<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: June 30, 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 Number 1-10368
PACIFIC INTERNATIONAL ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0243669
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4431 Corporate Center Drive
Suite 131
Los Alamitos, California 90720
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: (714) 816-0200
---------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months(or for 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title of Each Class Outstanding at June 30, 1997
- ----------------------------- ----------------------------
Common stock, $.001 par value 10,294,630
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
PACIFIC INTERNATIONAL ENTERPRISES, INC.
Form 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheet (Unaudited) as
of June 30, 1997...................................................... 4
Condensed Consolidated Statements of Operation (Unaudited)
for the three month periods ended
June 30, 1997 and 1996 and from inception
(February 28, 1995 to June 30, 1997)................................. 5
Condensed Consolidated Statements of Operation (Unaudited)
for the six month periods ended
June 30, 1997 and 1996 and from inception
(February 28, 1995 to June 30, 1997)................................. 6
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the six months ended June 30,1997
and 1996 and from inception
(February 28, 1995 to June 30, 1997)................................. 7
Notes to Condensed Consolidated (Unaudited)
Financial Statements.................................................. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................... 14
Item 2. Changes in Securities................................................. 14
Item 3. Default Upon Senior Securities........................................ 14
Item 4. Submission of Matters to a Vote of Security Holders................... 14
Item 5. Other Information..................................................... 15
Item 6. Exhibits and Reports on Form 8-K...................................... 15
</TABLE>
2
<PAGE> 3
PART I
FINANCIAL INFORMATION
3
<PAGE> 4
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30,
1997
-----------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 61,277
Inventory 47,354
Prepaid expenses and other 159,594
-----------
Total current assets 268,225
EQUIPMENT 18,044
PATENTS AND TRADEMARKS 50,866
-----------
$ 337,135
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable $ 1,090,865
Accounts payable 213,622
Accrued interest 82,494
Other accrued expenses 225,774
-----------
Total current liabilities 1,612,755
-----------
SHAREHOLDERS' DEFICIT:
Preferred stock - 3,000,000 authorized, $.001 par value,
zero shares issued and outstanding --
Common stock - 50,000,000 shares authorized, $.001 par
value; 10,294,630 shares issued and outstanding 10,295
Additional paid-in capital 4,430,383
Deficit accumulated during the development stage (5,716,298)
-----------
Net shareholders' deficit (1,275,620)
-----------
$ 337,135
===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 5
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from inception
Three Months Ended (February 28,
-------------------------------- 1995) to
June 30, June 30, June 30,
1996 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Costs and expenses:
Research and development $ (96,867) $ (10,715) $ (493,293)
General and administrative (75,217) (241,146) (2,829,029)
Interest (16,357) (25,674) (156,265)
----------- ----------- -----------
(188,441) (277,535) (3,478,587)
----------- ----------- -----------
Non-cash expenses related to issuance of common
stock and equivalents:
Consulting (356,070) (86,000) (1,247,773)
Compensation (28,400) (135,000) (254,600)
Interest (71,187) (32,400) (420,876)
----------- ----------- -----------
(455,657) (253,400) (1,923,249)
----------- ----------- -----------
Net loss $ (644,098) $ (530,935) $(5,401,836)
=========== =========== ===========
Net loss per common share $ (0.08) $ (0.06)
=========== ===========
Weighted average number of shares 7,740,013 9,401,947
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 6
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from inception
Six Months Ended (February 28,
-------------------------------- 1995) to
June 30, June 30, June 30,
1996 1997 1997
----------- ----------- ------------
<S> <C> <C>
COSTS AND EXPENSES:
Research and development $ (207,672) $ (16,581) $ (493,293)
General and administrative (454,443) (563,247) (2,829,029)
Interest (47,169) (56,878) (156,265)
----------- ----------- -----------
(709,284) (636,706) (3,478,587)
----------- ----------- -----------
Non-cash expenses related to issuance of common
stock and equivalents:
Consulting (712,140) (292,000) (1,247,773)
Compensation (56,800) (135,000) (254,600)
Interest (142,374) (90,143) (420,876)
----------- ----------- -----------
(911,314) (517,143) (1,923,249)
----------- ----------- -----------
NET LOSS $(1,620,598) $(1,153,849) $(5,401,836)
=========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.22) $ (0.13)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 7,221,852 8,898,564
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
From Inception
Six Months Ended (February 28,
------------------------------- 1995) to
June 30, June 30, June 30,
1996 1997 1997
------------ -------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,620,598) $(1,153,849) $(5,401,836)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 23,232 4,814 171,253
Issuance of shares for compensation -- 80,500 171,195
Non-cash interest expense 142,374 90,143 420,876
Non-cash consulting expense 712,140 292,000 1,247,773
Non-cash compensation expense 56,800 135,000 254,600
(Increase) decrease in assets:
Restricted cash 75,000 8,500 0
Prepaid expenses 22,241 (27,344) (97,344)
Inventory 23,386 (21,115) (47,353)
Other (5,775) (12,990) (12,990)
Patents and trademarks (19,295) (10,955) (55,562)
Increase (decrease) in liabilities:
Accounts payable (49,655) 35,996 261,861
Accrued expenses (45,969) 129,436 308,267
----------- ----------- -----------
Net cash used by operating activities (686,119) (449,864) (2,779,260)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (47,041) -- (137,581)
Investment in subsidiary (250,000) -- 0
----------- ----------- -----------
Net cash used by investing activities (297,041) -- (137,581)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable -- 295,000 1,793,750
Payments on notes payable (469,528) -- (469,528)
Exercise of warrants and options 26,712 40 57,312
Issuance of common stock 1,028,751 200,000 1,596,584
----------- ----------- -----------
Net cash provided by financing activities 585,935 495,040 2,978,118
----------- ----------- -----------
Net increase (decrease) in cash (397,225) 45,176 61,277
CASH, BEGINNING OF PERIOD 659,010 16,101 0
----------- ----------- -----------
CASH, END OF PERIOD $ 261,785 $ 61,277 $ 61,277
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Conversion of notes payable to common stock $ 225,750 $ -- $ 233,357
----------- ----------- -----------
Issuance of shares in debt swap $ -- $ 97,500 $ 97,500
----------- ----------- -----------
Assets acquired through issuance of common stock $ -- $ -- $ 47,019
----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements
<PAGE> 8
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
June 30, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Crush Innovative Sports Systems, Inc. ("Crush" or the "Company"), a
California corporation, was formed on February 28, 1995 for the purpose of
developing, marketing and selling innovative sports products incorporating
proprietary technology. Crush was formed by Laurence/Wayne, Inc. ("L/W"),
a research and development company organized in May 1989 to create
innovative fastening systems intended for use in the systems of numerous
sporting goods, including snowboard bindings, backpacks and in-line
skates. In 1994, L/W developed a unique snowboard binding system, the
"T-Bone". On February 28, 1995 L/W contributed to Crush all rights to the
T-Bone binding system and for the application of its fastening system to
backpacks, motorcycle saddlebags, in-line skates and other sporting goods,
certain assets and research and development. The value of the
consideration was $361,481, equal to the historical costs incurred by L/W,
allocated $47,019 to equipment and other assets and $314,462 to research
and development. In reaching this determination, the company considered,
among other factors, the stage of development, the time and resources
needed to complete the products, expected income and associated risks.
Crush is classified as a development stage company because its principal
activities involved obtaining capital, business development, obtaining
rights to certain technology and conducting research and development
activities.
Pacific International Enterprises, Inc., a Nevada corporation ("PIE"), was
formed on December 30, 1988. From inception until October 1995, PIE was
inactive and operated no business and held no significant assets.
Effective October 12, 1995, PIE exchanged 798,927 of its common stock for
all of the outstanding common stock of Crush. This transaction was a
reverse acquisition whereby PIE was the legal survivor; however, the
accounting reflects Crush as the survivor since Crush, as the operating
entity, was in effect the real acquirer. The transaction was accounted for
as a purchase of PIE by the Company and, accordingly, the accompanying
financial statements include the amounts and operations of the Company
from its inception and of PIE from October 12, 1995.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, Crush Innovative Sports Systems, Inc.
and PIE Acquisition Corp. PIE Acquisition Corp. is currently inactive. All
significant intercompany transactions and balances have been eliminated in
consolidation.
(continued)
<PAGE> 9
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interim Periods
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not
include all of the information required by generally accepted accounting
principles for complete financial statements. In the opinion of the
Company's management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 1997 are not
necessarily indicative of results for any future period. These statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Form 10-KSB for the year ended
December 31, 1996. Certain adjustments have been made to the comparative
information for 1996 to conform to the presentation used in the December
31, 1996 10-KSB.
2. EMPLOYMENT AGREEMENTS
The Company entered into three employment agreements with Company
executives in June 1997, all under substantially similar terms. The five
year agreements provide for annual base salaries of $115,200, payable in
cash or shares of common stock, with minimal annual increases of 20%.
Acquisition performance bonuses are to paid upon the occurrence of certain
events. The acquisition performance bonuses shall equal 3% of the purchase
price up to $2 million and 2% of the purchase price between $2 - $4
million upon signing an agreement to acquire either substantially all of
the assets or voting stock of a company. The same percentages of the
purchase price will be paid upon closing of such an acquisition.
Notwithstanding the percentages stated above, a minimum of $100,000 shall
be payable to each executive upon signing an acquisition agreement and
$100,000 upon closing the acquisition. However, should the Company be
unable to pay the bonus in cash during the first year of the agreement,
the executives may choose that the bonus be paid in shares of common stock
of the Company.
On each anniversary of the date of the agreements, the Company will grant
200,000 options to each executive to purchase common stock at an exercise
price of $.19, expiring in ten years. Among other benefits, the Company
will provide four weeks of paid vacation in the first year and six weeks
of paid vacation for each year thereafter; medical and dental coverage;
life insurance and annual disability payments in an amount equal to 125%
of base salary.
The Company entered into a three year employment agreement with another
Company executive in June 1997. It provides for a base salary of $96,000
annually, payable in cash or shares of common stock. Benefits include
three weeks of paid vacation in the first year and four weeks of paid
vacation for each year thereafter; medical and dental coverage; life
insurance and annual disability payments in an amount equal to 125% of
base salary.
(continued)
<PAGE> 10
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
3. CAPITAL AND FINANCING TRANSACTIONS
Common stock
In June 1997, the Company sold in a private placement 1,142,858 shares of
common stock at a price of $.175 per share. In connection with this
private placement memorandum, the Company issued 1,142,858 warrants to
purchase common stock at an exercise price of $.50, which approximated
fair market value, expiring in three years.
Warrants
In connection with an August 1995 private placement memorandum, Crush
issued notes payable totaling $1,423,750. These notes bear interest at 9%,
payable quarterly and are due the earlier of (i) the closing of a private
placement or public offering of equity securities or (ii) the first
anniversary of the issuance of the notes. The Company may prepay the notes
at any time without penalty. The notes are secured by the assets of the
Company. At any time prior to maturity, the notes are also convertible
into shares of the Company's common stock at a price equal to 70% of the
closing bid price of the Company's common stock on the date of conversion
but not less than $0.95 per share. In connection with this private
placement memorandum, the Company issued 1,423,750 Class A Warrants (the
"A Warrants") and 1,423,750 Class B Warrants (the "B Warrants") to
purchase shares of common stock at exercise prices of $.05 and $.95,
respectively. On the same terms, the Company also issued to registered
broker-dealers an aggregate of 141,750 A Warrants and 141,750 B Warrants.
The Warrants are exercisable for a period of three years. In the event the
Company does not repay the notes payable described above in full within
six months of the date of investment, then the exercise price of the B
Warrants will automatically decrease at a rate of $.04 per month,
commencing in the seventh month after the date of the note, but not below
$.50. The warrants are callable by the Company upon 60 days written notice
to the holders in the event of either (i) the ask price of the Company's
common stock exceeds $2.00 for any period of 60 consecutive days or (ii)
the notes are paid in full or converted into common stock. If not
exercised within such 60-day period, the warrants automatically expire.
The Company assigned a value of $313,100 to the detachable warrants
described above. This amount is included in unamortized warrant cost and
is amortized as discount on the notes over twelve months. At June 30,
1997, 478,750 A Warrants had been exercised. During 1996, notes payable of
$233,357 were converted into 183,482 shares of common stock, and $469,528
were paid off. On September 30, 1996, the remaining noteholders agreed to
extend the maturity date of the notes to March 31, 1997, and the Company
issued them warrants to purchase 735,724 shares of common stock at an
exercise price of $1.00 expiring on September 30, 1999. At June 30, 1997,
none of these warrants had been exercised. The remaining notes totaling
$753,713, including $32,848 accrued interest, are in default.
(continued)
<PAGE> 11
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
3. CAPITAL AND FINANCING TRANSACTIONS (CONTINUED)
Warrants (continued)
In December 1996, the Company offered in a private placement $120,000
promissory notes, of which $75,000 were issued in 1996 and the remainder
in the first quarter of 1997. The notes bear interest at 10% and principal
and accrued interest are due ninety days from the date of issuance.
Warrants to purchase 15,000 shares of common stock at an exercise price of
$.01 and warrants to purchase 22,500 shares of common stock at an exercise
price of $1.00, both expiring in December 2001, were issued with the notes
issued in 1996. Warrants to purchase 9,000 shares of common stock at an
exercise price of $.01 and warrants to purchase 13,500 shares of common
stock at an exercise price of $1.00, also expiring in December 2001, were
issued with the notes issued in 1997. The fair value allocated to the
warrants of $11,760 represents unamortized warrant cost that was amortized
in the first quarter of 1997. At June 30, 1997, 4,000 warrants were
exercised at a price of $.01. As incentive to extend the maturity date of
the notes to June 30, 1997, the Company issued 120,000 warrants to
purchase common stock at an exercise price of $.10. The $32,400 value
assigned to the warrants was recorded as unamortized warrant cost that was
amortized in the second quarter of 1997. At June 30, 1997, none of these
warrants had been exercised. The notes are currently in default. The
Company issued 400,000 shares of common stock to the underwriter as agent
for the noteholders as collateral to secure the notes against default. The
$120,000 value assigned to the shares was recorded as unamortized capital
stock that was also amortized in the first quarter of 1997.
Options
In connection with the three employment agreements described in Note 2,
the Company issued 1,500,000 options to purchase common stock at an
exercise price of $.10, expiring in ten years. The $135,000 value assigned
to the options was recorded as non-cash compensation expense in the second
quarter. In accordance with another employment agreement also described
above, the Company issued 500,000 options to purchase common stock at an
exercise price of $.19, which approximated fair market value, expiring in
three years.
