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EXHIBIT 9.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
January 2, 1998, by and between American Diversified Securities, Inc., a Nevada
corporation (the "Company"), American Diversified Holdings. Inc., a Nevada
corporation and the parent corporation of the Company("ADH" or the "Parent") and
XXXXX XXXXXXXX XXX, Jr. ("Executive").
1. EMPLOYMENT
The Company and ADH (hereinafter referred to collectively as the
"Employers") hereby employ Executive and Executive hereby accepts employment
upon the terms and conditions set forth below.
2. TERM AND RENEWAL
2.1 TERM. The term of this Agreement shall commence on the date of
this Agreement (the "Effective Date"), and shall continue for three years from
the Effective Date (the "Original Employment Term"), on the terms and conditions
set forth below, unless sooner terminated as provided in Section 5.
2.2 EXTENSION. Following the expiration of the Original Employment
Term and provided that this Agreement has not been terminated pursuant to
Section 5, and every year thereafter, the Agreement shall be automatically
renewed for an additional 12-month period, effective on each anniversary date of
the Effective Date.
3. COMPENSATION
3.1 BASE COMPENSATION. For the services to be rendered by Executive
under this Agreement, Executive shall be entitled to receive, commencing as of
the Effective Date, an initial annual base compensation ("Base Compensation") of
$ 100,000, payable in 12 equal monthly installments. Executive shall have the
option of taking a bi-monthly advance (not to exceed 1/2 of the monthly
installment) against each monthly installment and each discretionary benefits
fund payment under Section 3.2 below.
3.2 ANNUAL DISCRETIONARY BENEFITS FUND. Executive shall be
entitled to an annual discretionary benefits fund of $40,000 which shall be used
for such benefits and perquisites as the Executive shall determine in his sole
discretion, including life and disability insurance, car allowances and club
memberships. The Executive and Employer shall agree on the amounts and
allocations of the benefits and the allowance shall be payable monthly in equal
installments. Medical insurance and expenses for the Executive as well as his
spouse and children shall be provided under the Company's medical insurance
policy, or if not so obtained, shall be reimbursable to Executive. Any shortfall
in the amount of the benefits of less than $40,000 shall be paid to Executive as
a bonus. The Employee may not carry over unused portions of the annual
discretionary benefits fund from year to year.
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3.3 PENSION/PROFIT SHARING PLANS, ETC. The Executive shall be
entitled to participate in all pension, profit sharing, 401(k) and other
employee plans and benefits established by the Employers.
3.4 METHOD OF PAYMENT. The monetary compensation payable and any
benefits due to Executive hereunder may be paid or provided in whole or in part,
from time to time, by the Employers and/or their respective subsidiaries and
affiliates, but shall at all times remain the responsibility of the Employers.
4. POSITION AND DUTIES
4.1 POSITION. Executive shall serve as a Director, the President,
Chief Executive Officer, and Chief Financial Officer of the Company as well as
the designated General and Financial Principal of the Company. Executive shall
have such duties as are the usual and customary duties of the such offices.
Executive shall have such executive power and authority as shall reasonably be
required to enable Executive to discharge the duties of such offices. Executive
may, at Executive's discretion, serve the Employers and/or their respective
subsidiaries and affiliates in such other offices and capacities as they shall
mutually agree. In the event the Employers and Executive mutually agree that
Executive shall terminate Executive's service in any one or more of the
aforementioned capacities, or Executive's service in one or more of the
aforementioned capacities is terminated, Executive's compensation, as specified
in this Agreement, shall not be diminished or reduced in any manner.
4.2 DEVOTION OF TIME AND EFFORT. Executive shall use Executive's good
faith best efforts and judgment in performing Executive's duties as required
hereunder and in the best interests of the Employers. Executive shall devote
such time, attention and energies to the business of the Employers as are
reasonably necessary to satisfy Executive's required responsibilities and duties
hereunder.
4.3 OTHER ACTIVITIES. Executive may engage in other personal and
civic activities while employed hereunder, including without limitation
charitable, community and other business activities, provided that such other
activities do not interfere with the performance of Executive's duties
hereunder.
