EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into this 31
day of December, 1997, to be effective on January 1, 1998 (the "Effective
Date"), by and between Prime Companies, Inc., a Delaware corporation
("Employer"), and Xxxxx X. Xxxxxxxxx, a resident of California ("Employee").
WITNESSETH:
WHEREAS, Employer is a corporation engaged in business in the State of Delaware
and throughout the United States;
WHEREAS, Employer desires to employ Employee in the capacity of President and
Chief Operating Officer, upon the terms and conditions hereinafter set forth;
and WHEREAS, Employee is willing to enter into this Agreement with respect to
his employment and services upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, Employer hereby employs Employee and Employee hereby accepts
such employment upon the terms and conditions hereinafter set forth:
1. Term of Employment. The term of employment under this Agreement shall be
for a period of three (3) years, commencing on the Effective Date and
terminating on December 31, 2000, unless such employment is terminated or
extended prior to the expiration of said period as hereinafter provided.
2. Duties of Employee.
(a) President and Chief Operating Officer. Employee agrees that during the
term of this Agreement, he will devote his professional and business-related
time, skills and best efforts to the businesses of Employer in the capacity of
President and Chief Operating Officer, or such other capacity as Employer and
Employee may agree upon. If there are major significant changes in the duties
or responsibilities of Employee from those listed as Prohibited Activities on
Exhibit A attached hereto, that are not mutually agreed upon, Employee may
terminate his employment within sixty (60) days of any such change. In
addition, Employee shall devote all necessary time and his best efforts in
the performance of any other duties as may be assigned to him from time to time
by the Board of Directors of Employer including, but not limited to, serving on
Employer's Board of Directors if elected. Employee shall devote his full
professional and business skills to Employer as his primary responsibility.
Employee may engage in the practice of consulting on a part time basis, and in
personal, passive investment activities provided such activities do not
interfere with the performance of his duties hereunder and violate
the noncompetition and nondisclosure provisions set forth herein.
(b) Other Positions. Employer acknowledges and agrees that, during
the term of this Agreement, Employee will devote some of his professional and
business-related time, skills and best efforts to the businesses of Mid-Cal
Express, Inc. and Mid-Cal Logistics, Inc. in the capacity of Chairman of the
Board and that Employee may receive compensation from such companies for his
services. In addition, nothing herein shall be construed to prohibit
Employee from serving on the boards of non-competitive businesses or non
profit community organizations or similar entities.
3. Compensation.
(a) Base Salary. Employer shall pay Employee an annual base salary of One
Hundred Twenty Thousand ($120,000.00) per annum (or fraction for portions of a
year). Such base salary will be adjusted from time to time in accordance with
then current standard salary administration guidelines of Employer. Employee's
salary shall be subject to all appropriate federal and state withholding taxes
and shall be payable in accordance with the normal payroll procedures of
Employer.
(b) Annual Bonus. In addition to the salary set forth in Section 3(a)
hereof, Employee shall receive a bonus each year during the term of this
Agreement in an amount equal to a percentage of a certain net income target set
for each year as established annually in an annual planning session. If 100% or
more of such annual target is achieved in any year, Employee shall receive in
such year a bonus of 50% of his base salary (the "Maximum Bonus"). If less than
100% of such target is achieved in any year, Employee shall receive in such
year a bonus of a certain percentage of the Maximum Bonus as determined in
accordance with Schedule 3(b) attached hereto.
(c) Stock Options. Employee shall be granted stock options for shares of
common stock of Employer pursuant to the terms of a Stock Option Agreement
granted under the January 1, 1998 Stock Option Plan, as amended, a copy of
which has been provided to Employee. The number of shares of common stock,
exercise price and date of grant for such options is set forth on Schedule 3(c)
attached hereto.
