ex1012





                                                                     






EMPLOYMENT AGREEMENT




               
This EMPLOYMENT AGREEMENT (the "Agreement") effective as of September 1, 2001,
by and between P.W. STEPHENS, INC., a California corporation whose principal
executive offices are in Huntington Beach, California as (the "Company"), and
SCOTT JOHNSON (the "Executive").  The Company wishes to assure itself of
the services of the Executive for the period provided in this Agreement and the
Executive wishes to serve in the employ of the Company on the terms and
conditions hereinafter provided.




AGREEMENT




               
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as follows:




ARTICLE 1 EMPLOYMENT





  	1.1. 	
      Employment.  The Company hereby employs the Executive and the Executive
hereby accepts employment by the Company for the period and upon the terms and
conditions contained in this Agreement.

	1.2.	Office and Duties.
	1.2.1.	Position. 
The Executive shall serve the Company as President, with authority, duties and
responsibilities not less than the Executive has on the date of this Agreement,
with his actions at all times subject to the direction of the Board of Directors
of the Company.
	1.2.1.	Commitment.  Throughout the term of this Agreement, the Executive shall
devote substantially all of his time, energy, skill and best efforts to the
performance of his duties hereunder in a manner that will faithfully and
diligently further the business and interests of the Company.  Subject to
the foregoing, the Executive may serve, or continue to serve, on the boards of
directors of, and hold any other offices or positions in, companies or
organizations that are disclosed to the Board of Directors and that will not
materially affect the performance of the Executive's duties pursuant to this
Agreement.
	1.3.	 Term.  Subject to the provisions of Section 1.5, the term of this Agreement
shall commence on January 1, 2001 and shall end on December 31, 2005 (the period
of time between the commencement and the end of this Agreement is referred to
herein as the "Term").  







 




 










 




 




1.4.             Compensation





  	1.4.1.	



Base
Salary.  The Company shall pay the Executive as compensation an aggregate
salary ("Base Salary") of $125,000 per year during the Term, or such greater
amount as shall be approved by the Company's Board of Directors.  The Board
of Directors shall review the Executive's Base Salary at least annually. 
The Base Salary for each year shall be paid by the Company in accordance with
the regular payroll practices of the Company.




      







1.4.2.        

Annual Bonus. 





An annual bonus based on the net income of P.W. Stephens, Inc.  Such
bonus shall be calculated on a monthly basis and paid within 15 days after the
bonus is calculated.  The bonus shall be calculated using the following
criteria.




Fiscal Year 2001    A bonus of 5% of the net income up to
$500,000.00.  A bonus of 10% of the net income in excess of $500,000.00.


Fiscal Year 2002    A bonus of 5% of the net income up to
$400,000.00.  A bonus of 10% of the net income in excess of $400,000.00.


Fiscal Year 2003    A bonus of 5% of the net income up to
$300,000.00.  A bonus of 10% of the net income in excess of $300,000.00.


Fiscal Year 2004    A bonus of 5% of the net income up to
$200,000.00.  A bonus of 10% of the net income in excess of $200,000.00.


Fiscal Year 2005    A bonus of 5% of the net income up to
$100,000.00.  A bonus of 10% of the net income in excess of $100,000.00.




Quarterly Receivables Bonus.


A bonus for collection on receivables based on the following formula.




Beginning A/R + Ending A/R/2        
=             
Day Receivable Outstanding

Revenue for period # days in period



  	 	
      Days Receivables Outstanding                        
      
	Quarterly Bonus
	 	80	$3,125.00
	 	75	$5,000.00
	 	70	$6,250.00
	 	65	$7,812.50
	 	60	$9,375.00
	 	55	$10,937.50