4. NOTES PAYABLE
In January 1997, the Company issued a convertible note in the amount of
$250,000. The note bears interest at 10% and had an original maturity date
of ninety days. The note was subsequently extended for an additional six
months. At any time prior to maturity, the note is convertible into shares
of the Company's common stock at the current market price, in the amount
that equals the total amount due in principal, interest and late charges.
Options to purchase 150,000 shares of common stock were issued with the
convertible note at an exercise price of $.50. At the time the note and
the options were issued, the approximate fair value of the Company's
common stock was $.31. Accordingly, no value was attributed to the
options. Subsequent to June 30, 1997, the noteholder has informed the
Company of his intention to convert the note into shares of common stock.
If the conversion takes place, the 150,000 options will be canceled and
warrants to purchase common stock will be issued at an exercise price of
$.50 in an amount equal to the number of shares issued. The transaction is
currently pending.
(continued)
<PAGE> 12
PACIFIC INTERNATIONAL ENTERPRISES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
5. GOING CONCERN
The Company is experiencing cash flow shortages and will need to raise
additional capital in order to become operational. To date in 1997, the
Company has entered into loans in the amount of $250,000 and raised equity
in the amount of $200,000. These amounts have sustained operations to date
and the Company currently has commitments for an additional $100,000 in
exchange for equity. The Company has also recently acquired trade
financing to cover the production of 2,000 units to fulfill existing
orders. Such financing is anticipated to be available on an order by order
basis for future production requirements. However, such financing will not
be available to satisfy the potential shortfall in capital requirements.
There can be no assurance that the Company will be able to raise funds
through sales of additional equity. Without such additional funds, there
is substantial doubt about the ability of the Company to continue as a
going concern.
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is a development stage company that has devoted
substantially all of its resources to the development and commercialization of
its proprietary fastening technologies and products. The Company has focused its
initial efforts on developing and marketing the "T-Bone" system for snowboards
and the "Roc-Lock(TM)" technology for other commercial uses. These initial
efforts primarily consisted of research and development activities (including
prototype manufacturing, testing and customer pilot trials), developing consumer
and retailer awareness of the products and more recently, entering into sales
orders with large retail sporting goods chains. Pending commercial deployment of
and related volume orders for the Company's products, the Company expects to
incur additional losses.
The Company entered into a letter of intent in 1995 to merge
Laurence/Wayne, Inc. ("L/W") into the Company such that L/W will become an
operating subsidiary of the Company. As a result of the merger, the Company
would acquire all of the patents upon which its T-Bone snowboard binding and
other products depend. In the merger, the shares of Company Common Stock
currently held by L/W would be canceled, and new certificates will be issued
directly to the L/W shareholders. Thus, no dilution to existing shareholders of
the Company will occur. The merger has been approved by the shareholders of L/W
but is still subject to the approval of the Company's shareholders. Therefore,
there can be no guarantee that the merger will be consummated or consummated on
the terms of the letter of intent.
This discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, the cost and availability of capital to finance
its operations, competition, and the growth of the snowboard market generally.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 VERSUS THREE MONTHS ENDED JUNE 30, 1996
Since its inception the Company has been a development stage
enterprise, and as such, has not yet generated any operating revenues. Operating
expenses during the three months ended June 30, 1997 were $530,935 (including
$253,400 of noncash expenses related to stock and stock equivalent transactions)
as compared to $644,098 (including $455,657 of noncash expenses related to stock
and stock equivalent transactions) for the three months ended June 30, 1996.
This decrease in expenses was primarily due to lack of operating funds
necessitating major cutbacks in employees and operating activities.
SIX MONTHS ENDED JUNE 30, 1997 VERSUS SIX MONTHS ENDED JUNE 30, 1996
Operating expenses during the six months ended June 30, 1997 were
$1,153,849 (including $517,143 of noncash expenses related to stock and stock
equivalent transactions) as compared to $1,620,598 (including $911,314 of
noncash expenses related to stock and stock equivalent transactions) for the six
months ended June 30, 1996. This decrease in expenses was primarily due to lack
of operating funds necessitating major cutbacks in employees and operating
activities.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through the private sale of
debt and equity securities. The Company has raised approximately $3,583,895 from
the private sale of stock, the exercise of warrants and the issuance of debt
securities. In 1997 the Company has entered into loans in the amount of $295,000
and raised equity
13
<PAGE> 14
capital in the amount of $200,000 to sustain operations. As of June 30, 1997,
the Company had cash of approximately $61,277 and accounts payable of
approximately $213,622 (of which approximately $49,000 is due to officers of the
Company for expenses paid on behalf of the Company and approximately $88,000 is
due for professional services rendered). The Company estimates that the costs of
continuing operations through December 31, 1997 will be approximately $330,000.
Thus, the Company estimates that it will require approximately $500,000 to
sustain operations through fiscal year 1997. The Company currently has
commitments for an additional $100,000 investment in the Company Common Stock,
leaving approximately $400,000 of unfulfilled capital requirements for fiscal
1997. The Company has also recently acquired trade financing to cover the
production of 2,000 units to fulfill existing orders. Such financing is
anticipated to be available on an order by order basis for future production
requirements. However, such financing will not be available to satisfy the
potential shortfall in capital requirements. Every effort is being made to
eliminate overhead and reduce current expenses. Employees and officers of the
Company have agreed to take reduced or no cash salaries in exchange for equity
in the Company. In addition, the Company has been able to enter into long-term
payment plans with certain accounts payable. The Company does not currently have
any other commitments to raise additional funds. There can be no assurance that
the Company will be able to raise funds through sales of additional equity or
obtain further financing. Without such additional funds, there is substantial
uncertainty about the ability of the Company to continue as a going concern.
Net cash flows for the six months ended June 30, 1997 was approximately
$45,176.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company had no new legal proceedings and there were no new
developments in the case of Chardas v Graval, currently pending in Los Angeles
Superior Court (as referenced in the Company's Form 10-KSB for the fiscal year
ended December 31, 1996), for the six months ended June 30, 1997.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
In August, 1995, Crush Innovative Sports Systems, Inc. ("Crush")
entered into a private placement of debt in the amount of $1,423,750 with
various accredited investors. Crush became a subsidiary of the Company as a
result of a merger consummated in October, 1995. The Company has since repaid
$469,528 of the Notes, converted $233,357 of the Notes into the Company's Common
Stock and is currently in default on the remaining Notes. The amount in default
is $753,713 including $32,848 of interest accrued until June 30, 1997. The
noteholders have a security interest in all of the assets of Crush. No action
has yet been taken by such noteholders.
As of June 30, 1997, the Company is in default on $120,000 of Notes
given to various investors as part of a private placement in December, 1996. The
Notes bear interest at 10% and were originally due on March 31, 1997. The
Company subsequently issued warrants to the Noteholders as an incentive to
extend the maturity date of the Notes to June 30, 1997. The Notes are in default
as of June 30, 1997. The amount owed on the Notes is approximately $126,000,
including $6,000 of interest. The Notes are secured by a pledge of 400,000
shares of the Company's Common Stock. No action as been taken by the holders of
the Notes to either assume beneficial ownership of the shares or to pursue other
remedies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders in the six months ended June
30, 1997.
14
<PAGE> 15
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Amended Employment Agreement for Binks A. Graval.
10.2 Amended Employment Agreement for Anthony Broughton.
10.3 Amended Employment Agreement for Richard W. Perkins.
10.4 Employment Agreement with Lee Rogers.
27. Financial Data Schedule.
(b) Reports on Form 8-K
Not applicable
15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, therefore duly authorized.
PACIFIC INTERNATIONAL ENTERPRISES, INC.
DATE: August 12, 1997
By: /s/ Binks A. Graval
-----------------------------------
Binks A. Graval
Chief Executive Officer and
Chairman of the Board
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1 Amended Employment Agreement for Binks A. Graval
10.2 Amended Employment Agreement for Anthony Broughton
10.3 Amended Employment Agreement for Richard W. Perkins
10.4 Employment Agreement for Lee Rogers
27 Financial Data Schedule
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<PAGE> 1
EXHIBIT 10.1
AMENDED EMPLOYMENT AGREEMENT WITH BINKS A. GRAVAL
This Employment Agreement (this "Agreement") is made and entered into
as of June 29th, 1997 by and between PACIFIC INTERNATIONAL ENTERPRISES, INC. a
Nevada corporation (the "Company"), and BINKS A. GRAVAL, an individual
("Executive").
WITNESSETH:
WHEREAS, Executive and the Company wish to provide for the terms and
conditions of Executive's employment as President and Chief Executive of the
Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive agree as
set forth below.
1. Employment and Duties. The Company hereby employs Executive to serve
as President and Chief Executive Officer of the Company, with the powers and
duties customarily accorded to such position, including those powers and duties
set forth in the Bylaws of the Company for such office and such other duties
consistent therewith as may be assigned to Executive from time to time by the
Board of Directors of the Company. Initially, Executive's managerial and
supervisorial duties shall be limited to those departments and operations as
determined by the Board of Directors and subsequently expanded to include other
departments and operations as directed by the the Board of Directors. Executive
shall endeavor in good faith to perform his duties in an efficient, faithful and
business-like manner. During the term of his employment, it is intended that
Executive also serve as Chairman of the Board of Directors of the Company (the
"Board") and the Company will take action within its powers the include
Executive among the slate of directors proposed to be nominated by the Board at
any applicable stockholders meeting.
2. Term. The term of this Agreement shall begin on June 29th, 1997 and
shall expire on June 28th, 2002 unless terminated earlier as set forth in
Section 6 hereof or by mutual agreement of the parties hereto (the "Term").
3. Compensation.
(a) Base Salary. During the term of this Agreement, Executive shall be
paid a base salary (the "Base Salary"), payable in accordance with the Company's
normal payroll practices. During the first year of the term of this Agreement,
Executive's Base Salary shall be $115,200 and may be paid, at the election of
the Company, either in cash or in shares of common stock of the Company equal to
that portion of Executive's Base Salary which is unpaid divided by the average
trading price of the common stock over the 5 trading day period prior to the
payment date of Executive's Base Salary. After the first year of the term,
Executive's Base Salary shall be paid in cash, unless the Executive determines
to accept another form of payment. The annual Base Salary payable to Executive
shall be reviewed at least annually; with a minimal increase of 20% per annum
for each year of this agreement.
(b) Performance Bonus. Executive shall be entitled to a performance
bonus paid upon the occurrence of certain events (the "Acquisition Performance
Bonus"). The Acquisition Performance Bonus shall equal a percentage of the
purchase price upon signing an agreement to acquire either substantially all of
the assets or voting stock of a company and a percentage of the purchase price
upon the closing of such an acquisition. The percentages shall be as follows:
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Purchase Price of Acquisition Percentage upon Signing Percentage upon Closing
- ----------------------------- ----------------------- -----------------------
Up to $2 million 3% 3%
Between $2-$4 million 2% 2%
Notwithstanding the percentages set forth above, a minimum of $100,000 shall be
payable upon signing an acquisition agreement and $100,000 upon closing the
acquisition. However, should the Company be unable to pay the Acquisition Bonus
in cash during the first year of this Agreement, the Executive may choose that
Acquisition Bonus be paid in shares of common stock of the Company equal to that
portion of Executive's Acquisition Bonus which is unpaid divided by the average
trading price of the common stock over the 5 trading day period prior to the
payment date of Executive's Acquisition Bonus.
(c) Operational Bonus. The Company will adopt a bonus plan for officers
of the Company. The Board of Directors will determine the aggregate dollar
amount of the bonus prior to the beginning of each year, the distribution among
officers of the bonus and the threshold for awarding bonuses, be it sales,
earnings or return on equity. Any bonus paid to Executive pursuant to the
Operational Bonus shall be paid quarterly.
(d) Stock Options. On the execution of this Agreement, the Company
shall grant Executive non-qualified options to purchase 500,000 shares of the
Company's Common Stock (the "Options"). The Options will be exercisable at an
exercise price of $0.10 per share. The Options will remain exercisable by
Executive, whether or not Executive remains employed by the Company, until the
tenth anniversary of the date of the initial grant (subject to the effect, if
any, of Section 6(a)(x) below). The Company shall register the shares of Common
Stock issuable upon exercise of the Options and shall use its best efforts to
maintain a current registration statement under the Securities Act of 1933, as
amended, in respect of such shares. The Options shall be issued under the
Company's stock incentive plans maintained for its executives and shall contain
standard anti-dilution mechanism to adjust for stock dividends, stock splits,
reverse stock splits, recapitalizations, consolidations and mergers as are
provided for therein.
(e) Stock Options. On each anniversary of the date of the agreement ,
the Company shall grant Executive non-qualified options to purchase 200,000
shares of the Company's Common Stock (the "Anniversary Options"). The
Anniversary Options will be exercisable at $0.19, being bid value on June 29th,
1997. Once vested, the Anniversary Options will remain exercisable by Executive,
whether or not Executive remains employed by the Company, until the tenth
anniversary of the date of the initial grant (subject to the effect, if any, of
Section 6(a)(x) below). The Company shall register the shares of Common Stock
issuable upon exercise of the Anniversary Options and shall use its best efforts
to maintain a current registration statement under the Securities Act of 1933,
in respect of such shares.
4. Other Executive Benefits. During the term of the Agreement, the
Company shall provide to Executive benefits commensurate with his position,
including each of the following benefits:
(a) Medical and Dental Coverage. The Company agrees to provide coverage
to executive and dependent members of his family under the same medical and
dental plans as may be maintained from time to time in the discretion of the
Company's Board for the benefit of the other executive officers and the
dependent members of their families.
(b) Vacation. Executive shall be entitled to four (4) weeks of paid
vacation during Executive's first year of this Agreement and shall be entitled
to six (6) weeks during each year of employment with the Company thereafter for
the term of this Agreement. In each case, such entitlement shall accrue pro rata
over the contract year and shall be taken at such time or times as shall not
unreasonably interfere with the operations of the Company. Unutilized vacation
entitlement shall be paid in cash annually.
(c) Business Expenses. The Company will pay or reimburse Executive for
any out-of-pocket expenses incurred by Executive in the course of providing his
services hereunder, which comply with the Company's travel and expense policies
adopted from time to time by the Board for the executive officers. Such
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reimbursement shall be made by the Company based on receipts submitted to the
Company by Executive in the same manner and within the same time period as
applicable to the other executive officers of the Company.
(d) Automobile Allowance. The Company shall provide Executive with the
use of a luxury automobile that is selected by Executive and approved by the
Board of Directors. On the earlier of significant damage or destruction or
attaining three years of age, the company shall replace such automobile with a
new automobile selected by Executive and approved by the Board of Directors. The
Company shall pay all costs of insurance, repair, maintenance and operation of
such automobile.