4. Fringe Benefits. The terms of this Agreement shall not foreclose
Employee from participating with other employees of Employer in such fringe
benefit or incentive compensation plans as may be authorized and adopted from
time to time by Employer; provided, however, that Employee must meet any and
all eligibility provisions required under said fringe benefit or incentive
compensation plans. Employee may be granted such other fringe benefits or
perquisites as Employee and Employer may from time to time agree upon.
5. Vacations. Employee shall be entitled to the number of paid vacation
days in each calendar year as shall be determined by the Board of Directors of
Employer from time to time. In no event, however, shall Employee be entitled to
less than two weeks paid vacation during each calendar year.
6. Reimbursement of Expenses. Employer recognizes that Employee will incur
legitimate business expenses in the course of rendering services to Employer
hereunder. Accordingly, Employer shall reimburse Employee, upon presentation
of receipts or other adequate documentation, for all necessary and reasonable
business expenses incurred by Employee in the course of rendering services to
Employer under this Agreement.
7. Working Facilities. Employee shall be furnished an office, personal
secretary and such other facilities and services suitable to his position and
adequate for the performance of his duties, which shall be consistent with the
policies of Employer.
8. Termination. The employment relationship between Employee and Employer
created hereunder shall terminate before the expiration of the stated term of
this Agreement upon the occurrence of any one of the following events:
(a) Death or Permanent Disability. The death or permanent disability of
Employee. For the purpose of this Agreement, the "permanent disability" of
Employee shall mean Employee's inability, because of his injury, illness, or
other incapacity (physical or mental), to perform the essential functions of
the position contemplated herein, with or without reasonable accommodation
to Employee with respect to such injury, illness or other incapacity, for a
continuous period of 150 days or for 180 days out of a continuous
period of 360 days. Such permanent disability shall be deemed to have occurred
on the 150th consecutive day or on the 180th day within the specified period,
whichever is applicable.
(b) Termination for Cause. The following events, which for purposes of this
Agreement shall constitute "cause" for termination:
(1) The willful breach by Employee of any provision of Sections 2, 11, 12,
or 13 hereof (including but not limited to a refusal to follow lawful
directives of the Board of Directors of Employer) after notice to Employee of
the particular details thereof and a period of 10 days thereafter within which
to cure such breach and the failure of Employee to cure such breach within
such 10 day period;
(2) Any act of fraud, misappropriation or embezzlement by Employee with
respect to any aspect of Employer's business;
(3) The illegal use of drugs by Employee during the term of this Agreement
that, in the determination of the Board of Directors of Employer, substantially
interferes with Employee's performance of his duties hereunder;
(4) Substantial failure of performance by Employee that is repeated or
continued after 30 day written notice to Employee of such failure and that is
reasonably determined by the Board of Directors of Employer to be materially
injurious to the business or interests of Employer and which failure is not
cured by Employee within such 30 day period; or
(5) Conviction of Employee by a court of competent jurisdiction of a felony
or of a crime involving moral turpitude.
Any notice of discharge shall describe with reasonable specificity the cause or
causes for the termination of Employee's employment, as well as the effective
date of the termination (which effective date may be the date of such notice).
If Employer terminates Employee's employment for any of the reasons set forth
above, Employer shall have no further obligations hereunder from and after the
effective date of termination (other than as set forth below) and shall have
all other rights and remedies available under this or any other agreement and
at law or in equity.
(c) Termination by Employee with Notice. Employee may terminate this
Agreement without liability to Employer arising from the resignation of
Employee upon one (1) year written notice to Employer. Employer retains the
right after proper notice of Employee's voluntary termination to require
Employee to cease employment immediately; provided, however, in such event,
Employer shall remain obligated to pay Employee his salary during the one
(1) year notice period or the remaining term of this Agreement, whichever
is less. During such one (1) year notice period, Employee shall provide such
consulting services to Employer as Employer may reasonably request and shall
assist Employer in training his successor and generally preparing for an
orderly transition.
