreement contained in this
LDA or the Contract or the enforcement of any other appropriate
legal or equitable remedy, or for the recovery of actual damages
(excluding consequential, punitive damages or similar damages)
caused by Builder’s failure to pay the Deferred Purchase
Price, including reasonable attorneys' fees, and (ii) enforcing
Developer’s lien rights set forth in this LDA.
Developer’s remedies are non-exclusive.
7.
Expedited Dispute
Resolution
.
(a)
Disputes Related to Material Changes,
Draw Requests and Punchlist Items
. Notwithstanding anything
to the contrary herein, disputes related to Material Changes, any
Builder Punchlist item or matter, objections to Construction
Contracts, determination of Substantial Completion or the amount of
or responsibility for Constructing Party Cost Overruns or Builder
Cost Overruns (“
Expedited
Disputes
”) shall all be resolved by an independent,
impartial third party qualified to resolve such disputes as
determined by the Parties involved in the Expedited Dispute
(“
Informal
Arbitrator
”). If such Parties cannot agree on an
Informal Arbitrator, then the Parties involved shall select one (1)
registered engineer and the Builder shall select one (1) registered
engineer and the engineers so selected by such Parties shall
promptly select an independent, impartial third party qualified to
act as the Informal Arbitrator and resolve the Expedited Dispute.
Within five (5) business days after a Party delivers a Dispute
Notice, the Developer and the Builder shall deliver to the Informal
Arbitrator a written statement of how such Party believes the
Expedited Dispute should be resolved, together with reasonable
supporting documentation of such position (“
Resolution
Notice
”). Within ten (10) business days after receipt
of Resolution Notices from both such Parties, the Informal
Arbitrator shall approve one (1) of the Parties’ Resolution
Notice and shall deliver written notice of such approval to each
Party. The decision of the Informal Arbitrator shall be binding on
all Parties with respect to the applicable Expedited Dispute. All
Parties shall timely cooperate with the Informal Arbitrator in
rendering his or her decision. The party that is not the prevailing
party in the resolution of any Expedited Dispute shall promptly pay
the Informal Arbitrator’s fee, and the prevailing
party’s other fees and costs of any such expedited dispute
resolution process and reasonable attorney’s fees. The term
“prevailing party” means the party who successfully
obtains substantially all of the relief sought by such party or is
successful in denying substantially all of the relief sought by the
other party. The Parties acknowledge that there is a benefit to the
Parties in having work done as expeditiously as possible and that
there is a need for a streamlined method of making decisions
described in this Section so that work is not delayed. A Party and
shall not be entitled to recover from any other Party exemplary,
punitive, special, indirect, consequential or any other damages
other than actual damages (unless the Informal Arbitrator finds
intentional abuse or frustration of the arbitration process) in
connection with an Expedited Dispute.
(b)
Standards of Conduct
. The
Parties agree that with respect to all aspects of the expedited
dispute resolution process contained herein they will conduct
themselves in a manner intended to assure the integrity and
fairness of that process. To that end, if an Expedited Dispute is
submitted to expedited dispute resolution process, the Parties
agree that they will not contact or communicate with the Informal
Arbitrator who was appointed with respect to any Expedited Dispute
either
ex parte
or outside
of the contacts and communications contemplated by this
Article
7
, and the Parties
further agree that they will cooperate in good faith in the
production of evidence in a prompt and efficient manner to permit
the review and evaluation thereof by the other
Parties.
8.
Progress Meetings
. From and
after the date of this LDA and until Substantial Completion of the
Improvements, the Parties shall cause their designated
representatives to meet within five (5) business days following a
request from a Party regarding the status of construction of the
Improvements, scheduling and coordination issues, engineering and
design issues, and other similar issues. Any Party may change its
designated representative under this LDA at any time by written
notice to the other parties. The initial designated representative
for each Party for the purpose of this Section shall be the
individual listed on each Party’s respective signature page
attached hereto. All inquiries, requests, instructions,
authorizations, and other communications with respect to the
matters covered by this LDA shall be made to such representatives.
Any Party may without further or independent inquiry, assume and
rely at all times that the representatives of the other parties
designated hereunder have the power and authority to make decisions
on behalf of such other parties, to communicate such decisions to
the other Party and to bind such Party by his acts and deeds,
unless otherwise notified in writing by the Party designating the
representative. Any Party may change its representative under this
LDA at any time by written notice to the other
Parties.
9.
Builder’s Stormwater Permit
Responsibilities
. During any Overex construction activities
performed on the Builder Lots by Builder and following Substantial
Completion of the Improvements and prior to Builder engaging in any
construction activities upon the Builder Lots, Builder shall obtain
from the Colorado Department of Public Health, Water Quality
Control Division, a Colorado Construction Stormwater Discharge
Permit issued to Builder with respect to the Builder Lots. No fewer
than five (5) business days prior to the initiation of Overex or
construction activities on any Builder Lot, Builder shall deliver a
copy of at least one (1) of the following documents to
Developer:
(i)
Such valid Colorado
Construction Stormwater Discharge Permit for the Builder
Lots;
(ii)
A signed notice of
reassignment of permit coverage (State of Colorado
Form COR030000 or current equivalent), that transfers any
pre-existing permit coverage for the Builder Lots; or
(iii)
A signed State of
Colorado modification form to add the Builder Lots if Builder has
an existing site permit with the State of Colorado within the
Property.
To the
extent required by the County, Builder shall also obtain a
Stormwater Quality Permit issued to Builder by the County for the
Builder Lots. Builder shall be responsible to obtain and maintain
any State of Colorado dewatering permits if required for
Builder’s further construction within the Builder Lots. If
requested by Developer, Builder shall execute a Notice of Property
Conveyance and Change in Responsibility for the Colorado Discharge
Permit held by Developer or an affiliated entity with respect to
the Property. In all cases, Builder shall obtain from the Colorado
Department of Public Health & Environment Water Quality Control
Division, a Notice of Property Conveyance and Change in
Responsibility on a form acceptable to the Colorado Department of
Public Health & Environment Water Quality Control Division
executed by Builder, for the Colorado Stormwater Discharge Permit
held by Developer with respect to the Builder Lots prior to any
construction by Builder on the Builder Lots.
(b)
Developer’s Stormwater
Permit responsibilities
. Developer shall obtain and comply
with all necessary permits related to stormwater and erosion
control from all Approving Authorities, in relation to the
construction, repair, and maintenance of the
Improvements.
10.
Notices and Communications
. All
notices, statements, demands, requirements, approvals or other
communications and documents (“
Communications
”)
required or permitted to be given, served, or delivered by or to
any Party or any intended recipient under this LDA shall be in
writing and shall be given to the addresses set forth in this
Section
10
(“
Notice
Address
”). Communications to a Party shall be deemed
to have been duly given (i) on the date and at the time of
delivery if delivered personally to the Party to whom notice is
given at such Party’s Notice Address; or (ii) on the date and
at the time of delivery or refusal of acceptance of delivery if
delivered or attempted to be delivered by an overnight courier
service to the Party to whom notice is given at such Party’s
Notice Address; or (iii) on the date of delivery or attempted
delivery shown on the return receipt if mailed to the Party to whom
notice is to be given by first-class mail, sent by registered or
certified mail, return receipt requested, postage prepaid and
properly addressed to such Party at such Party’s Notice
Address; or (iv) on the date and at the time shown on the
facsimile or electronic mail message if telecopied or sent
electronically to the number or address designated in such
Party’s Notice Address and receipt of such telecopy or
electronic mail message is electronically confirmed. The Notice
Addresses for the Developer is as follows:
To
Developer:
PCY Holdings,
LLC
Attention:
Mark Harding
34501 E.
Quincy Ave.
Bldg. 34,
Box 10
Watkins,
Colorado 80137
Telephone:
(303) 292-3456
Facsimile:
(303) 292-3475
E-mail:
mharding@purecyclewater.com
with a
copy to:
Fox
Rothschild LLP
1225
17
th
Street, Suite 2200
Denver, CO
80202
Attention:
Rick Rubin, Esq.
Telephone:
(303) 292-1200
Email:
rrubin@foxrothschild.com
To
Builder:
Taylor
Morrison of Colorado, Inc.
1420 West
Canal Court, Suite 170
Littleton,
Colorado 80120
Attention:
Tom Hennessy, Division President
Telephone:
(303) 325-2426
E-mail:
thennessy@taylormorrison.com
with a
copy
to:
Brier,
Irish, Hubbard & Erhart P.L.C.
2400 East
Arizona Biltmore Circle, Suite 1300
Phoenix, AZ
85016
Attn: Jeff
Hubbard
Telephone:
(602) 522-0160
Facsimile:
(602) 522-3945
E-mail:
jhubbard@bihlaw.com
11.
Attorneys’ Fees
. Except
as provided in
Section
7(a)
, should any action be
brought in connection with this LDA, including, without limitation,
actions based on contract, tort or statute, the prevailing Party in
such action shall be awarded all costs and expenses incurred in
connection with such action, including reasonable attorneys’
fees. The provisions of this Section shall survive the expiration
or termination of this LDA.
12.
Further Acts
. Each of the
Parties hereto shall execute and deliver all such documents and
perform all such acts as reasonably necessary, from time to time,
to carry out the matters contemplated by this LDA.
13.
No Partnership; Third Parties
.
It is not intended by this LDA to, and nothing contained in this
LDA shall, create any partnership, joint venture or other
arrangement among the Parties hereto. No term or provision of this
LDA is intended to, or shall, be for the benefit of any person,
firm, organization or corporation not a Party hereto, and no such
other person, firm, organization or corporation shall have any
right or cause of action hereunder.
14.
Entire Agreement; Headings for
Convenience Only; Not to be Construed Against Drafter; No Implied
Waiver
. This LDA and all other written agreements among the
Parties constitute the entire agreement among the Parties hereto
pertaining to the subject matter hereof. No change or addition is
to be made to this LDA except by written amendment executed by the
Parties. The headings, captions and titles contained in this LDA
are intended for convenience of reference only and are of no
meaning in the interpretation or effect of this LDA. This LDA shall
not be construed more strictly against one (1) Party than another
merely by virtue of the fact that it may have been initially
drafted by one (1) of the Parties or its counsel, since all Parties
have contributed substantially and materially to the preparation
hereof. No failure by a Party to insist upon the strict performance
of any term, covenant or provision contained in this LDA, no
failure by a Party to exercise any right or remedy under this LDA,
and no acceptance of full or partial payment owed to a Party during
the continuance of any default by the other Party(ies), shall
constitute a waiver of any such term, covenant or provision, or a
waiver of any such right or remedy, or a waiver of any such default
unless such waiver is made in writing by the Party to be bound
thereby. Any waiver of a breach of a term or a condition of this
LDA shall not prevent a subsequent act, which would have originally
constituted a default under this LDA, from having all the force and
effect of a default.
15.
Governing Law
. This LDA is
entered into in Colorado and shall be construed and interpreted
under the law of the State of Colorado without giving effect to
principles of conflicts of law which would result in the
application of any law other than the law of the State of
Colorado.
16.
Severability
. If any provision
of this LDA is declared void or unenforceable, such provision shall
be severed from this LDA and shall not affect the enforceability of
the remaining provisions of this LDA.
17.
Assignment; Binding Effect
.
This LDA shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and permitted
assigns. Neither Builder or Developer may assign any of its rights
or obligations under this LDA without the prior written consent of
the other Party(ies), which consent may be withheld in each
Party’s sole and absolute discretion; provided, however,
that:
(a)
Builder may assign,
without consent, its rights under this LDA in full, but not in
part: (i) to a third party which acquires all of Builder’s
Builder Lots, or (ii) to an entity that controls, is controlled by,
or under common control with, Builder; provided further, however
that Developer approves the form of assignment, which approval
shall be in Developer’s reasonable discretion;
and
(b)
Developer may
assign, without consent, its rights under this LDA: (i) to an
entity that controls, is controlled by, or under common control
with, Developer; (ii) to any entity that acquires all or
substantially all of the Developer’s interests in the Builder
Lots.
18.
Counterparts; Copies of
Signatures
. This LDA may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one (1) and the same instrument.
The signature pages from one (1) or more counterparts may be
removed from such counterparts and such signature pages all
attached to a single instrument so that the signatures of all
Parties may be physically attached to a single document. This LDA
may be executed and delivered by facsimile or by electronic mail in
portable document format (.pdf) or similar means and delivery of
the signature page by such method will be deemed to have the same
effect as if the original signature had been delivered to the other
party. Upon execution of this LDA by Developer and Builder,
Developer shall provide a fully executed copy of this LDA to
Builder for its records.
19.
Time of the Essence
. Time is of
the essence for performance or satisfaction of all requirements,
conditions, or other provisions of this LDA, subject to any
specific time extensions set forth herein.
20.
Computation of Time Periods
.
All time periods referred to in this LDA shall include all
Saturdays, Sundays and holidays, unless the period of time
specifies business days. If the date to perform any act or give a
notice with respect to this LDA shall fall on a Saturday, Sunday or
national or state holiday, the act or notice may be timely
performed on the next succeeding day which is not a Saturday,
Sunday or a national or state holiday.
21.
Remedies
.
(a)
Except as
hereinafter provided with regard to Expedited Disputes and the
self-help remedy under Section 4.6, if any Party is in default of
any of its obligations under this LDA beyond any applicable notice
or cure periods, the other Party(ies) may avail itself to any
rights and remedies available at law and equity, but may only
recover its actual, out-of-pocket damages (excluding any
incidental, consequential, speculative, punitive or lost profits
damages) incurred as a result of such default. For Expedited
Disputes, the sole and exclusive remedy of the Parties is set forth
in Section 7 of this LDA, and for Developer Defaults, the sole and
exclusive remedy of the Parties is set forth in Section 4.6 of this
LDA.
(b)
In addition to the
remedies permitted under
Section 21.1
, any claim by
Developer against Builder for breach of Builder’s obligation
hereunder to pay of any portion of the Deferred Purchase Price,
together with simple interest at the rate of 12% per annum from the
date such payment is due and payable, and all costs and expenses
including reasonable attorneys' fees awarded to Developer in
enforcing any payment in any suit or proceeding under this LDA,
shall constitute a lien ("
Lien
")
against the applicable Phase of Builder Lots to which the payment
pertains until paid, effective upon the recording of a notice of
lien with respect thereto in the Office of the Clerk and Recorder
of the County; provided, however, that any such Lien shall be
subject and subordinate to (i) liens for taxes and other public
charges which by applicable law are expressly made superior, and
(ii) all liens recorded in the Office of the Clerk and Recorder of
the County prior to the date of recordation of said notice of lien.
All liens recorded subsequent to the recordation of the notice of
lien described herein shall be junior and subordinate to the Lien.
The notice of lien will be signed and acknowledged by Developer and
will contain the following: (a) a statement of all amounts due and
payable; (b) a description sufficient for identification of the
applicable Phase of Builder Lots to which the notice relates; (c)
the name of the Builder as owner of such Builder Lots; and (d) the
name and address of the Developer causing the notice to be
recorded. Developer has the right to enforce the Lien by
foreclosing the Lien against the applicable Phase of Builder Lots
under the prevailing Colorado law relating to the foreclosure of
realty mortgages. Upon the timely curing by the defaulting Builder
of any default for which a notice of lien was recorded, the
Developer shall record an appropriate release of such notice of
lien and Lien. The sale or transfer of a Builder Lot by Builder
does not affect the Lien.
22.
Jury Waiver
. TO THE EXTENT
PERMITTED BY LAW, THE PARTIES HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVE,
RELINQUISH AND FOREVER FORGO THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THE PROVISIONS OF THIS LDA.
[SIGNATURE PAGE
FOLLOWS]
(Sky
Ranch Lot Development Agreement)
F-23
IN
WITNESS WHEREOF, the Parties have executed this LDA as of the
Effective Date first set forth above.
DEVELOPER:
PCY
HOLDINGS, LLC
a
Colorado limited liability company
By:
___________________________________
Name:
___________________________________
Title:
___________________________________
Designated
Representative: ____________________
(Sky
Ranch Lot Development Agreement)
F-24
BUILDER:
TAYLOR
MORRISON, INC.,
a
Colorado Corporation
By:
___________________________________
Name:
___________________________________
Title:
___________________________________
Builder’s Builder
Lots
:
______________________________________________________
______________________________________________________
______________________________________________________
Designated
Representative: ____________________
(Sky
Ranch Lot Development Agreement)
F-25
List of Exhibits
Exhibit
A:
|
Concept
Plan, Takedowns, Phases - Description of Property
|
Exhibit
B:
|
List of
Plans
|
Exhibit
C:
|
Required
Insurance
|
Exhibit
D:
|
Finished
Lot Standard
|
Exhibit
E:
|
Construction
Schedule
|
Exhibit
F:
|
Initial
Budget
|
Exhibit
G:
|
Wet
Utilities – Phased
|
Exhibit
H:
|
Letter
of Credit
|
Exhibit
I:
|
Joint
Improvements Memorandum
|
|
|
|
|
|
|
|
|
|
|
(Sky
Ranch Lot Development Agreement)
F-26
Exhibit
A
to
Lot
Development Agreement
(Description
of Property for Each Applicable Phase)
Exhibit
B
to
Lot
Development Agreement
(List
of Plans for Each Applicable Phase)
Improvements to be Constructed by
Developer
[List
specific work to be performed]
Exhibit
C
to
Lot
Development Agreement
(Required
Insurance)
Developer
or the Substitute Constructing Party (as applicable) shall maintain
the amounts and types of insurance described below and shall cause
the Service Providers to maintain such coverages from insurance
companies licensed to do business in the State of Colorado having a
Best’s Insurance Report Rating of A/VI or better covering the
risks described below:
A.
Commercial General
Liability Insurance (including premises, operations, products,
completed operations, and contractual liability coverages) in an
amount not less than One Million Dollars ($1,000,000.00) per
occurrence, One Million Dollars ($1,000,000.00) personal injury and
advertising injury, and Two Million Dollars ($2,000,000.00) General
Aggregate.
B.
Automobile
Liability Insurance for all motor vehicles operated by or for
Developer or Substitute Constructing Party, including owned, hired,
and non-owned autos, with minimum Combined Single Limit for Bodily
Injury and Property Damage of One Million Dollars ($1,000,000.00)
for each occurrence.
C.
Workers
Compensation Insurance for all employees of Developer or Substitute
Constructing Party as required by law, to cover the applicable
statutory limits in the State of Colorado and employer’s
liability insurance with limits of liability of not less than One
Million Dollars ($1,000,000.00) for bodily injury by accident (each
accident) and One Million Dollars ($1,000,000.00) for bodily injury
by disease (each employee).
D.
With respect to
Service Providers that provide professional services (e.g.,
engineers), professional liability insurance, including prior acts
coverage sufficient to cover any and all claims arising out of the
services, or a retroactive date no later than the date of
commencement of the services, with limits of not less than One
Million Dollars ($1,000,000.00) per claim and Two Million Dollars
($2,000,000.00) annual aggregate. The professional liability
insurance shall be maintained continuously during the term of the
LDA and so long as the insurance is commercially reasonably
available, for a period not less than the Government Warranty
Period. The professional liability insurance required by this
paragraph shall not contain any exclusions or limitations
applicable to residential projects.
The
following general requirements shall apply to all insurance
policies described in this Exhibit.
1.
All liability
insurance policies, except workers compensation insurance, shall be
written on an occurrence basis.
2.
All insurance
policies required hereunder except Workers Compensation and
Employers Liability shall: (i) name the Parties as
“additional insureds” utilizing an ACORD form or
equivalent acceptable to Developer or Substitute Constructing Party
(as applicable), excluding, however, insurance policies of Service
Providers who provide professional services whose insurance
policies do not permit the designation of additional insureds;
(ii) be issued by an insurer authorized in the State of
Colorado; and (iii) provide that such policies shall not be
canceled or not renewed, nor shall any material change be made to
the policy without at least thirty (30) days’ prior
written notice to the Parties. Each additional insured endorsement
(or each policy, by reasonably acceptable endorsement) shall
contain a primary insurance clause providing that the coverage
afforded to the additional insureds is primary and that any other
insurance or self-insurance available to any of the additional
insureds is non-contributing. A waiver of subrogation endorsement
for the workers’ compensation coverage shall be provided in
favor of the Parties.
3.
The liability
insurance policies shall provide that such insurance shall be
primary on a non-contributory basis.
4.
Service Providers
shall provide Developer or Substitute Constructing Party (as
applicable) with certificates, or copies of insurance policies if
request by the Developer, evidencing the insurance coverages
required by this Exhibit in the certificate form described in
Item 2
of this
Exhibit, prior to the commencement of any activity or operation
which could give rise to a loss to be covered by such insurance.
Replacement certificates shall be sent to Developer or Substitute
Constructing Party (as applicable), as policies are renewed,
replaced, or modified.
5.
The foregoing
insurance coverage must be maintained in force at all times during
the construction of the Improvements.
Exhibit
D
to
Lot
Development Agreement
(Finished
Lot Standard)
“
Finished
Lot Standard
” means the following improvements on, to
or with respect to the Builder Lots or in public streets or tracts
in the locations as required by all Approving Authorities, and
substantially in accordance with the Plans:
(i)
overlot grading
together with corner pins for each Builder Lot installed in place,
graded to match the specified Builder Lot drainage template within
the Plans (but not any Overex);
(j)
water and sanitary
sewer mains and other required installations in connection
therewith identified in the Plans, valve boxes and meter pits,
substantially in accordance with the Plans approved by the
Approving Authorities, together with appropriate
markers;
(k)
storm sewer mains,
inlets and other associated storm drainage improvements pertaining
to the Builder Lots in the public streets as shown on the
Plans;
(l)
curb, gutter,
asphalt, sidewalks, street striping, street signage, traffic signs,
traffic signals (if any are required by the Approving Authorities),
and other street improvements, in the private and/or public streets
as shown on the Plans;
(m)
sanitary sewer
service stubs if required by the Approving Authorities, connected
to the foregoing sanitary sewer mains, installed into each
respective Builder Lot (to a point beyond any utility easements),
together with appropriate markers of the ends of such stubs, as
shown on the Plans;
(n)
water service
stubs connected to the foregoing water mains installed into each
Builder Lot (to a point beyond any utility easements), together
with appropriate markers of the ends of such stubs, as shown on the
Plans;
(o)
Lot fill in
compliance with the geotechnical engineer’s recommendation,
and with respect to any filled area or compacted area, provide from
a Colorado licensed professional soils engineer a HUD Data Sheet
79G Certification (or equivalent) and a certification that the
compaction and moisture content recommendations of the soils
engineer were followed and that the grading of the respective Lots
complies with the approved grading plans, with overlot grading
completed in conformance with the approving Authorities approved
grading plans within a +/- 0.2’ tolerance of the approved
grading plans; however, the Finished Lot Standard does not include
any Overex;
(p)
all storm water
management facilities as shown in the Plans; and
(q)
Electricity,
natural gas, and telephone service will be installed by local
utility companies. The installations may not be completed at the
time of a Closing, and are not part of the Finish Lot Standard;
provided, however, that: (i) with respect to electric distribution
lines and street lights, Developer will have signed an agreement
with the electric utility service provider and paid all costs and
fees for the installation of electric distribution lines and
facilities to serve the Builder Lots, and all sleeves necessary for
electric, gas, telephone and/or cable television service to the
Builder Lots will be installed; (ii) with respect to gas
distribution lines, Developer will have signed an agreement with
the gas utility service provider and paid all costs and fees for
the installation of gas distribution lines and facilities to serve
the Builder Lots. Developer will take commercially reasonable
efforts to assist Builder in coordinating with these utility
companies to provide final electric, gas, telephone and cable
television service to the residences on the Builder Lots, however,
Builder must activate such services through an end user contract.