4.4 VACATION. It is understood and agreed that Executive shall be
entitled to five (5) weeks vacation per year. During such vacation periods,
Executive shall not be relieved of Executive's duties under this Agreement and
there will be no abatement or reduction of Executive's compensation hereunder.
4.5 BUSINESS EXPENSES. The Employers shall promptly, but in no event
later than ten days after submission of a claim of expenditure, reimburse
Executive for all reasonable business expenses including, without limitation,
business seminar fees, professional association dues and other reasonable
entertainment expenses incurred by Executive in connection
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with the business of the Employers and/or their respective subsidiaries and
affiliates, upon presentation to the Employers of written receipts for such
expenses. Such reimbursement shall also include, but not be limited to,
reimbursement for all reasonable travel expenses, including all airfare, hotel
and rental car expenses, incurred by Executive in traveling in connection with
the business of the Employers.
4.6 EMPLOYERS' OBLIGATIONS. The Employers shall provide Executive
with any and all necessary or appropriate current financial information and
access to current information and records regarding all material transactions
involving the Employers and/or their representative subsidiaries and affiliates,
including but not limited to acquisition of assets, personnel contracts,
dispositions of assets, service agreements and registration statements or other
state or federal filings or disclosures, reasonably necessary for Executive to
carry out Executive's duties and responsibilities hereunder. In addition, the
Employers agree to provide Executive, as a condition to Executive's services
hereunder, such staff, equipment and office space as is reasonably necessary for
Executive to perform Executive's duties hereunder.
5. TERMINATION
5.1 BY EMPLOYERS WITHOUT CAUSE. The Employers may terminate this
Agreement without "cause" (as hereinafter defined) at any time following the
third anniversary of the Effective Date, provided that the Employers first
deliver to Executive the Employers' written election to terminate this Agreement
at least 90 days prior to the effective date of termination.
5.2 SEVERANCE PAYMENT.
(a) AMOUNT. In the event the Employers terminate Executive's
services hereunder pursuant to Section 5.1, Executive shall continue to render
services to the Employers pursuant to this Agreement until the date of
termination and shall continue to receive compensation, as provided hereunder,
through the termination date. In addition to other compensation payable to
Executive for services rendered through the termination date, the Employers
shall pay Executive no later than the date of such termination, as a single
severance payment, an amount equal to the sum of: (i) one-quarter of the
Executive's average annual Base Compensation paid hereunder for the preceding
thirty-six month period; plus (ii) an amount equal to one-quarter of the highest
annual bonus or profit sharing received by Executive during the preceding
thirty-six month period (the "Severance Amount").
(b) BENEFITS. In the event Executive's employment hereunder is
terminated by the Employers without cause pursuant to Section 5.1 or by
Executive pursuant to Section 5.4 or 5.6, then in addition to paying Executive
the Severance Amount, the Employers shall continue to provide to Executive and
Executive's spouse and children, as applicable, all of the benefits described in
Section 3.3 for a period three months commencing on the date of such termination
(the "Severance Benefits").
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(c) LIMITATION. The total of such severance payments shall be
reduced to the extent that the payment of such amount would cause Executive's
total termination benefits (as determined by Executive's tax advisor) to
constitute an "excess" parachute payment under Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and by reason of such excess
parachute payment Executive would be subject to an excise tax under Section
4999(a) of the Code, but only if Executive determines that the after-tax value
of the termination benefits calculated with the foregoing restriction exceed
those calculated without the foregoing restriction.
5.3 BY THE EMPLOYERS FOR CAUSE. The Employers may terminate
Executive for cause at any time, upon written notice to Executive. For purposes
of this Agreement, "cause" shall mean:
(a) Executive's conviction for commission of a felony or a crime
involving moral turpitude;
(b) Executive's willful commission of any act of theft,
embezzlement or misappropriation against the Employers which, in any such case,
is materially and demonstrably injurious to the Employers;
(c) Executive's willful and continued failure to substantially
perform Executive's duties hereunder (other than such failure resulting from
Executive's incapacity due to physical or mental illness), which failure is not
remedied within a reasonable time after demand for substantial performance is
delivered by the Employers which specifically identifies the manner in which the
Employers believe that Executive has not substantially performed Executive's
duties; or
(d) Executive's death or Disability (as hereinafter defined). In
the event Executive is terminated for cause pursuant to this Section 5.3,
Executive shall have the right to receive Executive's compensation as otherwise
provided under this Agreement through the effective date of termination.