(e) Benefit Plans. Executive shall be entitled to participate in any
pension, profit-sharing, stock option, stock purchase or other benefit plan of
the Company now existing or hereafter adopted for the benefit of employees
generally or the senior executives of the Company.
(f) Life Insurance. Provided the following policies may be obtained at
a reasonable cost, the Company shall obtain a $1,000,000 standard term life
insurance policy and a $1,000,000 standard term accidental death policy for the
benefit of named beneficiaries.
(g) Disability. Provided the following policy may be obtained at a
reasonable cost, the Company shall provide Executive with a long-term disability
policy which provides for an annual disability payment in an amount equal to
125% of Executive's Base Salary.
5. Confidential Information.
(a) Non-Disclosure. Executive hereby agrees, during the term of this
Agreement, he will not disclose to any person or otherwise use or exploit any
proprietary or confidential information, including, without limitation, trade
secrets, processes, records of research, proposals, reports, methods, processes,
techniques, computer software or programming, or budgets or other financial
information, regarding the Company, its business, properties, customers or
affairs (collectively, "Confidential Information") obtained by him at any time
during the term, except to the extent required by Executive's performance of
assigned duties for the Company. Notwithstanding anything herein to the
contrary, the term "Confidential Information" shall not include information
which (i) is or becomes generally available to the public other than as a result
of disclosure by Executive in violation of this Agreement, (ii) is or becomes
available to Executive on a non-confidential basis from a source other than the
Company, provided that such source is not known by Executive to be furnishing
such information in violation of a confidentiality agreement with or other
obligation of secrecy to the Company, (iii) has been made available, or is made
available, on an unrestricted basis to a third party by the Company, by an
individual authorized to do so or, (iv) is known by Executive prior to its
disclosure to Executive. Executive may use and disclose Confidential Information
to the extent necessary to assert any right or defend against any claim arising
under this Agreement or pertaining to Confidential Information or its use, to
the extent necessary to comply with any applicable statute, constitution,
treaty, rule, regulation, ordinance or order, whether of the United States, any
state thereof, or any other jurisdiction applicable to Executive, or if
Executive receives a request to disclose all or any part of the information
contained in the Confidential Information under the terms of a subpoena, order,
civil investigative demand or agency, whether of the United States or any state
thereof, or any other jurisdiction applicable to Executive.
(b) Injunctive Relief. Executive agrees that the remedy at law for any
breach by him of the covenants and agreements set forth in this Section 5 may be
inadequate and that in the event of any such breach, the Company may, in
addition to the other remedies that may be available to it at law, seek
injunctive relief prohibiting him (together with all those persons associated
with him) from the breach of such covenants and agreements.
6. Termination.
(a) Termination by Company for "Cause" or Voluntarily by Executive. The
Company may terminate this Agreement for "Cause" effective immediately upon
written notice thereof to Executive. For purposes of
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<PAGE> 4
this Agreement, "Cause" shall mean and be limited to the following event: (i) an
act of fraud, embezzlement or similar conduct by Executive involving the
Company; (ii) any action by Executive involving the arrest of Executive for
violation of any criminal statute constituting a felony if the Board reasonably
determines that the continuation of Executive's employment after such event
would have an adverse impact on the operations or reputation of the Company in
the financial community; or (iii) a continuing, repeated willful failure or
refusal by Executive to perform his duties; provided, however, that this
Agreement may not be terminated under this subclause (iv) unless Executive shall
have first received written notice from the Board advising Executive of the
specific acts or omissions alleged to constitute a failure or refusal to perform
and such failure or refusal to perform continues after Executive shall have had
a reasonable opportunity to correct the acts or omissions cited in such notice.
In the event of termination for "Cause", or voluntarily by Executive
other than as permitted in Sections 6(b)(i), 6(b)(ii) and 6(c), (x) Executive
shall be entitled to receive that portion of the Base Salary and all benefits
accrued through the date of termination and, (y) all Options that have become
exercisable as of the date of termination shall remain so for a period of 90
days.
(b) Termination by Company Other Than for "Cause".
(i) Death. Provided that notice of termination has not previously
been given under any Section hereof, if Executive shall die during the term of
this Agreement, this Agreement and all of the Company's obligations hereunder
shall terminate, except that Executive's estate or designated beneficiaries
shall be entitled to receive (A) all earned and unpaid Base Salary through the
date of termination and (B) the Base Salary, Performance Bonus, and all benefits
with respect to the then current contract year which would have been payable or
provided to Executive had the term ended one year following the last day of the
month in which Executive's death occurred; and (C) all other benefits that may
be due to Executive or Executive's estate or beneficiaries under the general
provisions of any benefit plan, stock incentive plan or other plan in which
Executive is then a participant, which benefits shall continue to be provided
for a period of one year following the date of death. In addition, of the
Options which are scheduled to vest on the next anniversary of the commencement
of the Agreement, a percentage of such number of Options shall vest at the date
of death determined by dividing the number of days which have elapsed since the
last such anniversary by the number 365 and multiplying the result by 100.
Further, all Options that have become exercisable as of the date of death
(including those which do so as a result of the provisions of the preceding
sentence) shall remain so for a period of twelve (12) months.
(ii) Disability. Provided that notice of termination has not
previously been given under any Section hereof, if Executive becomes ill or is
injured or disabled during the term such that Executive fails to perform all or
substantially all of the duties to be rendered hereunder and such failure
continues for a period in excess of 26 consecutive weeks (a "Disability"), the
Company shall continue to employ Executive under this Agreement for one year
form the date of the Disability (which one year period shall commence at the
beginning of the 26 week period referred to herein) and shall continue to pay
Executive the Base Salary in effect on the date of the Disability (determined at
the beginning of the 26 week period referred to herein), the Performance Bonus
and all benefits then in effect; provided, that (A) the Company may relieve
Executive of his duties and responsibilities hereunder to the extent permitted
by law and (B) any long-term disability payments received by Executive under any
disability insurance plan made available to Executive by the Company if the
premiums were paid by the Company shall be deducted from the salary and bonus
payments otherwise required to be paid to Executive hereunder. If during the
term and subsequent to the Disability commencement date (which shall be at any
time following the end of the 26 week period referred to herein) Executive shall
fully recover, the Company shall have the right (exercisable within 60 days
after receipt of notice from Executive of such recovery), but not the
obligation, to restore Executive to full-time service at full compensation. If
the Company elects not to restore Executive to full-time service, Executive
shall be entitled to obtain other employment. If Executive is not restored to
full-time employment with the Company, all stock options that have become
exercisable as of the date of Disability (determined at the end of the 26 week
period referred to herein) shall remain so for a period of 12 months.
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(iii) Without "Cause". If the Company elects to terminate Executive
for any reason whatsoever other than as provided in Section 6(a) or if the
Company causes a Defacto Termination of Executive (as defined below) (each a
"Severance Termination"), Executive shall receive the "Separation Package". As
used herein, the "Separation Package" shall consist of two years' Base Salary
(at the annual rate in effect at the date of the Severance Termination) plus an
amount equal to the Performance Bonus actually paid to Executive with respect to
the eight fiscal quarters preceding the date of the Severance Termination (or if
Executive has been employed for less than two years, the amount of Performances
Bonus paid to Executive for the entire period of employment multiplied by a
fraction, the numerator of which is the number eight and the denominator of
which is the actual number of fiscal quarters for which Executive was employed
by the Company). In addition, all Options and Anniversary Options which are
scheduled to vest on the next anniversary of the commencement of the Agreement
shall vest as of the date of the Severance Termination. Further, all options
that have become exercisable as of the date of such termination (including those
which do so as a result of the provisions of the preceding sentence) shall
remain so for a period of 24 months. In the event of a Severance Termination,
Executive will also be provided with reasonable office space and secretarial
support as well as the same mailing address and telephone number which Executive
had during the term for up to six months, and the Company shall pay the costs of
outplacement services with a provider of its choice at a level appropriate to
Executive's title and position as requested by Executive. For purposes of this
paragraph, a "Defacto Termination" shall include any of the following events:
(i) the Company shall fail to pay or shall reduce the Base Salary, Performance
Bonus or other benefits provided herein, except as permitted hereuner, or shall
otherwise breach any material provision hereof which breach is not cured within
10 days after receipt of notice thereof from Executive; (ii) the Company shall
fail to cause Executive to remain the Chief Executive Officer of the Company;
(iii) Executive shall not be continuously afforded the authority, powers,
responsibilities and privileges contemplated in Section 1 above (whether or not
accompanied by a change in title); (iv) the Company shall require Executive's
primary services to be rendered in an area other than the Company's principal
offices in the Los Angeles metropolitan area; or (v) after a Change in Control
(as defined below), the Company increases the Base Salary for senior executives
of the Company generally without similarly increasing the Base Salary of
Executive. For purposes of clause (iii), Executive shall be deemed not to have
been continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above if there shall occur any reduction in
the scope, level or nature of Executive's employment hereunder, or any demotion,
any phasing out or assignment to others, of the duties contemplated herein.
(c) Change in Control.
(i) Following a Change in Control, this Agreement shall continue to
be binding upon the Company and Executive shall be entitled to the payments
provided for in this Section 6 in the event of termination resulting from death,
disability, cause, or a Separation Termination, all as provided for in Sections
6(a) and 6(b).
(ii) Executive may (but shall not be obligated to) terminate this
Agreement effective 30 days after the giving of such notice given at any time
within two years following a Change in Control. In the event that Executive
elects to terminate this Agreement pursuant to this Section 6(c)(ii), Executive
shall be entitled to the following payments:
(A) If the Change in Control is effected to an Adverse Person
(as defined below), then Executive shall be entitled to and receive the
Severance Package. In addition, all Options and Anniversary Options then held by
Executive which are not yet vested shall vest as of the date of such
termination. Further, all options that have become exercisable as of the date of
such termination (including those which do so as a result of the provisions of
the preceding sentence) shall remain so for the entire remaining term of the
Options.
(B) If the Change in Control is effected to a person other
than an Adverse Person, Executive shall be entitled to receive the Severance
Package. In addition, all Options and Anniversary Options which are scheduled to
vest on the next scheduled vesting date during the 24 months following the
termination date shall vest as of the date of such termination. Further, all
options that have become exercisable as of the date of such termination
(including those which do so as a result of the provisions of the preceding
sentence) shall remain so for a period of 24 months.
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<PAGE> 6
(d) Payment of Termination Amounts. Executive may elect to have all
amounts to be paid to Executive pursuant to this Section 6 payable (i) over the
remaining term of this Agreement or for such shorter period as expressly
provided for herein, as applicable, or (ii) in a lump sum within 30 days
following termination; provided, however, in the case of death or disability,
the Acquisition Performance Bonus component shall be payable at such time as
performance-based bonuses are paid to similarly situated employees of the
Company and only if the specified targets set forth in Section 3(b) for the
applicable periods are actually met. In the event Executive elects to be paid
pursuant to clause (i), Executive agrees promptly to notify the Company in
writing of Executive's acceptance of full-time employment; within 15 days after
receipt of such notice, the Company shall pay Executive in a lump sum any
amounts which remain otherwise due to Executive hereunder.
(e) Stock and Similar Rights. Except with regard to the vesting and
exercise dates of Options and Anniversary Options as set forth in this Section
6, Executive's rights under any other agreement or plan under which stock
options, restricted stock or similar awards are granted shall be determined n
accordance with the terms and provisions of such plans or agreements.
(f) No Mitigation or Offset. Payment of any sum under this Section 6
shall not be subject to any claim of mitigation nor shall the Company be
entitled to any right of offset with respect thereto.
(g) Other Insurance Policies. Upon any termination of Executive's
employment, and upon reimbursement to the Company of all amounts paid by the
Company in connection with such policies, Executive shall have the right to
purchase or otherwise direct the disposition or assignment of any disability
insurance policy on him held by the Company (excluding only group disability
insurance policies) upon the payment of One Dollar ($1.00) as the total
consideration for each such policy.
7. Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events which occur
after the date hereof:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act ("Rule 13d-3")) of 20% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Voting
Securities").
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board.
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such reorganization, merger, or consolidation, which may be the
Company (the "Resulting Corporation"), entitled to vote generally in the
election of directors (the "Resulting Corporation Voting Securities") shall then
be owned beneficially, directly or indirectly, by all or substantially all of
the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger, or
consolidation; (ii) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, the Resulting Corporation, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the combined voting power
of Outstanding Voting Securities) shall own beneficially, directly or indirectly
20% or more of the combined voting power of the Resulting Corporation Voting
Securities; or (iii) at least a majority of the members of the Board shall have
been members of the Incumbent Board at the time of the execution of the
agreement providing for such reorganization, merger or consolidation.
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(d) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 60% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors ("Buyer Voting
Securities"), shall be owned beneficially, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such sale or other
disposition, in substantially the same proportion as their respective ownership
Outstanding Voting Securities, immediately prior to such sale or other
disposition; (ii) no Person (excluding the Company and any employee benefit plan
(or related trust) of the Company or Buyer and any Person that shall immediately
prior to such sale or other disposition own beneficially, directly or
indirectly, 20% or more of the combined voting power of Outstanding Voting
Securities), shall own beneficially, directly or indirectly, 20 % or more of the
combined voting power or Buyer Voting Securities; and (z) at least a majority of
the members of the Board of Directors of Buyer shall have been members of the
Incumbent Board at the time of the execution of the agreement or action of the
Board providing for such sale or other disposition or assets of the Company.
For purposes of this Agreement, an Adverse Person shall mean any
person which acquires control of the Company in a transaction involving a Change
in Control.
8. Insurance. During the term, the Company shall maintain, at no cost
to Executive, officers and directors liability insurance that would cover
Executive in an amount of no less than $5,000,000.
9. General provisions.
(a) Notices. All notices, requirements, request, demands, claims or
other communications hereunder shall be in writing. Any notice, requirement,
request, demand, claim or other communication hereunder shall be deemed duly
given (i) if personally delivered, when so delivered, (ii) if mailed, two (2)
business days after having been sent by registered or certified mail,
return-receipt requested, postage prepaid and addressed to the intended
recipient as set forth below, (iii) if given by telecopier, once such notice or
other communication is transmitted to the telecopier number specified below, and
the appropriate telephonic conformation is received, provided that such notice
or other communication is promptly thereafter mailed in accordance with the
provisions of clause (ii) above or (iv) if sent through an overnight delivery
service under circumstances by which such service guarantees next day delivery,
the date following the date so sent:
If to the Company, to:
PACIFIC INTERNATIONAL ENTERPRISES, INC.
