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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission File number 000-24721
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LEXON Technologies, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 870502701
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1401 Brook Drive, Downers Grove, Illinois 60515
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(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (630) 916-6196
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of April 5, 2000, the aggregate market value of LEXON's Common Stock
held by non-affiliates, based upon the average bid and asked price for such
common stock, was approximately $7,086,025.50.
As of April 5, 2000, there were 13,542,561 shares of Common Stock, par
value $.001 per share, outstanding.
The Index to Exhibits appears on page 49.
Documents Incorporated by Reference
The registrant's definitive 2000 Proxy Statement which will be filed
pursuant to Regulation 14A is incorporated by reference into Part III of this
Annual Report on Form 10-K.
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LEXON Technologies, Inc.
1999 Form 10-K Annual Report
TABLE OF CONTENTS
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Page
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PART I
Item 1. Business......................................................................................1
Item 2. Properties....................................................................................9
Item 3. Legal Proceedings.............................................................................9
Item 4. Submissions of Matters to a Vote of Security Holders..........................................9
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters....................10
Item 6. Selected Financial Data......................................................................19
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...................................27
Item 8. Financial Statements and Supplementary Data..................................................28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........43
PART III
Item 10. Directors and Executive Officers of the Registrant...........................................43
Item 11. Executive Compensation.......................................................................43
Item 12. Security Ownership of Certain Beneficial Owners and Management..............................43
Item 13. Certain Relationships and Related Transactions...............................................43
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports .........................................44
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The following trademarks and service marks appear in this Annual
Report: The National Atlas of the United States of America(TM); The National
Atlas of the United States(TM); Precision Mapping(TM) Streets; Precision
Mapping(TM) Traveler; Precision Mapping(TM) Quick-Finder; MapOCX(TM) (USA);
MapOCX(TM) (Canada); MapOCX(TM) (USA); MapOCX(TM) Pro (USA); MapOCX(TM) (South
Africa); Precision Mapping(TM) Quick-Finder; Trailer Life RV Campground
Finder(TM).
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PART I
ITEM 1. BUSINESS
GENERAL
LEXON Technologies, Inc., a Delaware corporation ("LEXON" or the
"Company" ), together with its wholly- owned subsidiary, Chicago Map Corporation
("Chicago Map"), is a developer and distributor of mapping and geographic data
technologies. LEXON develops mapping software, including high-quality vector map
displays, geocoding, data compression, and other related software programs and
components. LEXON's mission is to develop advanced, state-of-the-art solutions
that aid in the rapid and cost-efficient deployment of Geographic Information
System ("GIS") products for businesses and consumers.
On July 21, 1999, LEXON, formerly known as Rexford, Inc. ("Rexford"),
acquired Chicago Map under the terms of an Agreement and Plan of Merger. In this
transaction, Rexford issued a sufficient number of its common stock so that the
former shareholders of Chicago Map gained control of Rexford. Immediately
following its acquisition of Chicago Map, Rexford amended its Articles of
Incorporation to change its name to LEXON Technologies, Inc. From 1992 through
the date of the Company's acquisition of Chicago Map, the Company had no
operations and was principally focused on identifying potential business
acquisitions or opportunities in an effort to commence business operations.
Chicago Map was incorporated in 1990 to focus principally on emerging
opportunities in the business of designing, developing, producing, licensing and
marketing geographical digital map and related technologies, including Global
Positioning System ("GPS") products and navigation systems,
Web/Intranet/Internet map displays, digital data integration and referencing,
country-wide digital map sets, professional software and mobile asset
monitoring/tracking systems.
On March 12, 1999, Chicago Map, which had previously served as the
exclusive developer and licensee of mapping software invented and owned by
Trius, Inc., a Massachusetts corporation ("Trius"), acquired Trius's mapping
application technologies in an asset purchase transaction. Trius's key assets
have been effectively integrated into the operations of LEXON and form a crucial
element of LEXON's product offerings.
BUSINESS
LEXON creates technologies and software tools which provide development
capabilities that support a myriad of customized applications. LEXON's business
model and operations have been designed to effectively integrate navigation,
mobile-asset tracking/monitoring, mass-market retail and other specialized
markets into the GPS. LEXON's operations are also designed to aid in expediting
Internet applications using its map generating engines and client-server
solutions. These online interactive maps and development tools are designed to
help businesses and consumers properly reference geographic data and navigate a
course to a specific destination.
LEXON provides four types of services and products tailored towards
each of its fundamental customer bases: (a) programs for management and
distribution of data generated by government agencies, (b) professional
development tools, (c) consumer products, and (d) products developed solely for
use on the Internet. (See "Products and Services.")
(a) PROGRAMS FOR MANAGEMENT AND DISTRIBUTION OF DATA GENERATED BY
GOVERNMENT AGENCIES.
In April, 1999, LEXON's wholly-owned subsidiary, Chicago Map, entered
into a Cooperative Research and Development Agreement, dated as of April 1, 1999
(the "Development Agreement"), with the United States Geological Survey
("USGS'), an agency of the United States Department of Interior, to manage and
develop the National Atlas of
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the United States of America project (the "National Atlas Project"). The
National Atlas Project is a collaboration between the USGS and over twenty
departments and agencies of the United States federal government to assemble,
integrate and manage a vast array of geographic, topological, environmental,
social, historic and economic data about the United States of America in an
electronic format.
Under the Development Agreement, LEXON, as the parent of Chicago Map,
will serve as the primary developer of the software used to assemble, integrate,
and manage such data. In addition, under the Development Agreement, LEXON will
work with the USGS in overseeing the following: market research, design,
development, production, marketing, support, and maintenance of various projects
for the National Atlas Project. Moreover, the Company will work with the USGS in
planning, conducting, evaluating and refining customer research, in order to
ascertain both the current and future markets of products relating to the
National Atlas. LEXON will be the owner of the software and compiled data which
LEXON believes it can license to businesses, institutions and individuals.
In order to execute its duties under the Development Agreement, LEXON
has developed and created Project JUPITER, LEXON's research and information
portal, to manage and package the data collected by USGS and its
government-agency partners in the National Atlas Project. LEXON believes that
Project JUPITER will enable businesses and entities uncomplicated access to
invaluable information.
Project JUPITER's success depends upon LEXON's continued execution of
its duties under the Development Agreement. In the event that the USGS
terminates the Development Agreement, LEXON will not be able to execute a
crucial component of its strategy and this will have a materially adverse effect
on its financial condition and results of operations.
(b) PROFESSIONAL DEVELOPMENT TOOLS.
LEXON offers products and services to businesses that use or require a
broad spectrum of mapping images or technology. LEXON develops and distributes
software and technology products which enable businesses to create detailed
street-level map displays, map rotation, point-to-point routing and mapping, and
reverse geocoding. In addition, LEXON offers software products that focus on the
geography of particular geographical territories, such as the United States,
Canada and South Africa.
(c) CONSUMER PRODUCTS.
LEXON's products and services for consumers provide easy-to-use route
planning tools which include a comprehensive database of maps for specific
geographic locations such as cities, counties and even street segments located
in the United States, as well as maps which locate specific types of
attractions, such as campgrounds and sports and recreation facilities.
(d) INTERNET PRODUCTS.
LEXON also provides tools and systems which enable web designers to
immediately integrate detailed mapping images and location applications into
their web sites as well as the ability to generate geographic maps in an
electronic format.
COMPANY STRATEGY
LEXON believes that the Development Agreement with USGS provides LEXON
with the opportunity to become the primary repository and manager of credible,
public information about the geography, topography, environment, climates,
population, and socioeconomics of the United States. Because no one has
previously collected this information in a single database or library or
compiled it in a manner which allows it to be interpreted in a meaningful,
constructive way, such information has previously been underutilized by American
businesses and citizens.
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LEXON believes that its role as the repository and data manager under the
Development Agreement will enable it to become a leader in providing and
packaging information to businesses and individuals world-wide.
The cornerstone of LEXON's business strategy is Project JUPITER,
LEXON's information portal created to manage and package the information
collected in connection with the Development Agreement. Project JUPITER is being
designed to be a robust research and information portal which will deliver and
combine the geo-referable, statistical, map, and information databases of the
more than twenty government agencies contributing data to the National Atlas
Project. LEXON believes that Project JUPITER will be the first Internet portal
which will provide access to such a vast array of information in a concise, easy
to use, centralized location, and will enable the user/subscriber to generate
numerous benefits such as enriching their learning experience and making better
informed business decisions.
It is anticipated that Project JUPITER will possess the technical
ability to combine data in pre-packaged themes, previously unavailable in any
other product or service, creating intelligent pictures. These intelligent
pictures will be generated by a proprietary expert system "on the fly,"
representing the information the user has selected and delivered in an
easy-to-understand picture rendered in real-time. Through Project JUPITER, LEXON
intends to repackage the digital information obtained from its participation
under the Development Agreement with statistical and mapping information from
outside suppliers.
A crucial component in LEXON's business strategy is to become a primary
provider of Internet based education and reference tool to schools, libraries,
and businesses. The original National Atlas of the United States was successful
as a resource for schools and libraries. LEXON believes that the millennial
National Atlas Project, given the advent of electronic and computer learning
systems, will have a vital impact on the information available to public
learning institutions and also provide students and library patrons with a fun,
easy-to-use method for learning and data gathering. LEXON, therefore, intends to
focus its marketing and distribution efforts on library and education markets
(comprising public libraries, K-12 schools, colleges and universities) as the
target for the first phase of the Project JUPITER product launch.
LEXON believes that the penetration of these library and school markets
depends on LEXON's ability to create a solid brand identity for Project JUPITER.
To build that brand identity, LEXON must bring Project JUPITER into the
classroom as well as the school library which will require LEXON to develop
Project JUPITER in conjunction with school curriculums. An important goal of
LEXON will be to promote this curriculum directly to educators and take
advantage of the potential for web-based educational curriculum, a market that
remains significantly untapped at present.
MARKETS AND COMPETITION FOR LEXON'S PRODUCTS AND SERVICES
(a) MARKETS AND COMPETITION FOR PROJECT JUPITER
LEXON believes that the most appropriate market for LEXON's Project
JUPITER will be educational and learning facilities, such as schools and
libraries. Due to LEXON's relatively short operating history and limitations on
its cash resources, LEXON has not emerged as a leader in the online information
database industry. The current leaders in the provision of electronic resources
to schools and libraries, include, but may not be limited to, the Gale Group,
Bell & Howell Information & Learning Systems, and Follett Software. Gale and
Bell & Howell Information & Learning, for example, have a combined share of the
education/library market of approximately fifty percent.
As part of its efforts to achieve penetration in the appropriate
learning facilities markets for Project JUPITER, LEXON intends to implement a
four-pronged marketing approach as part of the launch and marketing of Project
JUPITER.
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(1) A nation-wide high-speed public and government relations
campaign will be established to promote Project JUPITER. The
U.S. Congress and state government bodies (public libraries,
state boards of education, state offices and state reps., etc.)
will also be targeted for support of the product.
(2) LEXON will conduct a campaign to establish a solid brand
identity associated with Project JUPITER. Creating a brand (and
brand extensions) that can expand from the education market
into consumer and business-to-business markets is a crucial
element of this process. LEXON is in the process of identifying
a full-service advertising agency to conduct this prong of its
marketing campaign.
(3) A direct mail/direct marketing campaign aimed at the
educational market will commence in the Summer of 2000, and
will include print media advertising in library trade
publications. Initial mailings will b image-oriented and will
be followed by call-to-action pieces, with direct-response
mechanism built-in.
(4) LEXON will continue to conduct ongoing comprehensive market
research in support of its strategies. Information from certain
data gathering organizations, such as Market Data Retrieval
Services, JUPITER Communications, Forrester Research, Media
Metrix, Strategy Research & Action, and Waugh & Rich is being
continually evaluated.
(b) MARKETS AND COMPETITION FOR OTHER PRODUCTS AND SERVICES
In addition to the launch and marketing of Project JUPITER, LEXON
intends to continue to develop, market and distribute its smaller-scale
products and services to businesses, consumers Internet web designers and other
professionals. LEXON's retail products offer, among other things, geographical
digital maps and related technologies, GSP products, navigation systems,
Web/Intranet/Internet map displays, digital data integration and referencing
country- wide digital map sets, as well as professional software and mobile
asset monitoring/tracking systems. LEXON believes that by maintaining the high
quality associated with its products and services and by delivering such
products and services at a competitive price point, LEXON may become a leader in
its industry.
Currently, the Company's technologies are distributed to a wide variety
of markets and industries including the following:
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Aerial/Satellite Imagery Motivational Marketing
Consumer Retail OEM GPS Manufacturers
Consumer Vehicle Tracking and Recovery Oil and Gas Research
Delivery Systems In-Vehicle Navigation
Demographic Analysis Pipeline Management
Direct Mail Portable Navigation Devices
Emergency Response Public Safety
Entertainment Presentation Maps
Fleet Vehicle Tracking Real Estate Property Analysis
Flood Water Analysis Surveying
Geo-Science Research Telecommunications
Hazardous Waste Management Thematic Mapping
Insurance Planning & Adjustments Topographic Determination
Integrated Phone Information Marine (Inland and Transportation
Coastal Waterways) Utility Management
Marketing Analysis and Research Weather Maps
Mobile Asset Management Web/Internet/Intranet Applications
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The Company offers a variety of geographic electronic software
products, which are used in a variety of markets and industries. These products
compete with other existing products and software companies. For instance, with
respect to LEXON's software mapping program products, there is a wide range of
mapping software products similar in features to those of the Company's product
line. Major competitors within the retail consumer market include Rand McNally,
DeLorme, and Microsoft. In addition, with respect to LEXON's professional tools
products, there are a variety of GIS companies which offer comparable services
and capabilities. The Company has sought to distinguish itself from competitors
by offering easy-to-use tools, extensive customer support, flexible licensing
and competitive pricing and by bundling a complete national map data set within
its professional products. Competitors within this product line include MapInfo,
ESRI and other smaller companies. (See "KNOWN TRENDS AND UNCERTAINTIES - New
Products and Technological Change and Competition" in "MANAGEMENT'S DISCUSSION
AND ANALYSIS").
PRODUCTS & SERVICES
(a) PROJECT JUPITER
LEXON is currently developing its premier product, Project JUPITER,
which will be a robust research and information portal delivering and combining
the geo-referable, statistical, map, and information databases of the more than
20 government agencies participating in the National Atlas Project. Project
JUPITER is being designed to contain the data gathered from the National Atlas
Project into a concise, easy to use, centralized location enabling the
user/subscriber to enrich their learning experience and make better informed
business decisions. Project JUPITER will rely on the technical ability to
combine data from these government agencies in pre-packaged themes, allowing the
user to see data in combinations unavailable in any other product or service,
creating intelligent pictures. These intelligent pictures will be generated by a
proprietary expert system "on the fly," representing the information the user
has selected to see in an easy-to-understand picture rendered in real-time. For
instance, Project JUPITER will enable users to obtain information in data sets,
which data sets will include, among other things, general reference information,
hydrological information, environmental information, information obtained by
means of the United States Census, information related to health and disease,
biological and ecological information, and other categories of information.
Currently, LEXON, with a combination of manufacturer representative
organizations and a direct sales effort, is developing Project JUPITER and plans
the Project JUPITER launch to follow the schedule set forth below.
Summer, 2000 The first phase of Project JUPITER will
be released on the Internet.
Fall, 2000 The second phase of Project JUPITER will
be available for delivery in a subscription
model for the education market.
Winter, 2001 The third phase of Project JUPITER will be
available for delivery into the education
and business markets by means of
subscriptions and licensing transactions.
Under the terms of the Development Agreement, USGS retains the rights
to terminate such agreement with thirty days prior written notice. In the event
that the USGS terminates the Development Agreement, LEXON may be foreclosed from
executing a crucial component of its operating strategy, Project JUPITER, and
this would have a materially adverse affect on LEXON's financial position and
results of operations.
(b) OTHER PRODUCTS AND SERVICES
In addition to Project JUPITER, LEXON offers additional mapping
technology products and services for professional development, consumer use and
Internet-based applications.
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PROFESSIONAL DEVELOPMENT TOOLS
LEXON's line of professional development products are designed to allow
software programmers to integrate quality map displays into third-party
applications. LEXON offers the following professional development products:
MAPOCX PRO (USA): A development toolkit for adding map displays within
any Window's visual development environment, MapOCX Pro's enhanced
features such as map rotation, Point-to-Point routing and reverse
geocoding are designed to provide tools for advanced programming needs.
In addition, this product is designed to enable developers to access
the Company's map engine to quickly generate detailed images of the
entire United States.
MAPOCX (CANADA): A software development toolkit for adding map displays
to applications, this product is designed to enable developers to
easily and quickly integrate high-quality map displays of Canadian
provinces, cities and communities within their applications.
MAPOCX (SOUTH AFRICA): A software development toolkit for adding map
displays to applications, this product is designed to enable developers
to easily and quickly integrate high-quality map displays of South
African cities and communities within their applications.
INTERNET MAPMANIA SDK (USA): A Web development tool specifically
designed to meet the requirements of programmers needing map images on
their Web sites. This product, which includes a complete street-level
database of the US, is designed to facilitate the addition of the
Company's comprehensive map data onto any commercial website.
CONSUMER RETAIL PRODUCTS
LEXON's line of consumer retail products provide consumers with tools
for travel, mapping and navigation. This line of products include the following:
PRECISION MAPPING STREETS V. 4.0A: A street-level mapping program of
the United States which is designed to provide an easy-to-use
environment for finding any location in the U.S. and creating
customized maps that are appropriate for a variety of applications.
PRECISION MAPPING STREETS/TRAVELER 4.0 COMBO: A mapping program which
is designed to enable consumers to create customized, detailed routing
instructions with its Point-to-Point route-planning feature using the
GPS technology.
PRECISION MAPPING QUICK-FINDER 3.0: A mapping application which is
designed to provide at the command of the user, virtually every street
segment, county and city in the United States and to allows users to
quickly locate specific destinations for ease of reference and adjust
the map image with the various zoom levels.
TRAILER LIFE RV CAMPGROUND FINDER V. 1.0A: An application which is
designed to provide a detailed directory of over 15,500 campgrounds, RV
parks and RV services across the United States of America. The database
is based on the Sam Good Club campground listing.
DRIVE!: A program designed to meet the sporting needs of the common
golfer, this software delivers a detailed directory listing of more
than 15,000 golf courses in the United States. Golf courses can be
searched by name, location, green fees, yardage, amenities, and number
of holes.
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INTERNET MAPPING PRODUCTS
LEXON offers a line of products distributed exclusively on the
Internet. LEXON's Internet product line includes the following:
MAPMANIA: A mapping application which is designed to enable businesses
to guide their customers to key locations or to search specific
addresses or cities in the United States via the Internet.
INTERNET MAPOCX: An internet mapping application which is designed to
enable web site programmer to design and integrate map images of the
United States, Canada, and other international geographic regions on
their own web sites.
LEXON'S SERVICES
LEXON also offers services to government agencies, businesses and
consumers which provide expertise in mapping data collection and assembly as
well as software programming and design to facilitate the creation of unique
mapping programs and displays. LEXON's service offerings include the following:
- customer programming to create, customize, and alter software
applications;
- technical consulting to assist companies in the design and
development phase of third-party applications;
- technical writing to create Help files and drafts of programming
specifications; and
- active participation in the National Atlas Project.
RESEARCH AND DEVELOPMENT
The software industry is characterized by extremely rapid changes in
technology, which require continuous expenditure on product research and
development to enhance existing products and create new products. LEXON believes
that the timely development of new products and ongoing enhancements to existing
products is essential to maintain its competitive position in the marketplace.
LEXON is committed to an open systems, standards-based product architecture to
provide software products that can be integrated into existing mainstream
business environments and be adaptable as environments change.
Most of LEXON's software products are developed internally. Internal
development allows LEXON to maintain close technical control over products in
terms of enhancements and modifications based on customer needs, and allows
LEXON to create a family of products that provides natural migration paths for
customers as their business information needs change.
INTELLECTUAL PROPERTY
LEXON regards its software and data products as proprietary and
attempts to protect them with a combination of copyright, trademark and trade
secret laws, employee and third-party non-disclosure agreements, and other
methods of protection. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of LEXON's products or
reverse engineer or obtain and use information LEXON regards as proprietary.
While LEXON's competitive position may be affected by its ability to protect its
proprietary information, LEXON believes that the trademark and copyright
protections are less significant to LEXON's success than other factors, such as
the knowledge, ability and experience of LEXON's personnel and ongoing product
development and support.
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EMPLOYEES
As of December 31, 1999, LEXON had 26 full-time employees. LEXON's
employees are not represented by any collective bargaining organization and
LEXON has never experienced a work stoppage. LEXON believes that its relations
with its employees are good.
RECENT DEVELOPMENTS
On February 9, 2000, LEXON and Steven J. Peskaitis, LEXON's then
Chairman and Chief Executive Officer, consummated a transaction with Anthony
Perino whereby Mr. Perino acquired voting control over the majority of LEXON's
issued and outstanding common stock. See "Management's Discussion and Analysis."
Under the terms of a Stock Purchase Agreement, dated February 9, 2000,
by and among LEXON, Mr. Peskaitis and Mr. Perino, Mr. Perino acquired (i)
1,000,000 shares of LEXON common stock from LEXON in exchange for $250,000 and
(ii) 2,000,000 shares of LEXON common stock from Mr. Peskaitis in exchange for
$500. Mr. Perino used cash from personal reserves to fund his investment in
LEXON. In addition, under a Voting Trust Agreement, Mr. Peskaitis and Stanley
Peskaitis appointed Mr. Perino Voting Trustee of 2,774,600 and 1,227,100 shares,
respectively, of LEXON common stock. The Voting Trust will terminate no later
than August 9, 2001.
In addition, under the terms of the Stock Purchase Agreement, Mr.
Perino will, subject to certain conditions, purchase an additional 2,400,000
shares of LEXON common stock from LEXON and Mr. Peskaitis in exchange for a cash
payment of $100,500 on or around March 7, 2000.
Moreover, Mr. Perino received Warrants to purchase up to an additional
4,100,000 shares of LEXON common stock. The Warrants are exercisable at prices
from $0.25 per share to $0.50 per share and expire at certain times between
September 1, 2000 and August 9, 2001. If Mr. Perino exercises all of the
Warrants, LEXON will receive an additional $1,150,000 in equity capital.
Moreover, in connection with the Warrants, LEXON and Mr. Perino entered into a
Registration Rights Agreement which provides Mr. Perino with demand and
piggy-back registration rights with respect to the shares of LEXON common stock
subject to the Warrants.
In connection with these transactions, under the terms of the Stock
Purchase Agreement, Mr. Peskaitis resigned as LEXON's Chief Executive Officer
and President, and Mr. Thomas Rieck resigned as a director of the Company. Mr.
Perino, Peter Haleas and Jerome Wolowicki were appointed to the Company's Board
of Directors and Mr. Perino was elected Chairman and Chief Executive Officer.
In addition, Under a Post-Closing Agreement, dated February 9, 2000, by
and among Mr. Perino, Mr. Peskaitis and Stanley Peskaitis, the Voting Trust
Agreement described above will be amended to provide for (i) the deposit of an
additional 1,500,000 shares of the LEXON's common stock into the Voting Trust,
subject to the prior rights of the holders of certain liens with respect to such
shares and (ii) the release of shares from the Voting Trust to the extent such
released shares are not necessary for Mr. Perino to maintain voting control over
fifty-one percent (51%) of LEXON'S issued and outstanding common stock.
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ITEM 2. PROPERTIES
LEXON occupies approximately 10,000 square feet of development,
production and administrative space in Downers Grove, Illinois. The facility
lease runs from May 7, 1999 through May 31, 2004. The current annual lease rate
for the first year of this lease is approximately $95,000, which annual rate
will increase by approximately $3,000 each year of the lease term. In addition,
the lease enables LEXON to use an additional 600 square feet of warehouse space
for an additional $250.00 per month.
In addition, LEXON occupies 2,000 square feet of space in Andover,
Massachusetts under an oral sublease with Trius, Inc., pursuant to which LEXON
pays $22,459.08 in annual rental payments.
ITEM 3. LEGAL PROCEEDINGS
On December 15, 1997, Chicago Map was served with a complaint in case
captioned Integrated GPS Technologies, Inc. v. Chicago Map Corporation,
Defendant Civil Action No. H-97-4063 in the United States District Court for the
Southern District of Texas. The complaint alleged that Chicago Map committed
trademark infringement and engaged in false advertising and unfair competition,
under both federal and Texas state law related to Chicago Map's Precision
Mapping (TM) software and demanded declaratory and injunctive relief as well as
unspecified monetary damages.
At the close of the plaintiff's case, the trial judge granted Chicago
Map's motion for a directed verdict and the plaintiff appealed to the Fifth
Court of Appeals, which appeal is pending. Chicago Map maintains insurance
policies which cover intellectual property infringement actions and Chicago Map
believes that any damage awards granted to the plaintiff in Integrated GPS v.
Chicago Map should be subject to payment or reimbursement by Chicago Map's
insurance policies. If, as a result of determinations adverse to Chicago Map,
Chicago Map is ordered to pay Integrated GPS damages from its cash reserves or
assets without payment or reimbursement from Chicago Map's insurer or if Chicago
Map is ordered to cease distribution of its Precision Mapping software, such
determinations could have a materially adverse effect on Chicago Map's financial
condition and results of operations.
On July 24, 1998, Chicago Map filed a complaint against Potthast & Ring
in case captioned Chicago Map Corp. v. Potthast & Ring, No. 97 L 12157, alleging
certain malpractice claims related to legal services provided to Chicago Map by
the defendant. On March 2, 2000, the parties agreed to a settlement, release and
dismissal of all claims contained in the original complaint.
The Company is not a party to any other material litigation.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET PRICE AND DIVIDENDS OF THE COMPANY'S COMMON STOCK.
(a) MARKET INFORMATION
The Company's shares have been registered under Section 12(g) of the
Securities and Exchange Act of 1934, however, the Company has not registered the
sale of any of its shares under the 1933 Act. All sales and other issuances of
the Company's common stock have been made in transactions exempt from the
registration requirements, but no sales of shares of the Company's common stock
have previously been registered with the Securities and Exchange Commission (the
"Commission") or any state securities agency or authority. As of April 5, 2000
there were 115 holders of record of the Company's common stock. The Company's
shares are currently quoted on the OTC Bulletin Board.
The following table sets forth, for the periods indicated, the high and
low reported bid and asked quotations for shares of common stock as reported on
the OTC Bulletin Board. The high and low bid and asked quotations set forth
below reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
High Low
---- ---
Fiscal 1998
First Quarter...................... N/A N/A
Second Quarter .................... N/A N/A
Third Quarter...................... N/A N/A
Fourth Quarter..................... $0.10 $0.02
Fiscal 1999
First Quarter...................... $0.10 $0.02
Second Quarter..................... $0.09 $0.02
Third Quarter...................... $7.00 $0.02
Fourth Quarter..................... $5.25 $2.00
The Company's shares were approved for quotation on the OTC Bulletin
Board in the fourth quarter of 1998. To the best knowledge of management of the
Company, prior to September 30, 1998, there was no established public trading
market for the Company's common stock and any trading of the Company's common
stock was limited or sporadic.
Due to the current bid and ask prices of the Company's shares, the
shares are likely subject to the provisions of Section 15(g) and Rule 15g-9 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(l) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
If the Company's shares are deemed to be a
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penny stock, trading in the shares will be subject to additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors, generally persons with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse. For transactions covered by these rules, broker-dealers must
make a special suitability determination for the purchase of such securities and
must have received the purchaser's written consent to the transaction prior to
the purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker- dealers to
trade and/or maintain a market in the Company's common stock and may affect the
ability of shareholders to sell their shares.
(b) HOLDERS
As of April 5, 2000, the Company had issued and outstanding 13,542,561
shares of common stock held by 115 holders of record
(c) DIVIDENDS
Chicago Map paid dividends in cash each of the fiscal years ended
December 31, 1998 and 1997 of, respectively, $62,420 or $6.24 per share, and
$60,275 or $6.03 per share. In addition, during the fiscal quarter ended March
31, 1999, Chicago Map declared a dividend of $209,774 or approximately $14.00
per share, which dividend remains unpaid.
In addition, the Company does not expect, and has no plans, to declare
or issue a dividend in the immediate future.
RECENT SALES OF UNREGISTERED SECURITIES
On September 30, 1997, the Company issued 23,024,015 shares of its
common stock, valued at approximately $0.002 per share, to Mark A. Scharmann, an
officer and director of the Company, in exchange for the conversion of $46,048
of notes and accrued interest payable by the Company.
On June 29, 1998, the Company issued an additional 17,785,406 shares of
the Company's common stock, valued at approximately $0.002 per share, to Mr.
Scharmann, in exchange for the conversion of approximately $35,571 of notes and
accrued interest payable by the Company. The securities issued in the foregoing
transactions were issued in reliance on the exemption from registration and the
prospectus delivery requirements of the Securities Act of 1933, as amended (the
'Securities Act"), set forth in section 3(b) and/or section 4(2) of the
Securities Act and the regulations promulgated thereunder.
On March 26, 1999, the Company issued warrants to purchase 100,000
shares of common stock at $2.50 per share to Mark Scharmann in connection with
an Interim Loan Agreement dated as of March 26, 1999, by and between the Company
and Mr. Scharmann. Under the March 26, 1999 Interim Loan Agreement, the Company
borrowed $100,000 at an annual interest rate of 12% with a term of three months.
In connection with the Interim Loan Agreement, Mr. Scharmann took a security
interest in the Company's accounts receivable and 250,000 shares, held in escrow
of LEXON common stock owned by an officer of LEXON. The warrant vested
immediately and is exercisable for a period of 18 months and includes piggyback
registration rights. This issuance was exempt from registration in reliance on
Section 4(2) of the Act.
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On April 29, 1999, the Company issued a warrant to purchase 100,000
shares of common stock at $2.50 per share to Steven J. Peskaitis in connection
with an Interim Loan Agreement, dated April 29, 1999, by and between the Company
and Mr. Peskaitis. Under the Interim Loan Agreement, the Company borrowed
$100,000 at an annual interest rate of 12% with a term of four months. In
connection with this Interim Loan Agreement, Mr. Peskaitis took a security
interest in assets of the Company. The warrant vested immediately and is
exercisable for a period of 18 months and includes piggyback registration
rights. This issuance was exempt from registration in reliance on Section 4(2)
of the Act.
On July 10, 1999, the Company issued a warrant to purchase 23,000
shares of common stock at $2.50 per share to Steven J. Peskaitis. This warrant
was issued in connection with an Interim Loan Agreement, by and between the
Company and the holder of this warrant. Under the Interim Loan Agreement, dated
July 10, 1999, the Company borrowed $23,000 at an annual interest rate of 12%
with a maturity date of November 10,1999. In connection with the Loan Agreement,
Peskaitis took a security interest in assets of the Company. The warrant vested
immediately and is exercisable for a period of 18 months and includes piggyback
registration rights. This sale was exempt from registration in reliance on
Section 4(2) of the Act.
On July 10, 1999, the Company issued a warrant to purchase 100,000
shares of common stock at $2.50 per share to Stanley Peskaitis. Issued in
connection with an Interim Loan Agreement by and between the Company and Mr.
Peskaitis. Under the Interim Loan Agreement, dated July 10, 1999, the Company
borrowed $100,000 at an annual interest rate of 12% with a maturity date of
November 10, 1999. In connection with the Loan Agreement, Peskaitis took a
security interest in the assets of the Company. The warrant vested immediately
and is exercisable for a period of 18 months and includes piggyback registration
rights. This sale was exempt from registration in reliance on Section 4(2) of
the Act.
On July 10, 1999, the Company issued a warrant to purchase 50,000
shares of common stock at $2.50 per share to John McLean in connection with an
Interim Loan Agreement, by and between the Company and Mr. McLean. Under the
Interim Loan Agreement, dated July 10, 1999, the Company borrowed $50,000 at an
annual interest rate of 12% with a maturity date of November 10, 1999. In
connection with the Loan Agreement, McLean took a security interest in the
assets of the Company. The warrant vested immediately and is exercisable for a
period of 18 months and includes piggyback registration rights. This sale was
exempt from registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued 6,774,600 shares of its common
stock to Steven J. Peskaitis in connection with the Company's acquisition of all
of the issued and outstanding common stock of Chicago Map Corporation and in
exchange for his shares of common stock of Chicago Map. This sale was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 1,227,100 shares of its common
stock to Stanley Peskaitis in connection with the Company's acquisition of all
of the issued and outstanding common stock of Chicago Map Corporation and in
exchange for his shares of common stock of Chicago Map. This sale was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 442,400 shares of its common stock
to Mike Barnett in connection with the Company's acquisition of all of the
issued and outstanding common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 730,800 shares of its common stock
to David A. Schulz in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
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On July 21, 1999, the Company issued 77,000 shares of its common stock
to David A. Leonard in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 730,800 shares of its common stock
to Paris Karahalios in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 100,100 shares of its common stock
to Kenneth Eaken in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 149,800 shares of its common stock
to Pamela Peskaitis in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 203,000 shares of its common stock
to Douglas Morris in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 22,400 shares of its common stock
to Rieck & Crotty in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 10,500 shares of its common stock
to John M. Williams in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 10,500 shares of its common stock
to Carol A. Kopta in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 10,500 shares of its common stock
to Robin A. Hawksely-Wahl in connection with the Company's acquisition of all of
the issued and outstanding Common stock of Chicago Map Corporation and in
exchange for his shares of common stock of Chicago Map. This sale was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued 10,500 shares of its common stock
to Robert Spychalski in connection with the Company's acquisition of all of the
issued and outstanding Common stock of Chicago Map Corporation and in exchange
for his shares of common stock of Chicago Map. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 21, 1999, the Company issued an option to purchase 80,500
shares of common stock at $.50 per share to Steven J. Peskaitis in connection
with the Company's acquisition of all of the issued and outstanding
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Common stock of Chicago Map Corporation. In connection with the acquisition, the
Company assumed Chicago Map's obligations under all outstanding warrants and
options. As such, the Company exchanged an option to purchase one share of
Chicago Map common stock for an option to purchase 700 shares of LEXON common
stock. The warrant vested immediately and is exercisable for a period of 10
years and includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 52,500
shares of common stock at $1.25 per share to Stanley Peskaitis in connection
with the Company's acquisition of all of the issued and outstanding common stock
of Chicago Map Corporation. In connection with the acquisition, the Company
assumed Chicago Map's obligations under all outstanding warrants and options. As
such, the Company exchanged an option to purchase one share of Chicago Map
common stock for an option to purchase 700 shares of LEXON common stock. The
warrant vested immediately and is exercisable for a period of 10 years and
includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 115,500
shares of common stock at $.50 per share to Kenneth Eaken in connection with the
Company's acquisition of all of the issued and outstanding Common stock of
Chicago Map Corporation. In connection with the acquisition, the Company assumed
Chicago Map's obligations under all outstanding warrants and options. As such,
the Company exchanged an option to purchase one share of Chicago Map common
stock for an option to purchase 700 shares of LEXON common stock. The option
vested immediately and is exercisable for a period of 10 years and includes
piggyback registration rights. This issuance was exempt from registration in
reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 115,500
shares of common stock at $.50 per share to Paris Karahalios in connection with
the Company's acquisition of all of the issued and outstanding Common stock of
Chicago Map Corporation. In connection with the acquisition, the Company assumed
Chicago Map's obligations under all outstanding warrants and options. As such,
the Company exchanged an option to purchase one share of Chicago Map common
stock for an option to purchase 700 shares of LEXON common stock. The option
vested immediately and is exercisable for a period of 10 years and includes
piggyback registration rights. This issuance was exempt from registration in
reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 115,500
shares of common stock at $.50 per share to John McLean in connection with the
Company's acquisition of all of the issued and outstanding Common stock of
Chicago Map Corporation. In connection with the acquisition, the Company assumed
Chicago Map's obligations under all outstanding warrants and options. As such,
the Company exchanged an option to purchase one share of Chicago Map common
stock for an option to purchase 700 shares of LEXON common stock. The option
vested immediately and is exercisable for a period of 10 years and includes
piggyback registration rights. This issuance was exempt from registration in
reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 115,5000
shares of common stock at $.50 per share to Mike Barnett in connection with the
Company's acquisition of all of the issued and outstanding Common stock of
Chicago Map Corporation. In connection with the acquisition, the Company assumed
Chicago Map's obligations under all outstanding warrants and options. As such,
the Company exchanged an option to purchase one share of Chicago Map common
stock for an option to purchase 700 shares of LEXON common stock. The option
vested immediately and is exercisable for a period of 10 years and includes
piggyback registration rights. This issuance was exempt from registration in
reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 52,500
shares of common stock at $1.25 per share to Dave Schulz in connection with the
Company's acquisition of all of the issued and outstanding Common stock of
Chicago Map Corporation. In connection with the acquisition, the Company assumed
Chicago Map's obligations under all outstanding warrants and options. As such,
the Company exchanged an option to purchase one share of Chicago Map common
stock for an option to purchase 700 shares of LEXON common stock. The option
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vested immediately and is exercisable for a period of 10 years and includes
piggyback registration rights. This issuance was exempt from registration in
reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 376,496
shares of common stock at $2.80 per share to Steven J. Peskaitis in connection
with the optionee's employment with the Company pursuant to the terms of a Stock
Option Agreement, dated as of July 21, 1999. Although the Option is exercisable
for a period of 10 years, under the terms of the Stock Option Agreement, the
Company retains the right to purchase 75,300 shares of common stock subject to
the option until December 31, 1999, 131,773 shares of common stock subject to
the option until December 31, 2000, and 169,423 shares of common stock subject
to the options until December 31, 2001. In addition, under the Stock Option
Agreement, the optionee may not sell or pledge more than 25% of the shares of
common stock subject to the Option in any ninety day period. This issuance was
exempt from registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 627,500
shares of common stock at $2.80 per share to Kenneth Eaken in connection with
the optionee's employment with the Company pursuant to the terms of a Stock
Option Agreement, dated as of July 21, 1999. Although the Option is exercisable
for a period of 10 years, under the terms of the Stock Option Agreement, the
Company retains the right to purchase 125,500 shares of common stock subject to
the option until December 31, 1999, 219,625 shares of common stock subject to
the option until December 31, 2000, and 282,375 shares of common stock subject
to the options until December 31, 2001. In addition, under the Stock Option
Agreement, the optionee may not sell or pledge more than 25% of the shares of
common stock subject to the Option in any ninety day period. This issuance was
exempt from registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 627,500
shares of common stock at $2.80 per share to Paris Karahalios in connection with
the optionee's employment with the Company pursuant to the terms of a Stock
Option Agreement, dated as of July 21, 1999. Although the Option is exercisable
for a period of 10 years, under the terms of the Stock Option Agreement, the
Company retains the right to purchase 125,500 shares of common stock subject to
the option until December 31, 1999, 219,625 shares of common stock subject to
the option until December 31, 2000, and 282,375 shares of common stock subject
to the options until December 31, 2001. In addition, under the Stock Option
Agreement, the optionee may not sell or pledge more than 25% of the shares of
common stock subject to the Option in any ninety day period. This issuance was
exempt from registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 627,500
shares of common stock at $2.80 per share to John McLean in connection with the
optionee's employment with the Company pursuant to the terms of a Stock Option
Agreement, dated as of July 21, 1999. Although the Option is exercisable for a
period of 10 years, under the terms of the Stock Option Agreement, the Company
retains the right to purchase 125,500 shares of common stock subject to the
option until December 31, 1999, 219,625 shares of common stock subject to the
option until December 31, 2000, and 282,375 shares of common stock subject to
the options until December 31, 2001. In addition, under the Stock Option
Agreement, the optionee may not sell or pledge more than 25% of the shares of
common stock subject to the Option in any ninety day period. This issuance was
exempt from registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 275,000
shares of common stock at $2.80 per share to Stanley Peskaitis in connection
with the optionee's employment with the Company pursuant to the terms of a Stock
Option Agreement, dated as of July 21, 1999. Although the Option is exercisable
for a period of 10 years, under the terms of the Stock Option Agreement, the
Company retains the right to purchase 100,000 shares of common stock subject to
the option until December 31, 1999, 100,000 shares of common stock subject to
the option until December 31, 2000, and 75,000 shares of common stock subject to
the options until December 31, 2001. In addition, under the Stock Option
Agreement, the optionee may not sell or pledge more than 25% of the shares of
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common stock subject to the Option in any ninety day period. This issuance was
exempt from registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 285,000
shares of common stock at $2.80 per share to Dave Schulz in connection with the
optionee's employment with the Company pursuant to the terms of a Stock Option
Agreement, dated as of July 21, 1999. Although the Option is exercisable for a
period of 10 years, under the terms of the Stock Option Agreement, the Company
retains the right to purchase 95,000 shares of common stock subject to the
option until December 31, 1999, 95,000 shares of common stock subject to the
option until December 31, 2000, and 95,000 shares of common stock subject to the
options until December 31, 2001. In addition, under the Stock Option Agreement,
the optionee may not sell or pledge more than 25% of the shares of common stock
subject to the Option in any ninety day period. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 12,500
shares of common stock at $2.80 per share to Dave Leonard in connection with the
optionee's employment with the Company pursuant to the terms of a Stock Option
Agreement, dated as of July 21, 1999. Although the Option is exercisable for a
period of 10 years, under the terms of the Stock Option Agreement, the Company
retains the right to purchase 12,500 shares of common stock subject to the
option until December 31, 1999. In addition, under the Stock Option Agreement,
the optionee may not sell or pledge more than 25% of the shares of common stock
subject to the Option in any ninety day period. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 12,550
shares of common stock at $2.80 per share to Jim Rooney in connection with the
optionee's engagement as an advisor to the Company pursuant to the terms of a
Stock Option Agreement, dated as of July 21, 1999. Although the Option is
exercisable for a period of 10 years, under the terms of the Stock Option
Agreement, the Company retains the right to purchase 12,550 shares of common
stock subject to the option until December 31, 1999. In addition, under the
Stock Option Agreement, the optionee may not sell or pledge more than 25% of the
shares of common stock subject to the Option in any ninety day period. This
issuance was exempt from registration in reliance on Section 4(2) of the Act.