Executive shall have no further right to receive compensation or other
consideration from the Employers or have any other remedy whatsoever against the
Employers as a result of this Agreement or the termination of Executive pursuant
to this Section 5.3, except as set forth below with respect to a termination due
to Executive's Disability.
In the event Executive is terminated by reason of Executive's Disability
(but not death), the Employers shall immediately pay Executive a single
severance payment equal to the Severance Amount. Said payment shall be in
addition to any disability insurance payments to which Executive is otherwise
entitled and any other compensation earned by Executive hereunder. For purposes
of this Agreement, the term "Disability" shall mean a physical or mental
incapacity as a result of which Executive becomes unable to continue the proper
performance of Executive's duties hereunder for six consecutive calendar months
or for shorter periods aggregating 180 business days in any 12 month period, but
only to the extent that such definition does not violate the Americans with
Disabilities Act.
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5.4 BY EXECUTIVE FOR GOOD REASON. Executive may terminate this
Agreement for good reason upon at least 30 days prior written notice to the
Employers. For purposes of this Agreement, "good reason" shall mean:
(a) the Employers' material breach of any of their respective
obligations hereunder and either such breach is incurable or, if curable, has
not been cured within fifteen (15) days following receipt of written notice by
Executive to the Employers of such breach by either of the Employers;
(b) any removal of Executive from the office specified in the
first sentence of Section 4.1 without cause and without Executive's prior
written consent; or
(c) any material decrease in Executive's authority or
responsibilities hereunder without Executive's prior written consent.
In the event that Executive terminates this Agreement for good reason
pursuant to this Section 5.4, Executive shall have the right to receive
Executive's compensation as provided hereunder through the effective date of
termination and shall also have the same rights and remedies against the
Employers as Executive would have had if the Employers had terminated
Executive's employment without cause pursuant to Section 5.1 (including the
right to receive the Severance Amount payable and the Severance Benefits to be
provided under Section 5.2).
5.5 EXECUTIVE'S VOLUNTARY TERMINATION. Executive may, at any time,
terminate this Agreement without good reason upon written notice delivered to
the Employers at least ninety (90) days prior to the effective date of
termination. In the event of such voluntary termination of this Agreement by
Executive: (i) Executive shall have the right to receive Executive's
compensation as provided hereunder through the effective date of termination,
and (ii) the Employers on the one hand, and Executive, on the other hand, shall
not have any further right or remedy against one another except as provided in
Sections 6, 7 and 8 hereof which shall remain in full force and effect.
5.6 CHANGE OF CONTROL. Executive may terminate this Agreement, upon
at least ten (10) days' prior written notice to the Employers at any time within
one (1) year after a "change in control" (as hereinafter defined) of either of
the Employers. In the event Executive terminates this Agreement within one (1)
year after a change in control pursuant to this Section 5.6, (i) Executive shall
continue to render services pursuant hereto and shall continue to receive
compensation, as provided hereunder, through the termination date, (ii) the
Employers shall pay Executive no later than the date of such termination, as a
single severance payment, an amount equal to the Severance Amount and (iii)
following such termination, the Employers shall provide the Severance Benefits
as required by Section 5.2. For purposes of this Agreement, (a "change in
control") shall mean the occurrence of any of the following events:
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(a) a merger, consolidation, share exchange or reorganization
involving the Parent, unless
(i) the stockholders of the Parent, immediately before such
merger, consolidation, share exchange or reorganization, own, directly or
indirectly immediately following such merger, consolidation, share exchange or
reorganization, at least 80% of the combined voting power of the outstanding
voting securities of the corporation that is the successor in such merger,
consolidation, share exchange or reorganization (the "Surviving Company") in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation, share exchange or reorganization;
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for such
merger, consolidation, share exchange or reorganization constitute at least
two-thirds (2/3rds) of the members of the board of directors of the Surviving
Company;
(b) a complete liquidation or dissolution of the Parent; or
(c) an agreement for the sale or other disposition of all or
substantially all of the assets of the Company or the Parent.
