SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File No. 0-22919
PRIME COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-2031531
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
155 MONTGOMERY STREET 94104 (Zip Code)
SAN FRANCISCO CALIFORNIA
(Address of principal executive offices)
Registrant's telephone number, including Area Code: (415) 398-4242
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB Yes No X
Aggregate market value of voting stock held by non-affiliates of the
registrant at MARCH 1, 1998:
Currently there is no public market for these securities.
Number of shares of common stock outstanding at December 31, 1997:
Common Stock - 3,013,123
Documents incorporated by reference:
Company's Notice and Proxy Statement for its annual meeting of stockholders to
be held on Monday, March 23, 1998 filed as an exhibit hereto and incorporated
in Part III hereof.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company operates as an irregular route, truckload carrier transporting a
range of commodities, including refrigerated food products, manufactured goods,
retail store merchandise, paper products, beverages and paints and chemicals,
between the western and northeastern United States and the provinces of Ontario
and Quebec, Canada. The Company transports various types of freight (except
certain types of explosives, household goods, hazardous materials and
commodities in bulk) from generally any point in the continental United
States to any other point in another state. The Company also operates a
growing logistics business that organizes transportation services for a
Fortune 500 corporation, and is developing new customer accounts.
In 1996, the Company acquired a small trucking company that was incorporated on
August 29, 1994 but inactive until 1996 when it acquired two tractors and
trailers, and initiated operations on a very small scale. The Company
later acquired the business of an established trucking company, and
management has successfully assumed control of this 33 year old trucking
operation. The Company's management has successfully integrated the
operations of two trucking companies to form a single fleet that provides
reliable service to existing and new customers. The Company's trucking
operation has gained a reputation for excellent service and expanded the
existing business of the acquired trucking company. Since January 1, 1997
the Company also initiated logistics operations in 1997, in order to provide
a broader range of transportation services. By offering logistics services,
the Company serves a greater share of companies in need of transportation
services and provides freight hauling without incurring the overhead
associated with owning or leasing a diversified fleet of tractors, trailers
and flatbeds. Additionally, the logistics and trucking operations complement
each other and create financial and operating synergies. Since the
inception of its logistics operations, the Company has consistently
increased its logistics-based monthly revenues. The logistics operation
partially serves as the marketing arm of the Company's trucking operation,
while also diversifying the Company's operations within the transportation
industry.
MARKETING AND CUSTOMERS
The Company operates in the non-local segment of the trucking industry, which
segment had estimated revenues of $330 billion in 1995. The trucking
industry can be further segmented into an estimated $55 billion for-hire
truckload segment and an estimated $110 billion private fleet segment, in
which companies transport goods for their own account. Truckload carriers
typically transport full trailer loads directly from origin to destination
without en route handling.
The truckload industry is highly fragmented, with the ten largest for-hire
truckload carriers accounting for less than 18% of total for-hire truckload
revenues in 1995. A variety of niches have developed within the truckload
industry based upon equipment type, length of haul, geographic region and
service criteria. The truckload transportation industry is currently
undergoing changes that affect both shippers and carriers. An increasing
number of shippers are focusing their capital resources on their primary
business and are outsourcing their transportation requirements to independent
carriers. Furthermore, many shippers are seeking to reduce the time and cost
of bringing finished products to the market quickly through the use of
just-in-time inventory management and regional assembly/distribution
methods, all of which make on-time pickup and delivery requirements more
important to shippers. Shippers also are seeking to reduce the number of
authorized carriers they use and to establish service-based, long-term
relationships with a small group of preferred or "core carriers." This helps
to ensure higher quality and more consistent service for the shipper, while
providing the carrier the opportunity for higher equipment utilization and more
predictable revenue streams. In this environment, shippers selectively choose
carriers that are financially stable and, based on measurable attributes, can
meet their distribution and service requirements. For example, carriers must
deliver shipments on a timely basis and possess reliable, quality equipment
and offer specialized services to customers. This trend toward the use of
"core carriers" offers significant growth opportunities for carriers that
possess financial stability and critical mass to support high equipment
utilization, a commitment to quality service and technological capabilities.
Carriers that do not possess these capabilities or that are less efficient
have begun to exit the truckload industry through liquidation or from
continued industry consolidation. The Company believes that this
consolidation trend in the industry will continue and that the trend toward
consolidation will provide growth opportunities for efficient, well-run
carriers.
Many carriers have focused on regional growth strategies, as over 66% of the
truckload market are in shorter length (less than 500 miles) markets. A regional
focus provides a carrier the opportunity to haul loads from origin to
destination, without any need for intermediate sorting, and increases the
opportunities for providing higher service levels to customers. Furthermore,
a shortage of qualified drivers continues to constrain the truckload market,
and truckload carriers are constantly seeking methods, such as increased
driver compensation and other techniques, to attract and retain drivers.
Carriers with a regional focus participating in the short to medium-haul
market generally have had more success in attracting and retaining drivers
because drivers may return home with more regularity.
In the trucking industry, revenues generally show a seasonal pattern as some
customers reduce shipments during and after the winter holiday season. The
Company's operating expenses have historically been higher in the winter months
due primarily to decreased fuel efficiency and increased maintenance costs
of revenue equipment in colder weather. However, the Company attempts to
minimize the impact of seasonality through its marketing program, which
seeks additional freight from certain customers during traditionally slower
shipping periods. Revenue can also be affected by bad weather and holidays,
since revenue is directly related to available working days of shippers.
During the fiscal years ended December 31, 1997, National Grocers Company
accounted for 27.8%, and Vertex accounted for 19.6%, of operating revenue.
The 1997 fiscal year was the Company's first year where its principal revenues
were generated from business operations. As such, no accurate and comprehensive
comparison between the Company's 1997 and 1996 operating results is available.
The Company does not have long-term contracts with its customers, and,
accordingly, there is no assurance that the current volume of business from
these major customers will continue. Management believes that the sudden
loss of a significant customer could have a material adverse effect on
revenue, equipment utilization and operating efficiencies.
OPERATIONS
The Company's customers are located throughout the 48 contiguous states of
the U.S. and provinces of Quebec and Ontario, Canada. The Company hauls a
variety of products, but a substantial portion of its services are devoted to
hauling produce and other temperature sensitive goods. During 1997, the
Company's largest 5 freight hauling services customers comprised
approximately 62% of revenues. The Company's trucking operation currently
serves over 200 customers, the majority of which have been attracted during
1997. The Company also continues to serve customers served by its
predecessor/acquired company and has expanded its services to those customers.
The Company has an arrangement with one of its major customers whereby it will
provide drivers to drive the customers' tractors and trailers in order to
haul the customers' goods. This provides a source of revenue with little
overhead and allows the Company to serve more customers, since more of its
equipment is available for other deliveries.
The Company's logistics operation currently serves a major national corporation
and is expanding its services. Logistics provides services to customers
requiring truckload (TL) and Less-than-truckload (LTL) deliveries. Mid-Cal
Express Logistics provides freight hauling broker services. Logistics
companies, such as Mid-Cal Express Logistics, allow a shipper to place a
single call to arrange truckload services anywhere in the United States and
certain areas of Canada, without having to contact numerous individual
carriers who may or may not have a truck available for a particular shipment
to a particular destination.
Mid-Cal Express Logistics maintains a network of truckload carriers to serve
its customers. Upon receiving a call from a customer, a Mid-Cal Express
Logistics representative contacts various truckload carriers until locating one
that has the time and the proper equipment to transfer the freight. The
representative will make all of the arrangements to have the freight picked
up and delivered. Mid-Cal Express Logistics also tracks the vehicles and
monitors the shipment from pickup through delivery enabling customers to
contact it rather than the individual carrier to get information on their
shipment. Mid-Cal Express Logistics' customers are sent a single invoice for
all shipments and payments for those shipments it arranges, covering the
shipping and broker fees. Mid-Cal Express Logistics then pays the hired
carrier, and retains a portion of the total fee paid by the customer. Thus,
customers avoid having to pay multiple invoices from carriers and brokers.
Mid-Cal Express Logistics first attempts to assign its customers' routes to
Mid-Cal Express. This reduces search costs related to finding an appropriate
carrier to serve a customer's needs. Mid-Cal Express Logistics' customers have
priority access to Mid-Cal Express service, as Mid-Cal Express Logistics serves
as the primary broker for the trucking subsidiary. Mid-Cal Express Logistics
also retains a database of carriers to assign to routes in the event Mid-Cal
Express cannot meet the needs of the broker's customer. The needs of the
customer dictate the carrier Mid-Cal Express Logistics will assign.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
bases and their dispersion across many different industries. The Company
performs ongoing credit evaluations and generally does not require collateral
from its customers. The Company's customers consist mostly of major national
corporations.
The Company does not engage in research and development, as the Company is
strictly involved in providing services and does not develop products and does
not plan to do so in the future. As part of operations, management performs
research of markets for the services provided by the Company. The Company's
management has identified possible new markets based on the following criteria:
market size, cost of entry, potential long-term profitability and synergy with
the Company's existing business. It was decided that Mid-Cal Express would
enter into the regional short-haul market. Regional short-haul consists of
dry-van freight with a shorter length of haul, generally around a major
metropolitan area or areas. Currently, the Company is largely involved in
temperature-controlled hauling of produce between the East and West coasts.
The Company also has a growing demand for its short-haul services along the
East Coast.
The Company's logistics service offerings build upon the existing strengths of
the Company's trucking operation while expanding the overall market in which
the Company serves the transportation needs of customers and aiding in the
growth of the Company's trucking operation. Currently, the Company's logistics
operation provides services to customers primarily located along the East
Coast, but is increasingly seeking to develop customers on the West coast.
The Company plans to expand this business to provide freight brokering and
management services to customers located throughout the United States.
The Company is currently researching the feasibility of acquiring small
logistics companies in desirable regions, as a method of accomplishing this
expansion.
The Company currently provides logistics services in connection with truck
freight hauling, but will research the possibility of expanding its service
offerings to include freight management in connection with other methods of
cargo transportation.
DRIVER AND OTHER EMPLOYEES
As of December 31, 1997, the Company employed 127 personnel; of these 93 were
employee drivers, 5 were in maintenance, 2 were in sales and marketing, and
the balance were in administration and management and two were logistics
representatives.
The Company also contracted with independent contractors (owner/operators)
throughout the year to provide equipment and human resources. None of the
Company's employees are represented by a labor union.
The recruitment, training and retention of qualified drivers are essential to
support the Company's continued growth and to meet the service requirements of
the Company's customers. Drivers are selected in accordance with Company-
specific quality guidelines relating primarily to safety history, driving
experience, road test evaluations and other personal evaluations, including
physical examinations and mandatory drug and alcohol testing. Drivers are
trained in all phases of the Company's policies and procedures, including
customer service requirements, general operations, fuel conservation and
equipment maintenance, operation and safety. Express' long-haul drivers
typically operate as teams, enabling faster delivery, greater equipment
utilization and more desirable trip-hours for the drivers.
The Company's drivers are compensated on the basis of miles driven and length
of haul. Drivers are also compensated for additional flexible services
provided to the Company's customers, as well as through bonuses for safety,
fuel efficiency, mileage and driver recruitment.The Company believes its
relationship with its employees is good.
INDEPENDENT CONTRACTORS (Owner/Operators)
The independent contractors utilized by the Company are owner/operators
who provide their own tractors, thus providing the Company's trucking
operation with an alternative method of obtaining additional revenue
producing equipment. The Company intends to continue to increase its use
of owner/operators. During 1997, the Company utilized an average of 65
independent contractors a week. Each owner/operator enters into a contract
with the Company pursuant to which it is required to furnish a tractor and a
driver or team of drivers exclusively to transport, load and unload goods
carried by the Company. Owner/operators are paid a fixed level of
compensation based on a fee per mile. Owner/operators are obligated to
maintain their own equipment and pay for their own fuel. The Company provides
trailers for each owner/operator. Since beginning operations in June 1996,
the Company has utilized the services of owner/operators to handle (on average)
approximately 45% of its hauling services.
FUEL
The Company, and the motor carrier industry as a whole, is dependent upon the
availability and cost of diesel fuel. Both the availability and the cost of
diesel fuel are influenced by economic and political events not within the
Company's control. The Company does not presently participate in any program
to insure price stability. Fuel costs during fiscal 1997 declined compared to
fiscal year 1996. Historically, most increases have not been passed through to
the Company's customers, through increased rates. Future shortages or
significant increased costs which could not be passed through to its
customers could have a material adverse impact on the Company's profitability.
GOVERNMENTAL REGULATION
The Company is a motor common and contract carrier previously regulated by both
the Interstate Commerce Commission ("ICC") and various state agencies. Although
the "ICC Termination Act of 1995" effectively eliminated the ICC as of January
1, 1996, most functions of the ICC were transferred to the Department of
Transportation ("DOT"). These regulatory authorities have broad powers
generally governing matters such as authority to engage in motor carrier
operations, rates and charges, accounting systems, certain mergers,
consolidations and acquisitions and periodic financial reporting. In
addition, the Company's Canadian business activities are subject to similar
requirements imposed by provincial and Canadian regulations.
The Company, like other motor carriers, is subject to certain safety
requirements governing interstate operations prescribed by the United States
Department of Transportation ("DOT") and by Canadian provincial authorities.
In addition, vehicle weight and dimensions are subject to federal, state, and
provincial regulations. Management believes that the Company is in compliance
in all material respects with applicable regulatory requirements relating to
its operations. The failure of the Company to comply with regulations of
the DOT, state or provincial agencies could result in substantial fines or
revocation of operating authorities. Federal, state and local environmental
laws and regulations impose requirements relating to, among other things,
contingency planning for spills of petroleum products, disposal of waste oil
and maintenance and testing of underground storage tanks. Management believes
that future compliance with such laws and regulations will not have a
material effect upon the Company's capital expenditures, earnings, or
competitive position.
COMPETITION
The truckload transportation industry is heavily fragmented and intensely
competitive. The Company has numerous competitors that vary in size, ranging
from small operators who can compete on certain lane segments due to lower
overhead, to significantly larger companies with greater financial resources,
more equipment, and larger volume capacities than the Company. The main
competitive factors in the truckload industry are service, pricing, and
availability of equipment. The Company competes primarily with other
long-haul truckload carriers of produce. To a lesser degree, the Company
competes with regional truckload carriers of produce as well as other goods.
Railroads, less-than-truckload carriers and private carriers also provide
competition, but to a minor degree.
Competition for the freight transported by Express is based primarily on
service and efficiency and, to some degree, on freight rates alone. Many other
truckload carriers have greater financial resources, own more equipment or
carry a larger volume of freight than Express. Express provides 24 hour
dispatch and sales service, which many smaller carriers do not provide.
Within the logistics services industry, key competitive factors include
information technology and carrier relationships. There are a number of other
companies in the logistics services business that have greater intangible
resources, more employees and a greater number of branch offices than the
Company.
SEASONALITY
In the trucking industry generally, results of operations show a seasonal
pattern because customers reduce shipments during the winter. The
Company's operating efficiency historically decreases during the winter
months due to increased maintenance costs, reduced fuel efficiency, detours
and delays for weather.
SAFETY AND INSURANCE
The Company is committed to ensuring that it has safe drivers and owner/
operators. The Company regularly communicates with drivers to promote safety
and to instill safe work habits through Company media and safety review
sessions. These programs reinforce the importance of driving safely,
abiding by all laws and regulations, regarding such matters as speed and
maximum driving hours, and performing equipment inspections. The Company
conducts quarterly safety training meetings for its drivers and owner/
operators. In addition, the Company has a recognition program for driver
safety performance.
The Company's Safety Director reviews all accidents, takes appropriate action
related to drivers, and examines trends and implements changes in procedures or
communications to address any safety issues. Management's emphasis on safety
also is demonstrated through its equipment specifications, maintenance programs
and payment of bonuses based on safety record.
The Company requires prospective drivers to meet or exceed the qualification
standards required by the U.S. Department of Transportation ("DOT"). The DOT
requires the Company's drivers and independent contractors to obtain national
commercial driver's licenses pursuant to regulations promulgated by the DOT. The
DOT also requires that the Company implement a drug testing program in
accordance with DOT regulations. The Company's program includes pre-
employment, random, post-accident and post-injury drug testing.