On July 21, 1999, the Company issued an option to purchase 12,550
shares of common stock at $2.80 per share to Thomas Rieck in connection with the
optionee's engagement as an advisor to the Company pursuant to the terms of a
Stock Option Agreement, dated as of July 21, 1999. Although the Option is
exercisable for a period of 10 years, under the terms of the Stock Option
Agreement, the Company retains the right to purchase 12,550 shares of common
stock subject to the option until December 31, 1999. In addition, under the
Stock Option Agreement, the optionee may not sell or pledge more than 25% of the
shares of common stock subject to the Option in any ninety day period. This
issuance was exempt from registration in reliance on Section 4(2) of the Act.
On July 26, 1999, the Company issued a warrant to purchase 100,000
shares of common stock at $2.50 per share to Mark Scharmann in connection with
the March 26, 1999 Interim Loan Agreement, between Mr. Scharmann and the
Company. The warrant vested immediately and is exercisable for a period of 18
months and includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On August 10, 1999, the Company issued a warrant to purchase 25,000
shares of common stock at $2.50 per share to Miller Capital Corporation. This
warrant was issued in connection with a Securities Purchase Agreement and a
Promissory Note, each dated as of August 10, 1999, by and among the Company and
Miller Capital Corporation, Stephen A. McConnell, Jock Patton and Dickerson
Wright. Under the Securities Purchase Agreement the Company borrowed $750,000 at
an annual interest rate of 18% with a maturity date of December 10, 1999. In
connection with the Securities Purchase Agreement and Promissory Note, the
lenders took security interests in the Company's assets and shares of stock
owned by an officer of the Company, which shares were held in escrow. The
warrant vested immediately and is exercisable for a period of 5 years and
includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
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On August 10, 1999, the Company issued a warrant to purchase 12,500
shares of common stock at $2.50 per share to Jock Patton. This warrant was
issued in connection with the August 10, 1999 Securities Purchase Agreement and
Promissory Note. The warrant vested immediately and is exercisable for a period
of 5 years and includes piggyback registration rights. This issuance was exempt
from registration in reliance on Section 4(2) of the Act.
On August 10, 1999, the Company issued a warrant to purchase 25,000
shares of Common stock at $2.50 per share to Dickerson Wright. This warrant was
issued in connection with an August 10, 1999 Securities Purchase Agreement and
Promissory Note. The warrant vested immediately and is exercisable for a period
of 5 years and includes piggyback registration rights. This issuance was exempt
from registration in reliance on Section 4(2) of the Act.
On August 10, 1999, the Company issued a warrant to purchase 12,500
shares of Common stock at $2.50 per share to Stephen A. McConnell. This warrant
was issued in connection with an August 10, 1999 Securities Purchase Agreement
and Promissory Note. The warrant vested immediately and is exercisable for a
period of 5 years and includes piggyback registration rights. This sale was
exempt from registration in reliance on Section 4(2) of the Act.
On August 19, 1999, the Company issued 2,500 shares of its common stock
to John C. Thompson in exchange for Mr. Thompson's services contributed to the
Company, which services were valued at $8,125.00 or $3.25 per share. This sale
was exempt from registration pursuant to Section 4(2) of the Securities Act of
1933.
On August 19, 1999, the Company issued 5,500 shares of its common stock
to Elliott N. Taylor in exchange for services contributed to the Company, which
services were valued at $17,875.00 or $3.25 per share. This sale was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On August 29, 1999, the Company issued a warrant to purchase 100,000
shares of common stock at $2.50 per share to Steven J. Peskaitis. This warrant
was issued in connection with the extension by Mr. Peskaitis of the term of a
loan under the Interim Loan Agreement, dated April 29, 1999, by and between the
Company and Mr. Peskaitis. The warrant vested immediately and is exercisable for
a period of 18 months and includes piggyback registration rights. This issuance
was exempt from registration in reliance on Section 4(2) of the Act.
On November 10, 1999, the Company issued a warrant to purchase 23,000
shares of common stock at $0.50 per share to Steven J. Peskaitis. This warrant
was issued in connection with the extension by Mr. Peskaitis of the term of the
July 10, 1999 Interim Loan Agreement between the Company and Mr. Peskaitis. The
warrant vested immediately and is exercisable for a period of 18 months and
includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On November 10, 1999, the Company issued a warrant to purchase 100,000
shares of common stock at $0.50 per share to Stan Peskaitis. This warrant was
issued in connection with the extension by Mr. Peskaitis of the term of the July
10, 1999 Interim Loan Agreement by and between the Company and Mr. Peskaitis.
The warrant vested immediately and is exercisable for a period of 18 months and
includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On November 10, 1999, the Company issued a warrant to purchase 50,000
shares of common stock at $0.50 per share to John Mclean. This warrant was
issued in connection with the extension by Mr. McLean of the term of the July
10, 1999 Interim Loan Agreement by and between the Company and Mr. McLean. The
warrant vested immediately and is exercisable for a period of 18 months and
includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
On November 26, 1999, the Company issued a warrant to purchase 100,000
shares of common stock at $0.50 per share to Mark Scharmann in connection with
Mr. Scharmann's extension of the term of the March 26,
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<PAGE> 20
1999 Interim Loan Agreement between Mr. Scharmann and the Company. The warrant
vested immediately and is exercisable for a period of 18 months and includes
piggyback registration rights. This sale was exempt from registration in
reliance on Section 4(2) of the Act.
On December 23, 1999, the Company issued 250 shares of its common stock
to Vicky R. Morcos in exchange for a cash payment of $750.00 or $3.00 per share.
This sale was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.
On December 23, 1999, the Company issued 7,000 shares of its common
stock to Charles K. West, an employee of the Company, as compensation for past
employment. This sale was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933.
On December 23, 1999, the Company issued 1,900 shares of its common
stock to ACAP Financial in exchange for services contributed to the Company,
which services were valued at $5,000.00 or $2.63 per share. This sale was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
On December 27, 1999, the Company issued 11,000 shares of its common
stock to S&S Public Relations, Inc. in exchange for services contributed to the
Company, which services were valued at $12,286.90 or $1.12 per share. This sale
was exempt from registration pursuant to Section 4(2) of the Securities Act of
1933.
On December 27, 1999, the Company issued 13,300 shares of its common
stock to Rieck & Crotty in exchange for services contributed to the Company,
which services were valued at $14,995.59 or $1.00 per share. This sale was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
On December 27, 1999, the Company issued 10,000 shares of its common
stock to AMC White Graphics, Inc. in exchange for services contributed to the
Company, which services were valued at $9,725.96 or $0.97 per share. This sale
was exempt from registration pursuant to Section 4(2) of the Securities Act of
1933.
On December 29, 1999, the Company issued a warrant to purchase 100,000
shares of common stock at $0.50 per share to Steven J. Peskaitis. This warrant
was issued in connection with the extension by Mr. Peskaitis of the term the
April 29, 1999 Interim Loan Agreement, between the Company and Mr. Peskaitis.
The warrant vested immediately and is exercisable for a period of 18 months and
includes piggyback registration rights. This issuance was exempt from
registration in reliance on Section 4(2) of the Act.
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<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data with respect to the Company's statements of
operations for each of the years is the three year period ended December 31,
1999 and the balance sheet data as of December 31, 1999, and 1998 are derived
from the Company's audited financial statements. The financial data for the
Company should be read in conjunction with the Company's Financial Statements
and Notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere herein.
Year Ended December 31,
-----------------------------------
1999 1998 1997
-------- -------- --------
(In Thousands, Except Per Share Data)
Statement of Operations Data:
Net Sales $ 750 $ 1,175 $ 1,934
Cost of Sales 309 333 891
-------- -------- --------
Gross Margin 441 842 1,043
Selling general and
administrative expenses 1,454 765 1,081
-------- -------- --------
Operating income (loss) (1,013) 77 (38)
Interest expense 82 -- --
Other income (expense)
including interest income 6 (13) --
-------- -------- --------
Net income (loss) $ (1,089) $ 64 $ (38)
======== ======== ========
Basic earnings (loss) per
share $ (0.09) $ .01 $ .00
======== ======== ========
Basic weighted average shares
outstanding 11,641 11,500 11,500
======== ======== ========
Diluted earnings (loss) per
share $ (.09) $ .01 $ .00
======== ======== ========
Diluted weighted average
shares outstanding 11,641 11,500 11,500
======== ======== ========
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<PAGE> 22
Year Ended December 31,
---------------------------
1999 1998 1997
--------- ------- -------
(In Thousands)
Balance Sheet Data:
Working capital $ (1,591) $164
======== ====
Total assets $ 704 $265
======== ====
Short term debt (including
current portion of long term
obligations) $ 1,142 --
======== ====
Long-term obligations
(excluding current portion) $ 82 --
======== ====
Retained Earnings
(Accumulated deficit) $ (1,103) $240
======== ====
Total stockholders' equity
(deficit) $ (1,023) $251
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<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
LEXON is an Internet-based provider of geo-referenceable content and
data and offers specific content solutions to institutional, governmental,
corporate and public consumers through advanced software applications.
RESULTS OF OPERATIONS FOR 1999, 1998 AND 1997
NET REVENUES
(Dollars in thousands)
1999 Change 1998 Change 1997
Net Revenues $750 (36%) $1175 (39%) $1,934
In 1999, revenues decreased $425,000 or (36%) to $750,000. This
decrease can be directly attributed to the lack of demand for LEXON's consumer
and private label based products.
In 1998, revenues decreased $759,000 or (39%) to $1,175,000. This
decrease can be directly attributed to the refocus of LEXON back to a software
business and discontinue the sale of GPS hardware products. This action took
LEXON back to profitability in 1998.
COST OF REVENUES
(Dollars in thousands)
1999 1998 1997
Cost of Revenues $309 $333 $891
Percent of Net Revenues 41% 28% 46%
Cost of revenues as a percentage of net revenues decreased from 1997 to
1998 as LEXON refocused its business back to a higher margin software business,
eliminating its GPS hardware reselling effort.
The cost of revenues as a percentage of net revenues increased from
1998 to 1999 as softened market demand for LEXON's consumer products resulted in
a combination of 1.) The increase in margins required by private label
resellers, and 2.) The increase in the costs of materials, due to the lack of
volume purchasing.
OPERATING EXPENSES
(Dollars in thousands)
1999 1998 1997
Selling & administrative expense $1,454 $765 $1,081
Percent of Net Revenues 194% 65% 56%
Selling and administrative expense decreased from 1997 to 1998 as
LEXON's expenses incurred in sales operations (outside sales personnel and
commissions) were eliminated.
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<PAGE> 24
The dramatic change from 1998 to 1999 is the direct result of LEXON's
efforts to refocus its business toward Project JUPITER. 1.) Addition of
personnel, 2.) Direct costs incurred in the reverse merger with Rexford and
public reporting, 3.) Legal expenses incurred in the reverse merger with Rexford
and public reporting, 4.) Increased rents for new facilities in Downers Grove,
IL, 5.) Facilities preparation (build-out, wiring, telephone system, and related
expenses) were all heavy contributors to the dramatic increase in spending.
The operating expenses in 1999 now include an increase in development
costs now that the mapping assets of TRIUS are part of LEXON. Previously, TRIUS
was paid a 20% royalty on the net revenues of LEXON. In March 1999, the TRIUS
employees become employees of LEXON. The employees are now an operating expense
and the royalties have been removed from the cost of revenues.
FINANCIAL CONDITION
LEXON's cash and short-term investments totaled $20,892 at December 31,
1999, and represented 3% of total assets.
LEXON has incurred a substantial operating loss in 1999 and used
substantial amounts of cash in operating activities. This loss was primarily
financed through bridge loan agreements between LEXON and five (5) private
investors during 1999. The aggregate total of these loans amounted to $1.123M.
In February 2000, a principal payment of $150K was made reducing the loan
amounts to $973K. The major lender is still owed $600K and favorable repayment
terms have been negotiated. The remaining $323K is being renegotiated for more
favorable terms to LEXON.
To secure additional operating capital to continue operations, on
February 9, 2000, LEXON and Steven J. Peskaitis, LEXON's then Chairman and Chief
Executive Officer, consummated a transaction with Anthony Perino whereby Mr.
Perino acquired voting control over the majority of LEXON's issued and
outstanding common stock.
Under the terms of a Stock Purchase Agreement, dated February 9, 2000,
by and among LEXON, Mr. Peskaitis and Mr. Perino, Mr. Perino acquired (i)
1,000,000 shares of LEXON common stock from LEXON in exchange for $250,000 and
(ii) 2,000,000 shares of LEXON common stock from Mr. Peskaitis in exchange for
$500. Mr. Perino used cash from personal reserves to fund his investment in
LEXON. In addition, under a Voting Trust Agreement, Mr. Peskaitis and Stanley
Peskaitis appointed Mr. Perino Voting Trustee of 2,774,600 and 1,227,100 shares,
respectively, of LEXON common stock. The Voting Trust will terminate no later
than August 9, 2001.
As of February 9, 2000, LEXON had 12,541,561 shares of common stock
issued and outstanding. Prior to the transactions described above, Mr. Peskaitis
owned 6,774,600 shares of LEXON common stock, which was fifty- four percent
(54%) of LEXON's issued and outstanding common stock. At the close of these
transactions, Mr. Perino beneficially owned, directly or indirectly, 7,001,700
shares of LEXON's common stock or fifty-two percent (52%) of LEXON's issued and
outstanding common stock.
In addition, under the terms of the Stock Purchase Agreement, Mr.
Perino will, subject to certain conditions, purchase an additional 2,400,000
shares of LEXON common stock from LEXON and Mr. Peskaitis in exchange for cash
payment of $100,500 on or around March 7, 2000.
Moreover, Mr. Perino received Warrants to purchase up to an additional
4,100,000 shares of LEXON common stock. The Warrants are exercisable at prices
from $0.25 per share to $0.50 per share and expire at certain times between
September 1, 2000 and August 9, 2001. If Mr. Perino exercises all of the
Warrants, LEXON will receive an additional $1,150,000 in equity capital.
Moreover, in connection with the Warrants, LEXON and Mr. Perino entered into a
Registration Rights Agreement, which provides Mr. Perino with demand, and
piggyback registration rights with respect to the shares of LEXON common stock
subject to the Warrants.
In connection with these transactions, under the terms of the Stock
Purchase Agreement, Mr. Peskaitis resigned as LEXON's Chief Executive Officer
and President; Mr. James Rooney and Mr. Thomas Rieck resigned as directors of
the Company. Mr. Perino, Peter Haleas and Jerome Wolowicki were appointed to the
Company's Board
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<PAGE> 25
of Directors and Mr. Perino was elected Chairman and Chief Executive Officer.
Kenneth J. Eaken was elected President and Chief Operating Officer. Jerome
Wolowicki was elected Chief Financial Officer and Treasurer. Steven Peskaitis
was elected Secretary.
During the months of February and March 2000, substantial changes have
been made to eliminate unnecessary expenses and refocus the corporation on the
primary objective of completing Project JUPITER. The staff of LEXON has been
reduced 53% reducing the total number of employees to 12 from the high of 26 in
1999 resulting in savings of over $680K annually. Negotiations are under way to
lease the Downers Grove facility to a new tenant; reducing property expenses 75%
saving over $70K a year.
Management believes existing cash and short-term financing together
with funds generated from operations should be sufficient to meet LEXON's
operating requirements for the next twelve months.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1999 the primary source of liquidity
was cash provided by short-term notes and income from operations. The net cash
used in operations was $648,289 for the year ended December 31, 1999 compared to
net cash provided by operations of $112,290 for the same period in the prior
year.
Net cash used in investing activities was $587,473, which was mainly
due to capital expenditures of $100,405, payment of computer software costs of
$330,966 and other costs associated with procuring short and long- term capital.
For the same period in the prior year net cash used in investing activities was
$56,580.
Net cash provided by financing activities was $1,185,128 for the year
ended December 31, 1999 compared to $60,275 used in the prior year.
In April, the Company entered into a Cooperative Research and
Development Agreement with the U.S. Geological Survey agency to produce the next
National Atlas of the United States of America. The Company views this product
to be a high gross margin business, sold on a subscription basis, with an 80%
level of recurring revenue. Although the project is consistent with the
company's technological capabilities, the development and distribution of a
product of this significance (initially to be sold to all schools and libraries
in the United States) will require significant external financing. The Company
has engaged the services of a financial advisory firm to assist in addressing
its capital requirements and is currently conducting discussions with several
potential sources.
Five short-term notes have been executed in favor of affiliated
individuals with varying terms and amounts, from March 26, 1999 through July 10,
1999, totaling $373,000 in principal. On August 10, 1999, the Company obtained
additional financing through short-term loans totaling $750,000 in principal due
December 10, 1999. In all cases, warrants to purchase the Company's common stock
at $2.50 per share were granted as part of these loan agreements. It is
anticipated that these loans will be either extended for a similar time period
or repaid entirely when permanent financing is obtained.
YEAR 2000 COMPLIANCE
(a) BACKGROUND
Many currently installed computer systems are not capable of correctly
processing 21st century dates. As a result, computer systems, software and other
computer controlled processes used by many companies in a wide variety of
applications will experience operating difficulties unless they are modified or
upgraded to adequately process information involving, related to, or dependent
upon the century change. Significant uncertainty exists concerning the scope and
magnitude of problems associated with the century change.
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<PAGE> 26
(b) WHAT THE COMPANY IS DOING
LEXON recognizes the need to take appropriate action so that its
operations will not be adversely impacted by Year 2000 computer failures and has
established a project team, consisting of specifically assigned employees, to
address Year 2000 risks. The assessment for internal systems is complete and the
remediation and testing is complete.
(c) STATUS OF COMPANY PRODUCTS
LEXON's saleable products rely on software applications. LEXON believes
that such products are Year 2000 compliant. It should be noted that despite
these efforts, there can be no assurances that LEXON's current products do not
contain undetected errors or defects associated with Year 2000 date functions
that may result in additional costs to LEXON.
(d) STATUS OF INTERNAL SYSTEMS
LEXON has completed the process of conducting a company-wide assessment
of its internal computer systems and operations infrastructure to identify
computer hardware, software, and process control systems that are not Year 2000
compliant. Based on this assessment, LEXON believes that its order processing,
principal accounting and production systems are Year 2000 compliant.
Others systems, such as personal computers and office productivity
software, have been remediated specifically for Year 2000 issues, in many cases
through low cost or free upgrades provided by the product vendors. LEXON
believes that the majority of its business-critical computer systems are
presently Year 2000 compliant
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements,
including statements as to the sufficiency of funds to meet operating
requirements for the next 12 months and statements as to the Year 2000
assessment. The following important factors, among others, could cause actual
results to differ materially from those indicated by forward-looking statements
made in this Annual Report on Form 10-K and presented elsewhere by management
from time to time. In addition to the Other information in this Annual Report on
Form 10-K, the following issues and risks, among others, should be considered in
evaluating LEXON's outlook and future.
KNOWN TRENDS AND UNCERTAINTIES
(a) NEW PRODUCTS AND TECHNOLOGICAL CHANGE
LEXON believes that the Development Agreement with USGS provides LEXON
with an opportunity to become the primary repository and manager of credible,
public information about the geography, topography, environment, climates,
population, and socioeconomics of the United States that, due to the inability
to collect this information in a single database or library or the problems
associated with attempting to interpret this data in a meaningful, constructive
way, has previously been underutilized. LEXON believes that its role as the
repository and data manager under the Development Agreement will enable it to
become a leader in providing and packaging information to businesses and
individuals world-wide.
The cornerstone of LEXON's business strategy is Project JUPITER,
LEXON's information portal created to manage and package the information
collected and integrated in connection with the Development Agreement and the
National Atlas Project. Project JUPITER, currently in development, is designed
to be a robust research and information portal delivering and combining the
geo-referable, statistical, map, and information databases of the more
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<PAGE> 27
than twenty government agencies contributing data to the National Atlas Project
into a concise, easy to use, centralized location enabling the user/subscriber
to enrich their learning experience and make better informed business decisions.
The marketable value of Project JUPITER will rely on the technical
ability to combine data from these government agencies in pre-packaged themes,
allowing the user to see data in combinations previously unavailable in any
other product or service, creating intelligent pictures. These intelligent
pictures will be generated by a proprietary expert system "on the fly,"
representing the information the user has selected and delivered in an easy-to-
understand picture rendered in real-time. Through Project JUPITER, LEXON intends
to repackage the digital information obtained from its participation under the
Development Agreement in combination with statistical and mapping information
from outside suppliers. LEXON believes that by seizing opportunities arising
from the public's interest in Internet map usage and by establishing a powerful
brand identity associated with its Project JUPITER, LEXON can empower a
generation of Americans with information about their country, its people and its
resources and significantly improve its financial condition and results of
operations.
A crucial component in LEXON's business strategy is to become a primary
provider of Internet based education and reference tool to schools, libraries,
and businesses. The original National Atlas of the United States was successful
as a resource for schools and libraries. LEXON Technologies believes that the
millennial National Atlas Project, given the advent of electronic and computer
learning systems, will have a vital impact on the information available to
public learning institutions and also provide students and library patrons with
a fun, easy-to-use method for learning and data gathering. LEXON, therefore,
intends to focus its marketing and distribution efforts on library and education
markets (comprising public libraries, K-12 schools, colleges and universities)
as the target for the first phase of the Project JUPITER product launch.
The software and information business is characterized by extremely
rapid technological change, evolving industry standards, and frequent new
product introductions. These conditions require continuous expenditures on
product research and development to enhance existing products and to create new
products. LEXON believes that the timely development of new products and
continuing enhancements to existing products is essential to maintain its
competitive position in the marketplace. LEXON's future success depends, in
part, upon customer and market acceptance of these new products. Any failure to
achieve acceptance of these and other new product offerings could have a
material adverse effect on LEXON's business and results of operations.
There can be no assurance that LEXON will successfully complete the
development of new or enhanced products or successfully manage transitions from
one product release to the next. In addition, if the USGS terminates the
Development Agreement, such a termination would have a materially adverse effect
on LEXON's financial condition and results of operations.
(b) COMPETITION
LEXON encounters significant competition in the market for an online
information and research portal on the Internet. Some of LEXON's competition may
have significant name recognition, as well as substantially greater capital
resources, marketing experience, research and development staffs and production
facilities than LEXON. Increased competition may lead to pricing pressures that
could adversely affect the LEXON's results of operations and financial
condition.
(c) USE OF THIRD PARTIES
LEXON relies in part on data supplied by the United States government
and strategic partners in the data reprocessing business. Failure by the United
States government to provide such data, or changes in the contractual
arrangements with such strategic partners could have a material adverse effect
on the LEXON's business and results of operations.
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<PAGE> 28
(d) PRICES
Future prices LEXON will be able to obtain for its products may
decrease from previous levels depending upon market or competitive pressures or
distribution channel factors. Any decrease could have a material adverse effect
on LEXON's business and results of operations.
(e) INTELLECTUAL PROPERTY RIGHTS
LEXON regards its software as proprietary and attempts to protect it
with a combination of copyright, trademark and trade secret laws, employee and
third-party non-disclosure agreements, and other methods of protection. Despite
these precautions, it may be possible for unauthorized third parties to copy
certain portions of LEXON's products, reverse engineer or obtain and use
information LEXON regards as proprietary. Also, the laws of some foreign
countries do not protect LEXON's proprietary rights to the same extent as do the
laws of the United States. Any misappropriation of LEXON's intellectual property
could have a material adverse effect on LEXON's business and results of
operations. Furthermore, there can be no assurance that third parties will not
assert infringement claims against LEXON in the future with respect to current
or future products. Any such assertion could require LEXON to enter into royalty
arrangements or result in costly litigation.
(f) COST OF REVENUES
Cost of revenues varies with the mix of technology development and
subscription fees, product revenues, as well as with the distribution channel
mix. Changes in the revenue mix, as well as the distribution model, may affect
cost of revenues as a percentage of net revenues in the future.
(g) EXPANSION TO INTERNET MARKET
LEXON has historically marketed its products primarily in the direct
and retail market. LEXON has recently expanded its product offerings beyond this
market to the development of Project JUPITER in the Internet/intranet markets.
Sales to the Internet/intranet markets are directed to different decision-makers
within customer organizations and require different selling and marketing
programs than are used in the direct and retail market. The failure of these
products to achieve market acceptance could have a material adverse effect on
the LEXON's business and results of operations.
(h) VARIABILITY OF QUARTERLY OPERATING RESULTS
LEXON's quarterly operating results may vary significantly from quarter
to quarter, depending upon factors such as the introduction and market
acceptance of Project JUPITER, the ability to reduce expenses, and the
activities of competitors. Because a high percentage of LEXON's expenses are
directly related to the expansion of the business, this can cause significant
variations in quarterly operating results. LEXON operates with little or no
backlog and has yet to establish long-term contracts. Accordingly, LEXON's
ability to accurately forecast future revenues and income for any period is
necessarily limited.
(i) POTENTIAL VOLATILITY OF STOCK PRICE
There has been, and will likely continue to be, significant volatility
in the market price of securities of technology companies. Factors such as
announcements of new products by LEXON or its competitors, quarterly
fluctuations in LEXON's financial results or other software companies' financial
results, shortfalls in LEXON's actual financial results compared to results
previously forecasted by stock market analysts, and general conditions in the
software industry and conditions in the financial markets could cause the market
price of the Common Stock to fluctuate substantially. These market fluctuations
may adversely affect the price of LEXON's Common Stock.
(j) RISKS ASSOCIATED WITH DISTRIBUTION CHANNELS
LEXON will primarily market and distribute its products in North
America through LEXON's telesales, outside sales force and through manufacturer
representatives. LEXON has limited control over representatives that are not
employees of LEXON.
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<PAGE> 29
There can be no assurance that LEXON will be able to retain its current
representatives, that its representatives will perform to LEXON's expectations,
or that LEXON will be able to expand its distribution channels by entering into
arrangements with new representatives in LEXON's current markets or in new
markets.
(k) ATTRACTING AND RETAINING KEY EMPLOYEES
LEXON's continued success will depend in large part on its ability to
attract and retain highly qualified technical, managerial, sales and marketing
and other personnel. Competition for such personnel is intense. There can be no
assurance that LEXON will be able to continue to attract or retain such
personnel.
(l) NEED FOR ADDITIONAL CAPITAL
If the Company's current cash reserves become inadequate, it may need
to seek additional funds through bank facilities, or public or private debt or
equity offerings. There can be no assurance that the Company will be able to
obtain additional capital on favorable terms, or at all, if and when it becomes
necessary. The terms on which the Company obtains any necessary capital in the
future could have an adverse impact on the rights of holders of LEXON common
stock. In addition, if the Company is unable to raise additional capital if and
when necessary, it may be unable to successfully complete its business strategy
or continue its operations on a going forward basis.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
LEXON does not currently possess a significant or material investment
portfolio due to limitations on its cash resources. To the extent that LEXON's
cash resources are invested in interest bearing or investment-type accounts,
LEXON's investment portfolio is exposed to market risk as it relates to interest
rates. Investments are comprised of certificates of deposit, commercial paper,
U.S. Treasury securities, asset backed securities, and money market accounts.
Only high credit quality issuers are used and exposure to any one issuer is
limited by policy. Maturities and average lives are lattered up to a maximum
term of three years. These investments are considered available for sale and are
recorded on the balance sheet at fair value. LEXON uses forward currency
exchange contracts to hedge foreign currency exposures for a certain supplier.
The contracts mature on various dates and may have maturities up to one year.
Such contracts are executed by a major financial institution whereby risk of
credit loss is minimized.
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<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-28-
<PAGE> 31
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
REPORT ON EXAMINATION
YEARS ENDED DECEMBER 31, 1999 AND 1998
INDEPENDENT AUDITORS' REPORT
The Board of Directors
LEXON Technologies, Inc.
We have audited the accompanying consolidated balance sheets of
LEXON Technologies, Inc. and subsidiary as of December 31, 1999 and 1998, and
the related consolidated statements of income (loss), changes in stockholders'
equity (deficit), and cash flows for each of the three years ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of LEXON
Technologies, Inc. and subsidiary as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
ended December 31, 1999, in conformity with generally accepted accounting
principles.
Hutton, Nelson & McDonald LLP
Oakbrook Terrace, Illinois
February 18, 2000, except for
Note 17 to the consolidated
financial statements as to
which the date is March 6, 2000
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<PAGE> 32
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
-------------------
1999 1998
Current assets
Cash $ 20,892 $ 71,526
Accounts receivable, less allowance for doubtful
accounts of $2,500 and $25,000 18,153 98,175
Inventories 1,656 8,013
Prepaid expenses 12,570
-------- --------
Total current assets 53,271 177,714
-------- --------
Property and equipment
Leasehold improvements 29,744 3,971
Furniture and equipment 178,452 107,791
Capital leases 105,458
-------- --------
313,654 111,762
Accumulated depreciation 116,631 79,625
-------- --------
197,023 32,137
Deferred charges and other assets
Computer software costs, net of accumulated
amortization of $76,875 in 1999 and $16,343
in 1998 325,279 54,845
Unamortized debt issue costs 38,442
Deferred charges 72,440
Deposits 17,762
-------- --------
453,923 54,845
-------- --------
$704,217 $264,696
======== ========
The accompanying notes are an integral
part of these financial statements.
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<PAGE> 33
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31,
--------------------------
1999 1998
----------- -----------
Current liabilities
Current maturities of long-term debt $ 19,286 $
Notes payable 1,123,000
Accounts payable 217,618 5,740
Accrued liabilities
Salaries 51,600
Payroll taxes 7,731
Interest 23,219
Distributions 209,774
----------- -----------
Total current liabilities 1,644,497 13,471
----------- -----------
Long-term debt 82,499
-----------
Stockholders' equity (deficit)
Common stock, par value $.001 per share;
authorized 100,000,000 shares; issued and
outstanding 12,441,561 and 11,500,081
shares 12,442 11,500
Additional paid-in capital 68,119
Retained earnings (deficit) (1,103,340) 239,725
----------- -----------
(1,022,779) 251,225
----------- -----------
$ 704,217 $ 264,696
=========== ===========
The accompanying notes are an integral
part of these financial statements.
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<PAGE> 34
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Sales $ 749,793 $ 1,175,295 $ 1,934,433
Cost of sales 309,159 333,357 890,586
------------ ------------ ------------
Gross profit 440,634 841,938 1,043,847
Selling and administrative expense 1,454,008 765,202 1,081,036
------------ ------------ ------------
Income (loss) from operations (1,013,374) 76,736 (37,189)
Other income (expense)
Interest income 3,246
Interest expense (82,427)
Loss on disposition of assets (3,338) (13,100)
Miscellaneous 6,411
------------ ------------ ------------
Income (loss) before income taxes (1,089,482) 63,636 (37,189)
Income taxes 927
------------ ------------ ------------
Net income (loss) $ (1,089,482) $ 63,636 $ (38,116)
============ ============ ============
Weighted average common shares outstanding 11,640,886 11,500,081 11,500,081
============ ============ ============
Basic and diluted earnings (loss) per common
share $ (.09) $ .01 $ (.00)
============ ============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-32-
<PAGE> 35
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
--------------------------- Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Equity (Deficit)
----------- ------------ ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 70,000,000 $ 70,000 $ $ 347,400 $ 417,400
Effect of one-for-seventy reverse
stock split (68,999,919) (69,000) (69,000)
Restatement for reverse acquisition
of Rexford, Inc. by Chicago Map
Corporation 10,500,000 10,500 (10,500)
Net loss (38,116) (38,116)
Cash distributions (62,420) (62,420)
---------- ----------- ---------- ---------- ----------
Balance, December 31, 1997 11,500,081 11,500 236,364 247,864
Net income 63,636 63,636
Cash distributions (60,275) (60,275)
---------- ----------- ---------- ---------- ----------
Balance, December 31, 1998 11,500,081 11,500 239,725 251,225
Stockholders' deficit assumed in
reverse acquisition of Rexford, Inc.
by Chicago Map Corporation (40,549) (40,549)
Issuance of common stock 941,480 942 68,119 500 69,561
Net loss (1,089,482) 1,089,482)
Distributions to stockholders
Cash (3,760) (3,760)
Accrued (209,774) (209,774)
---------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 12,441,561 $ 12,442 $ 68,119 $(1,103,340) $(1,022,779)
========== =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-33-
<PAGE> 36
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,089,482) $ 63,636 $ (38,116)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation 37,639 13,890 13,222
Amortization 87,990 16,343 17
Loss on disposition of assets 3,338 13,100
Change in assets (increase) decrease 73,809 6,400 (23,738)
Change in liabilities increase (decrease) 238,417 (1,079) (37,651)
----------- ----------- -----------
Net cash provided by (used in)
operating activities (648,289) 112,290 (86,266)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of equipment 425
Capital expenditures (100,405) (7,847) (17,880)
Payment of computer software costs (330,966) (49,158) (22,030)
Payment of debt issue costs (65,900)
Payment of deferred charges (72,440)
Payment of deposits (17,762)
----------- ----------- -----------
Net cash used in investing activities (587,473) (56,580) (39,910)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 1,123,000
Principal payments under capital lease obligations (3,673)
Proceeds from issuance of common stock 69,561
Cash distributions paid to stockholders (3,760) (60,275) (62,420)
----------- ----------- -----------
Net cash provided by (used in) financing
activities 1,185,128 (60,275) (62,420)
----------- ----------- -----------
Net decrease in cash (50,634) (4,565) (188,596)
Cash at beginning of year 71,526 76,091 264,687
----------- ----------- -----------
Cash at end of year $ 20,892 $ 71,526 $ 76,091
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 62,958 $ 927 $ 1,728
Income taxes
Noncash investing and financing activities:
Net liabilities assumed in reverse acquisition of
Rexford, Inc. 40,549
Capital lease obligations incurred when Company
entered into leases for new equipment 105,458
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-34-
<PAGE> 37
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial
statements include the accounts of LEXON Technologies, Inc. and its wholly-owned
subsidiary, Chicago Map Corporation. All material intercompany accounts and
transactions have been eliminated in consolidation.
Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Inventories - Inventories consists of finished goods which are
priced at the lower of cost, determined by the first-in, first-out method, or
market.
Property and Equipment - Property and equipment are recorded at
cost. Expenditures for renewals and betterments which extend the life of such
assets are capitalized. Maintenance and repairs are charged to expense as
incurred. Differences between amounts received and net carrying value of assets
retired or disposed of are charged or credited to income.
Depreciation - Depreciation is charged to income using
straight-line and accelerated methods based on the estimated useful lives of the
assets.
Computer Software Costs - Costs related to the purchase and
development of computer software are capitalized from the time technological
feasibility is established until the software is ready for use. Upon the general
release of the software to consumers, capitalized costs are amortized on a
straight-line basis over the estimated economic life of the software, generally
twenty-four months. Amortization expense charged to income was $60,532 and
$16,343 in 1999 and 1998, respectively. No amortization was charged to income in
1997. Unamortized computer software costs determined to be in excess of the net
realizable value of the software are expensed immediately.
Unamortized Debt Issue Costs - Expenses related to the issuance
of notes payable are being amortized on a straight-line basis over the term of
the notes. Amortization expense charged to income was $27,458 in 1999. No
amortization was charged to income in 1998 and 1997.
Deferred Charges - Deferred charges consist of incremental costs
incurred in connection with a proposed offering of securities. The costs will be
charged against the proceeds of the offering. If the offering is rescinded, the
costs will be expensed immediately.
Revenue Recognition - The Company records sales and related
profits as products are shipped. Revenue from licensing of software is based on
sales of copies of software products in accordance with distribution agreements
with licensed developers and recognized as licensing fees accrue. Revenue for
post-contract customer support, upgrades and enhancements is recognized ratably
over the term of the related agreements, which in most cases is one year.
Income Taxes - Prior to July 21, 1999, Chicago Map Corporation
had elected S corporation status for income tax purposes. Under this election,
the Company was not liable for federal income taxes, but was liable for certain
state income and replacement taxes. Federal taxable income and tax credits
flowed through to the stockholders to be reported on their individual income tax
returns. Upon acquisition by Rexford, Inc., Chicago Map Corporation terminated
its S corporation election.
-35-
<PAGE> 38
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF ACCOUNTING POLICIES (Continued)
Earnings (Loss) Per Share - Basic earnings (loss) per share is
computed using the weighted average number of common shares outstanding during
the year. Diluted earnings (loss) per share is computed using the weighted
average number of common shares and dilutive common share equivalents
outstanding during the year. All of the common share equivalents of 1,955,418 in
1999 have an antidilutive effect on earnings (loss) per share and, therefore,
have not been used in determining the total weighted average number of common
shares outstanding used in calculating diluted earnings (loss) per share. There
were no common share equivalents in 1998 and 1997.
2. NATURE OF OPERATIONS
The Company creates digital map technologies which provide for
the design and development of advanced geographic and mapping software
applications for institutional, governmental, corporate and public consumers
throughout the world.
3. NAME CHANGE
Effective July 21, 1999, the name of the Company was changed from
Rexford, Inc. to LEXON Technologies, Inc.
4. ORGANIZATION AND PRESENTATION
On July 21, 1999, LEXON Technologies, Inc. (formerly Rexford,
Inc.) (Rexford) acquired all of the issued and outstanding common stock of
Chicago Map Corporation (Chicago Map) in exchange for 10,500,000 shares of
common stock of Rexford. The shares issued in the acquisition resulted in the
owners of Chicago Map having operating control of Rexford immediately following
the acquisition. Therefore, for financial reporting purposes, Chicago Map is
deemed to have acquired Rexford in a reverse acquisition accompanied by a
recapitalization. The surviving entity reflects the assets and liabilities of
Rexford and Chicago Map at their historical book values and the historical
operations of the Company are those of Chicago Map. The issued common stock is
that of Rexford and the retained earnings (deficit) is that of Chicago Map. The
statements of income (loss) include operations of Chicago Map for each of the
three years ended December 31, 1999 and operations of Rexford from July 21, 1999
(date of acquisition) through December 31, 1999. The consolidated financial
statements assume that the acquisition of Rexford by Chicago Map occurred on
January 1, 1997.
5. ACQUISITION
On March 12, 1999, Chicago Map Corporation acquired certain
assets of TRIUS, Inc. for $62,300 in cash and 2,198 shares of common stock of
Chicago Map Corporation. The principal business of TRIUS, Inc. is the
development of computer software technologies.
-36-
<PAGE> 39
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. CASH
The Company maintains its cash in bank accounts which at times
exceed the federally insured limit of $100,000. Management believes there is no
significant concentration of credit risk with respect to these accounts.
7. DEPRECIATION
Depreciation was charged to income, based on the estimated useful
lives of the assets, in the following amounts:
<TABLE>
<CAPTION>
Estimated
1999 1998 1997 Life - Years
--------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Leasehold improvements $ 1,085 $ 260 $ 428 5 - 39
Furniture and equipment 21,489 13,630 12,794 3 - 7
Capital leases 15,065 7
------ --------- ---------
$37,639 $ 13,890 $ 13,222
====== ========= =========
</TABLE>
8. NOTES PAYABLE
<TABLE>
<S> <C>
Notes payable at December 31, 1999 consist of the following:
Promissory notes due on August 1, 2000 with interest
payable monthly at 18%. Effective February 1, 2000,
the interest rate was adjusted to 12% $ 750,000
Promissory note due on March 26, 2000 with interest
payable at maturity at 12% 100,000
Promissory notes with stockholders and employees due
on various dates through April 29, 2000. Interest at
12% is payable at maturity 273,000
----------
$1,123,000
==========
</TABLE>
The promissory notes due on August 1, 2000 are secured by all of
the assets of the Company, the common stock of Chicago Map Corporation, and the
guarantees of Chicago Map Corporation and an officer of the Company. In
addition, if the Company does not receive debt or equity financing proceeds in
an aggregate amount of $3,600,000 during the period December 30, 1999 to August
1, 2000, the promissory notes will be payable in six equal monthly installments
of principal and interest commencing August 1, 2000, as stated in the loan
agreements.
The promissory notes due on March 26, 2000 and through April 29,
2000 are secured by the accounts receivable of Chicago Map Corporation.