(d) Termination by Employer with Notice. Employer may terminate this
Agreement at any time upon one (1) year written notice to Employee; provided,
however, upon such notice Employee shall not be required to perform any
services for Employer other than during the period of three (3) months
immediately following the receipt of such notice of termination in which
Employee shall assist Employer in training his successor and generally
preparing for an orderly transition.
9. Compensation Upon Termination.
(a) General. Upon the termination of Employee's employment under this
Agreement before the expiration of the stated term hereof for any reason,
Employee shall be entitled to (i) the salary earned by him before the effective
date of termination, as provided in Section 3(a) hereof, prorated on the basis
of the number of full days of service rendered by Employee during the year
to the effective date of termination, (ii) any accrued, but unpaid, vacation
or sick leave benefits, (iii) any authorized but unreimbursed business
expenses, and (iv) any accrued, but unpaid annual bonus.
(b) Termination For Other Than Cause. If such termination is the result
of the discharge of Employee by Employer for any reason other than (i) his
death or permanent disability, (ii) by Employer or Employee with notice
pursuant to Section 8(d) or 8(c), respectively, or (iii) for cause (as
defined in Section 8(b) hereof), then Employee shall be entitled to receive
as a severance payment an amount equal to the salary (excluding
bonuses) that Employee would have received for the remainder of the term of
this Agreement in accordance with the regular payroll periods during the
remainder of the term of this Agreement. If Employee's employment hereunder
terminates because of the death of Employee, all amounts that may be due to
him under the terms of this Agreement shall be paid to his administrators,
personal representatives, heirs and legatees, as may be appropriate.
(c) Termination For Cause. If the employment relationship hereunder is
terminated by Employer for cause (as defined in Section 8(b) hereof), Employee
shall not be entitled to any severance compensation, except as provided in
Section 9(a) above.
(d) Termination by Employer with Notice. If the employment relationship is
terminated by Employer other than for cause or the permanent disability of
Employee, then Employee shall be entitled to receive as a severance payment
and as compensation for all services performed hereunder pursuant to Section
8(d) hereof an amount equal to the salary that Employee would have received for
the remainder of the term of this Agreement or one (1) year, whichever is less,
in accordance with the regular payroll periods of Employer during the
applicable period.
(e) Termination by Employee with Notice. If the employment relationship is
terminated by Employee pursuant to the provisions of Section 8(c) hereof,
Employee shall be entitled to receive as a severance payment and as
compensation for all services performed hereunder pursuant to Section 8(c)
hereof the salary that Employee would have received for the remainder of the
term of this Agreement or one (1) year, whichever is less, in accordance
with the regular payroll period of Employer during the applicable period.
(f) Survival. The provisions of Sections 9, 11, 12, and 13 hereof shall
survive the termination of the employment relationship hereunder and this
Agreement to the extent necessary or reasonably appropriate to effect the
intent of the parties hereto as expressed in such provisions.
10. Other Agreements. This Agreement shall be separate and apart from, and
shall be deemed to alter the terms of, any executive compensation agreements,
deferred compensation agreements, bonus agreements, general employment
benefits plans, stock option plans and any other plans or agreements entered
into between Employee and Employer pursuant to which Employee has been granted
specific rights, benefits or options.
11. Noncompetition. Employee agrees that, during his employment with
Employer and for a period of one year from the date of termination of his
employment with Employer he will not directly or indirectly compete with
Employer by engaging in the activities set forth on Exhibit A attached hereto
and incorporated herein by reference (the "Prohibited Activities") within the
geographic area that is set forth on Exhibit B attached hereto (the
"Restricted Area"). For purposes of this Section 11, Employee recognizes and
agrees that Employer conducts and will conduct business in the entire
Restricted Area and that Employee will perform his duties for Employer within
the entire Restricted Area.
