FORM 10-KSB
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: 9/30/96
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- ---------------
Commission file number: 0-10944
MTX INTERNATIONAL, INC.
------------------------------------------------
(Exact name of registrant as specified in charter)
Colorado 84-0729290
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7901 East Bellview Ave., Suite 50, Englewood, Colorado 80111
- ------------------------------------------------------ --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 770-9840
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Check 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 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 [ ]
The aggregate market value of Registrant's voting $0.01 par value common stock
held by non-affiliates, as of July 31,1996 was $306,104. The number of shares
outstanding of registrant's only class of common stock, as of July 31, 1996, was
10,774,398 shares of its $.01 par value common stock. No documents are
incorporated into the text by reference.
Exhibit Index is located on Page 17
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of Business. MTX International, Inc. (the
"Company") was incorporated under the laws of Colorado on November 2, 1976. The
Company is engaged in the design, development, marketing, sale and service of
its own proprietary business application computer software and the sale and
service of computer hardware systems. Formerly, the Company marketed its
products primarily to construction contractors and provided them with management
and technical consulting services.
The Company completed a public offering of its securities in February 1983
by issuing 2,000,000 units, each unit ("Unit") consisting of one share of its
$0.01 par value common stock and one warrant to purchase one share of its common
stock, at an offering price of $1.00 per Unit. The net proceeds to the Company
totaled $1,609,022 after deduction of underwriting commissions and expenses of
the offering and were used primarily to cover operational and product
development expenses. Warrants sold in the initial public offering and to the
underwriter expired without being exercised.
Prior to fiscal 1989, the Company's major focus was the sale of "turnkey"
hardware/software systems to construction contractors. The hardware sold during
this period was a proprietary system produced by Cubix Corporation which was not
compatible with the more common DOS based systems produced by companies such as
IBM and Compaq ("IBM compatible"). During fiscal 1989, the Company converted its
software products to run in a DOS environment as a means of enhancing marketing
capabilities for its software products. The Company also began the assembly of
personal IBM compatible "clone" computers in order to appeal to a broader market
base and reduce the costs of hardware previously included in system sales. In
addition to the sales of systems to the construction industry, the Company
believed that by offering IBM compatible hardware systems, it could be
competitive in the sales of personal computers, including Local Area Networks,
to industry segments other than construction. However, due to intense
competition and the rapid reduction in sales prices and margins of computer
hardware, the Company determined that it would substantially reduce sales
efforts of low margin computer hardware.
The Company believes that the computer industry is undergoing major changes
in regard to the deployment of computer software applications. A change to
Client/Server computing is in progress. This change includes the use of the
Internet. Microsoft Corporation is one of the industry leaders in this
transformation with its Windows operating environment. The Company determined in
June 1992 to work with Microsoft products to develop a new accounting product in
the Microsoft Windows environment. Microsoft invited the Company to announce The
MTX Accounting SDK for Microsoft Access at Fall Comdex in November 1992 in
conjunction with their official announcement of Microsoft Access. Access is a
relational database management system and was used by the Company to develop its
new products. Sales of the Accounting SDK product from December 15, 1992 to
September 30, 1993 resulted in revenues of $144,875 and $271,387 during fiscal
1994. The product was renamed to MTX Accounting for Microsoft Office in 1994.
Sales of the renamed product increased to $484,436 in fiscal 1995 and decreased
to $337,227 in fiscal 1996. The success of the Accounting SDK and MTX Accounting
combined with the growing relationship with Microsoft led the Company to believe
that it should enter into a more formalized relationship. The Company became a
Microsoft Solution Provider in March 1993 and a Microsoft Solution Provider
Partner in July 1994.
As a Microsoft Solution Provider Partner, the Company is determined to be a
leader in implementing new software technologies. The Company continues to make
a substantial investment in further development and marketing of the MTX
Accounting products. The Company believes that the future of the industry lies
in implementing the new technologies through the use of re-usable objects. The
MTX Accounting products were designed to be used as the accounting basis for the
development of customized solutions. Using The Windows platform, Microsoft
Office and the MTX Accounting products, cost effective, customized solutions may
be delivered to the end user. The MTX Accounting products are marketed to end
2
<PAGE>
users and to unaffiliated third parties consisting of software developers,
corporate developers and consultants as a modifiable accounting application
consisting of General Ledger, Accounts Payable, Accounts Receivable and Payroll
modules. Inventory, Order Entry and Purchase Order modules were designed and
developed during fiscal year 1995 then released during the Company's fiscal year
1996. Upon sale or resale of the MTX Accounting as all or part of an
application, the company receives an end user runtime license fee of between
$675 and $4,000 depending on the modules purchased. During fiscal 1995 the
Company initiated a sales effort for licensing of its product under O.E.M.
agreements. Under these agreements, developers of other software applications
would include MTX Accounting in their product offerings.
The Company began the conversion of the Accounting SDK to operate with a
new version of Microsoft Access and the development of further enhancements to
the product in January 1994. In May 1994, Microsoft announced a new Microsoft
Office compatible program. The Company was accepted into the program and
immediately began the modifications to the product, which were required to pass
certification testing by an independent testing laboratory. The product was then
renamed "MTX Accounting for Microsoft Office" and began shipping in September
1994. It was the first accounting system to be certified as Microsoft Office
compatible. Currently, the product is one of approximately four other accounting
applications which have been certified by Microsoft as Microsoft Office
compatible.
During fiscal 1996, the Company commenced development of a new version of
MTX Accounting for Microsoft Office called MTX Enterprise Accounting. This new
product is based upon Microsoft SQL Server, a larger more powerful database than
Microsoft Access. The company believes this version may be of interest to larger
organizations. The Company anticipates completing this new product during fiscal
year 1997 and plans to apply for Microsoft BackOffice logo certification in
order to assist in marketing the new product.
(b) Financial Information About Industry Segments. During its last three
fiscal years, the Company has been primarily engaged in the design, development,
marketing, and sale of accounting software products.
(c) Narrative Description of Business.
(i) Principal Products Produced and Services Rendered. Computer
Hardware and Software Operations
Earlier Products. The Company's first software product was called
CMS ("Construction Management System"). This product was sold by the Company to
electrical, mechanical and heating, ventilation and air conditioning
contractors. The Company no longer pursues business with this older DOS-based
product since the market now seeks Windows-based systems. The Company plans to
develop an OEM relationship with one or more future business partners in order
to provide a Windows-based system for this market. In December 1992, the Company
introduced the Accounting SDK (Software Development Kit) in conjunction with
Microsoft Corporation's announcement of its new Microsoft Windows relational
database management software product named Microsoft Access. Sales of this
product under the name "Accounting SDK for Microsoft Access" (version 1.1) was
discontinued in September 1994 upon release of the "MTX Accounting for Microsoft
Office" (version 2.0).
MTX Accounting for Microsoft Office. This product replaced the
prior product "Accounting SDK for Microsoft Access" in September 1994. MTX
Accounting for Microsoft Office complies with the design standards for the "look
and feel" as implemented by Microsoft for their suite of Microsoft Office
products which include Excel, Word, Powerpoint, Mail and Access. In addition,
the MTX product integrates with the Microsoft Office products. This integration
provides the capability for end users to automatically integrate data from the
accounting application with Microsoft Office products for financial analysis
including graphing, customized queries, reporting and presentations. Information
may also be distributed via e-mail directly from MTX Accounting for Microsoft
Office or from any of the Microsoft applications. MTX Accounting for Microsoft
Office is the first accounting product certified by Microsoft as "Microsoft
Office Compatible". Version 2.0 of this product was developed using Microsoft
Access version 2.0, a 16-bit version of Access designed for compatibility with
Microsoft Office 4.3. During calendar year 1995, Microsoft announced plans to
3
<PAGE>
launch a new 32- bit version of Microsoft Access called Microsoft Access 95 (to
be compatible with Microsoft Office 95). The Company converted their Version 2.0
product and sold a limited number of systems that use Microsoft Access 95. In
1996, the Company learned that Microsoft planned to release another updated
version of 32-bit Access, to be called Microsoft Access 97. When the Microsoft
Access 97 and Microsoft Office 97 plans by Microsoft became known to the
Company, the Company immediately ceased further development of an Access
95-based product. In fiscal 1997, the Company plans to update their Microsoft
Access-based product line to utilize Microsoft Access 97 and to be compatible
with Microsoft Office 1997. No sales of a Microsoft Access 97 version of MTX
Accounting for Microsoft Office were made during fiscal year ending September
30, 1996.
New Products. A new product called MTX Enterprise Accounting has been
designed and is under development. This new product will use Microsoft SQL
Server 6.5 as a database running on Microsoft Windows NT 4.0 in a client/server
network architecture. This new product is designed to process a larger number of
transactions than MTX Accounting for Microsoft Office and will provide the same
basic accounting functionality as MTX Accounting for Microsoft Office. The
Company plans to explore opportunities to extend MTX Enterprise Accounting
further so that alternative versions can be developed for Oracle, Informix,
Sybase and IBM client/server databases. No sales of this new product were made
during fiscal year 1996 ending September 30, 1996.
Direct Hardware Sales. During the fiscal years ended September
30, 1992, 1993, 1994, 1995, and 1996 the Company had sales of computer hardware
and software of $321,215 (47.67% of gross revenue), $549,380 (59.32% of gross
revenues), $652,103 (62.8%), $595,494 (59%) and $454,554 (50.3%) respectively.
The Company has substantially reduced its marketing efforts for hardware sales;
therefore, the majority of sales in 1995 and 1996 resulted from the sale of
software.
Support Services. The Company provides hardware and software
support services directly to the end user. Hardware support services primarily
consist of replacement of defective hardware modules for older CMS customers.
This method of hardware support does not require skilled electronics technicians
on-site and may be performed by the customer after the Company has determined a
module to be defective and has shipped the same overnight.
Software support consists of telephone consultations and periodic updates to the
various software modules on an as-needed basis. Due to the design of the
software, which in most instances allows customers to adapt the package to their
individual needs without software modifications, the Company can provide
periodic updates with only minimal personal contact.
Historically, support services were provided to the user through one-year
renewable hardware support contracts and either one year or monthly renewable
software support contracts. During the fiscal years ended September 30, 1992,
1993, 1994, 1995 and 1996 the Company had gross revenues from providing support
and consulting services of $342,644 (50.85% of gross revenues), $362,322 (39.12%
of gross revenue), $385,580 (37.1%), $404,945 (40.12%) and $447,726 (49.5%)
respectively. The Company briefly tested an incident-based support plan for new
users during fiscal year 1996 then determined that the Company would use a
conventional 12-month plan. Support services are billed at the time a new
software license is sold, then recognized as revenue over a 12- month period.
Marketing; Distribution. The Company has not committed any
significant marketing efforts to the sale of earlier products that have been
discontinued.
With the release of the MTX Accounting for Microsoft Office product, the
Company re-focused its advertising efforts to include end users. The Company has
also restructured its dealer program to require "Certified Dealers" to attend
training classes which include both technical and marketing segments. At
September 30, 1996, the Company had approximately 85 domestic dealers, seven
international dealers and one international distributor.
4
<PAGE>
(ii) Status of New Products or Industry Segments. In calendar year
1992, the Company developed versions of its software products that would permit
them to run under Microsoft Windows. Management had determined that
compatibility with "Windows" could enhance the marketing potential of its
existing product line. The basic conversion to Windows was completed in December
1992. The Company received its Microsoft Office Compatible certification for the
MTX Accounting for Microsoft Office product in early September 1994; and began
shipping the product at the end of September 1994. During fiscal 1996, the
Company completed the development of Sales Order, Purchase Order and Inventory
Control modules for the Microsoft Access 2.0 version of their systems, and
commenced development of a new version of MTX Accounting for Microsoft Office
called MTX Enterprise Accounting. This new client/server product operates on
Microsoft Windows 95 personal computers and Microsoft Windows NT servers; is
based upon Microsoft Access 97 and Microsoft SQL Server 6.5, and integrates with
Microsoft Office 97. The Company will continue enhancements to new products
based on technological changes and on developer and user requests.