-37-
<PAGE> 40
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. LONG-TERM DEBT
<TABLE>
<S> <C>
Long-term debt at December 31, 1999 consists of the following:
Obligation under capital lease payable in monthly installments
of $1,556, including interest, through September 2003 $ 52,836
Obligation under capital lease payable in monthly installments
of $1,205, including interest, through September 2004 48,949
--------
101,785
Current maturities 19,286
--------
$ 82,499
=========
</TABLE>
Scheduled maturity requirements of long-term debt are as follows:
Year ending December 31,
------------------------
2000 $ 19,286
2001 21,837
2002 25,480
2003 25,002
2004 10,180
--------
$101,785
========
10. LEASE COMMITMENTS
The Company leases office facilities under an operating lease
expiring on May 31, 2004. Under terms of the lease, the Company is responsible
for insurance, utilities, repairs and maintenance, and a prorata share of any
increase in real estate taxes. Future minimum lease commitments under all
noncancelable leases in effect at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Leases
-----------------------
Year ending December 31, Operating Capital
------------------------ --------- ---------
<S> <C> <C>
2000 $ 96,664 $ 34,343
2001 99,563 33,139
2002 102,549 33,139
2003 105,625 28,469
2004 44,551 10,846
-------- --------
Net minimum lease payments $448,952 139,936
=======
Less amount representing interest 38,151
--------
Present value of net minimum lease payments $101,785
=======
</TABLE>
-38-
<PAGE> 41
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. LEASE COMMITMENTS (Continued)
The present value of minimum future obligations under capital
leases is based on interest rates determined to be applicable at the inception
of the leases.
The capital lease obligations are secured by equipment with a
carrying value of $90,393 at December 31, 1999.
Total lease related expenses for the capital leases in 1999 were
as follows:
Depreciation expense $15,065
Interest expense 1,584
-------
$16,649
=======
Rent expense for all operating leases charged to income for the
years ended December 31, 1999, 1998 and 1997 approximated $84,000, $46,000 and
$59,000, respectively.
11. REVERSE STOCK SPLIT
On July 20, 1999, the stockholders of Rexford, Inc. approved a
one-for-seventy reverse stock split whereby the issued and outstanding shares of
common stock of the Company were reduced from 70,000,000 to 1,000,081. The
reverse stock split did not affect the authorized shares of common stock of the
Company.
12. STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," encourages, but does not require,
companies to record compensation expense for stock-based employee compensation
at fair value. The Company has chosen to account for stock-based compensation
using the intrinsic value method described in Accounting Principles Board
Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Under APB No. 25, compensation expense is measured as the
excess of market price over the price the employee must pay to acquire the stock
on the grant date.
During 1999, the Company issued 3,504,096 stock options, all of
which were outstanding and exercisable at December 31, 1999. The options were
granted at market price and, as a result, no compensation expense has been
recognized in 1999. The weighted average exercise price of the options was $2.40
per share in 1999. The weighted average life of the options outstanding at
December 31, 1999 was 9.55 years.
-39-
<PAGE> 42
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. STOCK-BASED COMPENSATION (Continued)
Pro forma information regarding net income (loss) and earnings
(loss) per common share is required by SFAS No. 123 and has been determined as
if the Company had accounted for its stock options under the fair value method
defined in that Statement. The weighted average fair value of stock options
granted during 1999 was $.61 per share. The fair value of the stock options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following assumptions: risk-free interest rate of 6.08%, dividend yield of
0%, expected volatility factor of 10%, and an expected life of 5 years. The
Company's pro forma information for 1999 follows:
Pro Forma As Reported
--------- -----------
Net loss $(3,241,927) $(1,089,482)
Loss per common share
Basic (0.28) (0.09)
Diluted (0.28) (0.09)
These pro forma amounts may not be representative of the effects
of such disclosures in future years.
13. STOCK PURCHASE WARRANTS
In connection with the issuance of notes payable during 1999, the
Company issued stock purchase warrants to note holders that are convertible into
shares of common stock. Each warrant represents the right to purchase one share
of the Company's common stock. Stock purchase warrants outstanding at December
31, 1999 consist of the following:
Warrants convertible at an exercise price of $2.50
per share with expiration dates ranging from
September 2000 to August 2004 648,000
Warrants convertible at an exercise price of $.50
per share with expiration dates ranging from
May 2001 to June 2001 373,000
---------
1,021,000
=========
14. EMPLOYEE BENEFIT PLAN
During 1999, the Company implemented a defined contribution plan
pursuant to Section 401(k) of the Internal Revenue Code. The plan covers all
employees meeting eligibility and service requirements. Eligible participants
may elect salary deferral contributions up to 15% of compensation, or the
maximum amount allowed under the Internal Revenue Code. The plan does not
provide for discretionary matching contributions by the Company.
-40-
<PAGE> 43
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. INCOME TAXES
The provision for income taxes of $927 for the year ended
December 31, 1997 was due to state income taxes. Since Chicago Map Corporation
had elected S corporation status, no provision was made for federal income
taxes. Chicago Map Corporation terminated its S corporation election on July 21,
1999 upon its acquisition by Rexford, Inc.
The Company recognizes deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the
financial reporting and tax basis of the Company's assets and liabilities.
Measurement of deferred tax assets and liabilities is based upon the provisions
of enacted tax laws and the effects of future changes in tax laws or rates.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Deferred tax assets and liabilities at December 31, 1999 consist
of the following:
Deferred tax assets
Allowance for doubtful accounts $ 969
Accrued expenses 9,692
Net operating loss carryforwards 397,368
--------
Gross deferred tax assets 408,029
Valuation allowance (398,682)
--------
9,347
Deferred tax liabilities
Depreciation 5,782
Capital leases 2,129
Amortization of computer software costs 1,436
----------
9,347
$ --
==========
At December 31, 1999, the Company had net operating loss
carryforwards for tax purposes of $1,025,764 expiring as follows:
Year Amount
---- ------
2002 $ 7,342
2003 49,380
2004 34,314
2005 7,609
2006 6,144
2008 4,073
2009 3,497
2010 2,746
2011 42,794
2017 46,350
2018 365,433
2019 456,082
----------
$1,025,764
==========
-41-
<PAGE> 44
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16. TRANSACTION WITH RELATED PARTY
During 1999, 1998 and 1997, Chicago Map Corporation leased office
facilities on a month-to-month basis from a stockholder at a monthly rental of
$3,000. Rent expense charged to income amounted to $12,000 in 1999, $36,000 in
1998 and $36,000 in 1997.
17. SUBSEQUENT EVENTS
In February 2000, a new equity investor acquired voting control
of the Company's issued and outstanding shares of common stock. Thereafter, a
major reorganization of the Company and its board of directors was implemented.
A new management team was installed and administrative staff was reduced
significantly. Currently, the Company is pursuing the transfer of its lease
obligations to a third party and the reissuance of its office lease at a reduced
rent. These changes are expected to reduce employment costs significantly and
result in other cost savings on an annualized basis. In addition, management is
reviewing other financial alternatives available to the Company to increase
liquidity, including restructuring its debt and raising additional capital.
The Company incurred a net loss of $1,089,482 in 1999 and used
substantial amounts of working capital in its operations. At December 31, 1999,
current liabilities exceeded current assets by $1,591,226 and total liabilities
exceeded total assets by $1,022,779. However, management believes that the
changes that have been implemented since December 31, 1999 and the initiatives
that are being pursued will provide the Company with the opportunity to continue
as a going concern.
-42-
<PAGE> 45
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section of the Company's 2000 Proxy Statement entitled "Directors and
Executive Officers of the Company" is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The section of the 2000 Proxy Statement entitled "Executive Compensation"
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section of the 2000 Proxy Statement entitled "Security Ownership of
Certain Beneficial Owners and Management" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section of the 2000 Proxy Statement entitled "Certain Relationships
and Related Transactions" is incorporated herein by reference.
-43-
<PAGE> 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Page Incorporation
Exhibit Number (if by Reference (if
Number Description of Documents applicable) applicable)
- ------ ------------------------ ----------- ----------------
<S> <C> <C> <C>
2.1 Agreement and Plan of Reorganization, dated as of July 21, 1999, by +
and between Rexford, Inc. and Chicago Map Corporation................
2.2 Securities Purchase Agreement, dated as of August 10, 1999, by and ++
among LEXON Technologies, Inc. and Miller Capital Corporation,
Stephen A. McConnell, Jock Patton and Dickerson Wright...............
3.1 Articles of Incorporation............................................ +
3.2 Bylaws...............................................................
4.1 Interim Loan Agreement, dated as of March 26, 1999, by and between
Chicago Map Corporation and Mark Scharmann...........................
4.2 Promissory Note, dated as of March 26, 1999, by and between
Chicago Map Corporation and Mark A. Scharmann.......................
4.3 Security Agreement, dated as of March 26, 1999, by and between
Mark A. Scharmann and Chicago Map Corporation.......................
4.4 Interim Loan Agreement, dated as of April 29, 1999, by and between
Steven J. Peskaitis and Chicago Map Corporation...
4.5 Promissory Note, dated as of April 29, 1999, by and between Chicago
Map Corporation and Steven J. Peskaitis.............................
4.6 Promissory Note, dated as of July 10, 1999, by and between Chicago
Map Corporation and Steven J. Peskaitis.............................
4.7 Promissory Note, dated as of July 10, 1999, by and between Chicago
Map Corporation and Stanley J. Peskaitis.............................
4.8 Promissory Note, dated as of July 10, 1999, by and between Chicago
Map Corporation and John B. McLean...................................
4.9 Form of Stock Option Agreement and Schedule thereto, dated as of
July 21, 1999 by and between LEXON Technologies, Inc. and Steven
J. Peskaitis..
4.10 Promissory Note, dated as of August 10, 1999, by LEXON .............. ++
Technologies, Inc. and Miller Capital Corporation, Stephen A.
McConnell, Jock Patton and Dickerson Wright..........................
4.11 Security and Pledge Agreement, dated as of August 10, 1999 by and ++
among LEXON Technologies, Inc. and Miller Capital Corporation,
Jock Patton, Stephen A. McConnell and Dickerson Wright...............
</TABLE>
-44-
<PAGE> 47
<TABLE>
<CAPTION>
Page Incorporation
Exhibit Number (if by Reference (if
Number Description of Documents applicable) applicable)
- ------ ------------------------ ----------- ----------------
<S> <C> <C> <C>
4.12 Continuing Guaranty, dated as of August 10, 1999, by and among ++
Chicago Map Corporation and Steven J. Peskaitis and Miller Capital
Corporation, Jack Patton, Stephen A. McConnell and Dickerson
Wright...............................................................
4.13 Stock Pledge and Security Agreement, dated as of August 10, 1999, ++
by and among Steven J. Peskaitis and Miller Capital Corporation,
Stephen A. McConnell, Jack Patton and Dickerson Wright...............
4.14 Warrants to Purchase Common Stock, dated as of August 10, 1999, ++
by LEXON Technologies, Inc...........................................
4.15 Supplemental Agreement to Bridge Loan Transaction, dated as of
December 30, 1999, by and among LEXON Technologies, Inc.,
Chicago Map Corporation and Steven J. Peskaitis and Miller Capital
Corporation, Stephen A. McConnell, Jock Patton and Dickerson
Wright...............................................................
10.1 Stock Purchase Agreement dated as of February 9, 2000, by and +++
among Anthony Perino and LEXON Technologies, Inc. and Steve J.
Peskaitis............................................................
10.2 Industrial Building Lease, dated as of June 1, 1999, by and between
Chicago Map Corporation and United States Brass & Copper Co., for
office space at 1401 Brook Drive, Downers Grove, IL 60615............
10.3 Cooperative Research and Development Agreement, dated as of
March 26, 1999, by and among United States Geological Survey and
Chicago Map Corporation..............................................
10.4 Employment Agreement, dated as of March 12, 1999, by and
between Chicago Map Corporation and Paris Karahalios.................
10.5 Employment Agreement, dated as of March 12, 1999, by and
between Chicago Map Corporation and David A. Schulz.................
10.6 Employment Agreement, dated as of April 19, 1999, by and between
Chicago Map Corporation and Kenneth J. Eaken.........................
10.7 Employment Agreement, dated as of February 23, 1999, by and
between Chicago Map Corporation and John B. McLean...................
10.8 Employment Agreement, dated as of May 1, 1999, by and between
Chicago Map Corporation and Steven J. Peskaitis......................
11.1 Statement Re: Computation of Per Share Earnings .....................
21 List of LEXON Technologies, Inc. Subsidiaries ......................
23.1 Consent of Auditor...................................................
</TABLE>
-45-
<PAGE> 48
<TABLE>
<CAPTION>
Page Incorporation
Exhibit Number (if by Reference (if
Number Description of Documents applicable) applicable)
- ------ ------------------------ ----------- ----------------
<S> <C> <C> <C>
24 Power of Attorney (contained in the signature page hereto)..........
27 Financial Data Schedule.............................................
</TABLE>
+ Incorporated by reference to LEXON Technologies, Inc.'s Current Report on
Form 8-K, dated as of July 21, 1999 and filed with the SEC on August 4,
1999.
++ Incorporated by reference to LEXON Technologies, Inc.'s Current Report on
Form 8-K, dated as of August 10, 1999 and filed with the SEC on August 24,
1999.
+++ Incorporated by reference to LEXON Technologies, Inc.'s Current Report on
Form 8-K, dated as of February 9, 2000 and filed with the SEC on February
18, 2000.
(b) CURRENT REPORTS ON FORM 8-K
None.
-46-
<PAGE> 49
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LEXON Technologies, Inc.
/s/ Anthony Perino
-------------------------------------------
Anthony Perino, Chairman of the Board and
Chief Executive Officer
/s/ Kenneth J. Eaken
-------------------------------------------
Kenneth J. Eaken, President and Chief
Operating Officer
/s/ Jerome J. Wolowicki
-------------------------------------------
Jerome J. Wolowicki, Director, Chief
Financial Officer and Treasurer
/s/ Steven J. Peskaitis
-------------------------------------------
Steven J. Peskaitis, Director and Senior
Vice President of Business Development and
Secretary
/s/ Paris Karahalios
-------------------------------------------
Paris Karahalios, Director and Senior Vice
President of Product Development
/s/ Peter J. Haleas
-------------------------------------------
Peter J. Haleas, Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitute
and appoint Anthony Perino and Jerome J. Wolowicki their true and lawful
attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for them and in their name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Anthony Perino
-------------------------------------------
Anthony Perino, Chairman of the Board and
Chief Executive Officer
-47-
<PAGE> 50
/s/ Kenneth J. Eaken
-------------------------------------------
Kenneth J. Eaken, President and Chief
Operating Officer
/s/ Jerome J. Wolowicki
-------------------------------------------
Jerome J. Wolowicki, Director, Chief
Financial Officer and Treasurer
/s/ Steven J. Peskaitis
-------------------------------------------
Steven J. Peskaitis, Director and Senior
Vice President of Business Development and
Secretary
/s/ Paris Karahalios
-------------------------------------------
Paris Karahalios, Director and Senior Vice
President of Product Development
/s/ Peter J. Haleas
-------------------------------------------
Peter J. Haleas, Director
-48-
<PAGE> 51
LEXON TECHNOLOGIES, INC.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.2 Bylaws
4.1 Interim Loan Agreement, dated as of March 26, 1999, by and
between Chicago Map Corporation and Mark Scharmann
4.2 Promissory Note, dated as of March 26, 1999, by and between
Chicago Map Corporation and Mark A. Scharmann
4.3 Security Agreement, dated as of March 26, 1999, by and
between Mark A. Scharmann and Chicago Map Corporation
4.4 Interim Loan Agreement, dated as of April 29, 1999, by and
between Steven J. Peskaitis and Chicago Map Corporation
4.5 Promissory Note, dated as of April 29, 1999, by and between
Chicago Map Corporation and Steven J. Peskaitis
4.6 Promissory Note, dated as of July 10, 1999, by and between
Chicago Map Corporation and Steven J. Peskaitis
4.7 Promissory Note, dated as of July 10, 1999, by and between
Chicago Map Corporation and Stanley J. Peskaitis
4.8 Promissory Note, dated as of July 10, 1999, by and between
Chicago Map Corporation and John B. McLean.
4.9 Form of Stock Option Agreement and Schedule thereto, dated
as of July 21, 1999 by and between LEXON Technologies, Inc.
and Steven J. Peskaitis
4.15 Supplemental Agreement to Bridge Loan Transaction, dated as
of December 30, 1999, by and among LEXON Technologies,
Inc., Chicago Map Corporation and Steven J. Peskaitis and
Miller Capital Corporation, Stephen A. McConnell, Jock
Patton and Dickerson Wright.
10.2 Industrial Building Lease, dated as of June 1, 1999, by and
between Chicago Map Corporation and United States Brass &
Copper Co., for office space at 1401 Brook Drive, Downers
Grove, IL 60615
10.3 Cooperative Research and Development Agreement, dated as of
March 26, 1999, by and among United States Geological
Survey and Chicago Map Corporation.
10.4 Employment Agreement, dated as of March 12, 1999, by and
between Chicago Map Corporation and Paris Karahalios
-49-
<PAGE> 52
10.5 Employment Agreement, dated as of March 12, 1999, by and
between Chicago Map Corporation and David A. Schulz
10.6 Employment Agreement, dated as of April 19, 1999, by and
between Chicago Map Corporation and Kenneth J. Eaken.
10.7 Employment Agreement, dated as of February 23, 1999, by and
between Chicago Map Corporation and John B. McLean.
10.8 Employment Agreement, dated as of May 1, 1999, by and
between Chicago Map Corporation and Steven J. Peskaitis
11.1 Statement Re: Computation of Per Share Earnings
21 List of LEXON Technologies, Inc. Subsidiaries
23.1 Consent of Auditor
24 Power of Attorney (contained in the signature page hereto)
27 Financial Data Schedule
-50-
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
LEXON TECHNOLOGIES, INC.
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1 - Stockholders............................................1
1.1 Place of Meetings ......................................1
1.2 Annual Meetings ........................................1
1.3 Special Meetings .......................................1
1.4 Notice of Meeting ......................................1
1.5 Voting List ............................................1
1.6 Quorum .................................................1
1.7 Adjournments ...........................................2
1.8 Voting and Proxies .....................................2
1.9 Action at Meeting ......................................2
1.10 Action Without Meeting .................................2
ARTICLE 2 - Directors ............................................. 2
2.1 General Powers .........................................2
2.2 Number, Election and Qualification .....................3
2.3 Enlargement of the Board ...............................3
2.4 Tenure .................................................3
2.5 Vacancies ......................................3
2.6 Resignation ............................................3
2.7 Regular Meetings .......................................3
2.8 Special Meetings .......................................3
2.9 Notice of Special Meetings .............................4
2.10 Meetings by Telephone Conference Calls .................4
2.11 Quorum .................................................4
2.12 Action at Meeting ......................................4
2.13 Action by Consent ......................................4
2.14 Removal ................................................4
2.15 Committees .............................................4
2.16 Compensation of Directors ..............................5
ARTICLE 3 - Officers ...............................................5
3.1 General ................................................5
3.2 Election ...............................................6
3.3 Qualification...........................................6
3.4 Tenure .................................................6
3.5 Resignation ............................................6
3.6 Vacancies...............................................6
3.7 Chairman of the Board and Vice Chairman of the Board ...6
3.8 President...............................................7
3.9 Vice Presidents ........................................7
3.10 Secretary and Assistant Secretaries ....................7
3.11 Treasurer and Assistant Treasurers .....................7
<PAGE> 3
3.12 Salaries ................................................8
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock .......................................8
4.2 Certificates of Stock ...................................8
4.3 Transfers ...............................................8
4.4 Lost, Stolen or Destroyed Certificates ..................9
4.5 Record Date .............................................9
ARTICLE 5 - Indemnification .........................................9
ARTICLE 6 - General Provisions .....................................10
6.1 Fiscal Year ............................................10
6.2 Corporate Seal .........................................10
6.3 Written Notice of Meetings .............................10
6.4 Waiver of Notice .......................................10
6.5 Voting of Securities ...................................10
6.6 Evidence of Authority ..................................10
6.7 Certificate of Incorporation ...........................10
6.8 Transactions with Interested Parties ...................11
6.9 Severability ...........................................11
6.10 Pronouns ...............................................11
ARTICLE 7 - Amendments .............................................11
7.1 By the Board of Directors ..............................11
7.2 By the Stockholders ....................................12
<PAGE> 4
BYLAWS
OF
LEXON TECHNOLOGIES, INC.
ARTICLE 1 - STOCKHOLDERS
1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the board of directors or the president or, if not so designated, at the
registered office of the corporation.
1.2 ANNUAL MEETINGS. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting, shall be held on the second Tuesday of the fourth
month after the end of the Corporation's fiscal year or at such other time as
fixed by the board of directors or the president. If this date shall fall upon a
legal holiday, then such meeting shall be held on the next succeeding business
day at the same hour. If no annual meeting is held in accordance with the
foregoing provisions, the board of directors shall cause the meeting to be held
as soon thereafter as convenient or a special meeting may be held in lieu of the
annual meeting, and any action taken at that special meeting shall have the same
effect as if it had been taken at the annual meeting, and in such case all
references in these Bylaws to the annual meeting of the stockholders shall be
deemed to refer to such special meeting.
1.3 SPECIAL MEETINGS. Special meetings of stockholders may be called at any
time by the chairman of the board of directors, by the board of directors or by
the holders of not less than one- fourth (1/4) of all the shares entitled to
vote at the meeting. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.
1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written notice
of each meeting of stockholders, whether annual or special, shall be given not
less than 10, nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. The notices of all meetings shall
state the place, date and hour of the meeting. The notice of a special meeting
shall state, in addition, the purpose or purposes for which the meeting is
called.
1.5 VOTING LIST. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
1.6 QUORUM. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding are entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
<PAGE> 5
1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these Bylaws by the stockholders present or represented at the meeting and
entitled to vote, although less than a quorum, or, if no stockholder is present,
by any officer entitled to preside at or to act as secretary of such meeting. If
the adjournment is for more than 30 days, or if after the adjournment, a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
1.8 VOTING AND PROXIES. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the secretary of the Corporation. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. No proxy
shall be voted or acted upon after three years from the date of its execution,
unless the proxy expressly provides for a longer period.
1.9 ACTION AT MEETING. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these Bylaws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
1.10 ACTION WITHOUT MEETING. Any action required or permitted to be taken
at any annual or special meeting of stockholders of the Corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - DIRECTORS
2.1 GENERAL POWERS. The business and affairs of the Corporation shall be
managed by or under the direction of a board of directors, who may exercise all
of the powers of the Corporation except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws. In the event
2
<PAGE> 6
of a vacancy on the board of directors, the remaining directors, except as
otherwise provided by law, may exercise the powers of the full board of
directors until the vacancy is filled.
2.2 NUMBER, ELECTION AND QUALIFICATION. The number of directors which shall
constitute the whole board of directors shall be seven (7). The number of
directors may be decreased at any time and from time to time either by the
stockholders or by a majority of the directors then in office, but only to
eliminate vacancies existing by reason of the death, resignation, removal or
expiration of the term of one or more directors. The directors shall be elected
at the annual meeting of stockholders by such stockholders as have the right to
vote in such election. Directors need not be stockholders, of the corporation.
2.3 ENLARGEMENT OF THE BOARD. The number of directors may be increased at
any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 TENURE. Each director shall hold office until the next annual meeting
and until such time as his successor is elected and qualified, or until his
earlier death, resignation or removal.
2.5 VACANCIES. Unless and until filled by the stockholders, any vacancy in
the board of directors, however occurring, including a vacancy resulting from An
increase in the number of directors, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is elected
and qualified, or until his earlier death, resignation or removal.
2.6 RESIGNATION. Any director may resign by delivering his written
resignation to the Corporation at its principal office or to the secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
2.7 REGULAR MEETINGS. Regular meetings of the board of directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the board of directors,
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the board of
directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.8 SPECIAL MEETINGS. Special meetings of the board of directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the chairman of the Board, president or two or more directors, or
by one director in the event that there is only a single director in office.
2.9 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of directors
shall be given to each director by the secretary or one of the directors calling
the meeting. Notice shall be duly given
3
<PAGE> 7
to each director: (i) by giving notice to such director in person or by
telephone at least 48 hours in advance of the meeting; (ii) by sending a
telegram or telex, or delivering written notice by hand to his last known
business or home address at least 48 hours in advance of the meeting; or (iii)
by mailing written notice to his last known business or home address at least 72
hours in advance of the meeting. A notice or waiver of notice of a meeting of
the board of directors need not specify the purpose of the meeting.
2.10 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members of
any committee designated by the directors may participate in a meeting of the
board of directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2. 11 QUORUM. A majority of the whole board of directors shall constitute a
quorum at all meetings of the board of directors. In the event one or more of
the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each such director so disqualified; provided,
however, that in no case shall less than one-third (1/3) of the whole board of
directors constitute a quorum. In the absence of a quorum at any such meeting, a
majority of. the directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting, until a quorum
shall be present.
2.12 ACTION AT MEETING. At any meeting of the board of directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these Bylaws.
2.13 ACTION BY CONSENT. Any action required or permitted to be taken at any
meeting of the board of directors or of any committee of the board of directors
may be taken without a meeting, if all members of the board of directors or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the board of directors or
committee.
2.14 REMOVAL. Any one or more or all of the directors may be removed, with
or without cause, by the holders of a majority of the shares then entitled to
vote at an election of directors, except that: (i) the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series; and (ii) in the case of a corporation having cumulative voting,
if less than the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire board of directors.
2.15 COMMITTEES. The board of directors may, by resolution passed by a
majority of the whole board of directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member of any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or
4
<PAGE> 8
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the board of directors as provided in subsection (a) of
Section 151 of the General Corporation Law of the State of Delaware, fix the
designations and any of the preferences of right's of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for shares of
any other class or classes or any other series of the same or any other class or
classes of stock of the Corporation or fix the number of shares of any series of
stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and unless the resolution, Bylaws or Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger. Each such committee shall keep minutes
and make such reports as the board of directors may from time to time request.
Except as the board of directors may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Bylaws for the board of
directors.
2.16 COMPENSATION OF DIRECTORS. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings as
the board of directors may from time to time determine. No such payment shall
preclude any director from serving the Corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - OFFICERS
3.1 GENERAL. The officers of the Corporation shall consist of a chairman of
the board, a president, a secretary, a treasurer and such other officers with
such other titles as the board of directors may determine, including a vice
chairman of the board, and one or more vice presidents, assistant treasurers,
and assistant secretaries. The board of directors may appoint such other
officers with such other powers and duties as it may deem appropriate.
3.2 ELECTION. The chairman of the board, president, treasurer and secretary
shall be elected annually by the board of directors at its first meeting
following the annual meeting of stockholders. Other officers may be appointed by
the board of directors at such meeting or at any other meeting.
5
<PAGE> 9
3.3 QUALIFICATION. No officer need bea stockholder. Any two or more offices
may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering his
written resignation to the Corporation at its principal office or to the
president or secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the board of directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 VACANCIES. The board of directors nay fill any vacancy occurring in any
office for any reason and may, in its discretion, leave unfilled for such period
as it may determine any offices other than those of president, treasurer and
secretary. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 CHAIRMAN OF THE BOARD AND VICE CHAIRMAN OF THE BOARD. The chairman of
the board of directors shall be the chief executive officer of the Corporation.
Subject to the direction of the board of directors, the chairman of the board of
directors shall have general charge and supervision of the business of the
Corporation, and shall have full authority to take all lawful actions necessary
to implement corporate and business policy established by the board of
directors. In addition, the chairman of the board of directors shall perform
such duties and possess such other powers as are assigned to him by the board of
directors. Unless otherwise provided by the board of directors, the chairman of
the board of directors shall preside at all meetings of the stockholders and the
board of directors. The board of directors may appoint a vice chairman of the
board of directors who may, in the absence or disability of the chairman,
perform the duties and exercise and powers of the chairman and perform such
other duties and possess such other powers as from time to time are authorized
by the board of directors.
3.8 PRESIDENT. The president shall be the chief operating officer of the
Corporation and shall have charge and supervision of the day to day business
operations of the Corporation, subject to the authority of the chairman of the
board of directors and of the board of directors. Unless the board of directors
or chairman of the board of directors shall otherwise direct, all executive
officers of the
6
<PAGE> 10
Corporation shall report, directly or through their immediate superior officers,
to the president. The president shall perform such other duties and shall have
such other powers as the board of directors may from time to time prescribe.
3.9 VICE PRESIDENTS. The vice president shall perform such duties and shall
have such powers as the board of directors, chairman of the board of directors
or the president may from time to time prescribe. The vice president shall
discharge the duties of the president when the president, for any reason, cannot
discharge the duties of his office. He shall have such other powers and perform
such other duties as shall be prescribed by the directors.
Any assistant vice presidents shall perform such duties and possess such powers
as the board of directors, the chairman of the board of directors, the president
or the vice president may from time to time prescribe.
3.10 SECRETARY AND ASSISTANT SECRETARIES. The secretary shall perform such
duties and shall have such power as the board of directors, chairman of the
board of directors or the president may from time to time prescribe. In
addition, the secretary shall perform such duties and have such powers as are
incident to the office of the secretary, including without limitation, the duty
and power to give notices of all meetings of stockholders and special meetings
of the board of directors, to attend all meetings of stockholders and the board
of directors and keep a record of the proceedings, to maintain a stock ledger
and prepare lists of stockholders and their addresses as required, to be
custodian of corporate records and the corporate seal if any, and to affix and
attest to the same on documents.
Any assistant secretary shall perform such duties and possess such powers as the
board of directors, the chairman of the board of directors, the president or the
secretary may from time to time prescribe. In the event of the absence,
inability or refusal to act of the secretary, the assistant secretary (or if
there be more than one, the assistant secretaries in the order determined by the
board of directors) shall perform the duties and exercise the powers of the
secretary.
In the absence of the secretary or any assistant secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate a
temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. The treasurer shall perform such
duties and shall have such powers as from time to time are assigned to him by
the board of directors, the chairman of the board of directors or the president.
In addition, the treasurer shall perform such duties and have such powers as are
incident to the office of treasurer, including without limitation the duty and
power to keep and be responsible for all funds and securities of the
Corporation, to deposit funds of the corporation in depositories selected in
accordance with these Bylaws, to disburse such funds as ordered by the board of
directors, the chairman of the board of directors, the president or any vice
president of the Corporation so authorized to act by specific authorization of
the board of directors or chairman of the Directors, to make proper accounts of
such funds, and to render, as required by the board of directors, chairman of
the board of directors or president, statements of all such transactions and of
the financial condition of the Corporation.
7
<PAGE> 11
The assistant treasurers shall perform such duties and possess such powers as
the board of directors, the chairman of the board of directors, the president or
the treasurer may from time to time prescribe. In the event of the absence,
inability or refusal to act of the treasurer, the assistant treasurer (or if
there shall be more than one, the assistant treasurers in the order determined
by the board of directors) shall perform the duties and exercise the powers of
the treasurer.
3.12 SALARIES. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the board of directors.
ARTICLE 4 - CAPITAL STOCK
4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the board of directors in such manner, for such
consideration and on such terms, as the board of directors may determine.
4.2 CERTIFICATES OF STOCK. Every holder of stock of the Corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the board of directors, certifying the number and class of shares owned by
him in the Corporation. Each such certificate shall be signed by, or in the name
of, the Corporation by the chairman or vice chairman, if any, of the board of
directors, or the president or a vice president, and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
Corporation. Any or all of the signatures on the certificate may be a facsimile.
Each for shares of stock which are subject to any restriction on transfer
pursuant to the Certificate of Incorporation, the Bylaws, applicable securities
laws or any agreement among any number of shareholders or among such holders and
the Corporation shall have conspicuously noted on the face or back of the
certificate either the full text of the restriction or a statement of the
existence of such restriction.
4.3 TRANSFERS. Except as otherwise established by rules and regulations
adopted by the board of directors, and subject to applicable laws, shares of
stock may be transferred on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the Corporation or its transfer agent may reasonable require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these Bylaws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes:
including the payment of dividends and the right to vote with respect to such
stock, regardless of any transfer, pledge or other disposition of such stock
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these Bylaws.
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4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen or destroyed, upon such terms and conditions as the board
of directors may prescribe, including the presentation of reasonable evidence of
such loss, theft or destruction and the giving such indemnity as the board of
directors may require for the protection of the Corporation or any transfer
agent or registrar.
4.5 RECORD DATE. The board of directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 days prior to any other
action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary shall be the day on which the
first written consent is expressed. The record date for determining stockholders
for any other purpose shall be at the close of business on the date on which the
board of directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
ARTICLE 5 - INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by Section 145 of the
General Corporation Law of the State of Delaware, as that Section may be amended
and supplemented from time to time, indemnify any director, officer or trustee
which it shall have power to indemnify under that Section against any expenses,
liabilities or other matters referred to in or covered by that Section. The
indemnification provided for in this Article: (i) shall not be deemed exclusive
of any other rights to which those, indemnified may be entitled under any bylaw,
agreement or vote of stockholders or disinterested directors or otherwise, both
as to action in their official capacities and as to action in another capacity
while holding such office; (ii) shall continue as to a person who has ceased to
be a director, officer or trustee; and (iii) shall inure to the benefit of the
heirs, executors and administrators of such, a person. The Corporation's
obligation to provide indemnification under this Article shall be offset to the
extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
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<PAGE> 13
ARTICLE 6 - GENERAL PROVISIONS
6.1 FISCAL YEAR. The fiscal year of the Corporation shall be determined by
the board of directors.
6.2 CORPORATE SEAL. The corporate seal, if any, shall be in such form as
shall be approved by the board of directors.
6.3 WRITTEN NOTICE OF MEETINGS. Whenever written notice is required to be
given to any person pursuant to law, the Certificate of Incorporation or these
Bylaws, it may be given to such person, either personally or by sending a copy
thereof by first class mail, or by telegram, charges prepaid, to his address
appearing on the books of the Corporation, or to his business or other address
supplied by him to, the Corporation for the purpose of notice. If the notice is
sent by first class mail or by telegraph, it shall be deemed to have been given
to the person entitled thereto when deposited in the United States mail or with
a telegraph office for transmission to such person. Such notice shall specify
the place, day and hour of the meeting and, in case of a special meeting of the
shareholders, the general nature of the business to be transacted.
6.4 WAIVER OF NOTICE. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these Bylaws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.5 VOTING OF SECURITIES. Except as the directors may otherwise designate,
the president or treasurer may waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for this Corporation
(with or without power of substitution) at any meeting of stockholders or
shareholders of any other Corporation or organization, the securities of which
may be held by this Corporation.
6.6 EVIDENCE OF AUTHORITY. A certificate by the secretary or an assistant
secretary, or a temporary secretary, as to any action taken by the stockholders
directors, a committee or any officer of representative of the Corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
6.7 CERTIFICATE OF INCORPORATION. All references in these Bylaws to the
Certificate of Incorporation shall be deemed to refer to the certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
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6.8 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction
between the Corporation and one or more of the directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of directors or a committee of the
board of directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest as to the
contract or transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in good
faith authorized the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the board of directors, a
committee of the board of directors, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee which authorizes
the contract or transaction.
6.9 SEVERABILITY. Any determination that any provision of these Bylaws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these Bylaws.
6.10 PRONOUNS. All pronouns used in these Bylaws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 7 - AMENDMENTS
7.1 BY THE BOARD OF DIRECTORS. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
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7.2 BY THE STOCKHOLDERS. These Bylaws may be altered, amended or repealed
or new Bylaws may be adopted by the affirmative vote of. the holders of a
majority of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alternation,
amendment, repeal or adoption of new Bylaws shall have been stated in the notice
of such special meeting.
<PAGE> 1
EXHIBIT 4.1
INTERIM LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered into
effective the 26th day of March, 1999, by and between MARK SCHARMANN, an
individual ("Lender"), and CHICAGO MAP CORPORATION, an Illinois corporation
("Borrower").
RECITAL
Lender will make a loan to Borrower in the principal sum of $100,000
(the "Loan"). Borrower is applying all of the Loan proceeds for general
corporate purposes associated with the business operations of the Borrower. Such
Loan is being made in anticipation of the acquisition by Rexford, Inc., a
Delaware corporation, an entity in which the Lender is a controlling principal
("Rexford"), of all of the issued and outstanding common stock of the Borrower
pursuant to an Agreement and Plan of Reorganization (the "Acquisition
Agreement"). As an inducement to Lender to make such Loan, on completion of the
reorganization contemplated under the Acquisition Agreement, Borrower will to
issue to Lender a common stock purchase warrant to purchase up to 100,000 shares
of Borrower's common stock at an exercise price of $2.50 per share.
AGREEMENT
NOW, THEREFORE, in reliance upon the recitals set forth above and for
an in consideration of the mutual promises and covenants contained herein and
the mutual benefits to the parties to be derived from this Agreement, it is
hereby agreed as follows:
ARTICLE I
LOAN
1.1 Amount. Subject to the terms and conditions set forth herein, the
Lenders shall loan to Borrower the principal amount of $100,000, and Borrower
shall execute and deliver to Lender a promissory note in the form attached
hereto as Exhibit A and incorporated herein by this reference (the "Note"),
subject to all the terms, conditions, and covenants of this Agreement.
1.2 Interest. The Loan made pursuant to the terms of this Agreement
shall bear interest on the unpaid balance at one percent (1%) per month from the
date of the Note until payment in full. The principal and interest evidenced by
the Note, together with any extensions, modifications, renewals, or additional
loans; the performance of the covenants and agreements of Borrower contained
herein; and the obligations of Borrower under the terms of the accompanying
security agreement attached hereto, shall be hereinafter referred to
collectively as the "Obligation."
1.3 Security Agreement. As security for the Obligation, including any
modifications, extensions, or renewals thereof, Borrower will (i) execute the
Security Agreement attached hereto as Exhibit B and incorporated herein by this
reference (the "Security Agreement"), granting Lender a security interest in all
the accounts receivable of the Borrower, and (ii) deliver to the escrow agent
(in accordance with Section 1.6) a certificate representing 250,000 shares of
Rexford's common stock (the "Collateral Shares"), which Collateral Shares
represent a portion
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of the 10,500,000 shares of Rexford's common stock to be issued to the
Borrower's Stockholders under the Acquisition Agreement, as more particularly
set forth therein.
1.4 Payment. The entire amount of the funds loaned under the Note,
including principal and interest, is due and payable within three (3) months
from the date hereof or immediately in the event of default by Borrower as
hereinafter provided.
1.5 Warrant. As further consideration for the Loan, on completion of
the transactions contemplated under the Acquisition Agreement (including giving
effect to the 70-for-1 reverse split contemplated herein), Borrower shall issue
to Lender a common stock purchase warrant (the "Warrant") to purchase up to
100,000 shares of the Borrower's common stock, at an exercise price of $2.50 per
share, all in accordance with the terms and conditions set forth in the form of
Warrant, attached hereto as Exhibit C and incorporated herein by this reference.
1.6 Escrow of Collateral Shares. As additional security for the
Obligation, Borrower will execute the Escrow Agreement attached hereto as
Exhibit D and incorporated herein by this reference (the "Escrow Agreement"),
that provides for the escrow of the Collateral Shares until the Loan is paid in
full or an event of default by Borrower occurs as hereinafter provided.
ARTICLE II
CONDITIONS OF LENDER'S OBLIGATIONS
2.1 Satisfaction of Conditions. Borrower shall have performed and
satisfied in all material respects all obligations, conditions, and covenants
required by this Agreement to be performed and satisfied by it at or before the
execution of this Agreement.
2.2 Certain Documents. The obligation of Lender to make its Obligation
is subject to the condition that all of the following documents shall have been
received by Lender:
(a) Resolutions of the Borrower's board of directors approving
and authorizing the execution, delivery, and performance of this
Agreement and all other Obligation documents executed by them,
certified as of the date of this Agreement by the Borrower's corporate
secretary;
(b) The Note in the form of Exhibit A attached hereto, drawn
to the order of Lender, with appropriate insertions, executed as
appropriate by Borrower;
(c) The Security Agreement in the form of Exhibit B attached
hereto, with appropriate insertions, executed as appropriate by
Borrower;
(d) Form UCC-1, executed as appropriate by Borrower; and
(e) This Agreement executed by Borrower and Lender.
2.3 Other Documents. Following completion of the Acquisition Agreement,
Borrower agrees that the following documents will be delivered by Borrower to
Lender:
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<PAGE> 3
(a) The Warrant in the form of Exhibit C attached hereto, with
appropriate insertions, executed as appropriate by Borrower; and
(b) The Collateral Shares with a stock power executed in blank
with signature medallion guaranteed, accompanied by the Escrow
Agreement in the form of Exhibit D attached hereto, with appropriate
insertions, executed by all the parties thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to obtain Lender's reliance and agreement to enter into this
Agreement and the transactions contemplated hereby, Borrower makes the following
representations and warranties:
3.1 Corporate Standing. Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Illinois
and has the corporate power and authority to own and operate its properties and
to carry on its business as now conducted. Neither the ownership of its
properties nor the nature of its business requires Borrower to be qualified to
do business in any jurisdiction other than the state of Illinois.