4431 Corporate Center Drive, Suite 131
Los Alamitos, CA 90720-2526
If to Executive, to:
BINKS A. GRAVAL
923 E. 3rd. Street, #111
Los Angeles, CA 90013
Any party may change the address to which notices, request, demands, claims and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
(b) Assignment. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may be the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; provided, however, that this Agreement and the benefits
hereunder may be assigned by the Company to any corporation into which the
Company may be merged or consolidated, and this Agreement and
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the benefits hereunder will automatically be deemed assigned to any such
corporation, subject, however, to Executive's right to terminate this Agreement
to the extent provided in Section 6. In the event of any assignment of this
Agreement to any corporation acquiring all or substantially all of the assets of
the Company or to any other corporation into which the Company may be merged or
consolidated, the responsibilities and duties assigned to Executive by such
successor corporation shall be the responsibilities and duties of, and
compatible with the status of, a senior executive officer of such successor
corporation. The Company may delegate any of its obligations hereunder to any
subsidiary of the Company, provided that such delegation shall not relieve the
Company of any of its obligations hereunder. Executive may not assign its rights
hereunder or delegate his duties hereunder to any Person.
(c) Complete Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes and cancels any and all previous written or oral negotiations,
commitments, understandings, agreements and any other writings or communications
in respect of such subject matter.
(d) Amendments. This Agreement may be modified, amended, superseded
or terminated only by a writing duly signed by both parties.
(e) Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
(f) No Waiver. Any waiver by either party of a breach of any
provisions of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of either party to insist upon strict adherence to
any term of this Agreement on one or more occasions shall be considered a waiver
or to deprive such party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement.
(g) Binding Effect. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their permitted assigns,
successors and legal representatives.
(h) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same document.
(i) Governing Law. This Agreement has been negotiated and entered
into in the State of California and shall be construed in accordance with the
laws of the State of California.
(j) Arbitration. The parties hereby expressly agree that any
controversy of claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rules of evidence shall apply. The costs
of the arbitrator shall be borne equally. Each party shall be responsible for
its own attorney's fees and costs. However, the arbitrator shall have the right
to award costs and expenses (including actual attorneys' fees) to the prevailing
party as well as equitable relief. The award of the arbitrator shall be final
and binding and shall be enforceable in any court of competent jurisdiction.
Nothing in this paragraph shall preclude the parties from seeking an injunction
or other equitable relief from a court of competent jurisdiction under
appropriate circumstances. Nothing in this paragraph shall preclude the parties
from seeking an injunction or other equitable relief from a court of competent
jurisdiction under appropriate circumstances.
(k) Headings. The headings included in this Agreement are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Executive has executed
the same as of the day and year first above written.
PACIFIC INTERNATIONAL ENTERPRISES, INC.
By: /s/ Anthony Broughton
----------------------------------
Anthony Broughton
Its: Chief Financial Officer
By: /s/ Binks A. Graval
----------------------------------
Binks A. Graval
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EXHIBIT 10.2
AMENDED EMPLOYMENT AGREEMENT WITH ANTHONY BROUGHTON
This Employment Agreement (this "Agreement") is made and entered into
as of June 29th, 1997 by and between PACIFIC INTERNATIONAL ENTERPRISES, INC. a
Nevada corporation (the "Company"), and ANTHONY D. BROUGHTON, an individual
("Executive").
WITNESSETH:
WHEREAS, Executive and the Company wish to provide for the terms and
conditions of Executive's employment as Chief Operating Officer and Chief
Financial Officer of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive agree as
set forth below.
1. Employment and Duties. The Company hereby employs Executive to serve
as Chief Operating Officer and Chief Financial Officer of the Company, with the
powers and duties customarily accorded to such position, including those powers
and duties set forth in the Bylaws of the Company for such office and such other
duties consistent therewith as may be assigned to Executive from time to time by
the Chief Executive Officer and/or the Board of Directors of the Company.
Initially, Executive's managerial and supervisorial duties shall be limited to
those departments and operations as determined by the Board of Directors and
subsequently expanded to include other departments and operations as directed by
the Chief Executive Officer and/or the Board of Directors. Executive shall
endeavor in good faith to perform his duties in an efficient, faithful and
business-like manner. During the term of his employment, it is intended that
Executive also serve as a member of the Board of Directors of the Company (the
"Board") and the Company will take action within its powers the include
Executive among the slate of directors proposed to be nominated by the Board at
any applicable stockholders meeting.
2. Term. The term of this Agreement shall begin on June 29th, 1997 and
shall expire on June 28th, 2002 unless terminated earlier as set forth in
Section 6 hereof or by mutual agreement of the parties hereto (the "Term").
3. Compensation.
(a) Base Salary. During the term of this Agreement, Executive shall
be paid a base salary (the "Base Salary"), payable in accordance with the
Company's normal payroll practices. During the first year of the term of this
Agreement, Executive's Base Salary shall be $115,200 and may be paid, at the
election of the Company, either in cash or in shares of common stock of the
Company equal to that portion of Executive's Base Salary which is unpaid divided
by the average trading price of the common stock over the 5 trading day period
prior to the payment date of Executive's Base Salary. After the first year of
the term, Executive's Base Salary shall be paid in cash, unless the Executive
determines to accept another form of payment. The annual Base Salary payable to
Executive shall be reviewed at least annually; with a minimal increase of 20%
per annum for each year of this agreement.
(b) Performance Bonus. Executive shall be entitled to a performance
bonus paid upon the occurrence of certain events (the "Acquisition Performance
Bonus"). The Acquisition Performance Bonus shall equal a percentage of the
purchase price upon signing an agreement to acquire either substantially all of
the assets or voting stock of a company and a percentage of the purchase price
upon the closing of such an acquisition. The percentages shall be as follows:
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Purchase Price of Acquisition Percentage upon Signing Percentage upon Closing
- ----------------------------- ----------------------- -----------------------
Up to $2 million 3% 3%
Between $2-$4 million 2% 2%
Notwithstanding the percentages set forth above, a minimum of $100,000 shall be
payable upon signing an acquisition agreement and $100,000 upon closing the
acquisition. However, should the Company be unable to pay the Acquisition Bonus
in cash during the first year of this Agreement, the Executive may choose that
Acquisition Bonus be paid in shares of common stock of the Company equal to that
portion of Executive's Acquisition Bonus which is unpaid divided by the average
trading price of the common stock over the 5 trading day period prior to the
payment date of Executive's Acquisition Bonus.
(c) Operational Bonus. The Company will adopt a bonus plan for
officers of the Company. The Board of Directors will determine the aggregate
dollar amount of the bonus prior to the beginning of each year, the distribution
among officers of the bonus and the threshold for awarding bonuses, be it sales,
earnings or return on equity. Any bonus paid to Executive pursuant to the
Operational Bonus shall be paid quarterly.
(d) Stock Options. On the execution of this Agreement, the Company
shall grant Executive non-qualified options to purchase 500,000 shares of the
Company's Common Stock (the "Options"). The Options will be exercisable at an
exercise price of $0.10 per share. The Options will remain exercisable by
Executive, whether or not Executive remains employed by the Company, until the
tenth anniversary of the date of the initial grant (subject to the effect, if
any, of Section 6(a)(x) below). The Company shall register the shares of Common
Stock issuable upon exercise of the Options and shall use its best efforts to
maintain a current registration statement under the Securities Act of 1933, as
amended, in respect of such shares. The Options shall be issued under the
Company's stock incentive plans maintained for its executives and shall contain
standard anti-dilution mechanism to adjust for stock dividends, stock splits,
reverse stock splits, recapitalizations, consolidations and mergers as are
provided for therein.
(e) Stock Options. On each anniversary of the date of the
agreement, the Company shall grant Executive non-qualified options to purchase
200,000 shares of the Company's Common Stock (the "Anniversary Options"). The
Anniversary Options will be exercisable at $0.19, being bid value on June 29th,
1997. Once vested, the Anniversary Options will remain exercisable by Executive,
whether or not Executive remains employed by the Company, until the tenth
anniversary of the date of the initial grant (subject to the effect, if any, of
Section 6(a)(x) below). The Company shall register the shares of Common Stock
issuable upon exercise of the Anniversary Options and shall use its best efforts
to maintain a current registration statement under the Securities Act of 1933,
in respect of such shares.
4. Other Executive Benefits. During the term of the Agreement, the
Company shall provide to Executive benefits commensurate with his position,
including each of the following benefits:
(a) Medical and Dental Coverage. The Company agrees to provide
coverage to executive and dependent members of his family under the same medical
and dental plans as may be maintained from time to time in the discretion of the
Company's Board for the benefit of the other executive officers and the
dependent members of their families.
(b) Vacation. Executive shall be entitled to four (4) weeks of paid
vacation during Executive's first year of this Agreement and shall be entitled
to six (6) weeks during each year of employment with the Company thereafter for
the term of this Agreement. In each case, such entitlement shall accrue pro rata
over the contract year and shall be taken at such time or times as shall not
unreasonably interfere with the operations of the Company. Unutilized vacation
entitlement shall be paid in cash annually.
(c) Business Expenses. The Company will pay or reimburse Executive
for any out-of-pocket expenses incurred by Executive in the course of providing
his services hereunder, which comply with the Company's travel and expense
policies adopted from time to time by the Board for the executive officers. Such
reimbursement shall be made by the Company based on receipts submitted to the
Company by Executive in the same manner and within the same time period as
applicable to the other executive officers of the Company.
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(d) Automobile Allowance. The Company shall provide Executive with
the use of a luxury automobile that is selected by Executive and approved by the
Board of Directors. On the earlier of significant damage or destruction or
attaining three years of age, the company shall replace such automobile with a
new automobile selected by Executive and approved by the Board of Directors. The
Company shall pay all costs of insurance, repair, maintenance and operation of
such automobile.
(e) Benefit Plans. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, stock purchase or other benefit plan
of the Company now existing or hereafter adopted for the benefit of employees
generally or the senior executives of the Company.
(f) Life Insurance. Provided the following policies may be obtained
at a reasonable cost, the Company shall obtain a $1,000,000 standard term life
insurance policy and a $1,000,000 standard term accidental death policy for the
benefit of named beneficiaries.
(g) Disability. Provided the following policy may be obtained at a
reasonable cost, the Company shall provide Executive with a long-term disability
policy which provides for an annual disability payment in an amount equal to
125% of Executive's Base Salary.
5. Confidential Information.
(a) Non-Disclosure. Executive hereby agrees, during the term of
this Agreement, he will not disclose to any person or otherwise use or exploit
any proprietary or confidential information, including, without limitation,
trade secrets, processes, records of research, proposals, reports, methods,
processes, techniques, computer software or programming, or budgets or other
financial information, regarding the Company, its business, properties,
customers or affairs (collectively, "Confidential Information") obtained by him
at any time during the term, except to the extent required by Executive's
performance of assigned duties for the Company. Notwithstanding anything herein
to the contrary, the term "Confidential Information" shall not include
information which (i) is or becomes generally available to the public other than
as a result of disclosure by Executive in violation of this Agreement, (ii) is
or becomes available to Executive on a non-confidential basis from a source
other than the Company, provided that such source is not known by Executive to
be furnishing such information in violation of a confidentiality agreement with
or other obligation of secrecy to the Company, (iii) has been made available, or
is made available, on an unrestricted basis to a third party by the Company, by
an individual authorized to do so or, (iv) is known by Executive prior to its
disclosure to Executive. Executive may use and disclose Confidential Information
to the extent necessary to assert any right or defend against any claim arising
under this Agreement or pertaining to Confidential Information or its use, to
the extent necessary to comply with any applicable statute, constitution,
treaty, rule, regulation, ordinance or order, whether of the United States, any
state thereof, or any other jurisdiction applicable to Executive, or if
Executive receives a request to disclose all or any part of the information
contained in the Confidential Information under the terms of a subpoena, order,
civil investigative demand or agency, whether of the United States or any state
thereof, or any other jurisdiction applicable to Executive.
(b) Injunctive Relief. Executive agrees that the remedy at law for
any breach by him of the covenants and agreements set forth in this Section 5
may be inadequate and that in the event of any such breach, the Company may, in
addition to the other remedies that may be available to it at law, seek
injunctive relief prohibiting him (together with all those persons associated
with him) from the breach of such covenants and agreements.
6. Termination.
(a) Termination by Company for "Cause" or Voluntarily by Executive.
The Company may terminate this Agreement for "Cause" effective immediately upon
written notice thereof to Executive. For purposes of this Agreement, "Cause"
shall mean and be limited to the following event: (i) an act of fraud,
embezzlement or similar conduct by Executive involving the Company; (ii) any
action by Executive involving the arrest of Executive for violation of any
criminal statute constituting a felony if the Board reasonably determines that
the continuation of Executive's employment after such event would have an
adverse impact on the operations or reputation of the Company in the financial
community; or (iii) a continuing, repeated willful failure or refusal by
Executive to perform his duties; provided, however, that this Agreement may not
be terminated under this subclause (iv) unless Executive shall have
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first received written notice from the Board advising Executive of the specific
acts or omissions alleged to constitute a failure or refusal to perform and such
failure or refusal to perform continues after Executive shall have had a
reasonable opportunity to correct the acts or omissions cited in such notice.
In the event of termination for "Cause", or voluntarily by Executive
other than as permitted in Sections 6(b)(i), 6(b)(ii) and 6(c), (x) Executive
shall be entitled to receive that portion of the Base Salary and all benefits
accrued through the date of termination and, (y) all Options that have become
exercisable as of the date of termination shall remain so for a period of 90
days.
(b) Termination by Company Other Than for "Cause".
(i) Death. Provided that notice of termination has not
previously been given under any Section hereof, if Executive shall die during
the term of this Agreement, this Agreement and all of the Company's obligations
hereunder shall terminate, except that Executive's estate or designated
beneficiaries shall be entitled to receive (A) all earned and unpaid Base Salary
through the date of termination and (B) the Base Salary, Performance Bonus, and
all benefits with respect to the then current contract year which would have
been payable or provided to Executive had the term ended one year following the
last day of the month in which Executive's death occurred; and (C) all other
benefits that may be due to Executive or Executive's estate or beneficiaries
under the general provisions of any benefit plan, stock incentive plan or other
plan in which Executive is then a participant, which benefits shall continue to
be provided for a period of one year following the date of death. In addition,
of the Options which are scheduled to vest on the next anniversary of the
commencement of the Agreement, a percentage of such number of Options shall vest
at the date of death determined by dividing the number of days which have
elapsed since the last such anniversary by the number 365 and multiplying the
result by 100. Further, all Options that have become exercisable as of the date
of death (including those which do so as a result of the provisions of the
preceding sentence) shall remain so for a period of twelve (12) months.
