Exhibit 10.21
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 an Operating Agreement,
dated September 10, 1999, as amended, entitled "Operating
Agreement of Southern Highlands/Xxxxxxxxxxx Homes I, LLC,"
(the "Operating Agreement").
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.
D. 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 sixty-five percent (65%) 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(f)(ii) of
the Operating Agreement, Consultant will pay to Xxxxxxxxxxx Homes sixty-five
percent (65%) of the distribution, and Consultant shall retain thirty-five
percent (35%) of said distribution.
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 one and one-half percent (1-1/2%) 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(d) 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. (Sales Revenue shall not include any Deposit
previously received by the LLC and distributed to the Members in
accordance with the Operating Agreement, unless the Operating Agreement
is otherwise modified).
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. Upon termination of the
Employment Agreement of J. Xxxxxxxxxxx Xxxxxxx with the Fortress Group,
Consultant shall be paid, in addition to the foregoing, a monthly fee of
$4,500.00 per month during the Initial Term.
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) This Agreement will have an initial term of twelve (12) months from
the date this Agreement is signed by both parties (the "Initial Term").
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 3.6.2 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 or 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 Parcel 305 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 Parcel 305
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 3.6.2 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 3.6.2 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 fails 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 Operating Agreement
of Southern Highlands/Xxxxxxxxxxx Homes I, L.L.C., a Nevada
Limited Liability Company.
(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; by 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 one and one-half percent
(1-1/2%) 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
---------------------------------
J. Xxxxxxxxxxx Xxxxxxx
11