3.2 No Conflicting Agreements. The execution and delivery of this
Agreement and the consummation of the transactions provided for herein will not
violate or conflict with or result in the breach of any provision or covenant or
constitute a default or an event which with notice or lapse of time or both
would constitute a default under, or accelerate the performance required by, or
result in the termination of any agreement, stipulation, order, judgment, or
decree to which Borrower is a party or is subject or which binds any of the
properties or assets of Borrower.
3.3 Litigation. Borrower is not aware of any claim or pending
litigation that would prevent or encumber its power to execute, deliver, or
consummate this Agreement and the transactions contemplated hereby.
3.4 Binding Obligation. This Agreement, the Note, the Security
Agreement and the documents related thereto have been duly executed and
delivered by Borrower and constitute legal, valid, and binding obligations of
Borrower and are enforceable against them in accordance with their terms, except
as the enforceability may be affected by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditor's rights generally and to the extent the
availability of certain remedies may be limited by certain equitable principles
of generally applicability.
3.5 Financial Condition. The financial statements of Borrower provided
to Lender have been prepared in accordance with generally accepted accounting
principles, consistently applied, and are complete, correct, and accurately
present the financial position of Borrower as of December 31, 1998.
3.6 No Material Changes. There have been no material adverse changes in
the financial condition of Borrower since the date of the latest financial
statements.
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<PAGE> 4
3.7 No Existing Default. Borrower is not in default nor has any event
occurred that with notice or the passage of time or both would constitute a
default under any agreement, indenture, or contract relating to any material
obligation for borrowed money or any form of credit agreement whatsoever,
including, but without limitation, any installment purchase agreements.
ARTICLE IV
NEGATIVE COVENANTS OF BORROWER
Borrower agrees that it will not, prior to the satisfaction of all its
obligations under the terms of this Agreement, the Note, the Security Agreement,
and the related documents, do any of the following:
4.1 Recapitalization. Borrower will not issue any equity or debt
securities or any instruments convertible into equity securities or amend the
terms and conditions of any of the foregoing, not shall it split or reclassify
or change the rights of any of its authorized stock or redeem, purchase, or
otherwise acquire any shares of its equity stock.
4.2 Satisfaction of Existing Obligations. Other than in the ordinary
course of business as now conducted, Borrower shall not discharge or satisfy any
lien, mortgage, pledge, charge, security, or other encumbrance on any of the
material assets or properties, nor will Borrower cause to be created or suffer
to exist any additional lien, mortgage, pledge, charge, security, or other
encumbrance on any of the material assets or properties.
4.3 Amendment of Contracts. Other than in the ordinary course of
business as now conducted, Borrower shall not engage in any transaction that
would create or result in any additional indebtedness or pay any obligation or
liability or enter into, terminate, or amend any agreement or transfer or grant
any rights under any lease, license, or other agreement or in any manner dispose
of or acquire any material amount of assets.
4.4 Continuation of Business. Borrower shall use its best efforts
consistent with prudent business practices to preserve and maintain the business
and business organization of borrower intact; to preserve its goodwill; to pay
its obligations as they mature; and to retain Borrower's relationship with its
customers.
4.5 Regulatory Compliance. Borrower shall not violate in any material
respect any law, rule, regulation, order, or ordinance applicable to the conduct
of the business of Borrower or relinquish or terminate any rights,
qualifications, license, or permits that would materially affect the financial
condition or the business of Borrower.
4.6 Transfer of Sale of Technology. Borrower shall not sell or in any
other manner transfer any asset, license, permit, patent, royalty, or other
governmental authorization of Borrower or cause or permit Borrower to purchase
or in any other manner acquire for consideration any material asset, license,
permit, patent, royalty, or other governmental authorization.
4.7 Sale of Assets. Other than those negotiations or agreements
associated with the consummation of the Acquisition Agreement between Borrower
and Rexford, Borrower shall not
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<PAGE> 5
enter into any negotiation or agreement or entertain any proposals relating to
the sale of all or substantially all the assets or stock of Borrower or merge,
consolidate, liquidate, or dissolve Borrower.
4.8 Guarantor or Surety. Borrower shall not guarantee or act as surety
for any indebtedness of any other entity or person.
ARTICLE V
AFFIRMATIVE COVENANTS OF BORROWER
5.1 Use of Loan Proceeds. Borrower shall utilize 100% of the proceeds
from the loan contemplated hereby for _____________________ and the direct costs
associated uses.
5.2 Financial Records. Borrower shall maintain adequate books,
accounts, and records in accordance with the practices of prudent businessmen
and in accordance with generally accepted accounting principles, consistently
applied, and shall make all such records available for inspection and
duplication, by Lender or its agents at any time during reasonable business
hours.
5.3 Prior Encumbrances. Borrower will timely pay and otherwise perform
each and every term, covenant, or condition required to be performed by it
pursuant to any priority lien or encumbrance on any property securing repayment
of the Obligation.
5.4 Taxes. Borrower shall duly pay and discharge all taxes,
assessments, and charges owed by or levied against Borrower or any of the
properties or assets belonging to Borrower.
5.5 Insurance. Borrower shall insure and keep insured at all times all
of their property of an insurable nature, with insurers who are financially
sound and responsible, against loss or damage from fire and other risks,
casualties, or contingencies, and shall carry such public liability as is
reasonably prudent in the conducting of Borrower's business.
5.6 Compliance With Laws. Borrower shall take whatever actions are
necessary to comply with all statutes and regulations governing the activities
and operations of Borrower and maintain its corporate existence and right to
carry on business in each state or other jurisdiction in which Borrower now
conducts business.
5.7 Additional Documents. Borrower shall promptly execute and deliver
or cause to be executed and delivered, any other instruments or documents which
Lender may reasonably request or which may be required in order to consummate
the transactions contemplated by this Agreement.
5.8 Legal Proceedings. Borrower is not now a party to any legal
proceedings and shall promptly notify Lender of any legal proceedings instituted
against Borrower.
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<PAGE> 6
ARTICLE VI
DEFAULT
6.1 Events of Default. Upon the occurrence and during the continuance
of any one or more of the events hereinafter enumerated, Lender may forthwith or
at any time thereafter during the continuance of any such event, by notice in
writing to Borrower, declare the unpaid balance of the principal and interest
then accrued on the Note to be immediately due and payable, and the principal
and interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of dishonor,
all of which are hereby expressly waived by Borrower, such events being as
follows:
(a) Default in the payment of the principal and interest of
the Note or any portion thereof when the same shall become due and
payable, whether at maturity as therein expressed, by acceleration, or
otherwise, unless cured within 10 days after notice thereof by the
holder of such Note to Borrower;
(b) The creditors under any priority secured indebtedness of
Borrower shall declare the amounts due thereunder to be due and payable
following default;
(c) Default in the due observance or performance of any other
covenant or obligation contained in this Agreement, in the Security
Agreement, or the Acquisition Agreement unless observed or performed
within 10 days after notice thereof to Borrower by Lender; provided, if
compliance is not possible within 10 days, default shall occur upon
failure within 10 days to take steps that will produce compliance as
soon as is reasonably practicable;
(d) Any representation or warranty herein or in the
Acquisition Agreement made by Borrower proves to have been untrue in
any material respect as of the date as of which the facts therein set
forth were stated or certified, and corrective measures, satisfactory
to Lender with respect thereto shall not have been taken within 10 days
after notice thereof to Lender; provided, if compliance is not possible
within 10 days, default shall occur upon failure within 10 days to take
steps that will produce compliance as soon as is reasonably
practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or
a voluntary petition seeking reorganization, or shall file an answer
admitting the jurisdiction of the court and any material allegations of
an involuntary petition filed pursuant to any act of Congress relating
to bankruptcy or to any act purporting to be amendatory thereof, or
shall be adjudicated bankrupt, or shall make an assignment for the
benefit of creditors, or shall apply for or consent to the appointment
of any receiver or trustee for Borrower, or of all or any substantial
portion of its property, or Borrower shall make an assignment to an
agent authorized to liquidate any substantial part of its assets;
(f) An order shall be entered pursuant to any act of Congress
relating to bankruptcy or to any act purporting to be amendatory
thereof approving an involuntary petition seeking reorganization of
Borrower, or an order of any court shall be entered appointing any
receiver or trustee of or for Borrower, or any receiver or trustee of
all or
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<PAGE> 7
any substantial portion of the property of Borrower, or a writ or
warrant of attachment or any similar process shall be issued by any
court against all or any substantial portion of the property of
Borrower, and such order approving a petition seeking reorganization or
appointing a receiver or trustee is not vacated or stayed, or such
writ, warrant of attachment, or similar process is not released or
bonded within 60 days after its entry or levy, or
(g) The rendering against the Borrower of final judgment for
the payment of money in excess of $25,000 and failure of the Borrower
to appeal therefrom (or from the order, decree, or process pursuant to
which such judgment was granted, passed, entered, or affirmed) and
obtain a stay of execution thereof within the period prescribed by law
for appeal, or to have such judgment discharged and satisfied within 60
days after the expiration of such period or of the period of any such
stay, whichever shall later occur.
6.2 Procedure on Default. Upon the occurrence of an event of default,
and at any time thereafter, Lender may elect to declare the entire Obligation
hereby secured immediately due and payable:
(a) In the event of default in the payment of said Obligation
when due or declared due, Lender, shall have all the rights and
remedies of a secured party and shall be entitled to avail itself of
all such other rights and remedies that may now or hereafter exist at
law or in equity for the collection of the Obligation and the
enforcement of the covenants herein and the foreclosure of the security
interest created hereby and resort to any remedy provided hereunder or
provided by the Illinois Uniform Commercial Code, or by any other law
of the state of Illinois, which shall not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies; and
(b) The requirement of reasonable notice to Borrower of the
time and place of any public sale of the security or of the time after
which any private sale, or any other intended disposition thereof is to
be made, shall be met if such notice is mailed, postage prepaid, to
Borrower at the address of such party designated below, at least 30
days before the date of any public or private sale or other disposition
is to be made.
6.3 Defaults Upon Prior Indebtedness. Upon the default by Borrower of
any term, covenant, or condition required to be performed by it on any priority
secured indebtedness or the receipt by Borrower from any such priority secured
creditor of notice of any default under such indebtedness, whether or not
repayment of the indebtedness is accelerated, Borrower shall promptly advise
Lender in writing of the nature and amount of default and of the action, if any,
threatened by such priority secured creditor. Notwithstanding the Borrower's
obligation to cure any and all such defaults, Lender may, but shall not be
obligated to do so, in the name, place, and stead of Borrower and, in the case
of such curative efforts by Lender, succeed to all of the rights, remedies and
security of such priority creditor.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Assignment of Agreement. Except as expressly provided, neither the
rights nor the obligations of the parties to this agreement may be assigned or
delegated by either party in whole or in part without the prior written consent
of the other party.
7.2 Governing Law. Unless otherwise provided herein, this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the state of Illinois.
7.3 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if personally delivered to it or, if sent
by facsimile transmission or other electronic communication confirmed by
registered or certified mail, postage prepaid, or if sent by prepaid telegram
addressed as follows:
<TABLE>
<S> <C> <C> <C>
If to Lender, to: MARK A. SCHARMANN If to Borrower, to: CHICAGO MAP CORPORATION
1661 Lakeview Circle Attn: Mike Barnett
Ogden, UT 84403 15419 127th Street
Fax No.: 801-399-3688 Lemont, IL 60439
Fax No.: 708-257-9678
with copies to: TAYLOR AND ASSOCIATES with copies to: RIECK & CROTTY
Attn: Elliott N. Taylor, Esq. Attn: Ron Duplack, Esq.
3090 East 3300 South, Suite 400
Salt Lake City, UT 84109
Fax No.: 801-463-6085 Fax No.: 312-726-0647
</TABLE>
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered or sent by facsimile
transmission or other electronic communication, three days after the date so
mailed, or one day after the date so telegraphed or sent by overnight delivery.
7.4 Title and Captions. Section titles or captions to this Agreement
are for convenience and reference only and shall not be deemed part of this
Agreement and shall not be interpreted to define, limit, augment extend, or
describe the scope, content, or intent of any part of parts of this Agreement.
7.5 Pronouns and Plurals. Whenever the context may require, all
pronouns used herein shall include the corresponding masculine, feminine, or
neuter forms and the singular form of pronouns and verbs shall include the
plural and vice versa. Each of the foregoing genders and plurals is understood
to refer to a corporation, partnership, or other legal entity when the context
so requires.
7.6 Further Action. The parties shall execute and deliver all documents
or instruments, provide all information, and take or forebear from all such
actions as may be necessary or appropriate to achieve the purpose of this
Agreement.
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7.7 Binding Effect Upon Successors. This Agreement shall be binding
upon, and insure to the benefit of, the parties and their respective heirs,
executors, administrators, successors, legal representatives, and assigns;
provided, that this provision shall not be construed as permitting assignment,
substitution, delegation, or other transfer of rights or obligations, except
strictly in accordance with the provisions of the other sections of this
Agreement.
7.8 Creditors. Unless expressly provided in this Agreement, none of the
provisions of this Agreement shall be for the benefit of, or enforceable by, any
creditors of any party hereto.
7.9 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, promise, or condition of this Agreement or to
exercise any right or remedy consequent upon a breach thereof shall constitute a
waiver of any such breach or any other covenant, duty, promise, or condition.
Any party may, by notice delivered in the manner provided in this Agreement, but
shall be under no obligation to, waive any of its rights or any conditions to
its obligations hereunder, or any duty, obligation, or covenant of any other
party. No waiver shall affect or alter the remainder of this Agreement, but each
and every other covenant, duty, promise, and condition hereof shall continue in
force and effect with respect to any other then existing or subsequently
occurring breach.
7.10 Severability. In the event that any condition, covenant, or other
provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement and shall in no way affect any other covenant or condition herein
contained. If such condition, covenant, or other provision shall be deemed
invalid due to its scope or breadth, such provision shall be deemed valid to the
extent of the scope or breadth permitted by law.
7.11 Exhibits. All exhibits annexed to this Agreement and any documents
to be delivered herewith are expressly made a part of this Agreement as fully as
though completely set forth in it. All references to this Agreement, either in
the Agreement itself or in any of such writings, shall be deemed to refer to and
include this Agreement itself or in any of such exhibits or writings. Any breach
of or default under any provision of any of such writing shall, for all
purposes, constitute a breach or default under this Agreement and all other such
writings.
7.12 Attorneys' Fees. Should either party take any legal action to
enforce any of the terms or provisions of this Agreement, or if any costs are
incurred by reason of breach or default in any of the covenants,
representations, warranties, terms, or conditions of this Agreement, the
non-defaulting party shall be entitled to recover any costs, including
attorneys' fees incurred in enforcing the obligations of the other party under
the terms of this Agreement or in collecting any judgment that may be entered.
7.13 Time of Essence. Time is of the essence in the performance of the
duties, covenants, or obligations of the parties under the terms of this
Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LENDER: BORROWER:
MARK A. SCHARMANN, CHICAGO MAP CORPORATION,
an Individual an Illinois corporation
/s/ Mark A. Scharmann By: /s/ Steven J. Peskaitis
- ------------------------------ -----------------------------
Mark A. Scharmann Its Duly Authorized Officer
10
<PAGE> 1
EXHIBIT 4.2
PROMISSORY NOTE
$100,000.00 Date: March 26, 1999
FOR VALUE RECEIVED, CHICAGO MAP CORPORATION, an Illinois corporation
("Borrower"), promises to pay to MARK A. SCHARMANN, an individual ("Lender"), or
order, the principal amount of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) with
interest on the unpaid principal balance at one percent (1%) per month (the
"Loan").
This Promissory Note is the Note referred to as Exhibit A to the
Interim Loan Agreement of even date herewith entered into by Borrower and
Lender. Pursuant to the terms of the Interim Loan Agreement, Lender has made the
Loan to Borrower as follows:
1. Payment and Term. The Loan shall bear interest on the principal
balance at 1% per month from and after the date thereof until payment in full.
The principal and interest, is due and payable as follows:
(a) The Note is due in full three (3) months from the date
hereof, unless extended by Lender pursuant to written notice thereof,
or such other agreement as may be entered into between Lender and
Borrower with respect thereto; and
(b) Borrower may, but is not obligated to, make periodic
payments in part or full payment of the Loan, until due.
2. Application of Payments. Unless applicable law provides otherwise,
all payments received by Lender shall be applied by Lender first in payment of
interest payable and next to the principal.
3.1 Events of Default. Upon the occurrence and during the continuance
of any one or more events hereinafter enumerated, Lender may forthwith or at any
time thereafter during the continuance of any such event, by notice in writing
to Borrower, declare the unpaid balance of the principal and interest then
accrued on the Note to be immediately due and payable, and the principal and
interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of dishonor,
all of which are hereby expressly waived by Borrower, such events being as
follows:
(a) Default in the payment of the principal and interest of
the Note or any portion thereof when the same shall become due and
payable, whether at maturity as therein expressed, by acceleration, or
otherwise, unless cured within 10 days after notice thereof by the
holder of such Note to Borrower;
<PAGE> 2
(b) The creditors under any priority secured indebtedness of
Borrower shall declare the amounts due thereunder to be due and payable
following default;
(c) Default in the due observance or performance of any other
covenant or obligation contained in the Interim Loan Agreement, this
Note or the Acquisition Agreement unless observed or performed within
10 days after notice thereof to Borrower by Lender; provided, if
compliance is not possible within 10 days, default shall occur upon
failure within 10 days to take steps that will produce compliance as
soon as is reasonably practicable;
(d) Any representation or warranty herein or in the
Acquisition Agreement made by Borrower proves to have been untrue in
any material respect as of the date as of which the facts therein set
forth were stated or certified, and corrective measures, satisfactory
to Lender with respect thereto shall not have been taken within 10 days
after notice thereof to Lender; provided, if compliance is not possible
within 10 days, default shall occur upon failure within 10 days to take
steps that will produce compliance as is reasonably practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or
a voluntary position seeking reorganization, or shall file an answer
admitting the jurisdiction of the court and any material allegations of
an involuntary petition filed pursuant to any act of Congress relating
to bankruptcy or to any act purporting to be amendatory thereof, or
shall be adjudicated bankrupt, or shall make an assignment for the
benefit of creditors, or shall apply for or consent to the appointment
of any receiver or trustee for Borrower, or of all or any substantial
portion of its property, or Borrower shall make an assignment to an
agent authorized to liquidate any substantial part of its assets;
(f) An order shall be entered pursuant to any act of Congress
relating to bankruptcy or to any act purporting to be amendatory
thereof approving an involuntary petition seeking reorganization of
Borrower, or an order of any court shall be entered appointing any
receiver or trustee of or for Borrower, or any receiver or trustee of
all or any substantial portion of the property of Borrower, or a writ
or warrant of attachment or any similar process shall be issued by any
court against all or any substantial portion of the property of
Borrower, and such order approving a petition seeking reorganization or
appointing a receiver or trustee is not vacated or stayed, or such
writ, warrant of attachment, or similar process is not released or
bonded within 60 days after its entry or levy; or
(g) The rendering against the Borrower of final judgment for
the payment of money in excess of $25,000 and failure of the Borrower
to appeal therefrom (or from the order, decree, or process pursuant to
which such judgment was granted, passed, entered, or affirmed) and
obtain a stay of execution thereof within the period prescribed by law
for appeal, or to have such judgment discharged and satisfied within 60
days after the expiration of such period or of the period of any such
stay, whichever shall later occur.
<PAGE> 3
3.2 Procedure on Default. Upon the occurrence of an event of default,
and at any time thereafter, Lender may elect to declare the entire Note
immediately due and payable.
(a) In the event of default in the payment of said Note when
due or declared due, Lender shall have all the rights and remedies of a
secured party and shall be entitled to avail itself of all such other
rights and remedies that may now or hereafter exist at law or in equity
for the collection of the Note and the enforcement of the covenants
herein and the foreclosure of the security interest created hereby and
resort to any remedy provided hereunder or provided by the Illinois
Uniform Commercial Code, or by any other law of the state of Illinois,
shall not prevent the concurrent or subsequent employment of any other
appropriate remedy or remedies; and
(b) The requirement of reasonable notice to Borrower of the
time and place of any public sale of the security or of the time after
which any private sale, or any other intended disposition thereof is to
be made, shall be met if such notice is mailed, postage prepaid, to
Borrower at the address of such party designated below, at least 30
days before the date of any public or private sale or other disposition
is to be made.
3.3 Defaults Under Prior Indebtedness. Upon the default by Borrower of
any term, covenant, or condition required to be performed by if on any priority
secured indebtedness or the receipt by Borrower from any such priority secured
creditor of notice of any default under such indebtedness, whether or not
repayment of the indebtedness is accelerated, Borrower shall promptly advise
Lender in writing of the nature and amount of default and of the action, if any,
threatened by such priority secured creditor. Notwithstanding the Borrower's
obligation to cure any and all such defaults, Lender may, but shall not be
obligated to do so, in the name, place, and stead of Borrower and, in the case
of such curative efforts by Lender, succeed to all of the rights, remedies, and
security of such priority creditor.
4. Attorneys' Fees. If this Note is placed with an attorney for
collection, or is suit be instituted for collection, or if any other remedy
permitted by law is pursued by Lender, because of any default in the terms and
conditions herein, then in such event, the undersigned agrees to pay reasonable
attorneys' fees, costs, and other expenses incurred by Lender in so doing.
5. Governing Law. This Master Note shall be governed by and construed
and enforced in accordance with the laws of the state of Illinois.
6. Security Interest. Borrower shall execute a Security Agreement and
an Escrow Agreement wherein Borrower shall grant to Lender a security interest
in the Collateral as defined in the Interim Loan Agreement, sufficient to secure
the obligation created hereunder, which agreements shall be made a part of the
Interim Loan Agreement and this Note and incorporated herein by this reference.
<PAGE> 4
BORROWER:
CHICAGO MAP CORPORATION,
an Illinois corporation
By: /s/ John B. McLean
-----------------------------------------
Its Duly Authorized Representative
<PAGE> 1
EXHIBIT 4.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is effective this 26th day of
March 1999, by and between MARK A. SCHARMANN, an individual ("Lender"), and
CHICAGO MAP CORPORATION, an Illinois corporation ("Borrower").
RECITAL
Contemporaneously with the execution of this Agreement, Lender shall loan
to Borrower the sum of $100,000, all as more particularly set forth in that
certain Interim Loan Agreement of even date hereof between Borrower and Lender
(the "Interim Loan Agreement"). Borrower shall use all of the proceeds of the
funds loaned to Lender pursuant to the manner specified in the Interim Loan
Agreement. The Lender would not have expended credit to Borrower without the
grant by the Borrower of a security interest in favor of the Lender in the
collateral described below. In order to provide security for the payment of the
promissory note (the "Note"), the performance of certain terms, covenants, and
conditions set forth in the Interim Loan Agreement and the various obligations
represented hereby, Borrower is granting to the Lender a security interest in
and to the collateral hereinafter described. The principal and interest
evidenced by the Note, together with any extensions, modifications, or renewals;
the performance of the covenants and agreements of Borrower contained in the
Interim Loan Agreement, and the obligations of the Borrower under this Agreement
are hereinafter referred to collectively as the "Obligation."
AGREEMENT
1. Creation of Security Interest. In consideration of financial
accommodations given, Borrower grants to Lender a security interest in and to
the following described property (hereinafter the "Collateral") to wit:
(a) Accounts receivable, meaning any right of the Borrower to payment
for goods sold or to be sold or for services rendered or to be rendered, no
matter how evidenced, including accounts, accounts receivable, contract
rights, general intangibles, purchase orders, notes, drafts, acceptances
and other forms of obligations and receivables; and
(b) A certificate representing 250,000 shares of the common stock of
Rexford, Inc. (the "Collateral Shares") which Collateral Shares represent a
portion of the 10,500,000 shares of Rexford, Inc. common stock to be issued
to Borrower's stockholders under the Agreement and Plan of Reorganization
(the "Acquisition Agreement") between Rexford, Inc. and the Borrower.
<PAGE> 2
If at any time the Collateral representing the Security Interest hereby granted
should decline in value or become impaired or for any other reason be deemed by
the Lender to be insufficient to secure the payment of all sums due and
compliance with all obligations created under the Obligation, Borrower agrees,
within 24 hours of demand by Lender, to furnish such additional Collateral as
may be satisfactory to the Lender. Unless otherwise defined, the words used
herein shall have the same meaning given them in the Illinois Uniform Commercial
Code as now adopted and as hereafter amended from time to time.
2. Payment of Principal and Interest. The repayment of the indebtedness
evidenced by the Borrower's Note of even date herewith in the principal sum of
$100,000 with interest thereon at one percent 1% per month from and after the
date thereof. The entire amount loaned under the Note is due three (3) months
from the date thereof.
3. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender under the Note shall be applied by Lender first in
payment of interest payable on the Note, next to the principal of the Note, and
last to any other sums secured by this Agreement.
4. Escrow of Collateral Shares. Borrower has executed the Escrow Agreement
attached to the Interim Loan Agreement as Exhibit D and incorporated herein by
this reference (the "Escrow Agreement"), that provides for the escrow of the
Collateral Shares until the Loan is paid in full or an event of default by
Borrower as hereinafter provided.
5. Ownership of Collateral in General. The Borrower owns all the
Collateral absolutely and no other person shall have any interest in the
Collateral; except (a) as disclosed on the date hereof as a matter of public
record in the proper place for filing notices of encumbrances on the respective
kinds of property so affected; and (b) except as warranted or disclosed in the
Interim Loan Agreement. The Borrower will defend any proceeding which may affect
the title to or the Lender's security interest in any Collateral, and will
indemnify the Lender and hold it harmless from all damages to Lender from any
such claim, including all costs and expenses of the Lender's defense.
6. Prior Indebtedness. The Security Interest granted hereby is subordinate
to the following described interests:
Secured Party Collateral Date Filed
----------------- ------------ --------------
<PAGE> 3
7.1 Events of Default. Upon the occurrence and during the continuance of
any one or more of the events hereinafter enumerated, Lender may forthwith or at
any time thereafter during the continuance of any such event, by notice in
writing to Borrower, declare the unpaid balance of the principal and interest
then accrued on the Note to be immediately due and payable, and the principal
and interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of dishonor,
all of which are hereby expressly waived by Borrower, such events being as
follows:
(a) Default in the payment of the principal and interest of the Note
or any portion thereof when the same shall become due and payable, whether
at maturity as therein expressed, by acceleration, or otherwise, unless
cured within 10 days after notice thereof by the holder of such Note to
Borrower;
(b) The creditors under any priority secured indebtedness of Borrower
shall declare the amounts due thereunder to be due and payable following
default;
(c) Default in the due observance or performance of any other
covenant or obligation contained in the Interim Loan Agreement, this
Agreement, or the Acquisition Agreement unless observed or performed within
10 days after notice thereof to Borrower by Lender; provided, if compliance
is not possible within 10 days, default shall occur upon failure within 10
days to take steps that will produce compliance as soon as is reasonably
practicable;
(d) Any representation or warranty herein or in the Acquisition
Agreement made by Borrower proves to have been untrue in any material
respect as of the date as of which the facts therein set forth were stated
or certified, and corrective measures, satisfactory to Lender with respect
thereto shall not have been taken within 10 days after notice thereof to
Lender; provided, if compliance is not possible within 10 days, default
shall occur upon failure within 10 days to take steps that will produce
compliance as is reasonably practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or a
voluntary petition seeking reorganization, or shall file an answer
admitting the jurisdiction of the court and any material allegations of an
involuntary petition filed pursuant to any act of Congress relating to
bankruptcy or to any act purporting to be amendatory thereof, or shall be
adjudicated bankrupt, or shall make an assignment for the benefit of
creditors, or shall apply for or consent to the appointment of any receiver
or trustee for Borrower, or of all or any substantial portion of its
property, or Borrower shall make an assignment to an agent authorized to
liquidate any substantial part of its assets;
(f) An order shall be entered pursuant to any of Congress relating to
bankruptcy or to any act purporting to be amendatory thereof approving an
<PAGE> 4
involuntary petition seeking reorganization of Borrower, or an order of any
court shall be entered appointing any receiver or trustee of or for
Borrower, or any receiver or trustee of all or any substantial portion of
the property of Borrower, or a writ or warrant of attachment or any similar
process shall be issued by any court against all or any substantial portion
of the property of Borrower, and such order approving a petition seeking
reorganization or appointing a receiver or trustee is not vacated or
stayed, or such writ, warrant of attachment, or similar process is not
released or bonded within 60 days after its entry or levy; or
(g) The rendering against the Borrower of final judgment for the
payment of money in excess of $25,000 and failure of the Borrower to appeal
therefrom (or from the order, decree, or process pursuant to which such
judgment was granted, passed, entered, or affirmed) and obtain a stay of
execution thereof within the period prescribed by law for appeal, or to
have such judgment discharged and satisfied within 60 days after the
expiration of such period or of the period of any such stay, whichever
shall later occur.
7.2 Procedure on Default. Upon the occurrence of an event of default, and
at any time thereafter, Lender may elect to declare the entire Obligation hereby
secured immediately due and payable:
(a) In the event of default in the payment of said Obligation when
due or declared due, Lender, shall have all the rights and remedies of a
secured party and shall be entitled to avail itself of all such other
rights and remedies that may now or hereafter exist at law or in equity for
the collection of the Obligation and the enforcement of the covenants
herein and the foreclosure of the security interest created hereby and
resort to any remedy provided hereunder or provided by the Illinois Uniform
Commercial Code, or by any other law of the State of Illinois, shall not
prevent the concurrent or subsequent employment of any other appropriate
remedy or remedies; and
(b) The requirement of reasonable notice to Borrower of the time and
place of any public sale of the security or of the time after which any
private sale, or any other intended disposition thereof is to be made,
shall be met if such notice is mailed, postage prepaid, to Borrower at the
address of such party designated below, at least 30 days before the date of
any public or private sale or other disposition is to be made.
7.3 Defaults Upon Prior Indebtedness. Upon the default by Borrower of any
term, covenant, or condition required to be performed by it on any priority
secured indebtedness or the receipt by Borrower from any such priority secured
creditor of notice of any default under such indebtedness, whether or not
repayment of the indebtedness is accelerated. Borrower shall promptly advise
Lender in writing of the nature and amount of default and of the action, if any,
threatened by such priority secured creditor. Notwithstanding the Borrower's
obligation to cure any and all such defaults, Lender may,
<PAGE> 5
but shall not be obligated to do so, in the name, place and stead of Borrower
and, in the case of such curative efforts by Lender, succeed to all of the
rights, remedies, and security of such priority creditor.
8. Cumulative Remedies. The security interest herein granted shall not be
affected by nor affect any other security taken for the indebtedness hereby
secured, or any part thereof, and any extensions may be made of the indebtedness
and this security interest and any releases may be executed, releasing the
Collateral, or any part thereof within effecting the priority of this security
interest or the validity thereof with reference to any third person, and the
holder of said indebtedness shall not be limited by any election of remedies if
he chooses to foreclose this security interest by suit. All remedies provided in
this Agreement are distinct and cumulative to any other right or remedy under
this Agreement or afforded by law or equity, and may be exercised concurrently,
independently, or successively.
9. Financing Statement. The Borrower agrees that this Agreement shall also
constitute a financing statement under the Illinois Uniform Commercial Code. If
the Lender shall so request, Borrower shall also execute and deliver a financing
statement on form UCC-1 to further evidence such security interest.
10. Notices. All notices consents, waivers, and other communications
hereunder shall be in writing and shall be deemed to have been given when sent
by prepaid air mail letter and shall be addressed to each of the parties at its
address first set forth in the Interim Loan Agreement, or at such other address
as may be designated by notice hereunder.
11. Survival of Warranties and Representations. The representations,
warranties, covenants, agreements, indemnities, and undertakings of the parties
in this Agreement shall not expire with, or be terminated or extinguished by,
the execution and delivery of this Agreement or any document or instrument
contemplated hereby, notwithstanding any investigations of the facts
constituting the basis of the presentations and warranties of another party by
any party hereto or anyone on behalf of any party hereto. Consummation of the
transactions contemplated hereby shall not be deemed or construed as a waiver of
any right or remedy that any party hereto may have or covenant, notwithstanding
any fact or facts that such party knew or should have known at such time.
12. Severability. In the event of this Agreement or the application of any
such provision to any person or circumstance shall conflict with any
jurisdiction, then such conflict shall not affect any other provision of this
Agreement which can be given effect without the conflicting provision and the
remainder of this Agreement or the application of such provisions to persons or
circumstances other than those as to which such provisions are held invalid or
unenforceable, shall not be affected thereby. The invalidity or unenforceability
of this Agreement or any provisions thereof in any jurisdiction shall not affect
the validity or enforceability of this Agreement or of such provision in any
<PAGE> 6
other jurisdiction. To this end, the provisions of this Agreement are declared
to be severable. In the event that any law limiting the amount of interest or
other charges permitted to be collected from the undersigned is interpreted so
that any charge provided for in this Agreement, whether considered separately or
together with other charges that are considered a party of this Agreement,
violates such law, and the Borrower declared by a court having jurisdiction in
the premises to be entitled to the benefit of such law, such charge is hereby
reduced to the extent necessary to eliminate such violation. The amounts, if
any, previously paid to the Lender in excess of the amounts payable to the
Lender computed on the basis of such charges as reduced shall be applied by
Lender to reduce the principal of the indebtedness secured by this Agreement.
13. Modification. This Agreement may not be supplemented, varied, or
rescinded except by a writing which contains an express reference to this
Agreement and which is signed by the party against whom enforcement of the
supplement, variance, or rescission is asserted.
14. Governing Law. This Agreement is being executed and delivered and is
intended to be performed in, and the execution, validity construction, and
performance of this Agreement shall be construed and enforced in accordance
with, the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
LENDER: BORROWER:
MARK A. SCHARMANN, CHICAGO MAP CORPORATION,
an Individual an Illinois corporation
/s/ Mark A. Scharmann /s/ Steven J. Peskaitis
- ---------------------------------- ------------------------------------
Mark A. Scharmann Its Duly Authorized Officer
<PAGE> 1
EXHIBIT 4.4
INTERIM LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered into
effective the 29th day of April, 1999, by and between STEVEN J. PESKAITIS, an
individual ("Lender"), and CHICAGO MAP CORPORATION, an Illinois corporation
("Borrower").
RECITAL
Lender will make a loan to Borrower in the principal sum of $100,000
(the "Loan"). Borrower is applying all of the Loan proceeds for general
corporate purposes associated with the business operations of the Borrower. Such
Loan is being made in anticipation of the acquisition by Rexford, Inc., a
Delaware corporation, an entity in which the Lender expects to become a
controlling principal ("Rexford"), of all of the issued and outstanding common
stock of the Borrower pursuant to an Agreement and Plan of Reorganization (the
"Acquisition Agreement"). As an integral part of the stock-for-stock exchange,
Rexford will (i) effect a 1 for 70 reverse split of its issued and outstanding
shares of common stock, (ii) change its name to LEXON Technologies, Inc.
("LEXON"), (iii) elect the nominees of Borrower to serve as the new board of
directors of LEXON, and (iv) Borrower will be a wholly owned subsidiary of
LEXON. As an inducement to Lender to make such Loan, on completion of the
reorganization contemplated under the Acquisition Agreement, the Borrower will
issue to Lender a common stock purchase warrant to purchase up to 100,000 shares
of LEXON's common stock at an exercise price of $2.50 per share.
AGREEMENT
NOW, THEREFORE, in reliance upon the recitals set forth above and for
an in consideration of the mutual promises and covenants contained herein and
the mutual benefits to the parties to be derived from this Agreement, it is
hereby agreed as follows:
ARTICLE I
LOAN
1.1 AMOUNT. Subject to the terms and conditions set forth herein, the
Lender shall loan to Borrower the principal amount of $100,000, and Borrower
shall execute and deliver to Lender a promissory note in the form attached
hereto as Exhibit A and incorporated herein by this reference (the "Note"),
subject to all the terms, conditions, and covenants of this Agreement.
1.2 INTEREST. The Loan made pursuant to the terms of this Agreement
shall bear interest on the unpaid balance at one percent (1%) per month from the
date of the Note until
<PAGE> 2
payment in full. The principal and interest evidenced by the Note, together with
any extensions, modifications, renewals, or additional loans; the performance of
the covenants and agreements of Borrower contained herein; and the obligations
of Borrower under the terms of the accompanying security agreement attached
hereto, shall be hereinafter referred to collectively as the "Obligation."
1.3 SECURITY AGREEMENT. As security for the Obligation, including any
modifications, extensions, or renewals thereof, Borrower will (i) execute the
Security Agreement attached hereto as Exhibit B and incorporated herein by this
reference (the "Security Agreement"), granting Lender a security interest in all
the accounts receivable of the Borrower, and (ii) following completion of the
reorganization contemplated under the Acquisition Agreement, deliver to the
escrow agent (in accordance with Section 1.6) a certificate representing 250,000
shares of LEXON's common stock (the "Collateral Shares"), which Collateral
Shares represent a portion of the 10,500,000 shares of LEXON's common stock to
be issued to the Borrower's Stockholders under the Acquisition Agreement, as
more particularly set forth therein.
1.4 PAYMENT. The entire amount of the funds loaned under the Note,
including principal and interest, is due and payable as follows:
(a) within four (4) months from the date hereof; or
(b) from the private placement offering proceeds received by
LEXON following completion of the reorganization contemplated under the
Acquisition Agreement, such funds to be disbursed to Lender at the
closing of the $500,000 minimum offering; which ever occurs last; or
(c) immediately in the event of default by Borrower as
hereinafter provided.
1.5 WARRANT. As further consideration for the Loan, on completion of
the transactions contemplated under the Acquisition Agreement (after giving
effect to the 70-for-1 reverse split contemplated therein), Lender will be
issued a common stock purchase warrant (the "Warrant") to purchase up to 100,000
shares of LEXON's common stock, at an exercise price of $2.50 per share, all in
accordance with the terms and conditions set forth in the form of Warrant,
attached hereto as Exhibit C and incorporated herein by this reference.
1.6 ESCROW OF COLLATERAL SHARES. As additional security for the
Obligation, At such time as the Collateral Shares are issued, Borrower will
deliver the Collateral Shares into escrow and execute the Escrow Agreement
attached hereto as Exhibit D and incorporated herein by this reference (the
"Escrow Agreement"), which Escrow Agreement provides for the escrow of the
Collateral Shares until the Loan is paid in full or an event of default by
Borrower occurs as herein provided.
2
<PAGE> 3
ARTICLE II
CONDITIONS OF LENDER'S OBLIGATIONS
All obligations of Lender under this Agreement are subject to the
fulfillment, prior to any loan hereunder, of each of the following conditions,
any or all of which may be waived in writing in whole or in part by Lender at or
prior to execution.
2.1 SATISFACTION OF CONDITIONS. Borrower shall have performed and
satisfied in all material respects all obligations, conditions, and covenants
required by this Agreement to be performed and satisfied by it at or before the
execution of this Agreement.
2.2 CERTAIN DOCUMENTS. The obligation of Lender to make its Obligation
is subject to the condition that all of the following documents shall have been
received by Lender:
(a) Resolutions of the Borrower's board of directors approving
and authorizing the execution, delivery, and performance of this
Agreement and all other Obligation documents executed by them,
certified as of the date of this Agreement by the Borrower's corporate
secretary;
(b) The Note in the form of Exhibit A attached hereto, drawn
to the order of Lender, with appropriate insertions, executed as
appropriate by Borrower;
(c) The Security Agreement in the form of Exhibit B attached
hereto, with appropriate insertions, executed as appropriate by
Borrower;
(d) Form UCC-1, executed as appropriate by Borrower; and
(e) This Agreement executed by Borrower and Lender.
2.3 OTHER DOCUMENTS. Following completion of the Acquisition Agreement,
Borrower agrees that the following documents will be delivered by Borrower to
Lender:
(a) The Warrant in the form of Exhibit C attached hereto, with
appropriate insertions, executed as appropriate by Borrower; and
(b) The Collateral Shares with a stock power executed in blank
with signature medallion guaranteed, accompanied by the Escrow
Agreement in the form of Exhibit D attached hereto, with appropriate
insertions, executed by all the parties thereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to obtain Lender's reliance and agreement to enter into this
Agreement and the transactions contemplated hereby, Borrower makes the following
representations and warranties:
3.1 CORPORATE STANDING. Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Illinois
and has the corporate power and authority to own and operate its properties and
to carry on its business as now conducted. Neither the ownership of its
properties nor the nature of its business requires Borrower to be qualified to
do business in any jurisdiction other than the state of Illinois.
3.2 NO CONFLICTING AGREEMENTS. The execution and delivery of this
Agreement and the consummation of the transactions provided for herein will not
violate or conflict with or result in the breach of any provision or covenant or
constitute a default or an event which with notice or lapse of time or both
would constitute a default under, or accelerate the performance required by, or
result in the termination of any agreement, stipulation, order, judgment, or
decree to which Borrower is a party or is subject or which binds any of the
properties or assets of Borrower.