(ii) Disability. Provided that notice of termination has not
previously been given under any Section hereof, if Executive becomes ill or is
injured or disabled during the term such that Executive fails to perform all or
substantially all of the duties to be rendered hereunder and such failure
continues for a period in excess of 26 consecutive weeks (a "Disability"), the
Company shall continue to employ Executive under this Agreement for one year
form the date of the Disability (which one year period shall commence at the
beginning of the 26 week period referred to herein) and shall continue to pay
Executive the Base Salary in effect on the date of the Disability (determined at
the beginning of the 26 week period referred to herein), the Performance Bonus
and all benefits then in effect; provided, that (A) the Company may relieve
Executive of his duties and responsibilities hereunder to the extent permitted
by law and (B) any long-term disability payments received by Executive under any
disability insurance plan made available to Executive by the Company if the
premiums were paid by the Company shall be deducted from the salary and bonus
payments otherwise required to be paid to Executive hereunder. If during the
term and subsequent to the Disability commencement date (which shall be at any
time following the end of the 26 week period referred to herein) Executive shall
fully recover, the Company shall have the right (exercisable within 60 days
after receipt of notice from Executive of such recovery), but not the
obligation, to restore Executive to full-time service at full compensation. If
the Company elects not to restore Executive to full-time service, Executive
shall be entitled to obtain other employment. If Executive is not restored to
full-time employment with the Company, all stock options that have become
exercisable as of the date of Disability (determined at the end of the 26 week
period referred to herein) shall remain so for a period of 12 months.
(iii) Without "Cause". If the Company elects to terminate
Executive for any reason whatsoever other than as provided in Section 6(a) or if
the Company causes a Defacto Termination of Executive (as defined below) (each a
"Severance Termination"), Executive shall receive the "Separation Package". As
used herein, the "Separation Package" shall consist of two years' Base Salary
(at the annual rate in effect at the date of the Severance Termination) plus an
amount equal to the Performance Bonus actually paid to Executive with respect to
the eight fiscal quarters preceding the date of the Severance Termination (or if
Executive has been employed for less than two years, the amount of Performances
Bonus paid to Executive for the entire period of employment multiplied by a
fraction, the numerator of which is the number eight and the denominator of
which is the actual number of fiscal quarters for which Executive was employed
by the Company). In addition, all Options and Anniversary Options which are
scheduled to vest on the next anniversary of the commencement of the Agreement
shall
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vest as of the date of the Severance Termination. Further, all options that have
become exercisable as of the date of such termination (including those which do
so as a result of the provisions of the preceding sentence) shall remain so for
a period of 24 months. In the event of a Severance Termination, Executive will
also be provided with reasonable office space and secretarial support as well as
the same mailing address and telephone number which Executive had during the
term for up to six months, and the Company shall pay the costs of outplacement
services with a provider of its choice at a level appropriate to Executive's
title and position as requested by Executive. For purposes of this paragraph, a
"Defacto Termination" shall include any of the following events: (i) the Company
shall fail to pay or shall reduce the Base Salary, Performance Bonus or other
benefits provided herein, except as permitted hereuner, or shall otherwise
breach any material provision hereof which breach is not cured within 10 days
after receipt of notice thereof from Executive; (ii) the Company shall fail to
cause Executive to remain the Chief Operating Officer and Chief Financial
Officer of the Company; (iii) Executive shall not be continuously afforded the
authority, powers, responsibilities and privileges contemplated in Section 1
above (whether or not accompanied by a change in title); (iv) the Company shall
require Executive's primary services to be rendered in an area other than the
Company's principal offices in the Los Angeles metropolitan area; or (v) after a
Change in Control (as defined below), the Company increases the Base Salary for
senior executives of the Company generally without similarly increasing the Base
Salary of Executive. For purposes of clause (iii), Executive shall be deemed not
to have been continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above if there shall occur any reduction in
the scope, level or nature of Executive's employment hereunder, or any demotion,
any phasing out or assignment to others, of the duties contemplated herein.
(c) Change in Control.
(i) Following a Change in Control, this Agreement shall
continue to be binding upon the Company and Executive shall be entitled to the
payments provided for in this Section 6 in the event of termination resulting
from death, disability, cause, or a Separation Termination, all as provided for
in Sections 6(a) and 6(b).
(ii) Executive may (but shall not be obligated to) terminate
this Agreement effective 30 days after the giving of such notice given at any
time within two years following a Change in Control. In the event that Executive
elects to terminate this Agreement pursuant to this Section 6(c)(ii), Executive
shall be entitled to the following payments:
(A) If the Change in Control is effected to an Adverse
Person (as defined below), then Executive shall be entitled to and receive the
Severance Package. In addition, all Options and Anniversary Options then held by
Executive which are not yet vested shall vest as of the date of such
termination. Further, all options that have become exercisable as of the date of
such termination (including those which do so as a result of the provisions of
the preceding sentence) shall remain so for the entire remaining term of the
Options.
(B) If the Change in Control is effected to a person other
than an Adverse Person, Executive shall be entitled to receive the Severance
Package. In addition, all Options and Anniversary Options which are scheduled to
vest on the next scheduled vesting date during the 24 months following the
termination date shall vest as of the date of such termination. Further, all
options that have become exercisable as of the date of such termination
(including those which do so as a result of the provisions of the preceding
sentence) shall remain so for a period of 24 months.
(d) Payment of Termination Amounts. Executive may elect to have all
amounts to be paid to Executive pursuant to this Section 6 payable (i) over the
remaining term of this Agreement or for such shorter period as expressly
provided for herein, as applicable, or (ii) in a lump sum within 30 days
following termination; provided, however, in the case of death or disability,
the Acquisition Performance Bonus component shall be payable at such time as
performance-based bonuses are paid to similarly situated employees of the
Company and only if the specified targets set forth in Section 3(b) for the
applicable periods are actually met. In the event Executive elects to be paid
pursuant to clause (i), Executive agrees promptly to notify the Company in
writing of Executive's acceptance of full-time employment; within 15 days after
receipt of such notice, the Company shall pay Executive in a lump sum any
amounts which remain otherwise due to Executive hereunder.
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(e) Stock and Similar Rights. Except with regard to the vesting and
exercise dates of Options and Anniversary Options as set forth in this Section
6, Executive's rights under any other agreement or plan under which stock
options, restricted stock or similar awards are granted shall be determined n
accordance with the terms and provisions of such plans or agreements.
(f) No Mitigation or Offset. Payment of any sum under this Section
6 shall not be subject to any claim of mitigation nor shall the Company be
entitled to any right of offset with respect thereto.
(g) Other Insurance Policies. Upon any termination of Executive's
employment, and upon reimbursement to the Company of all amounts paid by the
Company in connection with such policies, Executive shall have the right to
purchase or otherwise direct the disposition or assignment of any disability
insurance policy on him held by the Company (excluding only group disability
insurance policies) upon the payment of One Dollar ($1.00) as the total
consideration for each such policy.
7. Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events which occur
after the date hereof:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act ("Rule 13d-3")) of 20% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Voting
Securities").
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board.
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such reorganization, merger, or consolidation, which may be the
Company (the "Resulting Corporation"), entitled to vote generally in the
election of directors (the "Resulting Corporation Voting Securities") shall then
be owned beneficially, directly or indirectly, by all or substantially all of
the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger, or
consolidation; (ii) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, the Resulting Corporation, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the combined voting power
of Outstanding Voting Securities) shall own beneficially, directly or indirectly
20% or more of the combined voting power of the Resulting Corporation Voting
Securities; or (iii) at least a majority of the members of the Board shall have
been members of the Incumbent Board at the time of the execution of the
agreement providing for such reorganization, merger or consolidation.
(d) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 60% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors ("Buyer Voting
Securities"), shall be owned beneficially, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such sale or other
disposition, in substantially the same proportion as their respective ownership
Outstanding Voting Securities, immediately prior to such sale or other
disposition; (ii) no Person (excluding the Company and any employee benefit plan
(or related trust) of the Company or Buyer and any Person that shall immediately
prior to such sale or other disposition own beneficially, directly or
indirectly, 20% or more of the combined voting power of Outstanding Voting
Securities), shall own beneficially, directly or indirectly, 20 % or more of the
combined voting power or Buyer Voting Securities; and (z) at least a majority of
the members of the Board of Directors of Buyer shall have been members of the
Incumbent Board at the time of the execution of the agreement or action of the
Board providing for such sale or other disposition or assets of the Company.
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For purposes of this Agreement, an Adverse Person shall mean any
person which acquires control of the Company in a transaction involving a Change
in Control.
8. Insurance. During the term, the Company shall maintain, at no cost
to Executive, officers and directors liability insurance that would cover
Executive in an amount of no less than $5,000,000.
9. General provisions.
(a) Notices. All notices, requirements, request, demands, claims or
other communications hereunder shall be in writing. Any notice, requirement,
request, demand, claim or other communication hereunder shall be deemed duly
given (i) if personally delivered, when so delivered, (ii) if mailed, two (2)
business days after having been sent by registered or certified mail,
return-receipt requested, postage prepaid and addressed to the intended
recipient as set forth below, (iii) if given by telecopier, once such notice or
other communication is transmitted to the telecopier number specified below, and
the appropriate telephonic conformation is received, provided that such notice
or other communication is promptly thereafter mailed in accordance with the
provisions of clause (ii) above or (iv) if sent through an overnight delivery
service under circumstances by which such service guarantees next day delivery,
the date following the date so sent:
If to the Company, to:
PACIFIC INTERNATIONAL ENTERPRISES, INC.
4431 Corporate Center Drive, Suite 131
Los Alamitos, CA 90720-2526
If to Executive, to:
ANTHONY D. BROUGHTON
29707 Island View Drive,
Rancho Palos Verdes, CA 90725
Any party may change the address to which notices, request, demands, claims and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
(b) Assignment. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may be the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; provided, however, that this Agreement and the benefits
hereunder may be assigned by the Company to any corporation into which the
Company may be merged or consolidated, and this Agreement and the benefits
hereunder will automatically be deemed assigned to any such corporation,
subject, however, to Executive's right to terminate this Agreement to the extent
provided in Section 6. In the event of any assignment of this Agreement to any
corporation acquiring all or substantially all of the assets of the Company or
to any other corporation into which the Company may be merged or consolidated,
the responsibilities and duties assigned to Executive by such successor
corporation shall be the responsibilities and duties of, and compatible with the
status of, a senior executive officer of such successor corporation. The Company
may delegate any of its obligations hereunder to any subsidiary of the Company,
provided that such delegation shall not relieve the Company of any of its
obligations hereunder. Executive may not assign its rights hereunder or delegate
his duties hereunder to any Person.
(c) Complete Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes and cancels any and all previous written or oral negotiations,
commitments, understandings, agreements and any other writings or communications
in respect of such subject matter.
(d) Amendments. This Agreement may be modified, amended, superseded
or terminated only by a writing duly signed by both parties.
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(e) Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
(f) No Waiver. Any waiver by either party of a breach of any
provisions of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of either party to insist upon strict adherence to
any term of this Agreement on one or more occasions shall be considered a waiver
or to deprive such party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement.
(g) Binding Effect. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their permitted assigns,
successors and legal representatives.
(h) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same document.
(i) Governing Law. This Agreement has been negotiated and entered
into in the State of California and shall be construed in accordance with the
laws of the State of California.
(j) Arbitration. The parties hereby expressly agree that any
controversy of claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rules of evidence shall apply. The costs
of the arbitrator shall be borne equally. Each party shall be responsible for
its own attorney's fees and costs. However, the arbitrator shall have the right
to award costs and expenses (including actual attorneys' fees) to the prevailing
party as well as equitable relief. The award of the arbitrator shall be final
and binding and shall be enforceable in any court of competent jurisdiction.
Nothing in this paragraph shall preclude the parties from seeking an injunction
or other equitable relief from a court of competent jurisdiction under
appropriate circumstances. Nothing in this paragraph shall preclude the parties
from seeking an injunction or other equitable relief from a court of competent
jurisdiction under appropriate circumstances.
(k) Headings. The headings included in this Agreement are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Executive has executed
the same as of the day and year first above written.
PACIFIC INTERNATIONAL ENTERPRISES, INC.
By: /s/ Binks A. Graval
----------------------------------
Binks A. Graval
Its: Chairman and Chief Executive Officer
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By: /s/ Anthony D. Broughton
----------------------------------
Anthony D. Broughton
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EXHIBIT 10.3
AMENDED EMPLOYMENT AGREEMENT WITH RICHARD W. PERKINS
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of June 29th, 1997 by and between PACIFIC INTERNATIONAL ENTERPRISES, INC. a
Nevada corporation (the "Company"), and RICHARD PERKINS, an individual
("Executive").
WITNESSETH:
WHEREAS, Executive and the Company wish to provide for the terms and
conditions of Executive's employment as a Vice President of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive agree as
set forth below.
1. Employment and Duties. The Company hereby employs Executive to serve
as a Vice President of the Company, with the powers and duties customarily
accorded to such position, including those powers and duties set forth in the
Bylaws of the Company for such office and such other duties consistent therewith
as may be assigned to Executive from time to time by the Chief Executive
Officer. Initially, Executive's managerial and supervisorial duties shall be
limited to those departments and operations as determined by the Chief Executive
Officer. Executive shall endeavor in good faith to perform his duties in an
efficient, faithful and business-like manner. During the term of his employment,
it is intended that Executive also serve as Vice Chairman of the Board of
Directors of the Company (the "Board") and the Company will take action within
its powers to include Executive among the slate of directors proposed to be
nominated by the Board at any applicable stockholders meeting.
2. Term. The term of this Agreement shall begin on June 29th, 1997 and
shall expire on June 28th, 2002 unless terminated earlier as set forth in
Section 6 hereof or by mutual agreement of the parties hereto (the "Term").
3. Compensation.
(a) Base Salary. During the term of this Agreement, Executive shall
be paid a base salary (the "Base Salary"), payable in accordance with the
Company's normal payroll practices. During the first year of the term of this
Agreement, Executive's Base Salary shall be $115,200 and may be paid, at the
election of the Company, either in cash or in shares of common stock of the
Company equal to that portion of Executive's Base Salary which is unpaid divided
by the average trading price of the common stock over the 5 trading day period
prior to the payment date of Executive's Base Salary. After the first year of
the term, Executive's Base Salary shall be paid in cash, unless the Executive
determines to accept another form of payment. The annual Base Salary payable to
Executive shall be reviewed at least annually; with a minimal increase of 20%
per annum for each year of this agreement.
