MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement ("Agreement") is made as of this
30th day of December, 1998, by and among Mid-Cal Express, Inc., a
California corporation ("Company"); Gulf Northern Transport, Inc., a
Wisconsin corporation ("Manager"); and solely as respects matters relating to
it in this Agreement, Prime Companies, Inc., a Delaware corporation
("PCI").
RECITALS
WHEREAS, Company, a subsidiary of PCI, is engaged in the freight
transportation industry primarily through the use of tractor trailer trucks
throughout the United States and a terminal facility located at 21496 Main
Street, Grand Terrace, CA (the "Terminal");
WHEREAS, Manager, a subsidiary of U.S. Trucking, Inc., a Colorado
corporation, is engaged in the business of managing and operating fleets of
tractor trailers for the purpose of freight transportation and terminal
facilities throughout the United States;
WHEREAS, Company wishes to engage Manager for the purpose of managing its
freight transportation and terminal operations and Manager wishes to provide
such services to Company;
NOW, THEREFORE, in consideration of the mutual terms and conditions
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby
agree as follows:
1. ARTICLE - DEFINITIONS
As used herein:
1.1 "Beginning Time" means 12:01 p.m. (Pacific time) on December 30,
1998.
1.2 "Delivery Point" means the end point of a shipment.
1.3 "Existing Trip-In-Transit" means a Trip-In-Transit commencing prior
to the Beginning Time and in progress as of the Beginning Time.
1.4 "Pick Up Point" means the beginning point of a shipment.
1.5 "Rolling Stock" means all tractors and trailers owned, operated
and/or managed by Company.
1.6 "Shipping Contracts" means all contracts, orders and arrangements
of Company with shippers for Company to transport goods and products of
shippers from Pick Up Points to Delivery Points. These contracts may be
evidenced by invoices, bills of lading, shipping receipts and any and all
other forms of understanding by and between a shipper and a transporter.
1.7 "Trip- In-Transit" means a shipment at any point between the Pick
Up Point and the Delivery Point.
2. ARTICLE - TERM OF ENGAGEMENT
2.1 Term of Engagement. Manager shall perform the management services
provided herein for a term commencing as of the Beginning Time and continuing
through 12:01 a.m. (Pacific time) on February 28, 1999 (the "Termination
Date"). Manager, at its sole discretion may extend the Termination Date from
time to time, provided, however, that in order for the Termination Date to
extend beyond June 30, 1999, such extension shall be by a written agreement
signed by the Company and the Manager. Manager shall not have the obligation
to perform any of the management services provided herein after the
Termination Date, as it may be extended as provided in this paragraph 2.1.
3. ARTICLE - SERVICES TO BE RENDERED
3.1 Existing Trips-In-Transit. The Manager's obligation to perform any
management services with respect to any Existing Trip-In-Transit shall be
determined by the parties on a trip-by-trip basis.
3.1.1 Existing Trips-In-Transit Managed by Manager. In the event
that the parties determine that the Manager is to perform management services
with respect to a particular Existing Trip-In-Transit, then the following
shall apply: (i) the Manager will assume billing and collection responsibility
for such Existing Trip-In-Transit, (ii) the Manager will create a new billing
code separate and distinct from any initial billing code created for such
Existing Trip-In-Transit to reflect the assumption of the responsibilities for
such Existing Trip-In-Transit by the Manager, and (iii) the Company will fully
cooperate with the Manager in notifying the shipper of the transfer of
responsibility for such Trip-in Transit and will assist the Manager in its
billing and collection efforts respecting such Existing Trip-In-Transit to the
extent requested by the Manager.
3.1.2 Existing Trips-In-Transit Not Managed by Manager. In the
event that the parties determine that the Manager is not to perform services
with respect to a particular Existing Trip-In-Transit, then the Manager shall
have no obligations with respect to or any responsibility for such Existing
Trip-In-Transit and all of the Company's responsibilities and obligations with
respect to such Existing Trip-In-Transit shall remain with the Company.
