EMPLOYMENT AGREEMENT
AGREEMENT made as of this 28th day of July, 1997, by and, between Xxxxx
X. Xxxxx (the "Executive"), and Fortune Financial Systems, Inc., a Nevada
corporation (the "Company").
WHEREAS, the Company desires to employ the Executive and to enter into
an agreement embodying the terms of such employment, and the Executive desires
to accept such employment and to enter into such agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Position and Responsibilities; Outside Opportunities.
A. As of July 28, 1997 (the "Effective Date"), the
Executive shall serve as President and CEO of the
Company and, in such capacity, shall exercise such
powers and comply with and perform such directions
and duties in relation to the business and affairs of
the Company as are customarily associated with that
position and as may from time to time be vested in or
given to him by the Board of Director of the Company.
The Executive shall at all times report to, and his
activities shall at all times be subject to the
direction and control of, the Board of Directors of
the Company. The Executive agrees to devote
substantially all of his business time, attention and
services to the diligent, faithful and competent
discharge of such duties for the successful operation
of the Company's business. Notwithstanding the
foregoing, the Executive may engage in the activities
listed on Schedule A hereto.
B. The Executive acknowledges and agrees that nay
business opportunities of any nature within the scope
of the Company or their respective subsidiaries'
businesses or substantially similar to such
businesses that the Executive may become aware of or
be presented with during the course of his employment
hereunder shall be deemed the property of the
Company. The Executive shall not use or otherwise
pursue such business opportunities without first
presenting such opportunities to the Board of
Directors of the Company. If the Board of Directors
determine, within a reasonable period of time, that
the Company will not pursue such business
opportunities then, subject to Section 6 hereof, the
Executive may pursue such opportunities for his own
account.
2. Compensation: Salar, Bonus and Other Benefits. During the term
of this Agreement, the Company shall pay the Executive the
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following compensation, including the following annual salary,
bonus and other fringe benefits:
A. Salary. In consideration of the services to be
rendered by the Executive to the Company, the Company
shall pay to the Executive a base salary at the rate
of $25,000 per month (such salary as it may be
increased being hereinafter referred to as the "Base
Salary"). The Base Salary shall be increased, at
minimum, by 5% per year. Except as may otherwise be
agreed in writing, the Base Salary shall be payable
in conformity with the Company's customary practices
for executive compensation as such practices shall be
established or modified from time to time. Salary
payments shall be subject to all applicable federal
and state withholding, payroll and other taxes.
B. Reduction of Salary. Pursuant to the Contribution and
Operating Agreement, dated as of February 7, 1997, by
and among the Parent Company, Success Holdings
Company, LLC, an Illinois limited liability company
("Success Holdings") and Xxxxx Xxxxxx ("Xxxxxx"), the
Company will receive $500,000 from Xxxxxx and Xxxxxx
will arrange to have a $250,000 line of credit
established for use by the Company. If, after such
amount has been received by the Company and such line
of credit has been utilized in full, the Board of
Directors of the Parent Company determines, after due
regard for the Company's financial condition, and
current and future capital commitments, that the
Company does not have sufficient cash flow to pay the
Base Salary, then the Executive's salary shall be
reduced to $15,000 per month until such time as the
Board of Directors shall determine that the Company's
cash flow is sufficient to pay the Base Salary. In
the event such determination of sufficiency is made,
the Executive shall receive any portion of the Base
Salary not paid during such period over such period
of time as the Board of Directors of the Parent
Company shall determine.
C. Bonuses: The Executive shall be entitled to receive,
annually, a cash bonus, not in excess of $200,000,
equal to 10% of the Company's net earnings before
taxes as reflected int he Company's regularly
prepared audited financial statements, but before
deducting any bonuses under this or other executive
employment or consulting agreement ("Pre-tax
Profits"). If the Company's Pre-Tax Profits exceed $5
million for any fiscal year and the Executive is
employed hereunder for at least nine months of such
fiscal year, then the Executive shall be entitled to
receive an additional bonus in the form of a
combination of cash and stock options having net
value as follows: if Pre-tax Profits exceed $5
million but are less than $6 million, $350,000; and
if Pre-tax Profits exceed $7 million, $500,000, as
further described below. The Board of Directors shall
determine, in its sole discretion, the combination of
cash and stock options the Executive shall receive.