The principal claims arising in the Company's business consist of cargo loss
and damage, workers' compensation, and auto liability (personal injury and
property damage). The Company's insurance policies provide for general
liability coverage up to $1,000,000 per occurrence, automobile liability
coverage up to $1,000,000 per occurrence, and cargo insurance coverage up to
$1,000,000 per occurrence. An additional umbrella policy raises the Company's
base coverage up to $10,000,000. The Company carefully monitors claims and
participates actively in claims estimates and adjustment. The Company
believes that any exposure for claims in Express' operations is reduced due
to the fact that no physical handling, loading or unloading of freight or
equipment occurs at the Company's facility.
ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains its offices at 155 Montgomery Street, Suite 406 San
Francisco, California. The office space, which is 680 square feet, is leased
under a one-year lease expiring in November 1998. Prior to December 1, 1997,
offices were located at 155 Montgomery Street, Suite 411 in San Francisco,
California.
The Company's trucking operations are based at 21496 Main Street in Grand
Terrace, California, as of December 31, 1997. This property includes 6,200
square feet of office space and a 2,400 square foot storage facility on 5.31
acres of industrial zoned land. This property is subject to a capital lease,
the term of which is two years, ending December 31, 1999. The Company
currently plans to exercise its option to purchase this property for
$550,000 at the end of the lease period, with rent payments (in full)
applied toward this purchase price. The Lessor will finance the unpaid portion
of the purchase price ($442,000) at an interest rate of 9% per annum. The
note will amortize over 30 years, ballooning at the end of three years. Prior
to December 1997, the trucking operation was headquartered at 325 North Cota
Street, Corona, California 91720 on a month to month basis at $6,000 a month,
since May 1997. The Corona headquarters was assumed by the Company from its
predecessor (Country Wide). The facilities in Corona included a 20,000
square foot building on 5.38 acres of industrial zoned land.
The Company's logistics operation maintains its office at 1003 Old Philadelphia
Road, Aberdeen, Maryland 21001. These offices are rented under a one-year
lease, ending August 1, 1998, with rental payments of $250.00 per month for
300 square feet. The Company has an option to renew the lease.
EQUIPMENT AND TECHNOLOGY
Most of the Company's equipment is utilized in connection with the trucking
business. As of December 31, 1997, the Company operated a total of 102 company-
owned or leased tractors and used an average of 65 owner-operators that
provided one or more pieces of operating equipment. As of the same date, the
Company operated a modern fleet, with the average age of tractors being less
than three years and more than 50% of the tractors manufactured by Freightliner.
The tractors were operated in the service divisions as follows: 100%
temperature sensitive long hauls. The driving is roughly divided as follows:
30% single drivers and 70% driving teams. The Company leases its tractors
from large national leasing companies or through the leasing programs of the
manufacturer. This leasing strategy gives the Company the availability of
nationwide maintenance facilities to ensure minimal down time in case of
mechanical failure, as well as a nationwide system for the performance of
scheduled preventative maintenance, no matter where the individual unit is
located. These tractors are covered by manufacturer warranties during most
of their lease term, which yields savings in maintenance costs.
The current trailer fleet contains all modern 48 and 53-feet long, high cubic
capacity refrigerated units. The average age of the trailer fleet is less than
three years. As of December 31, 1997, the Company operated a fleet of 150
trailers. The use of newer equipment minimizes maintenance costs. The
Company adheres to a comprehensive maintenance program for both tractors and
trailers. Owner-operator tractors are inspected prior to acceptance by the
Company for compliance with operational and safety requirements of the Company
and the Department of Transportation. These tractors are then periodically
inspected, similar to Company-owned tractors, to monitor continued compliance.
The Company has invested heavily in modern computer and communications
technology. The modern tractor fleet operated by Mid-Cal Express (and most of
the equipment operated by companies utilized by Mid-Cal Express Logistics)
utilizes onboard computers with satellite communications capabilities. In the
case of the Mid-Cal Express fleet, approximately 40 tractors are equipped with
a QUALCOMM satellite communications system. QUALCOMM allows the dispatchers to
follow the progress of a vehicle's speed, fuel consumption, and most
importantly, its adherence to schedule, while allowing the timely and
efficient communication of operating data, such as pickup and delivery
instructions, directions to customer facilities, loading instructions, routing,
fuel, taxes, mileage, payroll, safety, weather advisories, and traffic and
maintenance information to the drivers. The Company plans to equip the balance
of its tractors with QUALCOMM in the next twelve months. The satellite tracking
of the movement of the vehicles, including schedule, speed, and fuel
consumption, together with the availability of two-way communication, has
allowed the Company to fine tune its operation and deliver its customers
consistent on-time service. Additionally, the Company utilizes EDI
(Electronic Data Interchange) for billing and order communications with its
customers that also use EDI. This system automates purchasing and billing,
enabling time and cost efficiencies to be realized. Logistics also utilizes
the satellite equipment and software whenever possible and practical.
In order to maintain the highest level of quality control and meet its
customers' strict performance standards, the Company's central dispatching/
customer service unit operates 24 hours a day, seven days a week. If any
problem should develop, managers and supervisors are either on hand or readily
available to the dispatch center.
AGE OF EQUIPMENT
The following table shows the type and average age of equipment operated by the
Company at December 31, 1997:
OVER-the-ROAD 48-FOOT 53-FOOT
TRACTORS TRAILERS TRAILERS
Company Owned 49 (AVG AGE-3YRS) - 35 (AVG
AGE-3YRS)
Company Leased 16 (AVG AGE-1YR) 114 (AVG AGE-2 YRS) -
Owner/Operator 35 (AVG AGE-3YRS) - -
Total 100 114 35
ITEM 3. LEGAL PROCEEDINGS
The Company is exposed to routine litigation incidental to its business,
primarily involving claims for personal injuries and property damage
incurred in the transportation of freight.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company has reserved the trading symbol of PCIC for such time as its shares
become traded publicly. As of December 31, 1997, there was no public market for
the Company's shares.
DIVIDEND POLICY
The Company has never paid a cash dividend on its Common Stock. It is the
current intention of the Company's Board of Directors to continue to retain
earnings to finance the growth of the Company's business rather than to pay
dividends. Future payment of cash dividends will depend upon the financial
condition , results of operations and capital commitments of the Company as
well as other factors deemed relevant by the Board of Directors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table provides a summary of selected financial data for
Prime Companies, Inc.
FISCAL YEAR ENDED DECEMBER 31,
1997 1996
(in thousands except per share data)
Operating Revenue $15,958 $ 0
Net Income (Loss) (695) 26
Earnings per share: $ (.28) $ (.02)
Total assets $ 8,495 $ 1,341
Long term debt,
less current portion $ 3,298 $ 19
The following table sets forth the percentage relationship of certain
revenue and expense items for the fiscal years indicated.
Percentages of
Operating Revenue
Year Ended December 31,
1997 1996
Operating revenue 100.0% 100.0%
Operating expenses and costs:
Salaries, wages and fringe benefits 27.8% 0.0%
Operating supplies and expenses 17.7 0.0
Operating taxes and licenses 2.7 0.0
Insurance and claims 3.8 0.0
Depreciation and amortization 4.1 0.0
Rents and purchased transportation 38.5 0.0
Other 10.8 2.8
Total operating expenses 105.4 2.8
Operating income (loss) (5.4) (2.8)
Other income (expense):
Interest and dividend income 0.88 100.00
Gain on marketable securities 0.0 0.0
Interest expense (2.3) 0.0
Income (loss) before income taxes (6.82) 97.20
Income taxes 2.45 0.0
Net income (loss) (4.40) 97.20
RESULTS OF OPERATIONS:
Fiscal year ended December 31, 1997 compared to Fiscal year ended December 31,
1996:
The 1997 fiscal year was the Company's first year where its principal revenues
were generated from business operations. As such, no accurate and
comprehensive comparison between the Company's 1997 and 1996 operating results
is available.
INFLATION
Inflation continues to have a minimal impact on operations.
SEASONALITY
In the trucking industry generally, results of operations show a seasonal
pattern because customers reduce shipments during the winter. The
Company's operating efficiency historically decreases during the winter
months due to increased maintenance costs, reduced fuel efficiency, detours
and delays for weather.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of Prime Companies, Inc.,
and Subsidiaries are included in Item 7:
Independent Accountants' Report
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Income for the years ended December 31, 1997,
and 1996.
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1997, and 1996.
Consolidated Statements of Cash Flows for the years ended December 31,
1997, and 1996.
Notes to Consolidated Financial Statements ! December 31, 1997.
Independent Accountants' Report
Gilbert & Company
Certified Public Accountant
1 Maritime Plaza, Suite 1300
San Francisco, California 94111
415/576-1300 FAX 415/491-4141
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Prime Companies, Inc.
We have audited the accompanying consolidated balance sheets of
Prime Companies, Inc. (a Delaware corporation) and subsidiaries as of
December 313, 1997 and 1996, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the years
then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of materials misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all materials respects, the financial position of
Prime Companies, Inc. and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Gilbert & Company
February 12, 1998
<PAGE>
PRIME COMPANIES, INC.
Consolidted Financial Statements
CONSOLIDATED BALANCE SHEETS
As of December 31, 1997 and 1996
Assets
December 31,
1997 1996
CURRENT ASSETS
Cash (Note 3) $ 200,570 $ 264,274
Accounts receivable, net of allowance for
doubtful accounts of $23,000 in 1997
and $-0- in 1996 (Note 5) 1,277,222 0
Accrued receivables (Note 5) 124,322 0
Other receivables 97,310 0
Fuel tax receivable (Note 3) 16,451 0
Investment accounts (Note 6) 436,510 1,017,115
Inventories (Note 3) 19,238 0
Driver advances (Note 3) 78,290 0
Notes receivable, current portion 387,232 13,271
Deferred income taxes (Note 12) 21,440 0
Prepaid expenses 601,298 0
__________ _________
Total Current Assets 3,259,883 1,294,660
FIXED ASSETS (Notes 3 and 8)
Land 200,000 0
Fixed assets 4,876,544 0
Improvements 33,074 0
Accumulated depreciation
and amortization -659,448 0
Net Fixed Assets 4,450,170 0
OTHER ASSETS
Investments, unlisted securities (Note 6) 101,394 0
Deferred income taxes (Note 12) 379,500 0
Deposits 244,935 0
Note receivable, less current
portion (Note 7) 36,489 46,729
Asset held for resale 23,000 0
Total Other Assets 785,318 46,729
TOTAL ASSETS $8,495,371 $1,341,389
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIME COMPANIES, INC.
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS (CONTINUED)
As of December 31, 1997 and 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
CURRENT LIABILITIES 1997 1996
Accounts payable (Note 9) $ 418,918 $ 0
Accrued liabilities (Note 9) 1,109,126 0
Accrued loss reserve (Note 16) 72,520 0
Current portion of long-term debt 726,570 0
Margin account payable (Note 6) 308,103 247,294
Deferred expense credit 37,500 0
Loan payable 150,000 0
Income and franchise
taxes payable (Note 12) 4,100 0
Total Current Liabilities 2,826,837 247,294
LONG-TERM LIABILITIES
Long-term debt, less current
portion (Note 10) 2,682,977 0
Deferred income 605,370 19,429
Security deposit 9,600 0
Total Long-Term Liabilities 3,297,947 19,429
Total Liabilities 6,124,7842 66,723
Commitments and Contingencies
(Note 16) -- --
STOCKHOLDERS' EQUITY (Notes 2 and 4)
Common stock, shares authorized 50,000,000,
par value $.0001, 3,013,123 and
1,255,123 were issued and outstanding
at par, respectively 276 126
Additional paid-in capital 3,459,834 1,254,998
Retained earnings -1,089,523 -180,458
Total Stockholders' Equity 2,370,587 1,074,666
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $8,495,371 $1,341,389
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIME COMPANIES, INC.
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS'EQUITY
For the Years Ended December 31, 1997 and 1996
Total
Common Stock Additional Stockholders'
Shares Par Paid-In Retained Equity
Value Capital Earnings (deficit)
Balance at
January 1, 1996 986,123 $99 $986,025 $(206,175) $ 779,449
Sale of
Common Shares 269,000 27 268,973 -- 269,000
Net Income--
December 31, 1996 -- -- -- 25,717 25,717
Balance at
December 31, 1996 1,255,123 $126 $1,254,998 $ (180,458) $1,074,666
Sale of
Common Shares 1,508,000 151 2,111,860 -- 2,112,011
Preferred Stock
Dividends -- -- -- (93,000) (93,000)
Acquisition of Mid-Cal
Express, Inc. -- -- 93,000 -- 93,000
Shares Issued in
Merger
Transaction 250,000 -- (25) -- (25)
Net Loss--December
31, 1997 -- -- -- (695,064) (695,064)
Balance at
December 31, 1997 3,013,123 $276 $3,459,834 $(1,089,523) $2,370,587
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIME COMPANIES, INC.
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF OPERATIONS
For the Years Ended December 31, 1997, and 1996
December 31,
REVENUE 1997 1996
Transportation revenue $ 14,776,294 $ 0
Logistics revenue 1,181,305 0
Total Revenue 15,958,229 0
COST OF GOODS SOLD
Purchased transportation 5,534,505 0
Brokerage purchased transportation 614,148 0
Total Cost of Goods Sold 6,148,653 0
GROSS PROFIT 9,809,576 0
OPERATING COSTS AND EXPENSES
Salaries and related expenses 4,442,038 0
Operating expenses and maintenance 2,832,136 726
Operating taxes and licenses 428,151 14
Insurance 614,329 0
Revenue equipment rentals 909,017 0
General supplies and expenses 726,192 0
Local delivery 17,946 0
Professional and consulting fees 58,250 0
Depreciation and amortization 659,448 0
Total Operating Costs and Expenses 10,687,507 740
Net (Loss) From Operations (877,931) (740)
OTHER INCOME (EXPENSE)
Interest income 4,116 26,456
Interest expense (362,688) 0
Rental income 63,900 0
Investment income 79,042 0
Consulting fees 10,000 0
Director fees (8,000) 0
Other income 4,887 0
Total Other Income (Expense) (208,743) 26,456
Net Income (Loss) after Other Expenses (1,086,674) 25,716
PROVISION FOR INCOME TAX (EXPENSE) BENEFIT
Current (9,330) 0
Deferred 400,940 0
Net Provision for Income Tax 391,610 0
Net Income (Loss) (695,064) 25,716
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIME COMPANIES, INC.
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
For the Years Ended December 31, 1997, and 1996
EARNINGS PER SHARE:
INCOME (LOSS) PER COMMON SHARE $ (0.28) $ 0.02
INCOME (LOSS) PER COMMON SHARE --
FULLY DILUTED $ (0.28) $ 0.02
WEIGHTED AVERAGE NUMBER OF SHARES:
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,479,064 1,097,973
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - FULLY DILUTED 2,486,128
1,097,973
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIME COMPANIES, INC.
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1997, and 1996
December 31,
1997 1996
CASH FLOW FROM
OPERATING ACTIVITIES:
Reconciliation of net income (loss) to net
cash (used) by operating activities:
Net Income (Loss) $(695,064) $ 25,717
Adjustments to reconcile net income
(loss) to net cash (used) by
operating activities:
Depreciation and amortization 659,448 0
Provision for bad debts 23,000 0
Net current and deferred tax benefit (391,610) 0
(Increase) decrease in:
Accounts, notes, fuel tax and
other receivables (1,799,409) (149,171)
Inventories (19,238) 0
Investments 479,2111 32,785
Prepaids, driver advances and deposits (924,523) 0
Asset held for resale (23,000) 0
Increase (decrease) in:
Accounts payable and accrued liabilities 1,528,044 0
Accrued loss reserve 75,520 0
Deferred income 585,941 (174,669)
Deferred expense credit 37,500 0
Income and franchise tax payable 4,100 0
Net cash (used) by operating activities (463,080) (165,338)
CASH FLOW FROM
INVESTMENT ACTIVITIES:
Additions to property, equipment and improvements (667,580) 0
Collections on notes receivable 21,083 0
Net cash provided (used) by investment
activities (646,497) 0
CASH FLOW FROM
FINANCING ACTIVITIES:
Net proceeds from current and long term debt 174,771 0
Margin account payable 60,809 153,542
Proceeds from the sale of stock 1,508,000 269,000
Principal payments on long-term debt (707,307) 0
Long term deposit 9,600 0
Net cash provided by financing activities 1,045,873 0
INCREASE (DECREASE) IN CASH (63,704) 257,204
CASH AT BEGINNING OF YEAR 264,274 7,070
CASH AT END OF YEAR $200,570 $264,274
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIME COMPANIES, INC.