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  	1.4.3.	Fringe
Benefits and Perquisites.  During the Term, the Executive shall be entitled
to participate in or receive benefits under any plan or arrangement made
available by the Company to its senior executive officers, including but not
limited to any hospitalization, medical, dental or pension plan, subject to and
on a basis consistent with the terms, conditions and overall administration of
such plans and arrangements.  Nothing paid to the Executive under any plan
or arrangement made available to the Executive shall be deemed to be in lieu of
compensation hereunder.
	1.4.4.	Auto
Allowance.  During the Term, the Company shall pay the Executive $500 per
month as an auto allowance to cover the costs of use of Executive's personal
auto for business requirements of the Company.
	1.4.5.	Payment
and Reimbursement of Expenses.  During the Term, the Company shall pay or
reimburse the Executive for all reasonable travel and other expenses incurred by
the Executive in performing his obligations under this Agreement in accordance
with the policies and procedures of the Company for its senior executive
officers, provided that the Executive properly accounts therefor in accordance
with the regular policies of the Company.  The Company is not required to
reimburse any single expenditure in excess of $10,000.00 without authority in
advance from the Chairman of the Board of Directors. 
	1.4.6.	Vacations. 
During the Term and in accordance with the regular policies of the Company, the
Executive shall be entitled to the number of paid vacation days in each calendar
year determined by the Company from time to time for its senior executive
officers, but not less than three weeks in any calendar year (prorated in any
calendar year in which the Executive is employed hereunder for less than the
entire year in accordance with the number of days in such calendar year during
which the Executive is so employed).  
	1.4.7.	Benefits
Not in Lieu of Compensation.  No benefit or perquisite provided to the
Executive shall be deemed to be in lieu of Base Salary, Bonus, Quarterly
Receivables Bonus or other compensation.
	1.5.	Termination
	1.5.1.	Disability.  The Company may terminate this Agreement for Disability.
 "Disability" shall exist if because of ill health or physical or mental
disability, and notwithstanding reasonable accommodations made by the Company,
the Executive shall have been unable, unwilling or shall have failed to perform
his duties under this Agreement, as determined in good faith by the Company's
Board of Directors, for a period of 180 consecutive days, or if, in any 12-month
period, the Executive shall have been unable or unwilling or shall have failed
to perform his duties for a period of 270 days, irrespective of whether or not
such days are consecutive. 







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  	1.5.2.	Cause. 
The Company may terminate the Executive's employment for Cause. 
Termination for "Cause" shall mean termination because of the Executive's (i)
willful gross misconduct that causes material economic harm to the Company or
that brings substantial discredit to the Company's reputation, (ii) final,
nonappealable conviction of a felony or (iii) material breach of any provision
of this Agreement.  Items (i) and (iii) of this subsection shall not
constitute Cause unless the Company notifies the Executive thereof in writing,
specifying in reasonable detail the basis therefor and stating that it is
grounds for Cause, and unless the Executive fails to cure such matter within 60
days after such notice is sent or given under this Agreement.  The
Executive shall be permitted to respond and to defend himself before the Board
of Directors or any appropriate committee thereof within a reasonable time after
written notification of any proposed termination for Cause under item (i) or
(iii) of this subsection. 
	1.5.3.	Without
Cause.  During the Term, the Company may terminate the Executive's
employment Without Cause, subject to the provisions of subsection 1.6.4
(Termination Without Cause or for Company Breach).  Termination "Without
Cause" shall mean termination of the Executive's employment by the Company other
than termination for Cause or for Disability.
	1.5.4. 	Company
Breach.  The Executive may terminate his employment hereunder for Company
Beach.  For purposes of this Agreement "Company Breach" shall mean:  (i)
without his express written consent, any material reduction in the authority,
duties and responsibilities that the Executive has on the date of this
Agreement, or the assignment to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the Company, or a change
in his reporting responsibilities, titles or offices, or any removal of the
Executive from or any failure to re-elect the Executive to any of such
positions, except in connection with the termination of his employment for
Cause, Disability or retirement or as a result of his death or by the Executive
other than for Company Breach or Change in Control; (ii) a reduction in the
Executive's Base Salary as in effect on the date of this Agreement or as the
same may be increased from time to time; (iii) a relocation of the Company's
principal executive offices to any county other than Orange County or any county
contiguous thereto within a twenty mile radius of Orange County, or the
Company's requiring the Executive to be based anywhere other than Orange County
or any county contiguous thereto within a twenty mile radius of Orange County,
except for required travel on the Company's business to an extent substantially
consistent with his present business travel obligations, or, in the event the
Executive consents to any relocation, the failure by the Company (a) to retain a
real estate broker, at the Company'[s expense, and otherwise assist the
      Executive in selling the Executive's principal residence in Orange 
      County, (b) to pay (or reimburse the Executive) for all reasonable moving
      







