Exhibit 10.17
This TRANSITIONAL MANAGEMENT AGREEMENT (the "Transitional Management
Agreement") entered as of August 14, 1998, by and between HomeFed Corporation, a
corporation organized and existing pursuant to the laws of the State of Delaware
("HFC"), and Accretive Investments, LLC, a limited liability company organized
and existing pursuant to the laws of the State of California ("Accretive").
RECITALS
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WHEREAS, San Elijo Ranch, Inc. ("San Elijo") through its wholly-owned
subsidiary Provence Hills Development Company, LLC, a Delaware limited liability
company ("Provence Hills") entered into a Development Management Agreement with
HomeFed Corporation ("HFC") dated as of August 14, 1998 (the "Development
Agreement") to, among other things, perform Development Services (such term
shall have the meaning set forth in the Development Agreement) and Construction
Management Services (such term shall have the meaning set forth in the
Development Agreement) with respect to 2,000 acres of undeveloped land located
in San Marcos, California owned by San Elijo ("Project");
WHEREAS, San Elijo and Accretive previously had entered into a
Management Agreement (the "Management Agreement"), dated July 17, 1997, pursuant
to which Accretive has performed certain management services for the Project
that will now be provided by HFC pursuant to the Development Agreement;
WHEREAS, it is intended that the Management Agreement will terminate
upon the effectiveness of this Agreement;
WHEREAS, pursuant to this Agreement, Accretive will provide transition
management services to HFC to facilitate a smooth transition of Accretive's
management responsibilities under the Management Agreement to HFC;
WHEREAS, Accretive is engaged in the business of managing the
development of undeveloped land in the State of California; and
WHEREAS, HFC desires to retain the services of Accretive on the terms
and conditions set forth in this Transitional Management Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter contained, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Appointment of Transition Manager. HFC hereby appoints Accretive and
Accretive hereby accepts appointment, as transition manager of the Project with
the obligation and authority to direct, supervise and manage the development and
operation of the Project in accordance with the terms and conditions set forth
in this Transitional Management Agreement. Accretive will provide transition
management services to San Elijo through December 31, 1999, unless, at HFC's
request effective after December 31, 1998 (upon at least 10 days' prior written
notice to Accretive), Accretive is no longer to
76830.0194
provide such transition management services for the Project. In such event,
through December 31, 1999, Accretive shall perform such advisory and consulting
services in connection with the Project as HFC may request and, in connection
therewith, Xxxxx Xxxxxxx shall devote up to 50% of his business time and
attention as is necessary to the performance of Accretive's obligations under
this Transitional Management Agreement, in a manner that is consistent with
Accretive's past performance of such obligations under this Transitional
Management Agreement and the Management Agreement.
2. Independent Contractor Status. (a) HFC and Accretive acknowledge and
agree that (a) this Transitional Management Agreement establishes and
constitutes both the only relationship and the only agreement between HFC and
Accretive, (b) HFC and Accretive are not joint venturers or partners, (c)
Accretive is not, and shall not be deemed to be, an employee of HFC, (d) none of
Accretive's members, employees or agents is, or shall be deemed to be, an
employee of HFC, and (e) Accretive at all times shall be, and shall be deemed to
be, an independent contractor of HFC. Accretive represents and warrants to HFC
that neither it, nor any of its members, directors, employees or agents, shall
hold itself, or themselves, out to be anything other than an independent
contractor for HFC.