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
1. ORGANIZATION:
THE BUSINESSES:
Prime Companies, Inc. ("PCI") (the "Corporation"), was
formed on December 30, 1997, as a result of the merger between
Prime Management, Inc., a California corporation, and Corcoran
Technologies Corporation, a Delaware corporation (see Note 4).
The Company has two wholly-owned subsidiaries as discussed
below.
MID-CAL EXPRESS, INC.
Mid-Cal Express, Inc. (the "Company") was incorporated
under the laws of the State of California in August, 1994.
The Company's core business consists of truck transportation
of temperature-controlled products throughout the United
States and Canada. The Company's strategy is to provide a
high level of service to customers requiring temperature-
controlled transportation and other specialized transportation
services. The Company uses team drivers in approximately
forty percent of its trips in order to provide safe and
reliable on-time delivery for long haul shipments.
An individual who is a present officer of the
Corporation owned all of the Company's common shares of stock
from 1994 through December 1996. The Company presently is a
wholly owned subsidiary of the Corporation which became a
publicly traded company on December 30, 1997, and as such the
Company's financial statements are incorporated in this
consolidated presentation of the Corporation's financial
statements. From inception to December 31, 1996, the Company
operated using a limited number of tractors. Beginning in
December 1996 through September 1997, the Company issued
shares of preferred and common stock to capitalize an
expansion of its tractor fleet and customer base. Effective
January 1, 1997, the Company purchased forty two tractors and
approximately one hundred thirty refrigerated trailers and the
rights to the business name Country Wide Truck Service for all
the outstanding debt owed on the equipment. The debt amounted
to approximately $2,700,000 of notes payable as well as
operating leases with future minimum payments of approximately
$4,000,000. The acquisition greatly increased the size of the
Company's tractor and trailer fleet. The resulting increase
in the customer base also increased sales dramatically.
In May 1997, the Company's parent Corporation purchased
a terminal cross-dock facility located in Fontana, California.
Effective June 30, 1997, the Company purchased this property
in exchange for 1,100,000 shares of common stock. At the
present time, the Company plans to operate this facility as
rental income property (see Note 11).
During the next year the Company plans to increase its
tractor fleet from approximately 100 tractors to 200 tractors
through a combination of business acquisitions, purchase
contracts and independent owner operations. Financing for
this growth is expected to be obtained by the Company's parent
Corporation through a series of stock offerings and
alternative financing. The Company expects that the
additional revenue generated by this increased fleet size will
be sufficient to restore profitability by the end of the year.
MID-CAL EXPRESS LOGISTICS, INC.
Mid-Cal Express Logistics, Inc. (the "Company") was
incorporated under the laws of the State of California in July
1997. The Company is a third party transportation logistics
provider. The Company provides its customers with full-
service logistics capabilities in less than truckload (LTL)
and truckload services.
The Company was incorporated as a wholly owned
subsidiary of Prime Management, Inc. (see Note 4) which became
a publicly traded company on December 30, 1997, and as such
the Company's financial statements are incorporated in this
consolidated presentation of the Corporation's financial
statements. The Company was formed to complement its sister
company, Mid-Cal Express, Inc., which, as noted above, is a
truck transportation provider. the Company utilizes the
trucks of Mid-Cal Express, Inc. as well as other carriers to
service the transportation needs for a subsidiary of a Fortune
500 company.
At the present time, the Company services one large
customer. During the next year, the Company plans to expand
its customer base by securing new customers utilizing the
close relationship with Mid-Cal Express, Inc. and other
carriers to provide the needed truck transportation.
2. STOCKHOLDERS' EQUITY:
The Corporation has authorized 10,000,000 shares of
preferred stock with a $.0001 par value. At December 31,
1997, none of the authorized preferred shares were issued and
outstanding.
The Corporation has authorized 50,000,000 shares of
common stock with a $.0001 par value. At December 31, 1997,
3,013,123 shares of such common stock were issued and
outstanding.
See Note 4 for a discussion of the stock transactions
prior to and as a result of the merger as addressed in Note 4.
The Corporation has not paid any ordinary and operating
cash dividends on its common or preferred stock and has no
plans to do so. Any payment of cash dividends in the future
will be at the discretion of the Corporation's Board of
Directors and will depend upon the financial condition,
capital requirements, and earnings, of the Corporation, as
well as other factors which the Board of Directors may deem
relevant.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The most significant accounting policies followed by the
Company are summarized as follows:
BASIS OF PRESENTATION
The financial statements are presented on the accrual
basis, which is the accounting method the corporation uses to
file its federal tax returns. Under this basis of accounting,
revenue and related assets are recognized when earned and
expenses and related liabilities are recognized when the
obligations are incurred.
NET INCOME (LOSS) PER COMMON SHARE
The net income (loss) per common share is computed using
a weighted average number of shares outstanding during the
period as follows:
Period Average No.
Ending of Shares
12/96 1,097,973
12/97 2,479,064
The above weighted average shares are based upon the
cumulative common stock outstanding.
The dilutive net income (loss) per common share is
computed using a weighted average number of shares outstanding
during the period as follows:
Period Average No.
Ending of Shares
12/96 1,097,973
12/97 2,486,128
The above weighted average shares are based upon the
cumulative common stock outstanding and incorporating the
above noted 2,578,541 options issued and outstanding as of
December 31, 1997, assuming that all such options were
exercised.
MERGER AND RELATED EFFECTS
See Note 4.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories for the trucking operations (Mid-Cal
Express, Inc.) consist primarily of spare parts and tires for
revenue equipment and are stated at the lower of cost or
market. Cost is determined using the first-in, first-out
(FIFO) method.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES
At December 31, 1997, the Corporation had an estimated
tax loss carryforward of approximately $1.1 million dollars,
which "may" be available to offset future taxable income, if
any, through the tax years ending between 2012 and 2013. The
net operating loss carryforward for tax purposes may be
severely limited with respect to its availability based on
certain consolidation tax return rules.
The Corporation and each of its wholly owned
subsidiaries follows the provisions of Statement of Financial
Accounting Standards ("SFAS") #109 - Accounting for Income
Taxes, which states the criteria for measuring the provision
for income taxes and recognizing deferred tax assets and
liabilities in the accompanying financial statements. SFAS
109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax
returns. Under this method, deferred tax assets and
liabilities are determined, based on the difference between
the financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
FIXED ASSETS
Land, property and equipment are stated at cost.
Provision for depreciation and amortization on property and
equipment is calculated using the straight-line method over
the estimated useful lives of the assets. Salvage values of
10 to 15 percent are used in the calculation of depreciation
for transportation revenue equipment. When assets are retired
or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts, and any resulting
gain or loss is recognized in income for the period.
Details of fixed assets are as follows (see Note 8 for
depreciation periods):
Land $ 200,000
Buildings and Improvements 182,161
Accumulated Depreciation 3,315
Net Buildings and Improvements 178,017
Revenue Equipment 4,469,219
Accumulated Depreciation 615,898
Net Revenue Equipment 3,853,321
Service Vehicles 14,000
Accumulated Depreciation 2,800
Net Service Vehicles 11,200
Furniture and Office Equipment 100,055
Accumulated Depreciation 16,797
Net Furniture and Office Equipment 83,258
Communications Equipment 132,229
Accumulated Depreciation 17,151
Net Communication Equipment 115,078
Shop Equipment 11,954
Accumulated Depreciation 3,487
Net Shop Equipment 8,467
Total Fixed Assets $5,109,618
Total Accumulated Depreciation $ 659,448
Net Fixed Assets $4,450,170
ACCOUNTING FOR LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets". The
Corporation and each of its wholly owned subsidiaries have
adopted SFAS No. 121 which requires each such entity to
compare the net carrying value of long-lived assets to the
related estimates of future cash flows, and other criteria, to
determine if impairment has occurred. If it is determined
that the net carrying value is overstated, then impairment is
recognized to reduce the carrying value to the estimated fair
value.
ACCRUED INSURANCE AND LOSS RESERVES
Mid-Cal Express, Inc. retains a portion of the risk
under vehicle liability, cargo loss, physical damage and other
insurance programs. Reserves have been recorded which reflect
estimated liabilities including claims incurred but not
reported.
REVENUE RECOGNITION
Transportation revenues and related expenses are
recognized using a method which approximates recognition of
both revenue and direct costs on the date the freight is
received for shipment. Brokerage revenues and related costs
and expenses are recognized upon the completion of the
shipments. Unbilled shipments are accrued, pending proof of
shipment and delivery.
CREDIT RISK
Financial instruments which potentially subject Mid-Cal
Express, Inc. to concentrations of credit risk include trade
accounts receivable and the assigned receivable reserve. With
respect to the concentration of credit risk in trade accounts
receivable, the five largest transportation revenue customers
of Mid-Cal Express, Inc. comprised 34 percent of the
outstanding accounts receivable, after reduction by proceeds
received by assigning receivables, as of December 31, 1997
(see Note 5).
With respect to Mid-Cal Express Logistics, Inc.,
financial instruments which potentially subject Mid-Cal
Express Logistics, Inc. to concentrations of credit risk
include trade accounts receivable. With respect to the
concentration of credit risk in trade accounts receivable,
Mid-Cal Express Logistics, Inc. has one customer, which is a
Fortune 500 company listed on the New York Stock Exchange.
USE OF ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principals may require
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
such estimates.
4. BUSINESS MERGER:
Pursuant to an Agreement and Plan of Merger (the
"Agreement") between Prime Management, Inc. ("PMI), a
California Corporation, and Corcoran Technologies Corporation
("CTC"), PMI was merged with and into CTC effected with the
State of Delaware on December 30, 1997. The Agreement was
adopted by the unanimous consent of the Board of Directors of
CTC and PMI and approved by the unanimous consent of the
shareholders of CTC and PMI on December 23, 1997.
Prior to the merger, CTC had 5,000,000 shares of common
stock outstanding held by Pierce Mill Associates, Inc.
Pursuant to the Agreement, CTC redeemed and retired 4,750,000
shares of the outstanding shares of common stock and issued
2,763,123 new shares of its common stock, subject to
adjustments for fractional and dissenting shares, to the
holders of all the outstanding common stock of PMI on a pro
rata basis resulting in a total of 3,013,123 shares
outstanding of CTC's common stock.
As a result of the stock exchange, the former
shareholders of PMI hold 91.7 percent of the outstanding
shares of common stock of CTC. The sole source of
consideration used by the shareholders of PMI to acquire their
respective interest in CTC was the exchange of 100 percent of
the outstanding common stock of PMI.
The outstanding warrants of PMI and other outstanding
rights to purchase shares of common stock of PMI are adjusted
according to the terms contained in such warrants or other
rights for conversion to warrants or rights to purchase
2,578,541 shares of common stock of CTC.
Pursuant to the Agreement, on the effective date of the
merger, the officers and directors of PMI became the officers
and directors of CTC. The by-laws of PMI were adopted as the
by-laws of CTC.
Effective as of the date of the merger, CTC changed its
name to "Prime Companies, Inc".
5. ACCOUNTS AND ACCRUED RECEIVABLES:
MID-CAL EXPRESS, INC.
Mid-Cal Express, Inc. entered into an agreement on
November 14, 1997, with KBK Financial ("KBK") which provides
for the assignment of its trade receivables for an immediate
advance of 80 percent of the assigned amount. the remaining
20 percent of the assigned amount is held in reserve until the
receivable is collected. The assignment is made with
recourse, which is limited to the aggregate reserve amount.
KBK charges a fixed amount of 25/100 of a percent on the
assigned amount and interest on the advances at the prime rate
plus 2.00 percent. In addition, the assigned receivables are
secured by all intangible assets of Mid-Cal Express, Inc. The
assigned receivable reserve consisted of the following as of
December 31, 1997:
Invoices assigned to KBK $ 1,363,801
Less: Amounts advanced to
Mid-Cal Express, Inc. (1,189,030)
Assigned receivable reserve $ 174,771
Accounts receivable of Mid-Cal Express, Inc. consisted
of the following at December 31, 1997:
Receivables retained by Mid-Cal Express, Inc $ 772,688
Less: Reserve for doubtful accounts (23,000)
Assigned receivable reserve. 174,771
Accounts receivable, net $ 924,459
Mid-Cal Express, Inc. performs periodic credit
evaluations of its customers' financial condition and
generally does not require collateral. Mid-Cal Express, Inc.
has recorded an allowance of $23,000 as of December 31, 1997,
which has been netted against the related amounts receivable.
MID-CAL EXPRESS LOGISTICS, INC.
Mid-Cal Express Logistics, Inc. has one customer as of
December 31, 1997. No provision for doubtful accounts has
been made because the customer has a satisfactory payment
history and is financially strong. The account receivable
balance was $368,153.
Receivables are accrued for unbilled revenue that has
been earned by the performance and delivery of the shipment.
The related costs of the revenue are included in accrued
expenses ($124,322).
6. INVESTMENTS AND MARGIN ACCOUNTS:
The parent Corporation maintains certain investment
accounts in order to realize the optimum return on monies
which are available for such short term purposes. Since
certain investments include listed (as well as non-listed)
securities, the Corporation also uses its margin rights in
order to borrow against the related securities in order to
avoid liquidating such securities which may not be beneficial
to the Corporation.
7. NOTES RECEIVABLE:
Mid-Cal Express, Inc. had notes receivable consisting of
the following:
Note receivable, due in monthly installments of $2,200
including interest at 8 percent through November 1999,
collateralized by transportation equipment. The details of
such note receivable is as follows:
December 31, 1997 - total $ 50,469
December 31, 1997 - current portion (13,980)
December 31, 1997 - net $ 36,489
December 31, 1996 - total $ 60,000
December 31, 1996 - current portion (13,271)
December 31, 1996 - net $ 46,729
8. FIXED ASSETS
As of December 31, 1997, the estimated useful lives for
the fixed asset categories as presented in Note 3, are as
follows:
Land N/A
Buildings and Improvements 31 years
Revenue Equipment 4 to 7 years
Service Vehicles 5 years
Furniture and Office equipment 3 to 5 years
Communications Equipment 5 years
Shop Equipment 3 years
The land, building and improvements are on an operating
lease (see Note 11).
All fixed assets, with the exception of $1,535 of office
equipment and $213 of related depreciation owned by Mid-Cal
Express Logistics, Inc. at December 31, 1997, are owned by
Mid-Cal Express, Inc.
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities related to Mid-
Cal Express, Inc. consisted of the following at December 31,
1997:
Accounts payable $ 410,623
Accrued compensation-related
liabilities 200,021
Accrued purchased transportation 278,416
Other accrued expenses 245,778
Total $1,134,838
Accounts payable and accrued liabilities related to Mid-
Cal Express Logistics, Inc. consisted of the following at
December 31, 1997:
Accounts payable $ 18,884
Accrued expenses 384,911
Total $ 403,795
Accounts payable related to the Parent Corporation
consisted of $4,801 of accounts payable at December 31, 1997:
10. NOTES PAYABLE AND LONG-TERM DEBT:
Mid-Cal Express, Inc. notes payable and long-term debt at
December 31, 1997, consisted of the following:
Notes payable, payable in aggregate monthly installments of $1,645
including interest ranging from 9.7 percent to 10.6 percent, maturing
at various dates through March 2000, collateralized by certain
computer equipment and software $ 39,532
Notes payable, payable in aggregate monthly installments of $68,559
including interest ranging from 8.5 percent to 10.99 percent, maturing
at various dates through May 2001, collateralized by certain
tractor equipment $2,474,230
Notes payable, payable in aggregate monthly installments of $30,666
including interest ranging from 10.0 percent to 10.3 percent, maturing
at various dates through May 2001, collateralized by certain
trailer equipment 1,055,902
Total $3,569,664
Less current portion (886,687)
Net $2,682,977
Scheduled maturities of notes payable and long-term debt are as follows:
December 31, 1998 $ 886,687
December 31, 1999 981,731
December 31, 2000 1,545,718
December 31, 2001 155,528
December 31, 2002 0
Total $3,569,664
11. PROPERTY ON OPERATING LEASE:
Mid-Cal Express, Inc. leases out a terminal facility
located in Fontana, California under a noncancelable net
operating lease which expires in June, 1999. The lease
provides for monthly rentals of $9,600, and $62,400 was earned
and collected during 1997.