Builder acknowledges that in some cases the telephone and cable
companies may not have pulled the main line through the conduit if
no closings of residences have occurred. Notwithstanding the
foregoing, if dry utilities have not been installed upon
substantial completion of the Improvements required by the Finished
Lot Standard, Developer shall be obligated to have contracted for
same and paid all costs and fees payable for such installation.
Unless Developer has contracted for such installation and paid such
costs before the Effective Date, Developer will give Builder notice
when such contracts have been entered and such costs
paid.
The
Finished Lot Improvements do not include (a) the Offsite
Infrastructure, which is addressed separately in Section 5 of the
Agreement, but it does include such other offsite improvements as
are necessary to obtain certificates of occupancy for homes
constructed on the Lots, provided that as aforesaid Seller shall
only be obligated to complete such improvements within a timeframe
so as not to delay issuance of such certificates of occupancy, or
(b) common area landscaping which will be installed when required
by the County or other applicable Authority so as not to delay the
issuance of building permits or certificates of occupancy for
residences constructed by Purchaser on the Lots.
The
Finished Lot Standard does not include Tree Lawns, which is
addressed separately in Section 4.11 of this LDA.
Exhibit
E
to
Lot
Development Agreement
Construction
Schedule
[To be
determined]
(Sky
Ranch Lot Development Agreement)
Exhibit
F
to
Lot
Development Agreement
Budget
[To be
determined]
(Sky
Ranch Lot Development Agreement)
Exhibit
G
to
Lot
Development Agreement
Wet
Utilities
(Sky
Ranch Lot Development Agreement)
Exhibit
H
to
Lot
Development Agreement
Letter
of Credit
(Sky
Ranch Lot Development Agreement)
4
Exhibit
I
to
Lot
Development Agreement
Joint
Improvements Memorandum
[To be
determined]
EXHIBIT G
FORM OF LETTER OF CREDIT
[INSERT BANK NAME]
[INSERT LETTER OF CREDIT DOCUMENT NAME]
[Insert name/address of Escrow Agent]
Gentlemen/Ladies:
1.
At the request and for the account of our
customer,
[Insert Owner name]
("
Owner
"),
[Insert Bank name]
("
Bank
"), hereby establishes in your favor this
[Insert Letter of
Credit Document Name]
("
Letter of
Credit
"). This Letter of
Credit is issued to you pursuant to the terms of that certain Joint
Development Agreement, wherein Owner is an "
Owner
,"
[Insert Contract
Administrator name]
is the
"
Contract
Administrator
," and you are
the "
Escrow
Agen
t" (the
"
Joint
Development Agreement
"). This
Letter of Credit authorizes you to draw on us in amounts which in
the aggregate shall not exceed the "
Stated
Amount
" of _____________
a
nd No/100 Dollars ($_).
2.
You or your duly
authorized successor or transferee (including any replacement
escrow agent and any court holding this Letter of Credit pursuant
to an action) may obtain the funds available under this Letter of
Credit by presentment to us, of your sight draft or drafts drawn on
us in the form set forth as
Attachment
#1
hereto, accompanied by your executed statement certifying
that the amount set forth in the draft is immediately due and
payable pursuant to the Joint Development Agreement and accompanied
by the original of this Letter of Credit and Amendment(s) thereto,
if any.
3.
This letter of
credit may be reduced upon our receipt of a reduction certificate
signed by you and by Owner, in the form of
Attachment
#2
hereto.
4.
We hereby engage
with the beneficiary of this Letter of Credit hereof that draft(s)
drawn and required documents presented in compliance with the terms
contained in this Letter of Credit will be duly honored upon
presentation and delivery toon or before the expiration date
hereof.
5.
Your sight draft
will be honored by payment to you of the draft amount in
immediately available funds within seven (7) days following
presentation. Each draft presented for payment under this Letter of
Credit must be dated as of the date of its presentation to us and
must be marked conspicuously, "Drawn under
[Insert Bank name] [Insert Letter of Credit
Document Name]
No. , accompanied by your certification(s) to
us stating the following:
"I am a duly authorized representative of the
beneficiary of
[Insert Bank name] [Insert
Letter of Credit Document Name]
No.
and
hereby certify that the amount
drawn hereunder represents
funds due under the terms of the Joint Development
Agreement.
6.
You may draw the
full amount of this Letter of Credit or only part of it, in your
discretion, provided that drafts honored by us under this Letter of
Credit shall not exceed the Stated Amount available to you under
this Letter of Credit.
7.
This Letter of
Credit shall expire not earlier than one (1) year after the date
set forth above (“
Initial
Expiration Date
”). If Owner does not deliver to you a
renewal Letter of Credit at least thirty (30) days prior to the
expiration of this Letter of Credit, then, in addition to other
rights available to you under the Joint Development Agreement, you
shall have the right to draw on this Letter of Credit.
[
IF EVERGREEN LOC
: This
Letter of Credit is deemed to be automatically extended without
amendment for 12 months from the Initial Expiration Date stated
above or any future expiration date hereof, as the case may be
(each, a “
Scheduled
Expiration Date
”), unless at least sixty (60) days
prior to the Initial Expiration Date or the then-current Scheduled
Expiration Date, the Bank notifies the beneficiary by registered
mail or courier service that this Letter of Credit will not be
renewed for any such additional period. Any notice of non-renewal
hereunder shall be sent to the beneficiary at the address shown
above or at such other address as the beneficiary may provide to
the Bank in writing, provided that the Bank receives such change of
address not later than ten (10) business days before the deadline
for the non-renewal notice.
8.
We consider this
Letter of Credit to be irrevocable and unconditional (except as
expressly stated herein) under the terms above
mentioned.
9.
Unless otherwise
expressly stated herein, this irrevocable Standby Letter of Credit
is subject to the International Standby Practices 1998,
International Chamber of Commerce Publication No. 590.
Very
truly yours,
[Insert Bank name]
By:
Name:
Its:
ATTACHMENT #1
to
Letter of Credit
|
Drawn
Under
[Insert Bank
name]
|
|
[Insert Letter of Credit Document Name]
|
|
No.
$ U.S.
|
|
Drawn
under
[Insert Bank name] [Insert
Letter of Credit Document Name]
No.
I am a
duly authorized representative of the beneficiary of
[Insert Bank name] [Insert Letter of Credit
Document Name]
No. and hereby certify that the amount
drawn hereunder represents funds due under the terms of the Joint
Development Agreement.
Accordingly, please
pay to the order of the
undersigned,
Dollars
($_________).
[Insert Escrow Agent name]
By:
Name:
Its:
ATTACHMENT #2
to
Letter of Credit
|
[Insert name/address of
Bank]
and
[Insert name/address of Owner]
Ref:
Letter of Credit No. _________________
As
parties to the above referenced Letter of Credit, we request that
the following action(s) be taken as evidenced by our signatures
below:
Reduce the amount
from U.S. $
to
U.S.
Authorization:
[Insert Escrow Agent name]
[Insert Owner name]
By:
Name: Title:
DATE OF ISSUE:
APPLICANT:
____________,
______________
BENEFICIARY:
____________________
____________________
____________________
|
DATE OF EXPIRY:
AMOUNT:
FIRST AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL
ESTATE
(Sky Ranch)
This
First Amendment to Contract for the Purchase and Sale of Real
Estate (‘First Amendment”) is entered into effective as
of August 24, 2017, by and between Taylor Morrison of Colorado,
Inc. a Colorado corporation (“Purchaser”), and PCY
Holdings LLC, a Colorado limited liability company
(”Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on September 20, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This First
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this First Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this First
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Its:
President
Purchaser:
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Its:
Vice President
SECOND AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Second Amendment to Contract for the Purchase and Sale of Real
Estate (‘Second Amendment”) is entered into effective
as of September 19, 2017, by and between Taylor Morrison of
Colorado, Inc. a Colorado corporation (“Purchaser”),
and PCY Holdings LLC, a Colorado limited liability company
)”Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on October 6, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Second
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Second Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this Second
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Its:
President
Purchaser:
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Its:
Vice President
THIRD AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Third Amendment to Contract for the Purchase and Sale of Real
Estate (‘Third Amendment”) is entered into effective as
of October 6, 2017, by and between Taylor Morrison of Colorado,
Inc. a Colorado corporation (“Purchaser”), and PCY
Holdings LLC, a Colorado limited liability company
)”Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on October 13, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Third
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Third Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this Third
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Its:
President
Purchaser:
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Its:
Vice President
FOURTH AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Fourth Amendment to Contract for the Purchase and Sale of Real
Estate (‘Fourth Amendment”) is entered into effective
as of October 13, 2017, by and between Taylor Morrison of Colorado,
Inc. a Colorado corporation (“Purchaser”), and PCY
Holdings LLC, a Colorado limited liability company
)”Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on October 18, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Fourth
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Fourth Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this Fourth
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Its:
President
Purchaser:
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Its:
Vice President
FIFTH AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Fifth Amendment to Contract for the Purchase and Sale of Real
Estate (‘Fifth Amendment”) is entered into effective as
of October 18, 2017, by and between Taylor Morrison of Colorado,
Inc. a Colorado corporation (“Purchaser”), and PCY
Holdings LLC, a Colorado limited liability company
)”Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on October 20, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Fifth
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Fifth Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this Fifth
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Its:
President
Purchaser:
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Its:
Vice President
SIXTH AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Sixth Amendment to Contract for the Purchase and Sale of Real
Estate (‘Sixth Amendment”) is entered into effective as
of October 20, 2017, by and between Taylor Morrison of Colorado,
Inc. a Colorado corporation (“Purchaser”), and PCY
Holdings LLC, a Colorado limited liability company
)”Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on October 31, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Sixth
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Sixth Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this Sixth
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Its:
President
Purchaser:
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Its:
Vice President
SEVENTH AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Seventh Amendment to Contract for the Purchase and Sale of Real
Estate (‘Seventh Amendment”) is entered into effective
as of October 20, 2017, by and between Taylor Morrison of Colorado,
Inc. a Colorado corporation (“Purchaser”), and PCY
Holdings LLC, a Colorado limited liability company
)”Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on November 3, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Seventh
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Seventh Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this Seventh
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Its:
President
Purchaser:
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Its:
Vice President
EIGHTH AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Eighth Amendment to Contract for the Purchase and Sale of Real
Estate (`Eighth Amendment") is entered into effective as of
November 3, 2017, by and between Taylor Morrison of Colorado, Inc.
a Colorado corporation ("Purchaser"), and PCY Holdings LLC, a
Colorado limited liability company ("Seller"), and amends that
certain Contract for Purchase and Sale of Real Estate between
Purchaser and Seller dated effective June 27, 2017 (the
"Agreement"), as follows:
1.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on November 7, 2017.
2.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Eighth
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Eighth Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In
witness whereof, Purchaser and Seller have executed this Eighth
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Name:
Mark Harding
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Name:
Phillip R. Cross
NINTH AMENDMENT
TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
This
Ninth Amendment to Contract for the Purchase and Sale of Real
Estate (“Ninth Amendment”) is entered into effective as
of November 7, 2017, by and between Taylor Morrison of Colorado,
Inc. a Colorado corporation (“Purchaser”), and PCY
Holdings LLC, a Colorado limited liability company
(“Seller”), and amends that certain Contract for
Purchase and Sale of Real Estate between Purchaser and Seller dated
effective June 27, 2017 (the “Agreement”), as
follows:
3.
Due Diligence
Period. The Due Diligence Period is hereby extended and shall
expire on November 10, 2017.
4.
Miscellaneous.
Except as stated herein, the Agreement shall remain in full force
and effect and is hereby ratified and approved. This Ninth
Amendment may be signed in counterpart. Fax copies and
electronically scanned copies of the executed signature pages of
this Ninth Amendment shall be effective and binding upon the
parties as if such signatures were original signatures. Any
capitalized term used herein without definition shall have the
meaning state in the Agreement.
[Balance of Page
Intentionally left Blank; Signature Page Follows]
In witness
whereof, Purchaser and Seller have executed this Ninth
Amendment.
Seller:
PCY
Holdings LLC, a Colorado limited liability company
Name:
Mark Harding
Taylor
Morrison of Colorado, Inc., a Colorado corporation
Name:
Phillip R. Cross
PCY HOLDINGS, LLC
and
KB HOME COLORADO INC.
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky
Ranch)
Table of Contents
1
|
Purchase
and Sale
|
2
|
2
|
Purchase
Price.
|
2
|
3
|
Payment
of Purchase Price
|
3
|
4
|
Seller’s
Title
|
3
|
5
|
Seller
Obligations
|
7
|
6
|
Pre-Closing
Conditions
|
10
|
7
|
Closing
|
11
|
8
|
Closings;
Closing Procedures
|
12
|
9
|
Seller’s
Delivery of Title
|
15
|
10
|
Due
Diligence Period; Acceptance of Property; Release and
Disclaimer
|
16
|
11
|
Seller’s
Representations
|
22
|
12
|
Purchaser’s
Obligations
|
24
|
13
|
Force
Majeure.
|
26
|
14
|
Cooperation
|
27
|
15
|
Fees
|
27
|
16
|
Water
and Sewer Taps; Fees; and District Matters.
|
27
|
17
|
Reimbursements
and Credits
|
29
|
18
|
Name
and Logo
|
29
|
19
|
Renderings
|
30
|
20
|
Communications
Improvements
|
30
|
21
|
Soil
Hauling
|
30
|
22
|
Specially
Designated Nationals and Blocked Persons List
|
31
|
23
|
Assignment
|
31
|
24
|
Survival
|
31
|
25
|
Condemnation
|
31
|
26
|
Brokers
|
32
|
27
|
Default
and Remedies
|
32
|
28
|
General
Provisions.
|
33
|
DEFINITIONS
“
Alternative
Service
” shall have the meaning set forth in Exhibit
C.
“
Architectural
Review Committee
” shall have the meaning set forth in
Section 12(d).
“
Authorities
”
and “
Authority
” shall have the
meaning set forth in the Recitals.
“
BMPs
”
shall have the meaning set forth in Section 28(x).
“
Board
”
shall have the meaning set forth in Section 16(b).
“
CDs
”
shall have the meaning set forth in Section 5(a)(i).
“
Closed
”
shall have the meaning set forth in Section 7.
“
Closing
Date
” shall have the meaning set forth in Section
8(b).
“
Closing
Purchase Price Payment
” shall have the meaning set
forth in Section 2(a).
“
Closing
”
shall have the meaning set forth in Section 7.
“
Communication
Improvements
” shall have the meaning set forth in
Section 20.
“
Communications
”
shall have the meaning set forth in Section 28(j).
“
Completion
Notice
” shall have the meaning set forth in Section
5(b).
“
Confidential
Information
” shall have the meaning set forth in
Section 28(bb).
“
Continuation
Notice
” shall have the meaning set forth in Section
10(a).
“
Contract
”
shall have the meaning set forth in the Recitals.
“
County
Records
” shall have the meaning set forth in Section
5(a)(i).
“
County
”
shall have the meaning set forth in the Recitals.
“
Deposit
”
shall have the meaning set forth in Section 3(a).
“
Design
Guidelines
” shall have the meaning set forth in
Section 12(d).
“
Development
”
shall have the meaning set forth in the Recitals.
“
District
Improvements
” shall have the meaning set forth in
Section 16(b).
“
District
”
shall have the meaning set forth in Section 9(d).
“
Due
Diligence Period
” shall have the meaning set forth in
Section 10(a).
“
Easement
”
shall have the meaning set forth in Section 20.
“
Effective
Date
” shall have the meaning set forth in the
Recitals.
“
Entitlements
”
shall have the meaning set forth in Section 5(a)(i).
“
Environmental
Claim
” shall have the meaning set forth in Section
10(h).
“
Environmental
Laws
” shall have the meaning set forth in Section
10(g).
“
EPA
”
shall have the meaning set forth in Section 10(c).
“
Escalator
”
shall have the meaning set forth in Section 2(b).
“
Feasibility
Review
” shall have the meaning set forth in Section
10(a).
“
Filing
”
and “
Filings
” shall have the
meaning set forth in the Recitals.
“
Final
Approval
” shall have the meaning set forth in Section
5(a)(ii).
“
Final
Plat
” shall have the meaning set forth in Section
5(a)(i).
“
Final
Subdivision Documents
” shall have the meaning set
forth in Section 5(a)(i).
“
Finished
Lot Improvement Deadline
” shall have the meaning set
forth in Section 8(b).
“
Finished
Lot Improvements
” shall have the meaning set forth in
the Recitals.
“
First
Closing
” shall have the meaning set forth in Section
1.
“
Force
Majeure
” shall have the meaning set forth in Section
13.
“
General
Assignment
” shall have the meaning set forth in
Section 8(d)(iii)(9).
“
Good
Funds
” shall have the meaning set forth in Section
2(a).
“
Government
Warranty Period
” shall have the meaning set forth in
Exhibit C, Section 6(a).
“
Governmental
Warranty
” shall have the meaning set forth in Exhibit
C, Section 6(a).
“
Hazardous
Materials
” shall have the meaning set forth in Section
10(g).
“
Homebuyer
Disclosure
” shall have the meaning set forth in
Section 12(e).
“
House
Plans
” shall have the meaning set forth in Section
12(d)(i).
“
Infrastructure
Improvements
” shall have the meaning set forth in
Section 17.
“
Lien
Affidavit
” shall have the meaning set forth in Section
4(a).
“
Lot
”
and “
Lots
” shall have the
meaning set forth in the Recitals.
“
Lotting
Diagram
” shall have the meaning set forth in the
Recitals.
“
Master
Commitment
” shall have the meaning set forth in
Section 4(a).
“
Master
Covenants
” shall have the meaning set forth in Section
4(d).
“
Master
Declaration
” shall have the meaning set forth in
Section 4(d).
“
Metro
District Payments
” shall have the meaning set forth in
Section 16(b).
“
New
Exception Objection
” shall have the meaning set forth
in Section 4(b).
“
New
Exception Review Period
” shall have the meaning set
forth in Section 4(b).
“
New
Exceptions
” shall have the meaning set forth in
Section 4(b).
“
NOI
”
shall have the meaning set forth in Section 28(x).
“
Non-Government
Warranty Period
” shall have the meaning set forth in
Exhibit C, Section 6(b).
“
Non-Government
Warranty
” shall have the meaning set forth in Exhibit
C, Section 6(b).
“
Non-Seller
Caused Exceptions
” shall have the meaning set forth in
Section 4(b).
“
NORM
”
shall have the meaning set forth in Section 10(c).
“
OFAC
”
shall have the meaning set forth in Section 22.
“
Offsite
Infrastructure Escrow Agreement
” shall have the
meaning set forth in Exhibit C.
“
Other
New Exceptions
” shall have the meaning set forth in
Section 4(b).
“
Overex
”
shall have the meaning set forth in Section 10(e).
“
Permissible
New Exceptions
” shall have the meaning set forth in
Section 4(b).
“
Permitted
Exceptions
” shall have the meaning set forth in
Section 9.
“
PIF
Percentage
” shall have the meaning set forth in
Section 9(e).
“
Property
”
shall have the meaning set forth in the Recitals.
“
Public
Improvement Fee
” or “PIF” shall have the
meaning set forth in Section 9(e).
“
Public
Improvements
” shall have the meaning set forth in
Exhibit C, Section 6(a).
“
Punch-List
Items
” shall have the meaning set forth in Section
5(b).
“
Purchase
Price
” shall have the meaning set forth in Section
2.
“
Purchaser
Parties
” shall have the meaning set forth in Section
10(i).
“
Purchaser’s
Geotechnical Reports
” shall have the meaning set forth
in Section 10(e).
“
Purchaser’s
SWPPP
” shall have the meaning set forth in Section
28(x).
“
Purchaser
”
shall have the meaning set forth in the Recitals.
“
Rangeview
”
shall have the meaning set forth in Section 16(a).
“
Records
”
shall have the meaning set forth in Section 3(d)(i).
“
Release
”
shall have the meaning set forth in Section 3(d)(i).
“
Representatives
”
shall have the meaning set forth in Section 28(bb).
“
SDF
”
shall have the meaning set forth in Section
16(c)(iii).
“
SDP
Criteria
” shall have the meaning set forth in Section
12(d).
“
Second
Closing
” shall have the meaning set forth in Section
1.
“
Seller
Caused Exception
” shall have the meaning set forth in
Section 4(b).
“
Seller
Cure Period
” shall have the meaning set forth in
Section 4(b).
“
Seller
Documents
” shall have the meaning set forth in Section
10(a).
“
Seller
Party
” or “
Seller Parties
” shall
have the meaning set forth in Section 10(h).
“
Seller’s
Actual Knowledge
” shall have the meaning set forth in
Section 11(h).
“
Seller’s
Condition Precedent
” shall have the meaning set forth
in Section 6(a).
“
Seller’s
Deed of Trust
” shall have the meaning set forth in
Section 3(d)(i).
“
Seller’s
Note
” shall have the meaning set forth in Section
3(d)(i).
“
Seller’s
Representations
” shall have the meaning set forth in
Section 11.
“
Seller
”
shall have the meaning set forth in the Recitals.
“
SFD
45’ Lots
” shall have the meaning set forth in
the Recitals.
“
Sidewalks
”
shall have the meaning set forth in Exhibit C, Section
5.
“
Sky
Ranch
” shall have the meaning set forth in the
Recitals.
“
Survey
”
shall have the meaning set forth in Section 4(a).
“
SWPPP
”
shall have the meaning set forth in Section 28(x).
“
Takedown
1 Finished Lot Improvement Deadline
” shall have the
meaning set forth in Section 8(b).
“
Takedown
1 Closing Date
” shall have the meaning set forth in
Section 8(b).
“
Takedown
1 Lots
” shall have the meaning set forth in the
Recitals.
“
Takedown
2 Closing Date
” shall have the meaning set forth in
Section 8(b).
“
Takedown
2 Closing
” shall have the meaning set forth in Section
8(b).
“
Takedown
2 Lots
” shall have the meaning set forth in the
Recitals.
“
Takedown
3 Closing Date
” shall have the meaning set forth in
Section 8(b).
“
Takedown
3 Closing
” shall have the meaning set forth in Section
8(b).
“
Takedown
3 Lots
” shall have the meaning set forth in the
Recitals.
“
Takedown
Commitment
” shall have the meaning set forth in
Section 4(b).
“
Takedown
”
shall have the meaning set forth in the Recitals.
“
Tap
Purchase Agreement
” shall have the meaning set forth
in Section 16(a).
“
Third
Closing
” shall have the meaning set forth in Section
1.
“
Title
Company
” shall have the meaning set forth in Section
4(a).
“
Title
Objections
” shall have the meaning set forth in
Section 4(a).
“
Title
Policy
” shall have the meaning set forth in Section
4(a).
“
Tree
Lawns
” shall have the meaning set forth in Exhibit C,
Section 5.
CONTRACT FOR PURCHASE
AND SALE OF REAL ESTATE
THIS
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE (this "
Contract
")
is entered into as of the last date of the signatures hereto (the
"
Effective
Date
"), by and between PCY HOLDINGS, LLC, a Colorado limited
liability company ("
Seller
"),
and KB HOME COLORADO INC., a Colorado corporation ("
Purchaser
").
WHEREAS, Seller is
developing a master planned residential community to be known as
"
Sky
Ranch
" which is located in Arapahoe County, Colorado
(“
County
”).
The Sky Ranch master planned residential community may also be
referred to herein as the "
Development
".
The preliminary concept map for Phase A of the Development is
depicted on
Exhibit A
attached hereto. The Development is being platted in several
subdivision filings and developed in phases. Each subdivision
filing is hereinafter sometimes respectively referred to as a
“
Filing
”
and collectively as “
Filings
”.