(iii) Sources and Availability of Raw Materials; Supplies. The
computer software sold by the Company runs in Microsoft Windows environment,
which is the industry standard for most business applications. The Company's new
products operate in the Microsoft Windows 95 and Microsoft Windows NT
environments, which have become industry standard operating environments for the
desktop and servers.
(iv) Patents, Trademarks, Licenses, Franchises and Concessions. The
Company currently has no patents for any of its products, and does not believe
that any of its current products are patentable. However, the Company attempts
to secure copyright protection for its computer software products by placing
appropriate language on its products, and has entered into non- disclosure
agreements with its employees concerning these products. In addition, the
Company has obtained trademark registration for the name "MTX" which it uses on
its computer systems and software. This trademark registration will remain in
force for 20 years, commencing November 5, 1985, unless sooner terminated.
(v) Working Capital Items. The Company does not maintain large amounts
of inventory but keeps a supply of modular hardware replacements on hand,
primarily as replacement equipment in connection with its support services. The
size of this replacement inventory is directly related to the volume of the
Company's maintenance services. Because the Company requires most new customers
to pay C.O.D., the Company does not maintain large accounts receivable balances.
The Company does grant credit terms on maintenance contracts and supply sales,
but does not anticipate any significant cash flow problems resulting therefrom.
In accordance with the Company's accounting policy for inventories, the
inventory value of repair parts for older computer equipment, which are still
covered by maintenance contracts, has been completely written down.
(vi) Major Customers. During the fiscal years ended September 30,
1994, 1995 and 1996 respectively, the Company was not dependent upon a single
customer, or a few customers, the loss of any one or more of which would have a
material adverse effect on its business.
(vii) Backlog. At September 30, 1994, 1995 and 1996, the Company had
no backlog of unfilled orders for its systems.
(viii) Renegotiation or Termination of Government Contracts. As of
July 31, 1997, no company products or service required government approval of
licensing. Further, no material portion of the Company's business is subject to
government regulation.
(ix) Competitive Conditions. The market for computer software and
hardware products is highly competitive. Many companies having an established
reputation in the computer industry have far greater financing, technology,
operating resources and personnel than the Company. At the present time, the
Company's competitive position in terms of market share in the overall market is
insignificant. However, the market is highly fragmented. The Company believes
there may be as many as 100 companies with products that compete directly with
the Company's products. The Company believes that each of those companies has a
small customer base and no one company holds a controlling share of the market.
5
<PAGE>
The computer software/hardware industry is also characterized by rapid
technological advances. The Company would be adversely affected if its
competitors introduced technologically superior products. The Company believes
that the computer industry will continue to make significant technological
advances and, as a result, the Company expects to continue to incur research and
development expenses in order to make its present and future software compatible
with such new hardware products and operating platforms.
(x) Research and Development. The Company operates in an industry
which is subject to rapid changes in technology, and therefore the Company's
ability to compete and operate successfully depends upon its ability to react to
such changes. This situation necessitates that the Company continue to devote
resources to software enhancement, specifically, to keeping its software current
with technological advances. As of September 30, 1996 the Company employed one
person who devoted a substantial part of their time to software enhancement
activities and also used the services of independent software contractors. As of
July 31, 1997, the Company had one full-time employee and several occasional
part-time software contractors devoted to software enhancement for the Company.
In addition, the Company's president spends a portion of his time working on the
design and development of new products, and the evaluation of new software
technology from Microsoft and others.
During the fiscal years ended September 30, 1992, 1993, 1994, 1995 and
1996, the Company expended $30,881, $76,081, $60,039 $61,749 and 85,623;
respectively, on software enhancement and development activities which have been
capitalized. During this same period, the company expended $12,490, $10,772,
$1,455, $37,137 and $47,201 respectively, on research and development activities
which have been expensed.
(xi) Environmental Laws. The Company's business, capital expenditures,
earnings and competitive position are not materially affected by compliance with
Federal, State or local provisions which have been enacted or adopted regulating
the discharge of materials into the environment, or otherwise relating to the
protection of the environment, and the Company does not anticipate any material
capital expenditures for compliance with environmental laws in the future.
(xii) Employees. As of September 30, 1996, the Company employed 10
persons full time. As of July 31, 1997 the Company employs 10 full time
employees and a variable number of independent software contractors.
ITEM 2. DESCRIPTION OF PROPERTIES.
The Company owns no real property and leases all of its facilities. The
Company's principal offices are located at 7901 East Bellview Avenue, Suite 50,
Englewood, Colorado. The Company leases 3294 square feet, at a base rental of
$22,644 per annum pursuant to a written lease from an unaffiliated entity which
commenced on September 1, 1996 and will terminate on August 31, 1999.
ITEM 3. LEGAL PROCEEDINGS.
There is no material pending or threatened legal proceedings to which the
Company is a party or of which any of its properties is subject, and no such
proceedings are known to the Company to be contemplated by governmental
authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended September 30, 1996, no
matters were submitted to a vote of the Company's security holders, through the
solicitation of proxies or otherwise.
6
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information. There is no established trading market for the
Company's stock. The Company's common stock may, from time to time, be traded
through the Company's market maker, Mercer, Bokert, Buckman & Reid, Inc. at 75
W. Front Street, Red Bank, NJ 07701.
The following table sets forth the range of high and low bid quotations for
the Company's common stock for each quarter of the last two fiscal years as
estimated from data available to the public by Telescan, Inc. and Edgar On-Line.
The quotations represent inter-dealer prices without retail markup, markdown or
commission, and may not necessarily represent actual transactions.
Quarter Ended Low Bid High Bid
12/31/94 $0.14 $0.24
3/31/95 $0.12 $0.20
6/30/95 $0.09 $0.16
9/30/95 $0.09 $0.13
12/31/95 $0.13 $0.18
3/31/96 $0.13 $0.18
6/30/96 $0.15 $0.20
9/30/96 $0.13 $0.18
Holders. The approximate number of holders of record of the Company's $.01
par value common stock, as of September 30, 1996, was 572.
Dividends. Holders of the Company's common stock are entitled to receive
such dividends as may be declared by its Board of Directors. No dividends on the
Company's common stock have ever been paid, and the Company does not anticipate
that dividends will be paid on its common stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Trends and Uncertainties. Management has tried to structure the Company so that
it can adjust to the trends and uncertainties in software development and sales
and services industry. The Company has tried to eliminate the major variables of
interest rates and operating expense. However, as the Company has little or no
control over the demand for its services, inflation and changing prices could
have a material effect on the future profitability of the Company. The Company's
lease for office space expires on August 31, 1999. It is probable the Company
will be unable renegotiate a new lease at the current rate. The Company will
attempt to negotiate a new lease with the current landlord or will negotiate a
new lease for other space with a different landlord. The company's software
technology and products are greatly affected by various new products produced by
Microsoft. During the fall of 1995, Microsoft released Microsoft Windows 95, and
shortly after that, Microsoft Access 95 and Microsoft Office 95. Then, in late
summer 1996, Microsoft announced plans to release Microsoft Access 97 and
Microsoft Office 97 in early 1997. It has become apparent that Microsoft intends
to revise their products frequently. There is no assurance the Company can
revise and update their current or future products to keep pace with the rate of
new product introductions from Microsoft.
Financial Condition and Changes in Financial Condition. For the year ended
September 30, 1996, the Company experienced a net loss from operating activities
of $118,714 compared to a loss of $125,465 for the same period in 1995; and a
gain of $44,043 for the same period in 1994. Net cash at September 30, 1996
decreased to $26,732 from $60,491 at September 30, 1995. This decrease is due
primarily to the net loss from operating activities. Depreciation and
amortization expenses remained relatively unchanged for these periods. Accounts
receivable increased from $84,562 at September 30, 1995 to $86,775 at September
7
<PAGE>
30, 1996. Inventories and other assets remained relatively equal for those
periods. An employee receivable, which reflects draws against commissions,
decreased from $11,957 in 1994 to $8,052 in 1995 and $1,270 at September 30,
1996. For the fiscal year ended September 30, 1995, the Company experienced an
increase in accounts payable of $61,734, an increase in accrued liabilities of
$37,103 and a decrease in deferred revenue of $11,310. The decrease in deferred
revenue is due to a decrease in support services sold with the sale of new
software licenses. The Company experienced a positive cash flow of $55,984 for
the year ended September 30, 1996 as compared to positive cash flow of $82,268
for the year ended September 30, 1995 as a result of operating activities.
For the year ended September 30, 1996, the Company experienced a decrease in
cash flow from investing activities of $86,344 due to the purchase and
development of computer software.
The Company experienced an increase in cash flows from financing activities of
$3,399 primarily due to repayment of officer loans. At September 30, 1996, the
Company had made no material commitments for capital expenditures.
Results of Operations: Comparison of fiscal 1996 and 1995. The Company's sales
revenues decreased from $595,493 in fiscal 1995 to $454,554 in fiscal 1996. This
decrease was primarily a result of a decrease in the sales of MTX Accounting for
Microsoft Office to dealers and end users.
Service and consulting revenues increased from $404,945 in fiscal 1995 to
$447,726 in fiscal 1996.
Miscellaneous revenues decreased from $8,799 in fiscal 1995 to $2,125 in fiscal
1996. This decrease is primarily a result of reduced shipping revenue associated
with the sales of new software.
Cost of sales, service and consulting decreased from $175,725, or 18% of sales,
in fiscal 1995 to $112,027, or 12% of sales, in fiscal 1996. This decrease was
primarily the result of the increase in sales of higher margin software products
and a decrease in sales of lower margin hardware products.
Marketing expenses decreased $129,684, or 26%, during fiscal 1996. These
expenses decreased from $503,129 in fiscal 1995 to $373,445 in fiscal 1996 due
to reduced sales promotions, reduced staffing, and reduced marketing supplies
and postage.
General and administrative expenses increased $59,173, or 16%, during fiscal
1996. These expenses increased from $371,178 in fiscal 1995 to $430,351 in
fiscal 1996. This increase is primarily a result of the full-year affect of
salaries and benefits for new management added in the prior fiscal year.
Depreciation and amortization expenses remained relatively unchanged.
Research and development expenses increased from $37,137 in 1995 to $47,201 in
1996. The increase in these expenses is a result of new product development.
Earnings increased from a loss of $125,465 in fiscal 1995 to a loss of $119,871
in fiscal 1996. This loss is primarily due to a decline in the sales of new
software licenses.
Results of Operations: Comparison of fiscal 1995 and 1994. The Company's sales
revenues decreased from $652,103 in fiscal 1994 to $595,494 in fiscal 1995. This
decrease was primarily a result of a decrease in low margin Hardware sales from
1994 to 1995. Hardware sales decreased $206,450, or 70%, from $295,105 in 1994
to $88,655 in 1995. Software sales of the Company's Microsoft Windows based
products increased $213,049, or 79%, from $271,387 in 1994 to $484,436 in 1995.
8
<PAGE>
Service and consulting revenues increased slightly from $385,580 in fiscal 1994
to $404,945 in fiscal 1995.
Miscellaneous revenues increased from $673 in fiscal 1994 to $8,799 in fiscal
1995. This increase is primarily a result of billings for shipping charges
associated with the Company's new products.
Cost of sales, service and consulting decreased from $338,503, or 33%, of sales
in fiscal 1994 to $175,725, or 18%, of sales in fiscal 1995. This decrease was
primarily the result of the increase in sales of higher margin software products
and a decrease in sales of lower margin hardware products.
Marketing expenses increased $151,654, or 43%, during fiscal 1995. These
expenses increased from $351,475 in fiscal 1994 to $503,129 in fiscal 1995 due
to the marketing efforts associated with the Company's new Microsoft Windows
compatible products.
General and administrative expenses increased $107,981, or 41%, during fiscal
1995. These expenses increased from $263,196 in fiscal 1994 to $371,178 in
fiscal 1995. This increase is primarily a result of the addition of new
management personnel, which are required for the further development of the
Company's new line of Microsoft Windows compatible software products.
Depreciation and amortization expenses remained relatively unchanged.