Minimum future rentals on noncancelable operating lease
as of December 31, 1997, are as follows:
December 31, 1998 $ 115,200
December 31, 1999 57,600
Total $ 172,800
12. INCOME TAXES:
MID-CAL EXPRESS, INC.
The provision for income taxes consists of the following
components for 1997:
Current taxes $ 3,300
Deferred taxes 44,750
Tax benefit of net operating
loss carryforward (444,900)
Net $(396,850)
The components of the deferred tax assets as of December
31, 1997, are as follows:
CURRENT DEFERRED TAX ASSETS
Vacation accrual reserve $ 12,600
Bad debt service 8,050
Total $ 20,650
LONG-TERM DEFERRED TAX ASSETS
Depreciation $(65,400)
Net operating loss carryforward 444,900
Total $379,500
Management believes the deferred tax assets will be
recoverable from future taxable income, as a result, a
valuation allowance is not required.
As of December 31, 1997, there existed net operating losses to
be carried forward for federal income tax purposes of
$1,271,162 which expire in the year 2012.
MID-CAL EXPRESS LOGISTICS, INC.
The provision for income taxes consists of the following
components for 1997:
Current taxes $ 800
Tax benefit of net operating
loss carryforward (790)
Net $ 10
MID-CAL EXPRESS LOGISTICS, INC. (CONTINUED)
The component of the current deferred tax assets as of
December 31, 1997, is a net operating loss carryforward
benefit in the amount of $790. As of December 31, 1997, there
existed net operating losses to be carried forward for federal
income tax purposes of $5,200 which expire in the year 2012.
13. RELATED PARTY TRANSACTIONS:
Mid-Cal Express, Inc. has a credit facility with the
majority stockholder. The credit facility is due on demand
and pays interest at 10 percent, payable monthly. The balance
of the credit facility was $831,000 as of December 31, 1997.
During 1997, Mid-Cal Express, Inc. paid $66,456 in interest
payments to the majority stockholder, and had accrued interest
in the amount of $4,440 as of December 31, 1997.
Related party transactions also occurred between Mid-Cal
Express, Inc. and Mid-Cal Express Logistics, Inc. Mid-Cal
Express, Inc. has advanced money to Mid-Cal Express Logistics,
Inc., on an as needed and non-interest bearing basis. The
amount of the loan receivable from Mid-Cal Express Logistics,
Inc. is $160,117 as of December 31, 1997. Mid-Cal Express,
Inc. also had sales of $408,441 with Mid-Cal Express Logistics, Inc.
during 1997, and as of December 31, 1997, had accounts
receivable of $177,071. Additionally, shared expenses such as
for wages and related general and administrative expenses in
the amount of $97,563 were charged to Mid-Cal Express
Logistics, Inc. by Mid-Cal Express, Inc. Mid-Cal Express
Logistics, Inc. also had $15,390 of accounts payable due to
Mid-Cal Express, Inc. at December 31, 1997.
All related party transactions have been eliminated
during the consolidation process with the Parent Corporation.
14. EMPLOYEE DEFINED CONTRIBUTION PLAN
Effective February 1, 1997, Mid-Cal Express, Inc.
adopted a Deferred Compensation Simple IRA Plan (the "Plan")
covering all full-time employees. To be eligible to
participate in the Plan, employees must be expected to earn at
least $5,000 annually. Employees involved in the Plan may
contribute up to $6,000 of their compensation, on a pre-tax
basis, subject to statutory and Internal Revenue Service
guidelines. Contributions to the Plan are invested at the
direction of the participant. Mid-Cal Express, Inc. made
matching contributions of $11,163 to the Plan during the year
ended December 31, 1997.
15. MAJOR CUSTOMERS
Mid-Cal Express, Inc. has approximately 200 customers
and the five largest customers, all unaffiliated, comprised
total transportation revenue of $9,424,864, or approximately
62 percent of their total transportation revenue.
16. COMMITMENTS AND CONTINGENCIES
MID-CAL EXPRESS, INC.
LEASES
Mid-Cal Express, Inc. has operating lease commitments
for revenue equipment and office and terminal property, which
expire over the next five years. The following is a schedule
of future minimum lease payments for operating leases (with
initial or remaining terms in excess of one year) as of
December 31, 1997:
December 31, 1998 $1,146,671
December 31, 1999 1,146,659
December 31, 2000 997,830
December 31, 2001 461,962
December 31, 2002 97,632
Total $3,850,754
Rental expense for all operating leases of the
transportation segment consisted of the following as of
December 31, 1997:
Revenue equipment rentals $ 912,295
Terminal, warehouse, and office rentals 124,792
Other equipment rentals 10,258
Total $1,047,345
Mid-Cal Express, Inc. is obligated under its liability
and property damage insurance policies for losses up to the
specific policy deductibles as a result of accidents and
claims incurred. Accrued loss reserves of $72,520 as of
December 31, 1997 were recorded to cover these potential
claims.
MID-CAL EXPRESS LOGISTICS, INC.
Mid-Cal Express Logistics, Inc. has an operating lease
commitment for office property, which expires in July, 1998.
PARENT CORPORATION
The Parent Corporation (Prime Companies, Inc.) maintains
its offices at 155 Montgomery Street, Suite 406, San
Francisco, California, 94104. The Parent Corporation leases
680 square feet under a one year lease expiring in November,
1998.
17. OTHER EVENTS:
On December 31, 1997, the President of Mid-Cal Express,
Inc. resigned to pursue other interests, and was replaced by
the Vice-President of Operations. The former president has
been retained until March 31, 1998 as a consultant to Mid-Cal
Express, Inc.
18. Quarterly Results of Operations (Unaudited)
Fiscal 1997
March 31 June 30 September 30 December 31
Operating revenue $3,399,000 $4,321,000 $4,066,000 $4,172,000
Operating expenses
and costs 3,521,000 4,237,000 4,375,000 4,703,000
Operating income <122,000> 84,000 309,000 <531,000>
Other income, net 14,000 17,000 39,000 84,000
Interest expense 88,000 97,000 103,000 75,000
Income (loss) before
income taxes <196,000> 4,000 <373,000> <522,000>
Income taxes (benefit) <70,000> 1,000 <134,000> <189,000>
Net income $<126,000> $3,000 $<239,000> $ <333,000>
Net income per share $<0.06> $0.00 $0.10 $0.13
Average shares and
share equivalents
outstanding 1,986,128 1,986,128 2,486,128 2,486,128
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Certain information about directors and executive officers of the Company
is set forth below:
OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions with the Company
as of the date of this Prospectus of all of the officers and directors (the
"Named Executive Officers") of the Company. Also set forth below is
information as to the principal occupation and background for each person in
the table.
a) Directors and Executive Officers of the Company
Name Age Director Since Position
Irving Pfeffer 73 1970 (1) Chairman, CEO
David Lefkowitz CPA 48 1996 President, COO
Marshall Raines 71 1998 Director
Alon Adani 31 1998 Director
Nicole Mason, JD 26 Corporate
Secretary
Emilio Guglielmelli 42 1996 President, Mid-Cal
Express and
Mid-Cal Express
Logistics/
COO Express
(1) As director of Prime Management, Inc. since its inception.
b) Key Personnel
David Gosling 48 1997 VP Finance, Mid-Cal
Express and Mid-
Cal Express
Logistics
The following is a summary of background information about the officers and
directors:
IRVING PFEFFER has practiced law at Pfeffer & Williams P.C. (formerly Law
Offices of Irving Pfeffer) since 1975. He specializes primarily in business
litigation and general corporate law and has assisted a number of "start-up"
companies with securities and other business related legal matters. In
the course of his corporate legal work, Mr. Pfeffer has assisted companies
to raise venture capital and develop their business plans. Mr. Pfeffer has
written and published extensively on the topics of capital markets, business
financing and insurance. He is also a Chartered Life and Property and
Casualty Underwriter. Mr. Pfeffer holds a BA degree in Economics and Political
Science from McGill University, Canada (1949); a Ph.D. In Economics from the
Wharton School of Business, University of Pennsylvania (1954) and a law
degree from LaSalle Extension University (1974).
Contact at: 155 Montgomery Street, Suite 406, San Francisco, CA 94104 (415)
398-4242
DAVID LEFKOWITZ is President and COO of Prime Companies. Mr. Lefkowitz has
been COO and President since January 1998. Between 1988 and December 1996, Mr.
Lefkowitz operated and worked for Lefkowitz & Company, A Certified Public
Accounting Firm. There, he specialized in management consulting of growing
companies, preparing them for eventual sale and/or mergers and acquisitions.
Mr. Lefkowitz has been a CPA since 1977 and sold his accounting practice in
December 1996 in order to consult full-time. Mr. Lefkowitz earned his BS in
Business and Accounting from University of Central Florida, Orlando, Florida
in 1974.
Contact at: 155 Montgomery Street, Suite 406 San Francisco, CA 94104 (415)
398-4242
MARSHALL L. RAINES: has been a Director of the Company since January 1998.
Mr. Raines is a Professor of Advertising, teaching a number of different
courses, at San Jose State University, since 1980. There he also coordinates
the advertising degree program, which is the largest such accredited program
in northern California. Mr. Raines has more than 22 years experience as a
senior marketing/advertising executive with major US corporations. He is on
the Marketing Advisory Board for the United States Postal Service. He earned
his BS in Marketing from New York University in 1949 and his MBA from the same
university in 1953.
Contact at: 155 Montgomery Street, Suite 406 San Francisco, CA 94104 (415)
398-4242
ALON ADANI has been a Director of the Company since January 1998. Mr. Adani is
an investment strategist and financial analyst for Ourinvest International
Corp. in Miami, Florida, since 1996. During 1994 and 1995, Mr Adani was
involved in the investment banking activities of Firma Praktika in Moscow,
Russia, where he handled transportation matters and contracts. Between 1992
and 1993, Mr. Adani was an exporter/importer for Sanscow Corporation in San
Francisco, California. Mr. Adani earned his B.S. in Finance and his M.B.A. at
the University of Miami.
Contact at: 155 Montgomery Street, Suite 406 San Francisco, CA 94104 (415)
398-4242
EMILIO GUGLIELMELLI has been President of Mid-Cal Express Logistics since its
inception in June of 1997 and became President of Mid-Cal Express in January
1998. Prior to the formation of Mid-Cal Express Logistics, Mr. Guglielmelli was
the Director of Marketing and Operations between September 1996 and June 1997.
While serving in that capacity, Mr. Guglielmelli created strong relationships
with customers and developed a network of contacts throughout the trucking
industry, which provided the foundation for Mid-Cal Express Logistics. Mr.
Guglielmelli has worked in the trucking transportation industry for 16 years
and is knowledgeable in all aspects of the business. Between 1992 and September
1996, he worked for D.E.F. Express in the Marketing and Operations
department, gaining a reputation for increasing sales of trucking
services.
Contact at: 21496 Main Street, Grand Terrace CA 92313 (909) 779-1800
NICOLE MASON is licensed to practice law in California and has practiced as a
corporate/securities associate at Pfeffer & Williams P.C. in San Francisco,
since July 1997. Ms. Mason has been corporate secretary of Prime Companies
since January 1998. Prior to joining Pfeffer & Williams, she worked as a
litigation associate at McMahon Law Offices in San Jose, from February to June
1997. From September 1996 !January 1997, Ms. Mason provided litigation
support services to a large full service law firm in San Francisco and the U.S.
government, with respect to class action litigation matters. While
attending law school, Ms. Mason worked at Kelso & Associates (May-December,
1994) and Auler Law Offices (January 1995-June 1996) in Champaign, Illinois.
She has also worked for the New York Supreme Court as a judicial clerk
(May-June 1995) and at Lincoln Financial Services in Tacoma, Washington
(July-August 1995) as a securities/investment advisor compliance consultant.
Ms. Mason attended the State University of New York at Albany and graduated
with BA's in Political Science and Psychology in 1993. She earned her law
degree at the University of Illinois (Champaign-Urbana) in 1996.
Contact at: 155 Montgomery Street, Suite 401 San Francisco, CA 94104 (415)
296-7272
KEY EMPLOYEES
DAVID GOSLING is currently Vice-President of Finance of Mid-Cal Express and Mid-
Cal Express Logistics. He has been the Controller of Logistics since its
inception in June 1997 and was previously the full time Controller of Mid-Cal
Express (and formerly Country Wide Truck Service, Inc.) since February 1993,
with a promotion to Deputy CFO of parent Country Wide Transport Services in
September 1995 and another promotion to VP of Finance for Mid-Cal Express in
August 1997. He is a California CPA since November 1991 and earned his BS
degree in Accounting from California State University Long Beach in 1984.
Contact at: 21496 Main Street, Grand Terrace CA 92313 (909) 779-1800
The Company's directors will be reimbursed for any out-of-pocket expenses
incurred by them for attendance at meetings of the Board of Directors or
committees thereof. The Board of Directors also intends to compensate non-
employee directors $500 for each meeting of the Board attended by such
director.
COMPENSATION
The Company has employment agreements with its CEO and President/COO, as of
January 1, 1998. No other employees or key personnel are subject to employment
agreements. Under the employment agreements, both the President/COO and CEO
agreed to provide services for three years at $10,000 a month plus 500,000
options each.
STOCK OPTION PLAN
The following table sets forth information concerning each grant of stock
options to each of the Named Executive Officers during the year ended December
31, 1997.
Individual Grants
Name/Position Number of Exercise Expiration
Securities Price (1) Date
Underlying Options/
Options/SAR's
SARs granted Granted during 1997
Chairman/CEO 50,000 $3.00 12/31/2000
Chairman/CEO 500,000 $3.00 12/31/2000
President, Express 100,000 $3.00 12/31/2000
President, Express 50,000 $6.00 12/31/2000
Controller, Express/
Logistics 5,000 $6.00 12/31/2000
President/COO 25,000 $3.00 12/31/2000
President/COO 500,000 $3.00 12/31/2000
President, Logistics/
COO, Express 100,000 $3.00 12/31/2000
President, Logistics/
COO, Express 50,000 $6.00 12/31/2000
Corporate Secretary 5,000 $3.00 12/31/2000
(1) Options were granted at prices determined by the Board.
ITEM 10. EXECUTIVE COMPENSATION
This item is incorporated by reference from the Company's Notice and Proxy
Statement for its annual meeting of stockholders to be held on Monday,
March 23, 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This item is incorporated by reference from the Company's Notice and Proxy
Statement for its annual meeting of stockholders to be held on Monday,
March 23, 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This item is incorporated by reference from the Company's Notice and Proxy
Statement for its annual meeting of stockholders to be held on Monday,
March 23, 1998.
PART IV
ITEM 13. EXHIBITS, REPORTS ON FORM 8-K AND SUPPLEMENTAL
INFORMATION
(a) INDEX TO EXHIBITS
4.1 1998 Proxy
4.2 Summary of 401(K) plan
4.3 Sample Stock certificate
10 Employment Agreements
27 Financial Data Schedule
In accordance with the Commission Rules, the following is a list of all
Compensatory Plans or Arrangements of the Company:
Prime Companies 401(k)
Prime Companies, Inc. Incentive Stock Option Plan
(b) No reports on Form 8-K were filed during the last quarter of the year
covered by this report.
FORWARD-LOOKING STATEMENTS
Certain statements made herein or elsewhere by, or on behalf of, the Company
that are not historical facts are intended to be forward-looking statements
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on
assumptions about future events and are therefore inherently uncertain.
The Company cautions readers that the following important factors, among
others, could affect the Company's consolidated results:
(1) Whether acquired businesses perform at pro forma levels used by management
in the valuation process and whether, and the rate at which, management is able
to increase the profitability of acquired businesses.
(2) The ability of the Company to manage its growth in terms of implementing
internal controls and information gathering systems, and retaining or
attracting key personnel, among other things.
(3) The amount and rate of growth in the Company's corporate general and
administrative expenses.
(4) Changes in interest rates, which can increase or decrease the amount the
Company pays on borrowings.
(5) Changes in government regulation, including tax rates and structures.
