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EXHIBIT 10.2
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT by and between Maxim Homes, Inc., an Arizona
corporation (the "Company"), and Xxxxx X. Xxxxx ("Executive") is made and
entered into as of March 20, 1998, but shall take effect as of January 1, 1998.
RECITALS:
WHEREAS the Company desires to retain the services of Executive as
president of the Company, subject to the terms and conditions hereof; and
WHEREAS Executive desires to serve as such, subject to the terms and
conditions hereof;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, Executive and the Company agree as follows:
1. Term. The Company hereby agrees to employ Executive, and
Executive hereby agrees to serve the Company, on the terms and conditions of
this Agreement for a five (5) year period commencing January 1, 1998 (such
period, subject to earlier termination or extension as provided herein, being
referred to as the "Period of Employment"). Commencing on the date five (5)
years after January 1, 1998, and on each annual anniversary of such date (each
such date being referred to as a "Renewal Date"), the Period of Employment shall
be automatically extended so as to terminate one year from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give written
notice to Executive or Executive shall give written notice to the Company that
the Period of Employment shall not be so extended.
2. Duties and Services. During the Period of Employment,
Executive agrees to serve the Company as President, and to perform such other
reasonable and appropriate duties as may be requested of him by the board of
directors of the Company (the "Board of Directors"), in accordance with the
terms herein set forth. Additionally, Executive may elect to serve in such other
offices and directorships of the Company and of its subsidiaries and related
companies (collectively, "Affiliates") to which he may be elected or appointed.
In performance of his duties, Executive shall be subject to the direction of the
Board of Directors. Excluding periods of vacation and sick leave to which
Executive is entitled, Executive shall devote his full time, energy and skill
during regular business hours to the business and affairs of the Company and its
Affiliates and to the promotion of their interests. The principal places of
performance by Executive of his duties hereunder shall be in Salt Lake City,
Utah and Phoenix, Arizona, or at such other location as may be mutually agreed
upon by the Company and the Executive, but Executive may be reasonably required
to travel outside those areas.
3. Compensation.
(a) Salary, Bonuses and Stock Options. As compensation for his
services hereunder, the Company shall pay Executive, during the
Period of Employment, annual base salary in the amount of One
Hundred Thousand Dollars ($100,000.00), payable in 24 equal
installments on the first and sixteenth of each month, or at
such other times as may
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mutually be agreed upon by the Company and Executive. On each
anniversary of the date of this Agreement, the annual base
salary payable hereunder shall be increased by the amount of any
increase during the immediately preceding 12 month period in the
United States All Cities Average Consumer Price Index for Urban
Wage Earners and Clerical Workers for all items (1982-84=100),
published by the Bureau of Labor Statistics of the U.S.
Department of Labor. Executive shall be entitled to such bonuses
and other benefits as the Board of Directors may periodically
award in its discretion. Nothing contained herein shall preclude
Executive from participating in the present or future employee
benefit plans of the Company or of any Affiliate, including
without limitation any employee stock ownership plan, pension
plan, profit-sharing plan, savings plan, deferred compensation
plan, stock option plan and health-and-accident plan or
arrangement, if he meets the eligibility requirements therefor.
Without limiting the foregoing, Executive shall be entitled to
participate in Xxxxxx Incorporated's incentive stock option
plan, with a grant of options for fifteen thousand (15,000)
shares of Xxxxxx Stock, vesting equally over five (5) years
commencing January 1, 1998, and exerciseable within ten (10)
years at an exercise price equal to the market price of Xxxxxx
Stock as of close of trading on March 19, 1998.
(b) Non-Compete Fee. In addition, during each of the five (5)
initial years of the Period of Employment, the Company shall pay
Executive the sum of Forty Thousand Dollars ($40,000.00) per
year, payable in 24 equal installments on the first and
sixteenth of each month, or at such other times as may mutually
be agreed upon by the Company and Executive. Said sum shall be
deemed additional consideration for the non-compete covenants of
Executive provided hereinbelow.