To the extent that the Executive is granted options
as described above to purchase shares of the Parent
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Company's common stock, such stock options (x) shall
have an exercise price per share to be determined by
the Board of Directors, provided, that such exercise
price is equal to not more than 50% of the Fair Value
of the share on the date of grant, (y) shall be
granted in accordance with a stock option agreement,
the form of which will be mutually acceptable to the
Executive and the Parent Company, and which agreement
will provide that the options shall be fully vested
upon the date of grant and that one-third of the
options shall be exercisable on each of the date of
grant and that one-third of the option shall be
exercisable on each of the date of grant and the
first and second anniversaries of the date of grant,
and (z) may be subject to the terms of any Parent
Company employee stock option plan adopted by the
Parent Company after the date hereof. The "net value"
of any stock options granted to the Executive under
the Section for purposes of calculation the $500,000
valuation above shall be the Fair Value per share on
the date of grant under such option multiplied by the
number os shares subject to such option. The term
"Fair Value" of a share of the Parent Company's
common stock shall mean (i) if the common stock is
traded on a national securities exchange, the closing
price for such stock on the day immediately preceding
the date of determination or if there is no closing
price on such date, the last preceding closing price,
(ii) if the common stock is not traded on a national
securities exchange, the mean of the high bid and ask
quotes of such stock as reported on the NASDAQ/NMS
reports or the National Quotation Bureau Inc.'s pink
sheets or in the NASD Bulletin Board on the day
immediately preceding the date of determination or if
there were no high bid and ask quotes on such date,
the last preceding day that there were, and (iii) if
neither (i) or (ii) are applicable, as determined in
good faith by the Board of Directors.
All cash bonuses shall be paid to the Executive at such time
as annual bonuses are paid to executives of the Company generally, but in no
event later than 60 days after the end of each fiscal year. All bonuses
consisting of stock options shall be granted no later than 60 days after the end
of each fiscal year.
D. Employee Benefits. The Executive shall be entitled to
participate, in accordance with the provisions
thereof, in any health, disability and life insurance
and other employee benefit plans and programs made
available by the Company to its executive management
employees generally.
E. Vacations. During each calendar year during the term
of his employment, the Executive shall be entitled to
five weeks paid vacation. In addition, the Executive
shall be entitled to all paid holidays given by the
Company to its employees generally.
F. Expenses. During the term of the Executive's
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employment under this Agreement, the Company shall
pay the Executive (i) an automobile allowance of $800
per month, (ii) $600 per month for payment of certain
club membership fees, and (iii) an entertainment
expense allowance of $1,000 per month. The Executive
shall also be entitled to receive prompt
reimbursement, in accordance with the Company's
policies, for all other reasonable and customary
expenses incurred by him in performing services
hereunder.
3. Term. The term of the Executive's employment under this
Agreement shall be from the Effective Date until the fifth
anniversary of the Effective Date, unless earlier terminated
as hereinafter provided.
4. Termination or Change of Control. The Executive's term of
employment under this Agreement may be earlier terminated as
follows:
A. At the Election of the Company For Cause. The Company
may, immediately and unilaterally, terminate the
Executive's employment hereunder "for cause" at any
time during the term of this Agreement upon written
notice to the Executive, but only after a
determination to so terminate the Executive has been
made by a decision approved by all members of the
Board of Directors of the Company at a meeting duly
noticed and held with an opportunity for the
Executive to be heard. Termination of the Executive's
employment by the Company shall constitute a
termination "for cause" under this Section 4(A) if
such termination is for one or more of the following
causes: (i) intentional misconduct causing material
damage to the Company; (ii) any act of fraud,
misappropriation, misfeasance, malfeasance or knowing
breach of fiduciary duty; (iii) conviction of a
felony, or, repeated habitual drunkenness or drug
addiction; (iv) continue gross negligence in the
conduct or management of the Company not remedied
within 30 days after receipt of written notice from
the Company; (v) willful refusal to perform the
duties reasonably assigned to the Employee by the
Board of Directors; (vi) willful and material breach
by the Executive of Sections 6, 7 or 8 of this
Agreement, or (vii) breach by the Executive of any
other material provision of this Agreement in any
material respect not remedied within 30 days after
receipt of written notice from the Company. Any
notice given by the Company pursuant to this Section
shall describe the activities which, in the Company's
opinion, constitute cause and such state that the
Company believes that such activities constitute
cause under this Agreement. In the event of a
termination "for cause' pursuant to the provisions of
causes (i) through (vii) above, inclusive, the
Executive shall be entitled to no payment or other
benefits, and shall have no further rights under this
Agreement. Notwithstanding the foregoing, the
Executive shall retain any stock options granted to
the Executive prior to the date of such termination
pursuant to Section 2(C) hereof.
B. At the Election of the Executive or Upon Death or
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Disability. The Executive's employment hereunder
shall terminate upon his death, and may be terminated
by the Company due to his Disability (as defined
below). "Disability" shall mean the determination by
the Board of Directors of the Company that the
Executive is physically or mentally incapacitated and
has been unable for a period of 90 days, whether or
not continuous, in any period of 12 consecutive
months, to perform the duties for which he was
immediately before the onset of his incapacity.