(6) Changes in accounting policies and practices adopted voluntarily or
required to be adopted by generally accepted accounting principles.
The Company cautions readers that it assumes no obligation to update or publicly
release any revisions to forward-looking statements made herein or any other
forward-looking statements made by, or on behalf of, the Company.
SHAREHOLDER INFORMATION
Form 10-KSB Availability. A copy of the 1997 Form 10-KSB filed with the
Securities and Exchange Commission will be forwarded, upon request, to any
shareholder. Requests should be directed to:
David Lefkowitz, President
Prime Companies, Inc.
155 Montgomery Street, Suite 406
San Francisco CA 94104-4109
Transfer Agent and Registrar
Continental Stock Transfer
and Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Independent Auditors
Gilbert & Company
Communications Directory
Corporate Offices: Prime Companies, Inc.
Mailing Address: 155 Montgomery Street, Suite 406, San Francisco CA 94104-4109
Telephone: (415) 398-4242
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized. Dated
this 23rd day of March, 1998.
Prime Companies, Inc.
By: /s/ Irving Pfeffer
Irving Pfeffer
Chairman, Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ David L. Lefkowitz By: /s/ Nicole B. Mason
David L. Lefkowitz Nicole B. Mason, Secretary
Director, President/COO and Chief
Financial Officer
By: /s/Emelio Guglielmelli By: /s/ Marshall L. Raines
Emelio Guglielmelli Marshall L. Raines
Director Director
By: /s/ Alon Adani
Alon Adani
Director
PRIME COMPANIES, INC.
155 MONTGOMERY STREET, SUITE 406
SAN FRANCISCO, CALIFORNIA
1998
Notice of Annual Shareholders Meeting
and
Proxy Statement
<PAGE>
PRIME COMPANIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 23, 1998
The Annual Meeting of Shareholders of Prime Companies, Inc. (the
"Company") will be held at the Company's corporate offices at 155
Montgomery Street, Suite 406, San Francisco, California 94104 on
March 23, 1998 at 10:00 A.M., Pacific Time, for the following
purposes:
I. To elect five directors to each serve a one year term expiring
in 1999 as of the next annual meeting.
II. To ratify the appointment of Gilbert & Company, CPA to
audit the Company's financial statements for the year 1998.
III. To approve the Stock Option Plans for Officers, Directors,
employees and consultants.
IV. To ratify the 401(k) plan.
V. To amend the Company's by-laws to eliminate cumulative
voting, or alternatively, to require advance notice by shareholders of
their election to cumulate their votes, for any given meeting.
VI. To transact such other business, including shareholder
proposals, as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 13,
1998 as the record date for determining the shareholders entitled to
notice and to vote at the Annual Meeting. Consequently, only the
holders of common shares of record on the transfer books of the
Company at the close of business on March 13, 1998 will be entitled
to notice of and to vote at the meeting.
We invite all shareholders to attend the meeting. To ensure that
your shares will be voted at the meeting, however, please complete,
date and sign the enclosed proxy and return it to the corporate offices
promptly. If you attend the meeting, you may vote in person, even
though you sent in your proxy.
David Lefkowitz
President
March 10, 1998
<PAGE>
PRIME COMPANIES, INC.
155 Montgomery Street, Suite 406
San Francisco, CA 94104
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
This proxy statement and the accompanying proxy/voting instruction
card (proxy card) are being mailed on or about March 13, 1998, to
holders of common shares in connection with the solicitation of
proxies by the Board of Directors for the 1998 Annual Meeting of
Shareholders in San Francisco, CA. Proxies are solicited to give all
shareholders of record at the close of business on March 12, 1998,
an opportunity to vote on matters that come before the meeting.
This procedure is necessary because shareholders live in many states
and most will not be able to attend. Shares can be voted only if the
shareholder is present in person or is represented by proxy. The
proxy may be revoked by a shareholder at any time prior to its use
by giving written notice of such revocation to the Secretary of the
Company or by voting in person at the meeting.
When your proxy card is returned properly signed, the shares
represented will be voted in accordance with your directions.
Abstentions are voted neither "for" nor "against," but are counted in
the determination of a quorum. You can specify your choices by
marking the appropriate boxes on the enclosed proxy card. If your
proxy card is signed and returned without specifying choices, the
shares will be voted as recommended by the directors.
Your vote is important. Accordingly, you are urged to sign and
return the accompanying proxy card whether or not you plan to
attend the meeting. If you do attend, you may vote by ballot at the
meeting, thereby canceling any proxy previously given.
As a matter of policy, proxies, ballots, and voting tabulations that
identify individual shareholders are kept private by the Company.
Such documents are available for examination only by the inspectors
of election and certain personnel associated with processing proxy
cards and tabulating the vote. The vote of any shareholder is not
disclosed except as may be necessary to meet legal requirements.
Securities and Exchange Commission ("SEC") rules require that an
annual financial report precede or be included with proxy materials.
Accordingly, a copy of the Prime Companies, Inc. audited financial
statements for the year ending December 31, 1997 is included herein.
The cost of the solicitation of proxies will be borne directly by the
Company.
On December 31, 1997, there were approximately 3,013,123 shares
of Common Stock outstanding. Each share of Common Stock is
entitled to one vote on each matter properly brought before the
meeting.
PROPOSAL I. ELECTION OF DIRECTORS
Five directors are to be elected at the 1998 Annual Meeting of
Shareholders, each to serve until the 1999 Annual Meeting, or until
their successors have been elected and qualified.
The Proxy Committee designated on the Proxy Card intend to vote
FOR the election of the five nominees identified below unless
otherwise instructed. These nominees have been selected by the
initial shareholders and current Board of Directors. If you do not
wish your shares to be voted for a particular nominee, please identify
the exceptions in the appropriate space provided on the proxy card.
If at the time of the meeting one or more of the nominees have
become unavailable to serve, shares represented by proxies will be
voted for the remaining nominee and for any substitute nominee or
nominees designated by the Board of Directors, or, if none, the size
of the board will be reduced. The Board of Directors knows of no
reason why any of the nominees will be unavailable or unable to
serve.
For each nominee there follows a brief listing of principal occupations
for at least the past five years, other major affiliations, and age as of
December 31, 1997.
IRVING PFEFFER has practiced law at Pfeffer & Williams P.C.
(formerly law Offices of Irving Pfeffer) since 1975. He specializes
primarily in business litigation and general corporate law and has
assisted a number of start-up companies with securities and other
business related legal matters. In the course of his corporate legal
work, Mr. Pfeffer has assisted companies to raise venture capital and
develop their business plans. Mr. Pfeffer currently devotes
approximately half of his time to the law firm and half to his position
as CEO of Prime Companies, Inc., where he oversees the activities
of the subsidiaries' management and handles general business and
legal matters of the Company. Mr. Pfeffer has written and published
extensively on the topics of capital markets, business financing and
insurance. He is also a Chartered Life and Property and Casualty
Underwriter. Mr. Pfeffer holds BA's in Economics and Political
Science from McGill University, Canada (1949); a Ph.D. In
Economics from the Wharton School of Business, University of
Pennsylvania (1954) and a law degree from LaSalle Extension
University (1974).
DAVID LEFKOWITZ is President and COO of Prime Companies.
Mr. Lefkowitz has been COO and President since January 1998.
Between 1988 and December 1996, Mr. Lefkowitz operated and
worked for Lefkowitz & Company, A Certified Public Accounting
Firm. There, he specialized in management consulting of growing
companies, preparing them for eventual sale and/or mergers and
acquisitions. Mr. Lefkowitz has been a CPA since 1977 and sold his
accounting in December 1996 in order to consult full-time. Mr.
Lefkowitz earned his BS in Business and Accounting from University
of Central Florida, Orlando, Florida in 1974.
MARSHALL L. RAINES: has been a Director of the Company since
January 1998. Mr. Raines is a Professor of Advertising, teaching a
number of different courses, at San Jose State University, since
1980. There he also coordinates the advertising degree program,
which is the largest such accredited program in northern California.
He has served as a consultant to advertising agencies and is on the
Marketing Advisory Board for the United States Postal Service, and
has published a number of books on the subject of advertising. He
earned his BS in Marketing from New York University in 1949 and
his MBA from the same university in 1953.
ALON ADANI has been a Director of the Company since January
1998. Mr. Adani is an investment strategist and financial analyst for
Ourinvest International Corp. in Miami, Florida, since 1996. During
1994 and 1995, Mr Adani was involved in the investment banking
activities of Firma Praktika in Moscow, Russia, where he handled
transportation matters and contracts. Between 1992 and 1993, Mr.
Adani was an exporter/importer for Sanscow Corporation in San
Francisco, California. Mr. Adani earned his B.S. in Finance and his
M.B.A. at the University of Miami.
EMILIO GUGLIELMELLI has been (full time) President of Mid-Cal
Express Logistics since its inception in June of 1997 and became
President of Mid-Cal Express, Inc. in January 1998. Prior to the
formation of Mid-Cal Express Logistics, Mr. Guglielmelli was the
Director of Marketing and Operations of Mid-Cal Express, Inc.
between September 1996 and June 1997. While serving in that
capacity, Mr. Guglielmelli created strong relationships with
customers and developed a network of contacts throughout the
trucking industry, which provided the foundation for Mid-Cal
Express Logistics. Mr. Guglielmelli has worked in the trucking
industry for 16 years and is knowledgeable in all major operational
aspects of the business. Between 1992 and September 1996, he
worked for D.E.F. Express in the Marketing and Operations
department, gaining a reputation for increasing sales of trucking
services.
The "outside" directors, Alon Adani and Marshall Raines presently
receive compensation in the amount of $500.00 per meeting for
serving as directors. No other directors receive compensation for
their services as Directors.
The Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the
Company. However, it is not involved in day-to-day operating
details. Members of the board are kept informed of the Company's
business through discussions with Officers and key personnel, by
reviewing analyses and reports sent to them each month, and by
participating in board and committee meetings.
The Board held 4 meetings during fiscal 1997. The first three meetings
were conducted by the predecessor company's Board (i.e. Prime
Management, Inc.), which is now the Board of Prime Companies, Inc.,
and the fourth Board meeting for the fiscal year 1997 was the first
meeting of the Board of the Company. The Company has had five
directors as of February, 1998, but only two during the entirety of
fiscal 1997. Thus all Board actions in fiscal 1997 were approved by
100% of the Board.
PROPOSAL II. RATIFICATION OF APPOINTMENT OF
AUDITORS
Subject to shareholder ratification, the Board of Directors has
appointed the firm of Gilbert & Company as the independent auditors
to examine the Company's financial statements for the year 1997.
The 1997 audit has been completed by Gilbert & Company. THE
BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR SUCH RATIFICATION. If the shareholders do not ratify this
appointment, other independent auditors will be considered by the
Board.
PROPOSAL III. RATIFICATION OF STOCK OPTION PLAN
The Company provides incentive-based compensation, in the form of
stock options, to Officers, Directors and qualified employees.
Options are currently granted at the discretion of the Board. During
fiscal 1997, options were granted to compensate Officers, Directors
and certain employees for services rendered. The Board plans to
effect a policy for future options grants, in order to reward beneficial
efforts and promote loyalty, productivity and creativity.The Board
recommends that you vote FOR ratification of the current stock
option Plan and selection and adoption of a Formal Plan.
PROPOSAL IV. RATIFICATION OF 401(K) PLAN
The Officers of the Company have adopted a 401(k) Plan to
compensate employees, promote loyalty and provide an incentive for
employees to continue serving the Company, reducing attrition costs.
A copy of the Plan's Summary is attached. THE BOARD
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE 401(K) PLAN.
PROPSAL V. AMENDMENT OF ARTICLE I, SECTION 8 OF
BY-LAWS
Currently, Article I, Section 8 of the Company's By-laws allows for
cumulative voting without advance notice by shareholders of
intentions to cumulate votes. Cumulative voting is not required by
law and is prohibited under the Company's Articles of Incorporation.
In order to bring the By-laws into conformity with the Articles, the
Board recommends that this voting method be eliminated.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE FOLLOWING CHANGES TO THIS SECTION
OF THE BY-LAWS: Eliminate the second paragraph currently
appearing in section 8.
Replace that paragraph with the following: "Every shareholder
entitled to vote at any election for directors of the Company shall be
entitled to one vote per share and shall give each one candidate a
number of votes equal to no more than the number of votes to which
his/her shares are entitled. Shareholders may not cumulate their
votes."
The Board feels that non-cumulative voting will ensure that
shareholders with the greatest interest in the Company's success will
have the greatest voice with respect to the management of the
Company. Furthermore, the Board feels that this amendment will
preserve the rights and interests of the Company's initial
shareholders.
OTHER MATTERS
In addition to the matters described above, there will be an address
by the Chairman and a general discussion period during which
shareholders will have an opportunity to ask questions about the
business.
If any other matter is presented to the meeting which under
applicable proxy regulations need not be included in this proxy
statement or which the Board of Directors did not know a reasonable
time before this solicitation would be presented, the persons named
in the accompanying proxy will vote proxies with respect to such
matter in accordance with their best judgement.
<PAGE>
BENEFIT PLANS
Effective January 1, 1998, the Company adopted a Deferred
Compensation 401K Plan (the "Plan") covering all full-time
employees of itself and its subsidiaries. To be eligible to participate
in the Plan, employees must have been employed by the Company
for six months, as regular employees. Employees involved in the
Plan may contribute up to 15% or $10,000 annually, whichever is
less, of their compensation, on a pre-tax basis, subject to statutory
and Internal Revenue Service guidelines. Contributions to the Plan
are invested, at the direction of the participant in accordance with
directives available under the Plan. The Company must make
matching contributions of up to 25% or $2000 of an employee's
deferral election for qualified employees.
REPORT OF THE DIRECTORS ON EXECUTIVE
COMPENSATION
The Board of Directors of the Company determines the base salaries
of the Company's executive officers and the amount of annual bonus
awards to be paid, if any, to the executive officers. In addition, the
Board administers the Company's stock option plans under which
stock option grants may be made to executive officers and other
employees.
COMPENSATION POLICIES AND COMPONENTS OF
COMPENSATION
The Board of Directors' fundamental executive compensation
philosophy is to enable the Company to attract and retain key
executive personnel and to motivate those executives to achieve the
Company's objectives. The assessment of each executive's
performance is based on attainment of his or her specific personal
objectives in light of the Company's overall annual strategic goals for
1998 related to budget goals, continued growth of the Company
through acquisitions or otherwise and Company financing. Each
objective is weighted in accordance with its relationship with the
Company's overall strategic goals and the extent to which the
objectives are achieved. The Company's annual strategic goals are
established by the Board of Directors.
Each executive officer's compensation package is reviewed annually
and is comprised of up to three components: base salary, cash
bonuses and stock options. In addition to those components,
executive officers of the Company are eligible to participate in all
employee benefit programs generally available to all other Company
employees.
BASE SALARY
In setting the base salary levels for each executive officer, the Board
of Directors reviews surveys and other available information on the
base salaries of executive officers in comparable companies. Factors
considered include, but are not limited to, company size, stage of
development and uniqueness of a company's products and geographic
locations. Internal performance reviews, the level of the executive's
responsibilities and the value of the executive's job in the
marketplace, are also important criteria in establishing salary
increases, in combination with overall compensation
recommendations from management. To remain competitive, the
Company's base salary ranges generally fall within a broad range of
such companies. The Board, however, does not target a specific
position in the range of comparative surveys and available data for
each executive. Other factors such as length of service and the
Committee's judgement as to an individual's contribution toward the
achievement of the Company's overall annual strategic goals are also
considered, but are not assigned any specific mathematical weight.
BONUS AWARDS
Bonuses are paid in accordance with the terms and conditions set
forth in employment agreements, to whom applicable, and/or the
compensation policy of the Company or its subsidiaries. As part of
the review and setting of annual compensation, there may be annual
cash or stock bonuses tied to the achievement of certain specified
corporate objectives and milestones. Awards may be based on the
attainment by the Company of specific annual milestones set by and
evaluated by the Board and are granted at the discretion of the
Board.
STOCK OPTIONS
The purpose of the granting of stock options is to enable the
company to attract, reward, compensate and retain people who
provide services to the company and to provide them with an
incentive to contribute to the additional technical or commercial
success of the Company.
