Document:

Exhibit 10.2

 

Exhibit 10.2

EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT (“Agreement”) dated as of April 1, 2004 (the
“Effective Date”) between HARRIS INTERACTIVE INC., a Delaware corporation
(“Company”), and GREGORY T. NOVAK (“Executive”).

     This Agreement amends, restates, and replaces in its entirety the
Employment Agreement between Company and Executive dated as of November 7, 2003
(the “Prior Agreement”); provided, however, that all rights of Executive to
payments and benefits under Sections 3.1 - 3.6, inclusive, of the Prior
Agreement accrued but unpaid as of the Effective Date shall survive execution
of this Agreement and the Stock Option Agreement referenced in Section 3.7 of
the Prior Agreement shall remain unchanged and in full force and effect.

1. CAPACITY AND DUTIES

     1.1 Employment; Acceptance of Employment. Company hereby employs
Executive and Executive hereby accepts employment by Company for the period and
upon the terms and conditions hereinafter set forth.

     1.2 Capacity and Duties.

          (a) Executive shall serve as the President and Chief Operating Officer of
the Company. Executive shall perform duties and shall have authority as may
from time to time be specified by the Chief Executive Officer and the Board of
Directors of Company (the “Board”). Executive’s position and duties may be
changed from time to time by the Chief Executive Officer and the Board;
provided, however, that Executive’s position, authority, duties, and
responsibilities shall be no less senior and executive in nature than those of
President and Chief Operating Officer. Executive will report to the Chief
Executive Officer of the Company. Executive shall perform his duties for
Company principally at Company’s executive offices, presently in Rochester, New
York, provided, however, that Executive acknowledges and agrees that travel to
Company’s and its affiliates’ various offices, and to other locations in
furtherance of Company’s business, will be required in connection with the
performance of Executive’s duties hereunder.

          (b) Executive shall devote full time efforts to the performance of
Executive’s duties hereunder, in a manner that will faithfully and diligently
further the business and interests of Company.

          (c) Executive acknowledges that Company’s reputation is important in the
continued success of its business, and agrees that he will not discuss or
comment in such a manner as may adversely impact the reputation or public
perception, or otherwise disparage, Company or its officers, employees, or
directors in any manner; provided, however, that Executive may make such
disclosures as may be required by law. Company acknowledges that Executive’s
reputation is important to his continued success. Company agrees that it will
not, and that it will use all reasonable efforts to cause its officers,
employees, and directors not to, defame, disparage, or otherwise discuss or
comment about Executive in such a manner as may adversely impact his reputation
or public perception; provided, however, that Company may make such disclosures
as may be required by law.

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2. TERM OF EMPLOYMENT

     2.1 Term. The term of Executive’s employment hereunder, for all purposes
of this Agreement, shall commence on the Effective Date (the “Commencement
Date”) and continue through and including the earliest to occur of (i) June 30,
2005, if and as further extended to subsequent June 30ths as provided in this
Section 2.1, (ii) the date on which Executive dies, and (iii) the date on which
either the Company or Executive terminates Executive’s employment for any
reason (the “Termination Date”). Except as hereinafter provided, on June 30,
2005 this Agreement shall be automatically extended for an additional one-year
term, and if so extended shall be automatically extended for successive
additional one-year terms, unless either the Executive or Company shall have
given the other written notice of nonrenewal of this Agreement at least three
(3) months prior to June 30, 2005, or if applicable any one-year extension term
then in effect. If written notice of nonrenewal is given as provided above,
Executive’s employment under this Agreement shall terminate on June 30, 2005,
or if the term of this Agreement has automatically renewed, on the June 30
immediately following the date of the non-renewal notice.

3. COMPENSATION

     3.1 Base Compensation. As compensation for Executive’s services, Company
shall pay to Executive base compensation in the form of salary (“Base
Compensation”) in the amount of $368,000 per annum. The salary shall be
payable in periodic installments in accordance with Company’s regular payroll
practices for its executive personnel at the time of payment, but in no event
less frequently than monthly. The Compensation Committee of the Board shall
review Base Compensation periodically for the purpose of determining, in its
sole discretion, whether Base Compensation should be adjusted; provided,
however, that Executive’s Base Compensation shall not be less than $368,000.

     3.2 Performance Bonus. As additional compensation for the services
rendered by Executive to Company, Executive shall be eligible for a performance
bonus (“Performance Bonus”) payable in full at the same time as payment of
other executive bonuses by the Company (generally targeted for payment within
ninety (90) days after the end of the relevant fiscal year of the Company).
The Performance Bonus award criteria and amounts shall be those established on
an annual basis by the Compensation Committee of the Board of Directors of the
Company based upon performance guidelines established for executive officers of
the Company; provided, however, that the target bonus for Executive for the
fiscal year ending June 30, 2004 shall be $100,000, and for the fiscal year
ending June 30, 2005 shall be $150,000, provided that performance guidelines
are met. No bonus will be due in the event that award criteria established by
the Compensation Committee are not met.

     3.3 Employee Benefits. Executive shall be entitled to participate in such
of Company’s employee benefit plans and benefit programs, including medical,
hospitalization, dental, disability, accidental death and dismemberment and
travel accident plans and programs, as may from time to time be provided by
Company for its senior executives generally. In addition, Executive shall be
eligible to participate in all pension, retirement, savings and other employee
benefit plans and programs maintained from time to time by Company for the
benefit of its senior executives generally. Company shall have no obligation,
however, to maintain any particular program or level of benefits referred to in
this Section 3.3.

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     3.4 Vacation. Executive shall be entitled to the normal and customary
amount of paid vacation provided to senior executive officers of the Company,
but in no event less than 20 days during each 12 month period. Any vacation
days that are not taken in a given 12 month period shall accrue and carry over
from year to year up to a maximum aggregate of 5 days. The Executive may be
granted leaves of absence with or without pay for such valid and legitimate
reasons as the Board in its sole and absolute discretion may determine, and is
entitled to the same sick leave and holidays provided to other executive
officers of Company.

     3.5 Expense Reimbursement. Company shall reimburse Executive for all
reasonable and documented expenses incurred by him in connection with the
performance of Executive’s duties hereunder in accordance with its regular
reimbursement policies as in effect from time to time.

     3.6 Stock Options. The Company intends to seek approval from its
shareholders at its 2004 annual meeting to increase the number of shares
available for grant under its Long Term Incentive Plan by at least 500,000. On
the date, if any, on which the shareholders approve such proposal, the Company
shall grant Executive options to purchase 500,000 shares of the Company’s stock
with an exercise price equal to the fair market value of the stock as of the
close of trading on the date of the grant. The options shall be granted under
and pursuant to the terms of the Company’s Long Term Incentive Plan and the
Stock Option Agreement executed and delivered by the Company in connection with
the grant; provided that such Stock Option Agreement shall provide that
twenty-five percent (25%) of the options shall vest as of March 30, 2005 and
one forty-eighth (1/48) of the options shall vest as of the last day of each of
the next 36 calendar months thereafter.

     3.7 Withholding. All payments under this Agreement shall be subject to
any required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.

4. TERMINATION OF EMPLOYMENT

     4.1 Accrued Obligations. For purposes of this Agreement, “Accrued Base
Obligations” shall mean amounts for Base Compensation, expense reimbursement,
employee benefits, and car allowance which have accrued, vested, and are unpaid
as of the Termination Date, and (ii) “Accrued Bonus Obligations” shall mean (i)
any unpaid Performance Bonus earned for any fiscal year ending before the
Termination Date, and (ii) for the year in which the Termination Date occurs, a
prorated Performance Bonus for the partial-year period ending before the
Termination Date if the Termination Date occurs in the last six months of the
applicable fiscal year calculated by annualizing the short period before
termination, and no prorated Performance Bonus if the Termination Date occurs
in the first six months of the applicable fiscal year. Accrued Base
Obligations shall be paid within thirty (30) days after the Termination Date,
and Accrued Bonus Obligations shall be paid on the date on which they would
have been paid under this Agreement absent the occurrence of the Termination
Date.

     4.2 Termination Procedures. Except as otherwise provided in this
Agreement, any termination of Executive’s employment by the Company or by
Executive (other than termination pursuant to death) shall be communicated by
written Notice of Termination to the other party hereto. For purposes of this
Agreement, a “Notice of Termination” shall mean a notice which

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shall indicate the specific termination provision in this Agreement relied
upon and, if applicable, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated.