(c) Earn-Out Bonus. In addition, Executive shall be entitled to earn
a bonus ("Earn-Out Payments") in each of the years 1998, 1999,
2000, 2001 and 2002, on the terms and conditions provided
herein. Each Earn-Out Payment shall be equal to a percentage
(the "Applicable Percentage") of, respectively, (i) the
Company's net (after tax) income(5) (herein "Company Income"),
and (ii) Xxxxxx Incorporated's net (after tax) income(6) from
Xxxxxx Incorporated's operations(7) for which the Company is
general contractor or project manager (herein "Eligible Xxxxxx
Income"(8)), in each case with
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5 (as determined in accordance with generally accepted accounting
principles, or "GAAP" and with all goodwill amortized over the first
twenty years following the Closing)
6 (as determined in accordance with GAAP)
7 (excluding income of the Company)
8 As used herein, Company Income shall be limited to income derived from
the construction and sale of single family detached residences with a
gross sales price in excess of $135,000.00 (adjusted for cost of living
increases from the date hereof) and the sale of developed lots, which
are considered the historical product lines of the
[Footnote Continued On Next Page]
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respect to the applicable calendar year (herein a "Reference Period").
The Applicable Percentage with respect to Company Income for each
Reference Period shall be as follows:
Reference Period: 1998 1999 2000 2001 2002
----------------- ---- ---- ---- ---- ----
Applicable Percentage: 25% 20% 15% 10% 5%
The Applicable Percentage for Eligible Xxxxxx Income for each Reference Period
shall be as follows:
Reference Period: 1998 1999 2000 2001 2002
----------------- ---- ---- ---- ---- ----
Applicable Percentage: 10% 8% 6% 4% 4%
Earn-Out Payments shall be calculated and paid as follows:
A. Company Income and Eligible Xxxxxx Income shall be multiplied
by the respective Applicable Percentages indicated above. Fifty percent of the
aggregate product shall be paid to Executive in cash. The remaining fifty
percent shall be divided by a number equal to the average market price of Xxxxxx
Stock as of close of trading on each of the last twenty (20) trading days of the
calendar year immediately preceding the applicable Reference Period (except with
respect to the Earn-Out Payment for Reference Period 1998, for which said number
will be $8.00). Executive shall receive a number of shares of Xxxxxx Stock equal
to the result of said division.
B. Anything to the contrary herein notwithstanding, to the extent
the aggregate value of all Earn-Out Payments would result in the issuance of
more than 375,000 shares of Xxxxxx Stock, all such excess must be paid only in
cash.
C. The cash portion of each Earn-Out Payment shall be paid in
quarterly installments, with the first three installments paid on or about
thirty (30) days after close of each
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[Footnote Continued From Previous]
Company. Any and all other income derived from the operations of the
Company and/or from Xxxxxx Incorporated shall be deemed Eligible Xxxxxx
Income including, but not limited to, income derived from (i) the
construction and sale of single family detached residences with a gross
sales price less than or equal to $ 135,000.00 (adjusted for cost of
living increases from the date hereof), (ii) the construction and sale
of attached residences, including but not limited to condominiums,
apartments and townhouses, and (iii) the construction and sale of
commercial and industrial projects. In some instances, a Maxim product
may be constructed on Xxxxxx land, in which event income allocable to
the land shall be Eligible Xxxxxx Income and income allocable to the
improvements shall be Company Income.
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of the first three calendar quarters, based upon determination of income for
such quarter. The stock portion of each Earn-Out Payment shall accrue quarterly
but, together with the final installment of the cash portion, shall be issued
and paid on or about each March 31 following the close of the applicable
Reference Period. Said final installment shall be subject to adjustment as
necessary to reconcile the aggregate Earn-Out Payment to which Executive is
actually entitled for the applicable Reference Period against any shortage or
overage of quarterly installments previously paid to Executive.
D. Anything to the contrary herein notwithstanding, in the event
Executive's employment with the Company is terminated for any reason other than
"for good reason" (as such term is defined in Section 4(d) hereof), Executive
shall be entitled to no further Earn-Out Payments other than any received by
Executive prior to such termination.
(i) Federal Securities Laws. Executive represents and
warrants that he is acquiring the Xxxxxx Stock be issued pursuant to this
employment agreement for investment and not with a view toward any distribution
thereof, and Executive understands that such Xxxxxx Stock will not be registered
under the Securities Act and Rules and Regulations promulgated thereunder by the
SEC.