Employee shall be deemed to be engaged in and carrying On the Prohibited
Activities if he engages in the Prohibited Activities in any capacity
whatsoever, including, but not limited to, by or through a partnership of
which he is a general or limited partner or an employee engaged in such
activities, or by or through a corporation or association of which he owns
five percent (5%) or more of the stock or of which he is an officer,
director, employee, member, representative, joint venturer, independent
contractor, consultant or agent who is engaged in such activities.
12. Confidential Data. Employee further agrees that, during his employment
with Employer and thereafter, he will keep confidential and not divulge to
anyone, disseminate nor appropriate for his own benefit or the benefit of
another any confidential information described in Exhibit C attached hereto
and incorporated by reference herein (the "Confidential Data"). Employee
hereby acknowledges and agrees that this prohibition against disclosure of
Confidential Data is in addition to, and not in lieu of, any rights or
remedies that Employer may have available pursuant to the laws of any
jurisdiction or at common law to prevent the disclosure of trade secrets,
and the enforcement by Employer of its rights and remedies pursuant to this
Agreement shall not be construed as a waiver of any other rights or
available remedies that it may possess in law or equity absent this Agreement.
13. Nonsolicitation of Employees. Employee covenants that, during his
employment with Employer and for a period of one (1) year from the date of
termination of his employment with Employer, he will not (i) directly or
indirectly induce or attempt to induce any employee of Employer to terminate
his or her employment or (if) without prior written consent of Employer, offer
employment either on behalf of himself or on behalf of any other individual
or entity to any employee of Employer or to any terminated employee of
Employer.
14. Property of Employer. Employee acknowledges that from time to time in
the course of providing services pursuant to this Agreement he shall have the
opportunity to inspect and use certain property, both tangible and intangible,
of Employer and Employee hereby agrees that such property shall remain the
exclusive property of Employer, and Employee shall have no right or proprietary
interest in such property, whether tangible or intangible, including,
without limitation, Employee's customer and supplier lists, contract
forms, books of account, computer programs and similar property.
15. Equitable Relief. Employee acknowledges that the services to be
rendered by him are of a special, unique, unusual, extraordinary, and
intellectual character, which gives them a peculiar value, and the loss of
which cannot reasonably or adequately be compensated in damages in an action
at law, and that a breach by him of any of the provisions contained in this
Agreement will cause Employer irreparable injury and damage. Employee
further acknowledges that he possesses unique skills, knowledge and ability
and that competition by him in violation of this Agreement or any other
breach of the provisions of this Agreement would be extremely detrimental to
Employer. By reason thereof, Employee agrees that Employer shall be entitled,
in addition to any other remedies it may have under this Agreement or
otherwise, to injunctive and other equitable relief to prevent or curtail
any breach of this Agreement by him.
16. "Change of Control". In the event (each such event, a "Change of
Control"): (1) Employer becomes a subsidiary of another corporation or entity
or is merged or consolidated into another corporation or entity or
substantially all of the assets of Employer are sold to another corporation
or entity; or (2) any person, corporation, partnership or other entity,
either alone or in conjunction with its "affiliates," as that term
is defined in Rule 405 of the General Rules and Regulations under the
Securities Act of 1933, as amended, or other group of persons, corporations,
partnerships or other entities who are not "affiliates" but who are acting
in concert, becomes the owner of record or beneficially of securities of
Employer that represent thirty-three and one-third percent (33 1/3%) or
more of the combined voting power of Employer's then outstanding securities
entitled to elect Directors; or (3) the Board of Directors of Employer or a
committee thereof makes a determination in its reasonable judgment that a
"Change of Control" of Employer has taken place; the term during which this
Agreement shall be effective shall include the remaining term of this Agreement
following the date of the Change of Control plus two (2) years, and Employee's
compensation for such period shall be based on the following formula, shall be
subject to the following conditions, and shall be in lieu of the
compensation provided for under Section 3 of this Agreement and in lieu of
the compensation upon termination provided for under Section 9 of this
Agreement (except for Section 9(a), which shall still apply):
(a) Employee shall be paid an annual salary for the remaining term of this
Agreement plus two (2) years consisting of one hundred percent (100%) of the
average amount of total cash compensation of Employee for the two (2) calendar
years prior to the Change of Control.