WHEREAS, Seller
desires to sell to Purchaser, and Purchaser desires to purchase and
obtain from Seller, approximately 149 platted single family
detached residential lots (individually referred to as a
"
Lot
" and
collectively as the "
Lots
") in
the Development which will be finished in accordance with this
Contract and which will be used for the construction of single
family residential dwellings upon the terms and conditions set
forth in this Contract.
WHEREAS, Seller is
selling residential lots within the Development to multiple
homebuilders, including Purchaser. The Lots to be sold by Seller
and acquired by Purchaser that are located within the Development
shall be hereinafter collectively referred to as the "
Property
."
The Lots will be conveyed at one or more Closings as more
particularly provided herein and each such Closing may be referred
to herein as a “
Takedown.
”
The Lots which are to be conveyed at the first Closing shall be
sometimes hereinafter collectively referred to as the "
Takedown 1
Lots
"; the Lots which are to be conveyed at the second
Closing shall be sometimes hereinafter collectively referred to as
the "
Takedown 2
Lots
"; and the Lots which are to be conveyed at the third
Closing shall be sometimes hereinafter collectively referred to as
the "
Takedown 3
Lots
"; the Lots which are to be conveyed at the fourth
Closing shall be sometimes hereafter collectively referred to as
the "
Takedown 4
Lots
"; the Lots which are to be conveyed at the fifth
Closing shall be sometimes hereafter collectively referred to as
the "
Takedown 5
Lots
"; and the Lots which are to be conveyed at the sixth
Closing shall be sometimes hereafter collectively referred to as
the "
Takedown 6
Lots.
"
WHEREAS, as of the
Effective Date, the Lots have not been subdivided pursuant to a
recorded final subdivision plat. The number and location of the
Lots to be acquired by Purchaser are generally depicted on the
preliminary concept map for Phase A of the Development attached
hereto as
Exhibit A
(the
"
Lotting
Diagram
"). The precise number, dimension and location of the
Lots will be established by the Final Plat (hereafter defined) for
such Lots at the time it is approved by the County and/or any other
relevant governmental authority (collectively, the "
Authorities
"
and each an “
Authority
”).
As of the Effective Date, the parties anticipate that Purchaser
will acquire approximately 149 Lots, of which approximately 103 are
approximately 45 feet wide by approximately 110 feet deep for the
construction of single family detached homes (“
S
FD 45’
Lots
”) and approximately 46 Lots are approximately 50
feet wide by approximately 110 feet deep for the construction of
single-family detached homes (“
SFD 50’
Lots
”).
WHEREAS, the Lots
which are acquired at each Closing will be finished lots and Seller
will construct or cause to be constructed certain infrastructure
improvements for the Lots as described on
Exhibit C
attached hereto (the
"
Finished Lot
Improvements
").
1.
Purchase and
Sale
. The Property
shall be purchased at six (6) Closings. Subject to the terms and
conditions of this Contract, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase from Seller, on or before the
dates set forth in
Section
6(b)
below, the Lots in each
Takedown, as generally depicted on the Lotting Diagram and as
follows:
At the
Takedown 1 Closing (“
First
Closing
”), twenty (25) Lots of which 9 are SFD
45’ Lots and 16 are SFD 50’ Lots;
At the
Takedown 2 Closing (“
Second
Closing
”), twenty-four (25) Lots of which 15 are SDF
45’ Lots and 10 are SFD 50’ Lots;
At the
Takedown 3 Closing (“
Third
Closing
”), twenty-four (25) Lots of which 25 are SFD
45’ Lots and 0 are SFD 50’ Lots;
At the
Takedown 4 Closing (“
Fourth
Closing
”), twenty-four (24) Lots of which 24 are SFD
45’ Lots and 0 are SFD 50’ Lots;
At the
Takedown 5 Closing (“
Fifth
Closing
”), twenty-four (25) Lots of which 25 are SFD
45’ Lots and 0 are SFD 50’ Lots; and
At the
Takedown 6 Closing (“
Sixth
Closing
”), twenty-four (25) Lots of which 5 are SFD
45’ Lots and 20 are SFD 50’ Lots.
Notwithstanding the
foregoing, however, the parties acknowledge and agree that the
parties shall negotiate during the Due Diligence Period to reach
agreement on a mutually acceptable site plan for the Lots and that
the exact number and location of the Lots within each Takedown are
subject to adjustment based upon the approval by the Authorities of
the Final Plat (as hereinafter defined) that includes the Lots to
be acquired by Purchaser at each Takedown. The precise number,
dimension (subject to the provisions of this Contract), location
and legal description of the Lots will be established at the time
the Final Plat for such Lots is approved by the County and/or any
other Authority, and upon approval of each such Final Plat the
parties shall execute an amendment to this Contract setting forth
the legal description of those Lots included in the approved Final
Plat.
The
purchase price to be paid by Purchaser to Seller for each Lot (the
"
Purchase
Price
") shall consist of the Closing Purchase Price Payment
(as hereinafter defined). The Purchase Price for each Lot shall be
calculated as provided in the following Section 2(a) and shall be
subject to adjustment as provided in Section 2(b)
below:
(a)
Purchase Price Payments
. For
each Lot the Purchase Price shall be the “
Closing Purchase
Price Payment
” of Sixty Seven Thousand Five Hundred
and 00/100 Dollars ($67,500.00) for each SFD 45’ Lot and
Seventy Five Thousand and 00/100 Dollars ($75,000.00) for each SFD
50’ Lot, to be paid by Purchaser to the Title Company as
escrow agent for the benefit of Seller at the applicable Closing by
wire transfer or other immediately available and collectible funds
(“
Good
Funds
”) (subject to adjustment as hereinafter provided
in Section 2(b) of this Contract);
(b)
Purchase Price Escalator
. The
Purchase Price of each Lot that is acquired at any Closing after
the First Closing will increase by an amount equal to the amount of
simple interest that would accrue on the Purchase Price for a Lot
for the period elapsing between the date that the First Closing
occurs until the date the applicable Closing occurs, at a per annum
rate equal to two and one-half percent (2.5%) (the
“
Escalator
”).
By way of example and for clarification purposes only, if the
Purchase Price of a Lot at the Closing of the Takedown 1 Lots is
$67,500, then at a subsequent Closing occurring 12 months (365
days) following the date of the closing of the Takedown 1 Lots, the
Purchase Price for a Lot at such subsequent Closing will be
$69,187.50, which is calculated as follows: $67,500 + ($67,500 x
.025) = $69,187.50.
3.
Payment of Purchase
Price
. The Purchase
Price for each of the Lots, as determined pursuant to
Section
2
above, shall be payable as
follows:
(a)
Earnest Money Deposit
. Within
three (3) business days following the Effective Date, Purchaser
shall deliver to the Title Company (as defined in
Section
4(a)
hereof) an earnest money
deposit in the amount of $100,000.00 (“
Initial
Deposit
”). Within three (3) business days following
the expiration of the Due Diligence Period, Purchaser shall deliver
to Title Company an additional earnest money deposit in the amount
$100,000.00 (“
Second
Deposit
”). Within three (3) business days following
Final Approval (as hereinafter defined) of the FDP (as hereinafter
defined), Purchaser shall deliver to Title Company an additional
earnest money deposit in the amount of $200,000.00
(“
Final
Deposit
”). The Title Company will act as escrow agent
and invest the earnest money deposits in a federally insured
institution at the highest money market rate available. The Initial
Deposit, the Second Deposit, the Final Deposit and all interest
earned thereon shall be referred to herein as the "
Deposit
."
The Deposit shall be paid in Good Funds. The Deposit will be
applied to the Closing Purchase Price Payment for the Takedown 6
Lots. If this Contract is terminated prior to the Deposit being
fully applied to the Purchase Price at the last Closing, the
Deposit shall be paid to Seller, except as provided elsewhere
herein.
(b)
Closing Purchase Price Payment
.
That portion of the Purchase Price for each Lot that is identified
as the Closing Purchase Price Payment in Section 2 above shall be
paid by Purchaser to Seller at the Closing of the applicable
Lot.
(a)
Preliminary Title Commitment
.
Within ten (10) business days after the Effective Date, Seller
shall furnish to Purchaser, at Seller’s expense, a current
commitment (the "
Master
Commitment
") for an ALTA Title Policy (“
Title
Policy
”) for the Property issued by Land Title
Guarantee Company ("
Title
Company
") and underwritten by First American Title Insurance
Company, together with copies of the instruments listed in the
schedule of exceptions in the Master Commitment. If the Master
Commitment contains any exceptions from coverage which are
unacceptable to Purchaser, then Purchaser shall object to the
condition of the Master Commitment in writing within forty-five
(45) days of Purchaser’s receipt of the Master Commitment
together with copies of all documents constituting exceptions to
title (the "
Title
Objections
"). Upon receipt of the Title Objections, Seller
may, at its option and at its sole cost and expense, clear the
title to the Property of the Title Objections. In the event Seller
fails, or elects not to clear the title to the Property of the
Title Objections on or before the date that is ten (10) days before
the expiration of the Due Diligence Period, the Purchaser, as its
sole remedy, may elect before the expiration of the Due Diligence
Period either: (i) to terminate this Contract, in which event the
Deposit shall be promptly returned to Purchaser, Purchaser shall
return to Seller all information and materials received by
Purchaser from Seller pertaining to the Property, and thereafter
the parties shall have no further rights or obligations under this
Contract except as otherwise provided in
Section
12(c)
below; or (ii) to
waive such objections and proceed with the transactions
contemplated by this Contract, in which event Purchaser shall be
deemed to have approved the title matters as to which its Title
Objections have been waived. If Purchaser fails to provide the
Title Objections prior to the expiration of the above-referenced
sixty (60) day period required by this
Section
4
(a)
, Purchaser shall be deemed
to have elected to waive its objections as described in the
preceding clause. If Purchaser fails to notify Seller of its
election to terminate this Contract or waive it objections,
Purchaser shall be deemed to have elected to waive its objections
to any title matter that Seller has failed or elected not to cure.
Seller shall release any monetary lien caused or created by Seller
against the Property with respect to that portion of the Property
to be acquired at a particular Closing, other than non-delinquent
real estate taxes and assessments and Permitted Exceptions, and
such monetary liens shall not constitute Permitted Exceptions (as
hereinafter defined). At each Closing, Seller shall execute and
deliver the Title Company's standard form mechanic's lien affidavit
(the “
Lien
Affidavit
”) in connection with the standard printed
exception for liens arising against the Lots purchased at the
Closing for work or materials ordered or contracted for by Seller,
and to the extent required by the Title Company a commercially
reasonable indemnity agreement (the “
Title Company Indemnity
”),
provided, however, if Purchaser determines during the Due Diligence
Period that the Title Company refuses or is unwilling to delete the
standard printed exception for liens as part of extended coverage
despite Seller’s offer to execute and deliver the Lien
Affidavit and Title Company Indemnity, then Purchaser will have the
right to terminate this Contract on or before the expiration of the
Due Diligence Period whereupon the Deposit will be returned to
Purchaser, or Purchaser may proceed with the Closing in which event
the Title Policy will contain, and the Lots will be conveyed
subject to, the standard printed exception for liens unless the
Title Company thereafter agrees thereafter to delete such lien
exception, however, the Purchaser shall have no further termination
rights if the Title Company does not agree to do so. Seller shall
request that the Takedown Commitment (as hereinafter defined)
provide for the deletion of the other standard printed exceptions
from the Title Policy as part of extended coverage (provided that
Seller's only obligation with respect thereto shall be to provide a
copy of Seller’s existing survey ("
Survey
"), if
any, of the land that contains the Lots, obtain and furnish a plat
certification issued by a licensed surveyor, and to execute the
Title Company's Lien Affidavit with respect to Seller's acts, in
form and substance reasonably acceptable to Seller). Seller has no
obligation to provide a new Survey or to update any existing
Survey.
(b)
Subsequently Disclosed
Exceptions
. Not less than fifteen (15) days prior to the
applicable Closing, in conjunction with Seller’s delivery of
the applicable Completion Notice (hereafter defined), Seller shall
provide the Plat Certification (hereafter defined) and request the
Title Company issue an updated title commitment for that portion of
the Property to be acquired at such Closing (each a "
Takedown
Commitment
"), together with copies of any additional
instruments listed in the schedule of exceptions which are not
reflected in the Master Commitment furnished pursuant to
Section
4
(a)
above or in any prior
Takedown Commitment. Additional items disclosed by a Takedown
Commitment that affect title to the subject Property are referred
to as “
New
Exceptions
”. New Exceptions affecting title to the
subject Property that are approved or deemed approved by the
provisions of this Contract are referred to as “
Permissible New
Exceptions
” and all other New Exceptions are referred
to as “
Other New
Exceptions
”. Purchaser has no right to object to any
Permissible New Exception. Purchaser shall have a period of seven
(7) days from the date of its receipt of such Takedown Commitment
and a copy of the New Exceptions (the "
New Exception
Review Period
") to review and to approve or disapprove any
Other New Exceptions. If the Other New Exception is unacceptable to
Purchaser, Purchaser shall object to the Other New Exception in
writing within seven (7) days from the date of Purchaser’s
receipt of the Takedown Commitment, together with a copy of the New
Exceptions (the "
New Exception
Objection
"). Upon receipt of the New Exception Objection,
Seller shall cure the New Exception Objection (by deletion or, with
Purchasers approval, insuring over or endorsement) to the extent
that such Other New Exception was caused or created by Seller
("
Seller Caused
Exception
"). If the New Exception Objection relates to an
Other New Exception that was not caused by Seller
(“
Non-Seller Caused
Exception
”), Seller may, at its sole discretion, cure
the New Exception Objection, within fifteen (15) days of receipt of
the New Exception Objection (“
Seller Cure
Period
”) and the applicable Closing Date will be
extended to accommodate the Seller Cure Period. In the event Seller
fails, or elects not to cure a Non-Seller Caused Exception within
such fifteen (15) day period, the Purchaser, as its sole remedy,
may elect within five (5) days after the end of the Seller Cure
Period either: (i) to terminate this Contract as to the Lots
affected by such New Exception, in which event the Deposit shall be
returned to Purchaser and the parties shall have no further rights
or obligations under this Contract as to such Lots not theretofore
purchased; or (ii) to waive such objection and proceed with
the acquisition of the Lots in such Takedown, in which event
Purchaser shall be deemed to have approved the New Exception. If
Purchaser fails to notify Seller of its election to terminate this
Contract as to the applicable Lots in accordance with the foregoing
sentences within five (5) days after the expiration of the Seller
Cure Period (i) Purchaser shall be deemed to have elected to waive
its objections as described in the preceding sentences (ii),
and all such items shall be deemed to be Permitted
Exceptions.
(c)
Permitted Exceptions; Additional
Easements
. Seller shall convey title to the Lots included in
each Takedown of the Property to Purchaser at the Closing for such
Takedown subject to the Permitted Exceptions described in
Section
9
hereof. Prior to each such
Closing, Seller shall have the right, subject to the limitations
set forth below and in
Exhibit
B
and provided Seller shall advise and provide copies of
same to Purchaser promptly after Seller becomes aware of same, to
utilize the reservation of rights set forth on
Exhibit B
hereof, to convey additional
easements as Permissible New Exceptions to utility and cable
service providers, governmental or quasi-governmental Authorities,
metropolitan, water and sanitation districts, homeowners
associations or property owners associations or other entities that
serve the Development or adjacent property for construction of
utilities and other facilities to support the Development or such
adjacent property, including but not limited to sanitary sewer,
water lines, electric, cable, broad-band and telephone
transmission, storm drainage and construction access easements
across the Property not yet acquired by Purchaser, allowing Seller
or its assignees the right to install and maintain sanitary sewer,
water lines, cable television, broad-band, electric, telephone and
other utilities on the Property and on the adjacent property owned
by Seller and/or its affiliates, and further, to accommodate storm
drainage from the adjacent property. Such easements shall require
the restoration of any surface damage or disturbance caused by the
exercise of such easements, shall not be located within the
building envelope of any Lot, shall not materially and adversely
affect the value, use or enjoyment of (i) the Lots affected or
the remaining portion of the Property on which such easements are
to be located, or (ii) any adjoining property of
Purchaser.
(d)
Master Covenants
. Prior to the
Takedown 1 Closing, Seller shall, subject to the limitations set
forth below, prepare covenants, conditions and restrictions for the
Development or the portion thereof in which the Property is located
(the "
Master
Declaration
") incorporating architectural and design
standards and guidelines, use limitations and restrictions and
which may establish an owners association or provide that the
District shall administer the Master Declaration, among other
matters, together with such supplemental declarations as may have
been or may be recorded to subject the Property to the provisions
of the Master Declaration (collectively, the "
Master
Covenants
"). Seller shall provide a draft of the Master
Covenants in substantially the form to be recorded to Purchaser for
Purchaser’s review not less than twenty (20) days prior to
the expiration of the Due Diligence Period. If the Master Covenants
contain any provisions which are unacceptable to Purchaser in
Purchaser’s reasonable discretion, Purchaser shall object to
such provisions with particularity in writing within ten (10) days
of receipt of the draft Master Covenants. Upon receipt of such
objection, Seller may, at its option, modify the objectionable
provisions of the Master Covenants within ten (10) days of receipt
of such objection from Purchaser. In the event Seller fails or
elects in its discretion not to modify the objectionable provisions
of the Master Covenants within such ten (10) day period, Purchaser
shall have the right as its sole remedy to elect either: (i) to
terminate this Contract, in which event the Deposit shall be
promptly returned to Purchaser, Purchaser shall return to Seller
all information and materials received by Purchaser from Seller
pertaining to the Property, and thereafter the parties shall have
no further rights or obligations under this Contract except as
otherwise provided in
Section
12(c)
below; or (ii) to waive
any objections to the Master Covenants and proceed with the
transactions contemplated by this Contract, in which event
Purchaser shall be deemed to have approved the Master Covenants as
to which its objections have been waived. If Purchaser fails to
provide written notice to Seller of its objection to the Master
Covenants within ten (10) days of receipt of the draft Master
Covenants as required by this
Section
4
(d)
, Purchaser shall be deemed
to have elected to waive its objections as described in the
preceding clause and the Master Covenants shall be deemed to be
Permitted Exceptions. Seller shall be permitted to revise the
Master Covenants at any time before the initial Closing under this
Contract without the consent of Purchaser, provided that any such
revisions have no material adverse effect on the Lots acquired or
to be acquired by Purchaser, the Purchaser’s approved product
or the Purchaser’s cost to construct such approved product on
such Lots, and Seller will give Purchaser notice at least five (5)
business days prior to the First Closing of any revisions to the
Master Covenants.
(e)
Title Policy
. Within a
reasonable time after each Closing, Seller, at its expense, shall
cause the Title Company to deliver a Title Policy, insuring
Purchaser’s title to the Property conveyed at such Closing,
pursuant to the applicable Takedown Commitment and subject only to
the Permitted Exceptions, and shall pay the premium for the basic
policy at such Closing. The Title Policy shall provide insurance in
an amount equal to the Purchase Price for all Lots purchased at
such Closing. Each Title Policy shall include extended coverage
subject to the provisions of Section 4(a) hereof. At each Closing,
Seller shall offer to execute and deliver a Lien Affidavit and
Title Company Indemnity, and shall obtain and furnish a plat
certification issued by a licensed surveyor, as provided in
Section
4
(a)
above. Purchaser shall pay
any fees charged by the Title Company to delete the standard
pre-printed exceptions. Purchaser shall pay for the premiums for
any endorsements requested by Purchaser, except that Seller shall
pay for any endorsements that Seller agrees to provide in order to
cure a Title Objection.
5.
Seller
Obligations
. Seller shall have
the following obligations:
(a)
Entitlements
.
(i)
Existing
Entitlements
. The County previously approved the following
entitlements for the Property (collectively, the
“
Existing
Entitlement Documents
”): a Preliminary Plat and a
Preliminary Development Plan. Seller shall provide a copy of the
Existing Entitlement Documents to Purchaser as part of the Seller
Documents.
(ii)
Platting
and Entitlements
. Seller shall be responsible, at Seller's
sole cost and expense, for preparing and processing in a
commercially reasonable manner and timeframe, and diligently
pursuing and obtaining Final Approval (as defined below) from the
County and any other appropriate Authority and recording in the
records of the Clerk and Recorder of the County (the "
County
Records
"), as may be required, the following for each
respective Takedown: (i) a specific development plan that includes
the Property (“
SDP
”);
(ii) an administrative site plan (“
ASP
”)
and final subdivision plat or plats for each Filing within the
Property (each a "
Final
Plat
"); (iii) the public improvement construction plans
relating to such Final Plat ("
CDs
"); and
(iv) the development or subdivision improvement agreement
associated with such Final Plat and other similar documentation
required by the Authorities in connection with approval of such
Final Plat (collectively, such documents are referred to, with
respect to each Takedown, as the "
Final Subdivision
Documents
" and together with the Existing Entitlement
Documents, collectively, the "
Entitlements
"
for such Takedown). The Final Subdivision Documents shall
substantially comply with the Preliminary Development Plan and the
Lotting Diagram, shall provide that each of the SFD 45’ Lots
are approximately 45 feet wide by approximately 110 feet deep, and
the SFD 50’ Lots are approximately 50 feet wide by
approximately 110 feet deep, with a building envelope on SFD
45’ Lots that is not less than 35’ wide and not less
than 40’ wide on SFD 50’ Lots (after taking into
consideration applicable setbacks), and the Final Subdivision
Documents shall not impose new or additional requirements upon
Buyer the cost of which is expected to exceed $3,000 for any Lot.
Seller shall use commercially reasonable efforts to have the
Entitlements for each Takedown, respectively, approved by the
Authorities and recorded as necessary in the County Records with
applicable governmental or third-party appeal or challenge periods
applicable to an approval decision of the Board of Commissioners or
Planning Commission having expired without any appeal then-pending
(“
Final
Approval
”). Once Seller obtains Final Approval of an
SPD and other Entitlements for a Takedown, Seller shall maintain
same in full force and effect for the term of this Contract and
provide to all applicable Authorities any subdivision improvement
guarantees or similar financial assurances required with respect to
such Entitlements. If Final Approval of the Entitlements applicable
to the Takedown 1 Lots has not been achieved as aforesaid on or
before nine (9) months after the Effective Date, then Seller, in
its discretion, shall have the right to extend the date for
obtaining such Final Approval for a period not to exceed six (6)
months after the initial nine (9) month period by providing written
notice to Purchaser prior to the expiration of such nine (9) month
period. If Seller shall not secure such Final Approval of the
Takedown 1 Lots by the expiration of the initial nine (9) month
period and shall fail to exercise such extension, each party shall
thereupon be relieved of all further obligations and liabilities
under this Contract, except as otherwise provided herein, and the
Deposit shall be returned to Purchaser. If Seller extends the time
period for obtaining Final Approval of the Takedown 1 Lots, then
during such extended time period Seller shall use commercially
reasonable efforts to obtain Final Approval of such Entitlements,
and failing which, Seller shall not be in default of its
obligations under this Contract (unless Seller failed to use
commercially reasonable efforts to obtain Final Approval of such
Entitlements), but this Contract shall terminate in which case each
party shall thereupon be relieved of all further obligations and
liabilities under this Contract, except as otherwise provided
herein, and the Deposit shall be returned to Purchaser. The timing
for Final Approval of the Entitlements for Takedowns after Takedown
1 is as set forth in Section 6(b)(i) hereof. During the approval
process, Seller shall keep Purchaser reasonably informed of the
process and the anticipated results therefrom and provide Purchaser
with reasonable documentation relating to same. Purchaser, at no
material cost to Purchaser (other than costs incurred to obtain
services that could reasonably be performed or provided in-house),
shall cooperate with Seller in Seller’s efforts to obtain
Final Approval of the Entitlements by the County.