(i) In the event the Executive voluntarily
terminates his employment hereunder is
terminated due to death or Disability, until
the date of such termination of his
employment, the Executive (or the
Executive's heirs) shall be entitled to
receive payments of Base Salary pursuant to
Section 2(A). In addition, to the extent the
Executive was entitled to receive a cash or
stock option bonus pursuant to Section 2(C),
such bonus shall be paid to the Executive
(or his heirs) in accordance with Section
2(C).
(ii) Change of Control. If there is a change of
control which is defined by 25% change of
ownership or control of the Board of
Directors other than Byrd, Morris, and
Xxxxxxx. Xxxxx will have the ongoing option
of continuing under the same terms and
conditions or resigning without restriction
with the Company continuing his compensation
and benefits program for a two year period.
5. Indemnification and Insurance. The Company will provide
Director and Officer Insurance at a minimum level of
$5,000,000. The Company agrees to fully indemnify Royce and
all of its officers and directors for acts taken on behalf of
the Company except for act of gross malfeasance. The Company
shall use reasonable best efforts to obtain a key man
insurance policy (the "Insurance Policy") on the Executive in
an amount equal to $5,000,000 at reasonable premium cost. The
Company shall be the sole beneficiary of the Insurance Policy.
6. Non-competition Covenant.
A. During the period of his employment hereunder if the
Executive is terminated for cause or voluntarily
terminates his employment prior to February 1, 2002,
for three months after termination of his employment,
the Executive agrees that he will not engage and will
not serve as a partner, officer, director,
consultant, employee, stockholder or in any other
capacity to any company or business organization
which engages in any business activity which is
competitive with the principal business of the
Company, Success as of date of termination (other
than the activities listed on Schedule A) unless the
Executive obtains the prior approval of the Company,
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and provides such persons with full disclosure of the
Executive's proposed activities. Notwithstanding the
foregoing, the Executive may own up to 5% of the
outstanding common stock of any class of common
equity which is traded on a national securities
exchange or in the over-the-counter market.
B. The Company may, at its option, require the Executive
to observe a non-competition covenant,
notwithstanding his termination or voluntary
resignation on or after February 1, 2002, if the
Company continues to pay the Executive the base
salary and benefits set forth in Section 2(A) for a
two year period of time.
7. Non-Solicitation.
A. During the period of his employment hereunder and, if
termination is for cause, or voluntary by the
Executive, for three months after the termination of
his employment, Executive agrees that he shall not
directly or indirectly solicit for employment, employ
in any capacity or make an unsolicited recommendation
to any other person that it employ or solicit for
employment any person who is a current or "former"
employee of the Company, the Parent Company or
Success or their affiliates. As used in this
Agreement, "former" employee means any employee who
was an employee of the Company, the Parent Company or
Success or their respective affiliates within 90 days
of such solicitation.
B. If the Executive violates the provisions of Section
7(A) hereof and it is adjudicated by arbitration,
then the Executive shall pay to either the Company,
or Success, as appropriate, an amount equal to the
compensation the solicited person received from such
company for the three months prior to the termination
of such person's employment with such company. Such
amount shall be payable by the Executive within 30
days after the Executive's receipt of written notice
from the Company, or Success, as appropriate.
8. Non-Disclosure Obligation. Executive will not at any time,
whether during or after the termination of his employment,
divulge, use, furnish, disclose or make available to any
person, association or company any of the trade secrets or
confidential information concerning the organization,
marketing plans and strategies, pricing policies, plans and
strategies relating to acquisitions made or to be made by the
Company, or Success, the business, finances or financial
information, of the Company, or Success so far as they have
come or may come to his knowledge, except as may be required
in the ordinary course of performing his duties as an officer
of the Company as may be in the public domain through no fault
of his, as may be required by law, or as were acquired by the
Executive prior to his association with the Company. Executive
shall keep secret all maters of such nature entrusted to him
and shall not use or attempt to use any such information in
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any manner which may injure or cause loss to the Company or
Success. Upon the termination of the Executive's employment,
the Executive shall return to the Company or Success, as
appropriate, any confidential materials in the Executive's
possession. Such materials may include professional, technical
and administrative manuals and the associated forms,
processes, computer software and other methodologies and
systems. If the Executive is required to disclose any
confidential information by law, the Executive shall contact
Company's Board of Directors prior to such disclosure.
9. Remedies Upon Breach. Executive agrees that any breach of this
Agreement by him could cause irreparable damage to the Company
or Success and that in the event of such breach the Company,
and Success shall have, in addition to any and all remedies of
law and otherwise under the Agreement, the right to an
injunction, specific performance or other equitable relief to
prevent the violation of his obligations hereunder, plus the
recovery of any and all costs and expenses incurred by the
Company, and Success, including reasonable attorneys fees in
connection with the enforcement of this Agreement, provided
that the Company, and Success shall have been successful on
the merits or otherwise in any proceeding related to the
enforcement thereof.
