Exhibit 10.19
AGREEMENT
Agreement entered into as of the 6th day of January, 2000, between
Xxxxxxxxxxx Homes Custom Home Division, Inc., a Nevada corporation ("Xxxxxxxxxxx
Homes") and J. Xxxxxxxxxxx Xxxxxxx, a resident of Nevada ("Xxxxxxx").
RECITALS
A. Christopher Homes is the Manager under a First Amended Operating
Agreement, dated February 26, 1999, entitled "First Amended
Operating Agreement of Star Canyon/Xxxxxxxxx, L.L.C., a Nevada
Limited Liability Company" (the "Operating Agreement").
B. Pursuant to Article 5.9 of the First Amended Operating Agreement
of Star Canyon Xxxxxxxxx/L.L.C., the Articles of Organization were
amended to change the name of the Limited Liability Company to
Bellacere, L.L.C., a Nevada Limited Liability Company, by
appropriate filing of a Certificate of Amendment in the office of
the Secretary of State of the State of Nevada on May 24, 1999.
X. Xxxxxxxxxxx Homes has specifically enumerated duties under the
Operating Agreement dealing with the development of a residential
community, and Consultant has experience in providing the type of
services contemplated.
X. Xxxxxxxxxxx Homes desires to retain a Consultant to assist it in
performing its duties under the Operating Agreement, and
Consultant desires to be retained for this purpose.
E. Unless otherwise stated, capitalized words and phrases used herein
have the same meaning as set forth in the Operating Agreement.
NOW, THEREFORE, in consideration of the bargaining of the parties and
other valuable consideration, the parties AGREE as follows:
1. Division of Net Profits. In return for the right to receive a
consulting fee as provided in this Agreement, Consultant promises to pay to
Xxxxxxxxxxx Homes eighty percent (80%) of all Net Profits to which he is
entitled under the Operating Agreement. On each occasion that Consultant
receives a distribution of quarterly Net Profits under Section 8.3 of the
Operating Agreement, Consultant will pay to Xxxxxxxxxxx Homes eighty (80%) of
the distribution, and Consultant shall retain twenty percent (20%) of said
distribution.
1
2. Fees and Other Consideration. In return for the right to receive
from Consultant a share of the Net Profits, and in reliance on Consultant's
promise to provide the consulting services described in this Agreement in
Section 3, Xxxxxxxxxxx Homes promises to pay to Consultant as a consulting fee
during the term of this Agreement two percent (2%) of all Sales Revenues.
Consulting fees will be paid to Consultant concurrently with, and on a pro rata
basis with fees paid to Xxxxxxxxxxx Homes pursuant to Section 8.3 of the
Operating Agreement. For purposes of this Agreement, "Sales Revenues" shall have
the following meaning:
"Sales Revenue" means the gross revenues from the sale or other
disposition of Lots and Residences as recorded by Southern
Highlands/Xxxxxxxxxxx Homes I, LLC (the "LLC") in accordance with
generally accepted accounting principles, including any payments for
upgrades, options and improvements and excluding any (i) transfer and
similar taxes reimbursed by a buyer, (ii) any third party home warranty
previously paid by buyer, (iii) any title insurance prorations,
premiums, dues or assignments paid by buyer and owed to third parties,
(iv) sales concessions afforded to the buyer, and (v) closing costs or
direct costs incurred in the transaction that are not recognized as a
reduction of revenue.
In addition to the foregoing, and as additional consideration for this
Agreement, the parties agree and acknowledge that Consultant shall be paid his
current salary and all benefits by and under the Employment Agreement by and
between Mr. J. Xxxxxxxxxxx Xxxxxxx and the Fortress Group through the
termination date of said Employment Agreement.
3. Appointment of Consultant. Upon the terms and conditions set forth
herein, Xxxxxxxxxxx Homes hereby retains and engages Consultant and Consultant
hereby accepts such retention and engagement.