     4.3 Death of Executive. If Executive dies prior to a Termination Date
that otherwise occurs, Company shall not thereafter be obligated to make any
further payments hereunder other than amounts for Accrued Base Obligations and
Accrued Bonus Obligations.

     4.4 Disability of Executive. If Executive is permanently disabled (as
defined in Company’s long-term disability insurance policy then in effect),
then the Board shall have the right to terminate Executive’s employment upon 30
days’ prior written notice to Executive at any time during the continuation of
such disability (“Disability”). In the event Executive’s employment is
terminated for Disability in accordance with this Section 4.4, Company shall
not be obligated to make any further payments hereunder except for Accrued Base
Obligations and Accrued Bonus Obligations.

     4.5 Termination for Cause.

          (a) Executive’s employment hereunder shall terminate immediately upon a
Notice of Termination from the Company that Executive is being terminated for
Cause (as defined herein), in which event Company shall not thereafter be
obligated to make any further payments hereunder other than Accrued Base
Obligations and Accrued Bonus Obligations.

          (b) “Cause” shall be limited to the following:

               (i) willful failure to substantially perform Executive’s duties as
described in Section 1.2 after demand for substantial performance is delivered
by Company in writing that specifically identifies the manner in which Company
believes Executive has not substantially performed Executive’s duties and
Executive’s failure to cure such non-performance within ten (10) days after
receipt of the Company’s written demand; provided, however, that a failure to
perform such duties during the remedy period set forth in Section 4.6(c)(i)
hereof following the issuance of a Notice of Termination (as herein defined) by
Executive for Good Reason shall not be Cause unless an arbitrator acting
pursuant to Section 6.1 hereof finds Executive to have acted in bad faith in
issuing such Notice of Termination;

               (ii) willful conduct that is materially and demonstrably injurious to
Company or any of its subsidiaries, but not including good faith conduct taken
without intention to injure the Company or its subsidiaries that, at the time
engaged in, could not reasonably be expected to be more likely than not to be
materially injurious to the Company; or

               (iii) conviction or plea of guilty or nolo contendere to a felony or to
any other crime which involves moral turpitude or, if not including moral
turpitude, provided the act giving rise to such conviction or plea is
materially and demonstrably injurious to the Company or any of its
subsidiaries;

               (iv) material violation of Section 5 of this Agreement, or material
violation of Company polices set forth in Company manuals or written statements
of policy provided in the case of violation of policy that such violation is
either materially and

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demonstrably injurious to Company or, if curable, continues for more then
three (3) days after written notice thereof is given to Executive by the
Company; and

               (v) material breach of any material provision of this Agreement by
Executive, which breach continues for more than ten days after written notice
thereof is given by the Company to Executive.

          Cause shall not exist under this Section 4.5 unless and until Company has
delivered to Executive a copy of a resolution duly adopted by a majority of the
members of the Board then in office finding that Cause exists in the good faith
opinion of the Board. This Section 4.5 shall not prevent Executive from
challenging, pursuant to Section 6.1, the Board’s determination that Cause
exists, or that Executive has failed to cure any act (or failure to act), to
the extent permitted by this Agreement, that purportedly formed the basis for
the Board’s determination.

     4.6 Termination without Cause or by Executive for Good Reason.

          (a) The Company reserves the right to terminate Executive’s employment at
any time. If, however, a Termination Date occurs (not including termination in
the ordinary course on any applicable June 30 if the term of this Agreement is
not automatically renewed) for any reason other than Cause under Section 4.5,
termination by Executive under Section 4.7, death, or Disability, then Company
shall have no further obligations under this Agreement except that Company
shall pay to Executive:

               (i) the Accrued Base Obligations through the date of termination, payable
promptly after the date of termination,

               (ii) any unpaid Performance Bonus earned for any fiscal year ended before
the Termination Date payable the later of (A) the date on which such
Performance Bonus would be paid absent termination and (B) a date no later than
30 days after the Termination Date,

               (iii) the Performance Bonus, if any is earned, for the fiscal year in
which the Termination Date occurs, allocable to and prorated for the period
prior to termination, calculated by annualizing any short period before
termination, calculated and payable when Performance Bonuses for the applicable
year are paid to all other Company senior executives,

               (iv) Base Compensation through and including the date one year after the
date of termination, payable at the same times as paid under Section 3.1; and

               (v) benefits as required by Section 3.3 of this Agreement during the same
period that Base Compensation is due under Section 4.6(a)(iv); provided,
however, if Executive, Executive’s spouse or Executive’s dependents are
ineligible to participate in the Company benefit programs under Section 3.3,
the Company shall arrange to provide Executive, Executive’s spouse and
Executive’s dependents with the economic equivalent of such benefits which they
otherwise would have been entitled to receive, and further provided that such
benefits shall terminate upon the date or dates Executive receives coverage and
benefits which are substantially similar, taken as a whole, without waiting
period or pre-existing condition limitations, under the plans and programs of a
subsequent employer.

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          (b) If this Agreement is terminated in the ordinary course on any
applicable June 30 because of a non-renewal notice given by the Company under
Section 2.1, then Company shall have no further obligations under this
Agreement except that Company shall pay to Executive the payments to which the
Executive would be entitled under Section 4.6(a)(i), (ii), (iii), and (iv). If
this Agreement is terminated in the ordinary course on any applicable June 30
because of a non-renewal notice given by the Executive under Section 2.1, then
Company shall have no further obligations under this Agreement except that
Company shall pay to Executive the payments to which the Executive would be
entitled under Section 4.6(a)(i), (ii), and (iii).

          (c) “Good Reason” shall mean the following:

               (i) material breach of Company’s obligations hereunder, including any
assignment of duties not part of duties normally performed by persons holding
the positions described in Section 1.2 unless previously agreed to in writing
by Executive, provided that Executive shall have given reasonably specific
written notice thereof to Company, and Company shall have failed to remedy the
circumstances within sixty (60) days thereafter;

               (ii) any decrease in Executive’s salary as it may have increased during
the term of this Agreement, except for decreases that are in conjunction with
decreases in executive salaries by the Company generally and that do not result
in a decrease in Executive’s annual salary below $368,000 per annum;

               (iii) the failure of Executive to be appointed to the positions set forth
in Section 1.2(a); or

               (iv) the failure of any successor in interest of Company to be bound by
the terms of this Agreement in accordance with Section 6.4 hereof.

          Executive must provide a Notice of Termination to the Company that he is
intending to terminate his employment for Good Reason within one hundred and
twenty (120) days after Executive has actual knowledge of the occurrence of the
latest event he believes constitutes Good Reason, which termination notice
shall specify a termination date within thirty (30) days after the date of such
notice except for termination under subsection (i) in which case the
termination date shall be as provided in such subsection. Executive’s right to
terminate Executive’s employment hereunder for Good Reason shall not be
affected by Executive’s subsequent Disability provided that the notice of
intention to terminate is given prior to the onset of such Disability. Subject
to compliance by Executive with the notice provisions of this Section 4.6,
Executive’s continued employment prior to terminating employment for Good
Reason shall not constitute consent to, or a waiver of rights with respect to,
any act or failure to act constituting Good Reason. In the event Executive
delivers to the Company a Notice of Termination for Good Reason, upon request
of the Board Executive agrees to appear before a meeting of the Board called
and held for such purpose (after reasonable notice) and specify to the Board
the particulars as to why Executive believes adequate grounds for termination
for Good Reason exist. No action by the Board, other than the remedy of the
circumstances within the time periods specified in Section this 4.6, shall be
binding on Executive.

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     4.7 Termination by Executive without Good Reason. In the event
Executive’s employment is voluntarily terminated by Executive without Good
Reason, Company shall not be obligated to make any further payments to
Executive hereunder other than Accrued Base Obligations and Accrued Bonus
Obligations through the Termination Date.

     4.8 Mitigation. Executive shall not be required to mitigate amounts
payable under this Section 4 by seeking other employment or otherwise, and
there shall be no offset against amounts due Executive under this Agreement on
account of subsequent employment except as specifically provided herein.

     4.9 Change of Control.

          (a) If Executive is terminated without Cause, a Termination Date occurs on
a June 30 due to non-renewal by the Company of the term of this Agreement under
Section 2.1, or Executive terminates his employment for Good Reason during the
one-year period following a Change of Control (as defined below), then in
addition to payments and benefits to which Executive is entitled under Section
4.6, Executive also shall receive reimbursement for reasonable (in the
discretion of the Company) and actual expenses incurred by Executive for six
months of out-placement services.