The Board recognizes that the company is in a highly competitive
field, and the success of the Company is very much dependent on its
ability to attract and retain top management talent. The Board has
concluded that the best way to compete for key personnel is to offer
significant potential rewards based on the Company's success through
the issuance of stock options.
SUMMARY
In summary, the Board of Directors, acting as the compensation
committee, believes that the Company's compensation policies and
structure appropriately takes into account those factors characteristic
of the transportation services business of which the Company is part.
EXECUTIVE COMPENSATION
The following table sets forth cash compensation paid to the chief
executive officer and the President of the Company and the officers
of its subsidiaries for services rendered to the Company and its
subsidiaries during the fiscal year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
Name and Principal position Salary Bonus
Irving Pfeffer CEO (1) $120,000 $0
David Lefkowitz President (2) $120,000 $0
Emilio Guglielmelli, President of both
subsidiaries $100,000 $0
Tony Avilez (3) $100,000 $0
(1) Cash compensation in the amount of $50,0000 was paid by
Mid-Cal Express, Inc. during fiscal year 1997, and options were
issued by the Company. No other cash compensation was received
or paid in fiscal 1997.
(2) Cash compensation in the amount of $20,000 was paid by
Prime Management, Inc. during fiscal year 1997 to cover consulting
fees, and stock and options were issued by the Company. No other
cash compensation was received or paid in fiscal 1997.
(3) Mr. Avilez resigned on December 31, 1997 and was replaced
as President of Mid-Cal Express by Emilio Guglielmelli. Mr. Avilez
has been retained as a consultant, at his 1997 rate of compensation,
through March 31, 1998.
EMPLOYMENT AGREEMENTS
On January 1, 1998, The Company entered into Employment
Agreements with David Lefkowitz and Irving Pfeffer. The
President/COO and CEO, respectively will receive a base salary of
$120,000 and will serve the Company in each of their respective
positions for three years. David Lefkowitz and Irving Pfeffer each
received a signing bonus of 500,000 options.
OPTION GRANTS IN 1997
In fiscal year 1997 there were no stock options exercised. A total of
2,578,543 options were granted to Officers, Directors, qualified
employees and shareholders during fiscal 1997. The following is a
summary of option grants to Officers, Directors and holders of stock
warrants for 5% or more of the stock issued and outstanding
(assuming the exercise of all options).
On January 1, 1997, options were issues as follows:
Irving Pfeffer 50,000
David Lefkowitz 25,000
Emilio Guglielmelli 100,000
On July 19, 1997, 50,000 options were granted to Emilio
Guglielmelli, Director. These options vested on January 1, 1998.
On October 1, 1997, the following options were issued to
Officers/Directors, immediately vested:
David Lefkowitz, President: 500,000
Irving Pfeffer, CEO: 500,000
On December 1, 1997, options were issued to all shareholders of
record. At that time the following options were issued to
Directors/shareholders, Officers and a 5% shareholder:
Irving Pfeffer 237,041
David Lefkowitz 2,667
Nicole Mason 5,000
Marshall Raines 5,000
David Shaw 333,333
These options vested immediately as of the date of issue.
All options issued in fiscal 1997 may be exercised between January
1, 1998 and December 31, 2000.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding as the
beneficial ownership of the Common Stock as of December 31, 1997
by (i) each director of the Company, (ii) each person nominated to
become a director of the Company, (iii) each of the executive
officers named in the Summary Compensation Table contained
herein, (iv) all directors and executive officers of the Company as a
group, and (v) each person known by the Company to own
beneficially more than 5% of the Common Stock issued. No
Preferred Stock has ever been issued.
Directors, Officers Shares Beneficially Approximate
and 5% Stockholders Owned (1) % of Class
Irving Pfeffer, CEO 1,246,124(2) 41%**
1045 Mason Street
San Francisco, CA 94108
David Lefkowitz
President 8,000 *
1250 Jones Street, Apt 1102
San Francisco, CA 94109
David Shaw 1,000,000 33%**
120 W. 45th Street
39th Floor, Tower 45
New York, NY 10036
All Directors and
Officers as a group
(3 individuals) 1,254,124 41%**
* Less than 1% of shares issued.
** Rounded to the nearest percentage point.
(1) This does not include stock warrants beneficially owned.
(2) 535,000 of the shares beneficially owned by Irving Pfeffer are
held in trust by Irving Pfeffer as non-beneficiary trustee of two
trusts. Irving Pfeffer has voting power with respect to these shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1997, Prime Management, Inc, the predecessor
company, leased office space from Pfeffer & Williams, P.C. for the
month of December 1997. This lease will continue through
November 1998 at $1,370 per month.
On December 30, 1997, the Company was formed as a result of a
merger between Prime Management, Inc. and Corcoran Technologies
Corporation, through which Prime Management, Inc. merged into
Corcoran Technologies Corporation, a public company. Per the
terms of the merger agreement, Corcoran Technologies changed its
name to Prime Companies, Inc. The shareholders of Prime
Management, Inc. received shares and/or options of Corcoran
Technologies in exchange for their shares and/or options.
Additionally, the shareholders of Corcoran Technologies retained
250,000 shares of stock in the Company. Pierce Mill & Associates
was the sole shareholder of Corcoran Technologies.The Company
currently owns real property in Fontana, California ( Cherry Avenue
property), which it leases to another trucking company. The lease
is for two years and commenced on June 7, 1997. The lessee pays
the Company (through its trucking subsidiary) $9,600 a month and
pays 90% of the property taxes on the building and a pro rata share
of the land assessment. Mid-Cal Express retains the right to use two
doors in the northeast corner of the dock located on the
property.Mid-Cal Express Logistics utilizes equipment and
accounting and administrative staff of Mid-Cal Express, Inc. Mid-
Cal Express Logistics reimburses Mid-Cal Express, Inc. for a
percentage of the cost of those services provided to it by employees
of Mid-Cal Express Inc.
Effective December 30, 1997, Antonio Avilez resigned as President
of Mid-Cal Express, but has been retained as a consultant until
March 31, 1998. In consideration therefor, Mr. Avilez will receive
(a) monthly compensation totaling approximately $25,000 for the
three months ending March 31, 1998 and (b) the use of a company
vehicle until March 31, 1998.
On October 1, 1997, the Company retained the services of Pfeffer &
Williams, a Professional Corporation, for legal counsel. Irving
Pfeffer, CEO and Chairman of the Board, is the President of Pfeffer
& Williams, P.C.
Irving Pfeffer is Chairman of the Boards of Mid-Cal Express, Inc.
and Mid-Cal Express Logistics, Inc., as well as a Director and
Officer of Prime Companies, inc.
FUTURE SHAREHOLDER PROPOSALS
The Company must receive at its principal office before March 19,
1998, any proposal which a shareholder wishes to submit for the
1998 Annual Meeting of Shareholders, if the proposal is to be
considered by the Board of Directors for inclusion in the proxy
materials for that meeting.
David Lefkowitz President
March 10, 1998
PRIME COMPANIES, INC.
401(k) PLAN
SUMMARY PLAN DESCRIPTION
<PAGE>
TABLE OF CONTENTS
I
INTRODUCTION TO YOUR PLAN
II
GENERAL INFORMATION ABOUT YOUR PLAN
1. General Plan Information 2
2. Employer Information 2
3. Plan Administrator Information 3
4. Plan Trustee Information 3
5. Service of Legal Process 4
III
PARTICIPATION IN YOUR PLAN
1. Eligibility Requirements 4
2. Participation Requirements 4
3. Excluded Employees 4
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan 5
2. Participant Salary Reduction Election 6
3. Your Share of Employer Contributions 7
4. Compensation 8
5. Forfeitures 9
6. Transfers From Qualified Plans (Rollovers) 9
7. Directed Investments 9
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement 10
2. Distribution of Benefits Upon Late Retirement 10
3. Distribution of Benefits Upon Death 10
4. Distribution of Benefits Upon Disability 11
5. Distribution of Benefits Upon Termination of Employment 11
6. Vesting in Your Plan 12
7. Benefit Payment Method 13
8. Hardship Distribution of Benefits 13
9. Treatment of Distributions From Your Plan 14
10. Domestic Relations Order 15
11. Pension Benefit Guaranty Corporation 15
VI
SERVICE RULES
1. Year of Service 15
2. Hour of Service 16
3. 1-Year Break in Service 16
4. Uniformed Services Employment and
Reemployment Rights Act 16
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules" 17
VIII
LOANS
1. Loan Requirements 18
IX
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
1. The Claims Review Procedure 20
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights 21
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment 22
2. Termination 22
<PAGE>
PRIME COMPANIES, INC.
401(k) PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
PRIME COMPANIES, INC. wishes to recognize the efforts its
employees have made to its success and to reward them by
adopting a 401(k) Profit Sharing Plan and Trust. This 401(k)
Profit Sharing Plan will be for the exclusive benefit of
eligible employees and their beneficiaries.
Your Plan is a "salary reduction plan." It is also called a
"401(k) plan." Under this type of plan, you may choose to
reduce your compensation and have these amounts contributed to
this Plan on your behalf.
The purpose of this Plan is to reward eligible employees for
long and loyal service by providing them with retirement
benefits.
Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. When you
retire, you will be eligible to receive the value of the
amounts which have accumulated in your account.
Your Employer has the right to submit this Plan to the
Internal Revenue Service for approval. The Internal Revenue
Service will issue a "determination letter" to your Employer
approving this Plan as a "qualified" retirement plan, if this
Plan meets specific legal requirements.
Other participating Employers have adopted the provisions of
this Plan. (See the Section in this Summary entitled "Employer
Information. ")
This Summary Plan Description is a brief description of your
Plan and your rights, obligations, and benefits under that
Plan. Some of the statements made in this Summary Plan
Description are dependent upon this Plan being "qualified"
under the provisions of the Internal Revenue Code. This
Summary Plan Description is not meant to interpret, extend, or
change the provisions of your Plan in any way. The provisions
of your Plan may only be determined accurately by reading the
actual Plan document.
A COPY OF YOUR PLAN IS ON FILE AT YOUR EMPLOYER'S OFFICE AND
MAY BE READ BY YOU, YOUR BENEFICIARIES, OR YOUR LEGAL
REPRESENTATIVES AT ANY REASONABLE TIME. IF YOU HAVE ANY
QUESTIONS REGARDING EITHER YOUR PLAN OR THIS SUMMARY PLAN
DESCRIPTION, YOU SHOULD ASK YOUR PLAN'S ADMINISTRATOR. IN THE
EVENT OF ANY DISCREPANCY BETWEEN THIS SUMMARY PLAN DESCRIPTION
AND THE ACTUAL PROVISIONS OF THE PLAN, THE PLAN WILL GOVERN.
<PAGE>
II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to
know about your Plan. This information has been summarized for
you in this section.
1. General Plan Information
PRIME COMPANIES, INC. 401(k) PLAN is the name of your Plan.
Your Employer has assigned Plan Number 001 to your Plan.
The provisions of your Plan become effective on January 1,
1998, which is called the Effective Date of the Plan.
Your Plan's records are maintained on a twelve-month period of
time. This is known as the Plan Year. The Plan Year begins on
January 1st and ends on December 31st.
Certain valuations and distributions are made on the
Anniversary Date of your Plan. This date is December 31.
The contributions made to your Plan will be held and invested
by the Trustee of your Plan.
Your Plan and Trust will be governed by the laws of the State
of California.
2. Employer Information
Your Employer's name, address and identification number are:
PRIME COMPANIES, INC.
155 Montgomery Street, Suite 406
San Francisco, California 94104
52-203 1531
Your Plan allows other employers to adopt its provisions. You
or your beneficiaries may examine or obtain a complete list of
employers, if any, who have adopted your Plan by making a
written request to the Administrator.
Other Employers who have adopted the provisions of the Plan
are:
MID-CAL EXPRESS (dba COUNTRYWIDE TRUCK SERVICE)
21496 Main Street, Grand Terrace
PO Box 630, Colton, California 92324
(800) 297-4429
77-0416473
MID-CAL LOGISTICS
c/o P. O. Box 630
Colton, California 92324
(800) 297-4429
33-0765034
3. Plan Administrator Information
The name, address and business telephone number of your Plan's
Administrator are:
PRIME COMPANIES, INC.
155 Montgomery Street, Suite 406
San Francisco, California 94104
(415) 398-4242
Your Plan's Administrator keeps the records for the Plan and
is responsible for the administration of the Plan. The
Administrator has discretionary authority to construe the
terms of the Plan and make determinations on questions which
may affect your eligibility for benefits. Your Plan's
Administrator will also answer any questions you may have
about your Plan.
4. Plan Trustee Information
The names of your Plan's Trustees are:
David Lefkowitz
Irving Pfeffer
The Trustees shall collectively be referred to as Trustee
throughout this Summary Plan Description.
The principal place of business of your Plan's Trustee is:
155 Montgomery Street, Suite 406
San Francisco, California 94104
Your Plan's Trustee has been designated to hold and invest
Plan assets for the benefit of you and other Plan
participants. The trust fund established by the Plan's Trustee
will be the funding medium used for the accumulation of assets
from which benefits will be distributed.
<PAGE>
3. Service of Legal Process
The name and address of your Plan's agent for service of legal
process are:
PRIME COMPANIES, INC.
155 Montgomery Street, Suite 406San Francisco, California
94104
Service of legal process may also be made upon the Trustee or
Administrator.
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan,
there are certain eligibility and participation rules which
you must meet. These rules are explained in this section.
1. Eligibility Requirements
You will be eligible to participate in the Plan if you have
completed six (6) months of service and have attained age 21.
You will have completed six (6) months of service if you are
in the employ of your Employer six (6) months after your
employment commencement date.
2. Participation Requirements
Once you have satisfied your Plan's eligibility requirements,
your next step will be to actually become a member or a
"participant" in the Plan. You will become a participant on a
specified day of the Plan Year. This day is called the
Effective Date of Participation.
You will become a participant on the first day of the month
coinciding with or next following the date you satisfy the
eligibility requirements.
3. Excluded Employees
There are certain employees of PRIME COMPANIES, INC. who will
not be eligible to participate in your Plan. Those employees
are:
(a) employees who are leased employees.
(b) employees whose employment is governed by a collective
bargaining agreement under which retirement benefits were the
subject of good faith bargaining, unless such agreement
expressly provides for participation in this Plan.
(c) certain nonresident aliens who have no earned income
from sources within the United States.
<PAGE>
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan
Each year, your Employer will contribute to your Plan the
following amounts:
(a) The total amount of the salary reduction you elected to
defer. (See the Section in this Article entitled "Participant
Salary Reduction Election. ")
(b) A matching contribution equal to 25.0% of the amount of
the salary reduction you elected to defer plus a discretionary
percentage of the amount of the salary reduction you elected
to defer, which percentage will be determined each year by the
Employer.
In applying this matching percentage, however, only salary
reductions up to $2,000 annually will be considered.
You must complete a Year of Service during the Plan Year and
be actively employed on the last day of the Plan Year to share
in the matching contribution.
Each year, your Employer may contribute to your Plan the
following amounts:
(a) On behalf of each non-highly compensated participant and
non-key employee, a special discretionary "qualified"
contribution equal to a uniform percentage of your
compensation, which percentage will be determined each year by
the Employer.
You must complete a Year of Service during the Plan Year and
be actively employed on the last day of the Plan Year to share
in this special contribution.
(b) A discretionary profit sharing amount in addition to the
special contribution, which amount will be determined each
year by your Employer.
You must complete a Year of Service during the Plan Year and
be actively employed on the last day of the Plan Year to share
in this contribution.
In determining your eligibility to share in contributions for
the year, there are special rules which apply if your
employment terminates due to your Retirement (Normal or Late),
Total and Permanent Disability or death.
In such cases, you will be eligible to share in the
contributions made by your Employer in accordance with the
following:
If the reason your employment terminated is due to your
Retirement (Normal or Late), Total and Permanent Disability or
death, then you will be eligible to share in the contribution
for the year without regard to whether you satisfied the
requirements explained above.
2. Participant Salary Reduction Election
As a participant, you may elect to defer up to 15.0% of your
compensation each year instead of receiving that amount in
cash. However, your total deferrals in any taxable year may
not exceed a dollar limit which is set by law. The limit for
1998 is $10,000. This limit may be increased in future years
for cost of living changes.