4. Duties. Consultant shall assist Xxxxxxxxxxx Homes in fulfilling its
responsibilities under the Operating Agreement with respect to the following
matters and in accordance with the following covenants and provisions:
(a) Plans, Documents, Specifications, and Planning Phase
1) The Consultant shall be responsible for the management and
supervision of the schematic conceptual and design
development drawings for base house plans and elevations.
The Consultant and Xxxxxxxxxxx Homes shall agree on the
number of plan variations to be offered. The Consultant
shall not be responsible for the development of any custom
plans designed outside the base plans; however, the
Consultant shall have the right to approve any custom plans
regarding conformance to community standards and Design
Development Covenants.
2
2) Xxxxxxxxxxx Homes shall assist the Consultant in the
finalization of design development drawings and in
establishing construction specifications, finish
specifications, development and construction budgets, and
project schedules.
3) Xxxxxxxxxxx Homes shall be responsible for converting the
design development drawings into completed working drawings
suitable for obtaining a building permit. The final working
drawings are subject to the reasonable approval of
Consultant.
4) Xxxxxxxxxxx Homes shall provide an annual marketing plan and
strategy, and associated sales and marketing budget. All
collateral material, advertisements, brochures, and other
marketing materials shall be presented to the Consultant for
approval.
5) All plans, designs, specifications, and budgets are subject
to the approval of the Consultant.
(b) Sales and Marketing Administration
1) In accordance with the approved budget and plan, Xxxxxxxxxxx
Homes shall provide all sales administration including
maintaining an on-site presence and coverage during hours
that are currently employed at other Xxxxxxxxxxx Homes
communities (e.g., Palisades, San Xxxxxxxx).
2) Xxxxxxxxxxx Homes shall administer and maintain the model
homes, as approved in the plan and budget, in a professional
manner and in accordance with the standards practiced at
other Xxxxxxxxxxx Homes communities.
3) Xxxxxxxxxxx Homes shall use its best efforts to attain the
targeted sales objectives as set forth in the approved plan
and budget.
(c) Construction Administration
1) Xxxxxxxxxxx Homes shall provide administrative, management,
and related services as required to coordinate the work of
contractors, subcontractors, and vendors in the completion
of all home construction in accordance with the approved
plans and specifications. Xxxxxxxxxxx Homes shall supervise
and direct the work using its skill and attention and shall
be responsible for all construction means, methods,
techniques, sequences, and procedures and for coordinating
the work under the contract.
3
2) Quality of work shall be consistent with the quality of
workmanship and materials in other Xxxxxxxxxxx Homes'
Models.
3) Xxxxxxxxxxx Homes will keep the premises free from excessive
accumulation of waste materials and rubbish caused by its
operations.
(d) Reporting
1) Xxxxxxxxxxx Homes shall maintain cost accounting records on
all authorized work, and shall submit for the Company's
approval on a periodic basis as required, requisitions for
payment to subcontractors and vendors in a timely fashion,
and in accordance with current Xxxxxxxxxxx Homes' payment
policies and practices. Xxxxxxxxxxx Homes shall submit the
Company-approved draw schedules directly to bank on behalf
of the Company; coordinate receipt and distribution of funds
received from bank; and administer release of liens and
other accounting matters on behalf of the Company.
2) Xxxxxxxxxxx Homes shall have no repayment obligation or
liability whatsoever to any bank or other lending sources.
The Company shall be solely responsible for providing
appropriate financing for the development and construction
of the project.
3) In order to facilitate communications between Xxxxxxxxxxx
Homes and the Company, Xxxxxxxxxxx Homes shall designate a
representative to act as a point of contact for the Company.
Xxxxxxxxxxx Homes' representative shall meet with Consultant
two times a month and at such other times, with reasonable
advance notice by Consultant, as circumstances dictate.
Consultant shall not interfere with the management of any
Xxxxxxxxxxx Homes employee, subcontractor or vendor without
prior approval of Xxxxxxxxxxx Homes.
