AMENDMENT TO
EMPLOYMENT AGREEMENT AND
PURCHASE AGREEMENT
REFERENCE IS MADE to that certain Employment Agreement dated November 13, 1998
by and between Diamond Key Homes, Inc., and Xxxxxxx X. Xxxxx (the "Employment
Agreement"), and that certain Stock and Membership Interest Purchase Agreement
dated October 7, 1998 by and between Diamond Key Homes, Inc., Diamond Key
Construction, LLC, Xxxxxxx X. Xxxxx, Xxxx Xxxxx, and Xxxxxx Incorporated (the
"Purchase Agreement"). Unless otherwise indicated, capitalized terms used herein
shall have the same meaning ascribed to such terms on the agreements.
RECITALS
A. WHEREAS, Executive and the Company have agreed to terminate Executive's
employment relationship, effective December 31, 1999 (the "Separation
Date");
B. WHEREAS, Seller has agreed to finance, on terms set forth below, the
Company's payment of the Deferred Cash;
C. WHEREAS, the Company agrees to release Seller from certain potential
claims under the Purchase Agreement; and
D. WHEREAS, the Company agrees to partially release Executive from the
constraints of the non-compete clause contained in the Employment
Agreement.
NOW THEREFORE, in consideration of the foregoing, the Employment Agreement
and Purchase Agreement are amended as follows:
TERMS OF AGREEMENT
1. Section 2 of the Employment Agreement is hereby amended to reflect that
the "Period of Employment" shall end as of the Separation Date.
2. Section 5(b) of the Employment Agreement is amended to read as follows:
(1) Executive agrees that during the Period of Employment, and for two
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
uses the name "Diamond Key" or a variant thereof and/or which is in
the business of production homebuilding within ninety (90) miles of
any location in which the Company, Xxxxxx or any Affiliate does
business or in which Executive has knowledge that the Company, Xxxxxx
or any Affiliate has committed (financially or otherwise) to conduct
business, including but not limited to greater Phoenix and Tucson,
Arizona areas;
(2) Notwithstanding the restrictions set forth in Section 5(b)(1)
above, Executive may for himself or others conduct business as a land
banker and develop and finance land for other production homebuilders
anywhere, with the exception of the project known as Xxxxxxx Farms,
located in Tucson, Arizona, in which Executive may not conduct
business as a land banker and develop and finance Xxxxxxx Farms
without the express written approval of the Company and Xxxxxx;
(3) Competition, as used in this Section 5(b) 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.
(4) Executive agrees that for two (2) years following the Separation
Date, neither Executive nor any person or enterprise controlled by
Executive will solicit for employment any person employed by the
Company, Xxxxxx or any other Affiliate at, or at any time within three
(3) months prior to, the time of the solicitation, without the prior
written approval of Xxxxxx.
(5) If Executive materially breaches the foregoing covenant not to
compete and/or non-solicitation, the Company shall be entitled to
liquidated damages of $1,000,000. Executive and the Company agree that
actual damages for breach of this provision would be substantial but
difficult to calculate and that such amount represents a reasonable
estimate thereof.
3. Section 5(c) of the Employment Agreement is deleted in its entirety.
4. Pursuant to Section 2.6(b)(ii) of the Purchase Agreement, Buyer and
Seller hereby agree that the remainder of the Deferred Cash is equal to
the sum of Seven Hundred Thousand Dollars ($700,000.00) and shall be paid
as follows:
January 3, 2000 $100,000.00
February 3, 2000 $125,000.00
March 3, 2000 $150,000.00
April 3, 2000 $175,000.00
May 3, 2000 $150,000.00 + all accrued interest
The foregoing terms for payment of the Deferred Cash shall be memorialized
in a promissory note the form and content of which shall be substantially
similar to Exhibit A (the "Note"), hereto.
5. Buyer and the Company hereby (i) release Seller and Xxxxx from any and
all liability arising from or related to any of the items identified under
Sections I, II and IV in the outline dated November 29,1999 attached hereto and
(ii) agree that neither Buyer nor the Company shall be entitled to offset any
Losses pursuant to Article 8 of the Purchase Agreement against amounts due to
Seller and/or Xxxxx in connection with the Note.
6. Except as expressly amended hereby, the Employment Agreement and Purchase
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Employment Agreement and Purchase Agreement as of this 6th day of December,
1999.
DIAMOND KEY HOMES, INC., DIAMOND KEY CONSTRUCTION, LLC,
An Arizona corporation, An Arizona limited liability company,
By: XXXXXX INCORPORATED,
By: ------------------------------- a Nevada corporation, managing
Xxxxx X. Xxxxxx, CEO member
By:
-------------------------------
Xxxxx X. Xxxxxx, President
-------------------------------
XXXXXXX P. XXXXX
XXXXXX INCORPORATED,
a Nevada corporation
------------------------------- By:-------------------------------
XXXX XXXXX Xxxxx X. Xxxxxx, President
EXHIBIT A
---------
PROMISSORY NOTE
$700,000.00 U.S. Las Vegas, Nevada
December 6, 1999
FOR VALUE RECEIVED, XXXXXX INCORPORATED, a Nevada corporation ("Maker"),
promises to pay to XXXXXXX X. XXXXX and XXXX X. XXXXX, husband and wife, or
order (collectively "Holder"), the principal sum of SEVEN HUNDRED THOUSAND
DOLLARS ($700,000.00), together with interest thereon from the date hereof at
the rate of twelve percent (12%) per annum. This Note is given to evidence the
remaining balance of the "Deferred Cash" due Holder under Section 2.6(b)(ii) of
that certain Stock and Membership Interest Purchase Agreement dated as of
October 7, 1998 between Holder, Maker, Diamond Key Homes, Inc. and Diamond Key
Construction LLC.