(ii) Restrictions on Transfer. Executive understands,
acknowledges and agrees that unless and until the Xxxxxx Stock is registered
under the Securities Act, the Xxxxxx Stock will be subject to Rule 144 of the
Securities and Exchange Commission, and Executive will not be permitted to sell
or otherwise transfer or dispose of any of the Xxxxxx Stock or any interest
therein except in accordance with said Rule 144 or any other applicable
exemption from registration thereunder. In addition, Executive shall not dispose
of any Xxxxxx Stock without first having complied with each of the following
conditions, unless Xxxxxx Incorporated waives such conditions in writing:
(1) Xxxxxx Incorporated shall have received written notice of the
proposed sale or transfer, setting forth the circumstances and
details thereof;
(2) Xxxxxx Incorporated shall have received a written opinion from a
law firm satisfactory to Xxxxxx Incorporated specifying the
nature and circumstances of the proposed sale or transfer and
indicating that the proposed sale or transfer will not be in
violation of any of the provisions of the Securities Act and the
Rules and Regulations promulgated thereunder; and
(3) Xxxxxx Incorporated shall have received an opinion from its own
counsel concurring in the opinion that the proposed sale or
transfer will not be in violation of any of the provisions of the
Securities Act and the Rules and Regulations promulgated
thereunder.
(d) Fringe Benefits. Executive shall receive employment fringe benefits
not less favorable than those made available to the Company's most
senior executives. To the extent the value of said fringe benefits is
less than $50,000.00 (non-cumulative) in any given year, Executive
shall be entitled to an amount equal to the difference in cash.
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(e) Expenses. Subject to existing Company policies established from time
to time, all travel and other expenses incident to the rendering of
services by Executive hereunder shall be paid by the Company. If any
such expenses are paid in the first instance by Executive, the
Company shall reimburse him therefor on presentation of the
appropriate documentation required by the Internal Revenue Code of
1986, as amended, and Treasury Regulations or otherwise required
under the Company policy in connection with such expenses.
(f) Vacation. Executive shall be entitled to paid vacation, to be taken
at time or times mutually satisfactory to Executive and the Company,
in accordance with the Company's vacation policy in effect from time
to time for its most senior executives.
4. Early Termination.
(a) Notwithstanding the provisions of Section 1 hereof, Executive may be
discharged by the Company for Cause (as defined in Section 4(c) hereof), in
which event the Period of Employment hereunder shall cease and terminate and the
Company shall have no further obligation or duties under this Agreement, except
for obligations accrued under Section 3 at the date of termination. In addition,
the Period of Employment hereunder shall cease and terminate upon the earliest
to occur of the following events: (i) the death of Executive; or (ii) at the
election of the Board of Directors (subject to the Americans With Disabilities
Act), the inability of Executive by reason of physical or mental disability to
continue the proper performance of his duties hereunder for a period of 180
consecutive days, and the Company shall have no further obligation or duties
under this Agreement, except for obligations accrued under Section 3 at the date
of termination.
(b) In the event that (i) Executive is discharged by the Company other
than for Cause or other than pursuant to Section 4(a) hereof by reason of
physical or mental disability, or (ii) Executive terminates employment with the
Company for good reason (as defined in Section 4(d) hereof), Executive shall
have no further obligations or duties under this Agreement; provided, however,
that Executive shall continue to be bound by the provisions of Section 5 hereof
if the Company performs its obligations under this Section 4(b). In the event of
termination of the Period of Employment pursuant to the preceding sentence, the
Company shall, in addition to paying the obligations accrued under Section 3 at
the date of termination, pay Executive, with no duty by Executive to mitigate,
an amount equal to the entire compensation otherwise payable to him under
Sections 3(a) and (b) hereof for the lesser of two years or the remaining Period
of Employment (without giving effect to any future available renewals of the
term hereof). At the Company's option, said payment may be (x) in the form of a
cash severance payment, in which event the amount of said payment shall be
discounted to net present value and payable within 30 days of termination, or
(y) in the form of equal installments payable on the first and sixteenth of each
month as provided under Sections 3(a) and (b) hereof.