Research and development expenses increased from $1,455 in 1994 to $37,137 in
1995. The increase in these expenses is a result of new product development.
Earnings decreased from $41,003 in fiscal 1994 to a loss of $125,465 in fiscal
1995. This decrease is primarily a result of the costs associated with the
restructuring of the Company to a Microsoft Solution Provider and Microsoft
Certified Developer and to increased marketing expenses associated with the
Company's new products.
ITEM 7. FINANCIAL STATEMENTS
Financial Statements. The response to this item is being submitted as a separate
section of this report beginning on page F-l.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Neither during the two fiscal years ending September 30, 1996 or September 30,
1995, nor in any subsequent period, did the Company file a Form 8-K with the
Securities and Exchange Commission reporting a change of accountants involving a
disagreement of any matter of accounting principles or practices of financial
statement disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Identification of Directors and Executive Officers of the CompanyThe following
table sets forth the names and ages of all directors and executive officers of
the Company and all persons nominated or chosen to become a director, indicating
all positions and offices with the Company held by each such person and the
period during which he has served as a director:
9
<PAGE>
Name Age Position Since
Gerald J. Novreske 58 CEO and Director November 1976
A.W. Blair 57 President and Director April 1995
Dale R. Hunzelman 65 Treasurer and Director March 1979
Secretary June 25, 1991
Jerry R. Brookhart 56 Director October 1979
The Company's directors hold office until the next annual meeting of the
Company's shareholders. There is no arrangement or understanding between any
director or nominee for director of the Company and any other person or persons
pursuant to which such director was or is to be selected as a director or
nominee for director.
Identification of Certain Significant Employees. The Company does not employ any
person, other than the above-named executive officers, who make or are expected
to make significant contributions to the business of the Company.
Family Relationship. There are no family relationships between any director or
executive officer or person nominated or chosen by the Company to become a
director or executive officer.
Business Experience. The following is a brief account of the business experience
during at least the past five years of the directors and executive officers,
indicating their principal occupations and employment during that period, and
the names and principal businesses of the organizations in which such
occupations and employment were carried out.
Gerald J. Novreske. Mr. Novreske was the President and a Director of the
Company from its inception on November 2, 1976 to December 31, 1996. Mr.
Novreske is no longer an executive officer or director of the Company (see
below). From 1973 to 1975, Mr. Novreske was a vice- president of Apollo Electric
Co., Inc., Denver, Colorado, with administrative and engineering
responsibilities. From 1971 to 1973, Mr. Novreske was the president of I.V.
Company, Peru, Illinois, a mechanical/electrical contracting company. From 1969
to 1971, Mr. Novreske was a vice-president of Zaborac Electric, Inc., East
Peoria, Illinois, with responsibilities for sales, administration and data
processing.
A.W. Blair. Mr. Blair has been President and Chief Operating Officer and a
Director of the Company since April 1, 1995. From 1990 to 1995 he served as Vice
President of Enterprise Computing Services for Semiotix, Inc., a Colorado-based
client/server software consulting and training firm. From 1985 to 1989 Mr. Blair
served as Executive Vice President for the largest operating division of
Kayser-Roth Apparel in New York City. In this position he was responsible for
$50 million in annual sales from 17 domestic and international manufacturing
plants. Previously, as Vice President of Administration on the corporate staff,
he supervised all HR, MIS and administrative services spanning 10 different
operating companies comprising $350 million in annual sales from 83
manufacturing plants and 23 distribution centers. Prior to 1985 Mr. Blair served
10
<PAGE>
in various senior operating management and MIS positions with The J.R.Simplot
Company, Bayly Corporation and The Great Western Sugar Company. Mr. Blair is a
Certified Microsoft Product Specialist and holds an MBA Degree from the
University of Oklahoma City (1966) and a B.A. in Mathematics from the University
of Colorado (1962). He served as a Captain in the Air Force during the Vietnam
War and was awarded the AF Commendation Medal for computerized numerical control
manufacturing.
Dale R. Hunzelman. Mr. Hunzelman has been Treasurer of the Company since
October 20, 1979, a director of the Company since March 5, 1979 and served as
the Secretary of the Company from October 20, 1979 until resigning from that
position effective February 2, 1987 and then again since June 25, 1991 to
January 23, 1997. Mr. Hunzelman is no longer an executive officer or director of
the Company (see below). From April 1982 to March 1986, he was a full-time
employee of the Company. Since March 1986, Mr. Hunzelman has been controller of
R/W Specialties, Commerce City, Colorado, a distributor of construction
products. From l964 to February of 1982, Mr. Hunzelman was a director, officer
and co-founder of Dalby & Associates, Denver, Colorado, a public accounting firm
and data processing service bureau.
Jerry R. Brookhart. Mr. Brookhart has been a Director of the Company since
October 20, 1979. Mr. Brookhart is no longer an executive officer or director of
the Company (see below). In 1994 Mr. Brookhart co-founded Image Signs, Inc. with
his son. Image Signs is a full service sign designer and manufacturer located in
Denver, Colorado. From 1990 to 1994 Mr. Brookhart was Director of Channel
Management for Valisys, a provider of CIM integration software for the large
scale manufacturing environment. From 1985 to 1990, he was Regional Sales
Manager for Cadam, Inc., Golden, Colorado, a division of Lockheed which markets
CAD software. From 1982 to 1985, he was Manager, Third Party Sales, for
Precision Visual, Inc., Boulder, Colorado. Prior thereto, he was Senior Account
Manager for Tektronix Corp., Denver, Colorado during 1981. From 1980 to 1981, he
was Senior Account Manager for Auto-Trol Technology Corporation, Denver,
Colorado. In 1979, he was Marketing Director of Solar Industries, Inc., Denver,
Colorado. From 1977 to 1979, Mr. Brookhart was General System Division Regional
Special Systems Unit Manager for IBM, with responsibility for marketing and
technical support covering five states for the IBM Series/1 mini-computer. From
1974 to 1977, he was Data Processing Division Marketing Manager for IBM with
responsibility for System 370 marketing to large manufacturing and process
companies. He was also an IBM Systems Engineering Manager during 1974, and a
Headquarters Staff Senior Industry Marketing Representative for the process
industry from 1972 to 1974. From 1963 to 1972, he held various other positions
with IBM, including Advisory Marketing Representative, Account Representative
and Systems Engineer. Mr. Brookhart received a Bachelor of Science Degree in
agricultural science from the University of Illinois in 1963, and has completed
advanced business courses at the University of Chicago.
Changes in Management. Subsequent To September 30, 1996. Subsequent to September
30, 1996 and prior to filing this Annual Report, all of the above directors
(except for A. W. Blair) resigned for various personal reasons. Gerald J.
Novreske resigned as chief executive officer effective December 31, 1996 and
agreed to provide consulting services to the Company at the rate of $4,100 per
month from January 1, 1997 through March 31, 1998. He subsequently resigned his
position on the Board of Directors effective March 31, 1997. A. W. Blair was
appointed to the position of chief executive officer effective January 2, 1997,
replacing Mr. Novreske. Dale R. Hunzelman resigned as Secretary/Treasurer and as
a member of the Board of Directors effective January 23, 1997. Jerry R.
Brookhart subsequently advised the Company that he had relocated from Colorado
and resigned his position as a member of the Board of Directors of the Company
effective April 15, 1997.
Mr. Blair appointed an interim board of directors to replace the previous board
and filed a Form 8-K reporting such events on April 15, 1997. On July 2, 1997
the new board appointed Thomas O. Lawson as Vice President of Sales and
Marketing of the Company. The following table sets forth the names and ages of
all officers and directors of the Company as of July 2, 1997.
11
<PAGE>
Name Age Position Since
A. W. Blair 57 President and CEO April 1995
Director
Kevin J. Cox 40 Director April 1997
J. David Higgins * 55 Director April 1997
Gary W. Williams 47 Controller and Director April 1997
Secretary
Thomas O. Lawson 47 Vice President of Sales and July 1997
Marketing
* Mr. Higgins resigned as a director effective August 5, 1997.
Business Experience of New Management. The following is a brief account of the
business experience during at least the past five years of the new directors and
executive officers, indicating their principal occupations and employment during
that period, and the names and principal businesses of the organizations in
which such occupations and employment were carried out.
Kevin J. Cox. Mr. Cox is the President and Founder of Computer Peritia; a
Colorado-based corporation formed February 1995 to specialize in consulting,
training, and software development activities. From 1988 to 1995, Mr. Cox was
employed as a Client/Server Architect, Senior Software Engineer, and Trainer by
Semiotix, Inc., a Microsoft Solution Provider specializing in training,
consulting and client/server application development. Mr. Cox has over 17 years
of experience in the computer industry and is a noted national expert in
Microsoft SQL Server relational database technology and Microsoft Windows NT. He
speaks nationally at various technical conferences and is the author of The
Administrators Guide to Microsoft SQL Server 6.5. The Company has retained the
services of Mr. Cox to focus on the Company's MTX Enterprise Accounting system.
Mr. Cox has earned numerous Microsoft Professional and Training certifications.
He is also a certified PowerBuilder developer and instructor. He has an MBA from
the University of Denver, and a B.S. Degree from Arizona State University.
J. David Higgins. Mr. Higgins is the President and Founder of Telsoft
Corporation. Founded in 1989, Telsoft is a communications and marketing company
established for low cost distribution of software via telephone, computer and
video technology on the Internet. Prior to founding Telsoft, Mr. Higgins founded
and/or worked for several venture capital funded high tech start-ups and
marketing services firms. From 1969 to 1980 Mr. Higgins served in senior level
sales and marketing positions of increasing responsibility for Digital Equipment
Corporation. Mr. Higgins holds an MBA Degree from Pepperdine University and a
B.S. Degree from Utah State University. Mr. Higgins is no longer a director of
the Company (see above).
Gary W. Williams. Mr. Williams is a Certified Public Accountant. Mr.
Williams joined the Company in February 1997 as Controller. Prior to joining the
Company, Mr. Williams worked from 1987 to 1997 as an independent CPA. Prior to
that period, from 1986 to 1987 he worked as an accountant for Reliance Equities,
a mortgage company in Denver, Colorado. From 1983 to 1986 he worked as an
auditor for Wolf & Company/Cordle & Co. From 1981 to 1983 he worked as an
independent CPA in Grand Junction, Colorado. From 1978 to 1981 he worked as a
Senior Accountant for the John M. Hanson & Company in Denver, Colorado. Mr.
Williams is a graduate of the University of Northern Colorado with a B.S.B.A. in
Accounting.
12
<PAGE>
Thomas O. Lawson. Mr. Lawson was appointed Vice President of Sales &
Marketing of the Company in July 1997. Prior to joining the Company, from 1985
to 1997 Mr. Lawson served as Sales Manager for Business Management Systems Inc.,
a privately held accounting software firm with sales nationwide. Prior to that
time he worked in management, financial, and business development positions for
Ideal Basic Industries, Beechcraft, Cessna Aircraft, and the State of Kentucky.
Mr. Lawson served as a Missile Launch Officer in the Air Force from 1971-1975.
He has an M.B.A. in Finance from the University of North Dakota, and a B.S.
Degree in Marketing from Western Kentucky University.
Directorships. No director or nominee for director holds a directorship in any
other company with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934 or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940.
ITEM 10. EXECUTIVE COMPENSATION
During fiscal 1996, and as of the date of filing this Annual Report, no
compensation has been paid, nor have there been compensation arrangements or
plans, other than what has been indicated below.
Cash Compensation. The following table sets forth all cash compensation paid to
each of the Company's five most highly compensated executive officers whose cash
compensation exceed $60,000 and to all executive officers of the Company as a
group, for services in all capacities to the Company during the fiscal year
ended September 30, 1996:
Name of Individual Capacities Cash
or Number in Group In Which Served Compensation
Gerald J. Novreske CEO $96,085 (1)
A. W. Blair President and COO $100,417
All Executive Officers as All Capacities $196,502
a Group (2 Persons)
(1) Reflects auto expense compensation of $8,733.