(b) Employee shall be paid an annual amount for the remaining term of this
Agreement plus two (2) years in consideration of the noncompetition covenant of
Section 11 of this Agreement consisting of fifty percent (50%) of the average
amount of total cash compensation of Employee for the two (2) calendar years
prior to the Change of Control. Such annual amounts shall be paid quarterly
in advance.
(c) Notwithstanding any of the provisions of this Agreement, the amount of
all payments to be made pursuant to this Section 16 after a Change of Control
shall not exceed one dollar ($1.00) less than that amount that would cause any
such payment to be deemed a "parachute payment" as defined in Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), and as Section 280G
of the Code is then in effect at the time of such payment.
(d) In the event the employment relationship is terminated for cause
(pursuant to Section 8(b) hereof) following a Change of Control, Employer shall
not be obligated to make any further payments of the compensation amounts
provided for in this Agreement, except as provided in Section 9(a) above.
Notwithstanding any other provision of this Agreement, except for paragraph
(g) of this Section 16, which shall control in the event Employee terminates
employment as provided in paragraph (g), in the event Employee voluntarily
terminates employment following a Change of Control for other than Good
Reason, as defined hereinafter, compensation amounts set forth in paragraphs
(a) and (b) shall be payable only for a one (1) year period following
termination of employment.
"Good Reason" to terminate employment with Employer occurs if: (1) duties are
assigned that are materially inconsistent with previous duties; (2) duties and
responsibilities are substantially reduced; (3) base compensation is reduced
not as part of an across the board reduction for all senior officers or
executives; (4) participation under compensation plans or arrangements
generally made available to persons at Employee's level of responsibility
at Employer is denied; (5) a successor fails to assume this Agreement; or (6)
termination is made without compliance with prescribed procedures.
(e) In the event Employee is involuntarily terminated by Employer without
cause, Employee voluntarily terminates employment for Good Reason or the
employment relationship is terminated by death or permanent disability of
Employee, Employer's obligation to pay the compensation amounts provided in
this Section 16 shall survive termination of employment.
(f) In the event of termination of employment during the pendency of a
"Potential Change of Control", as hereinafter defined, paragraphs (d) and (e)
of this Section 16 shall apply as if an actual Change of Control had taken
place. A "Potential Change of Control" shall be deemed to have occurred if:
(1) Employer has entered into an agreement or letter of intent the
consummation of which would result in a Change of Control; (2) any person
publicly announces an intention to take or to consider taking actions that, if
consummated, would constitute a Change of Control; or (3) the Board of
Directors of Employer or a committee thereof in its reasonable judgment
makes a determination that a Potential Change of Control for purposes of
this Agreement has occurred. A Potential Change of Control remains pending
for purposes of receiving payments under this Agreement until the earlier
of the occurrence of a Change of Control or a determination by the Board of
Directors or a committee thereof (at any time) that a Change of Control is no
longer reasonably expected to occur.
(g) Notwithstanding anything contained in this Agreement to the contrary,
Employee and Employer, or the person, corporation, partnership or other entity
acquiring control of Employer pursuant to this Section 16, with the concurrence
of the Chief Executive Officer and Compensation Committee of the Board of
Directors of Employer, may mutually agree that Employee, with three (3) months'
notice, may terminate his employment and receive a lump sum payment equal to
the present value of remaining payments under this Agreement discounted by
the then current Treasury Xxxx rate for the remaining term of this Agreement.
17. Successors Bound. This Agreement shall be binding upon Employer and
Employee, their respective heirs, executors, administrators or successors in
interest, including without limitation, any corporation, partnership or other
entity acquiring control of Employer pursuant to Section 16 hereof.