(c) For purposes of this Agreement, cause ("Cause") shall be deemed to
exist only (i) upon Executive's consistent, unexcused refusal to substantially
perform, or willful misconduct in the substantial performance of, his duties and
obligations hereunder; provided such duties and
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obligations are consistent with the duties and obligations imposed on Executive
by this Agreement and are clearly communicated to Executive or (ii) Executive's
conviction of a felony.
(d) For purposes of this Agreement, the term "for good reason" shall
mean (i) the Company's requiring relocation of Executive, without his prior
written consent, to a place of employment other than Salt Lake City, Utah,
except for travel reasonably required in the performance of Executive's
responsibilities; or (ii) the Company's failure to substantially comply with the
provisions of Section 3 of this Agreement or other material breach by the
Company of this Agreement; provided, however, that prior to termination of this
Agreement pursuant to this subsection 4(d), Executive shall have given the
Company not less than twenty (20) days prior written notice of the condition
upon which such termination is purportedly based, and the Company shall not have
cured such condition within said twenty (20) days.
5. Confidentiality, Non-Competition and Nepotism.
(a) The Company and Executive acknowledge that the services to be
performed by Executive under this Agreement are unique and extraordinary and, as
a result of such employment, Executive will be in possession of confidential
information, proprietary information and trade secrets (collectively,
"Confidential Material") relating to the business practices of the Company and
its Affiliates. Executive agrees that he will not, directly or indirectly, (i)
disclose to any other person or entity either during or after his employment by
the Company or (ii) use, except during his employment by the Company in the
business and for the benefit of the Company or any of its Affiliates, any
Confidential Material acquired by Executive during his employment by the
Company, without the prior written consent of the Company. Upon termination of
his employment with the Company for any reason, Executive agrees to return to
the Company all tangible manifestations of Confidential Materials and all copies
thereof. All programs, ideas, strategies, approaches, practices or inventions
created, developed, obtained or conceived of by Executive prior to or during the
term thereof, and all business opportunities presented to Executive during the
term hereof by reason of his engagement by the Company, shall be owned by and
belong exclusively to the Company, provided that they are related in any manner
to its business or that of any of its Affiliates. Executive shall (i) promptly
disclose all such programs, ideas, strategies, approaches, practices, inventions
or business opportunities to the Company and (ii) execute and deliver to the
Company, without additional compensation, such instruments as the Company may
require from time to time to evidence its ownership of any such items.
(b) Executive agrees that during the Period of Employment, and for two
(2) years following the end of such Period of Employment if the termination of
employment results from (i) Executive's discharge by the Company for Cause; (ii)
Executive's written notice to the Company of his decision not to extend the
Period of Employment on any Renewal Date as provided in Section 1 hereof, or
(iii) Executive's decision to terminate this Agreement other than "for good
reason" within the meaning of Section 4(d) hereof, he will not become a
stockholder, director, officer, employee or agent of or consultant to any
corporation (other than an Affiliate), or member of or consultant to any
partnership or other entity, or engage in any business as a sole proprietor or
act as a consultant to any such entity, or otherwise engage, directly or
indirectly, in any enterprise, in each case which competes with any business or
activity engaged in, or known
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by Executive to be contemplated to be engaged in, by the Company or any of its
Affiliates within ninety (90) miles of any location in which the Company, Xxxxxx
Incorporated or any Affiliate does business, including but not limited to the
greater Salt Lake City, Utah area and the greater Phoenix, Arizona area;
provided, however, that competition shall not include the ownership (solely as
an investor and without any other participation in or contact with the
management of the business) of less than two percent (2%) of the outstanding
shares of stock of any corporation engaged in any such business, which shares
are regularly traded on a national securities exchange or in an over-the-counter
market. Executive agrees that during the noncompete period referred to in this
Section 5, neither Executive nor any person or enterprise controlled by
Executive will solicit for employment any person employed the Company or any of
its Affiliates at, or at any time within three (3) months prior to, the time of
the solicitation.
(c) Executive agrees that during the Period of Employment Executive
shall not own or hold any real estate related interest as a partner, member of a
limited liability company, shareholder, beneficiary of a trust, or any other
form of ownership or economic interest, in or to any real estate related entity,
except with respect to Executive's personal residence.