3.3 LITIGATION. Borrower is not aware of any claim or pending
litigation that would prevent or encumber its power to execute, deliver, or
consummate this Agreement and the transactions contemplated hereby.
3.4 BINDING OBLIGATION. This Agreement, the Note, the Security
Agreement and the documents related thereto have been duly executed and
delivered by Borrower and constitute legal, valid, and binding obligations of
Borrower and are enforceable against them in accordance with their terms, except
as the enforceability may be affected by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditor's rights generally and to the extent the
availability of certain remedies may be limited by certain equitable principles
of generally applicability.
3.5 FINANCIAL CONDITION. The financial statements of Borrower provided
to Lender have been prepared in accordance with generally accepted accounting
principles, consistently applied, and are complete, correct, and accurately
present the financial position of Borrower as of December 31, 1998.
3.6 NO MATERIAL CHANGES. There have been no material adverse changes in
the financial condition of Borrower since the date of the latest financial
statements.
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<PAGE> 5
3.7 NO EXISTING DEFAULT. Borrower is not in default, nor has any event
occurred that with notice or the passage of time or both would constitute a
default under any agreement, indenture, or contract relating to any material
obligation for borrowed money or any form of credit agreement whatsoever,
including, but without limitation, any installment purchase agreements.
ARTICLE IV
NEGATIVE COVENANTS OF BORROWER
Borrower agrees that it will not, prior to the satisfaction of all its
obligations under the terms of this Agreement, the Note, the Security Agreement,
and the related documents, do any of the following:
4.1 SATISFACTION OF EXISTING OBLIGATIONS. Other than in the ordinary
course of business as now conducted, Borrower shall not discharge or satisfy any
lien, mortgage, pledge, charge, security, or other encumbrance on any of the
material assets or properties, nor will Borrower cause to be created or suffer
to exist any additional lien, mortgage, pledge, charge, security, or other
encumbrance on any of the material assets or properties.
4.2 AMENDMENT OF CONTRACTS. Other than in the ordinary course of
business as now conducted, Borrower shall not engage in any transaction that
would create or result in any additional indebtedness or pay any obligation or
liability or enter into, terminate, or amend any agreement or transfer or grant
any rights under any lease, license, or other agreement or in any manner dispose
of or acquire any material amount of assets.
4.3 CONTINUATION OF BUSINESS. Borrower shall use its best efforts
consistent with prudent business practices to preserve and maintain the business
and business organization of Borrower intact; to preserve its goodwill; to pay
its obligations as they mature; and to retain Borrower's relationship with its
customers.
4.4 REGULATORY COMPLIANCE. Borrower shall not violate in any material
respect any law, rule, regulation, order, or ordinance applicable to the conduct
of the business of Borrower or relinquish or terminate any rights,
qualifications, license, or permits that would materially affect the financial
condition or the business of Borrower.
4.5 TRANSFER OF SALE OF TECHNOLOGY. Borrower shall not sell or in any
other manner transfer any asset, license, permit, patent, royalty, or other
governmental authorization of Borrower or cause or permit Borrower to purchase
or in any other manner acquire for consideration any material asset, license,
permit, patent, royalty, or other governmental authorization.
4.6 SALE OF ASSETS. Other than those negotiations or agreements
associated with the consummation of the Acquisition Agreement, Borrower shall
not enter into any negotiation or agreement or entertain any proposals relating
to the sale of all or substantially all the assets or stock of Borrower or
liquidate or dissolve Borrower.
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<PAGE> 6
4.7 GUARANTOR OR SURETY. Borrower shall not guarantee or act as surety
for any indebtedness of any other entity or person.
ARTICLE V
AFFIRMATIVE CONVENANTS OF BORROWER
5.1 USE OF LOAN PROCEEDS. Borrower shall utilize 100% of the proceeds
from the loan contemplated hereby for general and administrative expenses
associated with the operation of the Borrower's business.
5.2 FINANCIAL RECORDS. Borrower shall maintain adequate books,
accounts, and records in accordance with the practices of prudent businessmen
and in accordance with generally accepted accounting principles, consistently
applied, and shall make all such records available for inspection and
duplication, by Lender or its agents at any time during reasonable business
hours.
5.3 PRIOR ENCUMBRANCES. Borrower will timely pay and otherwise perform
each and every term, covenant, or condition required to be performed by it
pursuant to any priority lien or encumbrance on any property securing repayment
of the Obligation.
5.4 TAXES. Borrower shall duly pay and discharge all taxes,
assessments, and charges owed by or levied against Borrower or any of the
properties or assets belonging to Borrower.
5.5 INSURANCE. Borrower shall insure and keep insured at all times all
of their property of an insurable nature, with insurers who are financially
sound and responsible, against loss or damage from fire and other risks,
casualties, or contingencies, and shall carry such public liability as is
reasonably prudent in the conducting of Borrower's business.
5.6 COMPLIANCE WITH LAWS. Borrower shall take whatever actions are
necessary to comply with all statutes and regulations governing the activities
and operations of Borrower and maintain its corporate existence and right to
carry on business in each state or other jurisdiction in which Borrower now
conducts business.
5.7 ADDITIONAL DOCUMENTS. Borrower shall promptly execute and deliver
or cause to be executed and delivered, any other instruments or documents which
Lender may reasonably request or which may be required in order to consummate
the transactions contemplated by this Agreement.
5.8 LEGAL PROCEEDINGS. Excepted for Integrated GPS Technologies, Inc.
v. Chicago Map Corporation, Civil Action No. H-97-4063, United States District
Court for the Southern District of Texas, Houston Division, Borrower is not now
a party to any legal proceedings and shall promptly notify Lender of any legal
proceedings instituted against Borrower.
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<PAGE> 7
ARTICLE VI
DEFAULT
6.1 EVENTS OF DEFAULT. Upon the occurrence and during the continuance
of any one or more of the events hereinafter enumerated, Lender may forthwith or
at any time thereafter during the continuance of any such event, by notice in
writing to Borrower, declare the unpaid balance of the principal and interest
then accrued on the Note to be immediately due and payable, and the principal
and interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of dishonor,
all of which are hereby expressly waived by Borrower, such events being as
follows:
(a) Default in the payment of the principal and interest of
the Note or any portion thereof when the same shall become due and
payable, whether at maturity as therein expressed, by acceleration, or
otherwise, unless cured within 10 days after notice thereof by the
holder of such Note to Borrower;
(b) The creditors under any priority secured indebtedness of
Borrower shall declare the amounts due thereunder to be due and payable
following default;
(c) Default in the due observance or performance of any other
covenant or obligation contained in this Agreement, in the Security
Agreement, or the Acquisition Agreement unless observed or performed
within 10 days after notice thereof to Borrower by Lender; provided, if
compliance is not possible within 10 days, default shall occur upon
failure within 10 days to take steps that will produce compliance as
soon as is reasonably practicable;
(d) Any representation or warranty herein or in the
Acquisition Agreement made by Borrower proves to have been untrue in
any material respect as of the date as of which the facts therein set
forth were stated or certified, and corrective measures, satisfactory
to Lender with respect thereto shall not have been taken within 10 days
after notice thereof to Lender; provided, if compliance is not possible
within 10 days, default shall occur upon failure within 10 days to take
steps that will produce compliance as soon as is reasonably
practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or
a voluntary petition seeking reorganization, or shall file an answer
admitting the jurisdiction of the court and any material allegations of
an involuntary petition filed pursuant to any act of Congress relating
to bankruptcy or to any act purporting to be amendatory thereof, or
shall be adjudicated bankrupt or shall make an assignment for the
benefit of creditors, or shall apply for or consent to the appointment
of any receiver or trustee for Borrower, or of all or any substantial
portion of its property, or Borrower shall make an assignment to an
agent authorized to liquidate any substantial part of its assets;
(f) An order shall be entered pursuant to any act of Congress
relating to bankruptcy or to any act purporting to be amendatory
thereof approving an involuntary petition seeking reorganization of
Borrower, or an order of any court shall be entered
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<PAGE> 8
appointing any receiver or trustee of or for Borrower, or any receiver
or trustee of all or any substantial portion of the property of
Borrower, or a writ or warrant of attachment or any similar process
shall be issued by any court against all or any substantial portion of
the property of Borrower, and such order approving a petition seeking
reorganization or appointing a receiver or trustee is not vacated or
stayed, or such writ, warrant of attachment, or similar process is not
released or bonded within 60 days after its entry or levy, or
(g) The rendering against the Borrower of final judgment for
the payment of money in excess of $25,000 and failure of the borrower
to appeal therefrom (or from the order, decree, or process pursuant to
which such judgment was granted, passed, entered, or affirmed) and
obtain a stay of execution thereof within the period prescribed by law
for appeal, or to have such judgment discharged and satisfied within 60
days after the expiration of such period or of the period of any such
stay, whichever shall later occur.
6.2 PROCEDURE ON DEFAULT. Upon the occurrence of an event of default,
and at any time thereafter, Lender may elect to declare the entire Obligation
hereby secured immediately due and payable:
(a) In the event of default in the payment of said Obligation
when due or declared due, Lender, shall have all the rights and
remedies of a secured party and shall be entitled to avail itself of
all such other rights and remedies that may now or hereafter exist at
law or in equity for the collection of the Obligation and the
enforcement of the covenants herein and the foreclosure of the security
interest created hereby and resort to any remedy provided hereunder or
provided by the Illinois Uniform Commercial Code, or by any other law
of the state of Illinois, which shall not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies; and
(b) The requirement of reasonable notice to Borrower of the
time and place of any public sale of the security or of the time after
which any private sale, or any other intended disposition thereof is to
be made, shall be met if such notice is mailed, postage prepaid, to
Borrower at the address of such party designated below, at least 30
days before the date of any public or private sale or other disposition
is to be made.
6.3 DEFAULTS UPON PRIOR INDEBTEDNESS. Upon the default by Borrower of
any term, covenant, or condition required to be performed by it on any priority
secured indebtedness or the receipt by Borrower from any such priority secured
creditor of notice of any default under such indebtedness, whether or not
repayment of the indebtedness is accelerated, Borrower shall promptly advise
Lender in writing of the nature and amount of default and of the action, if any,
threatened by such priority secured creditor. Notwithstanding the Borrower's
obligation to cure any and all such defaults, Lender may, but shall not be
obligated to do so, in the name, place, and stead of Borrower and, in the case
of such curative efforts by Lender, succeed to all of the rights, remedies, and
security of such priority creditor.
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<PAGE> 9
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 ASSIGNMENT OF AGREEMENT. Except as expressly provided, neither the
rights nor the obligations of the parties to this agreement may be assigned or
delegated by either party in whole or in part without the prior written consent
of the other party.
7.2 GOVERNING LAW. Unless otherwise provided herein, this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the state of Illinois.
7.3 NOTICES. Any notices or other communications required or permitted
hereunder shall be sufficiently given if personally delivered to it or, if sent
by facsimile transmission or other electronic communication confirmed by
registered or certified mail, postage prepaid, or if sent by prepaid telegram
addressed as follows:
If to Lender, to: Steven J. Peskaitis
1401 Brook Drive
Downers Grove, Illinois 60515
Fax No.: 630-916-6218
If to Borrower, to: Chicago Map Corporation
Attn: Mike Barnett
1401 Brook Drive
Downers Grove, Illinois 60515
Fax No.: 630-916-6218
with copies to: Rieck & Crotty, P.C.
Attn: Ronald J. Duplack, Esq.
55 West Monroe, Suite 3390
Chicago, IL 60603
Fax No.: 312-726-0647
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered or sent by facsimile
transmission or other electronic communication, three days after the date so
mailed, or one day after the date so telegraphed or sent by overnight delivery.
7.4 TITLE AND CAPTIONS. Section titles or captions to this Agreement
are for convenience and reference only and shall not be deemed part of this
Agreement and shall not be interpreted to define, limit, augment, extend, or
describe the scope, content, or intent of any part or parts of this Agreement.
7.5 PRONOUNS AND PLURALS. Whenever the context may require, all
pronouns used herein shall include the corresponding masculine, feminine, or
neuter forms and the singular form of pronouns and verbs shall include the
plural and vice versa. Each of the foregoing
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<PAGE> 10
genders and plurals is understood to refer to a corporation, partnership, or
other legal entity when the context so requires.
7.6 FURTHER ACTION. The parties shall execute and deliver all documents
or instruments, provide all information, and take or forebear from all such
action as may be necessary or appropriate to achieve the purpose of this
Agreement.
7.7 BINDING EFFECT UPON SUCCESSORS. This Agreement shall be binding
upon, and inure to the benefit of, the parties and their respective heirs,
executors, administrators, successors, legal representatives, and assigns;
provided, that this provision shall not be construed as permitting assignment,
substitution, delegation, or other transfer of rights or obligations, except
strictly in accordance with the provisions of the other sections of this
Agreement.
7.8 CREDITORS. Unless expressly provided in this Agreement, none of the
provisions of this Agreement shall be for the benefit of, or enforceable by, any
creditors of any party hereto.
7.9 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, promise, or condition of this Agreement or to
exercise any right or remedy consequent upon a breach thereof shall constitute a
waiver of any such breach or any other covenant, duty, promise, or condition.
Any party may, by notice delivered in the manner provided in this Agreement, but
shall be under no obligation to, waive any of its rights or any conditions to
its obligations hereunder, or any duty, obligation, or covenant of any other
party. No waiver shall affect or alter the remainder of this Agreement, but each
and every other covenant, duty, promise, and condition hereof shall continue in
force and effect with respect to any other then existing or subsequently
occurring breach.
7.10 SEVERABILITY. In the event that any condition, covenant, or other
provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement and shall in no way affect any other covenant or condition herein
contained. If such condition, covenant, or other provision shall be deemed
invalid due to its scope or breadth, such provision shall be deemed valid to the
extent of the scope or breadth permitted by law.
7.11 EXHIBITS. All exhibits annexed to this Agreement and any documents
to be delivered herewith are expressly made a part of this Agreement as fully as
though completely set forth in it. All references to this Agreement, either in
the Agreement itself or in any of such writings, shall be deemed to refer to and
include this Agreement itself or in any of such exhibits or writings. Any breach
of or default under any provision of any of such writing shall, for all
purposes, constitute a breach or default under this Agreement and all other such
writings.
7.12 ATTORNEYS' FEES. Should either party take any legal action to
enforce any of the terms or provisions of this Agreement, or if any costs are
incurred by reason of breach or default in any of the covenants,
representations, warranties, terms, or conditions of this Agreement, the
non-defaulting party shall be entitled to recover any costs, including
attorneys' fees incurred in enforcing the obligations of the other party under
the terms of this Agreement or in collecting any judgment that may be entered.
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<PAGE> 11
7.13 TIME OF ESSENCE. Time is of the essence in the performance of the
duties, covenants, or obligations of the parties under the terms of this
Agreement.
7.14 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.15 FACSIMILE TRANSMISSION. Facsimile transmission of any signed
original document, and retransmission of any signed facsimile transmission,
shall be the same as delivery of an original. At the request of any party
hereto, the parties will confirm facsimile transmitted signatures by signing an
original document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LENDER: BORROWER:
STEVEN J. PESKAITIS, CHICAGO MAP CORPORATION,
an Individual an Illinois corporation
/s/ Steven J. Peskaitis By /s/ John B. McLean
- -------------------------- ---------------------------
Steven J. Peskaitis Its Duly Authorized Officer
11
<PAGE> 1
EXHIBIT 4.5
PROMISSORY NOTE
$100,000.00 Date: April 29, 1999
FOR VALUE RECEIVED, CHICAGO MAP CORPORATION, an Illinois corporation
("Borrower"), promises to pay to STEVEN J. PESKAITIS, an individual ("Lender"),
or order, the principal amount of ONE HUNDRED THOUSAND DOLLARS ($100,000.00)
with interest on the unpaid principal balance at one percent (1%) per month (the
"Loan").
This Promissory Note is the Note referred to as Exhibit A to the Interim Loan
Agreement of even date herewith entered into by Borrower and Lender. Pursuant to
the terms of the Interim Loan Agreement, Lender has made the Loan to Borrower as
follows:
1. Payment and Term. The Loan shall bear interest on the principal balance at
1% per month from and after the date thereof until payment in full. The
principal and interest, is due and payable as follows:
(a) The Note is due in full four (4) months from the date hereof, unless
extended by Lender pursuant to written notice thereof, or such other
agreement as may be entered into between Lender and Borrower with
respect thereto; and
(b) Borrower may, but is not obligated to, make periodic payments in part or
full payment of the Loan until due.
2. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender shall be applied by Lender first in payment
of interest payable and next to the principal.
3.1 Events of Default. Upon the occurrence and during the continuance of
any one or more events hereinafter enumerated, Lender may forthwith or
at any time thereafter during the continuance of any such event, by
notice in writing to Borrower, declare the unpaid balance of the
principal and interest shall become and shall be immediately due and
payable without presentation, demand, protest, notice of protest, or
other notice of dishonor, all of which are hereby expressly waived by
Borrower, such events being as follows:
<PAGE> 2
(a) Default in the payment of the principal and interest of the Note or any
portion thereof when the same shall become due and payable, whether at
maturity as therein expressed, by acceleration, or otherwise, unless
cured within 10 days after notice thereof by the holder of such Note to
Borrower;
(b) The creditors under any priority secured indebtedness of Borrower shall
declare the amounts due thereunder to be due and payable following
default;
(c) Default in the due observance or performance of any other covenant or
obligation contained in the Interim Loan Agreement, this Note or the
Acquisition Agreement unless observed or performed within 10 days after
notice thereof to Borrower by lender; provided, if compliance is not
possible within 10 days, default shall occur upon failure within 10 days
to take steps that will produce compliance as soon as is reasonably
practicable;
(d) Any representation or warranty herein or in the Acquisition Agreement
made by Borrower proves to have been untrue in any material respects as
of the date as of which the facts therein set forth were stated or
certified, and corrective measures, satisfactory to Lender with respect
as of the date as of which the facts therein set forth were stated or
certified, and corrective measures, satisfactory to Lender with respect
thereto shall not have been taken within 10 days after notice thereof to
Lender; provided, if compliance is not possible within 10 days, default
shall occur upon failure within 10 days to take steps that will produce
compliance as is reasonably practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or a voluntary
position seeking reorganization, or shall file an answer admitting the
jurisdiction of the court and any material allegations of an involuntary
petition filed pursuant to any act of Congress relating to bankruptcy or
to any act purporting to be amendatory thereof, or shall be adjudicated
bankrupt, or shall make an assignment for the benefit of creditors, or
shall apply for or consent to the appointment of any receiver or trustee
for Borrower, or of all or any substantial portion of its property, or
Borrower shall make an assignment to an agent authorized to liquidate
any substantial part of its assets;
(f) An order shall be entered pursuant to any act of Congress relating to
bankruptcy or to any act purporting to be amendatory thereof approving
an involuntary petition seeking reorganization of Borrower, or an order
of any court shall be entered appointing any receiver or trustee of or
for Borrower, or any receiver or trustee of all or any substantial
portion of the property of Borrower, or a writ or warrant of attachment
or any similar process shall be issued by any court against all or any
substantial portion of the property of Borrower, and such order
approving a petition seeking reorganization or appointing a receiver or
trustee is not vacated or stayed, or such writ, warrant of attachment,
or similar process is not released or bonded within 60 days after its
entry or levy; or
<PAGE> 3
(g) The rendering against the Borrower of final judgment for the payment of
money in excess of $25,000 and failure of the Borrower to appeal
therefrom (or from the order, decree, or process pursuant to which such
judgment was granted, passed, entered, or affirmed) and obtain a stay of
execution thereof within the period prescribed by law for appeal, or to
have such judgment discharged and satisfied within 60 days after the
expiration of such period or of the period of any such stay, whichever
shall later occur.
3.2 Procedure on Default. Upon the occurrence of an event of default, and at
any time thereafter, Lender may elect to declare the entire Note
immediately due and payable.
(a) In the event of default in the payment of said Note when due or declared
due, Lender shall have all the rights and remedies of a secured party
and shall be entitled to avail itself of all such other rights and
remedies that may now or hereafter exist at law or in equity for the
collection of the Note and the enforcement of the covenants herein and
the foreclosure of the security interest created hereby and resort to
any remedy provided hereunder or provided by the Illinois Uniform
Commercial Code, or by any other law of the state of Illinois, shall not
prevent the concurrent or subsequent employment of any other appropriate
remedy or remedies; and
(b) The requirement of reasonable notice to Borrower of the time and place
of any public sale of the security or of the time after which any
private sale, or any other intended disposition thereof is to be made,
shall be met if such notice is mailed, postage prepaid, to Borrower at
the address of such party designated below, at least 30 days before the
date of any public or private sale or other disposition is to be made.
3.3 Defaults Under Prior Indebtedness. Upon the default by Borrower of any
term, covenant, or condition required to be performed by if on any priority
secured indebtedness or the receipt by Borrower from any such priority
secured creditor of notice of any default under such indebtedness, whether
or not repayment of the indebtedness is accelerated, Borrower shall
promptly advise Lender in writing of the nature and amount of default and
of the action, if any, threatened by such priority secured creditor.
Notwithstanding the Borrower's obligation to cure any and all such
defaults, Lender may, but shall not be obligated to do so, in the name,
place, and stead of Borrower and, in the case of such curative efforts by
Lender, succeed to all of the rights, remedies, and security of such
priority creditor.
4. Attorneys' Fees. If this Note is placed with an attorney for collection, or
is suit be instituted for collection, or is any other remedy permitted by
law is pursued by Lender, because of any default in the terms and
conditions herein, then in such event, the undersigned agrees to pay
reasonable attorneys' fees, costs, and other expenses incurred by Lender in
so doing.
5. Governing Law. This Master Note shall be governed by and construed and
enforced in accordance with the laws of the state of Illinois.
<PAGE> 4
6. Security Interest. Borrower shall execute a Security Agreement and an
Escrow Agreement wherein Borrower shall grant to Lender a security interest
in the Collateral as defined in the Interim Loan Agreement, sufficient to
secure the obligation created hereunder, which agreements shall be made a
part of the Interim Loan Agreement and this Note and incorporated herein by
this reference.
BORROWER:
CHICAGO MAP CORPORATION, an Illinois
corporation
By: /s/ John B. McLean
-----------------------------------
Its Duly Authorized Representative
<PAGE> 1
EXHIBIT 4.6
PROMISSORY NOTE
$23,000.00 Date: July 10, 1999
FOR VALUE RECEIVED, CHICAGO MAP CORPORATION, an Illinois corporation
("Borrower"), promises to pay to STEVEN J. PESKAITIS, an individual ("Lender"),
or order, the principal amount of TWENTY-THREE THOUSAND DOLLARS ($23,000.00)
with interest on the unpaid principal balance at one percent (1%) per month (the
"Loan").
This Promissory Note is the Note referred to as Exhibit A to the Interim Loan
Agreement of even date herewith entered into by Borrower and Lender. Pursuant to
the terms of the Interim Loan Agreement, Lender has made the Loan to Borrower as
follows:
1. Payment and Term. The Loan shall bear interest on the principal balance at
1% per month from and after the date thereof until payment in full. The
principal and interest, is due and payable as follows:
(a) The Note is due in full four (4) months from the date hereof, unless
extended by Lender pursuant to written notice thereof, or such other
agreement as may be entered into between Lender and Borrower with
respect thereto; and
(b) Borrower may, but is not obligated to, make periodic payments in part or
full payment of the Loan until due.
2. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender shall be applied by Lender first in payment of
interest payable and next to the principal.
3.1 Events of Default. Upon the occurrence and during the continuance of any
one or more events hereinafter enumerated, Lender may forthwith or at any
time thereafter during the continuance of any such event, by notice in
writing to Borrower, declare the unpaid balance of the principal and
interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of
dishonor, all of which are hereby expressly waived by Borrower, such events
being as follows:
<PAGE> 2
(a) Default in the payment of the principal and interest of the Note or any
portion thereof when the same shall become due and payable, whether at
maturity as therein expressed, by acceleration, or otherwise, unless
cured within 10 days after notice thereof by the holder of such Note to
Borrower;
(b) The creditors under any priority secured indebtedness of Borrower shall
declare the amounts due thereunder to be due and payable following
default;
(c) Default in the due observance or performance of any other covenant or
obligation contained in the Interim Loan Agreement, this Note or the
Acquisition Agreement unless observed or performed within 10 days after
notice thereof to Borrower by lender; provided, if compliance is not
possible within 10 days, default shall occur upon failure within 10 days
to take steps that will produce compliance as soon as is reasonably
practicable;
(d) Any representation or warranty herein or in the Acquisition Agreement
made by Borrower proves to have been untrue in any material respects as
of the date as of which the facts therein set forth were stated or
certified, and corrective measures, satisfactory to Lender with respect
as of the date as of which the facts therein set forth were stated or
certified, and corrective measures, satisfactory to Lender with respect
thereto shall not have been taken within 10 days after notice thereof to
Lender; provided, if compliance is not possible within 10 days, default
shall occur upon failure within 10 days to take steps that will produce
compliance as is reasonably practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or a voluntary
position seeking reorganization, or shall file an answer admitting the
jurisdiction of the court and any material allegations of an involuntary
petition filed pursuant to any act of Congress relating to bankruptcy or
to any act purporting to be amendatory thereof, or shall be adjudicated
bankrupt, or shall make an assignment for the benefit of creditors, or
shall apply for or consent to the appointment of any receiver or trustee
for Borrower, or of all or any substantial portion of its property, or
Borrower shall make an assignment to an agent authorized to liquidate
any substantial part of its assets;
(f) An order shall be entered pursuant to any act of Congress relating to
bankruptcy or to any act purporting to be amendatory thereof approving
an involuntary petition seeking reorganization of Borrower, or an order
of any court shall be entered appointing any receiver or trustee of or
for Borrower, or any receiver or trustee of all or any substantial
portion of the property of Borrower, or a writ or warrant of attachment
or any similar process shall be issued by any court against all or any
substantial portion of the property of Borrower, and such order
approving a petition seeking reorganization or appointing a receiver or
trustee is not vacated or stayed, or such writ, warrant of attachment,
or similar process is not released or bonded within 60 days after its
entry or levy, or
<PAGE> 3
(g) The rendering against the Borrower of final judgment for the payment of
money in excess of $25,000 and failure of the Borrower to appeal
therefrom (or from the order, decree, or process pursuant to which such
judgment was granted, passed, entered, or affirmed) and obtain a stay of
execution thereof within the period prescribed by law for appeal, or to
have such judgment discharged and satisfied within 60 days after the
expiration of such period or of the period of any such stay, whichever
shall later occur.
3.2 Procedure on Default. Upon the occurrence of an event of default, and at
any time thereafter, Lender may elect to declare the entire Note
immediately due and payable.
(a) In the event of default in the payment of said Note when due or declared
due, Lender shall have all the rights and remedies of a secured party
and shall be entitled to avail itself of all such other rights and
remedies that may now or hereafter exist at law or in equity for the
collection of the Note and the enforcement of the covenants herein and
the foreclosure of the security interest created hereby and resort to
any remedy provided hereunder or provided by the Illinois Uniform
Commercial Code, or by any other law of the state of Illinois, shall not
prevent the concurrent or subsequent employment of any other appropriate
remedy or remedies; and
(b) The requirement of reasonable notice to Borrower of the time and place
of any public sale of the security or of the time after which any
private sale, or any other intended disposition thereof is to be made,
shall be met if such notice is mailed, postage prepaid, to Borrower at
the address of such party designated below, at least 30 days before the
date of any public or private sale or other disposition is to be made.
3.3 Defaults Under Prior Indebtedness. Upon the default by Borrower of any
term, covenant, or condition required to be performed by if on any
priority secured indebtedness or the receipt by Borrower from any such
priority secured creditor of notice of any default under such indebtedness,
whether or not repayment of the indebtedness is accelerated, Borrower shall
promptly advise Lender in writing of the nature and amount of default and
of the action, if any, threatened by such priority secured creditor.
Notwithstanding the Borrower's obligation to cure any and all such
defaults, Lender may, but shall not be obligated to do so, in the name,
place, and stead of Borrower and, in the case of such curative efforts by
Lender, succeed to all of the rights, remedies, and security of such
priority creditor.
4. Attorneys' Fees. If this Note is placed with an attorney for collection, or
is suit be instituted for collection, or is any other remedy permitted by
law is pursued by Lender, because of any default in the terms and
conditions herein, then in such event, the undersigned agrees to pay
reasonable attorneys' fees, costs, and other expenses incurred by Lender in
so doing.
5. Governing Law. This Master Note shall be governed by and construed and
enforced in accordance with the laws of the state of Illinois.
<PAGE> 4
6. Security Interest. Borrower shall execute a Security Agreement and an
Escrow Agreement wherein Borrower shall grant to Lender a security
interest in the Collateral as defined in the Interim Loan Agreement,
sufficient to secure the obligation created hereunder, which agreements
shall be made a part of the Interim Loan Agreement and this Note and
incorporated herein by this reference.
BORROWER:
CHICAGO MAP CORPORATION, an Illinois
corporation
By: /s/ John B. McLean
----------------------------------
Its Duly Authorized Representative
<PAGE> 1
EXHIBIT 4.7
PROMISSORY NOTE
$100,000.00 Date: July 10, 1999
FOR VALUE RECEIVED, CHICAGO MAP CORPORATION, an Illinois corporation
"Borrower"), promises to pay to STANLEY P. PESKAITIS, an individual ("Lender"),
or order, the principal amount of ONE HUNDRED THOUSAND DOLLARS ($100,000.00)
with interest on the unpaid principal balance at one percent (1%) per month (the
"Loan").
This Promissory Note is the Note referred to as Exhibit A to the Interim Loan
Agreement of even date herewith entered into by Borrower and Lender. Pursuant to
the terms of the Interim Loan Agreement, Lender has made the Loan to Borrower as
follows:
1. Payment and Term. The Loan shall bear interest on the principal balance at
1% per month from and after the date thereof until payment in full. The
principal and interest, is due and payable as follows:
(a) The Note is due in full four (4) months from the date hereof,
unless extended by Lender pursuant to written notice thereof, or
such other agreement as may be entered into between Lender and
Borrower with respect thereto; and
(b) Borrower may, but is not obligated to, make periodic payments In
part or full payment of the Loan until due.
2. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender shall be applied by Lender first in payment of
interest payable and next to the principal.
3.1 Events of Default. Upon the occurrence and during the continuance of any
one or more events hereinafter enumerated, Lender may forthwith or at any
time thereafter during the continuance of any such event, by notice in
writing to Borrower, declare the unpaid balance of the principal and
interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of
dishonor, all of which are hereby expressly waived by Borrower, such events
being as follows:
(a) Default in the payment of the principal and interest of the Note or
any portion thereof when the same shall become due and payable,
whether at maturity as therein expressed, by acceleration, or
otherwise, unless cured within 10 days after notice thereof by the
holder of such Note to Borrower;
<PAGE> 2
(b) The creditors under any priority secured indebtedness of Borrower
shall declare the amounts due thereunder to be due and payable
following default;
(c) Default in the due observance or performance of any other covenant
or obligation contained in the Interim Loan Agreement, this Note or
the Acquisition Agreement unless observed or performed within 10
days after notice thereof to Borrower by lender; provided, if
compliance is not possible within 10 days, default shall occur upon
failure within 10 days to take steps that will produce compliance
as soon as is reasonably practicable;
(d) Representation or warranty herein or in the Acquisition Agreement
made by Borrower proves to have been untrue in any material
respects as of the date as of which the facts therein set forth
were stated or certified, and corrective measures, satisfactory to
Lender with respect as of the date as of which the facts therein
set forth were stated or certified, and corrective measures,
satisfactory to Lender with respect thereto shall not have been
taken within 10 days after notice thereof to Lender; provided, if
compliance is not possible within 10 days, default shall occur upon
failure within 10 days to take steps that will produce compliance
as is reasonably practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or a
voluntary position seeking reorganization, or shall file an answer
admitting the jurisdiction of the court and any material
allegations of an involuntary petition filed pursuant to any act of
Congress relating to bankruptcy or to any act purporting to be
amendatory thereof, or shall be adjudicated bankrupt, or shall make
an assignment for the benefit of creditors, or shall apply for or
consent to the appointment of any receiver or trustee for Borrower,
or of all or any substantial portion of its property, or Borrower
shall make an assignment to an agent authorized to liquidate any
substantial part of its assets;
(f) An order shall be entered pursuant to any act of Congress relating
to bankruptcy or to an act purporting to be amendatory thereof
approving an involuntary petition seeking reorganization of
Borrower, or an order of any court shall be entered appointing any
receiver or trustee of or for Borrower, or any receive or trustee
of all or any substantial portion of the property of Borrower, or a
writ or warrant of attachment or any similar process shall be
issued by any court against all or any substantial portion of the
property of Borrower, and such order approving a petition seeking
reorganization or appointing a receiver or trustee is not vacated
or stayed, or such writ, warrant of attachment, or similar process
is not released or bonded within 60 days after its entry or levy,
or
<PAGE> 3
(g) The rendering against the Borrower of final judgment for the
payment of money in excess of $25,000 and failure of the Borrower
to appeal therefrom (or from the order, decree, or process pursuant
to which such judgment was granted, passed, entered, or affirmed)
and obtain a stay of execution thereof within the period prescribed
by law for appeal, or to have such judgment discharged and
satisfied within 60 days after the expiration of such period or of
the period of any such stay, whichever shall later occur,
3.2 Procedure on Default. Upon the occurrence of an event of default, and at
any time thereafter, Lender may elect to declare the entire Note
immediately due and payable.
(a) In the event of default in the payment of said Note when due or
declared due, Lender shall have all the rights and remedies of a
secured party and shall be entitled to avail itself of all such
other rights and remedies that may now or hereafter exist at law or
in equity for the collection of the Note and the enforcement of the
covenants herein and the foreclosure of the security interest
created hereby and resort to any remedy provided hereunder or
provided by the Illinois Uniform Commercial Code, or by any other
law of the state of Illinois, shall not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies;
and
(b) The requirement of reasonable notice to Borrower of the time and
place of any public sale of the security or of the time after which
any private sale, or any other intended disposition thereof is to
be made, shall be met if such notice is mailed, postage prepaid, to
Borrower at the address of such party designated below, at least 30
days before the date of any public or private sale or other
position is to be made.
3.3 Defaults Upon Prior Indebtedness. Upon the default by Borrower of any term,
covenant, or condition required to be performed by if on any priority
secured indebtedness or the receipt by Borrower from any such priority
secured creditor of notice of any default under such indebtedness, whether
or not repayment of the indebtedness is accelerated, Borrower shall
promptly advise Lender in writing of the nature and amount of default and
of the action, if any, threatened by such priority secured creditor.
Notwithstanding the Borrower's obligation to cure any and all such
defaults, Lender may, but shall not be obligated to do so, in the name,
place, and stead of Borrower and, in the case of such curative efforts by
Lender, succeed to all of the rights, remedies, and security of such
priority creditor.
4. Attorneys' Fees. If this Note is placed with an attorney for collection, or
is suit be instituted for collection, or is any other remedy permitted by
law is pursued by Lender, because of any default in the terms and
conditions herein, then in such event, the undersigned agrees to pay
reasonable attorneys' fees, costs, and other expenses incurred by Lender in
so doing.
5. Governing Law. This Master Note shall be governed by and construed and
enforced in accordance with the laws of the state of Illinois.
<PAGE> 4
6. Security Interest. Borrower shall execute a Security Agreement and an
Escrow Agreement wherein Borrower shall grant to Lender a security interest
in the Collateral as defined in the Interim Loan Agreement, sufficient to
secure the obligation created hereunder, which agreements shall be made a
part of the Interim Loan Agreement and this Note and incorporated herein by
this reference.
BORROWER:
CHICAGO MAP CORPORATION
an Illinois corporation
By:
/s/ John B. McLean
----------------------------------
Its Duly Authorized Representative
<PAGE> 1
EXHIBIT 4.8
PROMISSORY NOTE
$50,000.00 Date: July 10, 1999
FOR VALUE RECEIVED, CHICAGO MAP CORPORATION, an Illinois corporation
("Borrower"), promises to pay to JOHN B. MCLEAN, an individual ("Lender"), or
order, the principal amount of FIFTY THOUSAND DOLLARS ($50,000,00) with interest
on the unpaid principal balance at one percent (1%) per month (the "Loan").
This Promissory Note is the Note referred to as Exhibit A to the Interim Loan
Agreement of even date herewith entered into by Borrower and Lender. Pursuant to
the terms of the Interim Loan Agreement, Lender has made the Loan to Borrower as
follows:
1. Payment and Term. The Loan shall bear interest on the principal balance at
1% per month from and after the date thereof until payment in full. The
principal and interest, is due and payable as follows:
(a) The Note is due in full four (4) months from the date hereof, unless
extended by Lender pursuant to written notice thereof, or such other
agreement as may be entered into between Lender and Borrower with respect
thereto; and
(b) Borrower may, but is not obligated to, make periodic payments in part or
full payment of the Loan until due.
2. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender shall be applied by Lender first in payment of
interest payable and next to the principal.
3.1 Events of Default. Upon the occurrence and during the continuance of any
one or more events hereinafter enumerated, Lender may forthwith or at any
time thereafter during the continuance of any such event, by notice in
writing to Borrower, declare the unpaid balance of the principal and
interest shall become and shall be immediately due and payable without
presentation, demand, protest, notice of protest, or other notice of
dishonor, all of which are hereby expressly waived by Borrower, such events
being as follows:
(a) Default in the payment of the principal and interest of the Note or any
portion thereof when the same shall become due and payable, whether at
maturity as therein expressed, by acceleration, or otherwise, unless cured
within 10 days after notice thereof by the holder of such Note to Borrower;
<PAGE> 2
(b) The creditors under any priority secured indebtedness of Borrower shall
declare the amounts due thereunder to be due and payable following default;
(c) Default in the due observance or performance of any other covenant or
obligation contained in the Interim Loan Agreement, this Note or the
Acquisition Agreement unless observed or performed within 10 days after
notice thereof to Borrower by lender; provided, if compliance is not
possible within 10 days, default shall occur upon failure within 10 days to
take steps that will produce compliance as soon as is reasonably
practicable;
(d) Any representation or warranty herein or in the Acquisition Agreement made
by Borrower proves to have been untrue in any material respects as of the
date as of which the facts therein set forth were stated or certified, and
corrective measures, satisfactory to Lender with respect as of the date as
of which the facts therein set forth were stated or certified, and
corrective measures, satisfactory to Lender with respect thereto shall not
have been taken within 10 days after notice thereof to Lender; provided, if
compliance is not possible within 10 days, default shall occur upon failure
within 10 days to take steps that will produce compliance as is reasonably
practicable;
(e) Borrower shall file a voluntary petition in bankruptcy or a voluntary
position seeking reorganization, or shall file an answer admitting the
jurisdiction of the court and any material allegations of an involuntary
petition filed pursuant to any act of Congress relating to bankruptcy or to
any act purporting to be amendatory thereof, or shall be adjudicated
bankrupt, or shall make an assignment for the benefit of creditors, or
shall apply for or consent to the appointment of ANY receiver or trustee
for Borrower, or of all or any substantial portion of its property, or
Borrower shall make an assignment to an agent authorized to liquidate any
substantial part of its assets;
(f) An order shall be entered pursuant to any act of Congress relating to
bankruptcy or to any act purporting to be amendatory thereof approving an
involuntary petition seeking reorganization of Borrower, or an order of any
court shall be entered appointing any receiver or trustee of or for
Borrower, or any receive or trustee of all or any substantial portion of
the property of Borrower, or a writ or warrant of attachment or any similar
process shall be issued by any court against all or any substantial portion
of the property of Borrower, and such order approving a petition seeking
reorganization or appointing a receiver or trustee is not vacated or
stayed, or such writ, warrant of attachment, or similar process is not
released or bonded within 60 days after its entry or levy; or
(g) The rendering against the Borrower of final judgment for the payment of
money in excess of $25,000 and failure of the Borrower to appeal therefrom
(or from the order, decree, or process pursuant to which such judgment was
granted, passed, entered, or affirmed) and obtain a stay of execution
thereof within the period prescribed by law for appeal, or to have such
judgment discharged and satisfied within 60 days after the expiration of
such period or of the period of any such stay, whichever shall later occur.
3.2 Procedure on Default. Upon the occurrence of an event of default, and at
any time thereafter, Lender may elect to declare the entire Note
immediately due and payable.
(a) In the event of default in the payment of said Note when due or declared
due, Lender shall have all the rights and remedies of a secured party and
shall be entitled to avail itself of all such other rights and remedies
that may now or hereafter exist at law or in equity for the
<PAGE> 3
security interest created hereby and resort to any remedy provided
hereunder or provided by the Illinois Uniform Commercial Code, or by any
other law of the state of Illinois, shall not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies; and
(b) The requirement of reasonable notice to Borrower of the time and place of
any public sale of the security or of the time after which any private
sale, or any other intended disposition thereof is to be made, shall be met
if such notice is mailed, postage prepaid, to Borrower at the address of
such party designated below, at least 30 days before the date of any public
or private sale or other disposition is to be made.