(ii)
Lot
Minimums for each Takedown
. The Final Plat(s) for the
Property and the Lots are anticipated to be in a form which is
substantially consistent, with respect to the number of Lots, with
the Lotting Diagram, subject to changes made necessary by the
Authorities and/or final engineering decisions which are necessary
to properly engineer, design, and install the improvements in
accordance with the requirements of the County and other applicable
Authorities.
(b)
Finished Lot
Improvements
.
(i)
Seller shall cause
to be Substantially Completed (as hereinafter defined) prior to
each applicable Closing the Finished Lot Improvements (as defined
in
Exhibit C
),
with the exception of Punch-List Items (hereafter defined), for the
Lots being purchased and acquired by Purchaser at each Closing.
Notwithstanding the foregoing and the agreement that Seller only
need to Substantially Complete the Finished Lot Improvements prior
to each applicable Closing, all of the Finished Lot Improvements
remain Seller’s responsibility and same are to be completed
by Seller in accordance with applicable laws, codes, regulations
and governmental requirements for the Property. Seller will notify
Purchaser when the Finished Lot Improvements have been
Substantially Completed. Seller shall give Purchaser ten (10)
business days written notice (“
Completion
Notice
”) when Seller believes that it has
Substantially Completed the Finished Lot Improvements for the Lots
to be acquired at a Takedown, and the parties shall then conduct a
walk-through inspection of the applicable Lots to confirm whether
or not the Finished Lot Improvements are Substantially Complete and
can be used for their intended purpose, and prepare a punch-list of
any non-material items that have not been Substantially Completed
and the effect of which the County will not withhold building
permits for the Lots to be acquired at such Closing due to failure
of the same to have been completed (the “
Punch-List
Items
”). Seller shall use good faith efforts to
complete any unfinished Punch-List Items before the scheduled
Closing. Notwithstanding the foregoing or anything to the contrary
set forth herein, Seller may elect to Substantially Complete such
unfinished Punch-List Items within ninety (90) days after the
scheduled Closing. Seller’s obligation to Substantially
Complete any Punch-List Items (as well as Seller’s obligation
to complete all Finished lot Improvements), shall survive the
Closings. After obtaining Final Approval of all necessary
Entitlements for the applicable Lots, Seller agrees to commence and
diligently pursue Substantial Completion of the Finished Lot
Improvements, subject to Force Majeure, and so long as Purchaser
does not otherwise default under this Contract beyond the any
applicable cure periods set forth in this Contract. Notwithstanding
anything to the contrary including any Punch-List Items, if an
Authority grants preliminary approval or construction acceptance to
any of the Finished Lot Improvements, or if the engineer issues a
certification with respect to the grading, fill and compaction in
accordance with item (g) of
Exhibit C
,
then for the purposes of the walk-through inspection and
preparation of the Punch List Items, the Finished Lot Improvements
for which an Authority grants preliminary approval or construction
acceptance or for which the engineer issues a certification with
respect to the grading, fill and compaction in accordance with item
(g) of
Exhibit C
will be presumed to have been Substantially Completed in accordance
with applicable laws, codes, regulations and governmental
requirements for the Property, subject to completion of any punch
list provided by the approving Authority and both the Governmental
Warranty and Non-Government Warranty as described in Section 6 of
Exhibit
C
.
(ii)
Definition of
Substantial Completion. “
Substantial Completion
” or
“
Substantially
Completed
” or “
Substantially Complete
” with
respect to the Finished Lot Improvements (or applicable component
thereof) shall mean and be deemed to have occurred when all of the
following have occurred with respect to the Finished Lot
Improvements (or applicable component thereof):
(1)
Seller has
completed or corrected all punchlist items provided by the
Authorities such that same have been accepted and approved by the
Authorities and the Punch-List Items prepared by the Parties
affecting the Finished Lot Improvements (or applicable component
thereof) to the extent required so that Purchaser is not precluded
from obtaining from the Authorities building permits for houses
constructed, or to be constructed, on any Lots solely as a result
of items (or applicable component thereof) on either punchlist not
being complete;
(iii)
The Finished Lot
Improvements (or applicable component thereof) have been installed
pursuant and in accordance with the CDs and the applicable
requirements of the Authorities to the extent required so that
Purchaser is not precluded from obtaining from the Authorities
building permits for houses constructed, or to be constructed, on
any Lots solely as a result of such Improvements (or applicable
component thereof) not being complete;
(iv)
Any Finished Lot
Improvements (or applicable component thereof) that are intended to
be dedicated to or accepted by an Approving Authority shall have
been inspected and preliminarily accepted by the applicable
Authority (subject to the Government Warranty Period (as defined
below)); except that those Finished Lot Improvements that are (x)
to be phased, if any, as set forth in the Entitlements, or (y) not
necessary or required by the Authority to occur prior to issuance
of a building permit or certificate of occupancy for Homes on the
Lots, consisting of (i) certain landscape, irrigation and park
improvements (ii) installation of monuments, site signage, street
lighting, common area fencing, mailboxes and other site amenities,
if any; (iii) dry utilities (gas, electric, telephone and cable
television services) as described in Exhibit C; (iv) a final lift
of asphalt on streets; (v) installation of common area improvements
and subsequent dedications of such improvements, for example,
trails, open space improvements and related landscape, which will
be completed when required by the County; (vi) any other
infrastructure improvements required by the Entitlements that are
required for the issuance of certificates of occupancy for
residences, but not building permits, on the Lots (collectively,
the “
Additional
Improvements
”), will not be required to achieve
Substantial Completion, but Seller shall nevertheless be required
to complete construction and obtain acceptance of such Additional
Improvements by the applicable Authority after Substantial
Completion at such time as is required by the applicable
Authorities and so that Purchaser is not precluded from obtaining
from the Authorities building permits or certificate of occupancy
for houses constructed, or to be constructed, on any Lots solely as
a result of such Additional Improvements (or applicable component
thereof) not being complete.
(v)
No mechanics’
or materialmen’s liens shall have then been filed against any
of the Lots with respect to the Finished Lot Improvements and lien
waivers have been obtained from the contractors that constructed
the Finished Lot Improvements (or applicable portion thereof), or
the Seller has obtained a bond to insure over any such
mechanics’ or materialmen’s liens.
(vi)
With respect to any
Improvements that are required by the CD’s or other
Entitlements and the applicable requirements of the Authorities or
that are required by the subdivision improvement agreement
applicable to the Lots but which are not addressed as part of or
included in the definition of the Finished Lot Improvements, and
any other improvements which are not required for the issuance of
building permits but which are required by the Authorities so that
homes and other improvements constructed by Purchaser on the Lots
are eligible for the issuance of certificates of occupancy for
homes, the Seller shall complete or cause the completion of such
other improvements, to the extent required by the Authorities, so
as not to delay the issuance of certificates of occupancy for homes
constructed by Purchaser on the Lots.
(vii)
The Alternative
Service (as defined in Exhibit C) has been completed as necessary
to service the Lots being purchased subject to the provisions of
Exhibit C.
6.
Pre-Closing
Conditions
.
(a)
Seller’s Conditions
.
Seller’s obligations to close the First Closing is contingent
upon satisfaction of the following condition ("
Seller's Condition
Precedent
"), which shall be in accordance with
Seller’s requirements to be pursued by Seller in good faith
using commercially reasonable efforts:
(i)
That Purchaser and
other homebuilders are under contract to purchase at least 200 of
the residential lots in the Development. If for any
reason,
other than
Seller’s fault or exercise of its discretion, this Seller's
Condition Precedent is not satisfied on or before the date required
for Final Approval of the Entitlements under Section 5(a), Seller
may terminate this Contract (in which event the Deposit shall be
returned to Purchaser), or elect, by written notice to Purchaser at
least ten (10) days after the date required for Final Approval of
the Entitlements under Section 5(a), to waive the condition and
proceed to the First Closing, or elect to extend the applicable
deadline for a period of time not to exceed 90 days by giving
written notice to Purchaser on or before the respective deadline
set forth above, during which time Seller shall use commercially
reasonably efforts to cause such condition to be
satisfied.
(b)
Purchaser’s Conditions
.
It shall be a condition precedent to Purchaser’s obligation
to close each Takedown, that the following conditions have been
satisfied:
(i) Final
Approval of the Entitlements for each respective Takedown by the
County and all other applicable Authorities and recordation of such
Entitlements in the County Records as may be required by the County
on or before a date which is sufficient to allow Seller to satisfy
Purchaser’s condition precedent in Section 6(b)(ii) below,
and such Entitlements remain in force and effect on the applicable
Closing Date;
(ii) Substantial
Completion of the Finished Lot Improvements for the applicable
Takedown on or before the applicable Finished Lot Improvement
Deadline (as hereinafter defined);
(iii) Seller’s
representations and warranties set forth herein shall be materially
true and correct as of each Closing;
(iv) The
Title Company shall be committed to issue to Purchaser, as soon as
reasonably possible following each Closing Date, the applicable
Title Policy, subject only to the Permitted Exceptions accepted by
Purchaser in accordance with the provisions of this
Contract.
(v) There
shall have been no material adverse change to the
Property.
(vi)
Seller has obtained and delivered to Purchaser and Title Company a
Plat Certification for the Final Plat.
(vii)
If Purchaser delivered its proposed House Plans (hereafter defined)
to Seller, receipt of written approval of same from Seller as
provided in Section 12(d)(i) of this Contract.
(viii)
The parties shall have agreed upon the form of Homebuyer
Disclosure.
If the
foregoing Purchaser’s conditions precedent are not satisfied
on or before each respective Closing Date, Purchaser may as its
sole remedy hereunder terminate this Contract as to such Takedown
and any remaining Takedowns by written notice to Seller, delivered
on or before the applicable Closing Date, in which case each party
shall thereupon be relieved of all further obligations and
liabilities under this Contract, except as otherwise provided
herein, and the Deposit shall be returned to Purchaser, but if the
failure of Purchaser’s conditions precedent are as a result
of Seller’s default hereunder, Purchaser also shall have the
rights and remedies of Section 27(b). Failure to give notice as
described above shall be an irrevocable waiver of Purchaser’s
right to terminate this Contract as to the affected Takedown
pursuant to this
Section
6
(b)
. A Seller notice to extend
given to Purchaser pursuant to Section 6(a) above has precedence
and controls over any termination notice given by Purchaser to
Seller pursuant to this Section 6(b).
7.
Closing
. "
Closing
"
shall mean the delivery to the Title Company of all applicable
documents and funds required to be delivered pursuant to
Section
8
hereof,
unconditional authorization of the Title Company to disburse,
deliver and record the same, and recording of the deed conveying
the Lots to Purchaser. The purchase of Lots at the closing of a
Takedown shall be deemed to be "
Closed
" when
the documents and funds required to be delivered pursuant to
Section
8
hereinafter have
been delivered to the Title Company, and the Title Company agrees
to unconditionally to disburse, deliver and record the same, and
the deed has been recorded.
8.
Closings; Closing
Procedures
.
(a)
On each respective
Closing Date, Purchaser shall purchase the number of Lots that
Purchaser is obligated to acquire hereunder in the applicable
Takedown.
(b)
Closing Dates
. The date of the
First Closing of the purchase and sale of the Takedown 1 Lots shall
be the date that is five (5) business days after the parties have
completed the list identifying the Punch-List Items have been
determined pursuant to Section 5(B), all of which is to occur after
Seller provided Purchaser with the Completion Notice, Plat
Certification and Takedown Commitment for the Takedown 1 Lots. If
substantial completion of the Finished Lot Improvements with
issuance of the Completion Notice for the Takedown 1 Lots has not
been achieved by the date that is twelve (12) months after the date
that the Continuation Notice is delivered to Seller for the
Takedown 1 Lots (the “
Takedown 1 Finished
Lot Improvement Deadline
”), then the Closing Date of
the First Closing may be extended by Seller up to four (4) months
after the Takedown 1 Finished Lot Improvement Deadline by written
notice from Seller to Purchaser issued prior to the initial
Takedown 1 Finished Lot Improvement Deadline. Such date of Closing
is herein referred to as the "
Takedown 1 Closing
Date
." The date of the Second Closing of the purchase and
sale of the Takedown 2 Lots (the "
Takedown 2
Closing
") shall be the date that is nine (9) months after
the date that the First Closing occurs or such other date as Seller
and Purchaser may mutually agree. Such date of Closing is herein
referred to as the "
Takedown 2 Closing
Date
." The date of the Third Closing of the purchase and
sale of the Takedown 3 Lots (the "
Takedown 3
Closing
") shall be the date that is six (6) months after the
date that the Second Closing occurs or such other date as Seller
and Purchaser may mutually agree. Such date of Closing is herein
referred to as the "
Takedown 3 Closing
Date
." The date of the Fourth Closing of the purchase and
sale of the Takedown 4 Lots (the "
Takedown 4
Closing
") shall be the date that is six (6) months after the
date that the Third Closing occurs or such other date as Seller and
Purchaser may mutually agree. Such date of Closing is herein
referred to the "
Takedown 4 Closing
Date
." The date of the Fifth Closing of the purchase and
sale of the Takedown 5 Lots (the "
Takedown 5
Closing
") shall be the date that is six (6) months after the
date that the Fourth Closing occurs or such other date as Seller
and Purchaser may mutually agree. Such date of Closing is herein
referred to the "
Takedown 5 Closing
Date
." The date of the Sixth Closing of the purchase and
sale of the Takedown 6 Lots (the "
Takedown 6
Closing
") shall be the date that is six (6) months after the
date that the Fifth Closing occurs or such other date as Seller and
Purchaser may mutually agree. Such date of Closing is herein
referred to the "
Takedown 6 Closing
Date
." The term "
Closing
Date
" may be used to refer to each of the Takedown 1 Closing
Date, the Takedown 2 Closing Date, the Takedown 3 Closing Date, the
Takedown 4 Closing Date, the Takedown 5 Closing Date and the
Takedown 6 Closing Date. If Purchaser desires to accelerate any of
the Closing Dates, Purchaser may request that a Closing Date be
accelerated, and if Seller is willing to do so in its sole and
absolute discretion, the parties will work together to prepare a
mutually acceptable amendment to this Contract to accommodate such
request. The Finished Lot Improvements for the Takedown 2 Lots, the
Takedown 3 Lots, the Takedown 4 Lots, the Takedown 5 Lots and the
Takedown 6 Lots shall be Substantially Complete on or before ten
(10) business days prior to the applicable Closing (such dates with
the Takedown 1 Finished Lot Improvements Deadline are referred to
as a “
Finished Lot
Improvement Deadline
”). The Takedown 2 Closing Date,
the Takedown 3 Closing Date, the Takedown 4 Closing Date, the
Takedown 5 Closing Date and the Takedown 6 Closing Date are each
subject to extension by Seller, inclusive of Force Majeure
extensions, of up to four (4) months in the same manner as provided
above for the Takedown 1 Closing Date. If requested by Purchaser
during the Due Diligence Period, Seller will consider adjusting the
foregoing schedule to align same with Purchaser’s proposed
phasing schedule, but any such adjustment shall be in
Seller’s and Purchaser’s sole discretion and, if made,
shall be made in writing by amendment to this
Contract.
(c)
Closing Place and Time
. Each
Closing shall be held at 11:00 a.m. on the applicable Closing Date
at the offices of the Title Company or at such other time and place
as Seller and Purchaser may mutually agree.
(d)
Closing Procedures
. Each
purchase and sale transaction shall be consummated in accordance
with the following procedures:
(i) All
documents to be recorded and funds to be delivered hereunder shall
be delivered to the Title Company to hold, deliver, record and
disburse in accordance with closing instructions approved by
Purchaser and Seller;
(ii) At
each Closing, Seller shall deliver or cause to be delivered in
accordance with the closing instructions the
following:
(1) A
special warranty deed conveying the applicable portion of the
Property to be acquired at such Closing to Purchaser. The special
warranty deed shall contain a reservation of easements, minerals,
mineral rights and water and water rights as set forth on
Exhibit B
. The special
warranty deed shall also be subject to non-delinquent general real
property taxes for the year of such Closing and subsequent years,
District assessments and the Permitted Exceptions.
(2)
Payment (from the proceeds of such Closing or otherwise) sufficient
to satisfy any encumbrance relating to the portion of the Property
being acquired at such Closing, required to be paid by Seller at or
before the time of Closing.
(3) A
tax certificate or other evidence sufficient to enable the Title
Company to ensure the payment of all general real property taxes
and installments of District assessments then due and payable for
the portion of the Property being acquired at such
Closing.
(4) An
affidavit, in a form sufficient to comply with applicable laws,
stating that Seller is not a foreign person or a foreign
corporation subject to the Foreign Investment in Real Property Tax
Act, and therefore not subject to its withholding
requirements.
(5) A
certification or affidavit to comply with the reporting and
withholding requirements for sales of Colorado properties by
non-residents (Colorado Department of Revenue Form
DR-1083).
(6) A
Lien Affidavit and Title Company Indemnity.
(7) A
partial assignment of declarant rights or builder rights under the
Master Covenants, assigning declarant and/or builder rights, if
any, from Seller to Purchaser as necessary to enable Purchaser to
maintain sales offices, construction offices, management offices,
model homes and signs advertising the Development and/or Lots and
take other action as is customary for the construction, advertising
and sales of homes, and such other rights to which the parties may
mutually agree.
(8) The
Tap Purchase Agreement (as defined herein).
(9) A
general assignment to Purchaser in the form attached hereto as
Exhibit D
("
General
Assignment
") with respect to the applicable
Lots.
(10)
The Offsite Infrastructure Escrow Agreement (as defined in Exhibit
C) if not theretofore entered.
(11)
Such other documents as may be required to be executed by Seller
pursuant to this Contract or the closing instructions.
(iii) At
each Closing, Purchaser shall deliver or cause to be delivered in
accordance with the closing instructions the
following:
(1) The
Purchase Price payable at such Closing, computed in accordance with
Section
2
above, for the
Lots being acquired at such Closing, such payment to be made in
Good Funds.
(3) The
Tap Purchase Agreement.
(4) All
other documents required to be executed by Purchaser pursuant to
the terms of this Contract or the closing
instructions.
(5)
Payment of any amounts due pursuant to
Section
16
hereof.
(6) The
Offsite Infrastructure Escrow Agreement (if Buyer desires to join
same via joinder).
(iv) At
each Closing, Purchaser and Seller shall each deliver an executed
settlement statement, which shall set forth all prorations,
disbursements of the Purchase Price and expenses applicable to such
Closing;
(vi) The
following adjustments and prorations shall be made between
Purchaser and Seller as of each Closing:
(1)
Real property taxes and installments of District assessments, if
any, for the applicable portion of the Property for the year in
which the Closing occurs shall be prorated based upon the most
recent known rates, mill levy and assessed valuations; and such
proration shall be final.
(2)
Seller shall pay real property taxes for years prior to the year in
which the Closing occurs.
(3)
Purchaser shall pay any and all recording costs and documentary
fees required for the recording of the deed.
(4)
Seller shall pay the base premium for the Title Policy and for any
endorsement Seller agrees to provide to cure a Title Objection, and
Purchaser shall pay the premium for any other endorsements
requested by Purchaser in accordance with
Section
4
above, including an extended
coverage endorsement.
(5)
Each party shall pay one-half (1/2) of any closing or escrow
charges of the Title Company.
(6) All
other costs and expenses not specifically provided for in this
Contract shall be allocated between Purchaser and Seller in
accordance with the customary practice of commercial real estate
transactions in Arapahoe County, Colorado.
(vii) Possession
of the applicable portion of the Property being acquired at each
Closing shall be delivered to Purchaser at such Closing, subject to
the Permitted Exceptions.
9.
Seller’s Delivery of
Title
. At each Closing,
Seller shall convey title to the applicable portion of the
Property, subject to the following items, to the extent that they
have been approved, or are deemed to have been approved by
Purchaser pursuant to the terms of this Contract (collectively, the
"
Permitted
Exceptions
"):
(a)
all easements,
agreements, covenants, restrictions, rights-of-way and other
matters of record approved or deemed approved by Purchaser in
accordance with
Section
4 above (unless
otherwise identified herein as an obligation, fee or encumbrance to
be assumed by Purchaser or which otherwise survives such Closing,
the foregoing items, however, shall not include any mortgages,
deeds of trust, mechanic’s liens or judgment liens arising
by, through or under Seller, which monetary liens Seller shall
cause to be released (or with Buyer’s approval fully insured
over by the Title Company), to the extent they affect any portion
of the Property, on or prior to the date that such portion of the
Property is conveyed to Purchaser);
(b)
the Entitlements,
including without limitation, the Final Plat applicable to the
Property being acquired at such Closing;
(c)
the Master
Covenants;
(d)
the inclusion of
the Property into the Sky Ranch Metropolitan District (the
"
District
")
and such other special districts as may be disclosed by the Master
Commitment;
(e)
A Public
Improvement Fee Covenant substantially in the form provided by
Seller to Buyer by email on May 20, 2017 or as otherwise approved
by the parties prior to the expiration of the Due Diligence Period
with respect to construction and installation of eligible public
improvements on the Property, which imposes a public improvement
fee equal to a percentage (the “
PIF
Percentage
”) of all sales that occur on the Property
that is one percentage point less than the total sales tax imposed
on taxable sales occurring in that portion of the City of Aurora,
Colorado located within the boundaries of the County and the PIF
Percentage of the cost of building materials (the "
Public Improvement
Fee
" or "
PIF
"). The
PIF will be collected by (i) all sellers or providers of goods or
services who engage in any PIF sales transactions within those
portions of the Property subject to the PIF Covenant from the
purchaser or recipient of such goods or services and (ii) all
homebuilders and then will be paid over to the PIF collection
agent. The PIF collection agent will receive and remit the Public
Improvement Fee to the Seller or District. PIF sales shall not
include the sale of residential improvements or any goods incident
to the sale of residential improvements. It is expected the Public
Improvement Fee Covenant will provide and allow for Buyer to make a
single payment at the issuance of a building permit for each home
based on the construction valuation of the home.
(f)
A reservation of
water and mineral rights as set forth on
Exhibit B
hereof;
(g)
applicable zoning
and governmental regulations and ordinances;
(h)
title exceptions,
encumbrances, or other matters created by, through or under
Purchaser or otherwise approved by Purchaser in
writing;
(i)
items apparent upon
an inspection of the Property or shown or that would be shown on an
accurate and current survey of the Property as of the end of the
Due Diligence Period; and
(j)
any Permissible New
Exception, any Other New Exception approved or deemed approved by
Purchaser, and any other document required or permitted to be
recorded against the Property in the County Records pursuant to the
terms of this Contract..
10.
Due Diligence Period; Acceptance of
Property; Release and Disclaimer
.
(a)
Feasibility Review
. Within five
(5) business days following the Effective Date, Seller shall
deliver or make available (at Seller’s office, via electronic
file share or other means) to Purchaser the following listed items
to the extent in Seller’s actual possession; if an item
listed below is not in Seller’s possession and not delivered
or made available to Purchaser but is otherwise readily available
to Seller, then Purchaser may make written request to Seller to
provide such item and Seller will use its reasonable efforts to
obtain and deliver or make such item available to Purchaser, but
Seller will have no obligation otherwise to obtain any item not in
Seller’s possession: (i) any environmental reports, soil
reports and certifications pertaining to the Lots, (ii) a copy of
any subdivision plat for the Property and the current version of
all Entitlements, (iii) engineering and construction plans
pertaining to the Lots, (iv) biological, grading, drainage,
hydrology and other engineering reports and plans and engineering
and constructions plans for offsite improvements that are required
to obtain building permits/certificates of occupancies for
single-family detached homes constructed on the Lots; (v) any PUD,
Development Agreement, Site Development Plans and other approvals
or pending Entitlement applications pertaining to the Lots
particularly and the Development generally; (vi) any Special
District Service Plans; (vii) any existing ALTA or other boundary
Survey of the Property; and (viii) copies of any subdivision bonds
or guarantees applicable to the Lots (collectively, the
"
Seller
Documents
"). In the event Seller received any update to the
Seller Documents, Seller shall deliver same promptly to Purchaser.