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  	 	expenses incurred by him relating to a
      change of his principal residence in connection with such relocation and
      (c) to indemnify the Executive against any loss (defined as the difference
      between the actual sale price of such residence and the higher of (1) his
      aggregate investment in such residence or (2) the fair market value of
      such residence as determined by a real estate appraiser designated by the
      Executive and reasonably satisfactory to the Company, realized on the sale
      of the Executive's principal residence in connection with any such change
      of residence; (iv) the failure by the Company to continue in effect any
      benefit or compensation plan (including but not limited to any stock
      option plan, pension plan, life insurance plan, health and accident plan
      or disability plan) in which the Executive is participating (or plans
      providing substantially similar benefits), the taking of any action by the 
      Company which would adversely affect the Executive's participation in or
      materially reduce his benefits under any of such plans or deprive him of
      any material fringe benefit enjoyed by him, or the failure by the Company
      to provide the Executive with the number of paid vacation days to which he
      is then entitled on the basis of years of service with the Company in
      accordance with the Company's normal vacation policy in effect on the date
      hereof; (v) any failure of the Company to obtain the assumption of, or the
      agreement to perform, this Agreement by any successor as contemplated in
      Section 4.13 (Binding Effect Etc.) hereof; (vi) if the Company has a
      positive cash flow during the Term and any vendor is not paid pursuant to
      terms and such nonpayment is not due to other reasons than cash flow, in
      such case the Company only has 30 days to cure such breach after notice is
      sent to the Company by the Executive; or (vii) any material breach of this
      Agreement by the Company; provided, however, that a material breach of
      this Agreement by the Company shall not constitute Company Breach unless
      the Executive notifies the Company in writing of the breach, specifying in
      reasonable detail the nature of the breach and stating that such breach is
      grounds for  Company Breach, and unless the Company fails to cure
      such breach within 60 days after such notice is sent or given under this
      Agreement. 
      


  	1.5.5	



Change in Control.  The Executive may terminate his
employment hereunder at any time after twelve months following any other Change
in Control (defined below).  "Change in Control" shall mean any of the
following: (1) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Company's common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger; (2) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company; (3) any approval by the stockholders of the Company
of any plan or proposal for the liquidation or dissolution of the Company; (4)
the cessation of control (by virtue of their not constituting a majority of
directors) of the Company's Board of Directors by the individuals (the
"Continuing Directors") who (x) at the date of this  




      





 




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Agreement were directors or (y) become directors after the date of this Agreement and whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then in office who were
directors at the date of this Agreement or whose election or nomination for
election was previously so approved; or (5) the acquisition of beneficial
ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of an aggregate of 15% of the voting power of the Company's
outstanding voting securities by any person or group (as such term is used in
Rule 13d-5 under such Act) who beneficially owned less than 10% of the voting
power of the Company's outstanding voting securities on the date hereof; or the
acquisition of beneficial ownership of an additional 5% of the voting power of
the Company's outstanding voting securities by any person or group who
beneficially owned at least 10% of the voting power of the Company's outstanding
voting Securities on the date hereof, provided, however, that notwithstanding
the foregoing, an acquisition shall not constitute a Change in Control hereunder
if the acquiror is (w) the Executive, (x) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company and acting in such
capacity, (y) a corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of
voting securities of the Company or (z) any other person whose acquisition of
shares of voting securities is approved in advance by a majority of the
Continuing Directors or who is an affiliate, associate or shareholder of any
shareholder of the Company as of the execution of this Agreement; (6) subject to
applicable law, in a Chapter 11 bankruptcy proceeding, the appointment of a
trustee or the conversion of a case involving the Company to a case under
Chapter 7.




      
	1.5.6.	Without
Good Reason.  During the Term, the Executive may terminate his employment
Without Good Reason upon sixty (60) days advance written notice. 
Termination "Without Good Reason" shall mean termination of the Executive's
employment by the Executive other than (i) termination for Company Breach or
(ii) a termination more than twelve months following a Change in Control.
	1.5.7.	Explanation of Termination of Employment.  Any party terminating this
Agreement shall give prompt written notice ("Notice of Termination") to the
other party hereto advising such other party of the termination of this
Agreement.  Within thirty (30) days after notification that the Agreement
has been terminated, the terminating party shall deliver to the other party
hereto a written explanation (the "Explanation of Termination of Employment"),
which shall state in reasonable detail the basis for such termination and shall
indicate whether termination is being made for Cause, Without Cause or for
Disability (if the Company has terminated the Agreement) or for Company Breach,
upon a Change in Control or Without Good Reason (if the Executive has terminated
the Agreement).