3.2 Basic Management Services. With respect to all: (i) Existing
Trips-In-Transit for which the parties have agreed that the Manager will
perform management services pursuant to paragraph 3.1 above; (ii) Shipping
Contracts entered into after the Beginning Time; (iii) all Rolling Stock from
and after the Beginning Time; and (iv) the other activities of the Company
from and after the Beginning Time, the Manager shall render management
services in connection with the day-to-day operations of the Company which
shall include, without limitation, rendering advisory services with respect to
any: (a) dealings between the Company and any lender, (b) insurance issues,
(c) negotiating owner-operator settlements, (d) matters related to the
continued employment or severance of Company employees; and (e) other matters
as to which to the Company may request advice from the Manager from time to
time.
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3.3 Billing, Collections and Accounting. The Manager shall be
responsible for all billings and collections with respect to: (i) all Existing
Trips-In-Transit for which the parties have agreed pursuant to paragraph 3.1
above that the Manager will perform management services, Terminal charges;
and (iv) all other revenue producing activities related to the Company. The
Manager shall receive all such proceeds and, during the term of this
Agreement, shall regularly report on such accounts to the Company and/or the
Company's creditors, as appropriate. The Manager shall have no responsibility
for and will not conduct any billing or collection activities with respect to
any account created before the Beginning Time and for which the parties have
not agreed pursuant to paragraph 3.1 above that the Manager would have
responsibilities with respect thereto unless and until the parties otherwise
agree in writing that the Manager shall have such billing and collection
responsibilities.
4. ARTICLE - MANAGEMENT FEES AND PAYMENT OF COSTS
4.1 Management Fees. Manager shall be entitled to receive management
fees of an amount equal to 2% of all revenues collected pursuant the terms of
this Agreement, but in any event not in excess of $40,000.
4.2 Costs Incurred by the Manager. All obligations and costs,
including without limitation, to employees, vendors, lenders and lessors, and
a proportionate share of professional fees incurred by Manager under the terms
of this Agreement, shall be paid as provided in paragraph 4.4 below.
4.3 Costs Incurred by the Company. All obligations and costs,
including without limitation, to employees, venders, lenders and lessors
(subject to the express provisions of paragraph 4.6.2 below) incurred by the
Company prior to the Beginning Time and all costs with respect to the
completion of an Existing Trip-In-Transit for which the parties have not
agreed pursuant to paragraph 3.1 above that the Manager will have
responsibilities with respect thereto shall continue to be the obligations of
the Company, and shall be paid by the Company, and the Manager shall have no
obligation therefor.
4.4 Use of Proceeds Collected by the Manager. The Manager shall apply
the proceeds collected by Manager pursuant to paragraph 3.3 in the following
order and priority: (i) first, to the payment of any obligations and costs
required to be paid by the Manager pursuant to paragraph 4.2 above, (ii)
second, to the payment of any management fees owed to the Manager pursuant to
Section 4.1 above, and (iii) thereafter, the balance of such proceeds shall be
placed on deposit in a federally insured banking institution for payment to
Company or any assignee, receiver or trustee duly appointed with respect to
Company's assets or business.
4.5 Manager's Receipt of $100,000 Deposit. The parties acknowledge
that prior to the date of this Agreement, PCI delivered to the Manager a
$100,000 deposit. The parties further agree that subject to consent of the
Steering Committee, the Manager may use all or a portion of this $100,000
deposit to reimburse the Manager for any costs incurred by the Manager
pursuant to paragraph 4.2 above and not otherwise reimbursed pursuant to
paragraph 4.4 above.
4.6 Funding by Company and PCI. Company or PCI shall advance from
time to time as required the amounts as set forth in this paragraph 4.6.