3.3 Defaults Upon Prior Indebtedness. Upon the default by Borrower of any term,
covenant, or condition required to be performed by if on any priority
secured indebtedness or the receipt by Borrower from any such priority
secured creditor of notice of any default under such indebtedness, whether
or not repayment of the indebtedness is accelerated, Borrower shall
promptly advise Lender in writing of the nature and amount of default and
of the action, if any, threatened by such priority secured creditor.
Notwithstanding the Borrower's obligation to cure any and all such
defaults, Lender may, but shall not be obligated to do so, in the name,
place, and stead of Borrower and, in the case of such curative efforts by
Lender, succeed to all of the rights, remedies, and security of such
priority creditor.
4. Attorneys' Fees. If this Note is placed with an attorney for collection, or
is suit be instituted for collection, or is any other remedy permitted by
law is pursued by Lender, because of any default in the terms and
conditions herein, then in such event, the undersigned agrees to pay
reasonable attorneys' fees, costs, and other expenses incurred by Lender in
so doing.
5. Governing Law. This Master Note shall be governed by and construed and
enforced in accordance with the laws of the state of Illinois.
6. Security Interest. Borrower shall execute a Security Agreement and an
Escrow Agreement wherein Borrower shall grant to Lender a security interest
in the Collateral as defined in the Interim Loan agreement, sufficient to
secure the obligation created hereunder, which agreements shall be made a
part of the Interim Loan Agreement and this Note and incorporated herein by
this reference.
BORROWER:
CHICAGO MAP CORPORATION
an Illinois corporation
By: /s/ John B. McLean
-------------------------------
Its Duly Authorized Representative
<PAGE> 1
EXHIBIT 4.9
FORM OF STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made as of the 21st day of
July, 1999 between LEXON Technologies, Inc., a Delaware corporation ("Company),
and _______________________, ("Optionee").
In consideration of $1.00 in hand paid to Company, it is agreed:
1. OPTION. Company hereby grants Optionee an option to purchase ________
shares of the $.001 par value common stock of Company ("Shares"), on the terms
hereinafter set forth.
2. PURCHASE PRICE. The purchase price payable for the Shares upon
exercise of such option shall be $2.80, representing 100% of the fair market
value per Share as of July 21, 1999.
3. METHOD OF EXERCISING OPTION. The option may be exercised at any time
during the period beginning on July 21, 1999 and continuing to the tenth
anniversary of this Agreement ("Option Period"). The option may be exercised in
whole or in part by giving to the Company notice in writing to that effect
Within thirty (30) days after the receipt by it of notice of exercise of such
option, the Company shall cause certificates for the number of Shares with
respect to which such option is exercised to be issued in the name of Optionee
or his executors, administrators, or other legal representatives, heirs,
legatees, next of kin, or distributees, or to be properly endorsed or
accompanied by separate stock powers duly executed, and to be delivered to
Optionee or his executors, administrators, or other legal representatives,
heirs, legatees, next of kin, or distributees, or to be properly endorsed or
accompanied by separate stock powers duly executed, and to be delivered to
Optionee or his executors, administrators, or other legal representatives,
heirs, legatees, next of kin, or distributees. Payment of the purchase price for
the Shares with respect to which such option is exercised shall be made to the
Company upon the delivery of such Shares. The Company shall give the person or
persons entitled to the same at least five (5) days notice of the time and place
for delivery and for the payment of suet purchase price.
4. CONDITIONS OF OPTION. The option is subject to the following additional
conditions:
a. The option herein granted to Optionee shall not be transferable by
Optionee other than by will or the laws of descent and
distribution, and shall be exercisable, during his lifetime, only
by him.
b. In the event of Optionee's death, the option may be exercised by
his executors, administrators, or other legal representatives,
heirs, legatees, next of kin, or distributees during the Option
Period.
c. The provisions of the option shall become null and void and
inoperative immediately upon any attempted sale, assignment,
transfer, or other disposition by Optionee of such option or any of
his right, title, and interest therein; provided, however, that
nothing herein shall be construed as prohibiting Optionee upon his
death (at any time while he has the right to exercise such option)
from providing for the disposition of such option or his right,
title, and interest in it by will or as prohibiting the transfer of
such option or his right, title, and interest in it by will or as
prohibiting the transfer of such option by the laws of descent and
distribution.
<PAGE> 2
d. Each Share issued to the Optionee upon any exercise of the option
granted hereunder shall be subject to repurchase by the Company at
a price equal to the price paid for each such Share, upon the
termination of Optionee's service with the Company for any reason
or upon the death of Optionee, if such termination of service or
death occurs on or before December 31, 2001, provided that the
Company's right to repurchase shall terminate as to the following
number of such Shares on each of the following dates: as to 75,300
Shares as of December 31, 1999; as to 131,773 Shares, as of
December 31, 2000; and as to 169,423 Shares as of December 31,
2001.
e. Notwithstanding anything in this Agreement to the contrary, the
option herein granted to Optionee shall in the event be exercisable
after ten (10) years.
5. RESTRICTION ON THE TRANSFER OF SHARES. Optionee hereby agrees,
without the consent of the Company, he will not, directly or indirectly, sell,
assign, transfer, pledge or otherwise dispose of (collectively "Transfer more
than 25% of the Shares within any ninety (90) day period. Notwithstanding the
foregoing, Optionee may Transfer the Shares to (i) the spouse or children of
such Optionee, whether directly or in trust (including pursuant to the uniform
gift to minors provisions) for their sole benefit, provided that the transferee
agrees in writing to be bound by the terms of this Agreement, and provided
further that Optionee may not disclaim beneficial ownership of such Shares for
the purposes of any filing pursuant to any securities law, or (ii) a trust in
which Optionee owns all of the beneficial interest therein, provided further
that Optionee may not disclaim beneficial ownership of such Shares for the
purposes of any filing pursuant to any securities law and (iii) a third party
making a cash tender or exchange offer in compliance with Regulations 14D and
14E under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
following the filing with the Securities and Exchange Commission ('SEC') by the
Company, in compliance with the Exchange Act, a Recommendation Statement on
Schedule 14D-9 pursuant to which the Company affirmatively recommends to the
Company stockholders the acceptance of such cash tender or exchange offer.
6. STOCK ADJUSTMENT. If the Company shall issue any additional shares
of stock by way of a stock dividend on, or split-up, subdivision, or
reclassification of outstanding common shares, then the option shall be deemed
to cover such additional shares to the extent that the same would have been
issued to Optionee had such option been exercised in its entirety at the time of
such issuance of additional shares, and there shall be a corresponding
proportionate adjustment of the option price per share set forth above so that
in the aggregate the option price for all Shares then covered shall be the same
as the aggregate option price for the Shares remaining subject to such option
immediately prior to the issuance of such additional shares.
7. CORPORATE REORGANIZATION. If there shall be any capital
reorganization, or consolidation, or merger of the Company with any other
corporation or corporations, or any sale of all or substantially all of the
Company's property and assets to any other corporation or corporations, the
Company shall take appropriate action to enable Optionee to receive upon any
subsequent exercise of such option, in whole or in part, in lieu of any Shares
of the Company the share or shares, securities, or other assets as were issuable
or payable upon such reorganization, consolidation, merger, or sale in respect
of or in exchange for such Shares.
8. OPTIONEE'S REPRESENTATIONS. Optionee represents and/or acknowledges
the following:
a. That the Shares are being purchased for investment and not for
distribution or resale to others. Optionee agrees that he will not
sell or otherwise transfer the Shares unless they are registered
under the Securities Act of 1933 or unless an exemption from such
registration is available.
b. The Shares have not been registered under the Securities Act of 1933
or the Illinois Securities Act of 1953 as amended, or any other
applicable state securities laws; the economic risk of the
<PAGE> 3
investment must be borne indefinitely by Optionee, and the Shares
cannot be sold unless subsequently registered under the Securities
Act of 1933 and such state laws or an exemption from such
registration is available. The Company has agreed to register the
shares of Common Stock issuable on exercise of this Option at such
time as the Company is eligible to utilize the form of registration
on S-3 or S-8 under the Securities Act.
c. Optionee is and will be a resident of the State set forth below his
signature as of the date of his execution of this Agreement, and
that the personal information provided on the Signature page is true
and accurate as of the date hereof.
d. Optionee confirms that he is aware of the present operational and
financial condition of the Company, and has previously been advised
that all documents, records and books pertaining to Company finances
and operations were at all times available for inspection at the
offices of Company, and that all documents, records and books
pertaining to Company and Shares requested by Optionee have been
made available to him.
e. Optionee has had an opportunity to ask questions of, and receive
answers from Company, its officers, directors, employees and agents
concerning the terms and conditions of this Agreement, the
transactions contemplated thereby, the operations of Company and
related matters.
f. Optionee, understands that no assurance is given that the actual
result of operations will correspond with the past results as set
forth in any tax or financial statements or other documents provided
to Optionee and no reliance should be placed upon results of such
past operations in determining whether an investment in Shares is
advisable.
9. COMPANY'S REPRESENTATIONS. The Company represents the following:
a. It has the Tight to issue the Shares to Optionee.
b. Optionee shall receive good and marketable title to the Shares,
free of all encumbrances.
10. BINDING EFFECT. This Agreement shall be binding upon the parties,
their heirs, legal representatives, successors, and assigns.
11. ENTIRE AGREEMENT. This Agreement supersedes all agreements
previously made between the parties relating to its subject matter. There are no
other understandings or agreements between them.
12. NON-WAIVER. No delay or failure by either party to exercise any
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
13. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Illinois as to all matters including, but not limited to, matters of
validity, construction, effect, performance and remedies, and as partial
consideration for the other party's execution and performance hereunder, each
party hereby consents to the jurisdiction of any state or federal court located
within Cook County, Illinois and waives personal service of any and all process
upon it, to the extent permitted by law, and consents that all such service of
process be made upon such party at the address and in the manner set forth in
this Agreement, and service so made shall be deemed to be completed upon the
earlier of actual receipt or three (3) days after the same shall have been
posted to such party's address. Each party hereby waives trial by jury, and
waives any objection which it may have based on improper venue or forum non
conveniens, to the conduct of any proceeding instituted hereunder, and consents
to the granting of such legal or equitable relief as is deemed appropriate by
the court.
<PAGE> 4
IN WITNESS WHEREOF, the parties have signed this Agreement.
LEXON Technologies, Inc.
By:
--------------------------
John B. McLean,
Assistant Secretary
----------------------------
Optionee
<PAGE> 5
SCHEDULE TO EXHIBIT 4.9 - FORM OF STOCK OPTION AGREEMENT
On July 21, 1999, the Company entered into Stock Option Agreements with
certain employees of the Company. The Stock Option Agreements, which are
substantially similar, provide for immediate exercisability of the options
subject to certain forfeiture restrictions relating to the shares, which
forfeiture restrictions expire on the terms set forth below.
Number of Shares
Issuable Upon Exercise Shares Subject to Forfeiture/
Optionee of the Option Date Forfeiture Expires
- -------- ---------------------- -----------------------------
Steven J. Peskaitis 376,496 75,300/ December 31, 1999
131,773/ December 31, 2000
169,423/ December 31, 2001
Kenneth Eaken 627,500 125,500/ December 31, 1999
219,625/ December 31, 2000
282,375/ December 31, 2001
Paris Karahalios 627,500 125,500/ December 31, 1999
219,625/ December 31, 2000
282,375/ December 31, 2001
John McLean 627,500 125,500/ December 31, 1999
219,625/ December 31, 2000
282,375/ December 31, 2001
Stanley Peskaitis 275,000 100,000/ December 31, 1999
100,000/ December 31, 2000
75,000/ December 31, 2001
Dave Schulz 285,000 95,000/ December 31, 1999
95,000/ December 31, 2000
95,000/ December 31, 2001
Dave Leonard 12,500 12,500/ December 31, 1999
Jim Rooney 12,550 12,550/ December 31, 1999
Thomas Riek 12,550 12,550/ December 31, 1999
<PAGE> 1
EXHIBIT 4.15
SUPPLEMENTAL AGREEMENT TO BRIDGE LOAN TRANSACTION DATED
AUGUST 10, 1999 (AS EXTENDED AND AMENDED TO DATE) BY AND BETWEEN
LEXON TECHNOLOGIES, INC. ("DEBTOR"), CHICAGO MAP CORPORATION
AND STEVEN PESKAITIS ("GUARANTORS"), AND MILLER CAPITAL
CORPORATION, STEPHEN A. MCCONNELL, JOCK PATTON AND DICKERSON
WRIGHT ("LENDERS")
For and in consideration of $1.00, and other good and valuable consideration
provided by each of the parties hereto to each of the others, including
agreement to the following terms and conditions, the parties hereto agree this
30th of December, 1999 that the following terms and conditions are incorporated
in and made a part of the Securities Purchase Agreement, Notes, Security
Agreements, Guaranties and other instruments and documents ("Loan Documents")
executed and delivered at any time from and after August 10, 1999 in connection
with the above-captioned Bridge Loan Transaction as well as that certain
Engagement Letter dated July 26, 1999 relating to investment advisory services
provided to Debtor by Miller Capital Corporation ("MCC").
o Debtor will pay Lenders $150,000.00 in cash on or before January 31,
2000.
o Debtor will pay the remaining principal balance of $600,000.00, plus
interest at the rate of 12% per annum, in monthly payments of
interest only for 6 months beginning March 1, 2000 and continuing on
the 1st day of each month thereafter.
o Debtor will pay the remaining principal balance of $600,000.00, plus
any accrued interest, on August 1, 2000, provided the Debtor has
received debt or equity financing proceeds in an aggregate amount of
$3,000,000 or more during the period commencing December 30, 1999
and continuing through August 1, 2000, and limited to the extent
such proceeds exceed $3,000,000. Any debt or equity financing
proceeds received in an aggregate amount of less than $3,000,000.00
during this period will be used for operations.
o If the Debtor has not received debt or equity financing proceeds in
an aggregate amount of $3,600,000 or more during the period
commencing December 30, 1999 and continuing through August 1, 2000,
the Debtor will pay the remaining principal balance of $600,000.00,
plus interest at the rate of 12% per annum, in six equal monthly
payments of principal and interest beginning on August 1, 2000 and
continuing on the 1st day of each month thereafter. Any debt or
equity financing proceeds received after August 1, 2000, to the
extent in excess of $3,000,000, will be applied first to payment in
full of outstanding principal and interest to the Lenders.
o The Debtor will issue 300,000 shares of common stock to MCC for
$1.00 of consideration with regard to termination of the Engagement
Letter and 250,000 shares of common stock, for $1.00 of
consideration, to Lenders in connection with the Loan Documents.
<PAGE> 2
o The Engagement Letter will terminate on December 30, 1999 and
neither party thereto will have any continuing duty or obligation to
the other, except that Debtor will pay a fee to MCC pursuant to the
fee schedule set forth therein out of the proceeds, if any, received
by Debtor from any equity or debt financing or investment by any of
the parties introduced to Debtor by MCC and identified in the
schedule attached hereto.
o MCC and the other Lenders will not subordinate any of the existing
security interests and guarantees in favor of MCC and Lenders under
the Loan Documents to any lender or investor ("New Lender") that at
any time hereafter provides equity or debt financing or investment
to Debtor, but hereby consents to and agrees to permit Debtor to
incur any such new financing or investment with the grant of a
security interest to such New Lender in and to any and all
collateral under the Loan Documents, which security interest shall
be pari passu with the Lender's debt, provided that: (i) the terms
of such new debt provide that no principal payments can be made on
the new debt until the Lender's debt has been repaid in full; and
(ii) the amount of such new debt does not exceed $1,500,000. Lenders
all agree to enter into a collateral sharing arrangement with such
New Lender, pursuant to which the collateral currently securing the
debt of the Lenders would also be permitted to secure the debt of
the New Lender on a pari passu basis.
ACCEPTED AND AGREED THIS 30th day of December 1999.
On Behalf of MCC and Lenders: On Behalf of Debtor:
Miller Capital Corporation, Inc. LEXON Technologies, Inc.
By: /s/ Rudy P. Miller By: /s/ Steven Peskaitis
-------------------------------- ---------------------------
Rudy P. Miller, CEO Steven Peskaitis,
President
On Behalf of Guarantors:
Chicago Map Corporation
By: /s/ Steven Peskaitis
---------------------------
Steven Peskaitis,
President
2
<PAGE> 1
EXHIBIT 10.2
INDUSTRIAL BUILDING LEASE
Term of Lease:
Beginning: May 7, 1999
Ending: May 31, 2004
Monthly Rent: SEE RIDER ATTACHED
Date of Lease: June 1, 1999
Location of Premises: OFFICE SPACE AT 1401 BROOK DRIVE,
DOWNERS GROVE, ILLINOIS 60515
PER DIAGRAM ATTACHED.
Purpose: GENERAL OFFICE USE
Lessee:
Name: CHICAGO MAP CORPORATION
Address: 15419 EAST 127th STREET
City: LEMONT, ILLINOIS 60439
Lessor
Name: UNITED STATES BRASS & COPPER CO.
Address: 1418 CENTRE CIRCLE DRIVE
City: DOWNERS GROVE, ILLINOIS 60515
In consideration of the mutual covenants and agreements herein stated, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor solely for the
above purposes designated above (the "Premises"), together with the
appurtenances thereto, for the above Term.
LEASE COVENANTS AND AGREEMENTS
1. RENT. Lessee shall pay Lessor or Lessor's agent as rent for the Premises the
sum stated above, monthly in advance, until termination of this lease, as
Lessor's address stated above or such other address as Lessor may designate in
writing.
2. CONDITION AND UPKEEP OF PREMISES. Lessee has examined and knows the condition
of the Premises and has received the same in good order and repair, except as
otherwise set forth in the Riders attached hereto and made a part hereof, and
acknowledges that no representations as to the condition and repair thereof have
been made by Lessor, or his agent, prior to or at the execution of this lease
that are not herein expressed. Lessee will
<PAGE> 2
keep the Premises, including all appurtenances, in good repair, replacing all
broken glass with glass of the same size and quality as that broken; and upon
the termination of this lease, in any way, will yield up to the Premises to
Lessor, in good condition and repair, loss by fire and ordinary wear excepted,
and will deliver the keys therefor at the place of payment of said rent.
3. LESSEE NOT TO MISUSE SUBLET; ASSIGN. Lessee will not allow Premises to be
used for any purpose that will increase the rate of insurance thereon, nor for
any purpose other than that hereinbefore specified, and will not load floors
with machinery or goods beyond the floor load rating prescribed by applicable
municipal ordinances, and will not allow the Premises to be occupied in whole,
or in part, by any other person, and will not sublet the same, or any part
thereof, nor assign this lease without in each case the written consent of the
Lessor first hand, and Lessee will not permit any transfer by operation of law
of the interest in Premises acquired through this lease, and will not permit
Premises to be used for any unlawful purpose, or for any purpose that will
injure the reputation of the building or increase the fire hazard of the
building, or disturb the tenants or the neighborhood, and will not permit the
same to remain vacant or unoccupied for more than ten consecutive days; and will
not allow any signs, cards or placards to be posted or placed thereon, nor
permit any alteration of or addition to any of the Premises, except by written
consent of Lessor; all alterations and additions to the Premises shall remain
for the benefit of Lessor unless otherwise provided in the consent aforesaid.
4. MECHANIC'S LIEN. Lessee will not permit any mechanic's lien or liens to be
placed upon the Premises or any building or improvement thereon during the term
hereof, and in case of the filing of such lien Lessee, will promptly pay same.
If default in payment thereof shall continue for thirty (30) days after written
notices thereof from Lessor to the Lessee, the Lessor shall have the right and
privilege at Lessor's option of paying the same or any portion thereof without
injury as to the validity thereof, and any amounts so paid, including expenses
and interest, shall be so much additional indebtedness hereunder due from Lessee
to Lessor and shall be repaid to Lessor immediately on condition of bill
therefor.
5. INDEMNITY FOR ACCIDENTS. Lessee covenants and agrees that he will protect and
save and keep the Lessor forever harmless and indemnified against and from any
penalty or damages of charges imposed for any violation of any laws or
ordinances, whether occasioned by the neglect of Lessee or those holding under
Lessee, and that Lessee will at all times protect, indemnify and save and keep
harmless the Lessor against and from any and all loss, cost, damage or expense,
arising out of or from any accident or other occurrence on or about the
Premises, causing injury to any person or property whichsoever or whatsoever and
will protect, indemnify and save and keep harmless the Lessor against and from
any and all claims and against and from any and all loss, cost, damage or
expense arising out of any failure of Lessee in any respect to comply with and
perform all the requirements and provision hereof.
2
<PAGE> 3
6. NON-LIABILITY OF LESSOR. Except as provided by Illinois statute, Lessor shall
not be liable for any damage occasioned by failure to keep the Premises in
repair, nor for any damage done or occasioned by or from plumbing, gas, water,
sprinkler, steam or other pipes or sewage or the bursting, leading or running on
any pipes, tanks or plumbing fixture in, above, upon or about Premises or any
building or improvement thereon nor for any damage occasioned by water, snow or
ice being upon or coming through the roof, skylights, trap door or otherwise,
nor for any damages arising from acts or neglect of any owners or occupants of
adjacent or contiguous property.
7. WATER, GAS AND ELECTRIC CHARGES. Lessee will pay, in addition to the rent
above specified, all water rents, gas and electric light and power bills taxed,
levied or charged on the Premises, for and during the time for which this lease
is granted, and in case said water rents and bills for gas, electric light and
power shall not be paid when due, Lessor shall have the right to pay the same,
which amounts so paid, together with any sums paid by Lessor to keep the
Premises in a clean and healthy condition, as above specified, are declared to
be so much additional rent and payable with the installment of rent next due
thereafter.
8. KEEP PREMISES IN REPAIR. Lessor shall be obliged to incur any expense for
repairing any improvements upon said damaged premises or connected therewith,
and the Lessee at his own expense will keep all improvements in good repair
(injury by fire, or other causes beyond Lessee's control excepted) as well as in
good tenantable and wholesome condition, and will comply with all local or
general regulations, laws and ordinances applicable thereto, as well as lawful
requirements of all competent authorities in that behalf. Lessee will, as far as
possible, keep said improvements from deterioration due to ordinary wear and
from falling temporarily out of repair. If Lessee does not make repairs as
required hereunder promptly and adequately, Lessor may but need not make such
repairs and pay the costs thereof, and such costs shall be so much additional
rent immediately due from and payable by Lessee to Lessor.
9. ACCESS TO PREMISES. Lessee will allow Lessor, upon 48 hours prior written
notice, and during ordinary business hours, free access to the Premises for the
purpose of examining or exhibiting the same, or to make any repairs or
alterations thereof which Lessor may see fit to make and will allow to have
place upon the Premises at all times notice of "For Sale" and "To Rent", and
will not interfere with the same.
10. ABANDONMENT AND RELETTING. If Lessee shall abandon and vacate the Premises,
or if Lessee's right to occupy the Premises be terminated by Lessor by reason of
Lessee's breach of any of the covenants herein, the same may be re-let by Lessor
for such rent and upon such terms as Lessor may deem fit, subject to Illinois
statute; and if a sufficient sum shall not thus be realized monthly, after
paying the expenses of such re-letting and collecting to satisfy the rent hereby
reserved, Lessee agrees to satisfy and pay all deficiency monthly during the
remaining period of this lease.
3
<PAGE> 4
11. HOLDING OVER. Lessee will, at the termination of this lease by lapse of time
or otherwise, yield up immediate possession to Lessor, and failing so to do,
will pay as liquidated damages, for the whole time such possession is withheld
the sum of FIVE HUNDRED AND 00/100 Dollars ($500.00) per day; but the provisions
of this clause shall not be held as a waiver by Lessor of any rights of re-entry
as hereinafter set forth; nor shall the receipt of said rent or any part thereof
or any other act in apparent affirmance of tenancy, operate as a waiver of the
right to forfeit this lease and the term hereby granted for the period still
unexpired, for a breach of any of the covenants herein.
12. EXTRA FIRE HAZARD. There shall not be allowed, kept, or used on the Premises
any inflammable or explosive liquids or materials save such as may be necessary
for use in the business of the Lessee, and in such case, any such substances
shall be delivered and stored in amount, and used, in accordance with the rules
of the applicable Board of Underwriters and statutes and ordinances now or
hereafter in force.
13. DEFAULT BY LESSEE. If default be made in the payment of the above rent, or
any part thereof, which remains uncured for 5 days following Lessee's receipt of
written notice thereof from Lessor, or in any of the covenants herein contained
to be kept by the Lessee which remain uncured 20 days following Lessee's receipt
of written notice thereof from Lessor, Lessor may at any time thereafter at his
election declare said term ended and re-enter the Premises or any part thereof,
with or (to the extent permitted by law) without notice or process of law, and
remove Lessee or any persons occupying the same, without prejudice to any
remedies which might otherwise be used for arrears of rent, and Lessor shall
have at all times the right to distrain for rent due, and shall have a valid and
first lien upon all personal property which Lessee now owns, or may hereafter
acquire or have an interest in, which is by law subject to such distrain, as
security for payment of the rent herein reserved.
14. NO RENT DEDUCTION OR SET OFF. Lessee's covenant to pay rent is and shall be
independent of each and every other covenant of this lease. Lessee agrees that
any claim by Lessee against Lessor shall not be deducted from rent nor set off
against any claim for rent in any action.
15. RENT AFTER NOTICE OR SUIT. It is further agreed, by the parties hereto, that
after the service of notice or the commencement of a suit or after final
judgment for possession of the Premises, Lessor may receive and collect any rent
due, and the payment of said rent shall not waive or affect said notice, said
suit or said judgment.
16. PAYMENT OF COSTS. Lessee will pay and discharge all reasonable costs,
attorney's fees and expenses that shall be made and incurred by Lessor in
enforcing the covenants and agreements of this lease.
17. RIGHT CUMULATIVE. The rights and remedies of Lessor under this lease are
cumulative. The exercise or use of any one or more thereof shall not bar Lessor
from
4
<PAGE> 5
exercise or use of any other right or remedy provided herein or otherwise
provided by law, nor shall exercise nor use of any rights or remedy by Lessor
waive any other right or remedy.
18. FIRE AND CASUALTY. In case the Premises shall be rendered untenantable
during the term of this lease by fire or other casualty, Lessor at this option
may terminate the lease or repair the Premises within 60 days thereafter. If
Lessor elects to repair, this lease shall remain in effect provided such repairs
are completed within said time, and provided that rent for the Premises will be
presented and reduced accordingly for any period in which the Premises are
untenantable. If Lessor shall not have repaired the Premises within said time,
then at the end of such time the term hereby created shall terminate. If this
lease is terminated by reason of fire or casualty as herein specified, rent
shall be apportioned and paid to the day of such fire or casualty.
19. SUBORDINATION. This lease is subordinate to all mortgages which may now or
hereafter affect the Premises.
20. PLURALS; SUCCESSORS. The words "Lessor" and "Lessee" wherever herein
occurring and used shall be construed to mean "Lessors" and "Lessors" in case
more than one person constitutes either party to this lease; and all the
covenants and agreements contained shall be binding upon, and inure to, their
respective successors, heirs, executors, administrators and assigns and may be
exercised by his or their attorney or agent.
21. SEVERABILITY. Wherever possible each provision of this lease shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this lease shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this lease.
SEE DIAGRAM, "RIDER A" TO LEASE DATED MAY 6, 1999, AND "RIDER B" TO LEASE DATED
MAY 6, 1999, ALL ATTACHED HERETO AND MADE A PART HEREOF.
If this instrument is executed by a corporation, such execution has
been authorized by a duly adopted resolution of the Board of Directors of such
corporation.
This lease consists of five pages numbered 1 to 5, as well at a diagram
of the Premises, a rider, dated May 7, 1999 consisting of two pages, and a rider
dated May 7, 1999, consisting of two pages, all identified by Lessor and Lessee.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this instrument this day
and year first above written.
UNITED STATES BRASS CHICAGO MAP CORPORATION
& COPPER COMPANY
/s/ David Kavanaught 5/10/99 /s/ Steven Peskaitis 5/7/99
- ----------------------------------- -------------------------------------
Name Date Name Date
President President
- ----------------------------------- -------------------------------------
Title Title
/s/ Mike Barnett 5/7/99
- ----------------------------------- -------------------------------------
Name Date Name Date
Secretary
- ----------------------------------- -------------------------------------
Title Title
6
<PAGE> 7
ASSIGNMENT BY LESSOR
On this _______________, 20_____, for value received, Lessor hereby
transfers, assigns and sets over to , all right, title and interest the above,
Lease and the rent thereby received, except rent thus and payable prior to
____________________, 20______.
(SEAL)
-------------------------------------
(SEAL)
-------------------------------------
7
<PAGE> 8
RIDER A TO LEASE, DATED MAY 7, 1999 BETWEEN UNITED STATES BRASS & COPPER CO., AS
LESSOR, AND CHICAGO MAP CORPORATION, AS LESSEE
1. Lessee shall pay Lessor rent monthly in advance as follows:
Monthly Annual
------- ------
Year One $7,916.75 $ 95,000.00
Year Two $8,154.25 $ 97,850.00
Year Three $9,398.75 $100,786.00
Year Four $8,650.75 $103,809.00
Year Five $8,910.25 $106,923.00
Possession of the Premises shall be granted to Lease, May 7, 1999, but no
rent shall be payable for the period from May 7, 1999 to May 31, 1999.
2. All gas and electric bills for the Premises shall be paid by Lessee, per
separate meters now being installed for the space occupied by Lessee.
3. All sewer and water charges for the building shall be paid by Lessor and
Lessee shall reimburse Lessor pro-rate therefor based on area occupied by
Lessee. Lessee shall reimburse Lessor in the amount of $300.00 a month as its
share of landscaping charges from spring cleanup through November.
4. Real estate taxes for 1997 are $41,450.62. Tenant shall pay 20% of any
increase thereof yearly for the period of the Lease.
5. Lessee shall pay up to $1,000.00 per occurrence towards the repair or
replacement of any individual HVAC units in or servicing the premises. Lessee
shall pay for the quarterly maintenance contract for the HVAC units in or
servicing the premises. Lessee shall pay for the quarterly maintenance
contract for the HVAC units.
6. Forty (40) Parking spaces are included with the Lease, and Lessee shall pay
all snow removal costs for those spaces. Lessee may use the docks as
necessary with the Lessor's cooperation. All parking lot repairs, snow
removal in alleys, driveway to dock and clean-up charges relating to the
common area shall be paid by Lessor.
7. Lessee shall be allotted approximately 600 sq. ft. of warehouse space at a
rental of $250.00 per month which will be secured by fencing installed at
Lessor's expense.
8
<PAGE> 9
8. Roof structure, parking lot and exterior walls are to be maintained by
Lessor except for damage caused by Lessee.
9. Upon execution of this Extension Agreement, Lessee shall deposit $15,000.00
with Lessor as a security deposit for the faithful performance of all the
terms and conditions of the Lease Agreement. In no event shall Lessor be
obligated to apply the deposit on rents or other charges in arrears or on
damages for failure to perform the terms and conditions of the Lease by
Lessee.
The security deposit is to be returned to Lessee when the Lease Agreement
is terminated, according to the terms of the Lease Agreement, if not
applied toward the payment of rent in arrears or toward the payment of
damages suffered by Lessor by result of any breach of the terms and
conditions of the Lease Agreement by Lessee.
In no event is the security to be returned until Lessee has vacated the
demised Premises and delivered possession to the Lessor. The security
deposit will draw no interest and Lessor shall not be obligated to hold the
security in a separate fund, but may mix the security with other funds of
Lessor.
10. Lessee shall, at is sole cost and expense, obtain and maintain in full
force and effect for the mutual benefit of the Lessor and Lessee,
comprehensive public liability insurance in the minimum amount of
$1,000,000 combined single limit coverage against claims for bodily injury,
death, or property damage arising out of the use and occupancy of the
Premises. This insurance shall include public liability insurance against
claims for bodily injury, death or property damage occurring in or on the
building, streets, sidewalks, parking and contiguous areas, and the Lessor
shall be named as an additional insured.
Whatever (1) any loss, cost, damage or expense resulting from fire
explosion or any other casualty or occurrences is incurred by either of the
parties to this Lease Agreement in connection with the demised premises and
(2) such party is then covered in whole or in party by insurance with
respect to such loss, cost, damage or expense, then the party so insured
hereby releases the other party from any liability it may have on account
of such loss, cost, damage or expense to the extent of any amount recovered
by reason of such insurance and waives any right of subrogation which might
otherwise exist in or accrue to any person on account thereof, provided
that such release of liability and waiver of the right of subrogation shall
not be operative in any case where the effect thereof is to invalidate such
insurance
9
<PAGE> 10
coverage or increase the cost thereof (provided that in the case of the
increased cost, the other party shall have the right within thirty (30)
days following written notice, to pay such increased cost, thereupon
keeping such release and waiver in full force and effect.).
UNITED STATES BRASS CHICAGO MAP CORPORATION
& COPPER COMPANY
/s/ David Kavanaught 5/10/99 /s/ Steven Peskaitis 5/7/99
- ----------------------------------- -------------------------------------
Name Date Name Date
President President
- ----------------------------------- -------------------------------------
Title Title
/s/ Mike Barnett 5/7/99
- ----------------------------------- -------------------------------------
Name Date Name Date
Secretary
- ----------------------------------- -------------------------------------
Title Title
10
<PAGE> 11
RIDER B TO BUILDING LEASE
DATED MAY 7, 1999, BETWEEN UNITED STATED BRASS & COPPER CO., AS
LESSOR, AND CHICAGO MAP CORPORATION, AS LESSEE
AGREEMENT ON FACILITY WORK ORDER
1. Lessor will paint all office areas except the two executive offices,
executive conference room, executive waiting area, main conference room and
lobby, which will have wall covering.
2. Lessor will put up new wall covering and remove old wall covering in
areas referenced above.
3. Lessee will be responsible for the cost of wall covering for the above
areas, less a painting allowance of $.40/sq. ft.
4. Lessor will give the Lessee's a carpet allowance of $14/sq. yd. for the
area of the building that is currently carpeted.
5. Lessee will carpet all space with the exception of the east wing.
6. Lessee is responsible for cleaning the carpet in the east wing.
7. Lessor will provide vinyl molding throughout the offices.
8. Lessor will re-key all outside entrances and provide keys for interior
offices.
9. Lessor will replace tile in washrooms with new ceramic tile, new light
fixtures and vanities, including counter tops and sinks. Lessor will clean
doors to washrooms and install kick plates to protect lower portion of
door. Lessor will paint or repair stalls in bathrooms.
10. Lessor will clean all ceiling tiles and replace where necessary.
11. Lessor will clean all air ducts.
12. Lessor will clean all vertical blinds and repair or replace where
necessary.
13. Lessor will refinish reception desk to match existing trim/woodwork and
make appropriate repairs to executive secretary station.
14. Lessor will close off south door to employee area and install door or
warehouse side at north end of same.
11
<PAGE> 12
15. Lessor will clean and polish stone floor in lobby/foyer.
16. Lessor will repair and re-hang pocket doors in executive offices.
17. Lessor will seal and repair all windows throughout the Premises.
18. Lessor will effect other repairs, as necessary, to deliver the Premises in
working/aesthetically proper order as identified prior to moving in and up
to 60 days thereafter.
19. Lessor will ensure that facilities have been sprayed for insects and
rodents prior to Lessee's occupation of the Premises.
20. Lessor will repair the water problem in the east lobby.
21. Lessor will replace tiles in east lobby entrance.
22. Lessor will replace tubes in all light fixtures, clean lenses and light
fixtures.
23. Lessor will reimburse Lessee for the incremental (versus standard 6'8"
door) cost of installing 4'6" doors and sidelines in the new private
offices.
UNITED STATES BRASS CHICAGO MAP CORPORATION
& COPPER COMPANY -----------------------
- -------------------
/s/ David Kavanaught 5/10/99 /s/ Steven Peskaitis 5/7/99
- ---------------------------------- -------------------------------
Name Date Name Date
President President
- ---------------------------------- -------------------------------
Title Title
/s/ Mike Barnett 5/7/99
- ---------------------------------- -------------------------------
Name Date Name Date
Secretary
- ---------------------------------- -------------------------------
Title Title
12
<PAGE> 1
EXHIBIT 10.3
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
FOR A PROJECT BETWEEN THE U.S. GEOLOGICAL
SURVEY AND ONE COLLABORATOR
GENERAL PROVISIONS
This Cooperative Research and Development Agreement ("CRADA") is entered into by
and between Chicago Map Corporation ("the Collaborator"), and the National
Mapping Division of the United States Geological Survey ("USGS"). The parties
agree as follows:
ARTICLE 1. DEFINITIONS
1.1 The term "Cooperative Research and Development Agreement" (CRADA) means the
document describing research activities that are jointly undertaken by the
USGS and one or more non-Federal parties that have entered into a CRADA
with USGS for that purpose.
1.2 The term "Invention" means any invention or discovery which is or may be
patentable under Title 35 of the United States Code.
1.3 The term "made" in relation to any invention means the conception or first
actual reduction to practice of such invention.
1.4 The term "Proprietary Information" means information which embodies trade
secrets developed at private expense outside of this CRADA or which is
confidential technical, business, or financial information provided that
such information:
(i) Is not generally known or available from other sources without
obligations concerning its confidentiality;
(ii) Has not been made available by the owners to others without
obligation concerning its confidentiality; and
(iii) Is not already available to the Government without obligation
concerning its confidentiality.
1.5 The term "Subject Data" means all recorded information first produced in
the performance of this CRADA.
1.6 The term "Subject Invention" means any invention of the Collaborator or
USGS conceived or first actually reduced to practice in the performance of
work under this CRADA.
1.7 The term "Intellectual Property" means patents, trademarks, copyrights,
trade secrets, mask works and other forms of comparable property
protectable by Federal, State, or foreign laws.
<PAGE> 2
1.8 The term "Background Intellectual Property" (BIP) refers to a patent or
patent application covering an invention or discovery of either party, or a
copyrighted work, a mask work, trade secret or trademark developed with
separate funds outside of the CRADA by one of the parties or with others.
BIP is not considered as a Subject Invention.
1.9 The term "Created" in relation to any copyrightable software work means
when the work is fixed in any tangible medium of expression for the first
time, as provided for at 17 U.S.C. 101.
1.10 The term "Generated Information" means information produced in the
performance of the CRADA.
1.11 The term "Protected CRADA Information" means Generated Information which is
marked as being Protected CRADA Information by a party to this agreement
and which would have been Proprietary Information had it been obtained from
a non-Federal entity.
1.12 The term "Collaborator's Assigned Employees" means those employees of the
Collaborator who are present at USGS facilities for a continuous period of
more than 2 weeks.
ARTICLE 2. STATEMENT OF WORK
Cooperative research performed under this CRADA shall be performed in accordance
with the Statement of Work attached hereto as pages 2 through 11. Any
modification to this initial scope shall be made by mutual agreement between the
Collaborator and USGS and shall be incorporated herein by a formally executed
written amendment to this CRADA as per Article 12.5.
ARTICLE 3. FINANCIAL OBLIGATION
3.1 The term of the joint project is from March 15, 1999 to March 15, 2004. The
Collaborator's total contribution is estimated at $ 7,550,000. Of the total
stated above, $ 0 is direct contribution to the USGS and $ 7,550,000 is
in-kind services and resources. Method and scheduling of payment for
current and subsequent years is included on cover attachment 9-2040 or will
be provided annually by amendment to the CRADA General Provisions.
3.2 The contribution of USGS shall be in the form of labor, equipment,
facilities, information, and/or computer software estimated $ 4,000,000
subject to available funding.
3.3 Royalty payments, when required, shall be made by the Collaborator to USGS
in accordance with provisions of Articles 4.6 and 6.1. All payments by the
Collaborator shall be made payable to the United States Geological Survey
and mailed to the following address:
<PAGE> 3
U.S. Geological Survey
Office of Financial Management
271 National Center
12201 Sunrise Valley Drive
Reston, Virginia 20192
ARTICLE 4. PATENT RIGHTS
4.1 Reporting. The parties agree to disclose to each other every Subject
Invention, which may be patentable or otherwise protectable, within 60 days
of the time that an inventing party reports such invention to the person(s)
responsible for patent matters in the inventing organization. These
disclosures should be in sufficient enough detail to enable a reviewer to
make and use the invention under 35 U.S.C. 112. The disclosure shall also
identify any statutory bars, i.e., printed publications describing the
invention or public use or sale of the invention in this country. The
parties further agree to disclose to each other any subsequent statutory
bar that occurs for an invention disclosed but for which a patent
application has not been filed. All invention disclosures shall be marked
as confidential under 35 U.S.C. 205.
