Vice President of Finance Employment Agreement

This Employment Agreement ("Agreement") is made as of the Effective Date of the Acquisition described in the registration statement on Form S-4 of American Family Holdings, Inc., filed with the Securities and Exchange Commission (File No. 333-37161) on October 3, 1997, by and between American Family Holdings, Inc. (hereinafter referred to as "AFH" or the "Company") at 4220 Von Karman Avenue, Suite 110, Newport Beach, California 92660, and Mark Kawanami, at 17 Carlina, Irvine, California 92620 (the "Employee").


The parties agree as follows:


1. EMPLOYMENT/TERM. AFH will employ Employee as Vice President of Finance. AFH will also cause Employee to be employed as Vice President of Finance for American Family Communities, Inc. ("AFC") when it is formed. Employee will be based in Newport Beach, California, at AFH's offices and will report directly to Bob Albertson, Executive Vice President of American Family Holdings, Inc. As Vice President, Employee will be responsible for all finance, accounting and reporting issues and internal controls. It is understood and accepted that job functions and responsibilities may be modified by the Board of Directors as the business objectives of AFH and AFC evolve over the next year. The term of this Agreement is from the Effective Date of the Acquisition through December 31, 1998 and renewable yearly thereafter.


2. BASE COMPENSATION. The annual base salary for the year will be $100,000. This salary is payable bi-monthly in accordance with AFH's standard payroll procedures. Within 60 days, prior to the expiration of this contract, the Company and Employee agree to discuss contract renewal.


3. INCENTIVE BONUS COMPENSATION. Employee will be eligible to receive incentive bonus compensation in an amount up to 20% of base salary which will be based upon specific performance criteria. Ten percent of this bonus shall be discretionary by the Company, ten percent of this bonus shall be non-discretionary. This will be due and payable within 90 calendar days of the term of this agreement and after the completion of the Company=s audited financial statements for the prior year. The performance criteria are set forth on Schedule A attached hereto.


4. FOUNDERS STOCK. Employee shall purchase 1,000 shares of stock at $0.01 per share.


5. STOCK OPTIONS. Employee is hereby granted options to purchase 5,000 shares of Company common stock which will be exercisable for a period of ten years for $10 per share. The options shall vest at the rate of 25% every three months commencing on the first day of the first full month after the Effective Date of the Acquisition. Any unexercised options shall lapse should Employee resign or be terminated for "Cause" (as hereinafter defined).


6. BUSINESS EXPENSES. All corporate travel, hotels, meals and entertainment and other business expenses including reasonable cellular telephone charges will be paid for by the Company. Itemization and business expense forms with original receipts will be turned in monthly for reimbursement. AFH will cover any reasonable costs for any professional seminars and conferences attended, as well as professional organizational memberships and dues.


7. BENEFITS. As an employee of the Company, Employee will receive, at the Company's cost, medical benefits that the Company offers to its employees.


8. VACATION. Employee will receive two weeks of paid vacation for the term of this Agreement. He will also be eligible to receive paid sick leave and all legal holidays in accordance with AFH's policies and procedures.


9. EXCLUSIVE EMPLOYMENT/INDEMNIFICATION. Employee will devote all working time to the Company and will not have interests which conflict with duties or a full-time employment commitment to the Company. He will be covered under AFH's Direct ...