4) On a monthly basis, Xxxxxxxxxxx Homes shall provide a
written M.D. & A. highlight report to the Company and a
P & L budget to actual report, and L.L.C. balance sheet, and
an "actual" to projected pro forma analysis.
5) Other reports shall be provided to the Company including
sales and closing reports, construction schedules, house
margin reports, and results of customer satisfaction surveys
conducted with customers of the project. On a quarterly
basis, Xxxxxxxxxxx Homes will submit revised forecasts for
the remaining duration of the project.
4
With respect to the foregoing responsibilities, each of the parties
hereto agrees that Consultant shall have sole and absolute control and
discretion with respect to all aspects of product control for the design and
product development of the Project, as delineated in Section 4(a), above.
The parties hereto expressly acknowledge and agree that the foregoing
description of duties and responsibilities is not intended to change, modify or
otherwise abrogate the duties and responsibilities of Xxxxxxxxxxx Homes under
the Operating Agreement. In the event that any provision hereof conflicts with
any provision of the Operating Agreement, the terms and provisions of the
Operating Agreement shall control.
It is recognized that although Consultant, as of the date of this
Agreement, is the President of Xxxxxxxxxxx Homes and has executive
responsibility for the entity, the parties contemplate a change in the
management responsibilities with respect to Xxxxxxxxxxx Homes. Effective January
6, 2000, Consultant's duties will be limited to those identified above. In
carrying out his duties under this Agreement, Consultant shall be subject to the
same standard of care to which the Manager is subject as set forth in Section
6.6 of the Operating Agreement. Notwithstanding the foregoing, at all times
during the term of this Agreement, and all extended terms hereof, Consultant
shall retain the title of "Chairman" of Xxxxxxxxxxx Homes. Upon termination of
this Agreement for any reason, the title of "Chairman" shall be deemed
automatically revoked and terminated as of the effective date of termination
hereof.
5. Term.
(a) Notwithstanding anything to the contrary set forth in Section 6.8
of the Operating Agreement, this Agreement will have an initial term of twelve
(12) months from the date this Agreement is signed by both parties (the "Initial
Term"). Further, and notwithstanding anything to the contrary set forth in
Section 6.8 of the Operating Agreement, Consultant shall have the right to elect
to extend the term of this Agreement for successive periods of twelve (12)
months each at the sole and absolute discretion of Consultant, referred to
herein as an "Extended Term." Should Consultant elect not to extend the term
hereof for additional term(s) of twelve (12) months, Consultant shall provide
not less than ninety (90) days advance written notice to Xxxxxxxxxxx Homes
before the expiration of the applicable term of its election not to extend the
term hereof. Should Consultant elect not to extend the term of this Agreement
for additional term(s), then Consultant agrees to exercise its right under
Section 6.8 of the Operating Agreement and remove Xxxxxxxxxxx Homes as Manager,
and replace Xxxxxxxxxxx Homes with a Manager in accordance with the terms of
said Operating Agreement.
(b) Notwithstanding a decision by Consultant to extend the term of this
Agreement, Xxxxxxxxxxx Homes may elect to resign its duties as Manager under the
Operating Agreement and not to go forward under this Agreement by providing to
Consultant written notice of its election at least ninety (90) days before the
expiration of the applicable term, thereby terminating this Agreement. In such
event, Consultant agrees to indemnify and hold Xxxxxxxxxxx Homes harmless
against the Members of the Operating Agreement for a claim
5
under the Operating Agreement alleging that Xxxxxxxxxxx Homes wrongfully
resigned or terminated its duties under the Operating Agreement.