(b) Performance Bonus. Executive shall be entitled to a performance
bonus paid upon the occurrence of certain events (the "Acquisition Performance
Bonus"). The Acquisition Performance Bonus shall equal a percentage of the
purchase price upon signing an agreement to acquire either substantially all of
the assets or voting stock of a company and a percentage of the purchase price
upon the closing of such an acquisition. The percentages shall be as follows:
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Purchase Price of Acquisition Percentage upon Signing Percentage upon Closing
- ----------------------------- ----------------------- -----------------------
Up to $2 million 3% 3%
Between $2-$4 million 2% 2%
Notwithstanding the percentages set forth above, a minimum of $100,000 shall be
payable upon signing an acquisition agreement and $100,000 upon closing the
acquisition. However, should the Company be unable to pay the Acquisition Bonus
in cash during the first year of this Agreement, the Executive may choose that
Acquisition Bonus be paid in shares of common stock of the Company equal to that
portion of Executive's Acquisition Bonus which is unpaid divided by the average
trading price of the common stock over the 5 trading day period prior to the
payment date of Executive's Acquisition Bonus.
(c) Operational Bonus. The Company will adopt a bonus plan for
officers of the Company. The Board of Directors will determine the aggregate
dollar amount of the bonus prior to the beginning of each year, the distribution
among officers of the bonus and the threshold for awarding bonuses, be it sales,
earnings or return on equity. Any bonus paid to Executive pursuant to the
Operational Bonus shall be paid quarterly.
(d) Stock Options. On the execution of this Agreement, the Company
shall grant Executive non-qualified options to purchase 500,000 shares of the
Company's Common Stock (the "Options"). The Options will be exercisable at an
exercise price of $0.10 per share. The Options will remain exercisable by
Executive, whether or not Executive remains employed by the Company, until the
tenth anniversary of the date of the initial grant (subject to the effect, if
any, of Section 6(a)(x) below). The Company shall register the shares of Common
Stock issuable upon exercise of the Options and shall use its best efforts to
maintain a current registration statement under the Securities Act of 1933, as
amended, in respect of such shares. The Options shall be issued under the
Company's stock incentive plans maintained for its executives and shall contain
standard anti-dilution mechanism to adjust for stock dividends, stock splits,
reverse stock splits, recapitalizations, consolidations and mergers as are
provided for therein.
(e) Stock Options. On each anniversary of the date of the
agreement, the Company shall grant Executive non-qualified options to purchase
200,000 shares of the Company's Common Stock (the "Anniversary Options"). The
Anniversary Options will be exercisable at $0.19, being bid value on June 29th,
1997. Once vested, the Anniversary Options will remain exercisable by Executive,
whether or not Executive remains employed by the Company, until the tenth
anniversary of the date of the initial grant (subject to the effect, if any, of
Section 6(a)(x) below). The Company shall register the shares of Common Stock
issuable upon exercise of the Anniversary Options and shall use its best efforts
to maintain a current registration statement under the Securities Act of 1933,
in respect of such shares.
4. Other Executive Benefits. During the term of the Agreement, the
Company shall provide to Executive benefits commensurate with his position,
including each of the following benefits:
(a) Medical and Dental Coverage. The Company agrees to provide
coverage to executive and dependent members of his family under the same medical
and dental plans as may be maintained from time to time in the discretion of the
Company's Board for the benefit of the other executive officers and the
dependent members of their families.
(b) Vacation. Executive shall be entitled to four (4) weeks of paid
vacation during Executive's first year of this Agreement and shall be entitled
to six (6) weeks during each year of employment with the Company thereafter for
the term of this Agreement. In each case, such entitlement shall accrue pro rata
over the contract year and shall be taken at such time or times as shall not
unreasonably interfere with the operations of the Company. Unutilized vacation
entitlement shall be paid in cash annually.
(c) Business Expenses. The Company will pay or reimburse Executive
for any out-of-pocket expenses incurred by Executive in the course of providing
his services hereunder, which comply with the Company's travel and expense
policies adopted from time to time by the Board for the executive officers. Such
reimbursement shall be made by the Company based on receipts submitted to the
Company by Executive in the same manner and within the same time period as
applicable to the other executive officers of the Company.
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(d) Automobile Allowance. The Company shall provide Executive with
the use of a luxury automobile that is selected by Executive and approved by the
Board of Directors. On the earlier of significant damage or destruction or
attaining three years of age, the company shall replace such automobile with a
new automobile selected by Executive and approved by the Board of Directors. The
Company shall pay all costs of insurance, repair, maintenance and operation of
such automobile.
(e) Benefit Plans. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, stock purchase or other benefit plan
of the Company now existing or hereafter adopted for the benefit of employees
generally or the senior executives of the Company.
(f) Life Insurance. Provided the following policies may be obtained
at a reasonable cost, the Company shall obtain a $1,000,000 standard term life
insurance policy and a $1,000,000 standard term accidental death policy for the
benefit of named beneficiaries.
(g) Disability. Provided the following policy may be obtained at a
reasonable cost, the Company shall provide Executive with a long-term disability
policy which provides for an annual disability payment in an amount equal to
125% of Executive's Base Salary.
5. Confidential Information.
(a) Non-Disclosure. Executive hereby agrees, during the term of
this Agreement, he will not disclose to any person or otherwise use or exploit
any proprietary or confidential information, including, without limitation,
trade secrets, processes, records of research, proposals, reports, methods,
processes, techniques, computer software or programming, or budgets or other
financial information, regarding the Company, its business, properties,
customers or affairs (collectively, "Confidential Information") obtained by him
at any time during the term, except to the extent required by Executive's
performance of assigned duties for the Company. Notwithstanding anything herein
to the contrary, the term "Confidential Information" shall not include
information which (i) is or becomes generally available to the public other than
as a result of disclosure by Executive in violation of this Agreement, (ii) is
or becomes available to Executive on a non-confidential basis from a source
other than the Company, provided that such source is not known by Executive to
be furnishing such information in violation of a confidentiality agreement with
or other obligation of secrecy to the Company, (iii) has been made available, or
is made available, on an unrestricted basis to a third party by the Company, by
an individual authorized to do so or, (iv) is known by Executive prior to its
disclosure to Executive. Executive may use and disclose Confidential Information
to the extent necessary to assert any right or defend against any claim arising
under this Agreement or pertaining to Confidential Information or its use, to
the extent necessary to comply with any applicable statute, constitution,
treaty, rule, regulation, ordinance or order, whether of the United States, any
state thereof, or any other jurisdiction applicable to Executive, or if
Executive receives a request to disclose all or any part of the information
contained in the Confidential Information under the terms of a subpoena, order,
civil investigative demand or agency, whether of the United States or any state
thereof, or any other jurisdiction applicable to Executive.
(b) Injunctive Relief. Executive agrees that the remedy at law for
any breach by him of the covenants and agreements set forth in this Section 5
may be inadequate and that in the event of any such breach, the Company may, in
addition to the other remedies that may be available to it at law, seek
injunctive relief prohibiting him (together with all those persons associated
with him) from the breach of such covenants and agreements.
6. Termination.
(a) Termination by Company for "Cause" or Voluntarily by
Executive. The Company may terminate this Agreement for "Cause" effective
immediately upon written notice thereof to Executive. For purposes of this
Agreement, "Cause" shall mean and be limited to the following event: (i) an act
of fraud, embezzlement or similar conduct by Executive involving the Company;
(ii) any action by Executive involving the arrest of Executive for violation of
any criminal statute constituting a felony if the Board reasonably determines
that the continuation of Executive's employment after such event would have an
adverse impact on the operations or reputation of the Company in the financial
community; or (iii) a continuing, repeated willful failure or refusal by
Executive to perform his duties; provided, however, that this Agreement may not
be terminated under this subclause (iv) unless Executive shall have
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first received written notice from the Board advising Executive of the specific
acts or omissions alleged to constitute a failure or refusal to perform and such
failure or refusal to perform continues after Executive shall have had a
reasonable opportunity to correct the acts or omissions cited in such notice.
In the event of termination for "Cause", or voluntarily by Executive
other than as permitted in Sections 6(b)(i), 6(b)(ii) and 6(c), (x) Executive
shall be entitled to receive that portion of the Base Salary and all benefits
accrued through the date of termination and, (y) all Options that have become
exercisable as of the date of termination shall remain so for a period of 90
days.
(b) Termination by Company Other Than for "Cause".
(i) Death. Provided that notice of termination has not
previously been given under any Section hereof, if Executive shall die during
the term of this Agreement, this Agreement and all of the Company's obligations
hereunder shall terminate, except that Executive's estate or designated
beneficiaries shall be entitled to receive (A) all earned and unpaid Base Salary
through the date of termination and (B) the Base Salary, Performance Bonus, and
all benefits with respect to the then current contract year which would have
been payable or provided to Executive had the term ended one year following the
last day of the month in which Executive's death occurred; and (C) all other
benefits that may be due to Executive or Executive's estate or beneficiaries
under the general provisions of any benefit plan, stock incentive plan or other
plan in which Executive is then a participant, which benefits shall continue to
be provided for a period of one year following the date of death. In addition,
of the Options which are scheduled to vest on the next anniversary of the
commencement of the Agreement, a percentage of such number of Options shall vest
at the date of death determined by dividing the number of days which have
elapsed since the last such anniversary by the number 365 and multiplying the
result by 100. Further, all Options that have become exercisable as of the date
of death (including those which do so as a result of the provisions of the
preceding sentence) shall remain so for a period of twelve (12) months.
(ii) Disability. Provided that notice of termination has not
previously been given under any Section hereof, if Executive becomes ill or is
injured or disabled during the term such that Executive fails to perform all or
substantially all of the duties to be rendered hereunder and such failure
continues for a period in excess of 26 consecutive weeks (a "Disability"), the
Company shall continue to employ Executive under this Agreement for one year
form the date of the Disability (which one year period shall commence at the
beginning of the 26 week period referred to herein) and shall continue to pay
Executive the Base Salary in effect on the date of the Disability (determined at
the beginning of the 26 week period referred to herein), the Performance Bonus
and all benefits then in effect; provided, that (A) the Company may relieve
Executive of his duties and responsibilities hereunder to the extent permitted
by law and (B) any long-term disability payments received by Executive under any
disability insurance plan made available to Executive by the Company if the
premiums were paid by the Company shall be deducted from the salary and bonus
payments otherwise required to be paid to Executive hereunder. If during the
term and subsequent to the Disability commencement date (which shall be at any
time following the end of the 26 week period referred to herein) Executive shall
fully recover, the Company shall have the right (exercisable within 60 days
after receipt of notice from Executive of such recovery), but not the
obligation, to restore Executive to full-time service at full compensation. If
the Company elects not to restore Executive to full-time service, Executive
shall be entitled to obtain other employment. If Executive is not restored to
full-time employment with the Company, all stock options that have become
exercisable as of the date of Disability (determined at the end of the 26 week
period referred to herein) shall remain so for a period of 12 months.
(iii) Without "Cause". If the Company elects to terminate
Executive for any reason whatsoever other than as provided in Section 6(a) or if
the Company causes a Defacto Termination of Executive (as defined below) (each a
"Severance Termination"), Executive shall receive the "Separation Package". As
used herein, the "Separation Package" shall consist of two years' Base Salary
(at the annual rate in effect at the date of the Severance Termination) plus an
amount equal to the Performance Bonus actually paid to Executive with respect to
the eight fiscal quarters preceding the date of the Severance Termination (or if
Executive has been employed for less than two years, the amount of Performances
Bonus paid to Executive for the entire period of employment multiplied by a
fraction, the numerator of which is the number eight and the denominator of
which is the actual number of fiscal quarters for which Executive was employed
by the Company). In addition, all Options and Anniversary Options which are
scheduled to vest on the next anniversary of the commencement of the Agreement
shall
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vest as of the date of the Severance Termination. Further, all options that have
become exercisable as of the date of such termination (including those which do
so as a result of the provisions of the preceding sentence) shall remain so for
a period of 24 months. In the event of a Severance Termination, Executive will
also be provided with reasonable office space and secretarial support as well as
the same mailing address and telephone number which Executive had during the
term for up to six months, and the Company shall pay the costs of outplacement
services with a provider of its choice at a level appropriate to Executive's
title and position as requested by Executive. For purposes of this paragraph, a
"Defacto Termination" shall include any of the following events: (i) the Company
shall fail to pay or shall reduce the Base Salary, Performance Bonus or other
benefits provided herein, except as permitted hereuner, or shall otherwise
breach any material provision hereof which breach is not cured within 10 days
after receipt of notice thereof from Executive; (ii) the Company shall fail to
cause Executive to remain the Chief Executive Officer of the Company; (iii)
Executive shall not be continuously afforded the authority, powers,
responsibilities and privileges contemplated in Section 1 above (whether or not
accompanied by a change in title); (iv) the Company shall require Executive's
primary services to be rendered in an area other than the Company's principal
offices in the Los Angeles metropolitan area; or (v) after a Change in Control
(as defined below), the Company increases the Base Salary for senior executives
of the Company generally without similarly increasing the Base Salary of
Executive. For purposes of clause (iii), Executive shall be deemed not to have
been continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above if there shall occur any reduction in
the scope, level or nature of Executive's employment hereunder, or any demotion,
any phasing out or assignment to others, of the duties contemplated herein.
(c) Change in Control.
(i) Following a Change in Control, this Agreement shall
continue to be binding upon the Company and Executive shall be entitled to the
payments provided for in this Section 6 in the event of termination resulting
from death, disability, cause, or a Separation Termination, all as provided for
in Sections 6(a) and 6(b).
(ii) Executive may (but shall not be obligated to) terminate
this Agreement effective 30 days after the giving of such notice given at any
time within two years following a Change in Control. In the event that Executive
elects to terminate this Agreement pursuant to this Section 6(c)(ii), Executive
shall be entitled to the following payments:
(A) If the Change in Control is effected to an Adverse
Person (as defined below), then Executive shall be entitled to and receive the
Severance Package. In addition, all Options and Anniversary Options then held by
Executive which are not yet vested shall vest as of the date of such
termination. Further, all options that have become exercisable as of the date of
such termination (including those which do so as a result of the provisions of
the preceding sentence) shall remain so for the entire remaining term of the
Options.
(B) If the Change in Control is effected to a person other
than an Adverse Person, Executive shall be entitled to receive the Severance
Package. In addition, all Options and Anniversary Options which are scheduled to
vest on the next scheduled vesting date during the 24 months following the
termination date shall vest as of the date of such termination. Further, all
options that have become exercisable as of the date of such termination
(including those which do so as a result of the provisions of the preceding
sentence) shall remain so for a period of 24 months.