3. Accretive's Management Duties and Obligations. Unless otherwise
instructed by HFC, Accretive, as the transition manager of the Project, shall
have the obligation to perform or to assist or advise HFC with respect to any or
all of the following actions at the request of HFC:
(a) implementation of the plan of development in accordance with the
Development Agreement and specific plan amendments and negotiation of required
approvals from the City of San Marcos and other authorities;
(b) negotiation and documentation of a Redevelopment Agency Funding
Agreement;
(c) supervision of all litigation relating to the Project, including,
without limitation, those actions necessary to protect San Elijo's property and
other rights from the negative impacts related to the San Marcos landfill;
(d) negotiation of a full mitigation agreement and school fee credit
agreement with the San Marcos Unified School District, if appropriate;
(e) creation of an Assessment District to spread off-site development
costs to surrounding property owners;
(f) preparation of a Community Facilities District so San Elijo will
have the option to utilize the Community Facilities District as a financing
vehicle under favorable terms;
(g) negotiation with the United States Postal Service to create a
separate zip code for the Project, if appropriate;
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(h) arranging for the preparation, filing, modification and acceptance
of tentative and final parcel maps with and by the City of San Marcos;
(i) negotiation of an export permit to complement San Elijo's
prospective Aggregate Mining Permit and to facilitate the sale of crushed rock,
if appropriate;
(j) negotiation with the City of San Marcos and the County of San Diego
of an agreement, or agreements, to effect the closure and post-closure
landscaping of the landfill adjacent to the Project;
(k) supervision of all employees and contractors, negotiation of
employment and contractor agreements and submission of such agreements to HFC
for approval; provided, however, Accretive shall not hire any contractors or
employees without the prior written consent of a vice president or more senior
officer of San Elijo or HFC;
(l) compliance with all laws, codes, regulations and other requirements
of all federal, state and local authorities having jurisdiction over the
Project, provided, however, Accretive shall first promptly notify San Elijo and
HFC of all orders and notices received by Accretive from any authority having
jurisdiction over the Project assessing, or requiring an expenditure, in excess
of $5,000.00 and shall obtain the written consent of a vice-president or more
senior officer of San Elijo or HFC prior to making the expenditure or prior to
complying with such order or notice;
(m) not less than annually, having an insurance review conducted by an
insurance professional satisfactory to HFC and San Elijo to ensure that San
Elijo, Provence Hills and the Project are fully insured against all insurable
claims and liabilities which may arise from the development, management or
operation of the Project;
(n) collection of all accounts receivable relating to the Project;
(o) timely payment of all expenses, taxes and financial obligations
related to the Project, including, without limitation, payments due under the
Chapter 11 plan of San Elijo and all debt service; provided, however, that prior
to making any single expenditure, or the first of any series of expenditures
that in the aggregate shall be in excess of $10,000.00 within any thirty-day
period, Accretive shall obtain the written consent of a vice-president or more
senior officer of San Elijo or HFC;
(p) advertising, promotion, marketing and sale of the Project, and each
of the lots comprising the Project, at wholesale or retail;
(q) preparation and revision as needed of the Project's financial
projections and operating budgets;
(r) preparation of periodic written management reports of San Elijo for
the officers and directors of San Elijo and HFC; and
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(s) monthly review of all financial statements of San Elijo and
Provence Hills with periodic reports to the officers and directors of San Elijo
and HFC concerning such financial statements.
4. Professional Management Standards. Accretive shall use its best
good-faith efforts in developing, managing and operating the Project subject to
the direction of HFC.
5. Accretive's Compensation. (a) Except as provided in (b) below, HFC
shall pay to Accretive $25,000 per month for Accretive's services pursuant to
this Transitional Management Agreement.
(b) If, at HFC's request pursuant to this Transitional Management
Agreement, Accretive is not serving as transitional manager of the Project, but
is instead rendering consulting and advisory services to San Elijo in respect of
the Project, San Elijo shall pay to Accretive $12,500 per month. In addition, in
the sole discretion of the management of HFC, Accretive shall be eligible to
receive periodic bonuses. For example, HFC may, in its absolute sole discretion,
(i) pay Accretive an annual bonus in an amount between $150,000 and $300,000, if
Accretive is serving as the transitional manager of the Project in a manner that
is satisfactory to HFC in its sole discretion, and (ii) pay Accretive an annual
bonus in an amount up to $150,000, if Accretive is serving as a consultant and
advisor to the Project in a manner that is satisfactory to HFC in its sole
discretion. The foregoing examples are an indication of the possible annual
bonus that HFC may pay Accretive; such examples are not intended to limit the
amount of the annual bonus that HFC may in its sole discretion elect to pay
Accretive for outstanding services or to guarantee the payment of any bonus to
Accretive.