Compensation Pursuant to Plans. The Company has no plan pursuant to which cash
or non-cash compensation was paid or distributed during the last fiscal year, or
is proposed to be paid or distributed in the future, to the individuals and
group described above, except as follows:
Gerald J. Novreske, the Company's CEO, in April, 1995, entered into a
written employment agreement with the Company for a three year term, at a yearly
salary of $96,000, plus a bonus of 6% of the Company's yearly net profit before
taxes. In addition to his salary Mr. Novreske is entitled to the use of an
automobile, 80% of the cost of which is borne by the Company. He may also
receive such other bonuses as the Board of Directors determines to award in its
sole discretion. Mr. Novreske is no longer an executive officer or director of
the Company (see Item 9 above).
A. W. Blair, The Company's President and COO, in April 1995, entered into a
written employment agreement with the Company for a three-year term, at a yearly
salary of $85,000. In addition to his basic salary, Mr.. Blair will receive a
commission based on performance and will be determined by multiplying 20% times
the gross profit contribution from increased revenues resulting from consulting
and related new business of the Corporation before taxes. Minimum guaranteed
commissions shall be $30,000 in year one of the agreement, $20,000 in year two
of the agreement and $10,000 in year three of the agreement. The commissions in
any year may not exceed 100% the base salary for that year.
13
<PAGE>
Change in Compensation for The Company's President. Subsequent to September 30,
1996 and prior to the date of this filing, the employment agreement of the
Company's president was modified on January 2, 1997 to also appoint Mr. Blair to
the position of chief executive officer and to increase the base salary to
$105,000. However, only 50% ($52,500 per year) will be paid until such time as
the Company has reported profitable quarterly operating results, or a change in
control of the Company occurs. At either such time the salary will be restored
to $105,000. In addition, a performance incentive of 8% of annual pre-tax
operating income will be paid to Mr. Blair in lieu of the previously described
20% consulting commission.
Stock Option and Stock Appreciation Right Plan On February 2, 1987, the Company
adopted the 1987 Stock Option Plan ("1987 ISOP") which provides for granting to
the Company's officers and employees options to acquire up to 3,000,000 shares
of the Company's common stock. The shares issuable under the 1987 ISOP were at a
price to be determined by the stock option committee (the "Committee"), but not
less than the fair market value of the stock on the date of grant, except that a
holder of 10% or more of the Company's stock must have paid 110% of the fair
market value. The exercise dates of the options are determined by the Committee,
not to exceed 10 years; for a holder of 10% or more of the Company's common
stock, the exercise date could not exceed five years.
The plan expired February 2, 1997. No executive officer or director holds any
options pursuant to the 1987 ISOP.
Compensation of Directors. Directors of the Company who are not employees of the
Company may receive a fee of $250 per meeting for their attendance at meetings
of the Company's Board of Directors, and are entitled to reimbursement for
reasonable travel expenses.
Termination of Employment and Change of Control Arrangement. Except as noted in
the next paragraph, the Company has no compensatory plan or arrangements,
including payments to be received from the Company, with respect to any
individual named in this Item, for the latest or the next preceding fiscal year,
which plan or arrangement may result or will result from the resignation,
retirement or any other termination of such individual's employment with the
Company, or from a change in control of the Company or a change in the
individual's responsibilities following a change in control.
Pursuant to the terms of Mr. Novreske's employment agreement, in the event his
employment was terminated by the Company without cause, he was entitled to the
full amount of the compensation for the remainder of the term of the contract,
however, in no event shall the amount of compensation to be less than 50% of the
total value of the agreement for all three years. In the event Mr. Novreske
became totally disabled during the term of his employment agreement, 60% of his
salary was to be continued for the remaining term of the agreement or for the
period of time for which he remains totally disabled, whichever was shorter. If
he was unable to perform services by reason of illness or physical injury, not
amounting to a disability, his salary shall continue to be paid in full.
As noted previously, Mr. Novreske resigned effective December 31, 1996.
As noted above, on January 2, 1997, Mr. Blair's employment agreement was
modified to state that in the event his employment is terminated by the Company
without cause, he will be entitled to the full amount of the compensation for
the remainder of the term of the contract, however, in no event shall the amount
of compensation be less than 50% of the total value of the agreement for all
three years. In the event Mr. Blair becomes totally disabled during the term of
his employment agreement, 60% of his salary will be continued for the remaining
term of the agreement or for the period of time for which he remains totally
disabled, whichever is shorter. If he is unable to perform services by reason of
illness or physical injury, not amounting to a disability, his salary shall
continue to be paid in full. (See above for additional terms of Mr. Blair's
employment agreement).
14
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of September 30, 1996, the following persons were officers or directors of
the Company or were known by the Company to own or control beneficially more
than five percent of the Company's common stock.
Amount and Nature Percent
Name and Address of Beneficial of
Beneficial Owner Ownership(1) Class(2)
Gerald J. Novreske 1,572,501(3) 14.6%
7575 Berkshire Ct.
Castle Rock, CO 80104
A.W. Blair 1,500,000 13.9%
7901 East Belleview Ave
Suite 50
Englewood, CO 80111
Cubix Corporation f/k/a 1,309,770 12.2%
L/F Technologies
Incorporated
2800 Lockheed Way
Carson City, NV 89701
Dale R. Hunzelman 449,823(4) 4.2%
3028 Isabell Court
Golden, CO 80401
Jerry R. Brookhart 175,440(5) 1.6%
21 Vista Drive
La Selva Beach, CA 95076
All Officers and Directors
as a Group (4 Persons) 3,697,764(3)(4)(5) 34.3%
(1) Unless otherwise indicated, the named individuals have sole voting power
regarding indicated shares.
(2) Based on 10,774,398 shares of common stock outstanding as of September 30,
1996, except that any securities not outstanding which are subject to presently
exercisable options or exercisable within 90 days from September 30, 1996 are
deemed to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person but are not deemed to
be outstanding for the purpose of computing the percentage of the class owned by
any other person.
(3) Includes 1,407,120 shares owned by Mr. Novreske, and 155,381 shares owned by
Susan R. Novreske, Mr. Novreske's wife, of which Mr. Novreske disclaims
beneficial ownership pursuant to Rule 13d-4 under the Securities Exchange Act of
1934, and 10,000 shares subject to stock options owned by Mr. Novreske which
were exercisable until January, 2000.
(4) Includes 329,823 shares owned by Mr. Hunzelman, 10,000 shares held jointly
with Mr. Hunzelman's wife; and 110,000 shares subject to stock options which
were exercisable until January, 2000.
15
<PAGE>
(5) Includes 65,440 shares owned by Mr. Brookhart and 110,000 shares subject to
stock options, which were exercisable until January 2000.
Changes in Control There are no arrangements, known to the Company, including
any pledge by any person of securities of the Company, the operation of which
may at a subsequent date result in a change of control of the Company. However,
as the result of a private agreement dated January 2, 1997, G.J. Novreske
granted A.W. Blair a first right of refusal on the sale of all MTX stock owned
by Mr. Novreske (1,407,120 shares) providing Mr. Blair remains employed by the
Company. The first right of refusal must be exercised within 14 days of any
bonafied offer. There is no expiration date on the first right of refusal
granted to Mr. Blair by Mr. Novreske.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During June 1991, at the request of a bank, a then existing loan was discounted
to the Company's president. The balance at June 27, 1991 amounting to $55,010
was repaid by the officer for $30,000 in cash and a $10,000 promissory note. The
Company recorded no gain or loss from the transaction and has continued carrying
the liability at its historical amount. The debt, which accrues interest at 12%
per annum, had a balance of $4,399 and $23,138 respectively as of September 30,
1995 and 1994. In addition, during 1993 this officer advanced the Company $1,175
which was added to the loan. The Company paid the officer $8,000 during the year
ended September 30, 1994 of which $3,040 is attributed to interest. During 1995
the Company paid the officer $20,196 including interest of $1,457. The remaining
debt of $4,399 was repaid by the Company during 1996.
There were no other transactions or series of transactions for the fiscal 1996
year, to which the Company is a party, in which the amount exceeds $60,000 and
in which to the knowledge of the Company any director, executive officer,
nominee, five percent shareholder or any member of the immediate family of any
of the foregoing persons, have or will have a direct or indirect material
interest.
Indebtedness of Management. No director or executive officer of the Company,
nominee for election as a director, any member of the immediate family of such
persons, the corporation or organization (other than the Company) of which any
of such persons is an executive officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities, or any trust or other estate in which any of such persons has a
substantial beneficial interest or as to which such person serves as a trustee
or in a similar capacity, has been indebted to the Company at any time since the
beginning of the Company's last fiscal year in an amount in excess of $60,000.
16
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The following financial statements and schedules are filed as part of this
report:
Report of Independent Public Auditors ..................................F-1
Balance Sheets..........................................................F-2
Statement of Operations.................................................F-3
Statement of Cash Flows.................................................F-4
Statement of Stockholders' Equity ......................................F-5
Notes to Financial Statements .......................................F-6-10
Schedules Omitted: All schedules other than those shown have been omitted
because they are not applicable, not required, or the required information is
shown in the financial statements or notes thereto.
(b) List of Exhibits The following exhibits are incorporated by reference
or filed with this report:
(3.0) Restated Articles of Incorporation and Bylaws, as amended,
incorporated by reference to Annual Report on Form 10-K for fiscal year ended
September 30, 1986.
(4.1) Form of Warrant Agreement between the Company and American Stock
Transfer, Inc., incorporated by reference to Annual Report on Form 10-K for
fiscal year ended September 30, 1986.
(4.2) Form of Stock Purchase Warrant, incorporated by reference to Annual
Report on Form 10-K for fiscal year ended September 30, 1986.
No exhibit ever filed under 10.1
(10.2) Lease Agreement, as amended, with Inverness Associates, incorporated
by reference to Annual Report on Form 10-K for fiscal year ended September 30,
1986.
(10.3) Employment Agreement with Gerald J. Novreske, effective October 1,
1985 and terminated September 30, 1988, incorporated by reference to Annual
Report on Form l0-K for fiscal year ended September 30, 1986.
(10.4) Employment Agreement with Dale R. Hunzelman, effective October 1,
1985 and terminated September 30, 1988, incorporated by reference to Annual
Report on Form 10-K for fiscal year ended September 30, 1986.
(10.5) Incentive Stock Option Plan, adopted October 11, 1982, incorporated
by reference to Annual Report on Form 10-K for fiscal year ended September 30,
1986.
No exhibit ever filed under 10.6
(10.7) Trademark Registration of "MTX," dated November 5, 1985,
incorporated by reference to Annual Report on Form 10-K for fiscal year ended
September 30, 1986.
(10.8) Amendment Number One to Office Lease Agreement (amendment of
agreement referred to in Exhibit 10.2), dated March 17, 1986, incorporated by
reference to Annual Report on Form 10-K for fiscal year ended September 30,
1986.
(10.9) Office Lease Agreement with Inverness Ventures, effective September
1, 1986 incorporated by reference to Annual Report on Form 10-K for fiscal year
ended September 30, 1986.
17
<PAGE>
(l0.l0) Amendment Number One to Office Lease Agreement (amending agreement
referred to in Exhibit l0.9), dated September 11, 1986, incorporated by
reference to Annual Report on Form 10-K for fiscal year ended September 30,
1987.
(10.11) Amendment Number Two to Office Lease Agreement (further amending
agreement referred to in Exhibit 10.2), dated September 11, 1986, incorporated
by reference to Annual Report on Form 10-K for fiscal year ended September 30,
1987.
(10.12) Letter Agreement with National Price Service, dated June 9, 1988
incorporated reference to Annual Report on Form 10-K for fiscal year ended
September 30, 1987.
(10.13) 1987 Incentive Stock Option Plan, incorporated by reference to
Annual Report on Form 10-K for fiscal year ended September 30, 1987.
(10.14) Cubix Products Purchase Agreement and Limited Warranty entered into
on March 24, 1989, incorporated by reference to Annual Report on Form 10-K for
fiscal year ended September 30, 1987.
(10.15) Office Lease Agreement with Inverness Drive East Business Center,
dated November 13, 1990 incorporated by reference to Annual Report on Form 10-K
for fiscal year ended September 30, 1990.
(10.16) Termination of Lease Agreement with Inverness Ventures dated
November 13, 1990 incorporated by reference to Annual Report on Form 10-K for
fiscal year ended September 30, 1990.