          (b) A “Change of Control” shall be deemed to have occurred if:

               (i) the following individuals cease for any reason to constitute a
majority of the number of directors then serving as directors of the Company:
individuals who, on the date hereof, constitute the Board of Directors of the
Company and any new director (other than a director whose initial assumption of
office is in connection with the settlement of an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the
Board of Directors of the Company or nomination for election by the Company’s
stockholders was approved or recommended by a vote of at least a majority of
the directors then still in office who either were directors on the date hereof
or whose appointment, election or nomination for election was previously so
approved or recommended;

               (ii) the stockholders of the Company approve a complete liquidation or
dissolution of the Company, except in connection with a recapitalization or
other transaction which does not otherwise constitute a Change of Control for
purposes of subsection (iii) or (iv) below;

               (iii) any consolidation or merger of the Company occurs; or

               (iv) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of assets accounting for fifty percent (50%) or
more of total assets or fifty percent (50%) or more of the total revenues of
the Company occurs;

other than, in case of either subsection (iii) or (iv), a transaction in which
immediately following such transaction, (x) more than fifty percent (50%) of
the combined voting power of the then outstanding voting securities of the
surviving entity in the case of a merger or consolidation or acquiring entity
in the case of a transfer (in each case, the “Surviving Entity”) entitled to
vote

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generally in the election of directors (or other determination of governing
body) is then beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) by all or substantially all of the individuals
and entities who were the owners of Company common stock immediately prior to
such transaction in substantially the same proportion, as among themselves, as
their ownership of such common stock immediately prior to such transaction, or
(y) a majority of the directors (or other governing body) of the Surviving
Entity consists of members of the Board of Directors of the Company in office
during the twelve months preceding the applicable transaction.

5. NON-COMPETITION AND CONFIDENTIALITY

     5.1 Non-Competition.

          (a) During the period that Executive is employed by the Company, and for a
period of one year after the Termination Date (the “Non-Competition Period”),
Executive shall not, directly or indirectly, own, manage, operate, join,
control, participate in, invest in or otherwise be connected or associated
with, in any manner, including, without limitation, as an officer, director,
employee, distributor, independent contractor, independent representative,
partner, consultant, advisor, agent, proprietor, trustee or investor, any
Competing Business (defined below); provided, however, that ownership of 4.9%
or less of the stock or other securities of a corporation, the stock of which
is listed on a national securities exchange or is quoted on the NASDAQ Stock
Market’s National Market, shall not constitute a breach of this Section 5, so
long as the Executive does not in fact have the power to control, or direct the
management of, or is not otherwise engaged in activities with, such
corporation.

          (b) For purposes of this Section 5.1, the term “Competing Business” shall
mean any business or venture which is substantially similar to the whole or any
significant part of the business conducted by Company, and which is in material
competition with the Company, and the term “Affiliate” of any person or entity
shall mean any other person or entity directly or indirectly controlling,
controlled by or under common control with such particular person or entity,
where “control” means the possession, directly or indirectly, of the power to
direct the management and policies of a person or entity whether through the
ownership of voting securities, contract, or otherwise.

     5.2 No Solicitation. During the Noncompetion Period, the Executive shall
not, directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of Company to
terminate such employee’s relationship with Company for any reason, or assist
any person or entity in doing so, or employ, engage or otherwise contract with
any employee or former employee of Company in a Competing Business or any other
business unless such former employee shall not have been employed by Company
for a period of at least one year and no solicitation prohibited hereby shall
have occurred prior to the end of such one-year period, (ii) interfere in any
manner with the relationship between any employee and Company, or (iii)
contact, service or solicit any existing clients, customers or accounts of
Company on behalf of a Competing Business, either as an individual on
Executive’s own account, as an investor, or as an officer, director, partner,
joint venturer, consultant, employee, agent or salesman of any other person or
entity.

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     5.3 Confidential Information.

          (a) “Confidential Information” shall mean all proprietary or confidential
records and information, including, but not limited to, development, marketing,
purchasing, organizational, strategic, financial, managerial, administrative,
production, distribution and sales information, distribution methods, data,
specifications, technologies, methods, and processes (including the Transferred
Property as hereinafter defined) presently owned or at any time hereafter
developed by Company, or its agents, consultants, or otherwise on its behalf,
or used presently or at any time hereafter in the course of the business of
Company, that are not otherwise part of the public domain.

          (b) Executive hereby sells, transfers and assigns to Company, or to any
person or entity designated by Company, all of Executive’s entire right, title
and interest in and to all inventions, ideas, methods, developments,
disclosures and improvements (the “Inventions”), whether patented or
unpatented, and copyrightable material, and all trademarks, trade names, all
goodwill associated therewith and all federal and state registrations or
applications thereof, made, adopted or conceived by solely or jointly, in whole
or in part prior to the Termination Date which (i) relate to methods,
apparatus, designs, products, processes or devices sold, leased, used or under
construction or development by Company or (ii) otherwise relate to or pertain
to the business, products, services, functions or operations of the Company
(collectively, the “Transferred Property”). Executive shall make adequate
written records of all Inventions, which records shall be Company’s property
and shall communicate promptly and disclose to Company, in such forms Company
requests, all information, details and data pertaining to the aforementioned
Inventions. Whether during the term of this Agreement or thereafter, Executive
shall execute and deliver to Company such formal transfers and assignments and
such other papers and documents as may be required of Executive to permit
Company, or any person or entity designated by Company, to file and prosecute
patent applications (including, but not limited to, records, memoranda or
instruments deemed necessary by Company for the prosecution of the patent
application or the acquisition of letters patent in the United states, foreign
counties or otherwise) and, as to copyrightable material, to obtain copyrights
thereon, and as to trademarks, to record the transfer of ownership of any
federal or state registrations or applications.

          (c) All Confidential Information is considered secret and will be
disclosed to the Executive in confidence, and Executive acknowledges that, as a
consequence of Executive’s employment and position with Company, Executive may
have access to and become acquainted with Confidential Information. Except in
the performance of Executive’s duties as an employee of Company, Executive
shall not, during the term and at all times thereafter, directly or indirectly
for any reason whatsoever, disclose or use any such Confidential Information.
All records, files, drawings, documents, equipment and other tangible items
(whether in electronic form or otherwise), wherever located, relating in any
way to or containing Confidential Information, which Executive has prepared,
used or encountered or shall in the future prepare, use or encounter, shall be
and remain Company’s sole and exclusive property and shall be included in the
Confidential Information. Upon termination of this Agreement, or whenever
requested by Company, Executive shall promptly deliver to Company any and all
of the Confidential Information and copies thereof, not previously delivered to
Company, that may be in the possession or under the control of the Executive.
The foregoing restrictions shall not apply to

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the use, divulgence, disclosure or grant of access to Confidential
Information to the extent, but only to the extent, (i) expressly permitted or
required pursuant to any other written agreement between Executive and Company,
(ii) such Confidential Information has been publicly disclosed (not due to a
breach by the Executive of Executive’s obligations hereunder, or by breach of
any other person, of a fiduciary or confidential obligation to Company) or
(iii) the Executive is required to disclose Confidential Information by or to
any court of competent jurisdiction or any governmental or quasi-governmental
agency, authority or instrumentality of competent jurisdiction, provided,
however, that the Executive shall, prior to any such disclosure, immediately
notify Company of such requirements and provided further, however, that the
Company shall have the right, at its expense, to object to such disclosures and
to seek confidential treatment of any Confidential Information to be so
disclosed on such terms as it shall determine.

     5.4 Consideration for Section 5 Covenants. In consideration of the
covenants contained in this Section 5, the Company is willing to incur the
payment and related obligations under this Agreement, including in particular
and without limitation those obligations under Section 4.6(a)(iv). Executive
acknowledges and agrees that the Company’s entry into this Agreement and its
incurrence of the related payment and other obligations hereunder are fair and
adequate consideration for the Executive’s obligations under this Section 5,
and that the Company has advised Executive that it would not bind itself in
advance to the obligations hereunder but for Executive’s agreement to this
Section 5. In this regard, the Executive understands that the provisions of
this Section 5 may limit Executive’s ability to earn a livelihood in a business
similar or related to the business of Company, but nevertheless agrees and
acknowledges that (i) the provisions of Section 5 are reasonable and necessary
for the protection of Company, and do not impose a greater restraint than
necessary to protect the goodwill or other business interest of Company, (ii)
such provisions contain reasonable limitations as to the time and the scope of
activity to be restrained, and (iii) the Company’s advance agreement to make
payments under the various circumstances set forth in this Agreement provide
Executive with benefits adequate to fully compensate Executive for any lost
opportunity due to the operation of Section 5. In consideration of the
foregoing and in light of Executive’s education, skills and abilities,
Executive agrees that all defenses by Executive to the strict enforcement of
such provisions are hereby waived by Executive.