6. Payment of Operating Expenses. During the term of this Consulting
Agreement, Xxxxxxxxxxx Homes shall pay the costs for, as tenant, providing Xxxxx
000X, 0000 Xxxxxxxx Xxxxx, Xxx Xxxxx 00000, as and for business offices from
which Consultant shall perform services to Xxxxxxxxxxx Homes under the terms of
this Agreement and any other Agreement entered into between the parties. If
requested to do so by Landlord or Consultant, Xxxxxxxxxxx Homes shall execute
the Landlord's Standard Lease Agreement in connection with providing the
foregoing Suite for the use of Consultant.
7. Covenants.
(a) Right of First Refusal. If during the term of this
Agreement, Consultant has an opportunity to participate in a project similar in
structure to the Bellacere Project which calls for a manager on behalf of whom
Consultant will provide design and marketing services, Consultant shall give
written notice to Xxxxxxxxxxx Homes (the "Notice"). The Notice shall set forth a
description of the project and a summary of the terms and proposed conditions of
the manager's role in the project and the relationship Consultant would have
with the manager, including fees and profit opportunities. Xxxxxxxxxxx Homes
will have thirty (30) days from the date of service of such notice as defined
hereinbelow to notify Consultant in writing of its acceptance of terms of the
offer. The parties shall thereafter proceed to finalize the negotiation and
execution of a definitive agreement implementing the terms of the offer. If
Xxxxxxxxxxx Homes does not accept the offer within the thirty (30) day period,
Consultant may associate as a consultant to another party that will act as the
manager of the project, provided the terms and conditions of the transaction are
identical to or worse than those contained in the Notice from Consultant as they
relate to the manager.
This right of First Refusal shall not apply to and shall not require
Consultant to provide notice to Xxxxxxxxxxx Homes in the event that Consultant
is an Owner of any entity which is contemplated to be the proposed manager of
the Project which may be deemed to be similar in structure to the Bellacere
Project. Further, except as specifically limited hereinabove, there are no
rights of First Refusal conveyed or granted to Xxxxxxxxxxx Homes herein.
(b) Removal of Xxxxxxxxxxx Homes as Manager.
(i) Subject to the conditions subsequent set forth in
subsection 7(b)(ii) below, Consultant covenants that during
the term of the Project, he will not exercise his right under
Section 6.8 of the Operating Agreement to remove Xxxxxxxxxxx
Homes as Manager or in any other fashion take action to remove
Xxxxxxxxxxx Homes as Manager or omit to take action that has
the effect of removing Xxxxxxxxxxx Homes as Manager.
6
(ii) Consultant shall be entitled to exercise his
right under Section 6.8 of the Operating Agreement to remove
Xxxxxxxxxxx Homes as Manager if, during the effective term of
this Consulting Agreement, either one of the following occurs:
(A) Xxxxxxxxxxx Homes is dissolved;
(B) Xxxxxxxxxxx Homes or the Fortress Group, Inc.
commences voluntary proceeding under either Federal Bankruptcy
Laws or under any other applicable Federal or State Law
relating to insolvency;
(C) This Agreement is terminated by Consultant
pursuant to Section 8(b) hereinbelow;
(D) Xxxxxxxxxxx Homes mis-manages or falls to perform
one or more of its duties under the Operating Agreement or as
set forth herein, which remains uncured within the time set
forth in Section 8(b)(ii) herein.
(E) A change in the ownership of voting stock of the
Fortress Group to any person or entity owning more than fifty
percent (50%) of the outstanding voting shares of stock of the
Fortress Group, Inc.
8. Termination.
(a) This Agreement shall terminate at the end of the Initial Term, or
any successive Extended Term as defined in Section 5 hereinabove. Upon
termination in accordance with the provisions of Section 5, Xxxxxxxxxxx Homes
shall be entitled to payment of any unpaid fees and profits, if any, under
Section 1 hereof due from closed escrows of sales of Lots and residences to
third-party home buyers. With respect to Lots and residences under construction
as of the date of termination in accordance with the provisions of Section 5,
and with respect to residences which are sold but upon which construction has
not yet commenced, Xxxxxxxxxxx Homes shall have the right, duty and
responsibility to complete the construction of homes on said Lots and residences
in accordance with the terms of this Agreement and the Operating Agreement, and
Xxxxxxxxxxx Homes shall be paid its fee and profits, if any, under Section 1
hereof based upon the Sales Revenue of such residences on the date of close of
escrow for such Lots and residences, notwithstanding the fact that the
termination of this Agreement may precede the completion of construction and
close of escrows.