(10.17) Agreement-in-Principle by and between the Company and Systems
Support Agency, Inc. incorporated by reference to Report on Form 8-K filed in
the first quarter of the fiscal year ended September 30, 1992.
(10.18) Agreement-In-Principle by and between the Company and Goodwin
Market of Quality incorporated by reference to Annual Report on Form 10-K for
fiscal year ended September 30, 1994.
(10.19) Agreement by and between the Company and Goodwin Market of Quality
regarding distribution rights of the ROS software application incorporated by
reference to Annual Report on Form 10-K for fiscal year ended September 30,
1994.
(10.20) Agreement by and between Microsoft Corporation wherein the Company
is accepted as a Microsoft Solution Provider incorporated by reference to Annual
Report on Form 10-K for fiscal year ended September 30, 1994.
(10.21) Agreement by and between Microsoft Corporation and the Company
whereby the Company is accepted into the Microsoft Office Compatible program
incorporated by reference to Annual Report on Form 10-K for fiscal year ended
September 30, 1994.
(10.22) Employment Agreement Effective April 1, 1995 between the Company
and A. W. Blair.
(10.23) Employment Agreement Effective April 1, 1995 between the Company
and G. J. Novreske.
(27) Financial Data Schedule.
(c) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission in Washington, D.C. during the fourth quarter of the Company's fiscal
year ended September 30, 1996.
18
<PAGE>
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange Act
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: August 26, 1997 MTX INTERNATIONAL, INC.
/s/ A. W. Blair
-----------------------------
By: A. W. Blair, President & CEO
In accordance with the Exchange Act this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ A.W. Blair Date: August 26, 1997
- ----------------------------------
A. W. Blair
President, CEO and Director
/s/ Gary W. Williams Date: August 26, 1997
- ----------------------------------
Gary W. Williams
Secretary, Controller and Director
/s/ Kevin J. Cox Date: August 26, 1997
- ---------------------------------
Kevin J. Cox
Director
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
MTX International, Inc.
We have audited the accompanying balance sheets of MTX International, Inc. as of
September 30, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
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 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 financial statements referred to above present fairly, in
all material respects, the financial position of MTX International, Inc. as of
September 30, 1996 and 1995, and the results of its operations, and its cash
flows for each of the three years in the period ended September 30, 1996, in
conformity with generally accepted accounting principles.
Winter, Scheifley and Associates, P.C.
Certified Public Accountants
Englewood, Colorado
February 5, 1997, except for Note 3
which is dated April 10, 1997
[GRAPHIC OMITTED]
F-1
<PAGE>
<TABLE>
<CAPTION>
MTX International, Inc.
Balance Sheets
September 30, 1996 and 1995
ASSETS
------ 1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash ...................................................... $ 26,732 $ 60,491
Accounts receivable, trade, less allowance for
doubtful accounts of $11,265 and $52,189 .................. 86,775 84,562
Employee receivable ........................................ 1,270 8,052
Inventories ................................................ 65,305 72,955
Prepaid expenses ........................................... 6,985 11,490
--------- ---------
Total current assets ................................... 187,067 237,550
Property and equipment, at cost, net of
accumulated depreciation of $197,508
and $192,291 ............................................... 14,412 18,908
Other assets:
Software acquisition and development costs, net
of amortization of $621,995 and $561,900 .................. 174,999 149,471
Refundable deposits ........................................ 4,318 3,278
--------- ---------
$ 380,796 $ 409,207
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable .......................................... $ 122,931 $ 61,197
Accrued liabilities ....................................... 84,543 50,108
Deferred revenue .......................................... 72,760 84,070
Note payable - officer .................................... -- 4,399
--------- ---------
Total current liabilities ............................. 280,234 199,774
Commitments (Note 4) ........................................ -- --
Stockholders' equity:
Common stock, $.01 par value,
40,000,000 shares authorized, 10,774,398
and 10,674,398 shares issued and outstanding .............. 107,744 106,744
Additional paid-in capital ................................. 2,225,459 2,225,459
Subscriptions to common stock .............................. 10,000 --
Treasury stock, 68,160 shares .............................. (22,493) (22,493)
Accumulated deficit ........................................ (2,220,148) (2,100,277)
--------- ---------
100,562 209,433
--------- ---------
$ 380,796 $ 409,207
========= =========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
Years ended September 30, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales .............................................. $ 454,554 $ 595,493 $ 652,103
Service and consulting ............................. 447,726 404,945 385,580
Miscellaneous ...................................... 2,125 8,799 673
--------- ---------- -----------
904,405 1,009,237 1,038,356
Costs and expenses:
Cost of sales, service and consulting .............. 112,027 175,725 338,503
Marketing .......................................... 373,445 503,129 351,475
General and administrative ......................... 430,351 371,178 263,197
Amortization of software acquisition costs.......... 60,095 47,534 39,693
Research and development ........................... 47,201 37,136 1,455
--------- ---------- -----------
1,023,119 1,134,702 994,323
--------- ---------- -----------
Income (loss) from operations ....................... (118,714) (125,465) 44,033
Other income and (expense):
Interest income .................................... 550 1,060 1,666
Utilization of operating loss carryforward.......... -- -- 7,800
Interest expense ................................... (1,707) (3,102) (4,696)
--------- ---------- -----------
(1,157) (2,042) 4,770
Income (loss) before income taxes ................... (119,871) (127,507) 48,803
Provision for income taxes .......................... -- -- (7,800)
--------- ---------- -----------
Net income (loss) ................................. $ (119,871) $ (127,507) $ 41,003
========= ========== ===========
Earnings (loss) per share:
Net income (loss) .................................. $ (0.01) $ (0.01) $ 0.01
========= ========== ===========
Weighted average shares outstanding ................ 10,682,731 9,443,148 7,919,398
========= ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
MTX International, Inc.
Statements of Cash Flows
Years ended September 30, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ....................................... $ (119,871) $ (127,507) $ 41,003
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation ........................................... 5,216 2,849 --
Amortization of software development costs ............. 60,095 47,534 39,693
Stock subscription for services ........................ 10,000 -- --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ............ 4,570 22,063 (14,125)
(Increase) decrease in inventory ...................... 7,650 (101) 10,312
(Increase) decrease in prepaid expenses ............... 4,505 (3,157) (8,333)
(Increase) in other assets ............................ (1,040) -- 1,048
Increase (decrease) in accounts payable ............... 61,734 (2,836) (5,036)
Increase (decrease) in accrued liabilities ............ 34,435 15,531 8,880
Increase (Decrease) in deferred revenue ............... (11,310) 53,892 8,272
--------- --------- ---------
Total adjustments .................................. 175,855 135,775 40,711
--------- --------- ---------
Net cash provided by (used in)
operating activities ................................... 55,984 8,268 81,714
--------- --------- ---------
Cash flows from investing activities:
Purchase of equipment ................................. (721) (21,757) --
Purchase and development of
computer software .................................... (85,623) (61,749) (60,039)
--------- --------- ---------
Net cash (used in) investing activities ................... (86,344) (83,506) (60,039)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock ..................... 1,000 114,750 --
Increase in officer loans .............................. -- -- --
Repayment of officer loans ............................. (4,399) (18,739) (4,960)
--------- --------- ---------
Net cash provided by (used in)
financing activities ................................... (3,399) 96,011 (4,960)
--------- --------- ---------
Increase (decrease) in cash ............................... (33,759) 20,773 16,715
Cash and cash equivalents,
beginning of period ...................................... 60,491 39,718 23,003
--------- --------- ---------
Cash and cash equivalents,
end of period ............................................ $ 26,732 $ 60,491 $ 39,718
========= ========= =========
Supplemental cash flow information:
Cash paid for interest ................................. $ 1,707 $ 3,103 $ 3,040
Cash paid for income taxes ............................. $ -- $ -- $ --
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MTX International, Inc.
Statement of Changes in Stockholders' Equity
Years ended September 30, 1996, 1995 and 1994
Additional
Common Stock Paid-in
ACTIVITY Shares Amount Capital
------ ------ --------
<S> <C> <C> <C>
Balance, September 30, 1993 .............. 7,919,398 $ 79,194 $ 2,128,259
Net income for the year .................. -- -- --
---------- -------- ---------
Balance, September 30, 1994 .............. 7,919,398 79,194 2,128,259
Common stock issued for cash ............. 1,000,000 10,000 90,000
Exercise of common stock options ......... 1,355,000 13,550 1,200
Issuance of subscription shares .......... 400,000 4,000 6,000
Net (loss) for the year .................. -- -- --
---------- -------- ---------
Balance, September 30, 1995 .............. 10,674,398 106,744 2,225,459
Common stock subscriptions ............... -- -- --
Exercise of common stock options.......... 100,000 1,000 --
Net (loss) for the year .................. -- -- --
---------- -------- ---------
Balance, September 30, 1996 .............. 10,774,398 $ 107,744 $ 2,225,459
========== ======== =========
<CAPTION>
Stock Treasury Accumulated
Subscriptions Stock Deficit Total
------------- -------- ----------- -----
<S> <C> <C> <C> <C>
Balance, September 30, 1993 .............. $ 10,000 $ (22,493) $ (2,013,773) $ 181,187
Net income for the year .................. -- -- 41,003 41,003
---------- -------- --------- --------
Balance, September 30, 1994 .............. 10,000 (22,493) (1,972,770) 222,190
Common stock issued for cash ............. -- -- -- 100,000
Exercise of common stock options.......... -- -- -- 14,750
Issuance of subscription shares .......... (10,000) -- -- --
Net (loss) for the year .................. -- -- (127,507) (127,507)
---------- -------- --------- --------
Balance, September 30, 1995 .............. -- (22,493) (2,100,277) 209,433
Common stock subscriptions ............... 10,000 -- -- 10,000
Exercise of common stock options.......... -- -- -- 1,000
Net (loss) for the year .................. -- -- (119,871) (119,871)
---------- -------- --------- --------
Balance, September 30, 1996 .............. $ 10,000 $ (22,493) $ (2,220,148) $ 100,562
========== ======== ========= ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
MTX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996, 1995 and 1994
1. Organization and significant accounting policies
Organization:
The Company was incorporated under the laws of the State of Colorado on November
2, 1976. The Company markets software and hardware micro-computer products to
construction contractors and provides management and technical consulting
services and, in 1994, began marketing an accounting software package that is
compatible with Microsoft Windows.
Estimates:
Management of the Company uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that management uses.
Revenue recognition:
Revenue is recognized on software and hardware products upon shipment to the
customer. Revenue from consulting and other services is recognized at the time
the services are performed or ratably over the term of maintenance contracts.
Inventories:
Inventories (which consist principally of spare parts) are stated at lower of
cost (first-in, first-out method) or market.
Depreciation:
Depreciation is provided on the straight-line method over the following
estimated useful lives:
Computer equipment 5-7 years
Furniture and equipment 3-7 years
Leasehold improvements 5 years
Software acquisition and development costs:
Costs incurred to establish the technological feasibility of a computer software
product to be sold, leased or otherwise marketed are research and development
costs and are charged to expense as incurred. Development costs incurred once
technological feasibility has been established are capitalized.
F-6
<PAGE>
MTX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996, 1995 and 1994
(Continued)
1. Organization and significant accounting policies (continued)
During the fiscal years ended September 30, 1996, 1995 and 1994, the Company
capitalized $85,623, $61,749 and $60,039, respectively, of costs related to
purchase and enhancements of software under the criteria mentioned in the
previous paragraph. These costs are being amortized on a straight-line basis
over the remaining estimated economic life of the specific product, generally
five years. Amortization amounted to $60,095, $47,534 and $39,693 for the years
1996, 1995 and 1994, respectively.
Income taxes:
For income tax purposes, the Company deducts software acquisition and
development costs (except for purchased software) as incurred. No deferred taxes
have been provided on this and other timing differences since the Company has
significant net operating loss carryforwards for financial reporting purposes
(see Note 6).
Earnings (loss) per share:
Earnings (loss) per share has been computed using the weighted average number of
shares outstanding during each period. The shares issuable under stock options
have an insignificant effect in the years presented. Earnings per share is
unchanged on a fully diluted basis.