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4.6.1 Operating Advances. Company or PCI shall advance amounts which
will be in the total sum of not in excess of $150,000 to fund any costs of
Company incurred during the term of this Agreement in the event that, from
time to time, collections of revenues due the Company, including from the
collection of accounts receivable, are insufficient to meet Company's
operating obligations. Each such advance shall be made by Company or PCI
one business day's notice from Manager. Notice may be given by Manager to
Company by verbal or written communication to either of the Company's members
of the Steering Committee, or such other representative of Company as shall be
designated by either such member. Company and PCI shall be reimbursed for any
such advance from the collections of Company's accounts receivable collections
after other monetary obligations under this Agreement shall have been
satisfied.
4.6.2 Lease and Finance Payment Obligations. Company acknowledges that
certain installments due under agreements with lenders financing the purchase
of Rolling Stock of Company and lessors under leases by the Company of Rolling
Stock ("Equipment Financing and Lease Agreements") are past due, causing such
agreements to be in default. Manager will use its best efforts to renegotiate
such Equipment Financing and Lease Agreements so that to the fullest extent
possible such past due installments can be included in the renegotiated terms
of such Equipment Financing and Lease Agreements, and the defaults thereunder
deemed satisfied by such renegotiated terms. However, Company acknowledges
that the renegotiated terms may include the requirement that at least some
portion of the installments in default be paid ("Cure Payments") prior to or
concurrently with the modification of such agreements. Company and PCI agree
that they shall be responsible for the payment of 50% of any required Cure
Payment. Manager agrees that it shall assume the responsibility for payment of
the remaining 50% of any such Cure Payment. Company or PCI shall pay Company's
share of any required Cure Payment upon one business day's notice from
Manager. Notice may be given by Manager to Company by verbal or written
communication to either of the Company's members of the Steering Committee, or
such other representative of Company as shall be designated by either such
member. Any portion of a Cure Payment made by Manager shall be subject to
reimbursement as a cost incurred by the Manager as provided in paragraphs 4.2
and 4.4 hereinabove. Company or PCI shall be reimbursed for any such Cure
Payment from the collections of Company's accounts receivable after other
monetary obligations under this Agreement shall have been satisfied, but prior
to the satisfaction of any reimbursement to which Company or PCI is entitled
under sub-paragraph 4.6.1 above.
5. ARTICLE - MISCELLANEOUS
5.1 Steering Committee. During the term of this Agreement, Irving
Pfeffer and David Leflowitz, as representatives of Company, and Anthony Huff
and Danny Pixler, as representatives of Manager, shall constitute a Steering
Committee. Anthony Huff shall serve as chair of the Steering Committee and
may call meetings, which may be telephonic, on 24 hours verbal or written
notice, to the members of the Committee. The responsibilities of the Steering
Committee shall to be oversee and insure the performance of the
responsibilities of the Manager and the Company under this Agreement, and to
make such decisions as are assigned to the Steering Committee under this
Agreement.
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5.2 Personnel. Any and all employees and owner/operators independently
engaged by the Company prior to the Beginning Time may be employed or engaged
by the Manager for the purposes of this Agreement. Commencing as of the
Beginning Time through the Termination Date, as it may be extended pursuant to
paragraph 2.1, the Manager, and not the Company, shall have the right to fire
or otherwise disengage the employment or independent contractor services of
any Company personnel which in the Manager's sole judgment are not required or
desirable for the continued operations of the Company. The Company shall have
no right, under any circumstances, to countermand any personnel decisions by
the Manager as provided in this paragraph 5.2.
5.3 Terminal. The Company acknowledges that it has a lease on the
Terminal. During the term of this Agreement, the Manager shall have the right
to occupy and operate from the Terminal without interference from the Company,
and any continued use of the Terminal during this period by the Company shall
be subordinate to the occupancy and operational rights of the Manager.
5.4 Facilitation. The parties will fully cooperate with each other in
facilitating the intent and purposes of this Agreement, including, without
limitation: (i) the delivery by the Company to all of its customers of a
letter in form substantially as attached hereto as Exhibit "A" notifying them
of this Agreement; and (ii) the execution of appropriate authorizations for
the Manager to utilize its operating authority to manage and operate the
Company's Rolling Stock as contemplated in this Agreement.