 





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	1.5.8.	Date of
Termination.  "Date of Termination" shall mean the date on which Notice of
Termination is sent or given under this Agreement.
	1.6.	Compensation During Disability or Upon Termination.
	1.6.1.	During Disability.  During
any period that the Executive fails to perform his duties hereunder because of
Disability, he shall continue to receive his full Base Salary and benefits
pursuant to Section 1.4 (Compensation) until the Date of Termination, including
his Annual Bonus for the fiscal year in which the Date of Termination occurs, as
prorated through the Date of Termination.  
	1.6.2	Termination for Disability. 
If the Company shall terminate the Executive's employment for Disability, then
the Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been paid.
	1.6.3.	Termination for Cause or Without
Good Reason.  If the Company shall terminate the Executive's employment for
Cause or if the Executive shall terminate his employment Without Good Reason,
then the Company shall have no further obligation to make any payment under this
Agreement which has not already become payable, but has not yet been paid,
except as may otherwise be provided under the terms of any employee benefit
programs in which the Executive is participating.
	1.6.4.	Termination Without Cause or for
Company Breach.  If the Company shall terminate the Executive's employment
Without Cause or if the Executive shall terminate his employment for Company
Breach, then the Company shall pay to the Executive, as severance pay in a lump
sum no later than the 15th day following the Date of Termination, the
following amounts:  (i) any payment of Base Salary (at the rate in effect
as of the Date of Termination) and Annual Bonus which has already become
payable, but has not yet been paid, through the Date of Termination; (ii) his
Annual Bonus for the fiscal year in which the Date of Termination occurs, as
prorated through the Date of Termination.  If such Annual Bonus is
dependent upon financial results for the fiscal year that are unknown at the
Date of Termination, his Annual Bonus received for the past fiscal year shall
substitute as his Annual Bonus for the fiscal year in which the Date of
Termination occurs; and (iii) in lieu of any further Base Salary and Annual
Bonus for periods subsequent to the Date of Termination, an amount equal to the
product of (A) the sum of the Executive's Base Salary at the rate in effect as
of the Date of Termination plus the average Annual Bonus paid to the Executive
during the preceding two (2) years (or such shorter period for which any Annual
Bonus has been paid), multiplied by (B) the number one (1).  If the
Executive terminates his employment for Company Breach based upon a material
      







 




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	 	reduction by the Company of the Executive's Base Salary, then for purposes of
this Section 1.6.4 (Termination Without Cause or for Company Breach), the
Executive's Base Salary as of the Date of Termination shall be deemed to be the
Executive's Base Salary immediately prior to the reduction that the Executive
claims as grounds for Company Breach.
	1.6.5.	Termination Upon a Change in
Control.  If the Executive terminates his employment pursuant to section
1.5.5 due to a Change in Control, but only if such termination occurs at least
twelve months following such Change in Control and at least one year prior to
the end of the Term, then the Company shall pay to the Executive as severance
pay and as liquidated damages (because actual damages is difficult to
ascertain), in a lump sum, in cash, within 15 days after termination, an amount
equal to the amounts provided in Sections 1.6.4 (i), (ii) and (iii) above. 
In addition, if the Executive is liable for the payment of any excise tax (the
"Basic Excise Tax") because of Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor or similar provision, with
respect to any payments or benefits received or to be received from the Company
or its affiliates, or any successor to the Company or its affiliates, whether
provided under this Agreement or otherwise, the Company shall pay the Executive
an amount (the "Special Reimbursement") which, after payment by the Executive
(or on the Executive's behalf) of any federal, state and local taxes applicable
thereto, including, without limitation, any further excise tax under such
Section 4999 of the Code, on, with respect to or resulting from the Special
Reimbursement, equal the net amount of the Basic Excise Tax.  The
determination of the amount of the payment described in this Section 1.6.5 shall
be made by the Company's independent auditors.
	1.6.6.	