A change in control shall not be deemed to occur upon the dilution of
existing shareholders through the issuance of capital stocks in one or more
successive series of public or private offerings of securities.
5.7 STOCK REPURCHASE
(a) The Company hereby irrevocably grants and issues to
Executive the right and option to sell to the Company (the "Put") all of the
Company's shares of Common Stock now or hereafter owned by Executive (the
"Shares") at a purchase price (the "Purchase Price") in the event of any of the
following transactions (a "Corporate Transaction") occur:
(i) on the date the Executive ceases for any reason to be
an employee of the company or its Parent;
(ii) a Change in Control as defined in Section 5.6 above;
(iii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company; or
(iv) withdrawal, suspension or termination of the Company
as a registered broker dealer under the Securities Exchange Act of 1934; as a
registered Investment Advisor under the Investment Company Act of 1940, or as an
Investment Advisor to investment companies registered under the Investment
Company Act of 1940.
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(b) For purposes of Section 5.7(a) above, the "Purchase Price"
shall mean the greater of (i) the price paid for the Shares or (ii) the Fair
Market Value of the Shares on the date of such Corporate Transaction
(c) Unless otherwise mutually agreeable to the Company and the
Executive, for purposes of Section 5(b) above the "Fair Market Value" shall
mean:
(i) The Company and the Executive shall each appoint an
independent, experienced appraiser who is a member of a recognized professional
association of business appraisers. The two appraisers shall determine the value
of the Shares assuming that the sale would be between a willing buyer and a
willing seller, both of whom have full knowledge of the financial and other
affairs of the Company. and neither of whom is under any compulsion to sell or
buy. The appraisers will value the Company as a whole and determine the value of
Executive's Shares as a pro rata portion of the whole without regard to any
minority interest valuation.
(ii) If the higher of the two appraisals is not more than
10% more than the lower of the appraisals, the Fair Market Value shall be the
average of the two appraisals. If the higher of the two appraisals is 10% or
more than the lower of the two appraisals, then the third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a third appraiser,
the American Arbitration Association shall appoint the third appraiser. The
third appraiser, regardless of who appoints him or her, shall have the same
qualifications as the first two appraisers.
(iii) The Fair Market Value after the appointment of the
third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be paid
one-half by the Company and one-half by the Executive.
(d) This provision of this Section 5.7, shall not be applicable
in the event Parent has effected a registration and public offering of its
Common Stock in the amount of at least $5 million under the Securities Act of
1933, as amended, and there exists a public trading market for the Common Stock.
6. CONFIDENTIALITY
During the term of Executive's employment under this Agreement, Executive
will have access to and become acquainted with various information relating to
the Employers' business operations, marketing data, business plans, strategies,
employees, contracts, financial records and accounts, projections and budgets,
and similar information. Executive agrees that to the extent such information is
not generally available to the public and gives either of the Employers an
advantage over competitors who do not know of or use such information, such
information and documents constitute "trade secrets" of the Employers. Executive
further agrees that all such
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information and documents relating to the business of the Employers whether they
are prepared by Executive or come into Executive's possession in any other way,
are owned by the Employers and shall remain the exclusive property of the
Employers. Executive shall not misuse, misappropriate or disclose any trade
secrets of the Employers directly or indirectly, or use them for Executive's own
benefit, either during the term of this Agreement or at any time thereafter,
except as may be necessary or appropriate in the course of Executive's
employment with the Employers unless such action is either previously agreed to
in writing by the Employers or required by law.
7. NON-SOLICITATION
For a period of three (3) months following the date Executive's employment
hereunder is terminated, Executive shall not solicit or induce any of the
Employers' employees, agents or independent contractors to end their
relationship with either of the Employers, or recruit, hire or otherwise induce
any such person to perform services for Executive, or any other person, firm or
company. The restrictions set forth in this Section 7 shall not apply if
Executive's employment is terminated pursuant to Section 5.1, 5.4 or 5.6.
8. INDEMNIFICATION
To the fullest extent permitted under applicable law, the Employers shall
indemnify, defend and hold Executive harmless from and against any and all
causes of action, claims, demands, liabilities, damages, costs and expenses of
any nature whatsoever (collectively, "Damages") directly or indirectly arising
out of or relating to Executive discharging Executive's duties hereunder on
behalf of the Employers and/or their respective subsidiaries and affiliates, so
long as Executive acted in good faith within the course and scope of Executive's
duties with respect to the matter giving rise to the claim or Damages for which
Executive seeks indemnification.