5.5 Further Agreements. Company and Manager intend this Agreement to
remain applicable for a limited period of time to enable Company and PCI, on
the one hand, and Manager and Manager's parent, U.S. Trucking, Inc., on the
other hand, to negotiate in good faith an Agreement whereunder Manager and/or
U.S. Trucking, Inc. will acquire substantially all of the operating assets of
Company in exchange for which Company shall receive 400,000 shares of U.S.
Trucking, Inc., having a market value as of the date on which such Agreement
is made not in excess of $5 million. The parties also agree, however, that
such a transaction will not be consummated until satisfactory arrangements are
in place for the payment of amounts owing to Company's creditors, or other
arrangements satisfactory to Company's creditors have been agreed upon. In
that regard, during the term of this Agreement, Company hereby agrees not to
take any action, including any action which would cause the filing of a case
under the United States Bankruptcy Code by Company, or which would cause any
creditor of Company to file an involuntary case under the United States
Bankruptcy Code, or which could or would result in the appointment of an
assignee for the benefit of creditors or a receiver, unless any such action is
first agreed to and approved by Manager.
5.6 Pledge of Company Stock. PCI hereby agrees to fully cooperate with
Manager and Manager's parent, U.S. Trucking, Inc. in insuring the full and
faithful performance by Company of its obligations under this Agreement, and
to facilitate the consummation of an agreement as contemplated in paragraph
5.5 hereinabove. In that regard, during the term of this Agreement, PCI
hereby agrees not to take any action, including any action which would cause
the filing of a case under the United States Bankruptcy Code by Company, or
which would cause any creditor of Company to file an involuntary case under
the United States Bankruptcy Code, or which could or would result in the
appointment of an assignee for the benefit of creditors or a receiver, unless
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any such action is first agreed to and approved by Manager. As security for
the full and faithful performance of the obligations of PCI and Company under
this paragraph 5.6, PCI is concurrently executing a pledge and security
agreement in the form of Exhibit "B" attached hereto (the "Pledge and Security
Agreement), which pledges to Manager all the outstanding capital stock of
Company. The Pledge and Security Agreement shall be in full force and effect
so long as this Agreement remains in effect; and, if, prior to the termination
of this Agreement, Manager shall have commenced enforcement efforts or been
required to defend its rights under this Agreement or the Pledge and Security
Agreement, as long as necessary thereafter to enable Manager to enforce or
protect its rights under the Pledge and Security Agreement.
5.7 Attorneys' Fees. The prevailing party in any litigation commenced
to enforce or defend the provisions of this Agreement shall be entitled to an
award of reasonable attorneys' fees and costs incurred in such litigation and
otherwise incurred in the protection of such party's interests hereunder.
5.8 Governing Law. This Agreement and the application or
interpretation hereof shall be governed and construed exclusively by its terms
and by the laws of the State of California, without regard to principles of
conflict of laws.
5.9 Forum Selection. Each party hereto irrevocably submits to the
exclusive jurisdiction of any California State or United States Federal Court
sitting in Los Angeles County, California over any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
herein. Each party waives, to the fullest extent permitted by law, any
objection that it may have to the laying of venue of any such suit, action or
proceeding brought in such a court and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
5.10 Severability. Each provision of this Agreement is intended to be
severable. If any provision hereof is illegal or invalid, such illegality or
invalidity shall not affect the validity of the remainder hereof.
THIS AGREEMENT is entered into as of the day and year first written
above.
MANAGER:
GULF NORTHERN TRANSPORT, INC., a
Wisconsin corporation
By: /s/ Danny Pixler
Its: President
COMPANY:
MID-CAL EXPRESS, INC., a California
corporation
By: /s/ Irving Phieffer
Its: Chairman
PCI: [with respect only to those matters
relating to PCI under this Agreement]
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PRIME COMPANIES, INC., a Delaware
corporation
By: /s/ Irving Phieffer
Its: /s/ Chairman
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