No
Mitigation.  The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 1.6 (Compensation During Disability or
Upon Termination) by seeking other employment or otherwise.  




      
	1.7	



Death of Executive.  If the Executive dies prior to the expiration of this
Agreement, the obligations under this Agreement shall automatically terminate
and all compensation to which the Executive is or would have been entitled
hereunder (including without citation under Sections 1.4.1 (Base Salary) and
1.4.2 (Annual Bonus) shall terminate as of the end of the month in which the
Executive's death occurs; provided, however, that (i) the Company shall pay to
the Executive's estate, as soon as practicable, a prorated Annual Bonus, if
earned in accordance with the Company's annual bonus plan; and (ii) for the
balance of the Term, the Executive's wife and children shall be entitled to
continue participation in the Company's group hospitalization, medical and
dental plans (if any), with the full amount of any premium to be borne by the
Company; and such reimbursement as may have been due to the Executive pursuant
to Section 1.4.5 (Payment and Reimbursement of Expenses) hereof.




      




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ARTICLE 2 NON-COMPETITION AND CONFIDENTIALITY




2.1                
Confidential Relationship / Non-Disclosure.  Executive acknowledges
that his relationship with the Company is one of trust and confidence and that
there are available to him certain intellectual property, records and
confidential business information of the Company and the Company's customers. 
In consideration for the foregoing, Executive covenants and agrees with the
Company that during the period of his employment with the Company,





  	(a)	except in the
performance of his duties hereunder, Executive will not communicate or disclose
to any person (other than the Company), or use for his own account, without the
prior written consent of the Company, any Confidential Information (as
hereinafter defined) that Executive shall obtain or acquire during the period of
his employment by the Company; and
	(b)	Executive
will retain all such Confidential Information in trust for the sole benefit of
the Company and its successors and assigns.







For purposes of this Paragraph 2.1, the term "Confidential Information" means
any and all knowledge and information relating to the business and affairs of
the Company and/or any other entity related to the Company directly or
indirectly by common ownership or management (collectively, the "Affiliated
Entities"), their products, systems, processes and/or services and their
customers, creditors, shareholders, contractors, agents, consultants and
employees, that is or is intended by the Affiliated Entities to be of a
confidential nature, including, without limitation, any and all knowledge and
information relating to their products, research, development, inventions,
accounting, finances, costs, profit margins, patent applications, marketing,
merchandising, selling, customer lists, customer requirements and personnel,
pricing, pricing methods, computer programs and software (whether held for sale
or license or used internally), databases and data processing and any and all
other such knowledge, information and materials, heretofore or hereafter during
the term of this Agreement, conceived, designed, created, used or developed by
or relating to the Company or related entity.  Confidential Information
specifically shall include, without limitation, any ideas, designs, plans,
methods, marketing or financial operations or techniques, or other conceptual
schemes originally conceived, developed or used, owned or contracted by the
Affiliated Entities including all documents, memoranda, prototypes, software
(whether held for sale or license or used internally), apparatus or other
materials evidencing the same.  Confidential Information does not include
any information that is in the public domain other than as a result of a breach
by Executive of any of the terms or provisions of this Agreement.




 




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  	2.2 	




Non-Interference.  Executive covenants and agrees with the Company
that he will not, whether for his own account or the account of any other person
or entity: at any time during the period of his employment wit the Company and
if (a) the Executive shall terminate his employment Without Good Reason or (b)
the Company shall terminate his employment for Cause at any time prior to
December 31, 2005, then for a period terminating on December 31, 2005, solicit,
employ or otherwise engage, as an employee, independent consultant or otherwise,
any person who is an employee of the Company, or in any manner induce or attempt
to induce any employee of the Company to terminate his or her employment with
the Company, (ii) at any time during the period of his employment with the
Company and if (a) the Executive shall terminate his employment Without Good
Reason or (b) the Company shall terminate his employment for Cause at any time
prior to December 31, 2005, then for a period terminating on December 31, 2005,
knowingly interfere with the relationship of the Company with any person or
entity, including, without limitation, any person or entity that at any time
during Executive' employment with the Company was a vendor or supplier to,
distributor or licensee of or in the habit of dealing with, the Company, or
(iii) at any time during the period of his employment with the Company and if
(a) the Executive shall terminate his employment Without Good Reason or (b) the
Company shall terminate his employment for Cause at any time prior to December
31, 2005, then for a period terminating on December 31, 2005, solicit, divert,
or take away the Company's customers, distributors or licensees who were served
by him during his employment with the Company or attempt directly or indirectly
to cause one or more of the Company's customers, distributor or licensees to
refrain from patronizing the Company.