10. Representations. The Executive hereby represents and warrants
that his employment with the Company on the terms and
conditions set forth herein and his execution and performance
of this Agreement do not constitute a breach or violation of
any other agreement, obligation or understanding with any
third party. The Executive represents that his is not bound by
any agreement or any other existing or previous business
relationship which conflicts with or may conflict with, the
performance of his obligations hereunder or prevent the full
performance of his duties and obligations hereunder. The
Executive represents that he has no knowledge of any
circumstance which would prevent the Company from obtaining
the Insurance Policy and, to his knowledge, he is in good
health.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Utah.
12. Severability. In case any one or more of the provisions
contained in this Agreement for any reason shall be held to be
invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement but this Agreement shall
be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein.
13. Waivers and Modifications. This Agreement may be modified, and
the rights and remedies of any provision hereof may be waived,
only in accordance with this Section 13. No modification or
waiver by the Company shall be effective without the consent
of at least a majority of the Board of Directors then in
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office at the time of such modification or waiver. No waiver
by either party of any breach by the other or any provision
hereof shall be deemed to be a waiver of any later or other
breach thereof or as a waiver of any other provision of this
Agreement. This Agreement sets forth all of the terms of the
understandings between the parties with reference to the
subject matter set forth herein and may not be waived,
changed, discharged or terminated orally or by any course of
dealing between the parties. But only by an instrument in
writing signed by the party against whom any waiver, change,
discharge or termination is sought.
14. Assignment. The Executive acknowledges that the services to be
rendered by him are unique and personal. Accordingly, the
Executive may not assign any of his rights or delegate any of
his duties or obligations under this Agreement. The company
shall have the right to assign this Agreement to its
successors and assigns, and the rights and obligations of the
Company under this Agreement shall inure to the benefit of,
and shall be binding upon, the successors and assigns of the
Company.
15. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to be duly given when (i)
delivered by hand, (ii) 5 days after mailing if sent by
first-class certified mail, postage prepaid, return receipt
requested, (iii) on the scheduled delivery date, if sent by
overnight commercial courier, or (iv) transmitted by telecopy
or facsimile machine (with receipt confirmation) provided a
copy is mailed by registered mail, return receipt requested,
to the following address or fax number, as applicable, of the
party to whom such notice is to be made or to such other
address as such party may designate in the same manner
provided herein:
If to the Company:
0000 Xxxxx Xxxx Xxxxxx, #000
Xxxxxxx, Xxxx 00000
Attn: President and CEO
If to the Executive:
0000 X. Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
16. Survival of Obligations. Executive's obligations under this
Agreement shall survive the termination of it's employment
with the Company regardless of the manner of such termination
and shall be binding upon his heirs, executors and
administrators. The provisions of Sections 6, 7 and 8 shall
survive the termination or expiration of this Agreement as a
continuing agreement of the Executive. The existence of any
claim or cause of action by Executive against the Company
shall not constitute and shall not be asserted as a defense to
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the enforcement by the Company of this Agreement.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled by arbitration
to be held in Salt Lake City, Utah. Upon the occurrence of any
such dispute or controversy, each of the parties shall select
an arbitrator (an "Arbitrator") who has no prior professional
or personal relationship with any party, the Arbitrators so
chosen shall select a third Arbitrator and each party shall
furnish to the Arbitrators written notice (each, a "Party
Determination") of such party's desired outcome or resolution
for such dispute or controversy. If upon receipt of a Party
Determination, the Arbitrators shall notify the other party in
writing (a "Determination Notice") that they have received
such Party Determination and the Arbitrators shall not
disclose the contents thereof until the earlier of the
Arbitrators' receipt of Party Determinations from the other
party and 20 days after delivery of the Determination Notice.
If the other party fails to deliver its Party Determinations
within 20 days after delivery of the Determination Notice, the
first Party Determinations shall be the resolution of the
dispute or controversy. If more than one Party Determination
is delivered to the Arbitrators within 20 days after the
delivery of the Determination Notice, the Arbitrators shall
determine the resolution of the dispute or controversy;
provided, however, that in determining the resolution of the
dispute or controversy, the Arbitrators' discretion shall be
limited to selecting one of the proposed resolutions set forth
in the Party Determination that was not chosen by the
Arbitrators. All decisions of the Arbitrators shall be final
and binding on each of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
FORTUNE FINANCIAL SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxx
------------------ -----------------
Xxxxx X. Xxxxx Xxxxx X. Xxxx, Xx. President CEO
Solely with respect,
to Sections 6, 7 and 8
SUCCESS HOLDINGS COMPANY, LLC
By: /s/ Xxxxx Xxxxxx
----------------
Xxxxx Xxxxxx, Chairman of Board
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SCHEDULE A
1. Westban Financial, Inc.
2. Board of Directors (3)
3. American Education Institute, Inc.
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