18. Severability and Reformation. The parties hereto intend all provisions
of this Agreement to be enforced to the fullest extent permitted by law. If,
however, any provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future law, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof, and
the remaining provisions shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance.
19. Integrated Agreement. This Agreement constitutes the entire Agreement
between the parties hereto with regard to the subject matter hereof, and there
are no agreements, understandings, specific restrictions, warranties or
representations relating to said subject matter between the parties other
than those set forth herein or herein provided for.
20. Attorneys' Fees. If any action at law or in equity, including any
action for declaratory or injunctive relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees from the nonprevailing party,
which fees may be set by the court in the trial of such action, or may be
enforced in a separate action brought for that purpose, and which fees
shall be in addition to any other relief which may be awarded.
21. Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, mailed by certified mail (return receipt
requested) or sent by overnight delivery service, cable, telegram, facsimile
transmission or telex to the parties at the following addresses or at such
other addresses as shall be specified by the parties by like notice:
(a) If to Employer: Prime Companies, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
(000) 000-0000
(b) If to Employee: Xxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, XX 00000
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by cable, telegram, facsimile transmission,
telex or personal delivery, on the date of actual transmission or, as the
case may be, personal delivery.
22. Further Actions. Whether or not specifically required under the terms
of this Agreement, each party hereto shall execute and deliver such documents
and take such further actions as shall be necessary in order for such party to
perform all of his or its obligations specified herein or reasonably implied
from the terms hereof.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW, AND NOT THE
LAW OF CONFLICTS, OF THE STATE OF CALIFORNIA.
24. Assignment. This Agreement is personal to Employee and may not be
assigned in any way by Employee without the prior written consent of Employer.
This Agreement shall not be assignable or delegable by Employer, other than to
an affiliate of Employer, except if there is a Change of Control as defined in
Section 16, Employer may assign its rights and obligations hereunder to the
person, corporation, partnership or other entity that has gained such
control.
25. Counterparts. This Agreement may be executed in counterparts, each of
which will take effect as an original and all of which shall evidence one and
the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.
Prime Companies, Inc.
By: ____________________________
Name: Xxxxxx Xxxxxxx
Title: Chairman and CEO
By: ____________________________
Name: Xxxxx X. Xxxxxxxxx
Title: President
EMPLOYEE:
By: _____________________________
Xxxxx X. Xxxxxxxxx
EXHIBIT A - PROHIBITED ACTIVITIES
Acting in any capacity, either individually or with any corporation,
partnership or other entity, directly or indirectly, in providing, or proposing
to provide the following types of duties in any part of the trucking industry:
1. The performance of the sales and marketing functions.
2. The responsibility for sales revenue generation.
3. The responsibility for customer satisfaction.
4. The providing and management of an operations staff to support the
above listed activities.
EXHIBIT B - RESTRICTED AREA
Fifty mile radius of the city limits of the following cities:
San Francisco, CA
EXHIBIT C (a) - CONFIDENTIAL INFORMATION
1. All business plans and strategies including:
strategic plans
product plans
marketing plans
financial plans
operating plans
resource plans
all research and development plans including all data produced by such
efforts.
2. Internal policies, procedures, methods and approaches which are unique
to Prime Companies, Inc. and are not public.
3. Any information relating to the employment, job responsibility,
performance, salary and compensation of any present or future
officer or employee of Prime Companies, Inc.
SCHEDULE 3 (b) - ANNUAL BONUS
% of net income target achieved of $1,500,000.00 Pre-Tax Profit for 1998
More than Up to % of Maximum Bonus
100% or more 100%
90% 100% 90%
80% 90% 75%
70% 80% 60%
60% 70% 45%
50% 60% 30%
40% 50% 15%
30% 40% 10%
20% 30% 5%
20% or less 0%
SCHEDULE 3 (c) - STOCK OPTIONS
BOOK VALUE OPTIONS
Number of Shares Exercise Price Date of Grant/Vesting
500,000 $3.00 December 1, 1997