     5.5 Acknowledgement; Remedies; Survival of this Agreement.

          (a) Executive acknowledges that violation of any of the covenants and
provisions set forth in Section 5 of this Agreement would cause Company
irreparable damage and agrees that Company’s remedies at law for a breach or
threatened breach of any of the provisions of this Agreement would be
inadequate and, in recognition of this fact, in the event of a breach or
threatened breach by Executive of any of the provisions of this Agreement, it
is agreed that, in addition to the remedies at law or in equity, Company shall
be entitled, without the posting of a bond, to equitable relief in the form of
specific performance, a temporary restraining order, temporary or permanent
injunction, or any other equitable remedy which may then be available for the
purposes of restraining Executive from any actual or threatened breach of such
covenants. Without limiting the generality of the foregoing, if Executive
breaches or threatens to breach this Section 5 hereof, such breach or
threatened breach will entitle Company (i) to terminate its obligations to make
further payments otherwise required under this

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Agreement, and (ii) to enjoin Executive from disclosing any Confidential
Information to any Competing Business, to enjoin any Competing Business from
retaining Executive or using any such Confidential Information, and to enjoin
Executive from rendering personal services to or in connection with any
Competing Business. The rights and remedies of the parties hereto are
cumulative and shall not be exclusive, and each such party shall be entitled to
pursue all legal and equitable rights and remedies and to secure performance of
the obligations and duties of the other under this Agreement, and the
enforcement of one or more of such rights and remedies by a party shall in no
way preclude such party from pursuing, at the same time or subsequently, any
and all other rights and remedies available to it.

          (b) The provisions of this Section 5 shall survive the termination of
Executive’s employment with Company.

6. MISCELLANEOUS

     6.1 Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Rochester, New York, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrator’s award in any court having jurisdiction. The parties consent
to the authority of the arbitrator, if the arbitrator so determines, to award
fees and expenses (including legal fees) to the prevailing party in the
arbitration. Notwithstanding the foregoing, Company shall be entitled to
enforce the provisions of Section 5 hereof through proceedings brought in a
court of competent jurisdiction as contemplated by Section 6.7 hereof.

     6.2 Severability; Reasonableness of Agreement. If any term, provision or
covenant of this Agreement or part thereof, or the application thereof to any
person, place or circumstance shall be held to be invalid, unenforceable or
void by an arbitrator or court of competent jurisdiction, the remainder of this
Agreement and such term, provision or covenant shall remain in full force and
effect, and any such invalid, unenforceable or void term, provision or covenant
shall be deemed, without further action on the part of the parties hereto,
modified, amended and limited, and the arbitrator or court shall have the power
to modify, amend and limit any such term, provision or covenant, to the extent
necessary to render the same and the remainder of the Agreement valid,
enforceable and lawful.

     6.3 Key Employee Insurance. Company in its sole discretion shall have the
right at its expense to purchase insurance on the life of Executive, in such
amounts as it shall from time to time determine, of which Company shall be the
beneficiary. Executive shall submit to such physical examinations as may
reasonably be required and shall otherwise cooperate with Company in obtaining
such insurance.

     6.4 Assignment; Benefit. This Agreement shall not be assignable by
Executive, other than Executive’s rights to payments or benefits hereunder,
which may be transferred only by will or the laws of descent and distribution.
Upon Executive’s death, this Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive’s beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such person succeeds to Executive’s interests under this Agreement. No rights
or obligations of Company under this Agreement may be assigned or transferred
except to any successor to the Company’s

11

 

business and/or assets (by merger, purchase of stock or assets, or
otherwise) which, to the extent not otherwise automatically provided by
operation of law, expressly assumes and agrees to perform this Agreement in the
same manner and to the same extent that Company would be required to perform if
no such succession had taken place.

     6.5 Notices. All notices hereunder shall be in writing and shall be
deemed sufficiently given (i) if hand-delivered, on the date of delivery, (ii)
if sent by documented overnight delivery service, on the first business day
after deposit with such service for overnight delivery, and (iii) if sent by
registered or certified mail, postage prepaid, return receipt requested, on the
third business day after deposit in the U.S. mail, in each case addressed as
set forth below or at such other address for either party as may be specified
in a notice given as provided herein by such party to the other. Any and all
service of process and any other notice in any such action, suit or proceeding
shall be effective against any party if given as provided in this Agreement;
provided that nothing herein shall be deemed to affect the right of any party
to serve process in any other manner permitted by law.

	(i)	 	If to Company:
	 
	 	 	Harris Interactive Inc.

135 Corporate Woods

Rochester, New York 14623

Attention: Chief Financial Officer

	 	 	With Copies To:

	 	 	Beth Ela Wilkens, Esq.

Harris Beach LLP

99 Garnsey Road

Pittsford, New York 14534
	 
	(ii)	 	If to Executive:
	 
	 	 	Gregory T. Novak

4964 Hillcrest Drive

Canandaigua, New York 14424

     6.6 Entire Agreement; Modification. This Agreement constitutes the entire
agreement between the parties hereto with respect to the matters contemplated
herein and supersedes all prior agreements and understandings with respect
thereto. No amendment, modification, or waiver of this Agreement shall be
effective unless in writing. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege hereunder 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 other right, remedy, power, or privilege with respect to such
occurrence or with respect to any other occurrence.

     6.7 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of Delaware
and the federal laws of the United

12

 

States of America, to the extent applicable, without giving effect to
otherwise applicable principles of conflicts of law. Subject to Section 6.1 of
this Agreement, the parties hereto expressly consent to the jurisdiction of any
state or federal court located in the State of New York, and to venue therein,
and consent to the service of process in any such action or proceeding by
certified or registered mailing of the summons and complaint therein directed
to Executive or Company, as the case may be, at its address as provided in
Section 6. hereof.

     6.8 Prevailing Party. Should either party breach the terms of this
Agreement, the prevailing party who seeks to enforce the terms and conditions
of this Agreement shall be entitled to recover its attorneys fee and
disbursements.

     6.9 Headings; Counterparts; Interpretation. The headings of paragraphs in
this Agreement are for convenience only and shall not affect its
interpretation.

     This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original and all of which, when taken together, shall
be deemed to constitute the same Agreement.

     The Company and the Executive each acknowledge that it has been
represented by legal counsel in the negotiation and drafting of this Agreement,
that this Agreement has been drafted by mutual effort, and that no ambiguity in
this Agreement shall be construed against either party as draftsperson.

     6.10 Further Assurances. Each of the parties hereto shall execute such
further instruments and take such other actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.

     IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first above written.

[Signature Page Follows]

13

 

	 	 	 
	HARRIS INTERACTIVE INC.
	 
	 	 
	By:

	 	          /S/ Robert E. Knapp

	Title:

	 	Vice Chairman and Chief Executive Officer
	 
	 	 
	          /S/ Gregory T. Novak

	          GREGORY T. NOVAK

14<PAGE>

                                                                  Exhibit 10.257

                               SECURITY AGREEMENT
                                                              [CITICAPITAL LOGO]

The undersigned debtor, meaning all debtors jointly and severally ("DEBTOR"), to
secure the obligations set forth herein grants to the secured party named below
(herein, with its successors and assigns, called "SECURED PARTY") under the
terms and provisions of this agreement (this "AGREEMENT") a security interest in
the following described property (herein, with all present and future
attachments, accessories, replacement parts, repairs and additions or
substitutions, referred to collectively as "EQUIPMENT").

     One (1) Freightliner FL70 Lube Truck: VIN # 1FVABTBV51HJ17394

The Equipment will be used primarily for: /x/ business or commercial use other
than farming operations: / / farming operations. When not in use, the Equipment
will be kept at: 1385 South State Street Space #2, Salina, UT 84654 and, when in
use, will be used only in the following State(s): UT, NV, AZ

_______________________________________________________________________________

                                PAYMENT SCHEDULE

Debtor promises to pay Secured Party the Total Amount of $32,663.88 (the "Total
Amount") in 12 installments as follows:

(a)  $2,721.99 on 05/01/2004, and a like sum on the like date of each month
thereafter until fully paid
                                      or
(b)

provided, however, that the final installment will be in the amount of the then
remaining unpaid balance. All amounts payable under this Agreement are payable
at Secured Party's address shown below or at such other address as Secured
Party may specify from time to time in writing. Any note taken in conjunction
with this Agreement evidences indebtedness and not payment.