PAYMENTS. Commencing on January 3, 2000 and continuing on the third (3rd) day of
--------
the next calendar month, Maker shall make monthly payments to the Holder in the
following amounts:
January 3, 2000 $100,000.00
February 3, 2000 $125,000.00
March 3, 2000 $150,000.00
April 3, 2000 $175,000.00
May 3, 2000 $150,000.00
All remaining unpaid interest accrued thereon shall be due and payable in full
on May 3, 2000. Payments shall be made in lawful monies of the United States of
America and delivered to Holder at 0000 X. Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx
00000, or such other address as Holder may give Maker in writing from time to
time. All payments shall be made pursuant to the attached procedures. All
payments shall be applied first to any late charges accruing hereunder, then to
accrued interest and finally to the principal balance hereof.
PREPAYMENT. Maker may prepay this Note in part or in full at any time, without
----------
premium or penalty.
DEFAULT. Time is of the essence hereof. If Maker fails to pay any sums due
-------
hereunder within five (5) days after the same are due, the entire unpaid amount
of this Promissory Note shall immediately become due and payable. There shall be
added to said delinquent sums a late charge equal to five percent (5%) of the
amount due. In addition, all delinquent sums hereunder (whether principal,
interest and/or late charges) shall bear interest from the date due until fully
paid, at the rate of eighteen percent (18%) per annum, compounded monthly. Also,
upon any non-payment or other default under this Note, provided said default is
not cured within five (5) days of Maker's receipt of written notice of the same,
all provisions and restrictions under Section 5 of the employment agreement
dated as of November 13, 1998 by and between Diamond Key Homes, Inc. and Xxxxxxx
X. Xxxxx (the "Employment Agreement") or any related restrictions pursuant to
the Employment Agreement shall terminate effective upon Maker's failure to cure
as provided for herein.
ENFORCEMENT. Maker hereby waives presentment, protest and notice of dishonor. In
-----------
the event Maker fails to pay any sums due hereunder as and when the same are due
and payable, Holder shall have the right, at its option and without limiting any
other rights and remedies available to Holder, to declare the entire principal
amount hereof and any interest and late charges accrued hereunder, to be
immediately due and payable in full. In the event of any action to enforce the
provisions of this Note or to collect any sums due hereunder, the prevailing
party shall be entitled to recover its costs and reasonable attorneys therein.
MISCELLANEOUS. This Note shall be binding upon Maker and its successors and
-------------
assigns. This Note shall be governed by and controlled in accordance with the
laws of the State of Arizona without resort to conflict of law principals. Maker
hereby submits to the jurisdiction of the Federal Court or the State Superior
Court in Phoenix, Arizona, and hereby waives any right to assert the defense of
inconvenient forum or venue in connection with any action therein commenced with
respect to this Note. The terms and provisions of this Note may not be amended
except by written instrument executed by Maker and Holder. If any provision
hereof is declared invalid or unenforceable by any court of competent
jurisdiction, said determination shall not affect the validity or enforceability
of the remaining provisions hereof.
MAKER:
-----
XXXXXX INCORPORATED,
a Nevada corporation
By:
-------------------------------
Xxxxx X. Xxxxxx, President
Diamond Key/ Xxxxx Xxxxx
$700,000 Issues
11/29/99
1. Undisclosed Liabilities
At this point I agree with Dan's summary showing LC owing $77,379. This is
subject to a final audit.
II. Undisclosed Assets/Income
LC is trying to claim income from escrow income (escrow income not refunded
to potential buyers who fell out) as well as income from a summary
judgement amounting to $114,282. There is no provision in the agreement for
undisclosed assets/ income. The summary judgement is expected to be settled
for the full amount this week.
DK has found another undisclosed asset for $48,000 on an overpayment to a
sub. That check is being cut this week.
III. Warranty Reserve
At this point I agree with Dan's summary showing SI/DK owing $40,547. This
is subject to final audit.
IV. Legal Issues
A. Post Office/ Val Vista- DK still has not collected on the shared
development costs between these two groups. Status is uncertain as to
collection. Estimated to be $125,000. Talked to Xxx: he says a check
for $114,000 from the Post Office will be here before 12/31/99. Val
Vista has offered to settle at $70,000, DK has countered and Xxx
thinks they will end up at about $85,000. The total of $199,000 will
exceed the book receivable.
B. Sales Tax Audit- Unresolved, yet I think we all agree this is a dumb
case. Xxx Xxxxxx owes me a call back concerning the status.
C. 3 Lots at Sonaran Vista- DH raised this issue this morning and I have
not had a chance to research it. Xxx says they have not had a loss on
any lots or specs to-date. DK still has a few lots left however.
D. Employment Litigation- 4 cases totaling $70,000. If anything is paid
some of it will be ours, but some would be LC 's.
E. Professional Fees Audit- Some of the fees paid to date may be LC's
costs not ours. This audit has not yet been done.
F. Strip Mining Buy-Back House- if this house pre dates our purchase
of DK, it may be an adjustment item.