4.2 Collaborator Employee Inventions. USGS, on behalf of the U.S. Government,
waives any ownership rights the U.S. Government may have in Subject
Inventions made by the Collaborator's employees under the Agreement and
agrees that the Collaborator shall have the option to retain title to any
such employee Subject Invention. The Collaborator shall promptly notify
USGS upon making this election and agrees to file patent applications on
such Subject Invention at its own expense and in a timely fashion. The
Collaborator agrees to grant to the U.S. Government on its employee's
Subject Inventions a nonexclusive, irrevocable, paid-up license in the
patents covering a Subject Invention to practice or have practiced,
throughout the world by, or on behalf of the U.S. Government. Such
nonexclusive license shall be evidenced by a confirmatory license agreement
prepared by the Collaborator in a form satisfactory to USGS. (See Article
4.4)
4.3 USGS Employee Inventions.
4.3.1 USGS, on behalf of the U.S. Government, shall have the initial option
to retain title to each Subject Invention made by its employees under
this Agreement. If an invention is made jointly by personnel of both
parties under this Agreement, it and all patent applications and/or
patents issued thereon shall be jointly owned by the parties, and
available for use and licensing without obligation to account to the
other party, subject to the obligations contained in Articles 4, 7,
and 9. USGS may release the rights provided for by this Article to
employee inventors or to the Collaborator subject to a license in
USGS (See Article 4.4).
4.3.2 If the USGS agrees to grant, convey, and assign the entire title to
any invention made under this agreement to the Collaborator for less
than the fair market value of the invention or the portion conveyed,
and if the inventor is an employee of the U.S. Government at the time
the invention is made or any portion thereof, then the USGS and the
Collaborator shall mutually agree with respect to an appropriate
<PAGE> 4
sum of monies to be given as fair compensation to the government
employee. This agreement shall be reached before such conveyance is
consummated. Compensation agreements shall be made in accordance with
the Federal Technology Act of 1986 and Executive Order 12591 dated
April 10, 1987.
4.4 Filing of Patent Applications. The party having the right to retain
title and file patent applications on a specific Subject Invention may
elect not to file patent applications thereon provided that it so
advises the other party within 90 days from the date it reports the
Subject Invention to the other party. Thereafter, the other party may
elect to file patent applications on the Subject Invention and the
party initially reporting such Subject Invention agrees to assign its
right title and interest in such Subject Invention to the other party
and cooperate with such party in the preparation and filing of patent
applications thereon. The assignment of the entire right title and
interest to the party pursuant to this Article shall be subject to the
retention by the party assigning title of a nonexclusive, irrevocable,
paid-up license to practice, or have practiced, the Subject Invention
throughout the world. In the event that neither of the parties to this
agreement elect to file a patent application on subject invention,
either or both (if a joint invention) may, at their sole discretion
and subject to reasonable conditions, release the right to file to the
inventor(s) with a license in each party of the same scope as set
forth in the immediate preceding sentence.
4.5 Patent Expenses. All of the expenses attendant to the filing of the
patent applications as specified in 4.4 above, shall be borne by the
party filing the patent application. Any post filing and post patent
fees shall also be borne by the same party. Each party shall provide
the other party with copies of the patent applications it files on any
Subject Invention along with the power to inspect and make copies of
all documents retained in the official patent application files by the
applicable patent office.
4.6 License Provisions. If requested, the USGS agrees to negotiate with
the Collaborator for an exclusive license to sole or jointly developed
inventions in the following identified field of use: GIS and
visualization activities related to this CRADA. Any such license shall
be negotiated independently from the CRADA and shall include
reasonable commercial terms. The collaborator's right to negotiate a
license(s) begins at the time that an invention disclosure is filed
and ceases 6 months after the termination of this CRADA for all
subject inventions.
ARTICLE 5. COPYRIGHTS
5.1 Reporting. The parties agree to disclose to each other every
copyrightable article of software (including modifications and
enhancement thereto), documentation or other works created in whole or
in part under this CRADA, which is subject to being copyrighted under
Title 17, United States Code.
5.2 Collaborator Option. The Collaborator shall have the option, solely at
its own discretion, as to whether it wishes to incorporate any
copyrightable article
<PAGE> 5
pursuant to Article 5.1, and developed in whole or in part by USGS,
into any commercial product(s) resulting from the efforts of this
CRADA.
5.3 The Collaborator shall have the option to own the copyright in all
software (including modifications and enhancement thereto),
documentation, or other works created in whole or in part by the
Collaborator under this CRADA, which is subject to being copyrighted
under Title 17, United States Code. The Collaborator shall mark any
such works with a copyright notice showing the Collaborator as the
author or co-author and shall in its reasonable discretion determine
whether to file applications for registration of copyright.
5.4 The Collaborator agrees to grant to the U.S. Government, solely for
U.S. Government purposes, a nonexclusive, irrevocable, paid-up,
worldwide license (hereinafter referred to as Government Purpose
License) in all copyrighted software or other works developed under
this agreement. The Government Purpose License (GPL) conveys to the
Government in part, and in any manner, for Government purposes only,
and to have or permit others to do so for Government purposes only.
Government purposes include competitive procurement, but do not
include the right to have or permit others to use the copyrighted
software or other works for non-U.S. Government or commercial
purposes.
5.5 The Collaborator will clearly mark all copyrighted software or other
works subject to the GPL with their name and the words "Government
Purpose License".
5.6 The Collaborator shall furnish USGS, at no cost to USGS, at least one
copy of each software, documentation, or other work developed in whole
or in part by the Collaborator under this CRADA, subject to the terms
and conditions of the GPL granted to USGS at Article 5.4.
ARTICLE 6. COPYRIGHT ROYALTIES
6.1 The Parties recognize that copyrightable articles, incorporated
subject to the provisions of Article 5.2, may provide varying degrees
of value to any commercial product(s) resulting from the efforts of
this CRADA. If this Collaborator exercises its option to use
copyrighted material developed in whole or in part by USGS pursuant to
Article 5.2, an amendment to this CRADA will be negotiated for
royalties that reflect the USGS contribution to the copyrighted
item(s), as well as the relative value that such item(s) contribute to
any commercial product(s) resulting from the efforts of this CRADA.
The Collaborator shall pay to USGS, at a rate to be determined within
the amendment, royalties over the life of the copyright by the
Collaborator or its affiliates from the licensing, assignment, sale,
lease and/or rental (hereinafter "disposition") of any copyrighted
work created under this CRADA. Payments by the Collaborator to USGS
shall be made payable to USGS, Office of Financial Management, 271
National Center, Reston, Virginia, 20192, and submitted not later than
sixty (60)
<PAGE> 6
days after the calendar year ending December 31st in which the
Collaborator receives the royalties or other income. Royalty payments
made under this Article by the Collaborator to USGS shall continue for
the life of the copyright(s), whether or not this CRADA has been
terminated or has expired.
6.2 Concurrently with each payment of royalties as required in Article 6.1
of this CRADA, or at such other time as payments are due, the
Collaborator shall submit a written report setting forth the period
for which the payment is made, the amount and a description of the
copyrighted works upon which a royalty is payable as provided at
Article 6.1, the net sales and other income received therefrom by the
Collaborator, and the amount of royalties due thereon. If no royalties
are due USGS for any report period, the report shall so state. The
reports required under this article shall also be made within 30 days
of the termination of this CRADA. The Collaborator agrees to keep
records showing the sales or other dispositions of the copyrighted
works upon which royalties are due under the provisions of Article 6.1
in sufficient detail to enable the royalties payable hereunder by the
Collaborator to be determined, and further agrees to permit its books
and records to be examined from time to time during its ordinary
business hours and not more often than once a year to the extent
necessary to verify the reports provided for in this article, such
examination to be made at the expense of USGS by any auditor appointed
by USGS who shall be acceptable to the Collaborator. Auditor approval
shall not be unreasonably withheld by the Collaborator.
ARTICLE 7. DATA AND PUBLICATION
7.1 Release Restrictions. USGS shall have the right to use all Subject
Data for any governmental purpose, but shall not release such Subject
Data publicly except: (I) USGS when reporting on the results of
sponsored research may publish Subject Data, subject to the provisions
of Article 7.4 below; and (ii) USGS may release such Subject Data
where such release is required pursuant to a request under the Freedom
of Information Act (5 U.S.C. Section 552); provided, however, that
such data shall not be released to the public if a patent application
is to be filed (35 U.S.C. Section 205) until the party having the
right to file has had a reasonable time to file.
7.2 Information Identification
7.2.1 Proprietary Information. The Collaborator shall place a
Proprietary notice on all information it delivers to USGS under
this CRADA which the Collaborator asserts is proprietary. USGS
agrees that any information designated as proprietary which is
furnished by the Collaborator to USGS under this CRADA, shall be
used by USGS only for the purpose of carrying out this CRADA.
Information designated as proprietary shall not be disclosed,
copied, reproduced, or otherwise made available in any form
whatsoever to any other person, firm, corporation, partnership,
association, or other entity without the consent of the
Collaborator except
<PAGE> 7
as such information may be subject to disclosure under the
Freedom of Information Act (5 U.S.C. 552).
USGS agrees to use its best efforts to protect information
designated as proprietary from unauthorized disclosure. The
Collaborator agrees that USGS is not liable for the disclosure
of information designated as proprietary which, after notice to
and consultation with the Collaborator, USGS determines may not
lawfully be withheld or which a court of competent jurisdiction
requires disclosure.
7.2.2 Background Intellectual Property. Both parties agree to
identify in advance or during the course of the CRADA
Background Intellectual Property (BIP) that has value for the
joint research but which was developed with separate funds
outside the CRADA. BIP does not qualify as a subject
invention(s) and is not subject to a government use license
unless originally developed with non-CRADA government funds.
7.3 Protected CRADA Information.
7.3.1 Each party may designate as Protected CRADA Information, as
defined in Article 1, any Generated Information produced by its
employees, and with the agreement of the other party, mark any
Generated Information produced by the other party's employees.
All such designated Protected CRADA Information shall be
appropriately marked.
7.3.2 For a period of 2 years from the date Protected CRADA
Information is produced, Parties agree not to further disclose
such Information except:
(1) as necessary to perform this CRADA;
(2) as mutually agreed by the Parties in advance.
7.3.3 The obligation of 7.3.2 above shall end sooner for any
Protected CRADA Information which shall become publicly known
without fault of either party, shall come into a party's
possession without breach by that party of the obligations of
7.3.2 above, or shall be independently developed by a party's
employees who did not have access to the Protected CRADA
Information or as required by the Freedom of Information Act.
7.4 Publication.
7.4.1 USGS may submit for publication the results of the research
work associated with this project. Depending on the extent of
contribution made, employees of the Collaborator may be cited
as coauthors. In no event, however, shall the name of the
Collaborator or any of its trademarks and trade names be used
in any publications without its prior written consent.
<PAGE> 8
7.4.2 USGS and the Collaborator agree to confer and consult at least
30 days prior to either party's submission for publication of
Subject Data to assure that no Proprietary Information or
Protected CRADA Information is released and that patent rights
are not jeopardized. The party receiving the document for
review has 30 days from receipt to object in writing detailing
the objections to the proposed submissions.
ARTICLE 8. RIGHTS IN GENERATED INFORMATION
The Parties understand that the Government shall have unlimited rights in all
Generated Information or information provided to the Parties under this CRADA
which is not marked as being copyrighted (subject to Article 5) or as
Proprietary Information or as Background Intellectual Property (subject to
Article 7.2) or as Protected CRADA Information (subject to Article 7.3).
ARTICLE 9. TERMINATION
9.1 The Collaborator and USGS each have the right to terminate this
agreement upon 30 days notice in writing to the other party.
9.2 In the event of withdrawal of the Collaborator, payments previously
received by USGS pursuant to Article 3 of this CRADA will be retained
by USGS to be used in support of the project.
9.3 In the event of termination by USGS, USGS shall repay the Collaborator
any prorated portion of payments previously made to USGS pursuant to
Article 3.1 of the CRADA in excess of actual costs incurred by USGS in
pursuing this project. A report on results to date of termination will
be prepared by USGS and the cost of the report will be deducted from
any amounts due to participants from USGS.
9.4 Termination of this CRADA by either party for any reason shall not
affect the rights and obligations of the parties accrued prior to the
effective date of termination of this CRADA. No termination or
expiration of this CRADA, however effectuated, shall release the
parties hereto from their rights, duties, and obligations under
Articles 3.3, 4, 5, 6, 7, 8, and 11.
ARTICLE 10. DISPUTES
10.1 Settlement. Any dispute arising under this CRADA which is not disposed
of by agreement of the parties shall be submitted jointly to the
signatories of this CRADA. A joint decision of the signatories or
their designees shall be the disposition of such dispute.
10.2 If the signatories are unable to jointly resolve a dispute within a
reasonable period of time after submission of the dispute for
resolution, the matter shall be submitted to the Director of the USGS,
or his designee for resolution.
<PAGE> 9
10.3 Continuation of Work. Pending the resolution of any dispute or claim
pursuant to this article, the parties agree that performance of all
obligations shall be pursued diligently in accordance with the
direction of the USGS signatory.
ARTICLE 11. LIABILITY
11.1 Property. The U.S. Government shall not be responsible for damages to
any property of the Collaborator provided to USGS pursuant to this
CRADA.
11.2 Collaborator's Employees.
11.2.1 During any temporary assignment at USGS facilities that may
result from this Agreement, the Collaborator's Assigned
Employees (as defined in Article 1.12 of this Agreement)
shall pursue their activities on the work schedule mutually
agreed upon between them, the Collaborator, and the USGS. The
Collaborator's Assigned Employees must agree to comply with
Federal Government security and conduct regulations that
apply to USGS employees. The Collaborator's Assigned
Employees shall conform to the requirements of the Office of
Government Ethics "Standards of Ethical Conduct for Employees
of the Executive Branch" (5 CFR Parts 2635 and 2636) and
Security Regulations, hereby made part of this Agreement, to
the extent that these regulations prohibit private business
activity or interest incompatible with the best interests of
the Department.
11.2.2 The Collaborator's Assigned Employees shall comply with
regulations that apply to USGS employees with regard to
disclosure of proprietary or procurement-sensitive
information, refusal from any activities which may present a
conflict of interest, including procurements or other actions
in which the Collaborator may have an interest. The
Collaborator's Assigned Employees may not represent the
Collaborator or work for the Collaborator in competing for
award from any other Federal agency during the term of the
CRADA (see Article 3) or extension thereto.
11.2.3 The Collaborator's Assigned Employees are permanently
prohibited from representing or performing activities for
the Collaborator on any matters before the USGS on which the
Collaborator's employees USGS while assigned to this
project.
11.2.4 The Collaborator's employees are prohibited from acting as
governmental employees, including making decisions on behalf
of the Government or performing inherently governmental
functions while working at the USGS.
11.3 No Warranty. Except as provided in Title 28, United States Code,
section 1498, the United States shall not be liable for the use or
manufacture of any invention made under this agreement nor for the
infringement of any patent or copyright
<PAGE> 10
during the performance of this agreement. The USGS makes no express or
implied warranty as to any matter whatsoever, including the conditions of
the research or any invention or product, whether tangible or intangible,
made or developed under this CRADA, or the ownership, merchantability, or
fitness for a particular purpose of the research or any invention or
product. These provisions shall survive termination of the CRADA.
11.4 Indemnification
11.4.1 Collaborator's Employees. The Collaborator agrees to indemnify and
hold harmless the U.S. Government for any loss, claim, damage, or
liability of any kind involving an employee of the Collaborator
arising in connection with this CRADA, except to the extent that
such loss, claim, damage or liability arises from the negligence of
USGS or its employees. USGS shall be solely responsible for the
payment of all claims for the loss of property, personal injury or
death, or otherwise arising out of any negligent act or omission of
its employees in connection with the performance of work under this
CRADA as provided under the Federal Tort Claims Act.
11.4.2 Technical Developments and Products. The Collaborator holds the U.S.
Government harmless and indemnifies the Government for all
liabilities, demands, damages, expense, and losses arising out of
the use by the Collaborator, or any party acting on its behalf or
under its authorization, of USGS's research and technical
developments or out of any use, sale, or other disposition by the
Collaborator, or others acting on its behalf or with its
authorization, of products made by the use of USGS's technical
developments. In respect to this Article, the Government shall not
be considered an assignee or licensee of the Collaborator. This
provision shall survive termination of this CRADA.
11.5 Force Majeure. Neither party shall be liable for any unforeseeable event
beyond its reasonable control not caused by the fault or negligence of such
party, which causes such party to be unable to perform its obligations
under this CRADA (and which its has been unable to overcome by the exercise
of due diligence), including, but not limited to, flood, drought,
earthquake, storm, fire, pestilence, lightning, and other natural
catastrophes, epidemic, war, riot, civil disturbance or disobedience,
strikes, labor dispute, or failure, threat of failure or sabotage of the
USGS facilities, or any order or injunction made by a court or public
agency. In the event of the occurrence of such a force majeure event, the
party unable to perform shall promptly notify the other party. It shall
further use its best efforts to resume performance as quickly as possible
and shall suspend performance only for such period of time as is necessary
as a result of the force majeure event.
<PAGE> 11
ARTICLE 12. MISCELLANEOUS
12.1 No Benefits. No member of, or delegate to the United States Congress,
or resident commissioner, shall be admitted to any share or part of
this CRADA, nor to any benefit that may arise therefrom; but this
provision shall not be construed to extend to this CRADA if made with
a corporation for its general benefit.
12.2 Governing Law. The construction validity, performance and effect of
this CRADA for all purposes shall be governed by applicable Federal
laws.
12.3 Entire Agreement. This CRADA constitutes the entire agreement between
the parties concerning the subject matter hereto and supersedes any
prior understanding or written or oral agreement relative to said
matter.
12.4 Headings. Titles and headings of the Sections and Subsections of this
CRADA are for the convenience of references only and do not form a
part of this CRADA and shall in no way affect the interpretation
thereof.
12.5 Amendments. If either party desires a modification in this CRADA, the
parties shall, upon reasonable notice of the proposed modification by
the party desiring the change, confer in good faith to determine the
desirability of such modification. Such modification shall not be
effective until a written amendment is signed by all parties hereto
by their representatives duly authorized to execute such amendment.
12.6 Assignment. Neither this CRADA nor any rights or obligations of any
party hereunder shall be assigned or otherwise transferred by either
party without the prior written consent of the other party except
that the Collaborator may assign this CRADA to the successors or
assignees of a substantial portion of the Collaborator's business
interests to which this CRADA directly pertains.
12.7 Notices. All notices pertaining to or required by this CRADA shall be
in writing and shall be directed to the signatory(s).
12.8 Independent Contractors. The relationship of the parties to this
CRADA is that of independent contractors and not as agents of each
other or as joint venturers or partners. USGS shall maintain sole and
exclusive control over its personnel and operations.
12.9 Use of Name or Endorsements.
12.9.1 The Collaborator shall not use the name of USGS or the
Department of the Interior on any product or service which is
directly or indirectly related to either this CRADA or any
patent license or assignment agreement which implements this
CRADA without the prior approval of USGS. The Collaborator
shall not publicize, or otherwise circulate, promotional
material (such as advertisements, sales brochures, press
releases, speeches,
<PAGE> 12
still and motion pictures, articles, manuscripts or other
publications) which states or implies governmental,
departmental, bureau, or government employee endorsement of a
product, service or position which the Collaborator
represents. No release of information relating to this CRADA
may state or imply that the Government approves of the
Collaborator's work product, or considers the Collaborator's
work product to be superior to other products or services.
12.9.2 The Collaborator must obtain prior governmental approval from
USGS for any public information releases which refer to the
Department of the Interior, any bureau or employee (by name
or title), or this agreement. The specific text, layout,
photographs, etc., of the proposed release must be submitted
with the request for approval.
12.9.3 By entering into this CRADA, USGS does not directly or
indirectly endorse any product or service provided, or to be
provided, by the Collaborator, its successors, assignees, or
licensees.
12.10 Trademarks. The Parties may seek to obtain
trademark/servicemark protection on products or services
generated under this CRADA in the United States or foreign
countries. The ownership and other rights to trademark usage
shall be mutually agreed upon and reduced to writing as
products develop.
ARTICLE 13. DURATION OF AGREEMENT AND EFFECTIVE DATE
13.1 Duration of Agreement. It is mutually recognized that the
development program cannot be rigidly defined in advance, and that
the contemplated time periods for completion of each phase are good
faith guidelines subject to adjustment by mutual agreement, to fit
circumstances as the development program proceeds. In no case will
this CRADA extend beyond the ending date specified in Article 3.1,
unless it is revised in accordance with Article 12.5 of this
agreement. Certain provisions survive the termination of this
CRADA, as specified, in Article 9.4.
13.1(b) It is expressly understood and agreed that this CRADA contains
a Statement of Work and General Terms and Conditions. It is the
intent of the parties that should it become necessary for any third
party to interpret this agreement, the terms and conditions set
forth in the General Provisions and any executed Amendments take
precedence over other documents generated for this project if there
is an apparent conflict in the terms.
<PAGE> 13
13.2 Effective Date. This CRADA shall enter into force as of the date of
the last signature of the parties as shown on the title page.
For the Collaborator /s/ Steven J. Peskaitis
------------------------------------
March 26, 1999
------------------------------------
Date
USGS Review /s/ Anton Inderbitzen
------------------------------------
March 25, 1999
------------------------------------
Date
For the U.S. Geological Survey /s/ Barbara J. Ryan
------------------------------------
March 25, 1999
------------------------------------
Date
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Agreement is made on the 12th day of March, 1999, by and between
Chicago Map Corporation, (hereinafter referred to as the "Corporation"), an
Illinois Corporation with a principal place of business in Lemont, Illinois, and
Paris Karahalios (hereafter referred to as "Karahalios"), a resident of Andover,
Massachusetts.
WHEREAS, the Corporation is engaged in the service of developing, marketing and
distributing computer mapping software programs;
WHEREAS, it is intended that Karahalios become an employee of the Corporation;
and
WHEREAS, the parties desire to define the relationship between Karahalios and
the Corporation.
1. EFFECTIVE DATE
The effective date of the employment relationship of the Corporation and
Karahalios shall be March 13, 1999.
2. SERVICES
2.1 As an employee of the Corporation, Karahalios agrees to devote substantially
his entire time and attention to service as a Senior Vice President of the
Corporation. He shall also serve on the Board of Directors of the Corporation,
without additional compensation.
2.2 The expenditure of reasonable amount of time for teaching, lecturing,
personal or outside business, shall not be deemed a breach of this Agreement,
provided such activities do not materially interfere with the services required
to be rendered to the Corporation hereunder.
2.3 Karahalios shall not, without the express prior written consent of the
Corporation, directly or indirectly, during the term of his employment
relationship, render services or engage in any activity competitive with and/or
adverse to the Corporation's business, whether alone, as a partner, or as an
officer, director, employee or shareholder (excluding the holding of the
securities of any corporation whose securities are publicly traded if such
securities owned by Karahalios do not exceed one percent (1%) in value of all of
the issued and outstanding securities of such corporation) of any other
corporation, or as a trustee, fiduciary or other representative of any other
activity.
1
<PAGE> 2
2.4 The making of passive and personal investments and the conduct of private
business affairs shall not be prohibited hereunder, provided the non-competitive
restrictions of the previous paragraph are not violated. The Corporation
acknowledges that Karahalios is also the President and principal shareholder of
TRIUS, Inc., a Massachusetts corporation, and acknowledges that said position
and Karahalios' participation in the business affairs of TRIUS, Inc. do not
currently present any conflicts of interest.
3. COMPENSATION
3.1 The Corporation agrees that commencing with March 13, 1999, Karahalios'
salary, as a Senior Vice President shall be $120,000.00 per year, paid in
twenty-four semi-monthly installments of $5,000.00 each.
3.2 The Corporation agrees that during the first five years of employment, and
that on each anniversary of such employment, beginning with twelve months
following the effective date of this Agreement, Karahalios will receive a three
percent (3%) increase on his then current salary. Following the completion of
the fifth year of employment, Karahalios will receive salary increases according
to the Corporation's then existing salary increase procedures.
3.3 The Corporation agrees to provide and Karahalios agrees to accept, the
conditions of a corporate stock options package. Both parties acknowledge that
the details of this package are not yet in place and have not been approved by
the Board of Directors of the Corporation as of the effective date of this
Agreement. Attachment A is a draft outline of the stock options package that
will be proposed to the Board of Directors and be voted upon within 60 days of
the date of this Agreement.
3.4 All compensation shall be subject to the customary withholding of taxes and
other deductions as required with respect to compensation paid by a corporation
to an employee.
4. VACATION
4.1 The Corporation agrees that in the first year of his employment, Karahalios
shall be entitled to three (3) weeks of vacation. Commencing with the second
year of employment, Karahalios shall be entitled to four (4) weeks of vacation
per year.
5. ATTENDANCE OF MEETINGS AND CONVENTIONS
5.1 Karahalios shall be entitled to attend meetings and conventions, that are to
the direct benefit of the Corporation, unless such attendance is specifically
prohibited by the Board of Directors.
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<PAGE> 3
5.2 The monies to which Karahalios shall be entitled as a benefit for attendance
of meetings and conventions as aforesaid, shall be limited to reimbursement of
any reasonable expenses incurred during the meeting or the convention and any
other specific expenses expressly approved by the Board of Directors.
6. TERMINATION
6.1 The Employment Relationship between the Corporation and Karahalios shall be
terminated upon the happening of any of the following events:
a. Whenever the Corporation and Karahalios shall mutually agree to
termination in writing.
b. In the event of bankruptcy, receivership, dissolution, or cessation
of the Corporation.
c. Upon the death of Karahalios.
d. At the Corporation's option, if Karahalios shall suffer a total and
permanent disability. For purposes of this Agreement "total and
permanent disability" shall mean the inability of Karahalios to
reasonably perform his regular duties for a continuous period of
(12) months as a result of the same illness or injury.
e. At the Corporation's discretion, for no cause, with a 30-day
notification to Karahalios, in writing.
6.2 Upon termination in accordance with Section 6.1.d above, Karahalios shall be
entitled to receive the compensation that is described in the then existing
Corporation's termination procedures.
6.3 Upon termination in accordance with Sections 6.1.a or 6.1.b above,
Corporation agrees to pay Karahalios one half (1/2) of the compensation defined
in Section 3.1 for the remainder of the term of this Agreement.
6.4 Upon termination in accordance with Section 6.1.e, the Corporation agrees to
pay Karahalios the compensation defined in Section 3.1 for the remainder of the
term of this Agreement.
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<PAGE> 4
7. CORPORATION'S AUTHORITY
7.1 Karahalios agrees to observe and comply with the by-laws of the Corporation
as adopted by its Board of Directors, in writing, respecting performance of his
duties and to carry and to perform orders, directions, and policies stated by
the Corporation to him, from time to time, either orally or in writing.
8. RECORDS
8.1 In the event of termination of this Employment Agreement, Karahalios shall
not be entitled to keep or preserve records as to any client, unless said client
shall specifically request or authorize such disposition of his records.
9. EXPENSES
9.1 During the period of his employment, Karahalios will be reimbursed for his
reasonable expenses in accordance with the general policy of the Corporation as
adopted by its Board of Directors, from time to time.
10. REIMBURSEMENT OF DISALLOWED COMPENSATION
10.1 In the event that any compensation paid to Karahalios shall, upon audit or
other examination of the income tax returns of the Corporation be determined not
to be allowable deductions from the gross income of the Corporation, and such
determinations shall be acceded to by the Corporation, or such determination
will be made final by the appropriate State or Federal taxing authority or a
final judgement of a court of competent jurisdiction, and no appeal shall be
taken therefrom, or the applicable period for filing notice of appeal shall have
expired, then in such event Karahalios shall reimburse the Corporation for the
amount of such disallowed compensation. Such reimbursement by Karahalios may not
be waived by the Corporation.
11. FRINGE BENEFITS
11.1 Fringe benefits which will be provided to Karahalios by the Corporation are
all benefits according to applicable policies of the Corporation, and include
the following:
a. Health Insurance
b. Group Term Life Insurance
c. Group Long Term Disability Insurance (Delay for 3 months)
d. 401(k) or Equivalent Retirement Plan (Delay for 3 months)
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<PAGE> 5
12. COVENANT NOT TO COMPETE
12.1 For a period of one (1) year from the date of termination of employment
with the Corporation, Karahalios will not, within the State of Illinois, or the
Commonwealth of Massachusetts, directly or indirectly, own (excluding the
holding of the securities of any corporation whose securities are publicly
traded if such securities owned by Karahalios do not exceed one percent (1%) in
value of all of the issued and outstanding securities of such corporation),
manage, operate, join, control or participate in the ownership, management,
operation or control of; or be connected as a partner, consultant or otherwise,
with any profit or non-profit business or organization which directly competes
with the Corporation or any of its subsidiaries.
12.2 It is expressly understood and agreed that although the parties hereto
consider the restrictions contained herein reasonable as to the protected
business, time and geographic area, if the aforesaid restrictive covenant is
found by any court of competent jurisdiction to be unreasonable because it is
too broad in extent as to the protected business, time period or the designated
geographic area, or as to any of them, then and in that case the restrictions
herein contained shall nevertheless remain effective, but shall be considered to
have been amended as to such protected business, time or area, or any of them,
as the case may be, as may be considered to be reasonable by such court, and as
so amended shall be enforceable.
12.3 It is further expressly agreed that in the event of breach by Karahalios of
any of the covenants herein contained, although the Corporation's damage may be
substantial, the same may be extremely difficult to ascertain and money damages
may not afford an adequate remedy; therefore, in the event of breach, in
addition to such other remedies, which may be provided by law, the Corporation
shall have the right to specific performance of the covenants herein contained
by way of temporary and/or permanent injunctive relief.
13. TERM
13.1 The term of this Agreement shall be five (5) years, commencing on the
effective date of March 13, 1999 and shall terminate on March 12, 2004. This
Agreement shall be automatically renewed for succeeding terms of one (1) year,
unless it is terminated in accordance with the provisions of Article 6 hereof.
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<PAGE> 6
14. INDEMNIFICATION
14.1 The Corporation will indemnify and hold Karahalios harmless with respect to
any liability, suits, causes of action or claims according to the
Indemnification provisions in the Corporate by-laws.
15. MISCELLANEOUS
15.1 This Agreement shall be governed by and construed under the laws of the
State of Illinois.
15.2 This Agreement is not assignable in whole or in part by either party
without the written consent of the other party.
15.3 This Agreement constitutes the entire agreement of the parties with respect
to the transaction contemplated hereby and supersedes all other agreements
between the parties, either written or oral, with respect to such transactions.
15.4 This Agreement may not be amended except by a writing signed by both
parties.
15.5 A waiver of any of the terms and conditions hereof shall not be construed
as a general waiver by the Corporation and the Corporation shall be free to
reinstate any such term or condition, with or without notice to Karahalios.
15.6 If any part, term or provision of this Agreement shall be held illegal,
unenforceable or in conflict with any law of a federal state, local or other
government having jurisdiction over this Agreement, the validity of the
remaining portions or provisions shall not be affected thereby.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
the duly authorized members of the Board of Directors and Karahalios has
hereunto set his hand and seal as of the date first above written.
For the Corporation: Employee:
/s/ Mike Barnett /s/ Paris Karahalios
- ---------------------------------- --------------------------
Mike Barnett, Secretary Paris Karahalios
/s/ Stanley Peskaitis
- ----------------------------------
Stanley Peskaitis, Treasurer
6
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Agreement is made on the 12th day of March, 1999, by and between Chicago
Map Corporation, (hereinafter referred to as the "Corporation"), an Illinois
Corporation with a principal place of business in Lemont, Illinois, and David A.
Schulz (hereafter referred to as "Schulz"), a resident of Tewksbury,
Massachusetts.
WHEREAS, the Corporation is engaged in the service of developing, marketing and
distributing computer mapping software programs;
WHEREAS, it is intended that Schulz become an employee of the Corporation; and
WHEREAS, the parties desire to define the relationship between Schulz and the
Corporation.
1. EFFECTIVE DATE
The effective date of the employment relationship of the Corporation and Schulz
shall be March 13, 1999.
2. SERVICES
2.1 As an employee of the Corporation, Schulz agrees to devote substantially his
entire time and attention to service as a Chief Developer of the Corporation.
2.2 The expenditure of reasonable amount of time for teaching, lecturing,
personal or outside business, shall not be deemed a breach of this Agreement,
provided such activities do not materially interfere with the services required
to be rendered to the Corporation hereunder.
2.3 Schulz shall not, without the express prior written consent of the
Corporation, directly or indirectly, during the term of his employment
relationship, render services or engage in any activity competitive with and/or
adverse to the Corporation's business, whether alone, as a partner, or as an
officer, director, employee or shareholder (excluding the holding of the
securities of any corporation whose securities are publicly traded if such
securities owned by Schulz do not exceed one percent (1%) in value of all of the
issued and outstanding securities of such corporation) of any other corporation,
or as a trustee, fiduciary or other representative of any other activity.
2.4 The making of passive and personal investments and the conduct of private
business affairs shall not be prohibited hereunder, provided the non-competitive
restrictions of the previous paragraph are not violated. The Corporation
acknowledges that Schulz is also the Clerk and principal shareholder of TRIUS,
Inc., a Massachusetts corporation, and acknowledges that said
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<PAGE> 2
position and Schulz' participation in the business affairs of TRIUS, Inc. do not
currently present any conflicts of interest.
3. COMPENSATION
3.1 The Corporation agrees that commencing with March 13, 1999, Schulz's salary,
as a Chief Developer, shall be $107,000 per year, paid in twenty-four
semi-monthly installments of $4,458.33 each.
3.2 The Corporation agrees that during the first five years of employment, and
that on each anniversary of such employment, beginning with twelve months
following the effective date of this Agreement, Schulz will receive a three
percent (3%) increase on his then current salary. Following the completion of
the fifth year of employment, Schulz will receive salary increases according to
the Corporation's then existing salary increase procedures.
3.3 The Corporation agrees to provide and Peskaitis agrees to accept, the
conditions of corporate stock option package. Both parties acknowledge that the
details of this package are not yet in place and have not been improved by the
Board of Directors of the Corporation as of the effective date of this
Agreement. Attachment A is a draft outline of the stock options package that
will be proposed to the Board of Directors and be voted upon within 60 days of
the date of this Agreement.
3.4 All compensation shall be subject to the customary withholding taxes and
other employment taxes as required with respect to compensation paid by a
corporation to an employee.
4. VACATION
4.1 The Corporation agrees that in the first year of his employment, Schulz
shall be entitled to three (3) weeks of vacation. Commencing with the second
year of employment, Schulz shall be entitled to four (4) weeks of vacation per
year.
5. ATTENDANCE OF MEETINGS AND CONVENTIONS
5.1 Schulz shall be entitled to attend meetings and conventions, that are to the
direct benefit of the Corporation, unless such attendance is specifically
prohibited by the Board of Directors.
5.2 The monies to which Schulz shall be entitled as a benefit for attendance of
meetings and conventions as aforesaid, shall be limited to reimbursement of any
reasonable expenses incurred during the meeting or the convention and any other
specific expenses expressly approved by the Board of Directors.
2
<PAGE> 3
6. TERMINATION
6.1 The Employment Relationship between the Corporation and Schulz shall be
terminated upon happening of any of the following events:
a. Whenever the Corporation and Schulz shall mutually agree to
termination in writing.
b. In the event of bankruptcy, receivership, dissolution, or cessation
of the Corporation.
c. Upon the death of Schulz.
d. At the Corporation's option, if Schulz shall suffer a total and
permanent disability. For purposes of this Agreement "total and
permanent disability" shall mean the inability of Schulz to
reasonably perform his regular duties for a continuous period of
(12) months as a result of the same illness or injury.
e. At the Corporation's discretion, for no cause, with a 30-day
notification to Schulz, in writing.
6.2 Upon termination in accordance with Sections 6.1 or 6.1.d above, Schulz
shall be entitled to receive the compensation that is described in the
Corporation's termination procedures.
6.3 Upon termination in accordance with Sections 6.1.a or 6.1.b above,
Corporation agrees to pay Schulz one half (1/2) of the compensation defined in
Section 3.1 for the remainder of the term of this Agreement.
6.4 Upon termination in accordance with Section 6.1.e, the Corporation agrees to
pay Schulz the compensation defined in Section 3.1 for the remainder of the term
of this Agreement.
7. CORPORATION'S AUTHORITY
7.1 Schulz agrees to observe and comply with the rules and regulations of the
Corporation as adopted by its Board of Directors, either orally or in writing,
respecting performance of his duties and to carry and to perform orders,
directions, and policies stated by the Corporation to him, from time to time,
either orally or in writing.
3
<PAGE> 4
8. RECORDS
8.1 In the event of termination of this Employment Relationship, Schulz shall
not be entitled to keep or preserve records as to any client, unless said client
shall specifically request or authorize such disposition of his records.
9. EXPENSES
9.1 During the period of his employment, Schulz will be reimbursed for his
reasonable expenses in accordance with the general policy of the Corporation as
adopted by its Board of Directors, from time to time.
10. REIMBURSEMENT OF DISALLOWED COMPENSATION
10.1 In the event that any compensation paid to Schulz shall, upon audit or
other examination of the income tax returns of the Corporation be determined not
to be allowable deductions from the gross income of the Corporation, and such
determinations shall be acceded to by the Corporation, or such determination
will be made final by the appropriate State or Federal taxing authority or a
final judgement of a court of competent jurisdiction, and no appeal shall be
taken therefrom, or the applicable period for filing notice of appeal shall have
expired, then in such event Schulz shall compensate the Corporation for the
amount of such disallowed compensation. Such compensation by Schulz may not be
waived by the Corporation.
11. FRINGE BENEFITS
11.1 Fringe benefits which will be provided to Schulz by the Corporation are all
benefits according to applicable policies of the Corporation, and include the
following:
a. Health Insurance
b. Group Term Life Insurance
c. Group Long Term Disability Insurance (Delay for 3 months)
d. 401(k) or Equivalent Retirement Plan (Delay for 3 months)
12. COVENANT NOT TO COMPETE
12.1 For a period of one (1) year from the date of termination of employment
with the Corporation, Schulz will not, within the State of Illinois, or the
Commonwealth of Massachusetts, directly or indirectly, own (excluding the
holding of the securities of any corporation whose securities are publicly
traded if such securities owned by Schulz do not exceed one percent (1%) in
value of all of the issued and outstanding securities of such corporation),
manage, operate, join, control or participate in the ownership, management,
operation or control of; or be connected as a
4
<PAGE> 5
partner, consultant or otherwise, with any profit or non-profit business or
organization which directly competes with the Corporation or any of its
subsidiaries.
12.2 It is expressly understood and agreed that although the parties hereto
consider the restrictions contained herein reasonable as to the protected
business, time and geographic area, if the aforesaid restrictive covenant is
found by any court of competent jurisdiction to be unreasonable because it is
too broad in extent as to the protected business, time period or the designated
geographic area, or as to any of them, then and in that case the restrictions
herein contained shall nevertheless remain effective, but shall be considered to
have been amended as to such protected business, time or area, or any of them,
as the case may be, as may be considered to be reasonable by such court, and as
so amended shall be enforceable.
12.3 It is further expressly agreed that in the event of breach by Schulz of any
of the covenants herein contained, although the Corporation's damage may be
substantial, the same may be extremely difficult to ascertain and money damages
may not afford an adequate remedy; therefore, in the event of breach, in
addition to such other remedies, which may be provided by law, the Corporation
shall have the right to specific performance of the covenants herein contained
by way of temporary and/or permanent injunctive relief.
13. TERM
13.1 The term of this Agreement shall be five (5) years, commencing on the
effective date of March 13, 1999 and shall terminate on March 12, 2004. This
Agreement shall be automatically renewed for succeeding terms of one (1) year
unless it is terminated in accordance with the provisions of Article 6 hereof.
14. INDEMNIFICATION
14.1 The Corporation will indemnify and hold Schulz harmless with respect to any
liability, suits, causes of action or claims according to the Indemnification
provisions in the Corporate By-laws.
15. MISCELLANEOUS
15.1 This Agreement shall be governed by and construed under the laws of the
State of Illinois.
15.2 This Agreement is not assignable in whole or in part by either party
without the written consent of the other party.
15.3 This Agreement constitutes the entire agreement of the parties with respect
to the transaction contemplated hereby and supersedes all other agreements
between the parties, either written or oral, with respect to such transactions.
5
<PAGE> 6
15.4 This Agreement may not be amended except by a writing signed by both
parties.
15.5 A waiver of any of the terms and conditions hereof shall not be construed
as a general waiver by the Corporation and the Corporation shall be free to
reinstate any such term or condition, with or without notice to Schulz.
15.6 If any part, term or provision of this Agreement shall be held illegal,
unenforceable or in conflict with any law of a federal state, local or other
government having jurisdiction over this Agreement, the validity of the
remaining portions or provisions shall not be affected thereby.
IN WITNESS WHEREOF, the Corporation has caused these present to be executed by
the duly authorized members of the Board of Directors and Schulz has hereunto
set his hand and seal as of the date first above written.
For the Corporation: Employee:
/s/ Mike Barnett /s/ David A. Schulz
- ---------------------------------- -------------------------
Mike Barnett, Secretary David A. Schulz
/s/ Stanley Peskaitis
- ----------------------------------
Stanley Peskaitis, Treasurer
6
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Agreement is made on the 19th day of April, 1999, by and between Chicago
Map Corporation, (hereinafter referred to as the "Corporation"), an Illinois
Corporation with a principal place of business in Lemont, Illinois, and Kenneth
J. Eaken (hereafter referred to as "Eaken"), a resident of Dallas, Texas.
WHEREAS, the Corporation is engaged in the service of developing, marketing and
distributing computer mapping software programs;
WHEREAS, it is intended that Eaken become an employee of the Corporation; and
WHEREAS, the parties desire to define the relationship between Eaken and the
Corporation.