(b) This Agreement may also be earlier terminated in accordance with
the following provisions:
7
(i) By Consultant removing Xxxxxxxxxxx Homes as
Manager in accordance with the provisions of paragraph
7(b)(ii); or
(ii) Upon written notice by the non-defaulting party
hereto to the other party of a material breach of one or more
of the obligations of this Agreement which notice gives the
defaulting party reasonable opportunity to cure of a period of
time not less than thirty (30) days, and which breach is not
cured within the period defined herein and in the notice given
by the non-defaulting party. Notwithstanding the foregoing or
any other term or provision set forth in this Consulting
Agreement, Xxxxxxxxxxx Homes shall not be entitled to
terminate this Agreement under any circumstances unless the
termination is coupled with the contemporaneous resignation of
Xxxxxxxxxxx Homes as Manager under the First Amended Operating
Agreement of Star Canyon/Xxxxxxxxx, L.L.C., as amended for
Bellacere, L.L.C.
(c) In the event of termination of this Agreement in
accordance with the terms of Section 7(b) (A),(B),(C) and (D) hereinabove,
Xxxxxxxxxxx Homes shall be entitled to receive payment of any unpaid fees and
profits under Section 1 hereof, if any, due from closed escrows of sales of Lots
to third-party home buyers, and with respect to Lots and residences under
construction based upon an amount equal to the product of the percentage of
construction completed on homes under construction multiplied by the estimated
Sales Revenue of such homes as of the date of termination, plus an amount of
profit under Section 1 hereof, if any, based upon an amount equal to the product
of the percentage of construction completed on homes under construction
multiplied by the amount of profit for each home calculated as of the date of
close of escrow. Xxxxxxxxxxx Homes shall not be entitled to any fee for homes
upon which construction has not been commenced as of the date of termination.
9. Miscellaneous.
(a) Notices, Covenants, Etc. Any notices, consents or other
communication required to be sent or given hereunder by any of the parties shall
in every case be in writing and shall be deemed properly served if (i) delivered
personally, (ii) sent by registered or certified mail, in all such cases with
first class postage prepaid, return receipt requested, or (iii) delivered by a
recognized overnight courier services, to the parties at the addresses as set
forth below or at such other addresses as may be furnished in writing.
(1) If to Consultant:
J. Xxxxxxxxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxx, Xxxxx 000X
Xxx Xxxxx, Xxxxxx 00000
8
(2) If to Xxxxxxxxxxx Homes:
Xxxxxxxxxxx Homes, Custom Home Division
Attention: J. Xxxxxxxxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
(3) The Fortress Group, Inc.
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Chief Executive Officer
Date of service of such notice shall be either: (1) the date such notice is
personally delivered; or (2) three (3) days after the date of mailing if sent by
certified or registered mail; or (3) one (1) day after date of delivery to the
overnight courier if sent by overnight courier.
(b) Severability. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision.
(c) Documents. Each party will execute all documents and take
such other actions as the other party may reasonably request in order to
consummate the transactions provided for herein and to accomplish the purposes
of this Agreement.
(d) Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
(e) Governing Law. This Agreement shall be construed and
governed in accordance with the law of the State of Nevada, without giving
effect to conflicts and choice of law principles.
(f) Headings. The subject headings of Articles and Sections of
this Agreement are included for purposes of convenience only and shall not
effect the construction or interpretation of any of its provisions.
(g) Assignment. This Assignment will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns but Consultant may not assign or delegate his duties hereunder
without the prior written consent of Xxxxxxxxxxx Homes.