Purchaser shall have a period expiring sixty (60) calendar days
following the Effective Date of this Contract within which to
review the same (the "
Due Diligence
Period
"). During the Due Diligence Period, Purchaser shall
have an opportunity to review and inspect the Property, all Seller
Documents provided or made available to Purchaser and any and all
factors deemed relevant by Purchaser to its proposed development
and the feasibility of Purchaser’s intended uses of the
Property in Purchaser’s sole and absolute discretion (the
"
Feasibility
Review
"). The Feasibility Review shall be deemed to have
been completed to Purchaser’s satisfaction if Purchaser gives
written notice to Seller of its election to continue this Contract
("
Continuation
Notice
") prior to the expiration of the Due Diligence
Period. If Purchaser fails to timely give a Continuation Notice or
if Purchaser gives a notice of its election to terminate (which may
be given at any time prior to the end of the Due Diligence Period,
for any reason or no reason), the Deposit shall be promptly
returned to Purchaser, Purchaser shall deliver to Seller all
information and materials received by Purchaser from Seller
pertaining to the Property and any non-proprietary and
non-confidential information otherwise obtained by Purchaser and
thereafter the parties shall have no further rights or obligations
under this Contract except as otherwise provided in
Section
24
below.
(b)
Approval of Property
. If
Purchaser gives a Continuation Notice on or before the expiration
of the Due Diligence Period, except as otherwise provided in this
Section
10
, Purchaser shall be deemed
to have waived Feasibility Review and elected to continue this
Contract and proceed as provided hereunder.
(c)
Radon
. Purchaser acknowledges
that radon gas and naturally occurring radioactive materials
(“
NORM
”)
each naturally occurs in many locations in Colorado. The Colorado
Department of Public Health and Environment and the United States
Environmental Protection Agency (the "
EPA
") have
detected elevated levels of naturally occurring radon gas in
residential structures in many areas of Colorado, including the
County and all of the other counties along the front range of
Colorado. The EPA has raised concerns with respect to adverse
effects on human health from long-term exposure to high levels of
radon and recommends that radon levels be tested in all Residences.
Purchaser acknowledges that Seller neither claims nor possesses any
special expertise in the measurement or reduction of radon or NORM.
Purchaser further acknowledges that Seller has not undertaken any
evaluation of the presence or risks of radon or NORM with respect
to the Property nor has it made any representation or given any
other advice to Purchaser as to acceptable levels or possible
health hazards of radon and NORM. SELLER HAS MADE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE
PRESENCE OR ABSENCE OF RADON, NORM OR OTHER ENVIRONMENTAL
POLLUTANTS WITHIN THE PROPERTY OR THE RESIDENCES TO BE CONSTRUCTED
ON THE LOTS OR THE SOILS BENEATH OR ADJACENT TO THE PROPERTY OR THE
RESIDENCES TO BE CONSTRUCTED ON THE LOTS PRIOR TO, ON OR AFTER THE
CLOSING DATE. Purchaser, on behalf of itself and its successors and
assigns, hereby releases the Seller from any and all liability and
claims with respect to radon gas. Every home sales contract entered
in to by Purchaser with respect to subsequent sales of Lots shall
include any disclosures with respect to radon as required by
applicable Colorado law.
(d)
Soils
. Purchaser acknowledges
that soils within the State of Colorado consist of both expansive
soils and low-density soils, and certain areas contain potential
heaving bedrock associated with expansive, steeply dipping bedrock,
which will adversely affect the integrity of a dwelling unit
constructed on a Lot if the dwelling unit and the Lot on which it
is constructed are not properly maintained. Expansive soils
contain clay mineral, which have the characteristic of changing
volume with the addition or subtraction of moisture, thereby
resulting in swelling and/or shrinking soils. The addition of
moisture to low-density soils causes a realignment of soil grains,
thereby resulting in consolidation and/or collapse of the soils.
Purchaser agrees that it shall obtain a current geotechnical
report for the Property and an individual lot soils report for each
Lot containing design recommendations from a licensed geotechnical
engineer for all structures to be placed upon the Lot. Purchaser
shall require all homes to have engineered footing and foundations
consistent with results of the individual lot soils report for each
Lot and shall take reasonable action as shall be necessary to
ensure that the homes to be constructed upon the Lots shall be done
in accordance with proper design and construction techniques.
Purchaser shall also provide a copy of the geotechnical report for
the Property and the individual lot soils report for each Lot to
Seller within seven (7) days after Seller’s request for the
same, and agrees in the event that this Contract terminates for any
reason Purchaser shall use reasonable efforts to assign, without
liability or recourse to Purchaser, at Seller’s request, the
geotechnical report for the Property and the individual lot soils
report for each Lot to any subsequent homebuilder who enters into a
purchase and sale agreement with Seller to purchase all of a
portion of the Lots. SELLER HAS MADE NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE PRESENCE OR ABSENCE
OF EXPANSIVE SOILS, LOW-DENSITY SOILS OR DIPPING BEDROCK UPON THE
PROPERTY AND PURCHASER SHALL UNDERTAKE SUCH INVESTIGATION AS SHALL
BE REASONABLE AND PRUDENT TO DETERMINE THE EXISTENCE OF THE SAME.
Purchaser shall provide all disclosures required by C.R.S. Section
6-6.5-101 in every home sales contract entered in to by Purchaser
with respect to subsequent sales of a Lot to a homebuyer.
Purchaser, on behalf of itself and its successors and assigns,
hereby releases the Seller from any and all liability and claims
with respect to expansive and low-density soils and dipping bedrock
located within the Property. Purchaser shall also indemnify, defend
and hold all Seller Parties harmless from and against any claims
asserted by all subsequent owners of the Lots relating to
geotechnical or soils conditions on the Lots; provided that
Purchaser is not required to indemnify consultants, contractors and
subcontractors who contract with Seller and who perform services or
supply labor, materials, equipment, and other work relating to
geotechnical or soils conditions on the Lots that is necessary for
the Lots to satisfy the requirements set forth herein.
(e)
Over Excavation
. The Finished
Lot Improvements required for each Lot do not include any
“over excavation” or comparable preparation or
mitigation of the soil (the “
Overex
”)
on the Property and Purchaser shall have sole responsibility at
Purchaser’s sole expense with respect to the Overex and shall
have the right (pursuant to a license agreement to be provided by
Seller) to enter such Lots for the purposes of performing the
Overex; provided, however, that such entry shall be performed in a
manner that does not materially interfere with or result in a
material delay or an increase in the costs or any expenses in the
construction of the Finish Lot Improvements, and provided further
that Purchaser shall promptly repair any portion of the Lots and
adjacent property that is materially damaged by Purchaser or its
agents, designees, employees, contractors, or subcontractors in
performing the Overex. Purchaser shall obtain, at its cost, a
current geotechnical report for the Property and an individual lot
soils report for each Lot containing design recommendations from a
licensed geotechnical engineer for all structures to be placed upon
the Lot (“
Purchaser’s
Geotechnical Reports
”) shall not rely upon any
geotechnical or soils report furnished by Seller, and Seller shall
have no responsibility or liability with respect to the Overex,
Purchaser’s Geotechnical Reports or any matters related
thereto. The parties shall reasonably cooperate in coordinating
Purchaser’s completion of the Overex so that the Overex can
be properly sequenced with Seller’s completion of the
Finished Lot Improvements. In no event shall the Seller be liable
to Purchaser for any delay or costs or damages incurred by
Purchaser with respect to such Overex, even if caused by any delay
in installation of Finished Lot Improvements sequenced ahead of the
Overex. THE PARTIES ACKNOWLEDGE AND AGREE THAT SELLER IS NOT
PERFORMING ANY OVER-EXCAVATION OF THE LOTS AND THAT SELLER SHALL
HAVE NO LIABILITY WHATSOEVER WITH RESPECT TO OR ARISING OUT OF ANY
OVER-EXCAVATION OF THE LOTS OR EXPANSIVE SOILS PRESENT ON THE LOTS
AND SELLER EXPRESSLY DISCLAIMS ANY LIABILITY WITH RESPECT TO ANY
OVER-EXCAVATION OF THE LOTS AND EXPANSIVE SOILS PRESENT ON THE
LOTS.
(f)
No Reliance on Documents
.
Except for and subject to the representations, warranties,
covenants and agreements of Seller expressly stated in this
Contract and/or expressly set forth in the documents executed by
Seller at Closing (collectively, the “
Seller’s
Express Representations
”), Seller makes no
representation or warranty as to the truth, accuracy or
completeness of any materials, data or information (including,
without limitation, the Seller Documents) delivered by Seller or
its brokers or agents to Purchaser in connection with the
transaction contemplated hereby. Except for and subject to
Seller’s Express Representations, all materials, data and
information delivered by Seller to Purchaser in connection with the
transaction contemplated hereby are provided to Purchaser as a
convenience only and any reliance on or use of such materials, data
or information by Purchaser shall be at the sole risk of Purchaser,
except as otherwise expressly stated herein. Except for and subject
to Seller’s Express Representations, the Seller Parties shall
not be liable to Purchaser for any inaccuracy in or omission from
any such reports. Purchaser hereby represents to Seller that, to
the extent Purchaser deems the same to be necessary or advisable
for its purposes, and without waiving the right to rely upon the
Seller’s Express Representations: (i) Purchaser has performed
or will perform an independent inspection and investigation of the
Lots and has also investigated or will investigate the operative or
proposed governmental laws, ordinances and regulations to which the
Lots may be subject, and (ii) Purchaser shall acquire the Lots
solely upon the basis of its own or its experts' independent
inspection and investigation, including, without limitation, (a)
the quality, nature, habitability, merchantability, use, operation,
value, fitness for a particular purpose, marketability, adequacy or
physical condition of the Lots or any aspect or portion thereof,
including, without limitation, appurtenances, access, landscaping,
parking facilities, electrical, plumbing, sewage, and utility
systems, facilities and appliances, soils, geology and groundwater,
(b) the dimensions or sizes of the Lots, (c) the development or
income potential, or rights of or relating to, the Lots, (d) the
zoning or other legal status of the Lots or any other public or
private restrictions on the use of the Lots, (e) the compliance of
the Lots with any and all applicable codes, laws, regulations,
statutes, ordinances, covenants, conditions and restrictions, (f)
the ability of Purchaser to obtain any necessary governmental
permits for Purchaser's intended use or development of the Lots,
(g) the presence or absence of Hazardous Materials on, in, under,
above or about the Lots or any adjoining or neighboring property,
(h) the condition of title to the Lots, or (i) the economics of, or
the income and expenses, revenue or expense projections or other
financial matters, relating to the Lots, except as provided in any
express representations/warranties and/or covenants contained in
this Contract.
(g)
As Is
. Except for and subject
to Seller’s Express Representations, Purchaser acknowledges
and agrees that it is purchasing the Property based on its own
inspection and examination thereof, and Seller shall sell and
convey to Purchaser and Purchaser shall accept the property on an
“AS IS, WHERE IS, WITH ALL FAULTS, LIABILITIES, AND DEFECTS,
LATENT OR OTHERWISE, KNOWN OR UNKNOWN” basis in an "AS IS"
physical condition and in an "AS IS" state of repair (subject in
all events to Seller’s Express Representations including but
not limited to the Finished Lot Improvements obligation set forth
in
Section
5(b)
hereof).
Except for and subject to Seller’s Express Representations,
to the extent not prohibited by law the Purchaser hereby waives,
and Seller disclaims all warranties of any type or kind whatsoever
with respect to the Property, whether express or implied, direct or
indirect, oral or written, including, by way of description, but
not limitation, those of habitability, fitness for a particular
purpose, and use. Without limiting the generality of the foregoing,
Purchaser expressly acknowledges that, except for and subject to
Seller’s Express Representations, Seller makes no other or
additional representations or warranties concerning, and hereby
expressly disclaims any representations or warranties concerning
the following: (i) The value, nature, quality or condition of the
Property; (ii) Any restrictions related to development of the
Property; (iii) The applicability of any governmental requirements;
(iv) The suitability of the Property for any purpose whatsoever;
(v) The presence in, on, under or about the Property of any
Hazardous Material or any other condition of the Property which is
actionable under any Environmental Law (as such terms are defined
in this
Section
10
)
; (vi) Compliance of the
Property or any operation thereon with the laws, rules, regulations
or ordinances of any applicable governmental body; or (vii) The
presence or absence of, or the potential adverse health, economic
or other effects arising from, any magnetic, electrical or
electromagnetic fields or other conditions caused by or emanating
from any power lines, telephone lines, cables or other facilities,
or any related devices or appurtenances, upon or in the vicinity of
the Property.
As used
herein, "
Hazardous
Materials
" shall mean, collectively, any chemical, material,
substance or waste which is or hereafter becomes defined or
included in the definitions of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutant" or "contaminant," or words of similar
import, under any Environmental Law, and any other chemical,
material, substance, or waste, exposure to, disposal of, or the
release of which is now or hereafter prohibited, limited or
regulated by any governmental or regulatory authority or otherwise
poses an unacceptable risk to human health or the
environment.
As used
herein, "
Environmental
Laws
" shall mean all applicable local, state and federal
environmental rules, regulations, statutes, laws and orders, as
amended from time to time, including, but not limited to, all such
rules, regulations, statutes, laws and orders regarding the
storage, use and disposal of Hazardous Materials and regarding
releases or threatened releases of Hazardous Materials to the
environment.
(h)
Release
. Purchaser agrees that,
except for and subject to Seller’s Express Representations,
Seller shall not be responsible or liable to Purchaser for any
defects, errors or omissions, or on account of geotechnical or
soils conditions or on account of any other conditions affecting
the Property, because Purchaser otherwise is purchasing the
Property AS IS, WHERE-IS, and WITH ALL FAULTS as set forth above in
subsection (g). Purchaser, or anyone claiming by, through or under
Purchaser, hereby fully releases Seller, Seller’s affiliates,
divisions and subsidiaries and their respective managers, members,
partners, officers, directors, shareholders, affiliates,
representatives, employees, consultants and agents (the
“
Seller
Parties
” and each as a “
Seller
Party
”) from, and irrevocably waives its right to
maintain, any and all claims and causes of action that it or they
may now have or hereafter acquire against the Seller Parties for
any cost, loss, liability, damage, expense, demand, action or cause
of action arising from or related to any defects, errors,
omissions, soils conditions or other conditions affecting the
Property of the suitability or fitness of the Property, except to
the extent that such loss or other liability derives or results
from a breach or default of any of Seller’s Express
Representations. Purchaser waives any Environmental Claim (as
defined in this Section) which it now has or in the future may have
against Seller, provided however, such waiver shall not apply to
activities to be performed by the Seller hereunder to construct the
Finished Lot Improvements. The foregoing release and waiver shall
be given full force and effect according to each of its express
terms and provisions, including, but not limited to, those relating
to unknown and suspected claims, damages and causes of action. As
used herein, "
Environmental
Claim
" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of
noncompliance or violation, whether written or oral, by any person,
organization or agency alleging potential liability, including
without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property
damages, including diminution of the market value of the Property
or any part thereof, personal injuries or penalties arising out of,
based on or resulting from the presence or release into the
environment of any Hazardous Materials or resulting from
circumstances forming the basis of any violation or alleged
violation of any Environmental Laws based Hazardous Materials, and
any and all claims by any person, organization or agency seeking
damages, contribution, indemnification, costs, recovery,
compensation or injunctive relief relating to same.
(i)
Indemnification
. Purchaser
shall indemnify, defend (with counsel reasonably selected by
Purchaser with Seller approval) and hold harmless the Seller
Parties of, from and against any and all claims, demands,
liabilities, losses, expenses, damages, costs and reasonable
attorneys’ fees that any of the Seller Parties may at any
time incur by reason of or arising out of: (i) any work performed
in connection with or arising out of Purchaser’s activities,
or Purchaser’s acts or omissions with respect to any Overex
work, (ii) Purchaser’s failure to perform its work on the
Property in accordance with applicable laws, and (iii) either
personal injuries or property damage occurring after the Closing by
reason of or arising out of the geologic, soils or groundwater
conditions on the Property acquired by Purchaser, (iv)
Purchaser’s or its successor’s development,
construction, use, ownership, management, marketing or sale
activities associated with the Lots (including, without limitation,
land development, grading, excavation, trenching, soils compaction
and construction on the Lots performed by or on behalf of Purchaser
(including, but not limited to, by all subcontractors and
consultants engaged by Purchaser); (v) the soils, subsurface
geologic, groundwater conditions or the movement of any home
constructed on the Lots after a Closing; (vi) the design,
engineering, structural integrity or construction of any homes
constructed by Purchaser on the Lots after a Closing; or (vii) any
claim asserted by Purchaser’s homebuyers or their successors
in interest alleging construction defects related to any Overex
work performed by Purchaser, or any soils, subsurface geologic or
groundwater conditions affecting the Lots. The foregoing indemnity
obligation of Purchaser includes acts and omissions of Purchaser
and all agents, consultants and other parties acting for or on
behalf of Purchaser (“
Purchaser
Parties
”). Notwithstanding the foregoing, Purchaser is
not required by this indemnification provision to indemnify the
Seller against (i) Seller's failure to perform its obligations
under this Contract or under any of the Closing documents, (ii)
Seller's breach of Seller’s Express Representation, or (iii)
claims arising directly from the decisions of Seller acting in its
capacity as declarant under the Declaration; and further provided
that Purchaser is not required to indemnify consultants,
contractors and subcontractors who contract with Seller and who
perform services or supply labor, materials, equipment, and other
work relating to geotechnical or soils conditions on the Lots that
is necessary for the Lots to satisfy the requirements set forth
herein.
(j)
The
provisions of this
Section
10
shall survive each Closing
and the delivery of each respective deed to the
Purchaser.
11.
Seller’s
Representations
. Seller hereby
represents and warrants to Purchaser as follows (the following
Subsections collectively referred to herein as "
Seller’s
Representations
"):
(a)
Litigation
. To Seller’s
Actual Knowledge (as defined in this
Section 11
), there is no
threatened or pending litigation affecting or pertaining to the
Property or the Development.
(b)
Non-Foreign Person
. Seller is
not a "foreign person" as that term is defined in Section 1445
of the Internal Revenue Code of 1986, as amended, and applicable
regulations.
(c)
Condemnation
. Seller has
received no written notice of any pending or threatened
condemnation or eminent domain proceedings which may affect the
Property or the Development or any part thereof.
(d)
Execution and Delivery
. The
execution, delivery and performance of this Contract by Seller does
not and will not result in a breach of, or constitute a default
under, any indenture, loan or credit agreement, mortgage, deed of
trust or other agreement to which Seller is a party.
(e)
Default
. To Seller’s
Actual Knowledge, Seller has not defaulted under any covenant,
restriction or contract affecting the Property or the Development,
nor has Seller caused by its act or omission an event to occur
which would with the passage of time constitute a breach or default
under such covenant, restriction or contract.
(f)
Violation of Law
. Seller has
not received any written notice of non-compliance, and to
Seller’s Actual Knowledge there is no non-compliance, of the
Property or the Development with respect to any federal, state or
local laws, codes, ordinances or regulations relating to the
Property or the Development.
(g)
Rights
. Seller has not granted
to any party, other than Purchaser hereunder, any option, contract,
right of refusal or other agreement with respect to a purchase or
sale of the Property.
(h)
Environmental
. Neither Seller
nor, to Seller's Actual Knowledge, any third party, has used,
generated, transported, discharged, released, manufactured, stored
or disposed of any Hazardous Materials from, into, at, on, under or
about the Property in any manner which violates federal, state, or
local laws, ordinances, rules, regulations, or policies governing
the use, storage, treatment, transportation, manufacture,
refinement, handling, production, or disposal of Hazardous
Material. To Seller's Actual Knowledge: (a) the Property is not
now, nor was it previously, in violation, and is not currently
under investigation for violation of any Environmental Law; (b)
there has been no migration of any Hazardous Materials from, into,
at, on, under or about the Property; and (c) there is not now, nor
was there previously, on or in the Property underground storage
tanks or surface below-grade impoundments used to store, treat or
handle Hazardous Materials or debris or refuse buried in, on or
under the Property.
(i)
Debt
. As of the Effective Date,
Seller owns the Property free and clear of any mortgages or deeds
of trust. If Seller encumbers the Property, or portion thereof,
with a mortgage or deed of trust before a Closing, the Lots to be
acquired at such Closing will be released from such encumbrance at
such Closing. Seller will use commercially reasonably efforts to
obtain a recognition agreement from the lender holding any such
mortgage or deed of trust, but makes no representation or other
covenant that such lender will agree to the terms of or execute a
recognition agreement.
(j)
Development
Ownership
. To Seller’s Actual Knowledge, as of the
Effective Date Seller owns, has or will acquire rights in all real
property as necessary or as will be necessary to be able comply
with the Entitlements.
(k)
Seller Documents
. To
Seller’s Actual Knowledge, the Seller Documents provided and
to be provided by Seller to Purchaser are and will be true, correct
and complete copies of same.
(l)
FASB
. The fair market value of
the Property does not exceed fifty percent (50%) of the fair market
value of the total assets of Seller.
For
purposes of the foregoing, the phrase "
Seller’s
Actual Knowledge
" shall mean the current, actual, personal
knowledge of Mark Harding as President of Seller, without any duty
of investigation or inquiry and without imputation of any other
person’s knowledge. The fact that reference is made to the
personal knowledge of the above identified individual shall not
render such individual personally liable for any breach of any of
the foregoing representations and warranties; rather,
Purchaser’s sole recourse in the event of any such breach
shall be against Seller, and Purchaser hereby waives any claim or
cause of action against the above identified individuals arising
from Seller’s Representations. In the event that any
information contained in the Seller Documents conflicts with
Seller’s Representations set forth in this Section, the
Seller Documents shall govern and control and such inconsistency
shall not constitute a breach by Seller of its Seller’s
Representations herein. Seller and Purchaser shall notify the other
in writing immediately if any Seller’s Representation become
untrue or misleading in light of information obtained by Seller or
Purchaser after the Effective Date. In the event that Purchaser has
actual knowledge that any of Seller’s Representations are
untrue or misleading, or of a breach of any of Seller’
Representations prior to the Closing, without the duty of further
inquiry, and Purchaser elects to close, Purchaser shall be deemed
to have waived any right of recovery, and Seller shall not have any
liability in connection therewith.
Seller’s
Representations shall be deemed to be made again as and at the date
of each Closing, and shall survive each respective Closing for a
period of twelve (12) months, except to the extent of any matter
that is known by Purchaser, or is contained in materials provided
to or made available to Purchaser that makes Seller’s
Representations untrue as of such Closing Date and in any such
instance Seller’s Representations shall not survive
Closing.
Seller
makes no promises, representations or warranties regarding the
construction, installation or operation of any amenities within the
Development, including without limitation, club houses, swimming
pools and sports courts. To the extent that any development plans,
site plans, rendering, drawings, marketing information or other
materials related to the Development include, depict or imply the
inclusion of any amenities in the Development, they are included
only to illustrate possible amenities for the Development that may
or may not be built and Purchaser shall not rely upon any such
materials regarding the construction, installation or operation of
any amenities within the Development. Nothing herein shall relieve
Seller of the obligation to construct such amenities that are
ultimately required by the Entitlements.