Cash:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Financial Instruments:
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts receivable/payable, and accruals. The carrying value of
these financial instruments approximate fair value because of their short-term
maturities.
Advertising Costs:
Advertising costs are expensed as incurred. Advertising expense was $21,516,
$13,396 and $15,337 for the years ended September 30, 1996, 1995, and 1994,
respectively.
2. Notes payable - officer
During June 1991, at the request of a bank, a then existing loan was discounted
to the Company's president. The balance at June 27, 1991 amounting to $55,010
was repaid by the officer for $30,000 in cash and a $10,000 promissory note. The
F-7
<PAGE>
MTX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996, 1995 and 1994
(Continued)
2. Notes payable - officer (continued)
Company recorded no gain or loss from the transaction and has continued carrying
the liability at its historical amount. The debt, which accrued interest at 12%
per annum, had a balance of $4,399 and $23,138 respectively as of September 30,
1995 and 1994. In addition, during 1993 this officer advanced the Company $1,175
which was added to the loan. The Company paid the officer $8,000 during the year
ended September 30, 1994 of which $3,040 is attributed to interest. During 1995
the Company paid the officer $20,196 including interest of $1,457. During 1996
the remaining debt of $4,399 was repaid by the Company.
3. Stockholders' equity
During April 1995 the Company sold 1,000,000 shares of its common stock at $.10
per share to an individual hired at that time to serve as the Company's
president. The price paid for the restricted shares was equivalent to the market
price at that date.
Also during 1995 the Company issued 400,000 of its restricted common stock in
connection with a subscription agreement entered into with an unrelated
individual during November 1992. The price established at that time, when no
market quote was available, was $.025 per share.
During 1996 the Company agreed to issue 80,000 shares of stock in exchange for
services valued at $10,000. These shares were issued in April, 1997.
4. Commitments
The Company rents equipment under operating leases which provide for annual base
rentals through September 30, 1999 of $11,394.
In August 1996 Company negotiated a thirty-six month lease on new office
facilities commencing on September 1, 1996. During the same period the Company
reached an agreement to terminate its prior lease agreement. The resulting lease
commitment under the new agreement is as follows:
Years ending
September 30,
------------
1997 $ 22,644
1998 22,644
1999 20,757
------
$ 66,045
======
F-8
<PAGE>
MTX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996, 1995 and 1994
(Continued)
4. Commitments (continued)
In addition to base rent, the Company is required to pay additional office
facility rent which represents its pro-rata share of operating expenses in
excess of base operating expenses.
Rent expense for office facilities and equipment amounted to $51,373, $50,179
and $42,031 for the years ended September 30, 1996, 1995 and 1994, respectively.
During 1990, the Company and other defendants reached a settlement regarding a
guarantee of payment under a contract with a third party. Under the agreement,
the Company and the related parties, including the President and a Director of
the Company, were jointly and severally liable to pay $50,000 over a six year
period. The Company's share of the future payments under the agreement was
$2,668 per year through 1996. The net present value of the payments amounts to
$2,668 as of September 30, 1995, and was paid in full during the year ended
September 30, 1996.
In April 1995 the Company entered into a three year employment contract with its
chief executive officer. The contract provided for a base salary of $96,000 per
year and a bonus of 6% of pre-tax profit (see Note 7).
In April 1995 the Company entered into a three year employment contract with its
president. The contract provided for a base salary of $85,000 per year and a
bonus of 20% of gross profits earned from new business products or services (see
Note 7).
5. Stock option plans
On February 2, 1987, the Company adopted the 1987 Stock Option Plan which
provides for granting to officers, directors and employees of the Company
options to acquire up to 3,000,000 shares of the Company's common stock.
The shares issuable under the 1987 plan are at a price to be determined by the
stock option committee (the Committee), but not less than the fair market value
of the stock on the date of grant, except that a holder of 10% or more of the
Company's stock must pay 110% of the fair market value. The exercise periods of
the options are determined by the Committee, not to exceed ten years; for a
holder of 10% or more of the Company's common stock the exercise period cannot
exceed five years.
F-9
<PAGE>
MTX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996, 1995 and 1994
(Continued)
5. Stock option plans (continued)
The following summarizes option transactions under the 1987 Stock Option Plan:
Number Option price
of shares per share Aggregate
--------- ------------ ---------
Balance, September, 30, 1993 ......... 1,940,000 $.01 - $.011 20,400
Granted ............................ 890,000 $.01 - $.011 9,100
Forfeited .......................... 220,000 $.01 - $.011 2,200
Exercised .......................... -- -- --
--------- ------------ ------
Balance, September, 30, 1994 .......... 2,610,000 $.01 - $.011 27,300
Granted ............................ 270,000 $.20 - $.22 52,200
Forfeited .......................... 256,000 $.01 - $.011 2,650
Exercised .......................... 1,355,000 $.01 - $.011 14,759
--------- ------------ ------
Balance, September, 30, 1995 ......... 1,269,000 $.01 - $.011 62,100
Granted ............................ -- -- --
Forfeited .......................... 20,000 $.01 200
Exercised .......................... 100,000 $.01 1,000
--------- ------------ ------
Balance, September, 30, 1996 .......... 1,149,000 $.01 - $.011 $ 60,900
========= ============ ======
Options exercisable at
September 30, 1996 ................... 1,269,000
=========
Options available for grant ........... 376,000
=========
During July 1994 the Company granted non-qualified options to purchase 150,000
shares of common stock to two individuals as an inducement to accept employment
by the Company. The options are exercisable $.20 per share (100% of market
value) during the period from November 1, 1994 to December 31, 1994. No market
existed for the Company's shares prior to July 1994. The options expired without
exercise at December 31, 1994.
6. Income taxes
At September 30, 1996, the Company had accumulated operating loss carryforwards
available for to reduce future income tax expense of approximately $2,209,000.
The Company has investment tax credit and research tax credit carryforwards of
approximately $9,900 and $32,200, respectively. During the year ended September
30, 1994, the Company utilized, for financial statement purposes, a net
operating loss carryforward resulting in an income tax benefit of $7,800 which
has been shown as other income in the accompanying financial statements.
F-10
<PAGE>
MTX INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996, 1995 and 1994
(Continued)
6. Income taxes (continued)
The carryforwards and credits expire as follows:
Operating Investment Research
loss tax credit tax credit
--------- ----------- -----------
1997 $ 110,000 $ 2,200 $ 4,000
1998 774,000 7,400 12,700
1999 830,000 300 15,500
2000 122,000
2001 3,000
2002 53,000
2003 2,000
2004 13,000
2005 36,000
2006 19,000
2010 127,000
2011 120,000
--------- ---------- ----------
$2,209,000 $ 9,900 $ 32,200
========== ========== ==========
The Company does not anticipate the utilization of these net operating losses in
the near future and has established a valuation allowance for the full amount of
deferred tax asset ($751,000) estimated to arise therefrom. The reserve amount
increased by approximately $33,000 during the year ended September 30, 1996.
7. Subsequent events:
The Company's employment agreement with its president (see Note 4) was modified
on January 2, 1997 to also appoint the president to the position of chief
executive officer and increase the base salary to $105,000. However only 50%
($52,500 per year) will be paid until such time as the Company has reported
profitable quarterly operating results, or a change in control of the Company
occurs. At either such time the salary will be restored to $105,000. In
addition, a performance incentive of 8% of annual pre-tax operating income will
be paid to this officer.
In addition, the former chief executive officer (see Note 4) resigned effective
December 31, 1996, and agreed to provide consulting services to the Company at
the rate of $4,100 per month from January 1, 1997 through March 31, 1998.
F-11
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated April 1, 1995 is by and between MTX International, Inc., a
Colorado Corporation ("Corporation") and A. W Blair, (Employee").
The Corporation desires to employ Employee and Employee desires to be employed
by the Corporation.
The parties hereby enter into this Agreement to set forth their mutual promises
and understandings.
ARTICLE I
EMPLOYMENT DUTIES AND RESPONSIBILITIES
Section 1.1 Employment. The Corporation hereby employees the Employee as
President and Chief Operating Officer of the Corporation. The Employee accepts
such employment and agrees to abide by the Articles of Incorporation, By-Laws,
and the decisions of the Board of Directors of the Corporation.
Section 1.2 Director of the Corporation. The Employee shall, if elected or
appointed, serve as a Director of the Corporation. Nothing in this Agreement
shall be construed as requiring the Corporation, its Shareholders or agents to
cause the election or appointment of the Employee as a Director.
Section 1.3 Duties and Responsibilities. The Employee is employed pursuant to
the terms of this Agreement and agrees to devote substantially all of his time
and energies to his employment under this Agreement. The Employee shall perform
such duties as may be determined and assigned to him by the Board of Directors
of the Corporation.
Section 1.4 Working Facilities. The Employee shall be furnished with facilities
and services suitable to the position and adequate for the performance of the
duties of the Employee under this agreement.
Section 1.5 Vacations. The Employee shall be entitled each year to a three (3)
week vacation, during which time the Employee's compensation shall be paid in
full. Each vacation shall be taken by the employee over a period or periods
meeting with the approval of the Board of Directors.
Section 1.6 Life Insurance. The Corporation shall pay the premiums on a $100,000
policy of term non convertible life insurance covering the Employee's life. The
Employee shall have the sole right to designate the beneficiary of such policy.
The Corporation, at its election, may secure "Key Man" insurance for its benefit
on the Employee's life and the Employee shall cooperate with the Corporation in
acquiring such insurance.
Section 1.7 Benefit Plans. The Employee may participate in any plans,
arrangements, or distributions, in accordance with their terms, by the
Corporation pertaining to or in connection with any retirement, health,
disability, bonus, pension. profit sharing, or similar plans.
Section 1.8 Expenses. The Employee is authorized to incur reasonable expenses
for promoting the business of the Corporation, including expenses for
entertainment, travel, and similar items. The Corporation will reimburse the
Employee for all such expenses upon the presentation by the Employee, from time
to time, of an itemized account of such expenditures. Such expenditures, shall,
however, be subject at all times to the approval of the Board of Directors.
<PAGE>
Section 1.9 Indemnification Against Liabilities. The Employee (and his heirs,
executors and administrators) shall be indemnified by the Corporation against
expenses reasonably incurred by or imposed upon him in connection with or
arising out of any action, suit or proceeding in which he may be involved or to
which he may be a party by reason of his being or having been a Director or
Officer of the Corporation, except in respect of matters as to which he shall be
finally adjudged in such action, suit or proceeding to be liable for negligence
or misconduct; or in the event of a settlement of any such action, suit or
proceeding, indemnification shall be provided only in connection with such
matters covered by the settlement as to which the Corporation is advised by
counsel that the Employee did not commit a breach of duty. The foregoing right
of indemnification shall not be exclusive of other rights to which the Employee
may be entitled under any applicable state statute.
ARTICLE II
COMPENSATION
Section 2.1 Basic Salary. The Corporation shall pay to the Employee a basic
salary of $85,000 for the first year of this Agreement, $85,000 for the second
year of this Agreement and $85,000 for the third year of this Agreement. Such
salary shall be paid over the course of each year pursuant to the Corporation's
usual pay periods.
Section 2.2 Director's Compensation. The Employee may receive additional
compensation, if elected or appointed a Director of the Corporation, upon
approval of such additional compensation by the Board of Directors of the
Corporation.
Section 2.3 Commissions. In addition to the basic salary, the Employee will
receive a commission. The commission will be based on performance and will be
determined by multiplying 20% times the gross profit contribution from increased
revenues resulting from consulting and related new business of the Corporation
before taxes. Minimum guaranteed commissions shall be $30,000 in year one of
this agreement, $20,000 in year two of this agreement and $10,000 in year three
of this agreement. The commissions in any year may not exceed 100% of the base
salary for that year.
ARTICLE III
TERM OF EMPLOYMENT AND TERMINATION
Section 3.1 Term. This Agreement shall be for a period of three years commencing
on its effective date, subject , however to termination during such period, as
provided in this article. This Agreement shall end at the end of such period.