                                USE OF PROCEEDS

SECURED PARTY IS HEREBY IRREVOCABLY AUTHORIZED AND DIRECTED TO DISBURSE THE
PROCEEDS OF THIS AGREEMENT AS FOLLOWS:

     Amount         Payee (Name and Address)
  $31,740.47        CITICAPITAL COMMERCIAL CORPORATION
                    121-0076327-000

  $     0.00

  $     0.00

Debtor hereby acknowledges and agrees that the proceeds of this Agreement will
be used for commercial, business or agricultural purposes and will not be used
for personal, family or household purposes. Secured Party may disburse the
proceeds using checks, drafts, orders, transfer funds, or any other method or
media Secured Party deems desirable. Disbursement may be made in Secured Party's
name on Debtor's behalf or in Debtor's name. Disbursement in accordance with the
above instructions or any written supplement to these instructions will
constitute payment and delivery to and receipt by Debtor of all such proceeds.

_______________________________________________________________________________

INSURANCE: PHYSICAL DAMAGE INSURANCE COVERING THE EQUIPMENT IS REQUIRED. DEBTOR
CAN FURNISH THIS INSURANCE THROUGH AN AGENT OR BROKER OF DEBTOR'S CHOICE. DEBTOR
HEREBY AUTHORIZES SECURED PARTY AND ANY ASSIGNEE TO RELEASE TO ANY INSURANCE
COMPANY AFFILIATED WITH SECURED PARTY OR ANY ASSIGNEE ANY INFORMATION RELATING
TO A CONTRACT OR POLICY OF INSURANCE WHICH IS PROVIDING OR MAY PROVIDE INSURANCE
COVERAGE AGAINST PHYSICAL DAMAGE TO THE EQUIPMENT.

_______________________________________________________________________________

TOTAL AMOUNT:  The Total Amount consists of $31,740.47 of principal and
precomputed interest in the amount of $923.41 computed on the basis of 5.30%
per annum on the assumption that all payments will be made on their respective
due dates.

DELINQUENCY, RETURNED CHECKS AND ACCELERATION INTEREST:  For each installment
not paid when due, Debtor agrees to pay to Secured Party a delinquency charge
calculated thereon at the rate of 1 1/2% per month for the period of delinquency
or, at Secured Party's option, 5% of such installment, provided that such a
delinquency charge is not prohibited by law, otherwise at the highest rate
Debtor can legally obligate itself to pay and/or Secured Party can legally
collect. DEBTOR AGREES TO REIMBURSE SECURED PARTY IMMEDIATELY UPON DEMAND FOR
ANY AMOUNT CHARGED TO SECURED PARTY BY ANY DEPOSITARY INSTITUTION BECAUSE A
CHECK, DRAFT OR OTHER ORDER MADE OR DRAWN BY OR FOR THE BENEFIT OF DEBTOR IS
RETURNED UNPAID FOR ANY REASON AND, IF ALLOWED BY LAW, TO PAY SECURED PARTY AN
ADDITIONAL HANDLING CHARGE IN THE AMOUNT OF $25.00 OR IN THE EVENT APPLICABLE
LAW LIMITS, OR RESTRICTS THE AMOUNT OF SUCH REIMBURSEMENT AND/OR HANDLING
CHARGE, THE AMOUNTS CHARGEABLE UNDER THIS PROVISION WILL BE LIMITED AND/OR
RESTRICTED IN ACCORDANCE WITH APPLICABLE LAW. Debtor agrees to pay Secured
Party, upon acceleration of Debtor's indebtedness, interest on all sums then
owing hereunder at the rate of 1 1/2% per month if not prohibited by law,
otherwise at the highest rate Debtor can legally obligate itself to pay and/or
Secured Party can legally collect. Any note take herewith evidences indebtedness
and not payment. All amounts payable hereunder are payable at Secured Party's
address shown below or at such other address as Secured Party may specify from
time to time in writing.

SECURITY INTEREST:  To secure payment of the Total Amount and all of Secured
Party's obligations under this Agreement or with respect to the Equipment,
Debtor hereby grants to Secured Party a first priority security interest in the
Equipment and in all cash and non-cash proceeds thereof (the Equipment and all
such proceeds are herein called the "COLLATERAL") regardless of any retaking
and/or redelivery of the Collateral to Debtor.

PREPAYMENT:  Debtor may prepay Debtor's obligations under this Agreement in
full at any time. Upon prepayment Debtor will receive a rebate of the unearned
portion of the interest calculated using an actuarial method or such other
method as is required by any applicable law minus, if the prepayment is made
prior to the last twelve months of the contract, a prepayment processing fee
equal to the lesser of (a) one percent (1%) of the amount prepaid for each full
twelve month period remaining under the term of this Agreement as of prepayment
and (b) the maximum prepayment and/or acquisition charge allowed by applicable
law. All accrued and unpaid late charges and other amounts chargeable to Debtor
under this Agreement will be payable immediately upon such prepayment.

Page 1 or 4 of Security Agreement dated 03/29/2004 between MEADOW VALLEY
CONTRACTORS INC. (Debtor) and CITICAPITAL COMMERCIAL CORPORATION (Secured
Party) which includes, without limitation, an item of Collateral with the
following serial number: 1FVABTBV51HJ17394

                            ORIGINAL FOR CITICAPITAL

                                                            Debtor's Initials
                                                                 /s/ BEL

         CITICAPITAL is a service mark of Citicorp
                                                    A member of [citigroup Logo]
<PAGE>
1.   CROSS-SECURITY. Debtor grants to Secured Party, its affiliates (including,
without limitation, any direct or indirect parent, subsidiary or sister entity),
successors and assigns a security interest in the Collateral (separate and
distinct from and subordinate to the security interest granted to Secured Party
on the first page of this Agreement) to secure the payment and performance of
all debts and all liabilities of Debtor to Secured Party of every kind and
character, whether now existing or hereafter arising, and whether direct,
indirect, absolute, contingent, primary, secondary, or otherwise, or to any
affiliates (including, without limitation, any direct or indirect parent,
subsidiary or sister entity), successors or assignees of Secured Party, now
existing or hereafter arising, whether under this Agreement or any other
agreement, and whether due directly or by assignment. The security interest
granted herein shall continue to be effective regardless of any retaking or
redelivery of the Collateral to Debtor. Upon any assignment of this Agreement by
Secured Party, the assignee shall then be deemed the Secured Party for the
purposes of this paragraph.

2.   ADDITIONAL WARRANTIES AND AGREEMENTS. Debtor warrants and agrees that the
execution of and performance by Debtor under the terms of this Agreement has
been approved for Debtor by all necessary action and by Debtor's partners or
board of directors, as applicable; the Equipment is currently and will continue
be maintained in good operating condition, repair and appearance and is
currently and will continue be used and operated with care only by qualified
personnel in the regular course of Debtor's business and in conformity with all
applicable governmental laws and regulations, manufacturer's specifications and
the restrictions contained in any insurance policy insuring the Equipment, the
Equipment is not currently and will not be used in conjunction with the storage,
transportation or disposal of substances considered to be toxic and/or hazardous
or in conjunction with any activity or for any use that would subject the
Equipment to seizure or confiscation by any governmental body, and the Equipment
is currently located at and will be kept by Debtor at the location set forth for
it on the reverse side of this Agreement and will not be removed from said
location without the prior written consent of Secured Party, except that if the
Equipment is of a type which is mobile and normally used by Debtor at more than
one location, Debtor may use the Equipment away from said location in the
regular course of Debtor's business provided that (a) if the Equipment is not
returned to said location within 30 days, Debtor will immediately thereafter,
and each 30 days thereafter until the Equipment is returned, report the then
current location of the Equipment to Secured Party in writing and (b) the
Equipment shall not be removed from the State(s) of use indicated on the reverse
side of this Agreement. Secured Party shall have the right to inspect the
Equipment at all reasonable times and from time to time.