12.
Purchaser’s
Obligations
. Purchaser shall
have the following obligations, each of which shall survive each
respective Closing and, where noted, termination of this Contract.
Notwithstanding any contrary provision set forth in this Contract,
Seller shall have the right to enforce said obligations by means of
any legal or equitable proceedings including, but not limited to,
suit for actual damages and equitable relief:
(a)
Master Covenants
. Purchaser
shall comply with all obligations applicable to Purchaser under the
Master Covenants.
(b)
Compliance with Laws
. Purchaser
shall comply with and abide by all laws, ordinances, statutes,
covenants, rules and regulations, building codes, permits,
association documents and other recorded instruments (as they are
from time to time amended, supplemented or changed) which regulate
any activities relating to the use, ownership, construction or sale
of any Lot or any improvements thereon.
(c)
Entry Prior to Closing
. From
and after the Effective Date of this Contract until the Closing
Date or earlier termination of this Contract, and so long as no
default by Purchaser exists under this Contract, Purchaser and its
agents, employees and representatives shall be entitled to enter
upon the Property for purposes of conducting soil and other
engineering tests and to inspect and survey any of the Property. If
the Property is altered or disturbed in any manner in connection
with any of Purchaser’s activities, Purchaser shall
immediately return the Property to substantially the condition
existing prior to such activities. Purchaser shall promptly refill
holes dug and otherwise to repair any damage to the Property as a
result of its activities. Purchaser and its agents shall not have
the right to conduct any invasive testing (e.g., borings, drilling,
soil/water sampling, etc.), except standard geotech preliminary
investigation, on the Lots (which may include borings, drilling,
and sampling), including, without limitation, any so-called "Phase
II" environmental testing, without first obtaining Seller's written
consent (and providing Seller at least seventy-two (72) hours'
prior written notice), which consent may be withheld by Seller in
its reasonable discretion and shall be subject to any terms and
conditions imposed by Seller in its reasonable discretion. In the
event that Purchaser fails to obtain Seller's written consent prior
to any invasive testing, in addition to and without limiting any
other obligations Purchaser may have under this Section, Purchaser
shall be fully responsible and liable for all costs of remediation
with respect to any materials disturbed in any manner that requires
remediation or that are removed in connection with such invasive
testing and including, but not limited to, costs for disposal of
materials removed during any invasive testing. Purchaser shall not
permit any lien to attach to the Property or any portion of the
Property as a result of the activities. Purchaser shall indemnify,
defend and hold Seller, its officers, directors, shareholders,
employees, agents and representatives harmless from and against any
and all mechanics’ and materialmen’s liens, claims
(including, without limitation, personal injury, death and property
damage claims), damages, losses, obligations, liabilities, costs
and expenses including, without limitation, reasonable
attorneys’ fees incurred by Seller, its officers, directors,
shareholders, employees, agents and representatives or their
property arising out of any breach of the provisions of this
Section 12(c) by Purchaser, its agents, employees or
representatives. The foregoing indemnity obligation of Purchaser
includes acts and omissions of Purchaser and all agents,
consultants and other parties acting for or on behalf of Purchaser.
Purchaser shall maintain in effect during its inspection of the
Property commercial general liability coverage for bodily injury
and property damage in the amount of at least $2,000,000.00
combined single limit, and automobile liability coverage for bodily
injury and property damage in the amount of at least $2,000,000.00
combined single limit, and the policy or policies of insurance
shall be issued by a reputable insurance company or companies which
are qualified to do business in the State of Colorado and shall
name Seller as an additional insured. In addition, before entering
upon the Property, Purchaser shall provide Seller with valid
certificates indicating such insurance is in effect. The foregoing
indemnity shall not apply to claims due to (i) Hazardous Materials
or conditions that are not placed on the Property or caused by
Purchaser or its agents, (ii) pre-existing matters, (iii) or
Seller’s actions or inactions. The indemnity and agreement
set forth in this
Section 12(c)
shall
survive the expiration or termination of this Contract for any
reason.
(d)
Architectural Approval
. In
order to assure that homes constructed by Purchaser are compatible
with the other residential construction in the Development and meet
certain architectural, design, and landscaping criteria and
guidelines included in the approved SDP applicable to the Property
(the “
SDP
Criteria
”) and are otherwise acceptable to Seller, all
construction and landscaping on the Lots shall be subject to the
prior review and approval of Seller. The Master Covenants will
provide for the formation of an architectural review committee
(“
Architectural
Review Committee
”) and for the Declarant’s
promulgation and adoption of design guidelines (“
Design
Guidelines
”) to be applied by the Architectural Review
Committee. The Master Covenants and/or the Design Guidelines will
provide for an exemption from obtaining Architectural Review
Committee approval for the Seller and any other person whose House
Plans (as hereinafter defined) has been reviewed and approved by
the Seller.
(i)
The Existing
Entitlement Documents contain the Preliminary Development Plan
which include the preliminary architectural, design, and
landscaping criteria and guidelines for the Property which will be
the basis for the SDP Criteria to be incorporated into the SDP.
Purchaser shall submit to Seller the Purchaser’s elevations,
floor plans, typical landscape plans, exterior color palettes for
homes and other buildings, structures and improvements to be
located on the Lots (“
House
Plans
”) within 20 days following the Effective Date of
this Contract. Seller will review the House Plans and Seller shall
deliver notice to Purchaser of the Seller’s preliminary
approval or disapproval of the House Plans within ten (10) business
days after receipt of the House Plans, with such approval not to be
unreasonably withheld, conditioned or delayed. If Seller fails to
so notify Purchaser of preliminary approval or disapproval within
such 10-business day period, the Purchaser shall provide Seller
with written notice of the same and Seller shall notify Purchaser
within three (3) business days of its approval of disapproval. If
Seller fails to approve or disapprove within such 3-business day
period, the House Plans shall be deemed preliminarily approved. In
the event of disapproval, Purchaser shall revise and resubmit the
House Plans to the Seller for reconsideration, addressing the
matters disapproved by the Seller, and the procedure set forth
above shall be repeated until the House Plans are approved by the
Seller. Seller will use reasonable efforts to confirm that
Purchaser’s House Plans, as approved by Seller, are
compatible with the SDP Criteria. Upon County approval of the SDP,
Seller will conduct a second review of the House Plans for
compliance and compatibility with the SDP Criteria. If the House
Plans do not materially comply with the County-approved SDP
Criteria applicable to the Property, Seller will notify Purchaser.
If Purchaser and Seller are unable to agree upon mutually
acceptable revisions to the House Plans so that they comply with
the SDP Criteria, then Purchaser may terminate this Contract, in
which event the Deposit shall be promptly returned to Purchaser,
Purchaser shall deliver to Seller all information and materials
received by Purchaser from Seller pertaining to the Property and
any non-confidential and non-proprietary information otherwise
obtained by Purchaser pertaining to the Property, and thereafter
the parties shall have no further rights or obligations under this
Contract except those that expressly survive termination of this
Contract. After Seller approves the Purchaser’s House Plans,
and before Purchaser commences construction of homes on the Lots,
Purchaser shall submit to Seller any material changes in the
approved House Plans. Seller shall review the material changes for
general consistency and compatibility with the standards and
criteria set forth in the SDP Criteria and the Master Covenants and
if Seller approves such changes, Seller shall notify Purchaser
within ten (10) business days of its approval, not to be
unreasonably withheld, conditioned or delayed.
(ii)
Purchaser shall
obtain Seller approval of House Plans before commencing
construction on a Lot. Purchaser shall perform all construction,
development and landscaping in accordance with the approved House
Plans and in conformity with the Master Covenants and the SDP
Criteria and all other requirements, rules, regulations of any
local jurisdictional authority. Purchaser and Seller acknowledge
that the County will not conduct architectural review nor issue
approval of Purchaser’s house plans, but rather requires the
building permit applicant to comply with the SDP Criteria.
Seller’s approval of Purchaser’s House Plans is only
intended as a review for compatibility with other residential
construction in the Development and the SDP Criteria and does not
constitute a representation or warranty that Purchaser’s
House Plans comply with SDP Criteria and Purchaser shall be
responsible for confirming such compliance.
(e)
Disclosures to Homebuyers
.
Purchaser shall include in each contract for the sale of any Home
constructed by Purchaser in the Development all disclosures
required by applicable laws, including, but not limited to, if
required by applicable law at the time of sale, a Special District
Disclosure, a Common Interest Community Disclosure, a Mineral
Disclosure, and Source of Potable Water Disclosure, along with
additional disclosures regarding expansive/low-density soils and
radon (“
Homebuyer
Disclosure
”). The Homebuyer Disclosure shall be in a
form to be agreed upon by Seller and Purchaser before the end of
the Due Diligence Period and a copy of each such signed (or
receipted) Homebuyer Disclosure shall be furnished to Seller upon
request.
13.
Force Majeure
.
A delay
in or failure to perform any obligations required of Seller under
this Contract shall not constitute a default to the extent such
delay or failure is caused by Force Majeure and all times for
performance shall be extended by the number of days of Force
Majeure. "
Force
Majeure
" shall be limited to acts of God, war, terrorism,
fire, flood, earthquake, hurricane, weather conditions, strike,
delay or unavailability of labor or materials, delay or
unavailability of utilities, delays in obtaining governmental
approvals to the extent not caused by the party seeking approval,
moratoria, injunctions, orders or directives of any court or
governmental body, or other actions of third parties (but not
including financial inability) which, despite the exercise of
reasonable diligence, the party required to perform is unable to
prevent, avoid or remove. If the performance of an obligation
hereunder, other than the payment of money, is expressly subject to
the effect of Force Majeure, then, unless otherwise provided
herein, the effect of a Force Majeure shall be to extend the time
for performance of such obligation for the reasonable period of
such Force Majeure. Each party shall promptly provide the other
with written notice of any event giving rise to a claim for Force
Majeure within fifteen (15) business days of the occurrence of such
event.
14.
Cooperation
. Purchaser shall
reasonably cooperate with and require its agents, employees,
subcontractors and other representatives to cooperate with all
other parties involved in construction within the Development,
including, where applicable, the granting of a nonexclusive license
to enter upon the Property conveyed to Purchaser. Purchaser shall
execute any and all documentation reasonably required by Seller or
the Authorities to effectuate any desired modification or change in
connection with Seller’s activities in the Development
including, without limitation, amendments or restatements of the
Master Covenants, or any Final Plat; provided, however, Purchaser
shall not be obligated to execute any such documentation if it will
materially adversely affect the fair market value or use of the
Property or Purchaser’s ability to construct or to sell its
proposed homes within the Property, or if it will materially
increase the cost of ownership or construction or interfere with
ownership or construction.
15.
Fees
. Subject to the
provisions of Sections 16 and 17 below:
(a)
FHA/VA
. Seller shall not be
required to obtain any specific approvals to cause the Property to
qualify for FHA or VA homebuyer financing programs.
(b)
Utility Company Refunds
. Any
refunds from utility providers relating to construction deposits
made by Seller for the Finished Lot Improvements relating to the
Property shall be the exclusive property of Seller. Purchaser shall
cooperate with Seller in turning over any such funds and directing
those funds to Seller.
16.
Water and Sewer Taps; Fees; and
District Matters
.
(a)
Rangeview Metropolitan
District
. The water and sewer service provider for the Lots
is the Rangeview Metropolitan District (“
Rangeview
”)
and Purchaser shall be required to purchase water and sewer taps
for the Lots from Rangeview. During the Due Diligence Period,
Purchaser shall negotiate in good faith to reach agreement with
Rangeview on terms and provisions of a Tap Purchase Agreement (the
"
Tap
Purchase Agreement
") in which Rangeview agrees to sell to
Purchaser, and Purchaser agrees to purchase from Rangeview, a water
and sewer tap for each Lot in accordance with an agreed-upon
purchase schedule, but in no event later than the issuance of a
building permit for a Lot. If Rangeview and Purchaser agree upon a
Tap Purchase Agreement before the expiration of the Due Diligence
Period, they shall prepare and execute an amendment to this
Contract to set forth the agreed-upon Tap Purchase Agreement and
execute the Tap Purchase Agreement on or before the date of the
First Closing. If Rangeview and Purchaser are unable to agree on a
Tap Purchase Agreement before the expiration of the Due Diligence
Period, this Contract shall terminate and the Deposit shall be
promptly returned to Purchaser, Purchaser shall deliver to Seller
(or destroy) all information and materials pertaining to the
Property provided by Seller and thereafter the parties shall have
no further rights or obligations under this Contract except as
otherwise provided in
Section 24
below. It is
expected the combined cost to purchase a water tap and sewer will
be dependent on Lot size, home square footage, number of floors,
driveway lanes, outdoor irrigated square footage, and xeriscape
square footage and may be subject to increase from time to time as
Rangeview revises its fee schedule.
(b)
Sky Ranch Metropolitan District No.
1
. The Property is included within the boundaries of the Sky
Ranch Metropolitan District No. 1 (“
District
”).
Persons affiliated with Seller have been elected or appointed to
the board of directors (“
Board
”)
of the District and Rangeview and serve in that capacity. Purchaser
shall not qualify any persons affiliated with Purchaser as its
representative to serve on the Board of the District or Rangeview
and this prohibition shall survive the Closing and delivery of
deeds hereunder until no person affiliated with Seller serves on
the Board. The District has been formed for purposes that include,
but are not limited to financing, owning, maintaining and/or
managing certain tracts and infrastructure improvements
(“
District
Improvements
”) to serve the Development, including the
Lots. Purchaser acknowledges that: (i) the construction of District
Improvements shall be without compensation or reimbursement to
Purchaser; and (ii) any reimbursements, credits, payments, or other
amounts payable by the District or Rangeview on account of the
construction of District Improvements or any other matters related
thereto (“
Metro District
Payments
”) shall remain the property of the Seller and
shall not be conveyed to or otherwise be claimed by Purchaser. Upon
request of Seller, the District or Rangeview, Purchaser will
execute any and all documents that may be reasonably required to
confirm Purchaser’s waiver of any right to Metro District
Payments. The provisions of this Section are material in
determining the Purchase Price, and the Purchase Price would have
been higher but for the provisions of this Section. Seller shall
provide to Purchaser as part of the Seller Documents information
available relating to the District including the service plan and
schedule of current fees and charges. This Section shall survive
Closing.
(c)
Fees
.
(i)
Seller shall pay
any and all of the following to the extent imposed by any Authority
in connection with the Property conveyed to Purchaser: (i) any
parks and recreation fees (including park dedication requirements
and/or cash-in-lieu payments related to the Property as part of the
platting thereof); (ii) drainage fees; (iii) fees for
payment-in-lieu of school land dedications, and (iv) fees and
charges that are due and payable at, before or as a condition
precedent to the approval or recordation of the
Entitlements.
(ii)
Following Closing,
Purchaser shall pay all costs and expenses for all water fees,
sewer fees, tap fees, connection fees, facility fees or
assessments, PIF fees, building and other permit costs specific to
obtaining a building permit for construction by Purchaser of homes
on the Lots, and any other costs or fees that may be imposed by the
District, Rangeview or any Authority relating to the construction,
use or occupancy of the homes to be constructed on the Lots,
excluding in all events the fees to be paid by Seller pursuant to
Section 16(c)(i) above. Without limiting the foregoing, and except
for the fees to be paid by Seller pursuant to Section 16(c)(i)
above, Purchaser shall pay any and all of the following to the
extent imposed in connection with the Property conveyed to
Purchaser: (i) system development fees; (iii) any infrastructure
(facility) fee, including, without limitation, any
transportation/road fee, which may be imposed either by the County,
the District or other Authority; (iv) any impact fees and
payment-in-lieu of land dedication fees imposed for roads or other
facilities that are payable at issuance of a building permit; and
(v) any excise fees. The covenants set forth in this
Section
16
shall survive each
respective Closing and shall represent a continuing obligation
until the complete satisfaction or payment thereof.
(iii)
As of the Effective
Date, the District does not levy a system development fee
(“
SDF
”)
against property within the District. If the District at any time
before a Closing adopts a SDF, then at the Closing the Purchaser
shall pay the District’s SDF applicable to the Lots acquired
at such Closing. In order to offset Purchaser’s payment of
the District’s SDF for a Lot at a Closing, Purchaser shall
receive a credit against the Purchase Price paid by Purchaser for
such Lot at such Closing equal to the amount of the
District’s SDF paid by Purchaser for the Lot.
17.
Reimbursements and
Credits
. Purchaser shall
have no right to any reimbursements and/or cost-sharing agreements
pursuant to any agreements entered into between Seller or any of
Seller’s affiliates and third parties which may or may not
affect the Property. In addition, Purchaser acknowledges that
Seller, its affiliates or one (1) or more metropolitan district(s)
have installed or may dedicate land for and install certain roadway
infrastructure improvements ("
Infrastructure
Improvements
") which benefit all or any part of the
Property, together with adjacent properties, and which may entitle
Seller or its affiliates and/or the Property or any part thereof to
certain reimbursements or credits by the County or other Authority
relating to transportation/road fees or traffic impact fees paid to
the County or other Authority ("
Transportation
Fees
"). To the extent that Purchaser pays or is required by
the County to pay any such Transportation Fees to the County or
other Authority pertaining to the Infrastructure Improvements which
are in turn reimbursable to Seller by the County or other
Authority, Purchaser shall cooperate with Seller as reasonable
necessary to enable Seller to obtain the reimbursement of such
Transportation Fees paid by Purchaser to the County or other
Authority. Also, in the event that Purchaser receives any credit or
waiver in Transportation Fees as a result of any Infrastructure
Improvements, the Purchaser shall pay to or reimburse Seller and/or
its designated affiliates in an amount equal to such credited or
waived Transportation Fees at the same time that the Transportation
Fees would otherwise be payable by Purchaser. In addition,
Purchaser acknowledges that Seller or its affiliate(s) may have
negotiated or may negotiate with the County or other Authority for
reimbursements to Seller or its affiliates. Purchaser acknowledges
that certain other governmental fees which may be paid by Purchaser
to the County or other Authority may be reimbursed to Seller and/or
its affiliates pursuant to the terms of said agreement. With
respect to any particular governmental fee actually paid by
Purchaser to the County, Purchaser shall not be obligated to pay or
reimburse Seller or its affiliates for such governmental fee. The
obligations and covenants set forth in this
Section
17
shall survive the Closing of
the purchase and sale of the Property, shall represent a continuing
obligation of Purchaser, its successors and assigns, until complete
satisfaction thereof.
18.
Name and
Logo
.
The name and logo of "Sky Ranch" are wholly owned by Seller.
Purchaser agrees that it shall not use or allow the use of the name
"Sky Ranch" or any logo, symbol or other words or phrases which are
names or trademarks used or registered by Seller or any of its
affiliates in any manner to name, designate, advertise, sell or
develop the Property or in connection with the operation or
business located or to be located upon the Property without the
prior written consent of Seller, which consent may be withheld for
any reason. Any consent to the use of such names or logos may be
conditioned upon Purchaser entering into a license agreement with
Seller, as applicable, at no additional cost to Purchaser.
Notwithstanding the foregoing, however, Purchaser shall have the
right, without the need for any further consent or approval by
Seller, to use the name and logo of "Sky Ranch" for the purpose of
providing information in advertisements and marketing materials as
to the general location of the Property and Purchaser’s
construction of homes at such location.
19.
Renderings
. All renderings,
plans or drawings of the Property or the Development showing
landscaping, trees, amenities and any other improvements are
artists’ conceptions only and may not accurately reflect the
existence of any such items or their actual location. Purchaser
waives any claims based upon any inaccuracy in any such items as
depicted on the renderings, plans or drawings (except no waiver is
made for any such items ultimately required by the
Entitlements).
20.
Communications
Improvements
. Seller may, but
is not obligated to, enter into an agreement with a service
provider for the development and installation of Communication
Improvements in all or any portion of the Development.
“
Communications
Improvements
” means any equipment, property and
facilities, if used or useful in connection with the delivery,
deployment, provision or modification of facilities and equipment
to provide monitoring and meter reading services for the benefit of
governmental entities, quasi-governmental entities, or utilities,
regarding the usage of electricity, gas, water and other resources
and any other service or services based on technology that is
similar to or is a technological extension of the foregoing
(“Service”). Communications Improvements do not include
any equipment, facilities or property located on or in the home of
a person who receives services from the service provider, such as,
but not limited to routers, wireless access points, in-house
wiring, set-top boxes, game consoles, gateways and other equipment
under the control of the owner or occupant of the home. Seller may
grant to such service provider one or more permanent,
non-exclusive, perpetual, assignable and recordable easements
(collectively referred to as the “
Easement
”)
to access and use the Property and other property within the
Development, as necessary, appropriate or desirable, to lay,
install, construct, reconstruct, modify, operate, maintain, repair,
enhance, upgrade, regulate, remove, replace and otherwise use the
Communications Improvements, but Seller shall not create any
covenant or requirement that Seller or a Lot owner use or market
such Communications Improvements. Seller also shall not create any
covenant or requirement that Seller or a Lot owner not use or
market any competing Communications Improvements. Subject to the
foregoing, and so long as any such Easement does not materially
interfere with Purchaser’s ability to construct its intended
single family homes on the Lots or otherwise materially detract
from the value, use or enjoyment of any Lots, Purchaser shall not
object to and shall cooperate with Seller in connection with the
installation and operation of the Communications
Improvements.
21.
Soil Hauling
. Purchaser shall
be responsible for relocating from the Property all surplus soil
generated during Purchaser's construction of structures on the
Property, which shall be transported at Purchaser’s expense
to a site designated by Seller within the Development, provided
that Seller has designated and made such a site available to
Purchaser at the time Purchaser is ready to transport surplus
soils. If and to the extent that Seller establishes stock pile site
within the Development, Seller may modify any such stock pile
locations from time to time in Seller’s discretion with at
least three (3) business days’ written notice to Purchaser.
At Seller’s request, Purchaser shall supply copies of any
reports or field assessments identifying the material
characteristics of the excess soil prior to accepting such soil for
fill purposes. Notwithstanding the foregoing, in the event that
Seller does not establish a stock pile site or elects not to accept
any surplus soils from Purchaser, then Purchaser shall, at its sole
expense, find a purchaser or taker or otherwise transport and
dispose of such surplus soil upon such terms as it shall desire,
but such surplus soil must still be removed from the Property and
may not be stockpiled on the Property or within the Development
after construction has been completed.
22.
Specially Designated Nationals and
Blocked Persons List
. Purchaser
represents and warrants to Seller that Purchaser and all persons
and entities owning (directly or indirectly) an ownership interest
in Purchaser are currently in compliance with and shall at all
times prior to the Closing of this transaction remain in compliance
with the regulations of the Office of Foreign Assets Control
("
OFAC
") of
the United States Department of the Treasury (including those named
on OFAC’s Specially Designated and Blocked Persons List) and
any statute, executive order (including the September 24, 2001,
Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit or Support Terrorism), or
other governmental action relating thereto.
(a)
Seller's Assignment
. Seller may
assign its rights and obligations under this Contract with respect
to the Lots not yet Closed without the consent of Purchaser: (i) to
any entity that acquires all or substantially all of the
Seller’ interests in such Lots which Seller reasonably
believes has the financial ability and experience to perform
Seller’s obligations under this Contract; or (ii) to an
entity that controls, is controlled by, or under common control
with, Seller.
(b)
Purchaser's Assignment
. The
obligations of the Purchaser under this Contract are personal in
nature, and neither this Contract nor any rights, interests, or
obligations of Purchaser under this Contract may be transferred or
assigned without the prior written consent of Seller, except that
Purchaser may assign its rights or obligations under this Contract,
without the prior written consent of Seller, to (i) any affiliate
of Purchaser, or (ii) any third-party from which Purchaser has a
contractual right to acquire the Lots pursuant to an option
agreement or similar arrangement with such third-party, but
Purchaser shall not be released from any obligations
hereunder.
