EMPLOYMENT AGREEMENT
AGREEMENT made as of this 7th day of February, 1997, by and between
Xxxxxxx X. Xxxxxxx (the "Executive"), and Fortune 21, Inc., a Florida
corporation (the "Company"), a wholly-owned subsidiary of Fortune Financial
Systems, Inc., a Nevada corporation (the "Parent 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 February 1, 1997 (the "Effective Date"), the
Executive shall serve as Executive Vice President 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 Boards of Directors of the Company and of the Parent
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 Boards of Directors of
the Company and of the Parent 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 any business
opportunities of any nature within the scope of the Parent Company, 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 Boards of
Directors of the Company and the Parent Company. If the Boards of Directors and
the Parent Company 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: Salary, Bonus and Other Benefits. During the
term of this Agreement, the Company shall pay the Executive the 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
Parent Company's 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 in the 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, $250,000; if
Pre- tax profits exceed $6 million but are less than $7 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
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 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 of 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 in 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 employment
under this Agreement, the Company shall pay the Executive (i) an automobile
allowance of $800 per month, (ii) $600 per month for the 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. 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 and the Parent Company other than the Executive and Xxxxx X. Xxxx, Xx.
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) continued 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 shall 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 clauses (i) through (vii) above, inclusive, the Executive shall be entitled
to no payments 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
Disability. (i) 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 responsible
immediately before the onset of his incapacity.
(ii) In the event the Executive voluntarily terminates his
employment hereunder or 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) and expense payments pursuant to Section 2(C). 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).
5. Insurance. 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. Noncompetition Covenant. A. During the period of his employment
hereunder, 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, the
Parent Company or Success as of date of termination (other than the activities
listed on Schedule A) unless the Executive obtains the prior approval of the
Company, Success, Xxxxxx, and Xxxxx X. Xxxx, Xx. 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 the foregoing non-competition covenant, notwithstanding his termination
or voluntary resignation, provided the Company continues to pay to the Executive
the base salary set forth in Section 2.A for the period of time for which the
Company requires the non-competition covenant to be in effect; provided,
however, the Company shall give the Executive 90 days notice prior to the
termination of such period.
7. Non-Solicitation.
A. During the period of his employment hereunder and, if
termination is for cause, or voluntary by the Executive. for two years 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 employees 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, then the Executive shall pay to either the Company, Fortune 21, or
Success, as appropriate, an amount equal to the compensation the solicited
person received from such company for the twelve 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, the Parent Company or Success, as appropriate.
8. Nondisclosure 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, the Parent Company or Success,
the business, finances or financial information, of the Company, the Parent
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 or the Parent 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 matters of such nature entrusted to him and shall not use or attempt to use
any such information in any manner which may injure or cause loss to the
Company, the Parent 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 the Company's Board of Director 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, the Parent
Company or Success and that in the event of such breach the Company, the Parent
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, the
Parent Company and Success, including reasonable attorneys fees in connection
with the enforcement of this Agreement, provided that the Company, the Parent
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 he 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 Florida.
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 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 (v) transmitted by telecopy or facsimile
machine (with receipt confirmed) 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 X.X.X. 000, Xxx 000
Xxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxx, Xx.
If to the Executive:
Xxxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
16. Survival of Obligations. Executive's obligations under this
Agreement shall survive the termination of his 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 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
Orlando, Florida. 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 Determinations delivered to the
Arbitrators within 20 days after the delivery of the Determination Notice. All
fees and expenses of the Arbitrators incurred in connection with its
determination of such dispute or controversy shall be borne by the party that
submitted a 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.
COMPANY:
FORTUNE 21, INC.
By: /s/ Xxxxx X. Xxxx
-----------------
Xxxxx X. Xxxx, Xx.
President
EXECUTIVE
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Xxxxxxx X. Xxxxxxx
Executive Vice President
PARENT COMPANY:
FORTUNE FINANCIAL SYSTEMS INC.
By: /s/ Xxxxx X. Xxxx
-----------------
Xxxxx X. Xxxx, Xx.
President
Solely with respect to Sections 6, 7 and 8
SUCCESS HOLDINGS COMPANY, LLC
By: /s/s Xxxxx X. Xxxxxx
--------------------
Xxxxx X. Xxxxxx
Chairman of the Board
SCHEDULE A
(Permitted Activities)
1. Xxxxxxx Media, Inc. - 100% owned by Xxxxxxx
- Advertising and Direct Response Marketing Agency
- Consulting Services - TV, marketing, print, direct mail, turnarounds,
radio, general media
2. List Mart of Florida, Inc. - 50% Xxxxxxx; 50% X. Xxxxxx
List Rental of direct mail, brokerage, consulting
3. JC Holdings, Inc.
Direct mail, list brokerage, database management, consulting, list
where
4. Securities Insurance and Money Management - 100% owned by Xxxxxxx
Securities licenses, insurance licenses held with different firms and
organizations)
5. Tax Institute - 100% owned by Xxxxxxx
Owner and developer of Tax Institute and Tax Connection programs and
other private labeled versions.
6. Xxxxxxx Travel Services - 100% Rep. deal
Independent travel agent
7. Real Estate Investments
Various properties and property management
8. Success Holdings/Magazine
Minority Shareholder - Board/Director