9
(h) Entire Agreement. This Agreement and the Operating
Agreement incorporated by reference to the Agreement set forth the entire
understanding of the parties and supersedes all prior or contemporaneous
agreements or negotiations (whether in writing or oral) and may be modified only
by instruments signed by both of the parties hereto. Oral modifications are
absolutely prohibited.
(i) Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or entity,
other than the parties to this Agreement, any rights ore remedies under or by
reason of this Agreement.
(j) Interpretive Matters. Unless the context otherwise
requires, (i) all references to Articles, Sections, Schedules or Exhibits in
this Agreement, and (ii) words in the singular or plural include the singular
and plural and pronouns stated in either the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
(k) Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
in any party in exercising a right, power, or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of the
right, power , or privilege, and no single or partial exercise of a right,
power, or privilege will preclude any other or further exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or the documents referred to
in it can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given.
(l) ALL CLAIMS (PURSUANT TO FEDERAL OR STATE STATUTE(S) OR BY
COMMON LAW), CONTROVERSIES, DIFFERENCES OR DISPUTES BETWEEN XXXXXXXXXXX HOMES
AND CONSULTANT ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH
THEREOF, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE RULES THEN IN
EFFECT OF THE AMERICAN ARBITRATION ASSOCIATION AT THE TIME OF THE DISPUTE. AFTER
AN AWARD IS RENDERED BY THE ARBITRATOR(S), A JUDGMENT MAY BE ENTERED IN ANY
COURT OF COMPETENT JURISDICTION. THE ARBITRATION SHALL OCCUR IN LAS VEGAS,
NEVADA TO THE EXCLUSION OF ALL OTHER LOCATIONS. THE ARBITRATOR(S) CANNOT ADD OR
SUBTRACT TO THE CONTENTS OF THIS AGREEMENT. THE PARTIES AGREE THAT THE
ARBITRATOR(S) MAY INCLUDE PROVISION FOR THE PAYMENT OF COSTS AND EXPENSES,
INCLUDING REASONABLE ATTORNEY'S FEES AS PART OF ANY RULING OR AWARD MADE
THEREUNDER. THE PARTIES ACKNOWLEDGE THAT ARBITRATION SHALL BE THE SOLE, FINAL,
BINDING AND EXCLUSIVE REMEDY OF THE PARTIES WITH RESPECT TO ANY SUCH MATTER FOR
WHICH ARBITRATION IS REQUIRED HEREUNDER. IN PREPARATION FOR THE
10
ARBITRATION HEREIN, EACH PARTY MAY UTILIZE ALL METHODS OF DISCOVERY AUTHORIZED
BY THE PROCEDURAL RULES AND STATUTES OF NEVADA AND MAY ENFORCE THE RIGHT TO
OBTAIN SUCH DISCOVERY IN THE MANNER PROVIDED BY SAID RULES AND STATUTES AND/OR
BY THE ARBITRATION LAW OF THE STATE OF NEVADA.
(m) Limitation of Damages. Consultant and Xxxxxxxxxxx Homes
agree and acknowledge that any and all damages sustained or incurred by
Xxxxxxxxxxx Homes, if any, resulting from a material breach of the obligations
set forth in this Agreement shall be expressly limited to Xxxxxxxxxxx Homes'
claim of right to receive from the Consultant an amount equal to Consultant's
Net Profit under paragraph 1 hereinabove and Consultant's fee limited to two
percent (2%) of all Sales Revenue as defined in paragraph 2 hereof. Xxxxxxxxxxx
Homes expressly waives, relinquishes and releases Consultant from any other
claim or any other damages except as expressly set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
XXXXXXXXXXX HOMES CUSTOM HOME
DIVISION, INC.
By: /s/ Illegible
----------------------
Consultant:
/s/
--------------------------
J. Xxxxxxxxxxx Xxxxxxx
11