6. Accretive's Expenses. Accretive will have no obligation to advance
funds on HFC's or San Elijo's behalf in the performance of Accretive's duties
under this Agreement. Should Accretive wish to advance funds, HFC shall promptly
reimburse Accretive for all funds advanced on behalf of HFC and reasonable
expenses incurred by Accretive in performing its obligations pursuant to this
Transitional Management Agreement. Such reimbursable expenses may include
charges for travel, lodging, meals, report production, telecommunications and
special delivery charges. Such reimbursable expenses shall not include
Accretive's overhead expenses, including, but not limited to, Accretive's
payroll, or other employee compensation, rent, insurance expense or utility
expense, other than the employees, if any, that San Elijo or HFC requests that
Accretive employ.
7. Non-discrimination. Accretive shall not discriminate against any
employee or prospective employee of San Elijo or HFC because of race, creed,
color, national origin, disability, gender, sexual preference or any other
classification then protected by law.
8. Harassment. HFC does not condone or permit harassment, including,
but not limited to, sexual harassment, of or by any of its employees. Accretive
agrees that it shall immediately notify a vice-president or more senior officer
of HFC, both verbally
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and in writing, of any evidence of which Accretive becomes aware of any
harassment of or by any employee of San Elijo or HFC regardless of whether a
claim of harassment is made. Accretive shall coordinate the education and
training of all current and future employees of San Elijo and HFC regarding the
harassment policy of HFC and the conduct prohibited by such harassment policy.
9. Indemnification. Accretive hereby agrees to indemnify, pay for the
defense of and hold HFC harmless from all claims, investigations, suits,
judgments, penalties, interest, court costs, litigation expenses and attorneys'
fees (a) arising from Accretive's willful misconduct, negligence or bad-faith
performance under the terms of this Transitional Management Agreement, (b)
arising from any act or omission of Accretive or of its members, employees or
agents occurring outside the scope of their duties or responsibilities under
this Transitional Management Agreement, or (c) asserted, obtained or incurred by
any current or former member, employee or agent of Accretive (unless arising out
of the willful misconduct or negligence of HFC, or and of their officers,
directors, employees, shareholders or agents). HFC shall have the right to be
represented by the attorneys of its choice for which Accretive will pay.
HFC hereby agrees to indemnify, pay for the defense of, and hold
Accretive harmless from and against all claims, investigations, suits,
judgments, penalties, interest, court costs, litigation expenses and attorneys'
fees arising out of or in connection with the performance by Accretive of its
duties and obligations under this Transitional Management Agreement, unless (a)
arising from Accretive's willful misconduct, negligence, or bad-faith
performance of its duties and obligations under this Transitional Management
Agreement, (b) arising from any act or omission of Accretive occurring outside
of the scope of their duties and responsibilities under this Transitional
Management Agreement, or (c) asserted, obtained or incurred by a current or
former member, employee or agent of Accretive (unless arising out of the willful
misconduct or negligence of HFC, or its officers, directors, employees,
shareholders or agents). Accretive shall have the right to be represented by
attorneys appointed by HFC for which HFC will pay.
10. Termination. This Transitional Management Agreement may be
terminated at any time by either Accretive or HFC on three months' prior written
notice for any reason or for no reason at all. HFC, in its sole discretion, may
terminate this Transitional Management Agreement at any time without providing
Accretive with three months' prior written notice by providing Accretive with
written notice of immediate termination of this Transitional Management
Agreement and tendering to Accretive a check in the amount of $75,000, or, if
Accretive's monthly compensation under this Transitional Management Agreement is
reduced pursuant to Paragraph 5(b), a check in the amount of $37,500 (one-half
of the $75,000 termination fee). On termination, Accretive shall immediately (a)
deliver to HFC all monies, if any, without deduction, of HFC, (b) deliver to HFC
all books, records and other documents in its possession or control which relate
to the Project or to HFC. Accretive shall reasonably cooperate with HFC and San
Elijo after receipt of written notice of termination with respect to all
matters, including, without limitation, all governmental applications and
approvals and all matters relating to all outstanding or future lawsuits.