The amount you elect to defer will be deducted from your pay
in accordance with a procedure established by your Employer
and Administrator. The procedure will require that you enter
into a written salary reduction agreement after you satisfy
the Plan's eligibility requirements. You will be permitted to
modify your election during the Plan Year. However, changes to
a salary reduction election are only permitted twice each
year, prior to the first day of a Plan Year and the first day
of the seventh month of a Plan Year. You are also permitted to
revoke your election any time during the Plan Year.
The amount you elect to defer, and any earnings on that
amount, will not be subject to income tax until it is actually
distributed to you. This money will, however, be subject to
Social Security taxes at all times.
You should also be aware that the annual dollar limit is an
aggregate limit which applies to all deferrals you may make
under this plan or other cash or deferred arrangements
(including tax-sheltered 403(b) annuity contracts, simplified
employee pensions or other 401(k) plans in which you may be
participating). Generally, if your total deferrals under all
cash or deferred arrangements for a calendar year exceed the
annual dollar limit, the excess must be included in your
income for the year. For this reason, it is desirable to
request in writing that these excess deferrals be returned to
you. If you fail to request such a return, you may be taxed a
second time when the excess deferral is ultimately distributed
from the Plan.
You must decide which plan or arrangement you would like to
have return the excess. If you decide that the excess should
be distributed from this Plan, you should communicate this in
writing to the Administrator no later than the March 1st
following the close of the calendar year in which such excess
deferrals were made. If the entire dollar limit is exceeded in
this Plan or any other plan maintained by the Employer, you
will be deemed to have notified the Administrator of the
excess. The Administrator will then return the excess deferral
and any earnings to you by April 15th.
In the event you receive a hardship distribution from your
deferrals to this Plan pursuant to your certification and
agreement that certain conditions are satisfied or any other
plan maintained by your Employer, you will not be allowed to
make additional salary reductions for a period of twelve (12)
months after you receive the distribution. Furthermore, the
dollar limitation set by law with respect to your taxable year
following the year in which you received the distribution,
will be reduced by your salary reductions, if any, for the
taxable year of the distribution.
You will always be 100% vested in the amount you deferred.
This means that you will always be entitled to all of the
deferred amount. This money will, however, be affected by any
investment gains or losses. If the Trustee invested this money
and there was a gain, the balance in your account would
increase. Of course, if there was a loss, the balance in your
account would decrease. Your interest in this account cannot
be forfeited for any reason.
Distributions from your deferred account (including any offset
of loans) are not permitted before age 59 1/2 EXCEPT in the
event of:
(a) death;
(b) disability;
(c) separation from service; or
(d) reasons of proven financial hardship (See the Section in
the Article entitled "Hardship Distribution of Benefits ").
In addition, if you are a highly compensated employee
(generally owners, officers or individuals receiving wages in
excess of certain amounts established by law), a distribution
from your deferred account of certain excess contributions may
be required to comply with the law. The Administrator will
notify you when a distribution is required.
3. Your Share of Employer Contributions
Your Employer will allocate the amount you elect to defer to
an account maintained by the Trustee on your behalf.
If you are eligible, your Employer will also allocate the
matching contribution and the special "qualified" contribution
made to the Plan on your behalf. (See the Section in this
Article entitled "Employer Contributions to the Plan. ")
Your Employer's discretionary profit sharing contribution will
be "allocated" or divided among participants eligible to share
in the contribution for the Plan Year. Your share of the
contribution will depend upon how much compensation you
received during the year and the compensation received by
other eligible participants.
The profit sharing contribution will be allocated to your
account in the same proportion that your compensation in
excess of the Social Security Taxable Wage Base (also called
"excess compensation") plus your compensation bears to the
total "excess compensation" plus compensation of all eligible
participants. However, the maximum amount which can be
allocated to you in this first step is 5.7% of your "excess
compensation" plus your compensation.
If after the first step of the allocation process there still
remains a portion of your Employer's profit sharing
contribution which has not yet been allocated, then the
remainder will be allocated to you in the same proportion that
your compensation bears to the total compensation of all
participants.
If your Employer maintains two or more plans providing for an
allocation or benefit in excess of a portion of your
compensation, then the allocation above may be adjusted. The
Administrator will notify you if your allocation will be
affected.
For any short Plan Year, the Social Security Taxable Wage Base
will be prorated.
In addition to the Employer's contributions made to your
account, your account will be credited annually with a share
of the investment earnings or losses of the trust fund.
You should also be aware that the law imposes certain limits
on how much money may be allocated to your account for a year.
These limits are extremely complex but generally no more than
the lesser of $30,000 or 25% of your compensation may be
allocated to you (excluding earnings or losses) in any year.
The Administrator will inform you if these limits have
affected you.
4. Compensation
For the purposes of your Plan, compensation has a special
meaning. Compensation is defined as your total compensation
that is subject to income tax, that is, all of your
compensation paid to you by your Employer during a Plan Year,
including your salary reduction contributions to any plan or
arrangement maintained by your Employer.
For the first year of your participation in the Plan, your
compensation will be recognized for benefit purposes for the
entire Plan Year.
The Plan, by law, cannot recognize compensation in excess of
$160,000. This amount will be adjusted in future years for
cost of living increases. It will also be applied to certain
highly compensated employees and their family members as if
they were a single participant. If you or a member of your
family may be affected by this rule, ask your Administrator
for further details. For any short Plan Year, the adjusted
limit will be prorated based upon the number of full months in
the short Plan Year.
5. Forfeitures
Forfeitures are created when participants terminate employment
before becoming entitled to their full benefits under the
Plan. Your account may grow from the forfeitures of other
participants. Forfeitures will be "allocated" or divided among
participants eligible to share for a Plan Year. However, a
portion of forfeited amounts will be used to reduce your
Employer contributions to the Plan.
6. Transfers From Qualified Plans (Rollovers)
At the discretion of the Administrator, you may be permitted
to deposit into your Plan distributions you have received from
other plans. Such a deposit is called a "rollover" and may
result in tax savings to you. You should consult qualified
counsel to determine if a rollover is in your best interest.
Your rollover will be placed in a separate account called a
"participant's rollover account." The Administrator may
establish rules for investment.
You will always be 100% vested in your "rollover account."
This means that you will always be entitled to all of your
rollover contributions. Rollover contributions will be
affected by any investment gains or losses. If the Trustee
invested this money and there was a gain, the balance in your
account would increase. Of course, if there were a loss from
an investment, the balance in your account would decrease.
7. Directed Investments
Your Employer has established procedures to permit you to
direct the investment of contributions made by you or on your
behalf to the Plan. These are called the "Participant
Direction Procedures" and consist of the forms you will be
asked to complete. You should request a copy of these
materials from the Administrator. You need to follow these
procedures when you direct investments by giving instructions
to the Administrator. You should review the information in
these materials carefully before you give investment
directions. In addition, the materials indicate how you can
obtain other important information available from the
Administrator on directed investments.
The Plan is intended to be a plan described in Section 404(c)
of the Employee Retirement Income Security Act of 1974. If the
Plan complies with this Section, which it intends to do, then
the fiduciaries of the Plan, including the Employer, the
Administrator and the Trustee, will be relieved of any legal
liability for any losses which are the direct and necessary
result of the investment directions that you give. The
Participant Direction Procedures must be followed in giving
investment directions. If you fail to do so, then your
investment directions need not be followed. You are not
required to direct investments. If you choose not to direct
investments, then the Trustee is responsible for investing
your accounts in a prudent manner.
When you direct investments, your accounts are segregated for
purposes of determining the gains, earnings or losses on these
investments. Your account does not share in the investment
performance for other Participants who have directed their own
investments.
In directing your investments, you should remember that the
amount of your benefits under the Plan will depend in part
upon your choice of investments. If you choose investments
which produce gains and other earnings, your benefits will
tend to increase in value over the period your investments
perform accordingly. Conversely, if you choose investments
that have losses, your benefits will tend to decrease in value
over the period your investments perform accordingly. Losses
can occur. There are no guarantees of performance, and neither
the Employer, the Administrator, the Trustee, nor any of their
representatives provide investment advice or insure or
otherwise guarantee the value or performance of any investment
you choose.
You may direct the Trustee as to the investment of your entire
interest in the Plan.
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement
Your Normal Retirement Date is the first day of the month
coinciding with or next following your Normal Retirement Age.
You will attain your Normal Retirement Age when you reach your
651h birthday.
At your Normal Retirement Age, you will be entitled to 100% of
your account balance. Payment of your benefits will, at your
election, occur as soon as practicable following your Normal
Retirement Date. If you continue working after your Normal
Retirement Age, you may defer receipt of your benefits until
your Late Retirement Date or, if earlier, the April 1st
following the end of the year in which you attain age 70 1/2.
2. Distribution of Benefits Upon Late Retirement
You may remain employed past your Plan's Normal Retirement
Date and retire instead on your Late Retirement Date. Your
Late Retirement Date is the first day of the month coinciding
with or next following the date you choose to retire after
first having reached your Normal Retirement Date. On your Late
Retirement Date, you will be entitled to 100% of your Account.
Actual benefit payment will occur as soon as practicable
following your Late Retirement Date.
3. Distribution of Benefits Upon Death
Your beneficiary will be entitled to a single lump-sum
distribution of 100% of your account balance upon your death.
If you are married at the time of your death, your spouse will
be the beneficiary of the death benefit, unless you otherwise
elect in writing on a form to be furnished to you by the
Administrator. IF YOU WISH TO DESIGNATE A BENEFICIARY OTHER
THAN YOUR SPOUSE, HOWEVER, YOUR SPOUSE MUST IRREVOCABLY
CONSENT TO WAIVE ANY RIGHT TO THE DEATH BENEFIT. YOUR SPOUSE'S
CONSENT MUST BE IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN
REPRESENTATIVE AND ACKNOWLEDGE THE SPECIFIC NONSPOUSE
BENEFICIARY.
If, however,
(a) your spouse has validly waived any right to the death
benefit in the manner outlined above,
(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then your death benefit will be paid to the beneficiary of
your own choosing in a single lump sum. You may designate the
beneficiary on a form to be supplied to you by the
Administrator. If you change your designation, your spouse
must again consent to the change.
Regardless of the method of distribution selected, your entire
death benefit must generally be paid to your beneficiaries
within five years after your death (the "5-year rule").
However, if your designated beneficiary is a person (instead
of your estate or most trusts), then you or your beneficiary
may elect to have minimum distributions begin within one year
of your death and it may be paid over the designated
beneficiary's life expectancy (the "1-year rule"). If your
spouse is the beneficiary, then under the "1-year rule," the
start of payments may be delayed until the year in which you
would have attained age 70 1/2. The election to have death
benefits distributed under the "1-year rule" instead of the
"5-year rule" must be made no later than the time at which
minimum distributions must commence under the "1-year rule"
(or, in the case of a surviving spouse, the "5-year rule," if
earlier).
Since your spouse has certain rights in the death benefit, you
should immediately report any change in your marital status to
the Administrator.
4. Distribution of Benefits Upon Disability
Under your Plan, disability is defined as a physical or mental
condition resulting from bodily injury, disease, or mental
disorder which renders you incapable of continuing any gainful
occupation with your Employer. This condition must constitute
total disability under the federal Social Security Acts.
If you become disabled while a participant, you will be
entitled to 100% of your account balance. Payment of your
disability benefits will be made to you as if you had retired.
(See the Section in this Article entitled "Benefit Payment
Method. ")
5. Distribution of Benefits Upon Termination of Employment
Your Plan is designed to encourage you to stay with your
Employer until retirement. Payment of your account balance
under your Plan is available upon your death, disability or
retirement.
If your employment terminates for reasons other than those
listed above, you will be entitled to receive only your
"vested percentage" of your account balance and the remainder
of your account will be forfeited. Only contributions made by
your Employer are subject to forfeiture. (See the Section in
this Article entitled "Vesting in Your Plan. ")
If you so elect, the Administrator will direct the Trustee to
distribute your vested benefit to you before the date it would
normally be distributed (upon your death, disability or
retirement). If your vested benefit under the Plan at the time
of any prior distribution exceeded $3,500 or currently exceeds
$3,500, you must give written consent before the distribution
may be made.
If your vested benefit under the Plan at the time of any prior
distribution did not exceed $3,500 and currently does not
exceed $3,500, the Administrator will direct the Trustee to
distribute your vested benefit to you before the date it would
normally be distributed (upon your death, disability or
retirement). This earlier distribution will be made within a
reasonable time after you terminate employment.
6. Vesting in Your Plan
Your "vested percentage" in your account is determined under
the following schedules and is based on vesting Years of
Service. You will always, however, be 100% vested upon your
Normal Retirement Age. (See the Section in this Article
entitled "Distribution of Benefits Upon Normal Retirement. ")
Vesting Schedule
Employer Discretionary Contributions
Years of Service Percentage
Less than 3 0 %
3 20 %
4 40 %
5 60 %
6 80 %
7 100 %
Vesting Schedule
Matching Contributions
Years of Service Percentage
Less than 3 0 %
3 20 %
4 40 %
5 60 %
6 80 %
7 100 %
However, matching contributions attributable to either salary
reduction amounts in excess of $10,000, or salary reduction
amounts that are distributed in a corrective distribution,
will be forfeited.
Regardless of the vesting schedules above, you are always 100%
vested in your salary reduction amounts and your Employer
special contributions contributed to the Plan.
Your vested benefit will normally be distributed to you or
your beneficiary upon your death, disability or retirement.
7. Benefit Payment Method
At the time you are entitled to receive a distribution under
the Plan, the Administrator will direct the Trustee to pay
your benefits to you in one lump-sum cash payment or in
property.
If you elect to delay the receipt of benefits, there are other
rules which generally require minimum payments to begin no
later than the April 1st following the year in which you reach
age 70 1/2. You should see the Administrator if you feel you
may be affected by this rule.
8. Hardship Distribution of Benefits
The Administrator may direct the Trustee to distribute up to
100 % of your account balance attributable to your salary
reduction election in the event of immediate and heavy
financial need. This hardship distribution is not in addition
to your other benefits and will therefore reduce the value of
the benefits you will receive at normal retirement.
Withdrawal will be authorized only if the distribution is to
be used for one of the following purposes:
(a) The payment of expenses for medical care (described in
Section 213(d) of the Internal Revenue Code) previously
incurred by you or your dependent or necessary for you or your
dependent to obtain medical care;
(b) The costs directly related to the purchase of your
principal residence (excluding mortgage payments);
(c) The payment of tuition, related educational fees, and
room and board expenses for the next twelve (12) months of
post-secondary education for yourself, your spouse or
dependent;
(d) The payment necessary to prevent your eviction from your
principal residence or foreclosure on the mortgage of your
principal residence.
A distribution will be made from your account, but only if you
certify and agree that all of the following conditions are
satisfied:
(a) The distribution is not in excess of the amount of your
immediate and heavy financial need. The amount of your
immediate and heavy financial need may include any amounts
necessary to pay any federal, state, or local income taxes or
penalties reasonably anticipated to result from the
distribution;
(b) You have obtained all distributions, other than hardship
distributions, and all nontaxable (at the time of the loan)
loans currently available under all plans maintained by your
Employer;
(c) That your elective contributions and employee
contributions will be suspended for at least twelve (12)
months after your receipt of the hardship distribution; and
(d) That you will not make elective contributions for your
taxable year immediately following the taxable year of the
hardship distribution, except to the extent permitted by the
Plan.
In addition to these rules, there are restrictions placed on
hardship distributions which are made from certain accounts.
These accounts are generally the accounts which receive your
salary reduction contributions and other Employer
contributions which are used to satisfy special rules that
apply to 401(k) plans. Any hardship distribution from these
accounts will be limited, as of the date of distribution, to
your total salary reduction contributions, reduced by the
amount of any previous distributions made to you from these
accounts. Ask your Administrator if you need further details.
9. Treatment of Distributions From Your Plan
Whenever you receive a distribution from your Plan, it will
normally be subject to income taxes. You may, however, reduce,
or defer entirely, the tax due on your distribution through
use of one of the following methods:
(a) The rollover of all or a portion of the distribution to
an Individual Retirement Account (IRA) or another qualified
employer plan. This will result in no tax being due until you
begin withdrawing funds from the IRA or other qualified
employer plan. The rollover of the distribution, however, MUST
be made within strict time frames (normally, within 60 days
after you receive your distribution). Under certain
circumstances all or a portion of a distribution may not
qualify for this rollover treatment. In addition, most
distributions will be subject to mandatory federal income tax
withholding at a rate of 20 %. This will reduce the amount you
actually receive. For this reason, if you wish to rollover all
or a portion of your distribution amount, the direct transfer
option described in paragraph (b) below would be the better
choice.