     Debtor further warrants and agrees that: the security interest in the
Collateral granted to and/or retained by Secured Party is and will continue to
be superior to any title to or interest in the Equipment now or hereafter held
or claimed by any other party; the Collateral is free from and will be kept free
from all liens, claims, security interests and encumbrances (whether superior or
inferior to the interests of Secured Party) other than that created by this
Agreement; notwithstanding Secured Party's interest in proceeds Debtor will not
and will not allow any other party to consign, sell, rent, lend, encumber,
pledge, transfer, secrete or otherwise dispose of any of the Collateral without
Secured Party's prior written consent; Debtor will do everything Secured Party
deems necessary or expedient to perfect or preserve the interests granted to
Secured Party under this Agreement and the first priority of such interests; any
Manufacturer's Statement or Certificate of Origin or Certificate of Title
relating to the Equipment shall be immediately delivered to Secured Party and,
if a Certificate of Title or registration is required for any item of Equipment,
Debtor will cooperate with Secured Party in obtaining the Certificate of Title
or registration disclosing the interests of Debtor and Secured Party in the
Equipment, Debtor will defend any action, proceeding or claim affecting the
Collateral or the interests of Secured Party in the Collateral, Debtor shall
promptly pay all amounts payable in conjunction with the storage, maintenance or
repair of the Equipment and all taxes, assessments, license fees and other
public or private charges levied or assessed in conjunction with the operation
or use of the Equipment or levied or assessed against the Collateral, this
Agreement or any accompanying note except for those which are being contested by
Debtor in good faith by appropriate proceedings and which do not constitute a
lien or encumbrance upon the Collateral; and Debtor will from time to time
furnish Secured Party with such financial statements and other information as
Secured Party may reasonably request.

     3.   INSURANCE AND RISK OF LOSS. Debtor shall at all times bear all risk of
loss of, damage to or destruction of the Equipment. Debtor agrees to immediately
procure and maintain insurance on the Equipment, for the full insurable value
thereof and for the life of this Agreement, in the form of "All Risk" or similar
insurance (insuring the Equipment for fire extended coverage, vandalism, theft
and collision and containing only those exclusions from coverage which are
acceptable to Secured Party) plus such other insurance as Secured Party may
specify from time to time, all in form and amount and with insurers satisfactory
to Secured Party. Debtor agrees to deliver promptly to Secured Party
certificates or, if requested, policies of insurance satisfactory to Secured
Party, each with a standard long-form loss-payable endorsement naming Secured
Party or assigns as loss-payee and providing that Secured Party's rights under
such policy will not be invalidated by any act, omission or neglect of anyone
other than Secured Party, and containing the insurer's agreement to give 30 days
prior written notice to Secured Party before any cancellation of or material
change in the policy(s) will be effective as to Secured Party, whether such
cancellation or change is at the direction of Debtor or insurer. Secured Party's
acceptance of policies in lesser amounts or risks will not be a waiver of
Debtor's obligation to procure insurance complying with the provisions hereof
promptly after notice from Secured Party. Debtor assigns to Secured Party all
proceeds of any physical damage or credit insurance for which a charge is stated
in this Agreement or which is maintained by Debtor in accordance herewith,
including returned and unearned premiums, up to the amount owing hereunder by
Debtor. Secured Party will not have the right to cancel any such insurance
without Debtor's consent prior to the occurrence of an event of default and the
repossession, loss or destruction of the Equipment. Debtor directs all insurers
to pay such proceeds solely to the order of Secured Party for application to
Debtor's indebtedness to Secured Party. Secured Party may, at its option, apply
any such proceeds received by Secured Party to the final maturing installments
due hereunder in the inverse order of their maturity.

     4.   PERFORMANCE BY SECURED PARTY. If Debtor fails to perform any of
Debtor's obligations pursuant to Paragraphs 1, 2, or 3 above, Secured Party may
perform the same for the account of Debtor. Any such action by Secured Party
will be in Secured Party's sole discretion and Secured Party will not be
obligated in any way to do so. Secured Party's performance on behalf of Debtor
will not obligate Secured Party to perform the same or any similar act in the
future and will not cure or waive Debtor's failure of performance as an event of
default hereunder. All sums advanced or costs and expenses incurred by Secured
Party pursuant to this Paragraph, including the reasonable fees of any attorney
retained by Secured Party, will be for the account of Debtor, will constitute
indebtedness secured by Secured Party's security interest in the Collateral,
will bear interest at the rate as specified on the reverse side of this
Agreement in the event of acceleration and, unless Secured Party, in Secured
Party's sole discretion agrees otherwise in writing, shall be immediately due
and payable.

     5.   EVENTS OF DEFAULT. Time is of the essence. An event of default will
occur if: (a) Debtor fails to pay when due any amount owed by it to Secured
Party or any affiliate (including, without limitation, any direct or indirect
parent, subsidiary or sister entity), successor or assignee of Secured Party
under this Agreement or under the terms of any promissory note delivered in
conjunction with this Agreement or if Debtor fails to pay when due any amount
owed by it to Secured Party or any affiliate (including, without limitation, any
direct or indirect parent, subsidiary or sister entity), successor or assignee
of Secured Party under any other document, agreement or instrument, (b) Debtor
fails to perform in compliance with any of its agreements hereunder or any
warranty made by Debtor in this Agreement is or becomes incorrect, or if Debtor
fails to perform or observe any term or provision to be performed or observed by
it under any other document, instrument or agreement furnished by Debtor to
Secured Party or any affiliate (including, without limitation, any direct or
indirect parent, subsidiary or sister entity), successor or assignee of Secured
Party or otherwise acquired by Secured Party or any affiliate (including,
without limitation, any direct or indirect parent, subsidiary or sister entity),
successor or assignee of Secured Party; (c) any information, representation, or
warranty furnished by Debtor to Secured Party or to any affiliate of Secured
Party is inaccurate or incorrect in any material respect when furnished; (d)
Debtor becomes insolvent or ceases to do or is prohibited by any court order or
governmental action from conducting the business in which Debtor is principally
engaged on the date of this Agreement as a going concern; (e) any surety or
bonding company assumes any of Debtor's responsibilities under any contract or
job; (f) if any of the Equipment is lost, stolen, destroyed, abandoned, or
relocated, used or maintained in violation of the terms hereof or if Debtor
attempts to consign, sell, rent, lend or encumber any of the Equipment or allows
another to do so; (g) Debtor files a petition in bankruptcy, or for an
arrangement, reorganization, or similar relief, or makes an assignment for the
benefit of creditors, or applies for the appointment of a receiver or trustee
for a substantial part of its assets or for any of the Equipment, or attempts to
take advantage of any process or proceeding for the relief of debtors, or if any
such action is taken against Debtor; (h) any other party attempts to attach,
repossess or execute upon any of the Collateral; (i) Debtor ceases to exist as a
legal entity or Debtor or any party in control of Debtor takes any action
looking to Debtor's dissolution as a legal entity; (j) there shall be a material
change in the management, ownership or control of Debtor, (k) Secured Party in
good faith believes that the prospect of payment or performance hereunder is
impaired; (l) if there shall occur an (i) appropriation, (ii) confiscation,
(iii) retention, or (iv) seizure of control, custody or possession of the
Collateral by any governmental authority including, without limitation, any
municipal, state, federal or other governmental entity or any governmental
agency or instrumentality (all such entities, agencies and instrumentalities
shall hereinafter be collectively referred to as "Governmental Authority"); (m)
if anyone in the control, custody or possession of the Collateral or the Debtor
is accused or alleged or charged (whether or not subsequently arraigned,
indicted or convicted) by any Governmental Authority to have used the Collateral
in connection with the commission of any crime (other than a misdemeanor moving
violation); (n) there shall be a material adverse change in any of the: (i)
condition (financial or otherwise), business, performance, prospects, operations
or properties of the Debtor (ii) legality, validity or enforceability of this
Agreement, (iii) perfection or priority of the lien granted in favor of Secured
Party pursuant to this Agreement, (iv) ability of the Debtor to repay the
indebtedness or perform its obligations under this Agreement or (v) rights and
remedies of the Secured Party under the Agreement are impaired; (o) there shall
be a death of a majority owner of Debtor or a guarantor of the obligations of
Debtor under this Agreement; or (p) except for the security interest, lien or
reservation of title in favor of Secured Party or as otherwise granted herein,
there shall be any lien, claim or encumbrance on any of the Collateral securing
the indebtedness or obligation of Debtor to Secured Party. Secured Party's
inaction with respect to an event of default shall not be a waiver of such
default and Secured Party's waiver of any default shall not be a waiver of any
other default.