9. PAYMENT OF FINANCIAL OBLIGATIONS BY EMPLOYERS
The payment or provision to the Executive by the Employers of any
remuneration, benefits or other financial obligations pursuant to this
Agreement, including, without limitation, the payment of Executive's Base
Compensation, any cash bonuses or profit sharing, the provision of benefits and
perquisites set forth in Section 3.3, the reimbursement of business expenses
pursuant to Section 4.5, the payment (if applicable) of the Severance Amount and
provision of the Severance Benefits and any indemnification obligations, shall
be the joint and several obligations of the Employer.
10. GENERAL PROVISIONS
10.1 ASSIGNMENT; BINDING EFFECT. None of the Employers or Executive
may assign, delegate or otherwise transfer this Agreement or any of their
respective rights or obligations hereunder without the prior written consent of
the other party. Any attempted
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prohibited assignment or delegation shall be void. This Agreement shall be
binding upon and inure to the benefit of any permitted successors or assigns of
the parties and the heirs, executors, administrators and/or personal
representatives of Executive.
10.2 NOTICES. All notices, requests, demands and other communications
that are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method with electronic confirmation of receipt; the day after it is sent, if
sent for next-day delivery to a domestic address by recognized overnight
delivery service (E.G., FEDEX); and upon receipt, if sent by certified or
registered mail, return receipt requested. In each case notice shall be sent to:
If to the Company
or ADH:
American Diversified Holdings, Inc.
0000 Xxx Xxx Xxxxxxx Xxxx, #000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Executive: Xxxxx Xxx
Xxxxx Xxxxxxxx Xxx, Inc.
00000 Xxxxxxxx Xxxx., #000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx Rea, Jr.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Any party may change its address for the purpose of this Section 10.2 by
giving the other party written notice of its new address in the manner set forth
above.
10.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties, and supersedes all prior agreements, understandings
and negotiations, whether written or oral, between the Employers and Executive
with respect to the employment of Executive by the Employers.
10.4 AMENDMENTS; WAIVERS. This Agreement may be amended or modified,
and any of the terms and covenants may be waived, only by a written instrument
executed by the parties hereto, or, in the case of a waiver, by the party
waiving compliance. Any waiver by any party in any one or more instances of any
term or covenant contained in this Agreement shall neither be deemed to be nor
construed as a further or continuing waiver of any such term or covenant of this
Agreement.
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10.5 PROVISIONS SEVERABLE. In case any one or more provisions of this
Agreement shall be invalid, illegal or unenforceable, in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not, in any way, be affected or impaired thereby. If any provision
hereof is determined by any court of competent jurisdiction to be invalid or
unenforceable by reason of such provision extending the covenants and agreements
contained herein for too great a period of time or over too great a geographical
area, or being too extensive in any other respect, such provision shall be
interpreted to extend only over the maximum period of time and geographical
area, and to the maximum extent in all other respects, as to which it is valid
and enforceable, all as determined by such court in such action.
10.6 ATTORNEY'S FEES. If any legal action, arbitration or other
proceeding, is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach or default in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, including
any appeal of such action or proceeding, in addition to any other relief to
which that party may be entitled.
10.7 GOVERNING LAW. This Agreement shall be construed, performed and
enforced in accordance with, and governed by the laws of the State of California
without giving effect to the principles of conflict of laws thereof.
10.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement effective as of the date first written above.
AMERICAN DIVERSIFIED HOLDINGS, INC.,
a Nevada corporation
By: /s/ Xxxxx Xxxxxxxx
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Name: Xxxxx Xxxxxxxx
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Title: President
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AMERICAN DIVERSIFIED SECURITIES, INC.,
a Nevada corporation
By: /s/ Xxxxx Xxxxxxxx Xxx, Jr.
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Name: Xxxxx Xxxxxxxx Rea, Jr.
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Title: President
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EXECUTIVE:
/s/ Xxxxx Xxxxxxxx Xxx, Jr.
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Xxxxx Xxxxxxxx Rea, Jr.