      
	2.3 	




Covenant to Report / Ownership of Trade Secrets.  Executive
covenants and agrees with the Company that:




      







 




	 	 	(a)	Executive
will render to the Company such reports of the activities undertaken by
Executive or conducted under his direction, as the Company may request. 
All written or electronic materials, records, databases and documents, including
software and systems and other intellectual property interests, made by
Executive or coming into his possession during his employment concerning or
relating to the business or affairs of the Company remain the property of the
Company.  Upon the termination of his employment with the Company or upon
the earlier request of the Company, Executive shall promptly deliver the same to
the Company.
	 	 	(b)	Any trade
secret, invention, improvement, patent, patent application or writing, and any
program, system or novel technique (whether or not capable of being trademarked,
copyrighted or patented) conceived, devised, developed or





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  	 	otherwise obtained by
Executive during the period of his employment with the Company relating to the
business, products, property, methods, suppliers or customers of the Company
shall be and become the property of the Company.  Executive will give the
Company prompt written notice of his conception, invention, authorship,
development or acquisition of any such trade secret, invention, improvement,
patent, patent application, writing, program, system or novel technique and will
execute such instruments of transfer, assignment, conveyance or confirmation and
such other documents and to do all appropriate lawful acts as may be required by
the Company to transfer, assign, confirm and perfect in the Company all legally
protectable rights in any such trade secret, invention, improvement, patent,
patent application, wiring, program, system or novel technique.
	2.4	Covenant Not to Compete.  In consideration of the confidential
relationship of the Company and Executive, Executive agrees during the period of
his employment with the Company and if the (a)  Executive shall terminate
his employment Without Good Reason or following a Change in Control or (b) the
Company shall terminate his employment for Cause at any time prior to December
31, 2005, then until December 31, 2005, Executive shall not, directly or
indirectly, including, without limitation, as employee, partner, agent, officer,
director or shareholder, own, manage, operate, engage or participate in, perform
services for, control or participate in the ownership, management, operation or
control of, or be connected, in any manner, within any business within the
states of California and Arizona, that shall be the same or similar business as
that currently being conducted by the Company or as that conducted at any time
by the Company during the final two years of his employment. 
Notwithstanding the foregoing, Executive may own up to 1% of the outstanding
equity securities of any publicly traded company engaged in any such competitive
business whose shares are listed on a national securities exchange.
	2.5	




Relief. 
Executive and the Company agree to the reasonableness of the restrictions
set forth in this Article 2, acknowledge that they have been negotiated at arm's
length, and agree that these restrictions shall be legally enforceable and shall
not be challenged by either party in any administrative or court proceeding,
subject to the laws of the State of California.  Executive agrees that the
Company's remedies at law for a breach of these restrictions will be inadequate
an that, in addition to any other available remedies, to temporary and permanent
injunctive relieve without the necessity of providing actual damage, immediate
or irreparable harm, or posting a bond.  If these restrictions are
determined to be unreasonable in any final court or arbitration proceeding, the
parties agree to the reformation of these restrictions by the court to limits it
finds to be reasonable and that neither party will assert that these
restrictions should be eliminated in their entirety by any court.




      







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  	2.6 
      	
No Right of Offset.  The existence of any claim or cause of action
by Executive against the Company, whether predicted on this Agreement or
otherwise, shall not constitute a defense to enforcement by the Company of the
restrictive covenants set forth in this Article 2, but shall be litigated
separately.
	 	



