EMPLOYMENT AGREEMENT
This Agreement is effective as of the -1st- day of -April-, 2009,
by and between Capital Financial Services, Inc., a Wisconsin
corporation (hereinafter referred to as the " Company "),
and Bradley Wells (hereinafter referred to as the " Employee
"); and Integrity Mutual Funds, Inc., (" the Parent ") a
North Dakota corporation that is the parent and sole owner of the
Company. This agreement is an Employment Agreement between the
Employee and the Company. The Parent of the Company is a party to
this Agreement and consents and ratifies this Agreement to the
extent it is affected by the terms of this Agreement.
WITNESSETH:
WHEREAS, Capital Financial Services, Inc., a Wisconsin corporation
(the " Company "), is a FINRA member Broker Dealer; and
WHEREAS, the Company desires to retain the services of the Employee
to be the Chief Executive Officer of the Company and to assist with
the growth, direction and oversight of the business activities of
the Company; and
WHEREAS, Employee desires to render services upon the terms herein
set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Employee hereby
agree as follows:
AGREEMENT
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1.
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Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment with the Company upon the terms
and conditions hereinafter set forth. It is expressly understood
that the Employee will also have separate employment, separate
duties and a separate compensation package as an officer of
Integrity Mutual Funds, Inc., independent of this Agreement.
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2.
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Term. Subject to the provisions for earlier termination
hereinafter set forth, the term of employment hereunder shall be
for two years and shall commence on the date hereof and end on the
day preceding the second anniversary of the date hereof (the "
Employment Period "). The parties hereto may by mutual
consent agree to renew this contract for another two-year period.
In such case all provisions of this contract will continue in
effect for an additional two-year period.
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3.
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Compensation. The Company agrees to provide the Employee
with the following compensation for all services rendered by the
Employee under this Agreement:
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3.1.
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Base Salary. The Company shall pay to the Employee an
initial salary equal to the sum of One Hundred Thirty Five Thousand
Dollars ($135,000) per year as a base salary, which sum shall be
payable per two week pay period, in arrears, (or prorated amount if
the first month is a portion of a month) commencing on the first
day of the month of April 2009, first payable on the first regular
payroll of the Company after April 1, 2009 and thereafter on each
regular two week payroll period thereafter during the entire term
hereof. All compensation provided for in this section shall be
subject to the Company deducting therefrom Social Security,
Medicare, federal and state income taxes and any and all
withholding payments as may be required by law.
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3.2.
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Net Income Based Compensation. Employee shall receive
additional monthly compensation equal to five percent (5%) of the
net income of the Company, as determined from the statement of
operations of the Company before deduction for federal and state
income tax expense and before deduction of the combination of the
Net Income Based Compensation to Employee described herein together
with the similar Net Income Based Compensation payable to Jeffrey
Lindsey under his contract dated the same date as this Agreement.
Said additional monthly compensation to be paid to Employee on the
next scheduled pay period following completion of the Company's
financial reports for each calendar month but in no event more than
twenty one (21) days after each month end. In the event that the
Company incurs a loss in any month, there will be no payment to
Employee and that loss will be carried forward to the next month
and deducted from that month's income (and each successive month
thereafter if necessary until positive net income in excess of the
prior month's loss is achieved) for purposes of calculation of
Employee's net income based compensation. Employee's first monthly
net income based compensation shall be determined for the month
ended March 31, 2009. All compensation provided for in this section
shall be subject to the Company deducting therefrom Social
Security, Medicare, federal and state income taxes and any and all
withholding payments as may be required by law.
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3.3.
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Increase of Base Salary for Cost of Living: Employee's Base
Salary shall be increased each year beginning April 1, 2010 by the
percentage amount of the most recently federally published annual
"Cost of Living Index" increase (if any increase is reported) for
the United States of America.
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3.4.
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Incremental Company Value Increase Bonus. A "Fair Value"
appraisal valuation of the Company at Nine Million Five Hundred
Thousand Dollars ($9,500,000) was completed with a valuation date
of March 31, 2008 on behalf of Integrity Mutual Funds, Inc. by
Valuation & Tacservices, LLC. This amount is accepted as the
base value of the Company for purposes of this Agreement. At the
date of termination of this contract, whether by passage of time or
by death, disability, or voluntary or involuntary termination,
Employee shall be entitled to a bonus, payable in cash, equal to
five percent (5%) of the increase in appraised value of the Company
over an initial base valuation of which is equal to the March 31,
2008 appraised value of $9,500,000 less the $742,380 United
Heritage debt allocated to the Company and Capital Financial
Holding, Inc., which is the allocation of debt which was utilized
for purposes of the amended proxy filed September 23, 2008 by
Integrity Mutual Funds, Inc. (the "base valuation") and a contract
termination date valuation of the Company mutually determined and
agreed by Employee and the Company or if no such mutual
determination is made or agreed within 30 days of termination of
this Agreement, then a valuation as determined by the "Fair Value"
appraisal valuation of the Company which shall be determined by a
utilizing a composite of the One-Year Capitalization Method which
utilizes estimated one year cash flow divided by an adjusted
discount rate and the Discounted Cash Flow Method which utilizes
three future years and a perpetuity estimate (terminal period)
divided by an adjusted discount rate ("Fair Value") and which
amount will then further include a reduction in the Fair Value
valuation for the capitalized costs of each acquisition made by the
Company after the date of this employment contract as evidenced by
such capitalized costs included in the Balance Sheet of the Company
(the "Termination Valuation"). Said valuation will be performed at
the Company's cost by an independent, qualified Valuation
Consultant to be mutually agreed by the Company and the Employee,
as of the date of Employee's termination or the termination of this
contract. To clarify, the Termination Valuation shall include a
reduction in the "Fair Value" appraisal amount for the capitalized
cost (on the Company's accounting records) of acquisitions made in
the expansion of the Company after the date of this agreement. For
example, with the base valuation of $8,757,620, if a Fair Value
valuation at the termination of this contract was determined to be
$12,000,000, and two acquisitions occurred with combined
capitalized costs on the accounting books of the Company of
$2,000,000, then Employee would be entitled to a bonus in cash of
$62,119 ($12,000,000 Fair Value—$2,000,000 capitalized
acquisition costs -8,757,620 base valuation * 5%). For avoidance of
doubt, upon termination of Employee for any reason other than
financial fraud, or upon the expiration date of this contract,
which expiration date would include the potential five-year
renewal, Employee i
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