Accretive's obligation to
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cooperate shall continue even after termination has become effective. Accretive
shall be paid the reasonable value for its time and efforts required to
cooperate with HFC following termination of this agreement. If Accretive refuses
to reasonably cooperate, it shall pay to HFC all costs and expenses, including,
without limitation, attorneys' fees, incurred, in part or in whole, as a result
of Accretive's failure to cooperate with HFC.
11. Freedom to Conduct Other Business. Accretive expressly retains the
right to work on other matters and/or to work with entities other than HFC in
any capacity so long as such work does not interfere with any of Accretive's
obligations, duties or responsibilities pursuant to this Transitional Management
Agreement.
12. Assignment. Accretive shall not assign, or have the right to
assign, any of its rights under this Transitional Management Agreement and
Accretive shall not delegate its obligations, responsibilities or authority
pursuant to this Transitional Management Agreement, without the prior written
consent of a vice-president or more senior officer of HFC which consent shall be
in the sole discretion of HFC; provided, however, that Accretive may assign its
rights to payments due under this Transitional Management Agreement with the
prior written consent of HFC which consent may not be unreasonably withheld.
13. Notices. All notices or other communications required or permitted
pursuant to this Transitional Management Agreement shall be in writing and shall
be (a) telefaxed and personally delivered or (b) telefaxed and sent by
registered or certified mail, return receipt requested. If mailed, each notice
or communication shall be deemed received upon actual receipt after deposit in
the United States mail, postage prepaid, and addressed to the person to receive
such notice or communication at the following address:
To HFC: Xxxxxxx Xxxx
HomeFed Corporation
000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Telefax: (000) 000-0000
with a copy to HFC's attorneys:
K. Xxxxxxx Xxxxxxx
Pillsbury, Madison & Sutro LLP
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Telefax: (000) 000-0000
with a copy to San Elijo: Xxxx Xxxxxx
c/o Leucadia National Corporation
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telefax: (000) 000-0000
with a copy to San Elijo's attorneys:
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Xxxxxxx Xxxxxxxx
Xxxx, Xxxxxxx, Xxxxxxxx & Scripps LLP
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telefax: (000) 000-0000
To Accretive: R. Xxxxx Xxxxxxx
Accretive Investments LLC
0000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Telefax: (000) 000-0000
14. Entire Agreement. This Transitional Management Agreement contains
the entire agreement between and among Accretive and HFC and supersedes all
prior written and oral agreements between the parties with respect to the
subject matter hereof.
15. Successors and Assigns. Subject to Paragraph 12 above, this
Transitional Management Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns.
16. Counterparts. This Transitional Management Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which, together, constitute one instrument.
17. Interpretation and Governing Law. This Transitional Management
Agreement shall be construed according to its fair meaning as though no single
party drafted this Transitional Management Agreement. This Transitional
Management Agreement has been made and entered into and shall be construed,
interpreted and governed by the laws of the State of California without
reference to its choice of law rules.
18. Modifications. No modification of this Transitional Management
Agreement shall be effective unless set forth in writing and signed by the party
sought to be bound.
19. Attorneys' Fees. If any party hereto institutes any action or
proceeding to enforce any provision hereof or to recover damages for breach of
this Transitional Management Agreement, the prevailing party shall be entitled
to recover from the losing party reasonable attorneys' fees and disbursements
for services rendered to the prevailing party in such action or proceeding.
20. Change of Control. If R. Xxxxx Xxxxxxx ceases to own, either in his
own name or beneficially, including trusts established for the benefit of his
immediate family, at least 50% of the outstanding equity interest in Accretive,
HFC may terminate this Transitional Management Agreement immediately without
giving the three months' prior written notice of termination, or without giving
the written notice of immediate termination or without tendering to Accretive
the payment otherwise required by paragraph 10 of this Transitional Management
Agreement.
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HOMEFED CORPORATION
By: /s/ Xxxx Xxxxxx
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Title: President
ACCRETIVE INVESTMENTS, LLC
By: /s/ Xxxxx Xxxxxxx
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Title: Member
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