Page 2 of 4 of Security Agreement dated 03/29/2004 between Meadow Valley
Contractors Inc. (Debtor) and CitiCapital Commercial Corporation (Secured Party)
which includes, without limitation, an item of Collateral with the following
serial number; 1FVABTBV5THJ17394                               Debtor's Initials
                                                                 /s/  BEL
                            ORIGINAL FOR CITICAPITAL
<PAGE>
6.   REMEDIES UPON DEFAULT.  Upon the occurrence of an event of default, and at
any time thereafter as long as the default continues, Secured Party may, at its
option, with or without notice to Debtor (i) declare this Agreement to be in
default, (ii) declare the indebtedness hereunder to be immediately due and
payable, (iii) declare all other debts then owing by Debtor to Secured Party or
any affiliate (including, without limitation, any direct or indirect parent,
subsidiary or sister entity), successor or assignee of Secured Party to
immediately due and payable, (iv) cancel any insurance and credit any refund to
the indebtedness, and (v) exercise all of the rights and remedies of a Secured
Party under the Uniform Commercial Code and any other applicable laws,
including, without limitation, the right to require Debtor to assemble the
Equipment and deliver it to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties, and to lawfully enter any
premises where the Collateral may be without judicial process and take
possession thereof. Acceleration of any or all indebtedness, if so elected by
Secured Party, shall be subject to all applicable laws including those
pertaining to refunds and rebates of unearned charges. Any property other than
the Collateral which is in or upon the Equipment at the time of repossession may
be taken and held without liability until its return is requested by Debtor. Any
sale or other disposition of any of the Equipment may be made at public or
private sale or through public auction at the option of Secured Party, Secured
party may buy at any sale and become the owner of the Equipment. Unless
otherwise provided by law, any requirement of reasonable notice which Secured
Party may be obligated to give regarding the sale or other disposition of
Collateral will be met if such notice is given to Debtor at least ten days
before the time of sale or other disposition. Debtor agrees that Secured Party
may bring any legal proceedings it deems necessary to enforce the payment and
performance of Debtor's obligations hereunder in any court in the State shown in
Secured Party's address set forth herein, and service of process may be made
upon Debtor by mailing a copy of the summons to Debtor. All notices to Debtor
relating to this Agreement will be considered received when delivered in person
(including by facsimile transmission) or mailed to Debtor at the address of
Debtor contained in this Agreement or at any address later designated by Debtor
to Secured Party in writing. The filing by Secured Party of any action or
proceeding with respect to the Equipment or any of Debtor's obligations
hereunder shall not constitute an election by Secured Party of Secured Party's
remedies or a waiver of Secured Party's rights to take possession of the
Equipment as provided above. Expenses of retaking, holding, preparing for sale,
selling and the like shall include (a) the reasonable fees of any attorneys
retained by Secured Party, (b) any amounts advanced or expenses incurred by
Secured Party pursuant to Paragraph 4 hereof and (c) all other legal and other
expenses incurred by Secured Party. Debtor agrees that it is liable for and will
promptly pay any deficiency resulting from any disposition of Collateral after
default and all costs and expenses, including the reasonable fees of any
attorney, incurred by Secured Party in the collection of any such deficiency.
Secured Party may sell the Equipment without giving any warranties as to the
Equipment. Secured Party may disclaim any warranties of title, possession, quiet
enjoyment, or the like. This procedure will not be considered to adversely
affect the commercial reasonableness of any sale of the Equipment.

7.   POWER OF ATTORNEY.  DEBTOR HEREBY APPOINTS SECURED PARTY OR ANY OFFICER,
EMPLOYEE OR DESIGNEE OF SECURED PARTY, OR ANY ASSIGNEE OF SECURED PARTY (OR ANY
DESIGNEE OF SUCH ASSIGNEE) AS DEBTOR'S ATTORNEY-IN-FACT TO, IN DEBTOR'S OR
SECURED PARTY'S NAME: (a) PREPARE, EXECUTE AND SUBMIT ANY NOTICE OR PROOF OF
LOSS IN ORDER TO REALIZE THE BENEFITS OF ANY INSURANCE POLICY INSURING THE
COLLATERAL, (b) PREPARE, EXECUTE AND FILE ANY AGREEMENT, DOCUMENT, FINANCING
STATEMENT, INSTRUMENT (OR ANY OTHER WRITING OR RECORD) THAT, IN SECURED PARTY'S
OPINION, IS NECESSARY TO PERFECT AND/OR GIVE PUBLIC NOTICE OF THE INTERESTS OF
SECURED PARTY IN ANY COLLATERAL THAT SECURES OR THAT MAY SECURE ANY OBLIGATIONS
OR INDEBTEDNESS OF DEBTOR TO SECURED PARTY, AND (c) ENDORSE DEBTOR'S NAME ON ANY
REMITTANCE REPRESENTING PROCEEDS OF ANY INSURANCE RELATING TO THE COLLATERAL OR
THE PROCEEDS OF THE SALE, LEASE OR OTHER DISPOSITION OF THE COLLATERAL (WHETHER
OR NOT THE SAME IS A DEFAULT HEREUNDER) This power is coupled with an interest
and is irrevocable so long as indebtedness remains unpaid from Debtor to Secured
Party. Debtor agrees to execute and deliver to Secured Party, upon Secured
Party's request, such documents, writings, records and assurances as Secured
Party deems necessary or advisable for the confirmation or perfection of the
security interest in Collateral and Secured Party's rights hereunder, including
such documents, writings, records and assurances as Secured Party may require
for filing or recording. Debtor authorizes Secured Party or any officer,
employee or designee of Secured Party or any assignee of Secured Party (or any
designee of such assignee) to file a financing statement describing the
Collateral. Debtor authorizes Secured Party or any officer, employee or designee
of Secured Party or any assignee of Secured Party (or any designee of such
assignee) to file financing statements covering assets of Debtor other than the
Collateral described herein.

8.   ASSIGNMENT. Debtor shall not assign this Agreement without the prior
written consent of Secured Party. Secured Party or any assignee or successor of
Secured Party shall have the right to transfer, sell or assign all or any
portion of this Agreement or the indebtedness and/or obligations hereunder,
without notice, acknowledgement or consent from Debtor. Upon assignment, the
term "Secured Party" shall mean and refer to any assignee who is the holder of
this Agreement. The assignor will not be the assignee's agent for any purpose.
Debtor waives and will not assert against any assignee of Secured Party any
claims, counterclaim, claims in recoupment, abatement, reduction, defenses, or
set-offs for breach of warranty or for any other reason which Debtor could
assert against Secured Party, except defenses which cannot be waived under the
Uniform Commercial Code. Upon full payment of all obligations secured by this
Agreement, the assignee may deliver all original papers to the assignor for
Debtor.

9.   PRIVACY WAIVER.  Secured Party may receive from and disclose to any
individual, corporation, business trust, association, company, partnership,
joint venture, or other entity (herein collectively, the "Entity"), including,
without limiting the generality of the foregoing, Secured Party's parent or any
affiliate or any subsidiary of Secured Party and any credit reporting agency or
other entity whether or not related to Secured Party for any purpose,
information about Debtor's accounts, credit application and credit experience
with Secured Party and Debtor authorizes any Entity to release to Secured Party
any information related to Debtor's accounts, credit experience and account
information regarding the Debtor. This shall be continuing authorization for all
present and future disclosures of Debtor's account information, credit
application and credit experience on Debtor made by Secured Party, or any Entity
requested to release such information to Secured Party.

10.  DEBIT TRANSACTIONS.  Secured Party may but shall not be required to offer
Debtor the option of paying any of Debtor's obligations to Secured Party through
printed checks ("Debit Transactions") drawn pursuant to this authorization upon
Debtor's checking account, using Debtor's checking account number, bank routing
code and other information which Debtor provides to Secured Party prior to the
first Debit Transaction. Debtor authorizes Secured Party to initiate Debit
Transactions from Debtor's checking account in the amount necessary to pay the
installment payments, delinquency charges, or such other amounts as may now or
hereafter be due hereunder or under any other present or future agreement with
or which is held by Secured Party, plus a fee of ten dollars ($10.00) for each
Debit Transaction initiated by Secured Party. In the event applicable law
prohibits or restricts the amount of such fee, the fee chargeable under this
provision shall be limited and/or restricted in accordance with applicable law.
Secured Party may from time to time increase or decrease the Debit Transaction
fee upon prior written notice addressed to Debtor's last known address as shown
on the records of Secured Party and such increase or decrease shall be effective
as stated in the written notice. Unless prohibited by applicable law, Debtor's
continued use of Debit Transactions after the effective date specified in such
notice shall conclusively establish Debtor's agreement to pay the new Debit
Transaction fee stated therein. Debtor authorizes Secured Party or any officer,
employee or designee of Secured Party to endorse Debtor's name as drawer on any
printed check drawn in accordance with this authorization. Until cancelled by
Debtor, this authorization shall be valid for all Debit Transactions Secured
Party initiates in payment of Debtor's obligations hereunder or under any other
present or future agreement with or which is held by Secured Party. This
authorization may be canceled at any time by Debtor giving at least three (3)
business days prior written notice to Debtor's bank and Secured Party. Payment
by Debit Transactions is not required by Secured Party nor is its use a factor
in the approval of credit.