(d) Payment of Termination Amounts. Executive may elect to have all
amounts to be paid to Executive pursuant to this Section 6 payable (i) over the
remaining term of this Agreement or for such shorter period as expressly
provided for herein, as applicable, or (ii) in a lump sum within 30 days
following termination; provided, however, in the case of death or disability,
the Acquisition Performance Bonus component shall be payable at such time as
performance-based bonuses are paid to similarly situated employees of the
Company and only if the specified targets set forth in Section 3(b) for the
applicable periods are actually met. In the event Executive elects to be paid
pursuant to clause (i), Executive agrees promptly to notify the Company in
writing of Executive's acceptance of full-time employment; within 15 days after
receipt of such notice, the Company shall pay Executive in a lump sum any
amounts which remain otherwise due to Executive hereunder.
(e) Stock and Similar Rights. Except with regard to the vesting and
exercise dates of Options and Anniversary Options as set forth in this Section
6, Executive's rights under any other agreement or plan under which
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stock options, restricted stock or similar awards are granted shall be
determined n accordance with the terms and provisions of such plans or
agreements.
(f) No Mitigation or Offset. Payment of any sum under this Section
6 shall not be subject to any claim of mitigation nor shall the Company be
entitled to any right of offset with respect thereto.
(g) Other Insurance Policies. Upon any termination of Executive's
employment, and upon reimbursement to the Company of all amounts paid by the
Company in connection with such policies, Executive shall have the right to
purchase or otherwise direct the disposition or assignment of any disability
insurance policy on him held by the Company (excluding only group disability
insurance policies) upon the payment of One Dollar ($1.00) as the total
consideration for each such policy.
7. Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events which occur
after the date hereof:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act ("Rule 13d-3")) of 20% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Voting
Securities").
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board.
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such reorganization, merger, or consolidation, which may be the
Company (the "Resulting Corporation"), entitled to vote generally in the
election of directors (the "Resulting Corporation Voting Securities") shall then
be owned beneficially, directly or indirectly, by all or substantially all of
the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger, or
consolidation; (ii) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, the Resulting Corporation, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the combined voting power
of Outstanding Voting Securities) shall own beneficially, directly or indirectly
20% or more of the combined voting power of the Resulting Corporation Voting
Securities; or (iii) at least a majority of the members of the Board shall have
been members of the Incumbent Board at the time of the execution of the
agreement providing for such reorganization, merger or consolidation.
(d) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 60% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors ("Buyer Voting
Securities"), shall be owned beneficially, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such sale or other
disposition, in substantially the same proportion as their respective ownership
Outstanding Voting Securities, immediately prior to such sale or other
disposition; (ii) no Person (excluding the Company and any employee benefit plan
(or related trust) of the Company or Buyer and any Person that shall immediately
prior to such sale or other disposition own beneficially, directly or
indirectly, 20% or more of the combined voting power of Outstanding Voting
Securities), shall own beneficially, directly or indirectly, 20 % or more of the
combined voting power or Buyer Voting Securities; and (z) at least a majority of
the members of the Board of Directors of Buyer shall have been members of the
Incumbent Board at the time of the execution of the agreement or action of the
Board providing for such sale or other disposition or assets of the Company.
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For purposes of this Agreement, an Adverse Person shall mean any person
which acquires control of the Company in a transaction involving a Change in
Control.
8. Insurance. During the term, the Company shall maintain, at no cost
to Executive, officers and directors liability insurance that would cover
Executive in an amount of no less than $5,000,000.
9. General provisions.
(a) Notices. All notices, requirements, request, demands, claims or
other communications hereunder shall be in writing. Any notice, requirement,
request, demand, claim or other communication hereunder shall be deemed duly
given (i) if personally delivered, when so delivered, (ii) if mailed, two (2)
business days after having been sent by registered or certified mail,
return-receipt requested, postage prepaid and addressed to the intended
recipient as set forth below, (iii) if given by telecopier, once such notice or
other communication is transmitted to the telecopier number specified below, and
the appropriate telephonic conformation is received, provided that such notice
or other communication is promptly thereafter mailed in accordance with the
provisions of clause (ii) above or (iv) if sent through an overnight delivery
service under circumstances by which such service guarantees next day delivery,
the date following the date so sent:
If to the Company, to:
PACIFIC INTERNATIONAL ENTERPRISES, INC.
4431 Corporate Center Drive, Suite 131
Los Alamitos, CA 90720-2526
If to Executive, to:
RICHARD W. PERKINS
13800 Valerio Street
Van Nuys, CA 91405
Any party may change the address to which notices, request, demands, claims and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
(b) Assignment. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may be the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; provided, however, that this Agreement and the benefits
hereunder may be assigned by the Company to any corporation into which the
Company may be merged or consolidated, and this Agreement and the benefits
hereunder will automatically be deemed assigned to any such corporation,
subject, however, to Executive's right to terminate this Agreement to the extent
provided in Section 6. In the event of any assignment of this Agreement to any
corporation acquiring all or substantially all of the assets of the Company or
to any other corporation into which the Company may be merged or consolidated,
the responsibilities and duties assigned to Executive by such successor
corporation shall be the responsibilities and duties of, and compatible with the
status of, a senior executive officer of such successor corporation. The Company
may delegate any of its obligations hereunder to any subsidiary of the Company,
provided that such delegation shall not relieve the Company of any of its
obligations hereunder. Executive may not assign its rights hereunder or delegate
his duties hereunder to any Person.
(c) Complete Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes and cancels any and all previous written or oral negotiations,
commitments, understandings, agreements and any other writings or communications
in respect of such subject matter.
(d) Amendments. This Agreement may be modified, amended, superseded
or terminated only by a writing duly signed by both parties.
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(e) Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
(f) No Waiver. Any waiver by either party of a breach of any
provisions of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of either party to insist upon strict adherence to
any term of this Agreement on one or more occasions shall be considered a waiver
or to deprive such party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement.
(g) Binding Effect. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their permitted assigns,
successors and legal representatives.
(h) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same document.
(i) Governing Law. This Agreement has been negotiated and entered
into in the State of California and shall be construed in accordance with the
laws of the State of California.
(j) Arbitration. The parties hereby expressly agree that any
controversy of claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rules of evidence shall apply. The costs
of the arbitrator shall be borne equally. Each party shall be responsible for
its own attorney's fees and costs. However, the arbitrator shall have the right
to award costs and expenses (including actual attorneys' fees) to the prevailing
party as well as equitable relief. The award of the arbitrator shall be final
and binding and shall be enforceable in any court of competent jurisdiction.
Nothing in this paragraph shall preclude the parties from seeking an injunction
or other equitable relief from a court of competent jurisdiction under
appropriate circumstances. Nothing in this paragraph shall preclude the parties
from seeking an injunction or other equitable relief from a court of competent
jurisdiction under appropriate circumstances.
(k) Headings. The headings included in this Agreement are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Executive has executed
the same as of the day and year first above written.
PACIFIC INTERNATIONAL ENTERPRISES, INC.
By: /s/ Binks A. Graval
--------------------------------------
Its: Chairman and Chief Executive Officer
8
<PAGE> 9
By: /s/ Richard W. Perkins
--------------------------------
Richard W. Perkins
9
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT WITH LEE ROGERS
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of June 29th, 1997 by and between CRUSH INNOVATIVE SPORTS SYSTEMS, INC. A
California Corporation (the "Company"), and LEE ROGERS, an individual
("Executive").
WITNESSETH:
WHEREAS, Executive and the Company wish to provide for the terms and
conditions of Executive's employment as President.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive agree as
set forth below.
1. Employment and Duties. The Company hereby employs Executive to serve
as President of the Company, with the powers and duties customarily accorded to
such position, including those powers and duties set forth in the Bylaws of the
Company for such office and such other duties consistent therewith as may be
assigned to Executive from time to time by the Chief Executive Officer.
Initially, Executive's managerial and supervisorial duties shall be limited to
those departments and operations as determined by the Chief Executive Officer
Executive shall endeavor in good faith to perform his duties in an efficient,
faithful and business-like manner. During the term of his employment, it is
intended that Executive also serve as a Director of the Board of Directors of
the Company (the "Board") and the Company will take action within its powers the
include Executive among the slate of directors proposed to be nominated by the
Board at any applicable stockholders meeting.
2. Term. The term of this Agreement shall begin on June 16th, 1997 and
shall expire on June 15th, 2000 unless terminated earlier as set forth in
Section 6 hereof or by mutual agreement of the parties hereto (the "Term").
3. Compensation.
(a) Base Salary. During the term of this Agreement, Executive shall
be paid a base salary (the "Base Salary"), payable in accordance with the
Company's normal payroll practices. During the first year of the term of this
Agreement, Executive's Base Salary shall be $96,000 and may be paid, at the
election of the Company in cash or in shares of common stock of the Company
equal to that portion of Executive's Base Salary which is unpaid divided by the
average trading price of the common stock over the 5 trading day period prior to
the payment date of Executive's Base Salary. In the event that the Company
exercises this election no less than 50% of the salary shall be paid in cash.
After the first year of the term, Executive's Base Salary shall be paid in cash,
unless the Executive determines to accept another form of payment. The annual
Base Salary payable to Executive shall be reviewed at least annually.
(b) Operational Bonus. The Company will adopt a bonus plan for
officers of the Company. The Board of Directors will determine the aggregate
dollar amount of the bonus prior to the beginning of each year, the distribution
among officers of the bonus and the threshold for awarding bonuses, be it sales,
earnings or return on equity. Any bonus paid to Executive pursuant to the
Operational Bonus shall be paid quarterly.
(c) Stock Options. On the execution of this Agreement, the Company
shall grant Executive non-qualified options to purchase 500,000 shares of the
Company's Common Stock (the "Options"). Of such options one third, 166,666
shares, shall vest immediately upon grant and an additional one third, 166,666
shares, shall vest on each
1
<PAGE> 2
anniversary of the commencement of this agreement. The Options will be
exerciseable at $0.19 being the bid price at the date of the commencement of
this agreement.
4. Other Executive Benefits. During the term of the Agreement, the
Company shall provide to Executive benefits commensurate with his position,
including each of the following benefits:
(a) Medical and Dental Coverage. The Company agrees to provide
coverage to executive and dependent members of his family under the same medical
and dental plans as may be maintained from time to time in the discretion of the
Company's Board for the benefit of the other executive officers and the
dependent members of their families.
(b) Vacation. Executive shall be entitled to three (3) weeks of
paid vacation during Executive's first year of this Agreement and shall be
entitled to four (4) weeks for each year of employment with the Company
thereafter for the term of this Agreement. In each case, such entitlement shall
accrue pro rata over the contract year and shall be taken at such time or times
as shall not unreasonably interfere with the operations of the Company.
Unutilized vacation entitlement shall be paid in cash annually.
(c) Business Expenses. The Company will pay or reimburse Executive
for any out-of-pocket expenses incurred by Executive in the course of providing
his services hereunder, which comply with the Company's travel and expense
policies adopted from time to time by the Board for the executive officers. Such
reimbursement shall be made by the Company based on receipts submitted to the
Company by Executive in the same manner and within the same time period as
applicable to the other executive officers of the Company.
(d) Automobile Allowance. The Company shall provide Executive with
an automobile allowance of $500 per month.
(e) Benefit Plans. Executive shall be entitled to participate in
any pension, profit-sharing, stock option, stock purchase or other benefit plan
of the Company now existing or hereafter adopted for the benefit of employees
generally or the senior executives of the Company.
(f) Life Insurance. Provided the following policies may be obtained
at a reasonable cost, the Company shall obtain a $1,000,000 standard term life
insurance policy and a $1,000,000 standard term accidental death policy on the
life of Executive for the benefit of named beneficiaries. (g) Disability.
Provided the following policy may be obtained at a reasonable cost, the Company
shall provide Executive with a long-term disability policy which provides for an
annual disability payment in an amount equal to 125% of Executive's Base Salary.
5. Confidential Information.
(a) Non-Disclosure. Executive hereby agrees, during the term of
this Agreement, he will not disclose to any person or otherwise use or exploit
any proprietary or confidential information, including, without limitation,
trade secrets, processes, records of research, proposals, reports, methods,
processes, techniques, computer software or programming, or budgets or other
financial information, regarding the Company, its business, properties,
customers or affairs (collectively, "Confidential Information") obtained by him
at any time during the term, except to the extent required by Executive's
performance of assigned duties for the Company. Notwithstanding anything herein
to the contrary, the term "Confidential Information" shall not include
information which (i) is or becomes generally available to the public other than
as a result of disclosure by Executive in violation of this Agreement, (ii) is
or becomes available to Executive on a non-confidential basis from a source
other than the Company, provided that such source is not known by Executive to
be furnishing such information in violation of a confidentiality agreement with
or other obligation of secrecy to the Company, (iii) has been made available, or
is made available, on an unrestricted basis to a third party by the Company, by
an individual authorized to do so or, (iv) is known by Executive prior to its
disclosure to Executive. Executive may use and disclose Confidential Information
to the extent necessary to assert any right or defend against any claim arising
under this Agreement or pertaining to Confidential Information or its use, to
the extent necessary to comply with any applicable statute, constitution,
treaty, rule, regulation, ordinance or order, whether of the United States, any
state thereof, or any other jurisdiction applicable to Executive, or if
Executive receives a request to
2
<PAGE> 3
disclose all or any part of the information contained in the Confidential
Information under the terms of a subpoena, order, civil investigative demand or
agency, whether of the United States or any state thereof, or any other
jurisdiction applicable to Executive.
(b) Injunctive Relief. Executive agrees that the remedy at law for
any breach by him of the covenants and agreements set forth in this Section 5
may be inadequate and that in the event of any such breach, the Company may, in
addition to the other remedies that may be available to it at law, seek
injunctive relief prohibiting him (together with all those persons associated
with him) from the breach of such covenants and agreements.
6. Termination.
(a) Termination by Company for "Cause" or Voluntarily by Executive.
The Company may terminate this Agreement for "Cause" effective immediately upon
written notice thereof to Executive. For purposes of this Agreement, "Cause"
shall mean and be limited to the following event: (i) an act of fraud,
embezzlement or similar conduct by Executive involving the Company; (ii) any
action by Executive involving the arrest of Executive for violation of any
criminal statute constituting a felony if the Board reasonably determines that
the continuation of Executive's employment after such event would have an
adverse impact on the operations or reputation of the Company in the financial
community; or (iii) a continuing, repeated willful failure or refusal by
Executive to perform his duties; provided, however, that this Agreement may not
be terminated under this subclause (iv) unless Executive shall have first
received written notice from the Board advising Executive of the specific acts
or omissions alleged to constitute a failure or refusal to perform and such
failure or refusal to perform continues after Executive shall have had a
reasonable opportunity to correct the acts or omissions cited in such notice.