24.
Survival
. All covenants and
agreements of either party which are intended to be performed in
whole or in part after any Closing or termination of this Contract,
and all representations, warranties and indemnities by either party
to the other under this Contract shall survive such Closing or
termination of this Contract and shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that Seller’s
Representations pursuant to this Contract shall survive each
respective Closing for a period of twelve (12) months, and any
action by Purchaser based on a breach of any of such Seller’s
Representations must be brought within such twelve (12) month
period.
25.
Condemnation
. If a condemnation
action is filed or either party receives written notice from any
competent condemning authority of intent to condemn which directly
affects any Lot or Lots which Purchaser has a right to purchase,
either party may at its sole discretion by written notice to the
other party within ten (10) days following receipt of such
condemnation notice terminate this Contract as to the Lots subject
to the condemnation action and receive a refund of the Deposit with
respect to those Lots only (the Deposit being applied pro rata
equally among all Lots for this purpose), and the parties shall
have no further rights or obligations with respect to those Lots.
If the right to terminate is not exercised by either party, this
Contract shall remain in full force and effect with respect to the
Lot in question and upon exercise of the right to purchase the Lot,
the Closing shall proceed in accordance with the terms of this
Contract, and any condemnation award relating to such Lot shall be
paid to Purchaser at Closing (if received by Seller prior to
Closing) and otherwise shall be assigned to Purchaser at
Closing.
26.
Brokers
. Each Party does
hereby represent that it has not engaged any broker, finder, or
real estate agent in connection with the transactions contemplated
by this Contract. Each party agrees to and does hereby indemnify
and hold the other harmless from any and all fees, brokerage and
other commissions or costs (including reasonable attorneys’
fees), liabilities, losses, damages or claims which may result from
any broker, agent or finder, licensed or otherwise, claiming
through, under or by reason of the conduct of either of them
respectively in connection with the purchase of the Lots by
Purchaser.
27.
Default and
Remedies
. Time is of the
essence hereof. If any amount received as a Deposit hereunder or
any other payment due hereunder is not paid by Purchaser, honored
or tendered when due and payable, or if each Closing is not
consummated as required in accordance with
Section
8
above, or if any other
covenant, agreement, obligation or condition hereunder is not
performed or waived as herein provided within five (5) business
days (or such longer period as required under this Contract) after
the party failing to perform the same has received written notice
of such failure, there shall be the following
remedies:
(a)
Purchaser’s Default
. If
Purchaser is in default under this Contract, Seller may terminate
this Contract, in which event the Deposit shall be forfeited and
retained on behalf of Seller, and both parties shall, except as
otherwise provided herein including specifically Section 27(d) ,
thereafter be released from all obligations hereunder. It is agreed
that, except as otherwise provided in this subpart (a) and in
subparts (c) and (d) below and except with respect to the
indemnification by Purchaser in
Sections 10, 12
and
26
above, such
payments and things of value are LIQUIDATED DAMAGES and are
SELLER’S SOLE AND ONLY REMEDY for Purchaser’s failure
to perform the obligations of this Contract prior to the Closing.
Except as otherwise provided in this Contract, Seller expressly
waives the remedies of specific performance and additional damages
with respect to a default by Purchaser. Notwithstanding the
foregoing or any other contrary provision of this Contract, any and
all provisions of this Contract pursuant to which Purchaser agrees
to indemnify, hold harmless and defend Seller from and against any
losses, costs, claims, causes of action or liabilities of any kind
or nature, or pursuant to which Purchaser waives any rights or
claims that it may have against Seller, shall survive any
termination of this Contract, and shall be and remain fully
enforceable against Purchaser in accordance with the terms of this
Contract and applicable laws.
(b)
Seller’s Default
. If
Seller is in default under this Contract, Purchaser may elect AS
ITS SOLE AND EXCLUSIVE REMEDY either: (i) to treat this
Contract as canceled, in which case the Deposit shall be returned
to Purchaser, and Purchaser shall have the right to recover, as
damages, all out-of-pocket expenses incurred by it in negotiating
this Contract and in inspecting, analyzing or otherwise performing
its rights and obligations pursuant to this Contract, but in no
event will the amount of such damages exceed Fifty Thousand Dollars
($50,000.00); or (ii) Purchaser may elect to treat this Contract as
being in full force and effect and Purchaser shall have a right to
specific performance, provided that any such action for specific
performance must be commenced within sixty (60) days after the
expiration of the applicable notice and cure period provided
herein, and, in the event specific performance is not available,
than Purchaser may pursue the remedy set forth in clause (i) above.
Seller shall not be liable for and Purchaser shall not be entitled
to recover exemplary, punitive, special, indirect, consequential,
lost profits or any other damages.
(c)
Award of Costs and Fees
.
Anything to the contrary herein notwithstanding, in the event of
any litigation arising out of this Contract related to an action
for specific performance brought by either party as permitted in
accordance with the terms of this Contract, the court shall award
the substantially prevailing party all reasonable costs and
expenses, including attorneys’ fees, incurred by the
substantially prevailing party in the litigation or other
proceedings.
(d)
Post-Closing Defaults
. With
respect to post-Closing defaults, the parties agree that the
non-defaulting party shall be entitled to exercise all rights and
remedies available at law or in equity, except that damages shall
be limited to actual out-of-pocket costs and expenses incurred
(along with reasonable costs and expenses, including
attorneys’ fees, pursuant to Section 27(c)).
28.
General Provisions
.
The
parties hereto further agree as follows:
(a)
Time of the Essence
. Time is of
the essence under this Contract. In computing any period of time
under this Contract, the date of the act or event from which the
designated period of time begins to run shall not be included. The
last day of the period so computed shall be included unless it is a
Saturday, Sunday, or federal legal holiday, in which event the
period shall run until the end of the next day which is not a
Saturday, Sunday, or federal legal holiday.
(b)
Governing Law
. This Contract
shall be governed by and construed in accordance with the laws of
the State of Colorado.
(c)
Severability
. Should any
provisions of this Contract or the application thereof, to any
extent, be held invalid or unenforceable, the remainder of this
Contract and the application thereof, other than those provisions
which shall have been held invalid or unenforceable, shall not be
affected thereby and shall continue in full force and effect and
shall be enforceable to the fullest extent permitted at law or in
equity.
(d)
Entire Contract
. This Contract
embodies the entire agreement between the parties hereto concerning
the subject matter hereof and supersedes all prior conversations,
proposals, negotiations, understandings and agreements, whether
written or oral.
(e)
Exhibits
. All schedules,
exhibits and addenda attached to this Contract and referred to
herein shall for all purposes be deemed to be incorporated in this
Contract by this reference and made a part hereof.
(f)
Further Acts
. Each of the
parties hereto covenants and agrees with the other, upon reasonable
request from the other, from time to time, to execute and deliver
such additional documents and instruments and to take such other
actions as may be reasonably necessary to give effect to the
provisions of this Contract.
(g)
Compliance
. The performance by
the parties of their respective obligations provided for in this
Contract shall comply with all applicable laws and the rules and
regulations of all governmental agencies, municipal, county, state
and federal, having jurisdiction in the premises.
(h)
Amendment
. This Contract shall
not be amended, altered, changed, modified, supplemented or
rescinded in any manner except by a written agreement executed by
both parties.
(i)
Authority
. Each of the parties
hereto represents to the other that each such party has full power
and authority to execute, deliver and perform this Contract, that
the individuals executing this Contract on behalf of said party are
fully empowered and authorized to do so, that this Contract
constitutes a valid and legally binding obligation of such party
enforceable against such party in accordance with its terms, that
such execution, delivery and performance will not contravene any
legal or contractual restriction binding upon such party or any of
its assets and that there is no legal action, proceeding or
investigation of any kind now pending or to the knowledge of each
such party threatened against or affecting such party or affecting
the execution, delivery or performance of this Contract. Each of
the parties hereto represents to the other that each such party is
a duly organized, legal entity and is validly existing in good
standing under the laws of the jurisdiction of its
formation.
(j)
Notices
. All notices,
statements, demands, requirements, or other communications and
documents (collectively, "
Communications
")
required or permitted to be given, served, or delivered by or to
either party or any intended recipient under this Contract shall be
in writing and shall be deemed to have been duly given (i) on
the date and at the time of delivery if delivered personally to the
party to whom notice is given at the address specified below; or
(ii) on the date and at the time of delivery or refusal of
acceptance of delivery if delivered or attempted to be delivered by
an overnight courier service to the party to whom notice is given
at the address specified below; or (iii) on the date of
delivery or attempted delivery shown on the return receipt if
mailed to the party to whom notice is to be given by first-class
mail, sent by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as specified
below; or (iv) on the date and at the time shown on the
facsimile or electronic mail message if telecopied or sent
electronically to the number or address specified below and receipt
of such telecopy or electronic mail message is
acknowledged:
To
Seller:
PCY Holdings, LLC
Attention: Mark
Harding
34501
E. Quincy Ave.
Bldg.
34, Box 10
Watkins, Colorado
80137
Telephone: (303)
292-3456
Facsimile: (303)
292-3475
E-mail:
mharding@purecyclewater.com
with a
copy to:
Fox
Rothschild LLP
1225
17
th
Street, Suite 2200
Denver,
CO 80202
Attention: Rick
Rubin, Esq.
Telephone: (303)
292-1200
Email:
rrubin@foxrothschild.com
To
Purchaser: KB Home
Colorado Inc.
7807 E
Peakview Avenue, Suite 300
Centennial, CO
80111
Attention: Doug
Shelton
Telephone: (303)
323-1141
E-mail:
dshelton@kbhome.com
with a
copy to:
KB
Home
5795 W.
Badura Ave., Ste. 180
Las
Vegas, Nevada 89118
Attn:
Anthony Gordon, Esq.
Telephone: (702)
266-8422
E-mail:
tgordon@kbhome.com
(k)
Place of Business
. This
Contract arises out of the transaction of business in the State of
Colorado by the parties hereto.
(l)
Counterparts; Facsimile
Signature
. This Contract may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one (1) and the same
instrument, and either of the parties hereto may execute this
Contract by signing any such counterpart. This Contract may
be executed and delivered by facsimile or by electronic mail in
portable document format (.pdf) or similar means and delivery of
the signature page by such method will be deemed to have the same
effect as if the original signature had been delivered to the other
party.
(m)
Captions; Interpretation
. The
section captions and headings used in this Contract are inserted
herein for convenience of reference only and shall not be deemed to
define, limit or construe the provisions hereof. Purchaser and
Seller acknowledge that each is a sophisticated builder or
developer, as applicable, and that each has had an opportunity to
review, comment upon and negotiate the provisions of this Contract,
and thus the provisions of this Contract shall not be construed
more favorably or strictly for or against either party. Purchaser
and Seller each acknowledges having been advised, and having had
the opportunity, to consult legal counsel in connection with this
Contract and the transactions contemplated by this
Contract.
(n)
Number and Gender
. When
necessary for proper construction hereof, the singular of any word
used herein shall include the plural, the plural shall include the
singular and the use of any gender shall be applicable to all
genders.
(o)
Waiver
. Any one (1) or more
waivers of any covenant or condition by a party hereto shall not be
construed as a waiver of a subsequent breach of the same covenant
or condition nor a consent to or approval of any act requiring
consent to or approval of any subsequent similar act.
(p)
Binding Effect
. Subject to the
restrictions on assignment contained herein, this Contract shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
(q)
Recordation
. Purchaser shall
not cause or allow this Contract or any memorandum or other
evidence thereof to be recorded in the County Records or become a
public record without Seller’s prior written consent, which
consent may be withheld at Seller’s sole discretion. If
Purchaser records this Contract, then Purchaser shall be in default
of its obligations under this Contract.
(r)
No Beneficiaries
. No third
parties are intended to benefit by the covenants, agreements,
representations, warranties or any other terms or conditions of
this Contract.
(s)
Relationship of Parties
.
Purchaser and Seller acknowledge and agree that the relationship
established between the parties pursuant to this Contract is only
that of a seller and a purchaser of single-family lots. Neither
Purchaser nor Seller is, nor shall either hold itself out to be,
the agent, employee, joint venturer or partner of the other
party.
(t)
Interstate Land Sales Full Disclosure
Act and Colorado Subdivision Developers Act Exemptions
. It
is acknowledged and agreed by the parties that the sale of the
Property will be exempt from the provisions of the federal
Interstate Land Sales Full Disclosure Act under the exemption
applicable to sale or lease of property to any person who acquires
such property for the purpose of engaging in the business of
constructing residential, commercial or industrial buildings or for
the purpose of resale of such property to persons engaged in such
business. Purchaser hereby represents and warrants to Seller that
it is acquiring the Property for such purposes. It is further
acknowledged by the parties that the sale of the Property will be
exempt under the provisions of the Colorado Subdivision Developers
Act under the exemption applicable to transfers between developers.
Purchaser represents and warrants to Seller that Purchaser is
acquiring the Property for the purpose of participating as the
owner of the Property in the development, promotion and sale of the
Property and portions thereof.
(u)
Special Taxing District
Disclosure
. In accordance with the provisions of
C.R.S. §38-35.7-101(1), Seller provides the following
disclosure to Purchaser:
SPECIAL TAXING
DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS
PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE
PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS
MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND TAX TO SUPPORT
THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN
THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS
WITHOUT SUCH AN INCREASE IN MILL LEVIES. PURCHASERS SHOULD
INVESTIGATE THE SPECIAL TAXING DISTRICTS IN WHICH THE PROPERTY IS
LOCATED BY CONTACTING THE COUNTY TREASURER, BY REVIEWING THE
CERTIFICATE OF TAXES DUE FOR THE PROPERTY, AND BY OBTAINING FURTHER
INFORMATION FROM THE BOARD OF COUNTY COMMISSIONERS, THE COUNTY
CLERK AND RECORDER, OR THE COUNTY ASSESSOR
.
(v)
Common Interest Community
Disclosure
. In accordance with the provisions of
C.R.S. §38-35.7-102(1), Seller provides the following
disclosure to Purchaser:
IF SELLER ELECTS TO
FORM A HOMEOWNERS ASSOCIATION UNDER THE MASTER COVENANTS FOR THE
DEVELOPMENT, THEN
THE PROPERTY IS,
OR WILL BE PRIOR TO EACH RESPECTIVE CLOSING, LOCATED WITHIN A
COMMON INTEREST COMMUNITY AND IS, OR WILL BE PRIOR TO SUCH CLOSING,
SUBJECT TO THE DECLARATION FOR SUCH COMMUNITY. THE OWNER OF THE
PROPERTY WILL BE REQUIRED TO BE A MEMBER OF THE OWNER’S
ASSOCIATION FOR THE COMMUNITY AND WILL BE SUBJECT TO THE BYLAWS AND
RULES AND REGULATIONS OF THE ASSOCIATION. THE DECLARATION, BYLAWS,
AND RULES AND REGULATIONS WILL IMPOSE FINANCIAL OBLIGATIONS UPON
THE OWNER OF THE PROPERTY, INCLUDING AN OBLIGATION TO PAY
ASSESSMENTS OF THE ASSOCIATION. IF THE OWNER DOES NOT PAY THESE
ASSESSMENTS, THE ASSOCIATION COULD PLACE A LIEN ON THE PROPERTY AND
POSSIBLY SELL IT TO PAY THE DEBT. THE DECLARATION, BYLAWS, AND
RULES AND REGULATIONS OF THE COMMUNITY MAY PROHIBIT THE OWNER FROM
MAKING CHANGES TO THE PROPERTY WITHOUT AN ARCHITECTURAL REVIEW BY
THE ASSOCIATION (OR A COMMITTEE OF THE ASSOCIATION) AND THE
APPROVAL OF THE ASSOCIATION. PURCHASERS OF PROPERTY WITHIN THE
COMMON INTEREST COMMUNITY SHOULD INVESTIGATE THE FINANCIAL
OBLIGATIONS OF MEMBERS OF THE ASSOCIATION. PURCHASERS SHOULD
CAREFULLY READ THE DECLARATION FOR THE COMMUNITY AND THE BYLAWS AND
RULES AND REGULATIONS OF THE ASSOCIATION
.
(w)
Source of Water Disclosure
. In
accordance with the provisions of C.R.S. §38-35.7-104,
Seller provides the following disclosure to Purchaser:
THE
SOURCE OF POTABLE WATER FOR THIS REAL ESTATE IS:
A
WATER PROVIDER, WHICH CAN BE CONTACTED AS FOLLOWS:
NAME:
Rangeview
Metropolitan District
ADDRESS:
c/o
Special District Management Services, Inc.
141
Union Blvd., Suite 150
WEB
SITE:
www.rangviewmetro.org
SOME
WATER PROVIDERS RELY, TO VARYING DEGREES, ON NONRENEWABLE GROUND
WATER. YOU MAY WISH TO CONTACT YOUR PROVIDER TO DETERMINE THE
LONG-TERM SUFFICIENCY OF THE PROVIDER’S WATER
SUPPLIES.
(x)
STORM WATER POLLUTION PREVENTION
PLAN
.
Seller has
previously filed a Notice of Intent ("
NOI
") and/or
prepared a Stormwater Pollution Prevention Plan ("
SWPPP
") to
satisfy its stormwater obligations arising from its work on the
Property. Seller covenants that prior to each Closing Date and
until Closing of the Lots, Seller and/or its contractor shall
comply with the SWPPP with respect to all of the Lots owned by
Seller, and shall comply with all local, state and federal
environmental obligations (including stormwater) associated with
the development of the Lots. Seller shall indemnify and hold
Purchaser harmless from all claims and causes of action arising
from breach of the foregoing covenants of Seller to the extent
there is an uncured notice of violation issued with respect to any
Lot prior to conveyance of the Lot to Purchaser. From and after
conveyance of Lots, and until such time as such Lots are subject to
Purchaser’s SWPPP (as hereafter defined), Purchaser shall be
solely responsible for complying with the SWPPP, maintaining all
required best management practices (
“BMPs
”), and conducting and
documenting all required inspections. Purchaser shall also comply
with all local state and federal environmental obligations
(including stormwater) associated with its ownership or development
of the Lots conveyed to Purchaser by Seller. Such obligations
include, without limitation, (i) complying with the SWPPP or the
Purchaser’s SWPPP, as applicable, (ii) maintaining all
required BMPs, and (iii) conducting and documenting all required
inspections. Purchaser covenants and Seller acknowledges that, with
respect to Lots acquired by Purchaser, Purchaser shall, within ten
(10) days after conveyance of such Lots, at its sole cost and
expense (subject to Seller’s prior written approval) submit
its own notice of intent for a new stormwater pollution prevention
plan (the “
Purchaser’s
SWPPP
”). Subsequent to the applicable Closing Date,
Purchaser shall comply with the Purchaser’s SWPPP with
respect to all of the Lots then owned by Purchaser, and shall
comply with all local, state and federal environmental obligations
(including stormwater) associated with its ownership or development
of all such Lots. Purchaser shall indemnify and hold Seller
harmless from all third party claims and causes of action solely
arising from breach of the foregoing covenants of
Purchaser.
(y)
Oil, Gas, Water and Mineral
Disclosure
. THE SURFACE ESTATE OF THE PROPERTY MAY BE OWNED
SEPARATELY FROM THE UNDERLYING MINERAL ESTATE, AND TRANSFER OF THE
SURFACE ESTATE MAY NOT NECESSARILY INCLUDE TRANSFER OF THE MINERAL
ESTATE OR WATER RIGHTS.
THIRD
PARTIES MAY OWN OR LEASE INTERESTS IN OIL, GAS, OTHER MINERALS,
GEOTHERMAL ENERGY OR WATER ON OR UNDER THE SURFACE OF THE PROPERTY,
WHICH INTERESTS MAY GIVE THEM RIGHTS TO ENTER AND USE THE SURFACE
OF THE PROPERTY TO ACCESS THE MINERAL ESTATE, OIL, GAS OR
WATER.
SURFACE
USE AGREEMENT. THE USE OF THE SURFACE ESTATE OF THE PROPERTY TO
ACCESS THE OIL, GAS OR MINERALS MAY BE GOVERNED BY A SURFACE USE
AGREEMENT, A MEMORANDUM OR OTHER NOTICE OF WHICH MAY BE RECORDED
WITH THE COUNTY CLERK AND RECORDER.
OIL AND
GAS ACTIVITY. OIL AND GAS ACTIVITY THAT MAY OCCUR ON OR ADJACENT TO
THE PROPERTY MAY INCLUDE, BUT IS NOT LIMITED TO, SURVEYING,
DRILLING, WELL COMPLETION OPERATIONS, STORAGE, OIL AND GAS, OR
PRODUCTION FACILITIES, PRODUCING WELLS, REWORKING OF CURRENT WELLS,
AND GAS GATHERING AND PROCESSING FACILITIES.
ADDITIONAL
INFORMATION. PURCHASER IS ENCOURAGED TO SEEK ADDITIONAL INFORMATION
REGARDING OIL AND GAS ACTIVITY ON OR ADJACENT TO THE PROPERTY,
INCLUDING DRILLING PERMIT APPLICATIONS. THIS INFORMATION MAY BE
AVAILABLE FROM THE COLORADO OIL AND GAS CONSERVATION
COMMISSION.
(z)
Property Tax Disclosure
Summary
. PURCHASER SHOULD NOT RELY ON SELLER’S CURRENT
PROPERTY TAXES AS THE AMOUNT OF PROPERTY TAXES THAT PURCHASER MAY
BE OBLIGATED TO PAY IN THE YEAR SUBSEQUENT TO PURCHASE. A CHANGE IN
OWNERSHIP OR PROPERTY IMPROVEMENTS TRIGGERS REASSESSMENTS OF THE
PROPERTY THAT COULD RESULT IN HIGHER PROPERTY TAXES. IF PURCHASER
HAS ANY QUESTIONS CONCERNING VALUATION, CONTACT THE COUNTY PROPERTY
APPRAISER’S OFFICE FOR INFORMATION.
(aa)
Waiver of Jury Trial
. TO THE
EXTENT PERMITTED BY LAW, THE PARTIES HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO THE PROVISIONS OF THIS
CONTRACT.
(bb)
Confidentiality
.
Purchaser and Seller agree that,
prior to each respective Closing, and thereafter if such Closing
does not occur, all information relating to the Property that is
the subject of such Closing, any reports, studies, data and
summaries developed by Purchaser, and any information relating to
the business of either party (together, the "
Confidential
Information
") shall be kept confidential as provided in this
section. Without the prior written consent of the other party,
prior to the applicable Closing, the Confidential Information shall
not be disclosed by Purchaser, Seller or their Representatives (as
hereinafter defined) in any manner whatsoever, in whole or in part,
except (1) to their Representatives who need to know the
Confidential Information for the purpose of evaluating the Property
and who are informed by Seller or Purchaser as applicable of the
confidential nature thereof; (2) as may be necessary for
Seller, Purchaser or their Representatives to comply with
applicable laws, including, without limitation, governmental
regulatory, disclosure, tax and reporting requirements (including,
without limitation, any applicable reporting requirements for
publicly traded companies); to comply with other requirements and
requests of regulatory and supervisory authorities and
self-regulatory organizations having jurisdiction over Seller,
Purchaser or their Representatives; to comply with regulatory or
judicial processes; or to satisfy reporting procedures and
inquiries of credit rating agencies in accordance with customary
practices of Seller, Purchaser or their affiliates; and (3) to
lenders and investors for the transaction. As used herein,
"
Representatives
"
shall mean: Seller’s and Purchaser’s managers, members,
directors, officers, employees, affiliates, investors, brokers,
agents or other representatives, including, without limitation,
attorneys, accountants, contractors, consultants, engineers,
lenders, investors and financial advisors. Seller, at its election,
may issue an oral or written press release or public disclosure of
the existence or the terms of this Contract without the consent of
the Purchaser. "
Confidential
Information
" shall not be deemed to include any information
or document which (I) is or becomes generally available to the
public other than as a result of a disclosure by Seller, Purchaser
or their Representatives in violation of this Contract,
(II) becomes available from a source other than Seller,
Purchaser or any affiliates of Seller or Purchaser or their agents
or Representatives, or (III) is developed by Seller or
Purchaser or their Representatives without reliance upon and
independently of otherwise Confidential Information. In addition to
any other remedies available to a party for breach of this Section,
the non-breaching party shall have the right to seek equitable
relief, including, without limitation, injunctive relief or
specific performance, against the breaching party or its
Representatives, in order to enforce the provisions of this
section. The provisions of this section shall survive the
termination of this Contract, or the applicable Closing, for one
(1) year.