Section 3.2 Termination By The Corporation Without Cause. The Board of
Directors, without cause, may terminate the Employee's employment, under this
Agreement at any time upon 30 days written notice to the Employee, but such
termination shall not affect the provisions of Article V of this Agreement. In
such event, the Employee, if requested by the Board of Directors, shall continue
to render the services required under this Agreement up to the date of
employment termination, and shall be paid, in such increments as agreed by the
Employee and the Board of Directors, the full amount of the compensation
provided for in Section 2.1 of this Agreement which remains unpaid at the date
of termination. However, in no event shall the amount of compensation payable
under this section be less than 50% of the total value of the agreement for all
three years.
<PAGE>
Section 3.3 Termination By The Employee Without Cause. The Employee, without
cause, may terminate this Agreement upon 30 days written notice to the
Corporation. In such event, the Employee shall continue to render services
required under this Agreement and shall be paid the compensation set forth in
Section 2.1 of this Agreement up to the date of termination and no severance
allowance shall be paid to the employee.
Section 3.4 Termination With Cause. The Board of Directors may terminate the
Employee at any time without notice by reason of misconduct by the Employee. The
term misconduct shall mean either the conviction of a felony or the continued
violation of direct orders of the Board of Directors by the Employee 30 days
after the Employee has received written notice that he has violated direct
orders. In such event, the employee shall be paid the compensation owed him by
the Corporation up to the date of termination.
Section 3.5 Termination Upon Death of Employee. In addition to any other
provisions relating the termination, this Agreement is terminated in the event
of the Employee's death.
ARTICLE IV
DISABILITY AND ILLNESS
Section 4.1 Disability And Salary Continuation.
A. Definition Of Disability. For purposes of this Agreement, the terms "totally
disabled", "disabled" and "disability" shall mean continuous disability as
defined in, and for the period necessary to qualify for, the benefits under any
disability income insurance policies paid for by the Corporation on the life of
the Employee.
If no disability insurance is in effect on the life of the Employee, the terms
"totally disabled", "disabled", and "disability" shall mean continuous
disability which prevents the Employee from performing his normal duties in the
Corporation pursuant to this Agreement as shall be determined by two physicians,
one designated by the Corporation and the other designated by the Employee. If
these two physicians can not agree on whether the employee is disabled within
the meaning of this Section, they shall appoint a third physician and the
opinion of the majority shall be final, binding and conclusive. The cost of all
examining physicians shall be at cost to the Corporation and not to the
Employee.
B. Salary Continuation. If the Employee becomes totally disabled during the term
of this Agreement, 60% of his salary shall continue for the remaining term of
this Agreement or for the period of time for which he remains totally disabled,
whichever is shorter.
If the Corporation pays premiums on a disability income insurance policy on the
life of the Employee, then any proceeds paid to the Employee by reason of
disability under such disability insurance policy shall be offset against salary
continuation payments due from the Corporation.
Section 4.2 Illness. In addition, if the Employee is unable to perform the
services required under this Agreement by reason of illness or physical injury
not amounting to disability as defined in this Article, the compensation
otherwise payable to the Employee under this Agreement shall be continued in
full.
<PAGE>
ARTICLE V
DISCLOSURE OF INFORMATION
Section 5.1 Employee Shall Not Disclose Information. The Employee recognizes and
acknowledges the confidentiality of any trade secret information regarding the
Corporation to which he has access, including, but not limited to, the
Corporations computer software knowledge which the Employee gains access to or
knowledge of while in the Corporations employment, any computer software
designs, the Contractors Management System, the MTX Accounting for Microsoft
Office, or other microcomputer systems, processes, user manuals and training
manuals, patents, pending patents, trademarks and other proprietary information
or any adaptation or modifications thereto which the Employee develops or
creates while in the Corporation's employ or subsequently, even if the
Corporation has declined to make use of such adaptation or modification. The
Employee also recognizes and acknowledges that the list of the Corporation's
customers, as it may exist from time to time, is a valuable, special, and unique
asset of the Corporation. The Employee will not disclose any such trade secret
information or the list of the Corporation's customers or any part thereof or
any information to any person, firm, corporation, association, or other entity
for any reason or purpose whatsoever. This Section 5.1 shall operate to so
restrict the Employee regardless of the nature of the termination of his
employment with the Corporation.
Section 5.2 Breach Of This Article. In the event of a breach or threatened
breach by the Employee of the provisions of this paragraph, the Corporation
shall be entitled to an injunction restraining the Employee from disclosing, in
whole or in part, any such trade secret information or the list of the
Corporation's customers, or rendering any services to any person, firm,
corporation, association, or other entity to whom such trade secret information
or list , in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the Corporation from
pursuing any other remedies available to the Corporation for such breach or
threatened breach, including recovery of damages.
ARTICLE VI
ARBITRATION
Section 6.1 Agreement To Arbitration Disputes. The parties agree to submit all
claims, disputes, and other controversies between them arising out of this
Agreement or the employment arrangement contemplated to arbitration in
accordance with the provisions below and the Colorado Uniform Arbitration Act of
1975 or any amendments thereto applicable upon the date of initiation of
arbitration proceedings.
Section 6.2 Initiation Of Arbitration. Arbitration pursuant to this Agreement
may be initiated by either party upon written demand mailed certified mail,
return receipt requested, to the other party. Such demand shall briefly set
forth the nature of the claim, dispute or controversy and the relief requested.
The party upon whom a demand for arbitration has been made may, in writing, and
within twenty (20) days following receipt of the demand, set forth any
counterdemand he or it may have against the other party. Such counterdemand
shall likewise briefly set forth the nature of the claim, dispute or controversy
and the relief requested. Neither party shall be required to make a written
answer to any demand or counterdemand.
Section 6.3 Appointment Of Arbitrator(s). Within thirty (30) days following the
date upon which the arbitration demand was mailed to the other party, the
Corporation and the Employee shall jointly appoint an arbitrator agreeable to
both of them.
<PAGE>
If the Corporation and the Employee cannot agree upon an arbitrator mutually
acceptable to them, each party shall designate an arbitrator and the two
arbitrators so selected shall, within thirty (30) days following the date upon
which the last of the arbitrators is selected, designate a third arbitrator. All
three arbitrators shall be present at all hearings and participate in
deliberations, but the decision of the arbitrators will be final and binding.
Section 6.4 Place Of Hearings. Arbitration hearings shall be conducted at a
place mutually agreeable to the parties and the arbitrators at Denver, Colorado
unless the parties and the arbitrators otherwise mutually select a different
place for the hearings or any portion of the hearings.
Section 6.5 Attendance At Hearings. Arbitration hearings shall be scheduled by
the arbitrator(s) at the earliest date mutually convenient to the arbitrator(s)
and the parties. Notice of such hearing dates shall be given in writing by
certified mail, return receipt requested, to each party. Arbitration hearings
may proceed in the absence of any party if notice of the proceedings has been
given to such party.
Section 6.6 Awards. The arbitrator(s) shall make his or their award in writing
within thirty (30) days after completion of the arbitration hearings. Copies of
the award shall be mailed to each of the parties and their attorneys, if any, by
certified mail, return receipt requested.
The award entered by the arbitrator(s) shall be final and binding upon the
parties to the extent and in the manner provided by the Colorado Uniform
Arbitration Act of 1975, as amended.
Section 6.7 Venue For Court Proceedings. Any court proceedings relative to these
arbitration provisions shall be initiated and conducted in the District Court in
and for the City and County of Denver and the State of Colorado.
Section 6.8 Effect Of Pendency Of Arbitration Proceedings. No party shall be
considered in default with respect to any obligation under the terms of this
Agreement which is subject matter of any pending arbitration proceedings but the
pendency of such proceedings shall not otherwise affect the rights and
obligations of the parties to this Agreement.
Section 6.9 Exception. This Article shall not apply with respect to any action
which the Corporation may wish to take pursuant to Article V of this Agreement.
ARTICLE VII
GENERAL MATTERS
Section 7.1 Colorado Law. This Agreement shall be governed by the laws of the
State of Colorado and shall be construed in accordance therewith.
Section 7.2 No Waiver. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.
Section 7.3 Amendment. This Agreement may be amended, altered or revoked at any
time, in whole or in part, by filing with this Agreement a written instrument
setting forth such changes, signed by all of the parties.
<PAGE>
Section 7.4 Effect Of Agreement. The terms of this Agreement shall be binding
upon and inure to the benefit of the Employee and the Corporation and their
heirs, personal representatives, successors and assigns to the extent that any
such benefits survive or may be assigned under the terms of this Agreement.
Section 7.5 Construction. Throughout this Agreement the singular shall include
the plural, and plural shall include the singular, and masculine and neuter
shall include the feminine, wherever the context so requires.
Section 7.6 Text To Control. The headings of articles and sections are included
solely for the convenience of reference. If any conflict between any heading and
the text of this Agreement exists, the text shall control.
Section 7.7 Severability. If any provision of this Agreement is declared by any
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in this
Agreement.
Section 7.8 Buy-Sell Agreement. Notwithstanding anything to the contrary
contained in this Agreement, any Buy-Sell Agreement between the Employee and the
Corporation shall control wherever applicable.
The effective date of this Agreement shall be April 1, 1995.
The parties have executed this Agreement on , 199 .
----------------- ---
MTX International, Inc.
By: /s/ Gerald J. Novreske
--------------------------------------
Gerald J. Novreske, Chairman and C.E.O.
Attest:
/s/ Dale R. Hunzelman
------------------------------------------
Dale R. Hunzelman, Secretary/Treasurer
Employee:
/s/ A. W. Blair
------------------------------------------
A. W. Blair
Approved:
/s/ Jerry R. Brookhart
------------------------------------------
Jerry R. Brookhart, Director
/s/ Dale R. Hunzelman
------------------------------------------
Dale R. Hunzelman, Director
/s/ Gerald J. Novreske
------------------------------------------
Gerald J. Novreske, Director
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated April 1, 1995 is by and between MTX International, Inc., a
Colorado Corporation ("Corporation") and Gerald J. Novreske, (Employee").
The Corporation desires to employ Employee and Employee desires to be employed
by the Corporation.
The parties hereby enter into this Agreement to set forth their mutual promises
and understandings.
ARTICLE I
EMPLOYMENT DUTIES AND RESPONSIBILITIES
Section 1.1 Employment. The Corporation hereby employees the Employee as
Chairman and Chief Executive Officer of the Corporation. The Employee accepts
such employment and agrees to abide by the Articles of Incorporation, By-Laws,
and the decisions of the Board of Directors of the Corporation.
Section 1.2 Director of the Corporation. The Employee shall if elected or
appointed, serve as a Director of the Corporation. Nothing in this Agreement
shall be construed as requiring the Corporation, its Shareholders or agents to
cause the election or appointment of the Employee as a Director.
Section 1.3 Duties and Responsibilities. The Employee is employed pursuant to
the terms of this Agreement and agrees to devote substantially all of his time
and energies to his employment under this Agreement. The Employee shall perform
such duties as may be determined and assigned to him by the Board of Directors
of the Corporation.
Section 1.4 Working Facilities. The Employee shall be furnished with facilities
and services suitable to the position and adequate for the performance of the
duties of the Employee under this agreement.
Section 1.5 Vacations. The Employee shall be entitled each year to a reasonable
vacation, during which time the Employee's compensation shall be paid in full.
Each vacation shall be taken by the employee over a period or periods meeting
with the approval of the Board of Directors.
Section 1.6 Automobile. The Employee shall be furnished with an automobile, the
cost of which shall be borne 80% by the Corporation. The total purchase price of
such automobile shall be as approved by the Board of Directors.
Section 1.7 Life Insurance. The Corporation shall pay the premiums on a $100,000
policy of term non convertible life insurance covering the Employee's life. The
Employee shall have the sole right to designate the beneficiary of such policy.
The Corporation, at its election, may secure "Key Man" insurance for its benefit
on the Employee's life and the Employee shall cooperate with the Corporation in
acquiring such insurance.
Section 1.8 Benefit Plans. The Employee may participate in any plans,
arrangements, or distributions, in accordance with their terms, by the
Corporation pertaining to or in connection with any retirement, health,
disability, bonus, pension. profit sharing, or similar plans.