(d) During the Period of Employment, Executive shall develop and sell
the Company's real property known as Corner Creek Cove located at 00000 Xxxxx
Xxxx Xxxxxx, Xxxxxx, Xxxx. Executive shall be entitled to receive any and all
net profits from the development of Corner Creek Cove and shall indemnify and
hold Xxxxxx Incorporated and the Company harmless from any net loss incurred in
the development of Corner Creek Cove.
(e) Executive agrees that during the Period of Employment Executive
shall not enter into any transaction on behalf of the Company with any member of
Executive's family, without prior approval of the Board of Directors of the
Company.
(f) Executive agrees that the remedy at law for any breach by him of
this Section 5 may be inadequate and that the Company shall be entitled to
injunctive relief, in addition to any and all other rights and remedies
available to the Company.
6. Miscellaneous.
(a) Notices. Any notice or other communication required or permitted to
be given hereunder shall be made in writing and shall be delivered in person, by
facsimile transmission or mailed by prepaid registered or certified mail, return
receipt requested, addressed to the parties as follows:
If to the Company
c/x Xxxxxx Incorporated
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
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If to Executive:
Xx. Xxxxx X. Xxxxx
Maxim Homes, Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile No: 801-484-4333
or to such other address as the party shall have furnished in writing in
accordance with this Section. Such notices or communications shall be effective
upon delivery if delivered in person or by facsimile and either upon actual
receipt or three days after mailing, whichever is earlier, if delivered by mail.
(b) Parties In Interest. This Agreement shall be binding upon and inure
to the benefit of Executive, and it shall be binding upon and inure to the
benefit of the Company and any corporation succeeding to all or substantially
all of the business and assets of the Company' by merger, consolidation,
purchase of assets or otherwise.
(c) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Executive by the Company and contains all of the covenants
and agreements between the parties with respect to such employment in any manner
whatsoever. Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without giving effect to the
choice of law or conflicts of laws rules and laws of such jurisdiction.
(e) Severability. In the event that any term or condition contained in
this Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition of
this Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable term or condition had never been contained herein. If a
court of competent jurisdiction determines by final judgment that the scope,
time period or geographical limitations set forth in Section 5 are too broad to
be capable of enforcement, it may modify such covenants and enforce such
provisions as to scope, time and geographical area as it deems equitable.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the date
first set forth above.
COMPANY: EXECUTIVE:
MAXIM HOMES, INC.,
an Arizona corporation /s/ Xxxxx X. Xxxxx
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XXXXX X. XXXXX
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By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx, President
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ADDENDUM TO EMPLOYMENT AGREEMENT
THIS ADDENDUM is attached to and incorporated in that certain
Employment Agreement by and between Maxim Homes, Inc. (the "Company") and Xxxxx
X. Xxxxx ("Executive") dated as of March 20, 1998 (the "Employment Agreement").
Notwithstanding the provisions of the Employment Agreement, the
Company and Executive acknowledge and agree to the following:
1. On September 24, 1997, Executive entered into an oral
agreement with Xxxxxx Xxxxxx ("Xxxxxx") in which Executive agreed to share
equally with Xxxxxx any and all profits derived from the sale of homes
constructed on Wood Ranch lots 213 and 223 (the "Lots").
2. As of the date of this Addendum, homes have not been
constructed on the Lots and the profits to be derived from the sale of said
homes are uncertain.
3. Upon the sale each of the Lots and determination of the
profits derived therefrom, Company agrees to disburse one half of the net
profits to Xxxxxx. Executive agrees to a deduction of an amount equal to the
sum(s) disbursed to Xxxxxx from the first installment(s) of Earn-Out Payments
following the disbursement(s).
4. As of the date of this Addendum, Executive has taken an
advance on his compensation, as authorized under the terms of the Employment
Agreement, in the amount of $35,600.00 (the "Advance"). Executive agrees to
repay the Advance through a deduction of the sum of $35,6000.00 from his first
installment(s) of Earn-Out Payments.
Except as amended hereby, all other terms and conditions of the Employment
Agreement shall remain unchanged.
COMPANY: EXECUTIVE:
MAXIM HOMES, INC.,
an Arizona corporation /s/ Xxxxx X. Xxxxx
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XXXXX X. XXXXX
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx, President
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