(cc)
Survival
. Obligations to be
performed subsequent to a Closing shall survive each
Closing.
[
SIGNATURE PAGE FOLLOWS
]
IN
WITNESS WHEREOF, Seller and Purchaser have executed this Contract
effective as of the day and year first above written.
SELLER:
|
PCY
HOLDINGS, LLC
a
Colorado limited liability company
|
|
|
|
|
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
June 29, 2017
|
PURCHASER:
|
KB HOME
COLORADO INC., a Colorado corporation
|
By: /s/
Randy Carpenter
Name:
Randy Carpenter
|
Title:
President
|
Date:
May 31, 2017
|
LIST OF EXHIBITS
EXHIBIT
A:
CONCEPTUAL
DEVELOPMENT PLAN AND LOTTING DIAGRAM
EXHIBIT
B:
RESERVATIONS AND COVENANTS
EXHIBIT
C:
FINISHED LOT IMPROVEMENTS
EXHIBIT
D:
FORM OF GENERAL
ASSIGNMENT
EXHIBIT A
CONCEPTUAL DEVELOPMENT PLAN AND LOTTING DIAGRAM
EXHIBIT B
RESERVATIONS AND COVENANTS
Reservation of Easements
.
Seller (referred to this paragraph as “Grantor”)
expressly reserves unto itself, its successors and assigns, the
right to grant easements for construction of utilities and other
facilities to support the development of the properties commonly
known as "Sky Ranch," including but not limited to sanitary sewer,
water lines, electric, cable, broad-band and telephone
transmission, storm drainage and construction access easements
across the Property allowing Grantor or its assignees the right to
install and maintain sanitary sewer, water lines, cable television,
broad-band, electric, and telephone utilities on the Property and
on its adjacent property, and further, to accommodate storm
drainage from its adjacent property. Such easements shall not allow
above-grade surface installation of facilities and shall require
the restoration of any surface damage or disturbance caused by the
exercise of such easements, shall not be located within the
building envelope of any Lot or otherwise interfere with the use of
a Lot for construction of Grantee’s homes, shall not
materially detract from the value, use or enjoyment of (i) the
remaining portion of the Property on which such easements are to be
located, or (ii) any adjoining property of Grantee, and shall
not require any reduction in allowed density for the Property or
reconfiguration of planned lots or the building envelope on a lot.
If possible, such easements shall be located within the boundaries
of existing easement areas. Grantor, at its sole expense, shall
immediately restore the land and improvements thereon to their
prior condition to the extent of any damage incurred due to
Grantor’s utilization of the easements herein
reserved.
Reservation of Minerals and Mineral
Rights
. To the extent owned by Grantor, Grantor herein
expressly excepts and reserves unto itself, its successors and
assigns, all right, title and interest in and to all minerals and
mineral rights, including bonuses, rents, royalties, royalty
interests and other benefits that may be payable as a result of any
oil, gas, gravel, minerals or mineral rights on, in, under or that
may be produced from the Property, including, but not limited to,
all gravel, sand, oil, gas and other liquid hydrocarbon substances,
casinghead gas, coal, carbon dioxide, helium, geothermal resources,
and all other naturally occurring elements, compounds and
substances, whether similar or dissimilar, organic or inorganic,
metallic or non-metallic, in whatever form and whether occurring,
found, extracted or removed in solid, liquid or gaseous state, or
in combination, association or solution with other mineral or
non-mineral substances, provided that Grantor expressly waives all
rights to use or damage the surface of the Property to exercise the
rights reserved in this paragraph and, without limiting such
waiver, Grantor’s activities in extracting or otherwise
dealing with the minerals and mineral rights shall not cause
disturbance or subsidence of the surface of the Property or any
improvements on the Property.
Reservation of Water and Water
Rights
. To the extent owned by Grantor, Grantor herein
expressly excepts and reserves unto itself, its successors and
assigns, all water and water rights, ditches and ditch rights,
reservoirs and reservoir rights, streams and stream rights, water
wells and well rights, whether tributary, non-tributary or not
non-tributary, including, but not limited to, all right, title and
interest under C.R.S. 37-90-137 on, underlying, appurtenant to or
now or historically used on or in connection with the Property,
whether appropriated, conditionally appropriated or unappropriated,
and whether adjudicated or unadjudicated, including, without
limitation, all State Engineer filings, well registration
statements, well permits, decrees and pending water court
applications, if any, and all water well equipment or other
personalty or fixtures currently used for the supply, diversion,
storage, treatment or distribution of water on or in connection
with the Property, and all water and ditch stock relating thereto;
provided that Grantor expressly waives all rights to use or damage
the surface of the Property to exercise the rights reserved in this
paragraph and, without limiting such waiver, Grantor’s
activities in dealing with the water and water rights herein
reserved shall not cause disturbance or subsidence of the surface
of the Property or any improvements on the Property.
The
obligations and covenants set forth herein shall be binding on
Grantee, its successors and assigns, and any subsequent owners of
the Property.
EXHIBIT C
FINISHED LOT IMPROVEMENTS
1.
"
Finished Lot
Improvements
" means the following improvements on, to or
with respect to the Lots or in public streets or tracts in the
locations as required by all approving Authorities, and
substantially in accordance with the CDs:
(a)
overlot grading
together with corner pins for each Lot installed in place, graded
to match the specified Lot drainage template within the CDs (but
not any Overex);
(b)
water and sanitary
sewer mains and other required installations in connection
therewith identified in the CDs, valve boxes and meter pits,
substantially in accordance with the CDs approved by the approving
Authorities, together with appropriate markers;
(c)
storm sewer mains,
inlets and other associated storm drainage improvements pertaining
to the Lots in the public streets as shown on the CDs;
(d)
curb, gutter,
asphalt, sidewalks, street striping, street signage, traffic signs,
traffic signals (if any are required by the approving Authorities),
and other street improvements, in the private and/or public streets
as shown on the CDs; for purposes of “Substantial
Completion”, Seller will either have applied a final lift of
asphalt or in Seller’s discretion posted sufficient financial
guarantees as required by the County for the Lots to qualify for
issuance of building permits in lieu of such final lift of
asphalt;
(e)
sanitary sewer
service stubs if required by the Authorities, connected to the
foregoing sanitary sewer mains, installed into each respective Lot
(to a point beyond any utility easements), together with
appropriate markers of the ends of such stubs, as shown on the
CDs;
(f)
water service
stubs connected to the foregoing water mains installed into each
Lot (to a point beyond any utility easements), together with
appropriate markers of the ends of such stubs, as shown on the
CDs;
(g)
Lot fill in
compliance with the geotechnical engineer’s recommendation,
and with respect to any filled area or compacted area, provide from
a Colorado licensed professional soils engineer a HUD Data Sheet
79G Certification (or equivalent) and a certification that the
compaction and moisture content recommendations of the soils
engineer were followed and that the grading of the respective Lots
complies with the approved grading plans, with overlot grading
completed in conformance with the approving Authorities approved
grading plans within a +/- 0.2’ tolerance of the approved
grading plans; however, the Finished Lot Improvements do not
include any Overex as provided in Section 10(e) of the
Contract;
(h)
all storm water
management facilities as shown in the CDs; and
2.
Dry Utilities
. Electricity,
natural gas, and telephone service will be installed by local
utility companies. The installations may not be completed at the
time of a Closing, and are not part of the Finish Lot Improvements;
provided, however, that: (i) with respect to electric distribution
lines and street lights, Seller will have signed an agreement with
the electric utility service provider and paid all costs and fees
for the installation of electric distribution lines and facilities
to serve the Lots, and all sleeves necessary for electric, gas,
telephone and/or cable television service to the Lots will be
installed; (ii) with respect to gas distribution lines, Seller will
have signed an agreement with the gas utility service provider, and
paid all costs and fees for the installation of gas distribution
lines and facilities to serve the Lots. Seller will take
commercially reasonable efforts to assist Purchaser in coordinating
with these utility companies to provide final electric, gas,
telephone and cable television service to the residences on the
Lots, however, Purchaser must activate such services through an end
user contract. Purchaser acknowledges that in some cases the
telephone and cable companies may not have pulled the main line
through the conduit if no closings of residences have occurred.
Notwithstanding the foregoing, if dry utilities have not been
installed upon Substantial Completion of the Finished Lot
Improvements, Seller shall be obligated to have contracted for same
and paid all costs and fees payable for such installation. Unless
Seller has contracted for such installation and paid such costs
before the Effective Date, Seller will give Purchaser notice when
such contracts have been entered and such costs paid. With respect
to any other improvements that are required by the subdivision
improvement agreement applicable to the Lots but which are not
addressed as part of the Finished Lot Improvements, Seller shall
complete such other improvements, to the extent required by the
County, so as not to delay the issuance of building permits or
certificates of occupancy for residences constructed on the
Lots.
3.
CO Required Improvements
. The
improvements which are not required for the issuance of building
permits, but which are required by the Authorities so that
dwellings and other home improvements constructed or to be
constructed by Purchaser on the Lots are eligible for the issuance
of certificates of occupancy for homes will be completed by Seller
as required by the Authorities so that Purchaser is not delayed or
prevented from obtaining certificates of occupancy for homes
constructed by Purchaser on the Lots.
4.
Wastewater Treatment
Facilities
. Rangeview will be constructing a new wastewater
reclamation facility (“WWRF”) for the Development.
Prior to closing, Seller shall provide evidence to Purchaser that
Rangeview has received the necessary authorizations from the Water
Quality Control Division of the Colorado Department of Public
Health and Environment and from the County to construct the WWRF,
and has awarded a contract for the construction of the WWRF.
Purchaser acknowledges that the currently planned WWRF for the
Development may not be Substantially Complete on or before the
dates that Purchaser obtains building permits and certificates of
occupancy for Lots. Therefore, Seller shall provide, at
Seller’s sole cost, a temporary alternative service for the
processing of wastewater sufficient for the issuance of building
permits and certificates of occupancy consisting of two sequential
batch reactor basins with a combined volume of 500,0000 gallons,
along with appurtenant facilities to mitigate the development of
odors, that Rangeview’s engineer will certify as having been
constructed in accordance with approved plans and specifications
(the “
Alternative
Service
”). The Alternative Service shall be
operational on the date that Purchaser closes on such Lot, as part
of Substantial Completion of the Finished Lot Improvements, and
shall continue in operation until such time as the wastewater
treatment plant is substantially complete and placed into
operation. In the event the County withholds such building permits
and/or certificates of occupancy pending final completion of the
WWRF, Purchaser may, at its election, upon notice to Seller, defer
any applicable closing until such a time that the County deems the
Lots are eligible for permit issuance. On or before the First
Closing, Seller have deposited funds into an escrow with the Title
Company pursuant to an “
Offsite
Infrastructure Escrow Agreement
” equal to the
contracted cost to substantially complete the WWRF for the
Development which Seller and/or Rangeview shall have the right to
draw upon to pay for water and sewer infrastructure improvements as
constructed. The form of the Offsite Infrastructure Escrow
Agreement shall be provided to Purchaser for Purchaser’s
review not less than twenty (20) days prior to the expiration of
the Due Diligence Period and shall be subject to Purchaser’s
review and approval during the Due Diligence Period and if
Purchaser is not satisfied with such agreement for any reason, then
Purchaser’s sole remedy shall be to terminate this Agreement
under Section 10(a) and if Purchaser does not so terminate the
Agreement then the Offsite Infrastructure Escrow Agreement shall be
deemed approved. At Closing the Purchaser may become a party by
joinder to the Offsite Infrastructure Escrow Agreement solely with
respect to remedies for a Seller default in timely completing the
Offsite Infrastructure Improvements, including a step right if
Seller does not timely complete the WWRF.
5.
Tree Lawns/Sidewalks
.
Notwithstanding anything in this Contract to the contrary, Seller
shall have no obligation to construct, install, maintain or pay for
the maintenance, construction and installation of (i) any
landscaping or irrigation for such landscaping behind the curb on
any Lot that is to be maintained by the owner of such lot
(collectively, “
Tree
Lawns
”), but Seller shall be responsible for
constructing and installing the detached sidewalks and ramps
(collectively, “
Sidewalks
”)
that are located immediately adjacent to any Lot or on a tract as
required by the approved CDs, County, or any other Authority and/or
applicable laws as provided in this Contract. Purchaser shall be
responsible for installing any other lead walks, pathways, and
driveways and any other flatwork on the Lots. Purchaser shall
install all Tree Lawns on or adjacent to the Lots in accordance
with all applicable CDs, requirements, regulations, laws,
development codes and building codes of all
Authorities.
6.
Warranty
.
(a)
Government Warranty
Period
.
The Authorities
require warranties (each a “
Governmental
Warranty
”) for periods of time after the final
completion (each a “
Government Warranty
Period
”) that is applicable to certain Finished Lots
Improvements that are dedicated to or owned, and accepted for
maintenance by the Authorities (the “
Public
Improvements
”). In the event a claim is made under a
Governmental Warranty or defects in the Public Improvements are
discovered or become apparent during the applicable Government
Warranty Period, then Seller shall coordinate the repairs with the
applicable Authorities and cause the contractors and service
provider(s) who performed the work or supplied the materials in
which the defect(s) appear to complete such repairs or, if such
service providers fail to correct such defects, otherwise cause
such defects to be repaired to the satisfaction of the Authorities.
Any costs and expenses incurred pursuant to a Government Warranty
in connection with any repairs or warranty work performed during
the Government Warranty Period (including, but not limited to, any
costs or expenses incurred to enforce any warranties against any
service providers) shall be borne by Seller, unless such defect was
caused by Purchaser or its contractors, subcontractors, employees,
or agents, in which event Purchaser shall pay all such costs and
expenses to the extent such defect was caused by Purchaser or its
contractors, subcontractors, employees, or agents.
(b)
Non-Government Warranty
Period
.
Seller
warrants (“
Non-Government
Warranty
”) to Purchaser that each Finished Lot
Improvement, other than the Public Improvements, shall have been
constructed in accordance with the CDs and other applicable
Entitlements for one (1) year from the date of Final Completion of
the Improvement (the “
Non-Government
Warranty Period
”). If Purchaser delivers written
notice to Seller of breach of the Non-Government Warranty during
the Non-Government Warranty Period, then Seller shall coordinate
the corrections with Purchaser and cause the contractors and
service provider(s) who performed the work or supplied the
materials in which the breach of Non-Government Warranty appears to
complete such corrections or, if such contractors and service
providers fail to make such corrections, otherwise cause such
corrections to be made to the reasonable satisfaction of Purchaser.
Any costs and expenses incurred in connection with a breach of the
Non-Government Warranty shall be borne by Seller (including, but
not limited to, any costs or expenses incurred to enforce any
warranties against contractors and service providers), unless such
breach was caused by Purchaser or its contractors, subcontractors,
employees, or agents, in which event Purchaser shall pay all such
costs and expenses to the extent the breach was caused by Purchaser
or its contractors, subcontractors, employees, or
agents.
(c)
EXCEPT AS EXPRESSLY
PROVIDED IN THIS SECTION 6 OF THIS EXHIBIT C AND ELSEWHERE IN THE
CONTRACT OR OTHER CLOSING DOCUMENTS ENTERED BY SELLER AT OR PRIOR
TO CLOSING, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY
KIND TO PURCHASER IN RELATION TO THE FINISHED LOT IMPROVEMENTS,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF HABITABILITY, MERCHANTABILITY, OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND EXPRESSLY DISCLAIMS ALL OF THE SAME AND
SHALL HAVE NO OBLIGATION TO REPAIR OR CORRECT AND SHALL HAVE NO
LIABILITY OR RESPONSIBILITY WITH RESPECT TO ANY DEFECT IN
IMPROVEMENTS FOR WHICH NO CLAIM IS ASSERTED DURING THE APPLICABLE
WARRANTY PERIOD OR AS OTHERWISE PROVIDED BY LAW.
EXHIBIT D
FORM OF GENERAL ASSIGNMENT
GENERAL
ASSIGNMENT
Reference is hereby
made to that certain Purchase and Sale Agreement dated as of
_______________, 2017 (the "Agreement"), pursuant to which PCY
Holdings, LLC, a Colorado limited liability company ("Seller"), has
agreed to sell to KB Home Colorado Inc., a Colorado corporation
("Purchaser"), the Property as described in the
Agreement.
For
good and valuable consideration, the receipt of which is hereby
acknowledged, Seller hereby assigns and transfers to Purchaser on a
non-exclusive basis, Seller's right, title and interest (but not
any obligations, all of same remaining with seller) in the
following as the same relate solely to the Property, and to the
extent the same are assignable: (i) all subdivision agreements,
development agreements, and entitlements; (ii) all construction
plans and specifications; (iii) all construction and other
warranties and indemnities including any and all warranties from
all contractors and service provider(s) who performed work or
supplied materials for the Property and the Development; and (iv)
all development rights benefiting the Property.
SELLER:
PCY
Holdings, LLC,
a
Colorado corporation
FIRST AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
FIRST AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A. Seller
and Purchaser previously entered into a Contract For Purchase And
Sale of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to September 15, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
August 28, 2017
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
President
Date:
August 28, 2017
|
SIGNATURE
PAGE TO FIRST AMENDMENT
2
SECOND AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
SECOND AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A. Seller
and Purchaser previously entered into a Contract For Purchase And
Sale of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to September 29, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
September 15, 2017
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
President
Date:
September 15, 2017
|
THIRD AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
THIRD AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A. Seller
and Purchaser previously entered into a Contract For Purchase And
Sale of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to October 6, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
September 28, 2017
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Title:
Date:
|
FOURTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
FOURTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A. Seller
and Purchaser previously entered into a Contract For Purchase And
Sale of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to October 13, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
President
Date:
October 9, 2017
|
FIFTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
FIFTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A. Seller
and Purchaser previously entered into a Contract For Purchase And
Sale of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to October 20, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
October 18, 2017
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
President
Date:
October 18, 2017
|
SIXTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
SIXTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A. Seller
and Purchaser previously entered into a Contract For Purchase And
Sale of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to October 31, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
October 20, 2017
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
President
Date:
October 20, 2017
|
SEVENTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
SEVENTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A. Seller
and Purchaser previously entered into a Contract For Purchase And
Sale of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B. Purchaser
and Seller now desire to amend the terms and conditions of the
Contract as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due
Diligence Period
. The expiration of the Due Diligence
Period, as defined in Section 10(a) of the Contract, is hereby
extended to November 3, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
October 31, 2017
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
Division President
Date:
October 31, 2017
|
EIGHTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
EIGHTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
A.
Seller and
Purchaser previously entered into a Contract For Purchase And Sale
of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
B.
Purchaser and
Seller now desire to amend the terms and conditions of the Contract
as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
1.
Due Diligence
Period
. The expiration of the Due Diligence Period, as
defined in Section 10(a) of the Contract, is hereby extended to
November 7, 2017.
2.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
President
Date:
November 3, 2017
|
NINTH AMENDMENT TO
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(Sky Ranch)
THIS
NINTH AMENDMENT TO CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
(this “
Amendment
”)
is made as of the date the last of the Parties executes and dates
this Amendment (the “
Effective
Date
”), by and between
PCY HOLDINGS, LLC
, a Colorado limited
liability company (“
Seller
”),
and
KB HOME COLORADO INC.
, a
Colorado corporation (“
Purchaser
”).
Seller and Purchaser may be referred to collectively as the
“
Parties
.”
RECITALS
C.
Seller and
Purchaser previously entered into a Contract For Purchase And Sale
of Real Estate effectively dated June 29, 2017 (the
“
Contract
”)
for approximately 149 platted single-family detached residential
lots in the Sky Ranch master planned residential community in the
County of Arapahoe, State of Colorado.
D.
Purchaser and
Seller now desire to amend the terms and conditions of the Contract
as set forth below.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Amendment and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Purchaser and Seller hereby agree as follows:
3.
Due Diligence
Period
. The expiration of the Due Diligence Period, as
defined in Section 10(a) of the Contract, is hereby extended to
November 10, 2017.
4.
Miscellaneous
.
In the case of any conflict between the terms of this Amendment and
the provisions of the Contract, the provisions of this Amendment
shall control. Except as the Contract is specifically modified by
this Amendment, the Parties hereby ratify, reaffirm, and restate
the terms of the Contract. This Amendment may be executed in
counterparts, each of which shall be deemed an original and may be
signed and delivered by facsimile transmission or electronic mail,
and all of which, when taken together, shall constitute one and the
same Amendment.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the last day and year written below.
SELLER:
PCY
HOLDINGS, LLC, a Colorado limited liability company
By: /s/
Mark Harding
Name:
Mark Harding
Title:
President
Date:
November 7, 2017
PURCHASER:
KB HOME
COLORADO INC.,
a
Colorado corporation
Name:
Randy Carpenter
Title:
President
Date:
November 7, 2017
|
EXHIBIT 21.1
SUBSIDIARIES
PCY Holdings, LLC, a Colorado limited liability
company
PCY-DT, LLC, a Colorado limited liability company
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-115240) and Form S-8 (No.
333-195733) of Pure Cycle Corporation of our report dated
November 15,
2017
, related to the financial
statements as of and for the year ended August 31, 2017 and
effectiveness of internal control over financial reporting as of
August 31, 2017 of Pure Cycle Corporation, which appears on page
F-1 of this annual report on Form 10-K for the year ended August
31, 2017.
/s/ CROWE HORWATH LLP
Denver, Colorado
November 15, 2017
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-115240) and Form S-8 (No.
333-195733) of Pure Cycle Corporation of our report dated
October 27,
2016
, related to the financial
statements as of and for the two year period ended August 31, 2016
of Pure Cycle Corporation (which expresses an unqualified opinion),
which report appears in the August 31, 2017 annual report on Form
10-K of Pure Cycle Corporation.
/s/ GHP HORWATH, P.C.
Denver, Colorado
November 15, 2017
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Mark W. Harding, certify that:
1.
I
have reviewed this Annual Report on Form 10-K of Pure Cycle
Corporation;
2.
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
I
am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under my supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to me by
others within those entities, particularly during the period in
which this report is being prepared;
(b)
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such
evaluation;
(d)
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
5.
I
have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent
functions):
(a)
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
(b)
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
Dated: November 15, 2017
/s/ Mark W. Harding
Mark W. Harding
Principal Executive Officer and Principal Financial
Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark W. Harding, the Chief Executive Officer and Chief Financial
Officer of Pure Cycle Corporation (the “Company”),
hereby certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
that:
(1)
The Form 10-K of the Company for the fiscal year ended August 31,
2017, as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2)
The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
/s/ Mark W. Harding
Mark W. Harding
Principal Executive Officer and Principal Financial
Officer
November 15, 2017