(b) You may request for most distributions that a direct
transfer of all or a portion of your distribution amount be
made to either an Individual Retirement Account (IRA) or
another qualified employer plan willing to accept the
transfer. A direct transfer will result in no tax being due
until you withdraw funds from the IRA or other qualified
employer plan. Like the rollover, under certain circumstances
all or a portion of the amount to be distributed may not
qualify for this direct transfer, e.g., a distribution of less
than $500 will not be eligible for a direct transfer. If you
elect to actually receive the distribution rather than request
a direct transfer, then in most cases 20 % of the distribution
amount will be withheld for federal income tax purposes.
(c) The election of favorable income tax treatment under
"10-year forward averaging," "5-year forward averaging" or, if
you qualify, "capital gains" method of taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL
DELIVER TO YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS.
HOWEVER, THE RULES WHICH DETERMINE WHETHER YOU QUALIFY FOR
FAVORABLE TAX TREATMENT ARE VERY COMPLEX. YOU SHOULD CONSULT
WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
10. Domestic Relations Order
As a general rule, your interest in your account, including
your "vested interest," may not be alienated. This means that
your interest may not be sold, used as collateral for a loan,
given away or otherwise transferred. In addition, your
creditors may not attach, garnish or otherwise interfere with
your account.
There is an exception, however, to this general rule. The
Administrator may be required by law to recognize obligations
you incur as a result of court ordered child support or
alimony payments. The Administrator must honor a "qualified
domestic relations order." A "qualified domestic relations
order" is defined as a decree or order issued by a court that
obligates you to pay child support or alimony, or otherwise
allocates a portion of your assets in the Plan to your spouse,
former spouse, child or other dependent. If a qualified
domestic relations order is received by the Administrator, all
or a portion of your benefits may be used to satisfy the
obligation. The Administrator will determine the validity of
any domestic relations order received.
11. Pension Benefit Guaranty Corporation
Benefits provided by your Plan are NOT insured by the Pension
Benefit Guaranty Corporation (PBGC) under Title IV of the
Employee Retirement Income Security Act of 1974 because the
insurance provisions under ERISA are not applicable to your
Plan.
VI
SERVICE RULES
1. Year of Service
The term "Year of Service" is used in this Summary Plan
Description and in your Plan.
You will have completed a Year of Service for vesting purposes
if you are credited with 1000 Hours of Service during a Plan
Year, even if you were not employed on the first or last day
of the Plan Year.
You will have completed a Year of Service for purposes of
sharing in Employer contributions if you are credited with
1000 Hours of Service during a Plan Year.
For purposes of determining whether you have completed a Year
of Service where the computation period is based upon a short
Plan Year, your Administrator will notify you of the number of
the Hours of Service that are required and the method of
calculating a Year of Service.
2. Hour of Service
You will be credited with an Hour of Service for:
(a) each hour for which you are directly or indirectly
compensated by your Employer for the performance of duties
during the Plan Year;
(b) each hour for which you are directly or indirectly
compensated by your Employer for reasons other than
performance of duties (such as vacation, holidays, sickness,
disability, lay-off, military duty, jury duty or leave of
absence during the Plan Year); and
(c) each hour for back pay awarded or agreed to by your
Employer.
You will not be credited for the same Hours of Service both
under (a) or (b), as the case may be, and under (c).
3. 1-Year Break in Service
A 1-Year Break in Service is a computation period during which
you have not completed more than 500 Hours of Service with
your Employer.
A 1-Year Break in Service does NOT occur, however, in the
computation period in which you enter or leave the Plan for
reasons of:
(a) an authorized leave of absence;
(b) certain maternity or paternity absences.
The Administrator will be required to credit you with Hours of
Service for a maternity or paternity absence. These are
absences taken on account of pregnancy, birth, or adoption of
your child. No more than 501 Hours of Service shall be
credited for this purpose and these Hours of Service shall be
credited solely to avoid your incurring a 1-Year Break in
Service. The Administrator may require you to furnish proof
that your absence qualifies as a maternity or paternity
absence.
4. Uniformed Services Employment and Reemployment Rights
Act
If you are a veteran and are reemployed under the Uniformed
Services Employment and Reemployment Rights Act of 1994, your
qualified military service may be considered service with the
Employer. If you may be affected by this law, ask your
Administrator for further details.
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A 401(k) Profit Sharing Plan that primarily benefits "key
employees" is called a "top heavy plan." Key employees are
certain owners or officers of your Employer. A Plan is a "top
heavy plan" when more than 60% of the contributions or
benefits have been allocated to key employees.
Each year, the Administrator is responsible for determining
whether your Plan is a "top heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-key
employees will be entitled to certain "top heavy minimum
benefits," and other special rules will apply. Among these top
heavy rules are the following:
(a) Your Employer may be required to make a contribution to
your account in order to provide you with at least "top heavy
minimum benefits."
(b) Instead of the vesting schedules outlined in the Article
and Section in this Summary entitled "BENEFITS UNDER YOUR
PLAN: Vesting in Your Plan," your nonforfeitable right to
benefits or contributions derived from Employer matching and
discretionary contributions will be determined according to
the following schedule:
Top Heavy Vesting Schedule
Years of Service Percentage
Less than 2 0 %
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
(c) If you are a participant in more than one Plan, you may
not be entitled to "top heavy minimum benefits" under both
Plans.
VIII
LOANS
You may apply to the Administrator for a loan from the Plan.
Your application must be in writing on forms which the
Administrator will provide to you. The Administrator may also
request that you provide additional information, such as
financial statements, tax returns and credit reports. After
considering your application, the Administrator may, in its
discretion, determine that you qualify for the loan. The
Administrator will inform the Trustee that you qualify. The
Trustee may then review the Administrator's determination and
make a loan to you if it is a prudent investment for the Plan.
1. Loan Requirements
There are various rules and requirements that apply for any
loan. These rules are outlined in this section. In addition,
your Employer has established a written loan program which
explains these requirements in more detail. You can request a
copy of the loan program from the Administrator. Generally,
the rules for loans include the following:
(a) Loans must be made available to all participants and
their beneficiaries on a uniform and non-discriminatory basis.
(b) All loans must be adequately secured. You may use up to
one-half (1/2) of your vested account balance under the Plan
as security for the loan. If more security is required, your
principal residence may be used, if permitted by State law.
The Plan may also require that repayments on the loan
obligation be by payroll deduction.
(c) All loans must bear a reasonable rate of interest. The
interest rate must be one a bank or other professional lender
would charge for making a loan in a similar circumstance.
(d) All loans must have a definite repayment period which
provides for payments to be made not less frequently than
quarterly, and for the loan to be amortized on a level basis
over a reasonable period of time, not to exceed five (5)
years. However, if you use the loan to acquire your principal
residence, you may repay the loan over a reasonable period of
time that may be longer than five (5) years. Loan repayments
may be suspended for any part of any period during which you
are performing service in the uniformed services.
(e) All loans will be considered a directed investment from
your account under the Plan. All payments of principal and
interest by you on a loan shall be credited to your account.
(f) The amount the Plan may loan to you is limited by rules
under the Internal Revenue Code. All loans, when added to the
outstanding balance of all other loans from the Plan, will be
limited to the lesser of:
(1) $50,000 reduced by the excess, if any, of your highest
outstanding balance of loans from the Plan during the one-year
period prior to the date of the loan over your current
outstanding balance of loans; or
(2) 1/2 of your vested account balance.
Also, no loan in an amount less than $1,000 will be made nor
will a loan be made if a prior loan is currently outstanding.
(g) If you fail to make payments when they are due under the
loan, you will be considered to be "in default." The Trustee
would then have authority to take all reasonable actions to
collect the balance owing on the loan. This could include
filing a lawsuit or foreclosing on the security for the loan.
Under certain circumstances, a loan that is in default may be
considered a distribution from the Plan, and could result in
taxable income to you. In any event, your failure to repay a
loan will reduce the benefit you would otherwise be entitled
to from the Plan.
IX
CLAIMS BY PARTICIPANTS AND BENEHCIARIES
Benefits will be paid to participants and their beneficiaries
without the necessity of formal claims. You or your
beneficiaries, however, may make a request for any Plan
benefits to which you may be entitled. Any such request must
be made in writing, and it should be made to the
Administrator. (See the Article in this Summary entitled
"GENERAL INFORMATION ABOUT YOUR PLAN.")
Your request for Plan benefits shall be considered a claim for
Plan benefits, and it will be subject to a full and fair
review. If your claim is wholly or partially denied, the
Administrator will furnish you with a written notice of this
denial. This written notice must be provided to you within a
reasonable period of time (generally 90 days) after the
receipt of your claim by the Administrator. The written notice
must contain the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on which the
denial is based;
(c) a description of any additional information or material
necessary to correct your claim and an explanation of why such
material or information is necessary; and
(d) appropriate information as to the steps to be taken if
you or your beneficiary wishes to submit your claim for
review.
If notice of the denial of a claim is not furnished to you in
accordance with the above within a reasonable period of time,
your claim will be deemed denied. You will then be permitted
to proceed to the review stage described in the following
paragraphs.
If your claim has been denied, and you wish to submit your
claim for review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you may file
your claim for review, in writing, with the Administrator.
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60 DAYS
AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF
YOUR CLAIM FOR BENEFITS, OR IF NO WRITTEN DENIAL OF YOUR CLAIM
WAS PROVIDED, NO LATER THAN 60 DAYS AFTER THE DEEMED DENIAL OF
YOUR CLAIM.
(c) You may review all pertinent documents relating to the
denial of your claim and submit any issues and comments, in
writing, to the Administrator.
(d) Your claim for review must be given a full and fair
review. If your claim is denied, the Administrator must
provide you with written notice of this denial within 60 days
after the Administrator's receipt of your written claim for
review. There may be times when this 60 day period may be
extended. This extension may only be made, however, where
there are special circumstances which are communicated to you
in writing within the 60 day period. If there is an extension,
a decision shall be made as soon as possible, but not later
than 120 days after receipt by the Administrator of your claim
for review.
(e) The Administrator's decision on your claim for review
will be communicated to you in writing and will include
specific references to the pertinent Plan provisions on which
the decision was based.
(f) If the Administrator's decision on review is not
furnished to you within the time limitations described above,
your claim will be deemed denied on review.
(g) If benefits are provided or administered by an insurance
company, insurance service, or other similar organization
which is subject to regulation under the insurance laws, the
claims procedure relating to these benefits may provide for
review. If so, that company, service, or organization will be
the entity to which claims are addressed. If you have any
questions regarding the proper person or entity to address
claims, you should ask the Administrator.
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan you are entitled to certain
rights and protections under the Employee Retirement Income
Security Act of 1974, also called ERISA. ERISA provides that
all Plan participants are entitled to:
(a) examine, without charge, all Plan documents, including:
(1) insurance contracts;
(2) collective bargaining agreements; and
(3) copies of all documents filed by the Plan with the U.S.
Department of Labor,such as detailed annual reports and Plan
descriptions.
This examination may take place at the Administrator's office
and at other specified employment locations of the Employer.
(See the Article in this Summary entitled "GENERAL INFORMATION
ABOUT YOUR PLAN");
(b) obtain copies of all Plan documents and other Plan
information upon written request to the Plan Administrator.
The Administrator may make a reasonable charge for the copies;
(c) receive a summary of the Plan's annual financial report.
The Administrator is required by law to furnish each
participant with a copy of this summary annual report;
(d) obtain a statement telling you whether you have a right
to receive a retirement benefit at Normal Retirement Age and,
if so, what your benefits would be at Normal Retirement Age if
you stop working under the Plan now. If you do not have a
right to a retirement benefit, the statement will tell you how
many years you have to work to get a right to a retirement
benefit. THIS STATEMENT MUST BE REQUESTED IN WRITING AND IS
NOT REQUIRED TO BE GIVEN MORE THAN ONCE A YEAR. The Plan must
provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA
imposes duties upon the people who are responsible for the
operation of the Plan. The people who operate your Plan,
called "fiduciaries" of the Plan, have a duty to do so
prudently and in the interest of you and other Plan
participants and beneficiaries. No one, including your
employer or any other person, may fire you or otherwise
discriminate against you in any way to prevent you from
obtaining a pension benefit or exercising your rights under
ERISA.
If your claim for a retirement benefit is denied in whole or
in part, you must receive a written explanation of the reason
for the denial. You have the right to have the Administrator
review and reconsider your claim. (See the Article in this
Summary entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES. ")
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the Plan
and do not receive them within 30 days, you may file suit in a
federal court. In such a case, the court may require the
Administrator to provide the materials and pay you up to
$100.00 a day until you receive the materials, unless the
materials were not sent because of reasons beyond the control
of the Administrator.
If you have a claim for benefits which is denied or ignored,
in whole or in part, you may file suit in a state or federal
court.
If the Plan's fiduciaries misuse the Plan's money, or if you
are discriminated against for asserting your rights, you may
seek assistance from the U.S. Department of Labor, or you may
file suit in a federal court. The court will decide who should
pay court costs and legal fees. If you are successful, the
court may order the person you have sued to pay these costs
and fees. If you lose, the court may order you to pay these
costs and fees if, for example, it finds your claim is
frivolous.
If you have any questions about this statement, or about your
rights under ERISA, you should contact the nearest Regional
Office of the U.S. Department of Labor's Pension and Welfare
Benefits Administration.
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment
Your Employer has the right to amend your Plan at any time. In
no event, however, will any amendment:
(a) authorize or permit any part of the Plan assets to be
used for purposes other than the exclusive benefit of
participants or their beneficiaries; or
(b) cause any reduction in the amount credited to your
account.
2. Termination
Your Employer has the right to terminate the Plan at any time.
Upon termination, all amounts credited to your accounts will
become 100% vested. A complete discontinuance of contributions
by your Employer will constitute a termination.
SAMPLE PRIME STOCK CERTIFICATE
Certificate Number No. Shares
Incorporated Under the Laws of the
State of Delaware, March 31, 1997
PRIME COMPANIES, INC.
Authorized Capital Stock, 50,000,000 Common Shares, Par Value
$0.0001 Per Share
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
UNDER THE LIMIT OFFERING EXEMPTION PROVIDED BY SEC.25102(f) OF
THE CALIFORNIA CORPORATIONS CODE.
THIS CERTIFIES THAT __________________________________ is the
owner of
_________________________________ Shares of the Capital Stock
of
PRIME COMPANIES, INC.
transferable only on the books of the Corporation by the
holder hereof in person or by Attorney upon surrender of this
Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and
to be sealed with the Seal of the Corporationthis
____________________ day of ______________________ A. D. 19
__________.
____________________ ___________________
Secretary President
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 David L. Lefkowitz, 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 Bill 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.
155 Montgomery Street, Suite 406
San Francisco, CA 94104
(415) 398-4242
(b) If to Employee: David L. Lefkowitz
1250 Jones Street, #1102
San Francisco, CA 94109
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: Irving Pfeffer
Title: Chairman and CEO
By: ____________________________
Name: David L. Lefkowitz
Title: President
EMPLOYEE:
By: _____________________________
David L. Lefkowitz
<PAGE>
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
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 200570
<SECURITIES> 436510
<RECEIVABLES> 2003827
<ALLOWANCES> (23000)
<INVENTORY> 19238
<CURRENT-ASSETS> 3259883
<PP&E> 5109618
<DEPRECIATION> (659448)
<TOTAL-ASSETS> 8495371
<CURRENT-LIABILITIES> 2826837
<BONDS> 0
0
0
<COMMON> 276
<OTHER-SE> 3459834
<TOTAL-LIABILITY-AND-EQUITY> 8495371
<SALES> 15958229
<TOTAL-REVENUES> 15958229
<CGS> 6148653
<TOTAL-COSTS> 10687507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23000
<INTEREST-EXPENSE> 362688
<INCOME-PRETAX> (1086674)
<INCOME-TAX> (391610)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (695064)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