In the event of termination for "Cause", or voluntarily by Executive
other than as permitted in Sections 6(b)(i), 6(b)(ii) and 6(c), (x) Executive
shall be entitled to receive that portion of the Base Salary and all benefits
accrued through the date of termination and, (y) all Options that have become
exercisable as of the date of termination shall remain so for a period of 90
days.
(b) Termination by Company Other Than for "Cause".
(i) Death. Provided that notice of termination has not
previously been given under any Section hereof, if Executive shall die during
the term of this Agreement, this Agreement and all of the Company's obligations
hereunder shall terminate, except that Executive's estate or designated
beneficiaries shall be entitled to receive (A) all earned and unpaid Base Salary
through the date of termination and (B) the Base Salary, Performance Bonus, and
all benefits with respect to the then current contract year which would have
been payable or provided to Executive had the term ended one year following the
last day of the month in which Executive's death occurred; and (C) all other
benefits that may be due to Executive or Executive's estate or beneficiaries
under the general provisions of any benefit plan, stock incentive plan or other
plan in which Executive is then a participant, which benefits shall continue to
be provided for a period of one year following the date of death. In addition,
of the Options which are scheduled to vest on the next anniversary of the
commencement of the Agreement, a percentage of such number of Options shall vest
at the date of death determined by dividing the number of days which have
elapsed since the last such anniversary by the number 365 and multiplying the
result by 100. Further, all Options that have become exercisable as of the date
of death (including those which do so as a result of the provisions of the
preceding sentence) shall remain so for a period of twelve (12) months.
(ii) Disability. Provided that notice of termination has not
previously been given under any Section hereof, if Executive becomes ill or is
injured or disabled during the term such that Executive fails to perform all or
substantially all of the duties to be rendered hereunder and such failure
continues for a period in excess of 26 consecutive weeks (a "Disability"), the
Company shall continue to employ Executive under this Agreement for one year
form the date of the Disability (which one year period shall commence at the
beginning of the 26 week period referred to herein) and shall continue to pay
Executive the Base Salary in effect on the date of the Disability (determined at
the beginning of the 26 week period referred to herein), the Performance Bonus
and all benefits then in effect; provided, that (A) the Company may relieve
Executive of his duties and responsibilities hereunder to the extent permitted
by law and (B) any long-term disability payments received by Executive under any
disability insurance plan made available to Executive by the Company if the
premiums were paid by the Company shall be deducted from the
3
<PAGE> 4
salary and bonus payments otherwise required to be paid to Executive hereunder.
If during the term and subsequent to the Disability commencement date (which
shall be at any time following the end of the 26 week period referred to herein)
Executive shall fully recover, the Company shall have the right (exerciseable
within 60 days after receipt of notice from Executive of such recovery), but not
the obligation, to restore Executive to full-time service at full compensation.
If the Company elects not to restore Executive to full-time service, Executive
shall be entitled to obtain other employment. If Executive is not restored to
full-time employment with the Company, all stock options that have become
exercisable as of the date of Disability (determined at the end of the 26 week
period referred to herein) shall remain so for a period of 12 months.
(iii) Without "Cause". If the Company elects to terminate
Executive for any reason whatsoever other than as provided in Section 6(a) or if
the Company causes a Defacto Termination of Executive (as defined below) (each a
"Severance Termination"), Executive shall receive the "Separation Package". As
used herein, the "Separation Package" shall consist of two years' Base Salary
(at the annual rate in effect at the date of the Severance Termination) plus an
amount equal to the Performance Bonus actually paid to Executive with respect to
the eight fiscal quarters preceding the date of the Severance Termination (or if
Executive has been employed for less than two years, the amount of Performances
Bonus paid to Executive for the entire period of employment multiplied by a
fraction, the numerator of which is the number eight and the denominator of
which is the actual number of fiscal quarters for which Executive was employed
by the Company). In addition, all Options and Anniversary Options which are
scheduled to vest on the next anniversary of the commencement of the Agreement
shall vest as of the date of the Severance Termination. Further, all options
that have become exercisable as of the date of such termination (including those
which do so as a result of the provisions of the preceding sentence) shall
remain so for a period of 24 months. In the event of a Severance Termination,
Executive will also be provided with reasonable office space and secretarial
support as well as the same mailing address and telephone number which Executive
had during the term for up to six months, and the Company shall pay the costs of
outplacement services with a provider of its choice at a level appropriate to
Executive's title and position as requested by Executive. For purposes of this
paragraph, a "Defacto Termination" shall include any of the following events:
(i) the Company shall fail to pay or shall reduce the Base Salary, Performance
Bonus or other benefits provided herein, except as permitted hereuner, or shall
otherwise breach any material provision hereof which breach is not cured within
10 days after receipt of notice thereof from Executive; (ii) the Company shall
fail to cause Executive to remain the Chief Executive Officer of the Company;
(iii) Executive shall not be continuously afforded the authority, powers,
responsibilities and privileges contemplated in Section 1 above (whether or not
accompanied by a change in title); (iv) the Company shall require Executive's
primary services to be rendered in an area other than the Company's principal
offices in the Los Angeles metropolitan area; or (v) after a Change in Control
(as defined below), the Company increases the Base Salary for senior executives
of the Company generally without similarly increasing the Base Salary of
Executive. For purposes of clause (iii), Executive shall be deemed not to have
been continuously afforded the authority, powers, responsibilities and
privileges contemplated in Section 1 above if there shall occur any reduction in
the scope, level or nature of Executive's employment hereunder, or any demotion,
any phasing out or assignment to others, of the duties contemplated herein.
(c) Change in Control.
(i) Following a Change in Control, this Agreement shall
continue to be binding upon the Company and Executive shall be entitled to the
payments provided for in this Section 6 in the event of termination resulting
from death, disability, cause, or a Separation Termination, all as provided for
in Sections 6(a) and 6(b).
(ii) Executive may (but shall not be obligated to) terminate
this Agreement effective 30 days after the giving of such notice given at any
time within two years following a Change in Control. In the event that Executive
elects to terminate this Agreement pursuant to this Section 6(c)(ii), Executive
shall be entitled to the following payments:
(A) If the Change in Control is effected to an Adverse
Person (as defined below), then Executive shall be entitled to and receive the
Severance Package. In addition, all Options and Anniversary Options then held by
Executive which are not yet vested shall vest as of the date of such
termination. Further, all options that have become exercisable as of the date of
such termination (including those which do so as a result of the provisions of
the preceding sentence) shall remain so for the entire remaining term of the
Options.
4
<PAGE> 5
(B) If the Change in Control is effected to a person other
than an Adverse Person, Executive shall be entitled to receive the Severance
Package. In addition, all Options and Anniversary Options which are scheduled to
vest on the next scheduled vesting date during the 24 months following the
termination date shall vest as of the date of such termination. Further, all
options that have become exercisable as of the date of such termination
(including those which do so as a result of the provisions of the preceding
sentence) shall remain so for a period of 24 months.
(d) Payment of Termination Amounts. Executive may elect to have all
amounts to be paid to Executive pursuant to this Section 6 payable (i) over the
remaining term of this Agreement or for such shorter period as expressly
provided for herein, as applicable, or (ii) in a lump sum within 30 days
following termination; provided, however, in the case of death or disability,
the Acquisition Performance Bonus component shall be payable at such time as
performance-based bonuses are paid to similarly situated employees of the
Company and only if the specified targets set forth in Section 3(b) for the
applicable periods are actually met. In the event Executive elects to be paid
pursuant to clause (i), Executive agrees promptly to notify the Company in
writing of Executive's acceptance of full-time employment; within 15 days after
receipt of such notice, the Company shall pay Executive in a lump sum any
amounts which remain otherwise due to Executive hereunder.
(e) Stock and Similar Rights. Except with regard to the vesting and
exercise dates of Options and Anniversary Options as set forth in this Section
6, Executive's rights under any other agreement or plan under which stock
options, restricted stock or similar awards are granted shall be determined n
accordance with the terms and provisions of such plans or agreements.
(f) No Mitigation or Offset. Payment of any sum under this Section
6 shall not be subject to any claim of mitigation nor shall the Company be
entitled to any right of offset with respect thereto.
(g) Other Insurance Policies. Upon any termination of Executive's
employment, and upon reimbursement to the Company of all amounts paid by the
Company in connection with such policies, Executive shall have the right to
purchase or otherwise direct the disposition or assignment of any disability
insurance policy on him held by the Company (excluding only group disability
insurance policies) upon the payment of One Dollar ($1.00) as the total
consideration for each such policy.
7. Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events which occur
after the date hereof:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act ("Rule 13d-3")) of 20% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Voting
Securities").
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board.
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such reorganization, merger, or consolidation, which may be the
Company (the "Resulting Corporation"), entitled to vote generally in the
election of directors (the "Resulting Corporation Voting Securities") shall then
be owned beneficially, directly or indirectly, by all or substantially all of
the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger, or
consolidation; (ii) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, the Resulting Corporation, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 20% or more of the combined voting power
of Outstanding Voting Securities) shall own beneficially, directly or indirectly
20% or more of the combined voting power of the Resulting Corporation Voting
Securities; or (iii) at least
5
<PAGE> 6
a majority of the members of the Board shall have been members of the Incumbent
Board at the time of the execution of the agreement providing for such
reorganization, merger or consolidation.
(d) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 60% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors ("Buyer Voting
Securities"), shall be owned beneficially, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such sale or other
disposition, in substantially the same proportion as their respective ownership
Outstanding Voting Securities, immediately prior to such sale or other
disposition; (ii) no Person (excluding the Company and any employee benefit plan
(or related trust) of the Company or Buyer and any Person that shall immediately
prior to such sale or other disposition own beneficially, directly or
indirectly, 20% or more of the combined voting power of Outstanding Voting
Securities), shall own beneficially, directly or indirectly, 20 % or more of the
combined voting power or Buyer Voting Securities; and (z) at least a majority of
the members of the Board of Directors of Buyer shall have been members of the
Incumbent Board at the time of the execution of the agreement or action of the
Board providing for such sale or other disposition or assets of the Company.
For purposes of this Agreement, an Adverse Person shall mean any
person which acquires control of the Company in a transaction involving a Change
in Control.
8. Insurance. During the term, the Company shall maintain, at no cost
to Executive, officers and directors liability insurance that would cover
Executive in an amount of no less than $1,000,000.
9. General provisions.
(a) Notices. All notices, requirements, request, demands, claims or
other communications hereunder shall be in writing. Any notice, requirement,
request, demand, claim or other communication hereunder shall be deemed duly
given (i) if personally delivered, when so delivered, (ii) if mailed, two (2)
business days after having been sent by registered or certified mail,
return-receipt requested, postage prepaid and addressed to the intended
recipient as set forth below, (iii) if given by telecopier, once such notice or
other communication is transmitted to the telecopier number specified below, and
the appropriate telephonic conformation is received, provided that such notice
or other communication is promptly thereafter mailed in accordance with the
provisions of clause (ii) above or (iv) if sent through an overnight delivery
service under circumstances by which such service guarantees next day delivery,
the date following the date so sent:
If to the Company, to:
CRUSH INNOVATIVE SPORTS SYSTEMS, INC.
4431 Corporate Center Drive, Suite 131
Los Alamitos, CA 90720-2526
If to Executive, to:
LEE ROGERS
P.O. BOX 6891
Big Bear Lake, CA 92315
Any party may change the address to which notices, request, demands, claims and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
(b) Assignment. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may be the
services to be performed hereunder be assigned by the Company to any person,
firm or corporation; provided, however, that this Agreement and the benefits
hereunder may be assigned
6
<PAGE> 7
by the Company to any corporation into which the Company may be merged or
consolidated, and this Agreement and the benefits hereunder will automatically
be deemed assigned to any such corporation, subject, however, to Executive's
right to terminate this Agreement to the extent provided in Section 6. In the
event of any assignment of this Agreement to any corporation acquiring all or
substantially all of the assets of the Company or to any other corporation into
which the Company may be merged or consolidated, the responsibilities and duties
assigned to Executive by such successor corporation shall be the
responsibilities and duties of, and compatible with the status of, a senior
executive officer of such successor corporation. The Company may delegate any of
its obligations hereunder to any subsidiary of the Company, provided that such
delegation shall not relieve the Company of any of its obligations hereunder.
Executive may not assign its rights hereunder or delegate his duties hereunder
to any Person.
(c) Complete Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes and cancels any and all previous written or oral negotiations,
commitments, understandings, agreements and any other writings or communications
in respect of such subject matter.
(d) Amendments. This Agreement may be modified, amended, superseded
or terminated only by a writing duly signed by both parties.
(e) Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
(f) No Waiver. Any waiver by either party of a breach of any
provisions of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of either party to insist upon strict adherence to
any term of this Agreement on one or more occasions shall be considered a waiver
or to deprive such party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement.
(g) Binding Effect. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their permitted assigns,
successors and legal representatives.
(h) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same document.
(i) Governing Law. This Agreement has been negotiated and entered
into in the State of California and shall be construed in accordance with the
laws of the State of California.
(j) Arbitration. The parties hereby expressly agree that any
controversy of claim relating to this Agreement, including the construction,
enforcement or application of the terms hereof, shall be submitted to
arbitration in Los Angeles, California by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of such association. The
arbitrator shall be a retired judge of the Los Angeles Superior Court or other
party acceptable to the parties and the rules of evidence shall apply. The costs
of the arbitrator shall be borne equally. Each party shall be responsible for
its own attorney's fees and costs. However, the arbitrator shall have the right
to award costs and expenses (including actual attorneys' fees) to the prevailing
party as well as equitable relief. The award of the arbitrator shall be final
and binding and shall be enforceable in any court of competent jurisdiction.
Nothing in this paragraph shall preclude the parties from seeking an injunction
or other equitable relief from a court of competent jurisdiction under
appropriate circumstances. Nothing in this paragraph shall preclude the parties
from seeking an injunction or other equitable relief from a court of competent
jurisdiction under appropriate circumstances.
(k) Headings. The headings included in this Agreement are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
7
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Executive has executed
the same as of the day and year first above written.
CRUSH INNOVATIVE SPORTS SYSTEMS, INC.
By: /s/ Binks A. Graval
------------------------------------
Binks A. Graval
Its: Chairman and Chief Executive Officer
By: /s/ Lee Rogers
------------------------------------
Lee Rogers
8
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