1. EFFECTIVE DATE
The effective date of the employment relationship of the Corporation and Eaken
shall be April 19, 1999.
2. SERVICES
2.1 As an employee of the Corporation, Eaken agrees to devote substantially his
entire time and attention to service as a Senior Vice-President of Business
Development.
2.2 The expenditure of reasonable amount of time for teaching, lecturing,
personal or outside business, shall not be deemed a breach of this Agreement,
provided such activities do not materially interfere with the services required
to be rendered to the Corporation hereunder.
2.3 Eaken shall not, without the express prior written consent of the
Corporation, directly or indirectly, during the term of his employment
relationship, render services or engage in any activity competitive with and/or
adverse to the Corporation's business, whether alone, as a partner, or as an
officer, director, employee or shareholder (excluding the holding of the
securities of any corporation whose securities are publicly traded if such
securities owned by Eaken do not exceed one percent (1%) in value of all of the
issued and outstanding securities of such corporation) of any other corporation,
or as a trustee, fiduciary or other representative of any other activity.
2.4 The making of passive and personal investments and the conduct of private
business affairs shall not be prohibited hereunder, provided the non-competitive
restrictions of the previous paragraph are not violated.
1
<PAGE> 2
3. COMPENSATION
3.1 The Corporation agrees that commencing with March 19, 1999, Eaken's salary,
as a Senior Vice-President of Business Development shall be $102,000.00 per
year, paid in twenty-four semi-monthly installments of $4,250.00 each.
3.2 The Corporation agrees that during the first three years of employment, and
that on each anniversary of such employment Eaken will receive salary increases
according to the Corporation's then existing salary increase procedures.
3.3 The Corporation agrees to provide and Eaken agrees to accept, the conditions
of a corporate stock options package. Both parties acknowledge that the details
of this package are not yet in place and have not been approved by the Board of
Directors of the Corporation as of the effective date of this Agreement.
Attachment A is a draft outline of the stock options package that will be
proposed to the Board of Directors and be voted upon within 60 days of the date
of this Agreement.
3.4 All compensation shall be subject to the customary withholding of taxes and
other deductions as required with respect to compensation paid by a corporation
to an employee.
4. VACATION
4.1 The Corporation agrees that in the first year of his employment, Eaken shall
be entitled to three (3) weeks of vacation. Commencing with the second year of
employment, Eaken shall be entitled to four (4) weeks of vacation per year.
5. ATTENDANCE OF MEETINGS AND CONVENTIONS
5.1 Eaken shall be entitled to attend meetings and conventions, that are to the
direct benefit of the Corporation, unless such attendance is specifically
prohibited by the Board of Directors.
5.2 The monies to which Eaken shall be entitled as a benefit for attendance of
meetings and conventions as aforesaid, shall be limited to reimbursement of any
reasonable expenses incurred during the meeting or the convention and any other
specific expenses expressly approved by the Board of Directors.
6. TERMINATION
6.1 The Employment Relationship between the Corporation and Eaken shall be
terminated upon happening of any of the following events:
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<PAGE> 3
a. Whenever the Corporation and Eaken shall mutually agree to
termination in writing.
b. In the event of bankruptcy, receivership, dissolution, or cessation
of the Corporation.
c. Upon the death of Eaken.
d. At the Corporation's option, if Eaken shall suffer a total and
permanent disability. For purposes of this Agreement "total and
permanent disability" shall mean the inability of Eaken to
reasonably perform his regular duties for a continuous period of
(12) months as a result of the same illness or injury.
e. At the Corporation's discretion, for no cause, with a 30-day
notification to Eaken in writing.
6.2 Upon termination in accordance with Paragraph 6.1.d above, Eaken shall be
entitled to receive the compensation that is described in the then existing
Corporation's termination procedures.
6.3 Upon termination in accordance with Paragraphs 6.1.a or 6.1.b above,
Corporation agrees to pay Eaken one half (1/2) of the compensation defined in
Section 3.1 for the remainder of the term of this Agreement.
6.4 Upon termination in accordance with Paragraph 6.1.e, the Corporation agrees
to pay Eaken the compensation defined in Paragraph 3.1 for the remainder of the
term of this Agreement.
7. CORPORATION'S AUTHORITY
7.1 Eaken agrees to observe and comply with the by-laws of the Corporation as
adopted by its Board of Directors, in writing, respecting performance of his
duties and to carry and to perform orders, directions, and policies stated by
the Corporation to him, from time to time, either orally or in writing.
3
<PAGE> 4
8. RECORDS
8.1 In the event of termination of this Employment Agreement, Eaken shall not be
entitled to keep or preserve records as to any client, unless said client shall
specifically request or authorize such disposition of his records.
9. EXPENSES
9.1 During the period of his employment, Eaken will be reimbursed for his
reasonable expenses in accordance with the general policy of the Corporation as
adopted by its Board of Directors, from time to time.
10. REIMBURSEMENT OF DISALLOWED COMPENSATION
10.1 In the event that any compensation paid to Eaken shall, upon audit or other
examination of the income tax returns of the Corporation be determined not to be
allowable deductions from the gross income of the Corporation, and such
determinations shall be acceded to by the Corporation, or such determination
will be made final by the appropriate State or Federal taxing authority or a
final judgement of a court of competent jurisdiction, and no appeal shall be
taken therefrom, or the applicable period for filing notice of appeal shall have
expired, then in such event Eaken shall reimburse the Corporation for the amount
of such disallowed compensation. Such reimbursement by Eaken may not be waived
by the Corporation.
11. FRINGE BENEFITS
11.1 Fringe benefits which will be provided to Eaken by the Corporation are all
benefits according to applicable policies of the Corporation, and include the
following:
a. Health Insurance
b. Group Term Life Insurance
c. Group Long Term Disability Insurance (Delay for 3 months)
d. 401(k) or Equivalent Retirement Plan (Delay for 3 months)
12. COVENANT NOT TO COMPETE
12.1 For a period of one (1) year from the date of termination of employment
with the Corporation, Eaken will not, within the State of Illinois, or the State
of Texas, directly or indirectly, own (excluding the holding of securities of
any corporation whose securities are publicly traded if such securities owned by
Eaken do not exceed one percent (1%) in value of all of the issued and
outstanding securities of such corporation), manage, operate, join, control or
participate in the ownership, management, operation or control of; or be
connected as a partner, consultant or
4
<PAGE> 5
otherwise, with any profit or non-profit business or organization which directly
competes with the Corporation or any of its subsidiaries.
12.2 It is expressly understood and agreed that although the parties hereto
consider the restrictions contained herein reasonable as to the protected
business, time and geographic area, if the aforesaid restrictive covenant is
found by any court of competent jurisdiction to be unreasonable because it is
too broad in extent as to the protected business, time period or the designated
geographic area, or as to any of them, then and in that case the restrictions
herein contained shall nevertheless remain effective, but shall be considered to
have been amended as to such protected business, time or area, or any of them,
as the case may be, as may be considered to be reasonable by such court, and as
so amended shall be enforceable.
12.3 It is further expressly agreed that in the event of breach by Eaken of any
of the covenants herein contained, although the Corporation's damage may be
substantial, the same may be extremely difficult to ascertain and money damages
may not afford an adequate remedy; therefore, in the event of breach, in
addition to such other remedies, which may be provided by law, the Corporation
shall have the right to specific performance of the covenants herein contained
by way of temporary and/or permanent injunctive relief.
13. TERM
13.1 The term of this Agreement shall be three (3) years, commencing on the
effective date of April 19, 1999 and shall terminate on April 18, 2002. This
Agreement shall be automatically renewed for succeeding terms of one (1) year
unless it is terminated in accordance with the provisions of Article 6 hereof.
14. INDEMNIFICATION
14.1 The Corporation will indemnify and hold Eaken harmless with respect to any
liability, suits, causes of action or claims according to the Indemnification
provisions in the Corporate by-laws.
15. MISCELLANEOUS
15.1 This Agreement shall be governed by and construed under the laws of the
State of Illinois.
15.2 This Agreement is not assignable in whole or in part by either party
without the written consent of the written party.
15.3 This Agreement constitutes the entire agreement of the parties with respect
to the transaction contemplated hereby and supersedes all other agreements
between the parties, either written or oral, with respect to such transactions.
5
<PAGE> 6
15.4 This Agreement may not be amended except by a writing signed by both
parties.
15.5 A waiver of any of the terms and conditions hereof shall not be construed
as a general waiver by the Corporation and the Corporation shall be free to
reinstate any such term or condition, with or without notice to Eaken.
15.6 If any part, term or provision of this Agreement shall be held illegal,
unenforceable or in conflict with any law of a federal state, local or other
government having jurisdiction over this Agreement, the validity of the
remaining portions or provisions shall not be affected thereby.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
the duly authorized members of the Board of Directors and Eaken has hereunto set
his hand and seal as of the date first above written.
For the Corporation: Employee:
/s/ Mike Barnett /s/ Ken Eaken
- ---------------------------------- --------------------------
Mike Barnett, Secretary Ken Eaken
/s/ Stanley Peskaitis
- ---------------------------------
Stanley Peskaitis, Treasurer
6
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
the 23rd day of February 1999, by and between John B. McLean ("Employee") and
Chicago Map Corporation, an Illinois corporation ("Company").
RECITALS OF THE PARTIES
A. Company is engaged in the business of designing, developing,
producing, licensing and marketing of geographical digital map technology
including GPS (Global Positioning System) products and navigation systems,
Web/Internet/Internet map displays, digital data integration and referencing,
county-wide digital map sets, professional software and mobile asset
monitoring/tracking systems ("Business").
B. Employee has substantial experience in fulfilling the duties as a
senior financial manager for numerous industries.
C. Company desires to retain Employee, and Employee desires to be
retained by Company, to serve as Chief Financial Officer of Company, pursuant to
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Retention. Company agrees that during the Term (as hereinafter
defined) of this Agreement, Company shall employ Employee as Chief Financial
Officer of Company, to perform such duties and exercise such authority as the
President of Company or his designees may from time to time assign including,
but not limited to, those services set forth in Exhibit A. Employee accepts such
employment and agrees that during the Term of this Agreement:
(a) he will perform such services in the foregoing capacity;
(b) he will devote his full time and best efforts and
abilities to the affairs of Company and to the performance of his duties
hereunder; and
(c) he will neither accept any other employment nor engage in
other activities which interfere with the proper discharge of his duties
hereunder.
2. Compensation. As compensation for the services to be performed by
Employee hereunder, Company agrees to pay Employee, and Employee agrees to
accept, the following compensation:
<PAGE> 2
2.1 Base Compensation. Employee shall receive base compensation ("Base
Compensation") in an amount equal to eighty-thousand dollars ($80,000.00) per
year, payable in arrears in bimonthly installments on the fifteenth and last day
of each month, in accordance with Company payroll procedures applicable to all
Company employees. Such Base Compensation shall be subject to annual review by
the Board.
2.2 Bonus Compensation. In addition to the Base Compensation, Employee
shall be eligible to receive annual bonus compensation ("Bonus Compensation")
based in part upon reasonable increases in Company's revenues and profits and
such other reasonable criteria and the achievement of such reasonable objectives
as the Board may from time to time establish. Such Bonus Compensation may be
payable at such times during the year and in such amounts as the Board may
determine appropriate. Any Bonus Compensation granted by the Board may be paid
in cash or in common stock of Company as the Board determines in its sole
discretion.
2.3 Reimbursement for Out-of-Pocket Expenses. In addition to the Base
and Bonus Compensation, Employee shall be entitled to reimbursement for
reasonable out-of-pocket expenses actually incurred by him on behalf of Company
for the following:
(a) Travel and Entertainment. Reasonable out-of-pocket
expenses with documentation, consistent with Company's policies, as in force
from time to time, provided however, that no travel and entertainment expenses
exceeding $500.00 shall be subject to reimbursement in the absence of prior
notice to and approval by the President.
(b) Commute Travel. During the period of time in which
Employee is required to travel from his primary residence, at the time of this
agreement, to the Company headquarters in Lemont, Illinois, Company shall
compensate Employee for a portion of the travel. Such reimbursement of expense
shall be detailed in writing and shall be delivered to Employee. Upon the
relocation of Company Headquarters or Employee's change in primary residence,
Company shall at its own discretion review this policy on reimbursement.
(c) Telephone. Employee shall be reimbursed for reasonable
telephone expenses, including cellular phone usage, made in support of the
Company's primary operations. The Company shall establish a policy regarding
reimbursement of telephone expense and shall deliver a copy of such policy to
Employee. The Company may choose, at is own discretion, to alter or change these
policies when appropriate for the Company.
2.4 Vacation Benefits. In addition to any other Compensation payable
under Section 2.1 through 2.3, Employee shall be entitled to three (3) weeks of
paid vacation during the first year of service under this Agreement and three
(3) weeks of paid vacation during each subsequent year of service hereunder.
2.5 Other Compensation and Benefits. In addition to any other
Compensation payable under Sections 2.1 through 2.4, Employee shall be eligible
to participate in any stock option, profit sharing, pension, retirement, medical
or disability insurance or other plan maintained from time to time by Company
for the benefit of employees of Company. The details of which will be disclosed
in writing to Employee.
<PAGE> 3
3. Term. The term ("Term") of this Agreement shall commence on the date
hereof and shall continue for a period of twelve (12) months, provided, however,
that the Term of this Agreement shall, in any event, terminate on such earlier
date on which any of the following events may occur:
(a) the death of Employee;
(b) the termination of Employee's employment by Company by
reason of Employee's Complete Disability, as herein defined, upon thirty (30)
days written notices given by Company as provided in Section 7.4 below;
(c) the termination of Employee's employment with Company for
Cause, as herein defined, upon written notice given by Company as provided in
Section 7.4 below; or
(d) the termination of Employee's employment with Company by
Employee due to a material breach by Company of its obligations hereunder, upon
written notice given by Employee as provided in Section 7.4 below; or
(e) at any time upon thirty (30) days' prior written notice by
Company to Employee given as provided in Section 7.4; or
(f) at any time upon thirty (30) days' prior written notice by
Employee to Company given as provided in Section 7.4.
3.1 Termination Without Cause. In the event of termination of this
Agreement upon occurrence of any event identified in Section 3(a), 3(b), 3(d),
3(e) or 3(f), Company shall pay Employee, as severance pay and in full and
complete satisfaction of any and all amounts under this Agreement, an amount
equal to the sum of (i) all Base Compensation for a period of three (3) months
from the date of termination; (ii) all vacation pay which is accrued as of the
date of termination; (iii) all reimbursable expenses incurred by Employee in
connection with his duties hereunder which are supported by documentation and
are unpaid at the date of termination; and (iv) all compensation and benefits
due to Employee at the date of termination under this or any agreement or plans,
including the Bonus Compensation for the quarter in which the termination
occurred, shall be due and payable.
3.2 Termination With Cause. In the event of termination of this
Agreement upon occurrence of any event identified in Section 3(c), Company shall
pay Employee, in full and complete satisfaction of any and all amounts under
this Agreement, an amount equal to the sum of (i) all accrued salary earned at
the date of termination; (ii) all vacation pay which is accrued as of the date
of termination; (iii) all reimbursable expenses incurred by Employee in
connection with his duties hereunder which are supported by documentation and
are unpaid at the date of termination; and (iv) all compensation and benefits
due to Employee at the date of termination under this or any agreement or plans,
including the Bonus Compensation on a prorated basis, through the date of
termination. The amount of Bonus Compensation which Employee shall be entitled
to receive, will
<PAGE> 4
be calculated on a prorated basis of the percentage of the quarter which has
been completed as of the date of termination.
4. Complete Disability and Cause. As used herein the terms "Complete
Disability" and "Cause" shall mean the following:
4.1 Complete Disability. The term "Complete Disability" shall mean the
inability of Employee, due to illness, accident or any other physical or mental
incapacity, to perform his duties hereunder during the Term hereof for a period
of three (3) consecutive months.
4.2 Cause. The term "Cause" shall mean the following:
(a) Employee's theft or embezzlement of money or property of
Company or violation of Sections 5 or 6 of this Agreement.
(b) Employee's conviction of a crime, the commission of which
shall have resulted in material injury to the property or operations of Company;
(c) any intentional and malicious harm caused to Company by
Employee; or
(d) any material default by Employee in the performance or
observance of any promise or understanding of Employee under this Agreement
including, but not limited to, refusal or failure to comply with any Company
policy or direct order of the Board of Directors, provided that, an act or
omission constituting such a material default shall not be deemed to constitute
Cause if it is of such a nature that all detriment otherwise resulting to
Company therefrom can be cured and eliminated by appropriate action, and
Employee causes such action to be taken within five (5) days following written
notice from Company.
5. Confidentiality and Non-competition Covenants.
5.1 Confidentiality. (a) As used herein, the term "Confidential
Information" shall mean any and all information, whether written or oral, and
which is not readily available in the public domain, including, but not limited
to, all data, compilations, programs, devices, strategies or methods concerning
or related to (i) Company's financial condition, results of operations, and
amounts of compensation paid to officers and employees; (ii) the terms and
conditions (including prices) of sales and offers of sales of products and
services of Company, and the current status of Company's relationship with any
customer or supplier; (iii) the terms, conditions and current status of
Company's agreements and relationship with any customer of Company; (iv) the
identities and business preferences of Company's actual and prospective
customers and suppliers or any employee or agent thereof with whom Company
communicates; (v) the trade secrets, market techniques, skills, ideas and
strategic plans possessed, developed, accumulated or acquired by Company; (vi)
any communications between Company, its officers, directors, shareholders or
employees, and any attorney retained by Company for any purpose, or any person
retained or employed by such attorney for the purpose of assisting such attorney
in his or representation of Company; (vii) the terms and conditions of this
Agreement; and (viii) any other information whether written or oral, and which
<PAGE> 5
is not readily available in the public domain, (a) by which Company derives
actual or potential economic value from such information whether written or
oral, and which is not readily available in the public domain, or (b) which
gives Company an opportunity to obtain an advantage over its competitors who do
not know or use the same.
(b) Employee acknowledges and agrees that Company is engaged
in a highly competitive business and has expended, or will expend, significant
sums or money, and has invested, or will invest, a substantial amount of time to
develop and use, and maintain the secrecy of its Confidential Information.
Company has thus obtained, or will obtain, a valuable economic asset which has
enabled or will enable, it to develop an extensive reputation and to establish
long term business relationships with its customers. If such Confidential
Information were disclosed to another person or entity or used for the benefit
of anyone other than Company, Company may suffer irreparable harm, loss and
damage. Accordingly, Employee convents and agrees that, unless the Confidential
Information becomes publicly known through legitimate origins not involving an
improper act or omission by Employee, and excluding such use by Employee in the
performance of his duties hereunder in the ordinary cause of business:
(i) the Confidential Information is, and at all times
hereafter shall remain the sole property of Company;
(ii) Employee shall use his reasonable best efforts
and reasonable diligence to guard and protect the Confidential Information from
disclosure to any competitor or customer of Company or any other person, firm,
corporation, or other entity;
(iii) unless Company gives Employee prior express
written permission, during his employment and thereafter, Employee shall not use
for his own benefit, or divulge to any competitor or customer or any other
person, firm, corporation, or other entity, any of the Confidential Information
which Employee may obtain, learn about, develop, or be entrusted with as a
result of Employee's employment by Company under this Agreement or unless
Employee shall involuntarily be required to do so by a court having competent
jurisdiction, by any government agency having supervisory authority over the
Business or by any administrative or legislative body with purported or apparent
jurisdiction to order Employee to divulge, disclose or make accessible such
Confidential Information after notice to the Company.
(c) Employee also acknowledges and agrees that all documentary
and tangible, Confidential Information including, without limitation, such
Confidential Information as Employee has committed to memory, is or has
heretofore been supplied or made available by Company to Employee solely to
assist him in performing his services hereunder. Employee agrees that after his
employment with Company terminates for any reason:
(i) he shall not remove from Company property, and
shall immediately return to Company, all documentary or tangible Confidential
Information in his possession, custody, or control including, but not limited
to, computer or other electronic tapes, disks or media, and not make or keep any
copies, notes, abstracts, summaries, or other record of any type of Confidential
Information; and
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(ii) he shall immediately return to Company any and
all other Company property in his possession, custody or control including, but
not limited to, any and all keys, security cards, passes, credit cards, and
marketing literature.
5.2 Non-Competition. Employee hereby agrees that he will not, during
his employment hereunder or at any time prior to the expiration of two (2) years
following the date he shall cease to be employed by Company, without the consent
in writing of Company: (a) engage in or become directly or indirectly interested
in any proprietorship, partnership, trust or corporation (whether as owner,
partner, trustee, beneficiary, stockholder (except as listed on any public
exchange), officer, director, employee, consultant lessor, lessee or otherwise)
which shall engage in the Business within a radius of fifty (50) miles of the
Company's offices in Lemont, Illinois; and (b) directly or indirectly, or by
action in concert with others, induce or influence, or seek to induce or
influence, any person who is engaged by Company as an employee, agent,
independent contractor or otherwise, or who has any other business relationship
with Company, as a supplier, customer, or otherwise, to terminate his/her/its
employment, engagement or business relationship, nor shall Employee directly or
indirectly, employ or engage or solicit for employment or engagement, or advise
or recommend to any other person or entity that such person or entity employ or
engage or solicit for employment or engagement, any person or entity employed or
engaged by Company.
5.3 Remedies. Each party acknowledges and agrees that the Business is
highly competitive, and that violation of any of any of the covenants provided
for in Section 5.1 and 5.2 of this Agreement may cause immediate, immeasurable
and irreparable harm, loss and damage to the other party not adequately
compensable by a monetary award. Accordingly, each party agrees, without or any
of them, may be enjoined or restrained by any court of competent jurisdiction,
and that any temporary restraining order or emergency, preliminary or final
injunctions may be issued by any court of competent jurisdiction, without notice
and without bond. In the event any proceedings are commenced by either party
against the other for any actual or threatened violation of any of said
covenants the prevailing party shall be entitled to recover from the other party
all costs and expenses of any kind, including reasonable attorneys' fees, which
the prevailing party may have incurred in connection with such proceedings.
5.4 Enforcement. It is the desire of the parties that the provisions of
Section 5.1, 5.2 and 5.3 be enforced to the fullest extent permissible under the
laws and public policies in each jurisdiction in which enforcement may be
sought. Accordingly, without limiting the general applicability of Section 7.10
hereof, if any particular portion of Section 5.1, 5.2 or 5.3 shall be
adjudicated as invalid or unenforceable, or if the application thereof to any
party or circumstance shall be adjudicated to be prohibited by or invalid under
such portion so adjudicated, said deletion to apply only with respect to the
operation of said Section 5.1, 5.2 and 5.3 in the particular jurisdiction so
adjudicating on the parties and under the circumstances as to which so
adjudicated, and such Sections shall only be amended to narrow them to the
minimum extent so required, and the parties will be deemed to have substituted
for such portion so deleted words which give the maximum scope permitted under
applicable law to Sections 5.1, 5.2 and 5.3.
<PAGE> 7
6. Property Rights of the Parties. Employee hereby assigns to
Company, its successors and assigns, all of his rights, if any, to copyrights,
inventions, discoveries, concepts and ideas, whether patentable or otherwise,
including, but not limited to, processes, methods, systems, devices, formulae
and techniques, as well as improvements thereon, or know-how related thereto,
relating to any prior or present activities of Employee and present or
prospective activities of Company, with which Employee is acquainted as a result
or consequence of his employment by Company, or which Employee has made or
conceived at any time prior hereto or which he may hereafter make or conceive,
either solely or jointly with others, during the term of this employment by
Company, or within twelve (12) months after termination of Employee's employment
with Company, or with the use of the time, material or facilities of Company, or
relating to any method, substance, machine, manufactured article or improvement
thereon within the scope of the Business of Company, as such Business may
hereafter be conducted. The consideration for this assignment is the mutual
covenants contained in this Agreement. All such processes, methods, systems,
devices, formulae and techniques, as well as improvements, shall be the
exclusive property of Company and their discovery or development shall be
reported to Company in writing, setting forth in detail the procedures employed
and the results achieved. In the event any such processes, methods, systems,
devices, formulae and techniques, as well as improvements, shall be deemed by
Company as patentable under United States or foreign law, Employee hereby
assigns to Company all of his rights therein and to applications for United
States or foreign letters patent and to United States or foreign letters patent
granted thereupon and shall apply, at Company's request and expense, for United
States and foreign letters patent, either in Employee's own name or otherwise as
Company shall desire. Employee shall acknowledge and deliver promptly to Company
such written instruments and do such other acts as may be necessary, in the
opinion of Company or its counsel, to obtain and maintain such United States or
foreign letters patent and to vest the entire right and title thereunder to
Company. The provisions of this subsection shall be applicable during the term
of this Agreement and thereafter for all times during which Employee is
employment by Company in any capacity, whether or not under this Agreement.
7. Miscellaneous Provisions.
7.1 Entire Agreement. This Agreement sets forth the entire agreement
between Employee and Company and supersedes all prior agreements and
understandings between the parties with respect thereto.
7.2 Amendment and Modification. This Agreement may be amended, modified
or supplemented only by written agreement signed by each of the parties.
7.3 Waiver of Compliance or Consent. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefit thereof only by a written instrument signed by the party granting
such waiver, but such waiver of failure to insist upon strict compliance with
such obligation, agreement, or condition shall not operate as a waiver of; or
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits the consent of any party, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 7.3.
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7.4 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given if: (a) delivered personally; or
(b) mailed by certified mail (return receipt requested), postage prepaid; or (c)
sent by overnight courier; or (d) transmitted by telefacsimile; to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice, provided that notices of a change of address shall be
effective only upon receipt thereof):
If to Employee to: John B. McLean
200 Fox Hunt Trail
Barrington, IL 60010
Telephone Number: 847-382-2620
Facsimile Number: 847-382-8380
If to Company to: Mr. Steven Peskaitis
Chicago Map Corporation
15419 127th Street
Lemont, Illinois 60439
Telephone Number: 630-257-7616
Facsimile Number: 630-257-9678
With a copy to: Ronald P. Duplack, Esq.
Rieck and Crotty, P.C.
55 West Monroe Street, Suite 3390
Chicago, Illinois 60603
Telephone Number: 312-726-4646
Facsimile Number: 312-726-0647
7.5 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party, nor is this Agreement
intended to confer upon any other person except the parties hereto any rights or
remedies hereunder.
7.6 Governing. This Agreement shall be governed by the laws of the
State of Illinois as to all matters including, but not limited to, matters of
validity, construction, effect, performance and remedies, and, as partial
consideration for the other party's execution and performance hereunder each
party waives personal service of any and all process upon it, to the extent
permitted by law, and consents that all such service of process be made by upon
such party at the address and in the manner set forth in Section 7.4 of this
Agreement and service so made shall be deemed to be completed upon the earlier
of: actual receipt or three days alter the same shall have been posted to such
party's address.
7.7 Binding Effect and Benefit. The provisions hereof shall be binding
upon, and shall inure to the benefit of; the parties, and their respective
heirs, executors, administrators, its successors, and assigns.
<PAGE> 9
7.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.9 Severability. Whenever possible, each of the provisions of this
Agreement shall be construed and interpreted in such a manner as to be effective
and valid under applicable law. If any provisions of this Agreement or the
application of any provision of this Agreement to any party or circumstance
shall be prohibited by, or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition without invalidating the remainder
of such provision, any other provision of this Agreement, or the application of
such provision to other parties or circumstances.
7.10 Arbitration. Except as otherwise provided herein, any controversy,
dispute or claim between the parties arising out of; related to or in connection
with this Agreement or the performance or breach hereof shall be submitted to
and settled by arbitration conducted by the American Arbitration Association in
Chicago, Illinois, in accordance with its commercial arbitration rules as then
in effect; provided that the arbitration shall be by a single arbitrator
mutually selected by Employee and Company, and if the parties do not agree
within thirty (30) days alter the date of notification of a request for such
arbitration made by either of the parties, the selection of the single
arbitrator shall be made by the American Arbitration Association in accordance
with said rules. In addition to, and not in substitution for any and all other
relief in law or equity that may be granted by the arbitrator, the arbitrator
may grant equitable relief and specific performance to compel compliance
hereunder. The determination of the arbitrator shall be accompanied by a written
opinion of the arbitrator and shall be final, binding and conclusive on the
parties, and judgment on the arbitrators award, including without limitation
equitable relief and specific performance, may be entered in and enforced by any
court having jurisdiction thereof fees and expenses of the American Arbitration
Association and of the arbitrator shall be borne as shall be determined by the
arbitrator, and the arbitrator may in his discretion award attorneys' fees and
expenses in addition to any other remedy that is allowed and regardless of
whether such remedy includes an award of damages.
7.11 Interpretation. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Chicago Map Employee:
By: /s/ Mike Barnett By: /s/ John B. McLean
--------------------------------------- ---------------------
Mike Barnett, Secretary John B. McLean
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Agreement is made on the 1st day of May, 1999, by and between Chicago Map
Corporation, (hereinafter referred to as the "Corporation"), an Illinois
Corporation with a principal place of business in Lemont, Illinois, and Steve
Peskaitis (hereafter referred to as "Peskaitis"), a resident of Lemont,
Illinois.
WHEREAS, the Corporation is engaged in the service of developing, marketing and
distributing computer mapping software programs;
WHEREAS, it is intended that Peskaitis become an employee of the Corporation;
and
WHEREAS, the parties desire to define the relationship between Peskaitis and the
Corporation.
1. EFFECTIVE DATE
The effective date of the employment Relationship of the Corporation and
Peskaitis shall be May 1, 1999.
2. SERVICES
2.1 As an employee of the Corporation, Peskaitis agrees to devote substantially
his entire time and attention to service as President and Chief Executive
Officer of the Corporation. He shall also serve on the Board of Directors of the
Corporation, without additional compensation.
2.2 The expenditure of reasonable amount of time for teaching, lecturing,
personal or outside business, shall not be deemed a breach of this Agreement,
provided such activities do not materially interfere with the services required
to be rendered to the Corporation hereunder.
2.3 Peskaitis shall not, without the express prior written consent of the
Corporation, directly or indirectly, during the term of his employment
relationship, render services or engage in any activity competitive with and/or
adverse to the Corporation's business, whether alone, as a partner, or as an
officer, director, employee or shareholder (excluding the holding of the
securities of any corporation whose securities are publicly traded if such
securities owned by Peskaitis do not exceed one percent (1%) in value of all the
issued and outstanding securities of such corporation) of any other corporation,
or as a trustee, fiduciary or other representative of any other activity.
2.4 The making of passive and personal investments and the conduct of private
business affairs shall not be prohibited hereunder, provided the non-competitive
restrictions of the previous paragraph are not violated.
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3. COMPENSATION
3.1 The Corporation agrees that commencing with May 1 1999, Peskaitis' salary,
as President and Chief Executive Officer shall be $48,000.00 per year, paid in
twenty-four semi-monthly installments of $2,000.00 each. The Corporation agrees
that it will initiate action to raise the necessary capital to fund operations
of Chicago Map Corporation. Such fund-raising activities may commence at the
discretion of the officers of the Corporation, but no later than 90 days
following the commencement of this Agreement. Subsequent to the Corporation
raising adequate capital, a figure not less than $500,000.00, then Peskaitis'
salary shall be immediately increased to $124,800 per year, paid in twenty-four
semi-monthly installments of $5,200.00 each.
3.2 The Corporation agrees that on the first five years of employment, and that
on each anniversary of such employment, Peskaitis will receive a three percent
(3%) increase on his then current salary. Following the completion of the fifth
year of employment, Peskaitis will receive salary increases according to the
Corporation's then existing salary increase procedures.
3.3 The Corporation agrees to provide and Peskaitis agrees to accept, the
conditions of corporate stock option package. Both parties acknowledge that the
details of this package are not yet in place and have not been improved by the
Board of Directors of the Corporation as of the effective date of this
Agreement. Attachment A is a draft outline of the stock options package that
will be proposed to the Board of Directors and be voted upon within 60 days of
the date of this Agreement.
3.4 All compensation shall be subject to the customary withholding taxes and
other employment taxes as required with respect to compensation paid by a
corporation to an employee.
4. VACATION
4.1 The Corporation agrees that in the first year of his employment, Peskaitis
shall be entitled to three (3) weeks of vacation. Commencing with the second
year of employment, Peskaitis shall be entitled to four (4) weeks of vacation
per year.
5. ATTENDANCE OF MEETINGS AND CONVENTIONS
5.1 Peskaitis shall be entitled to attend meetings and conventions, that are to
the direct benefit of the Corporation, unless such attendance is specifically
prohibited by the Board of Directors.
5.2 The monies to which Peskaitis shall be entitled as a benefit for attendance
of meetings and conventions as aforesaid, shall be limited to reimbursement of
any reasonable expenses incurred during the meeting or the convention and any
other specific expenses expressly approved by the Board of Directors.
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<PAGE> 3
6. TERMINATION
6.1 The Employment Relationship between the Corporation and Peskaitis shall be
terminated upon happening of any of the following events:
a. Whenever the Corporation and Peskaitis shall mutually agree to
termination in writing.
b. In the event of bankruptcy, receivership, dissolution, or cessation
of the Corporation.
c. Upon the death of Peskaitis.
d. At the Corporation's option, if Peskaitis shall suffer a total and
permanent disability. For purposes of this Agreement "total and
permanent disability" shall mean the inability of Peskaitis to
reasonably perform his regular duties for a continuous period of
(12) months as a result of the same illness or injury.
e. At the Corporation's discretion, for no cause, with a 30-day
notification to Peskaitis, in writing.
6.2 Upon termination in accordance with Sections 6.1 or 6.1.d above, Peskaitis
shall be entitled to receive the compensation that is described in the
Corporation's termination procedures.
6.3 Upon termination in accordance with Sections 6.1.a or 6.1.b above,
Corporation agrees to pay Peskaitis one half (1/2) of the compensation defined
in Section 3.1 for the remainder of the term of this Agreement.
6.4 Upon termination in accordance with Section 6.1.3, the Corporation agrees to
pay Peskaitis the compensation defined in Section 3.1 for the remainder of the
term of this Agreement.
7. CORPORATION'S AUTHORITY
7.1 Peskaitis agrees to observe and comply with the rules and regulations of the
Corporation as adopted by its Board of Directors, either orally or in writing,
respecting performance of his duties and to carry and to perform orders,
directions, and policies stated by the Corporation to him, from time to time,
either orally or in writing.
8. RECORDS
8.1 In the event of termination of this Employment Relationship, Peskaitis shall
not be entitled to keep or preserve records as to any client, unless said client
shall specifically request or authorize such disposition of his records.
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9. EXPENSES
9.1 During the period of his employment, Peskaitis will be reimbursed for his
reasonable expenses in accordance with the general policy of the Corporation as
adopted by its Board of Directors, from time to time.
10. REIMBURSEMENT OF DISALLOWED COMPENSATION
10.1 In the event that any compensation paid to Peskaitis shall, upon audit or
other examination of the income tax returns of the Corporation be determined not
to be allowable deductions from the gross income of the Corporation, and such
determinations shall be acceded to by the Corporation, or such determination
will be made final by the appropriate State or Federal taxing authority or a
final judgement of a court of competent jurisdiction, and no appeal shall be
taken therefrom, or the applicable period for filing notice of appeal shall have
expired, then in such event Peskaitis shall compensate the Corporation for the
amount of such disallowed compensation. Such compensation by Peskaitis may not
be waived by the Corporation.
11. FRINGE BENEFITS
11.1 Fringe benefits which will be provided to Peskaitis by the Corporation are
all benefits according to applicable policies of the Corporation, and include
the following:
a. Health Insurance
b. Group Term Life Insurance
c. Long Term Disability Insurance (Delay for 3 months)
d. 401k or Equivalent Retirement Plan (Delay for 3 months)
12. COVENANT NOT TO COMPETE
12.1 For a period of one (1) year from the date of termination of employment
with the Corporation, Peskaitis will not directly or indirectly, own (excluding
the holding of securities of any corporation whose securities are publicly
traded if such securities owned by Peskaitis do not exceed one percent (1%) in
value of all of the issued and outstanding securities of such corporation)
manage, operate, join, control or participate in the ownership, management,
operation or control of; or be connected as a partner, consultant or otherwise,
with any profit or non-profit business or organization which directly competes
with the Corporation or any of its subsidiaries.
12.2 It is expressly understood and agreed that although the parties hereto
consider the restrictions contained herein reasonable as to the protected
business, time and geographic area, if the aforesaid restrictive covenant is
found by any court of competent jurisdiction to be unreasonable because it is
too broad in extent as to the protected business, time period or the designated
geographic area, or as to any of them, then and in that case the restrictions
herein contained shall nevertheless remain
4
<PAGE> 5
effective, but shall be considered to have been amended as to such protected
business, time or area, or any of them, as the case may be, as may be considered
to be reasonable by such court, and as so amended shall be enforceable.
12.3 It is further expressly agreed that in the event of breach by Peskaitis of
any of the covenants herein contained, although the Corporation's damage may be
substantial, the same may be extremely difficult to ascertain and money damages
may not afford an adequate remedy; therefore, in the event of breach, in
addition to such other remedies, which may be provided by law, the Corporation
shall have the right to specific performance of the covenants herein contained
by way of temporary and/or permanent injunctive relief.
13. TERM
13.1 The term of this Agreement shall be five (5) years, commencing on the
effective date of May 1, 1999 and shall terminate on April 30, 2004. This
Agreement shall be automatically renewed for succeeding terms of one (1) year
unless it is terminated in accordance with the provisions of Article 6 hereof.
14. INDEMNIFICATION
14.1 The Corporation will indemnify and hold Peskaitis harmless with respect to
any liability, suits, causes of action or claims according to the
Indemnification provisions in the Corporate By-laws.
15. MISCELLANEOUS
15.1 This Agreement shall be governed by and construed under the laws of the
State of Illinois.
15.2 This Agreement is not assignable in whole or in part by either party
without the written consent of the other party.
15.3 This Agreement constitutes the entire agreement of the parties with respect
to the transaction contemplated hereby and supersedes all other agreements
between the parties, either written or oral, with respect to such transactions.
15.4 This Agreement may not be amended except by a writing signed by both
parties.
15.5 A waiver of any of the terms and conditions hereof shall not be construed
as a general waiver by the Corporation and the Corporation shall be free to
reinstate any such term or condition, with or without notice to Peskaitis.
5
<PAGE> 6
15.6 If any part, term or provision of this Agreement shall be held illegal,
unenforceable or in conflict with any law of a federal state, local or other
government having jurisdiction over this Agreement, the validity of the
remaining portions or provisions shall not be affected thereby.
IN WITNESS WHEREOF, the Corporation has caused these present to be executed by
the duly authorized members of the Board of Directors and Peskaitis has hereunto
set his hand and seal as of the date first above written.
For the Corporation: Employee:
/s/ Steve Peskaitis /s/ Steve Peskaitis
- --------------------------------- ----------------------------
Steve Peskaitis, President Steve Peskaitis
/s/ Stanley Peskaitis
- ---------------------------------
Stanley Peskaitis, Treasurer
6
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
December 31, December 31,
1999 1998
----------- -----------
Net income (loss) in $(1,089) $ 64
thousands
======= =======
Weighted average common 11,641 11,500
shares outstanding
Additional shares for options _ _
and warrants outstanding
under treasury-stock method
------- -------
11,641 11,500
======= =======
$ ( .09) $ .01
======= =======
<PAGE> 1
EXHIBIT 21
LIST OF LEXON TECHNOLOGIES, INC. SUBSIDIARIES
CHICAGO MAP CORPORATION
<PAGE> 1
Exhibit 23.1
CONSENT OF HUTTON, NELSON & MCDONALD LLP
The Board of Directors
LEXON Technologies, Inc.
We consent to incorporation by reference in the Annual Report on Form 10-K
of LEXON Technologies, Inc. of our report dated February 18, 2000 except for
Note 17 to the consolidated financial statements as to which the date is March
6, 2000 relating to the consolidated balance sheets of LEXON Technologies, Inc.
for the fiscal years ended December 31, 1999 and December 31, 1998, the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1999 and
to the reference to our firm under the heading "Experts" in the Annual Report on
Form 10-K.
/s/ Hutton, Nelson & McDonald LLP
---------------------------------
Hutton, Nelson & McDonald LLP
Chicago, Illinois
April 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,892
<SECURITIES> 0
<RECEIVABLES> 20,653
<ALLOWANCES> 2,500
<INVENTORY> 1,656
<CURRENT-ASSETS> 53,271
<PP&E> 313,654
<DEPRECIATION> 116,631
<TOTAL-ASSETS> 704,217
<CURRENT-LIABILITIES> 1,644,497
<BONDS> 0
0
0
<COMMON> 12,442
<OTHER-SE> (1,035,221)
<TOTAL-LIABILITY-AND-EQUITY> 704,217
<SALES> 749,793
<TOTAL-REVENUES> 749,793
<CGS> 309,159
<TOTAL-COSTS> 1,454,008
<OTHER-EXPENSES> (6,319)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,427
<INCOME-PRETAX> (1,089,482)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,089,482)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,089,482)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