ARTICLE 3 INDEMNIFICATION


      
	 	

 


      
	3.1.1. 	Indemnification.  The Company hereby agrees to hold harmless and indemnify
and to defend Executive to the full extent authorized or permitted by the
provisions of the applicable laws of the State of California against any claim
or liability or other amounts (including, without limitation, legal fees and
court costs) arising out of or in connection with any act or omission by
Executive performed or made in good faith for or on behalf of the Company
pursuant to this Agreement
	 	



ARTICLE 4 MISCELLANEOUS




      
	4.1	Period of Limitations.  No legal action shall be brought and no cause of
action shall be asserted by or on behalf of the Company or any Affiliate of the
Company against the Executive, the Executive's spouse, heirs, executors or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, and any claim or cause of action of the
Company or any Affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two-year period;
provided, however, that if any shorter period of limitations is otherwise
applicable to any such cause of action such shorter period shall govern.
	4.2 	Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
	4.3	Indulgences, Etc.  Neither the failure nor any delay on the part of either
party to exercise any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power, or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. 
	4.4 	Executive's Sole Remedy.  The Executive's sole remedy shall be against the
Company for any claim, liability or obligation of any nature whatsoever arising
out of or relating to this Agreement or an alleged breach of this Agreement or
for any other claim arising out of the Executive's employment by the Company,
his service to the Company, any indemnification 







12










 





  	 	



obligation of the company or the
termination of the Executive's employment hereunder (collectively, "Executive
Claims").  The Executive shall have no claim or right of any nature
whatsoever against any of the Company's directors, former directors, officers,
former officers, employees, former employees, stockholders, former stockholders,
agents, former agents or the Independent Counsel in their individual capacities
arising out of or relating to any Executive Claim.  The Executive hereby
releases and covenants not to sue any person other than the Company over any
Executive Claim.  The persons described in this Section 4.4 (other than the
Company and the Executive) shall be third-party beneficiaries of this Agreement
for the purposes of enforcing the terms of this Section 4.4 (Executive's Sole
Remedy) against the Executive. 




      
	4.5	



Notices.  All notices, requests, demands and other communications required
or permitted under this Agreement and the transactions contemplated herein shall
be in writing and shall be deemed to have been duly given, made and received
when sent by telecopy (with a copy sent by mail) or when personally delivered or
one business day after it is sent by overnight service, addressed as set forth
below:




      
	 	If to the Executive:                              
Scott Johnson
	 	 
	 	 
	 	If to the Company:                              
P.W. Stephens, Inc.

                                                          
15201 Pipeline Lane, Unit B

                                                          
      Huntington Beach, CA 92649

                                                          
Attn:  Board of Directors
	 	                                                            
	 	



Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this subsection for the giving of notice, which shall be effective
only upon receipt.




      
	4.6	



Provisions Separable.  The provisions of this Agreement are independent of
and separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.




      
	4.7	



Entire Agreement.  This Agreement contains the entire understanding between
the parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written, except as herein contained,
which shall be deemed terminated effective immediately.  The express terms
hereof control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof.  This Agreement may not be
modified or amended other than by an agreement in writing.




      







 




13










 





  	4.8	



Headings; Index.  The headings of paragraphs and Index of Defined Terms
herein are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.




      
	4.9 	



Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
principles of conflict of laws.




      
	4.10	



Dispute Resolution.  Subject to the Company's right to seek injunctive
relieve in court as provided in Section 2.3 (Injunctive Relieve) of this
Agreement and the Executive's right to such a judicial determination that the
Executive should be indemnified by the Company (as provided in Article 3
(Indemnification) of this Agreement, any dispute, controversy or claim arising
out of or in relation to or in connection with this Agreement, including without
limitation any dispute as to the construction, validity, interpretation,
enforceability or breach of this Agreement, shall be exclusively and finally
settled by arbitration, and any party may submit such dispute, controversy or
claim, including a claim for indemnification under this Section 4.10 (Dispute
Resolution), to arbitration.  (a) Arbitrators.  The arbitration shall
be heard and determined by one arbitrator, who shall be impartial and who shall
be selected by mutual agreement of the parties, provided, however, that if the
dispute involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators.  If three  (3) arbitrators are
necessary as provided above, then (i) each side shall appoint an arbitrator of
its choice within thirty (30) days of the submission of a notice of arbitration
and (ii) the party appointed arbitrators shall in turn appoint a presiding
arbitrator of the tribunal within thirty (30) days following the appointment of
the last party-appointed arbitrator.  If (x) the parties cannot agree on
the sole arbitrator, (y) one party refuses to appoint its party-appointed
arbitrator within said thirty (30) day period or (z) the party-appointed
arbitrators cannot reach agreement on a presiding arbitrator of the tribunal,
then the appointing authority for the implementation of such procedure shall be
the Senior United States District Judge for the Central District of California,
who shall appoint an independent arbitrator who does not have any financial
interest in the dispute, controversy or claim.  If the Senior United States
District Judge for the Central District of California refuses or fails to act as
the appointing authority within ninety (90) days after being requested to do so,
then the appointing authority shall be the Chief Executive officer of the
American Arbitration Association, who shall appoint an independent arbitrator
who does not have any financial interest in the dispute, controversy or claim. 
All decisions and awards by the arbitration tribunal shall be made by majority
vote.  (b) Proceedings.  Unless otherwise expressly agreed in writing
by the parties to the arbitration-proceedings: (i) The arbitration  