11.  MISCELLANEOUS. (A) All of Secured Party's rights hereunder are cumulative
and not alternative. (B) The inclusion of a trade name or division name in the
identification of Debtor hereunder does not limit Secured Party's rights, after
the occurrence of an event of default, to proceed against all of Debtor's
assets, including those held or used by Debtor individually or under another
trade or division name. (C) If permitted by law, Debtor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
may be filed as a financing statement. (D) Secured Party may correct patent
errors herein and fill in blanks. (E) All of the terms and provisions hereof
will apply to and be binding upon Debtor, its heirs, personal representatives,
successors and assigns and shall inure to the benefit of Secured Party, its
successors and assigns. (F) Debtor and Secured Party hereby waive any right to
trial by jury in any action or proceeding relating to this Agreement or the
transaction contemplated hereby. (G) Debtor hereby expressly waives notice of
nonpayment, presentment, protest, dishonor, default, intent to accelerate the
maturity hereof and of acceleration of the maturity hereof. (H) If allowed by
law, "the reasonable fees of attorneys" retained by Secured Party shall include
the amount of any flat fee, retainer, contingent fee and/or the hourly charges
of any attorney retained by Secured Party in enforcing any of Secured Party's
rights hereunder in the prosecution or defense of any litigation related to this
Agreement or the transactions contemplated by this Agreement. (I) To the extent
allowed by law, Debtor hereby waives any exemptions or appraisals. (J) No waiver
or change in this Agreement or in any related note will be binding upon Secured
Party, or Secured Party's assignee, unless such waiver or change is in writing
and signed by one of its officers and any such waiver or change shall then be
effective only upon the terms and to the extent provided in such writing. (K)
The acceptance by Secured Party of any remittance from a party other than Debtor
will in no way constitute Secured Party's consent to the transfer of any of the
Collateral to such party. (L) Any captions or headings included in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning of any provision contained in this Agreement. (M) Any
provision contained herein which is contrary to, prohibited by or invalid under
applicable laws or regulations will be deemed inapplicable and omitted
therefrom, but shall not invalidate the remaining provisions hereof. (N) The
only copy of this Agreement which constitutes "chattel paper" is the original
executed copy designated as "Original for CitiCapital".

Page 3 of 4 of Security Agreement dated 03/20/2004 between Meadow Valley
Contractors Inc. (Debtor) and CitiCapital Commercial Corporation (Secured Party)
which includes, without limitation, an item of Collateral with the following
serial number: 1FVABTBV51HJ17394.

                            ORIGINAL FOR CITICAPITAL           DEBTOR'S INITIALS
                                                                 /S/ BEL
<PAGE>
12.  APPLICATION OF PAYMENTS. All payments made by Debtor to Secured Party with
reference to this Agreement shall be applied first to any indebtedness which is
not secured, then to delinquency charges, then to interest, then to insurance
payments, then to any other fees or other amounts payable hereunder other that
the indebtedness secured by a purchase money security interest in the
Collateral, until all of such indebtedness is paid in full and then to the
indebtedness secured by a purchase money security interest in the Collateral in
the order in which that indebtedness was incurred. This provision controls over
any conflicting provision or in a subsequent agreement to override this
provision.

13.  LOCATION OF DEBTOR. (i) If Debtor is a corporation, limited liability
company, limited partnership or other registered organization, its state of
organization is in the state set forth immediately below its signature on the
last page of this Agreement; (ii) if Debtor is an individual, his/her principal
place of residence is at the address set forth immediately below his/her
signature on the last page of this Agreement, (iii) if Debtor is an
organization, its place of business or if it has more than one place of business
its chief executive office, is located at the address set forth immediately
below its signature on the last page of this Agreement. Debtor agrees that it
will not without prior written consent of Secured Party change its state of
organization if it is a corporation, limited liability company, limited
partnership or other registered organization or the location of its chief
executive office or its place of business, if it is an organization. If Debtor
is an individual Debtor must notify Secured Party in writing of a change in
his/her principal place of residence 30 days prior to such change.

14.  PAYMENT PROCESSING. Debtor hereby agrees that any payments made by Debtor
hereunder by check and received by Secured Party at an address other than the
address specified on the related invoice may be replaced by Secured Party with a
substitute instrument of equal amount and presented to Debtor's financial
institution for payment from the account referenced on the check from Debtor. If
Debtor sends any payment hereunder by check to Secured Party at any address
other than the one specified on the related invoice, then Debtor shall be deemed
to have authorized Secured Party to substitute such check with an instrument of
equal amount and present the substitute instrument to Debtor's financial
institution for payment from the account referenced on Debtor's check.

--------------------------------------------------------------------------------

                      DELIVERY AND ACCEPTANCE OF EQUIPMENT
                            (Check Appropriate Box)

Debtor's obligations and liabilities to Secured Party are absolute and
unconditional under all circumstances and regardless of any failure of
operation or Debtor's loss of possession of any item of Equipment or the
cessation or interruption of Debtor's business for any reason whatsoever.

[ ]  On _______________________ the Equipment being purchased with the proceeds
     of this Agreement was delivered to Debtor with all installation and other
     work necessary for the proper use of the Equipment completed at a location
     agreed upon by Debtor: the Equipment was inspected by Debtor and found to
     be in satisfactory condition in all respects and delivery was
     unconditionally accepted by Debtor.

[ ]  The Equipment being purchased with the proceeds of this Agreement has not
     yet been delivered to or accepted by Debtor and, upon delivery, Debtor
     agrees to execute such delivery and acceptance certificate as Secured Party
     requires.

[X]  All of the Equipment was acquired by Debtor prior to the date hereof and
     was previously delivered to and unconditionally accepted by Debtor.

--------------------------------------------------------------------------------

ADDITIONAL TERMS AND ORAL AGREEMENTS: Debtor and Secured Party agree that this
is a four page agreement and each page hereof constitutes a part of this
agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

Debtor's Social Security or Federal Taxpayer Identification Number is
88-017-1959 and Co-Debtor's is _____________________

<Table>
<S>                                                    <C>
Dated 03/29/2004                                       Debtor hereby acknowledges receipt of an exact copy of this contract.
     _____________________________________________
Secured Party   CitiCapital Commercial Corporation     Debtor(s)   Meadow Valley Contractors Inc.
                __________________________________               ____________________________________________________________
                SARA L. HEADLEY
                __________________________________               ____________________________________________________________
                Credit Analyst
                __________________________________               ____________________________________________________________
                GEID 0005050909
                __________________________________               ____________________________________________________________
                CAL 48
                __________________________________               ____________________________________________________________
                CitiCapital                            By          Bradley E Larson              Title     President
                __________________________________               _______________________________       ______________________
                949-225-4702                                      [If corporation or insured liability company, an authorized
                __________________________________                   party must sign and show her or his title. If limited
By              /s/ Sara L. Headley                              partnership, a general partner must sign and show that title.
                __________________________________                If sole proprietorship, then sole proprietor must sign and
Title                                                               show that title.  If individual, then individual should
                __________________________________                          sign and show title as  "Individually"]
                (If corporation authorized party
                must sign and show corporate title.
                If partnership, a general partner
                must sign. If owner or partner
                show which)
                                                       By        _______________________________ Title ______________________
                                                                 (If co-buyer, co-partner or co-officer, sign here and show
                                                                 which)
          17310 Redhill Ave Ste. 360
__________________________________________________
               (Street Address)                        State Organization:  AZ
                                                                           __________________________________________________
               Irvine CA 92614                         Principal Residence/Chief Executive Office/Place of Business:
__________________________________________________        4411 S. 40th Street
          (City, State and Zip Code)                   ______________________________________________________________________
                                                                                     (Street Address)
                                                          Phoenix                                             AZ  85040
                                                       ______________________________________________________________________
                                                                         (City, COUNTY, State and Zip Code)
</Table>

Page 4 of 4 of Security Agreement dated 03/29/2004 between Meadow Valley
Contractors Inc. (Debtor) and CitiCapital Commercial Corporation (Secured Party)
which includes, without limitation, an item of Collateral with the following
serial number: 1FVABTBVSTHJ17394.

                                                               Debtor's Initials
                                                                    /s/ BEL
                            ORIGINAL FOR CITICAPITAL

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