      







14










 




 





  	 	



proceedings
shall be held in Los Angeles, California, at a site chosen by mutual agreement
of the parties, or if the parties cannot reach agreement on a location within
this (30) days of the appointment of the last arbitrator, then at a site chosen
by the arbitrators; (ii) The arbitrators shall be and remain at all times wholly
independent and impartial; (iii) The arbitration proceedings shall be conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, as amended from time to time; (iv) Any procedural issues not
determined under the arbitral rules selected pursuant to item (iii) above shall
be determined by the law of the place of arbitration, other than those laws
which would refer the matter to another jurisdiction; (v) The costs of the
arbitration proceedings (including attorney's fees and costs) shall be borne in
the manner determined by the arbitrators; (vi) The decision of the arbitrators
shall be reduced to writing; final and binding without the right of appeal; the
sole and exclusive remedy regarding any claims, counterclaims, issues or
accounting presented to the arbitrators; made and promptly paid in the United
States dollars free of any deduction or offset; and any costs or fees incident
to enforcing the award shall, to the maximum extent permitted by law, be charged
against the party resisting such enforcement; (vii) The award shall include
interest from the date of any breach or violation of this Agreement, as
determined by the arbitral award, and from the date of the award until paid in
full, at 6% per annum; and (viii) Judgment upon the award may be entered in any
court having jurisdiction over the person or the assets of the party owing the
judgment or application may be made to such court for a judicial acceptance of
the award and an order of enforcement, as the case may be.




      
	4.11.	



Survival.  The covenants and agreements of the parties set forth in Article
2 (Non-Competition and Confidentiality), Article 3 (Indemnification) and Article
4 (Miscellaneous) are of a continuing nature and shall survive the expiration,
termination or cancellation of this Agreement in accordance with the terms
therein regardless of the reason therefore.   Article 2
(Non-Competition and Confidentiality) should be extended beyond the Term of
Agreement.




      
	4.12.	



No
Duplication of Payments.  Subrogation.  The Company shall not be
liable under this Agreement to make any payment in connection with any claim
made against the Executive to the extent the Executive has otherwise actually
received payment (under any insurance policy, Bylaw or otherwise) of the amounts
otherwise indemnifiable hereunder.  In the event the Executive actually
receives payment (under any insurance policy, Bylaw or otherwise) of any amount
with respect to which the Company has already indemnified or subsequently
indemnities the Executive.  The Company shall be subrogated to the extent
of such payment to all of the rights of recovery of the Executive, who shall
execute all papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.  




      







15










 




 





  	4.13.	Binding Effect, Etc.  This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors, assigns (including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
or assets of the Company), spouses, heirs, and personal and legal
representatives.  The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise to
all, substantially all, or a substantial part, of the business or assets of the
Company), by written agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. 
	4.14.	Discretion of Board of Directors.  No provision of this Agreement shall be
interpreted to prevent or limit the authority and discretion of the Board of
Directors in the making of decisions regarding the affairs of the Company. 
Notwithstanding the foregoing, the Board of Directors shall not have the power
or authority to modify the terms of this Agreement without the Executive's
written consent, which he may grant or withhold in his discretion.












16




 





IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its officer thereunto duly authorized, and Executive has signed this Agreement,
all as of the day and year first above written.





  	The Company 	The Executive
	 	 
	 	 
	 	 
	P. W. STEPHENS, INC.	SCOTT JOHNSON
	By:  ______________________________	 
	Name: ____________________________	By:______________________________
	Title: _____________________________	Date:_____________________________
	Date: _____________________________	 




 

 

 

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