Section 1.9 Expenses. The Employee is authorized to incur reasonable expenses
for promoting the business of the Corporation, including expenses for
entertainment, travel, and similar items. The Corporation will reimburse the
Employee for all such expenses upon the presentation by the Employee, from time
to time, of an itemized account of such expenditures. Such expenditures, shall,
however, be subject at all times to the approval of the Board of Directors.
Section 1.10 Indemnification Against Liabilities. The Employee (and his heirs,
executors and administrators) shall be indemnified by the Corporation against
expenses reasonably incurred by or imposed upon him in connection with or
arising out of any action, suit or proceeding in which he may be involved or to
which he may be a party by reason of his being or having been a Director or
Officer of the Corporation, except in respect of matters as to which he shall be
<PAGE>
finally adjudged in such action, suit or proceeding to be liable for negligence
or misconduct; or in the event of a settlement of any such action, suit or
proceeding, indemnification shall be provided only in connection with such
matters covered by the settlement as to which the Corporation is advised by
counsel that the Employee did not commit a breach of duty. The foregoing right
of indemnification shall not be exclusive of other rights to which the Employee
may be entitled under any applicable state statute.
ARTICLE II
COMPENSATION
Section 2.1 Basic Salary. The Corporation shall pay to the Employee a basic
salary of $96,000 for the first year of this Agreement, $96,000 for the second
year of this Agreement and $96,000 for the third year of this Agreement. Such
salary shall be paid over the course of each year pursuant to the Corporation's
usual pay periods.
Section 2.2 Director's Compensation. The Employee may receive additional
compensation, if elected or appointed a Director of the Corporation, upon
approval of such additional compensation by the Board of Directors of the
Corporation.
Section 2.3 Bonus. In addition to the basic salary, the Employee will receive a
bonus. The bonus will be based on performance and will be determined by
multiplying 6% times the net profit of the Corporation before taxes. Payments
will be made at the rate of 80% of the bonus paid quarterly and the balance in
full after completion of the certified audit at September 30.
A net loss at any quarter end voids a bonus calculation for that quarter. A net
loss requires a return of any previous bonus equal to 6% of the net loss, not to
exceed any previously paid bonus within the same fiscal year.
ARTICLE III
TERM OF EMPLOYMENT AND TERMINATION
Section 3.1 Term. This Agreement shall be for a period of three years commencing
on its effective date, subject , however to termination during such period, as
provided in this article. This Agreement shall end at the end of such period.
Section 3.2 Termination By The Corporation Without Cause. The Board of
Directors, without cause, may terminate the Employee's employment, under this
Agreement at any time upon 30 days written notice to the Employee, but such
termination shall not affect the provisions of Article V of this Agreement. In
such event, the Employee, if requested by the Board of Directors, shall continue
to render the services required under this Agreement up to the date of
employment termination, and shall be paid, in such increments as agreed by the
Employee and the Board of Directors, the full amount of the compensation
provided for in Section 2.1 of this Agreement which remains unpaid at the date
of termination. However, in no event shall the amount of compensation payable
under this section be less than 50% of the total value of the agreement for all
three years.
Section 3.3 Termination By The Employee Without Cause. The Employee, without
cause, may terminate this Agreement upon 30 days written notice to the
Corporation. In such event, the Employee shall continue to render services
required under this Agreement and shall be paid the compensation set forth in
Section 2.1 of this Agreement up to the date of termination and no severance
allowance shall be paid to the employee.
Section 3.4 Termination With Cause. The Board of Directors may terminate the
Employee at any time without notice by reason of misconduct by the Employee. The
term misconduct shall mean either the conviction of a felony or the continued
violation of direct orders of the Board of Directors by the Employee 30 days
after the Employee has received written notice that he has violated direct
orders. In such event, the employee shall be paid the compensation owed him by
the Corporation up to the date of termination.
<PAGE>
Section 3.5 Termination Upon Death of Employee. In addition to any other
provisions relating the termination, this Agreement is terminated in the event
of the Employee's death.
ARTICLE IV
DISABILITY AND ILLNESS
Section 4.1 Disability And Salary Continuation.
A. Definition Of Disability. For purposes of this Agreement, the terms "totally
disabled", "disabled" and "disability" shall mean continuous disability as
defined in, and for the period necessary to qualify for, the benefits under any
disability income insurance policies paid for by the Corporation on the life of
the Employee.
If no disability insurance is in effect on the life of the Employee, the terms
"totally disabled", "disabled", and "disability" shall mean continuous
disability which prevents the Employee from performing his normal duties in the
Corporation pursuant to this Agreement as shall be determined by two physicians,
one designated by the Corporation and the other designated by the Employee. If
these two physicians can not agree on whether the employee is disabled within
the meaning of this Section, they shall appoint a third physician and the
opinion of the majority shall be final, binding and conclusive. The cost of all
examining physicians shall be at cost to the Corporation and not to the
Employee.
B. Salary Continuation. If the Employee becomes totally disabled during the term
of this Agreement, 60% of his salary shall continue for the remaining term of
this Agreement or for the period of time for which he remains totally disabled,
whichever is shorter.
If the Corporation pays premiums on a disability income insurance policy on the
life of the Employee, then any proceeds paid to the Employee by reason of
disability under such disability insurance policy shall be offset against salary
continuation payments due from the Corporation.
Section 4.2 Illness. In addition, if the Employee is unable to perform the
services required under this Agreement by reason of illness or physical injury
not amounting to disability as defined in this Article, the compensation
otherwise payable to the Employee under this Agreement shall be continued in
full.
ARTICLE V
DISCLOSURE OF INFORMATION
Section 5.1 Employee Shall Not Disclose Information. The Employee recognizes and
acknowledges the confidentiality of any trade secret information regarding the
Corporation to which he has access, including, but not limited to, the
Corporations computer software knowledge which the Employee gains access to or
knowledge of while in the Corporations employment, any computer software
designs, the Contractors Management System, the MTX Accounting for Microsoft
Office, or other microcomputer systems, processes, user manuals and training
manuals, patents, pending patents, trademarks and other proprietary information
or any adaptation or modifications thereto which the Employee develops or
creates while in the Corporation's employ or subsequently, even if the
Corporation has declined to make use of such adaptation or modification. The
Employee also recognizes and acknowledges that the list of the Corporation's
customers, as it may exist from time to time, is a valuable, special, and unique
asset of the Corporation. The Employee will not disclose any such trade secret
information or the list of the Corporation's customers or any part thereof or
any information to any person, firm, corporation, association, or other entity
for any reason of purpose whatsoever. This Section 5.1 shall operate to so
restrict the Employee regardless of the nature of the termination of his
employment with the Corporation.
<PAGE>
Section 5.2 Breach Of This Article. In the event of a breach or threatened
breach by the Employee of the provisions of this paragraph, the Corporation
shall be entitled to an injunction restraining the Employee from disclosing, in
whole or in part, any such trade secret information or the list of the
Corporation's customers, or rendering any services to any person, firm,
corporation, association, or other entity to whom such trade secret information
or list , in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the Corporation from
pursuing any other remedies available to the Corporation for such breach or
threatened breach, including recovery of damages.
ARTICLE VI
ARBITRATION
Section 6.1 Agreement To Arbitration Disputes. The parties agree to submit all
claims, disputes, and other controversies between them arising out of this
Agreement or the employment arrangement contemplated to arbitration in
accordance with the provisions below and the Colorado Uniform Arbitration Act of
1975 or any amendments thereto applicable upon the date of initiation of
arbitration proceedings.
Section 6.2 Initiation Of Arbitration. Arbitration pursuant to this Agreement
may be initiated by either party upon written demand mailed certified mail,
return receipt requested, to the other party. Such demand shall briefly set
forth the nature of the claim, dispute or controversy and the relief requested.
The party upon whom a demand for arbitration has been made may, in writing, and
within twenty (20) days following receipt of the demand, set forth any
counterdemand he or it may have against the other party. Such counterdemand
shall likewise briefly set forth the nature of the claim, dispute or controversy
and the relief requested. Neither party shall be required to make a written
answer to any demand or counterdemand.
Section 6.3 Appointment Of Arbitrator(s). Within thirty (30) days following the
date upon which the arbitration demand was mailed to the other party, the
Corporation and the Employee shall jointly appoint an arbitrator agreeable to
both of them.
If the Corporation and the Employee cannot agree upon an arbitrator mutually
acceptable to them, each party shall designate an arbitrator and the two
arbitrators so selected shall, within thirty (30) days following the date upon
which the last of the arbitrators is selected, designate a third arbitrator. All
three arbitrators shall be present at all hearings and participate in
deliberations, but the decision of the arbitrators will be final and binding.
Section 6.4 Place Of Hearings. Arbitration hearings shall be conducted at a
place mutually agreeable to the parties and the arbitrators at Denver, Colorado
unless the parties and the arbitrators otherwise mutually select a different
place for the hearings or any portion of the hearings.
Section 6.5 Attendance At Hearings. Arbitration hearings shall be scheduled by
the arbitrator(s) at the earliest date mutually convenient to the arbitrator(s)
and the parties. Notice of such hearing dates shall be given in writing by
certified mail, return receipt requested, to each party. Arbitration hearings
may proceed in the absence of any party if notice of the proceedings has been
given to such party.
Section 6.6 Awards. The arbitrator(s) shall make his or their award in writing
within thirty (30) days after completion of the arbitration hearings. Copies of
the award shall be mailed to each of the parties and their attorneys, if any, by
certified mail, return receipt requested.
The award entered by the arbitrator(s) shall be final and binding upon the
parties to the extent and in the manner provided by the Colorado Uniform
Arbitration Act of 1975, as amended.
<PAGE>
Section 6.7 Venue For Court Proceedings. Any court proceedings relative to these
arbitration provisions shall be initiated and conducted in the District Court in
and for the City and County of Denver and the State of Colorado.
Section 6.8 Effect Of Pendency Of Arbitration Proceedings. No party shall be
considered in default with respect to any obligation under the terms of this
Agreement which is subject matter of any pending arbitration proceedings but the
pendency of such proceedings shall not otherwise affect the rights and
obligations of the parties to this Agreement.
Section 6.9 Exception. This Article shall not apply with respect to any action
which the Corporation may wish to take pursuant to Article V of this Agreement.
ARTICLE VII
GENERAL MATTERS
Section 7.1 Colorado Law. This Agreement shall be governed by the laws of the
State of Colorado and shall be construed in accordance therewith.
Section 7.2 No Waiver. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.
Section 7.3 Amendment. This Agreement may be amended, altered or revoked at any
time, in whole or in part, by filing with this Agreement a written instrument
setting forth such changes, signed by all of the parties.
Section 7.4 Effect Of Agreement. The terms of this Agreement shall be binding
upon and inure to the benefit of the Employee and the Corporation and their
heirs, personal representatives, successors and assigns to the extent that any
such benefits survive or may be assigned under the terms of this Agreement.
Section 7.5 Construction. Throughout this Agreement the singular shall include
the plural, and plural shall include the singular, and masculine and neuter
shall include the feminine, wherever the context so requires.
Section 7.6 Text To Control. The headings of articles and sections are included
solely for the convenience of reference. If any conflict between any heading and
the text of this Agreement exists, the text shall control.
Section 7.7 Severability. If any provision of this Agreement is declared by any
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in this
Agreement.
Section 7.8 Buy-Sell Agreement. Notwithstanding anything to the contrary
contained in this Agreement, any Buy-Sell Agreement between the Employee and the
Corporation shall control wherever applicable.
The effective date of this Agreement shall be April 1, 1995.
The parties have executed this Agreement on , 199 .
----------------- ---
MTX International, Inc.
By: /s/ Gerald J. Novreske
---------------------------------------
Gerald J. Novreske, Chairman and C.E.O.
Attest:
/s/ Dale R. Hunzelman
------------------------------------------
Dale R. Hunzelman, Secretary/Treasurer
Employee:
/s/ Gerald J. Novreske
------------------------------------------
Gerald J. Novreske
Approved:
/s/ Jerry R. Brookhart
------------------------------------------
Jerry R. Brookhart, Director
/s/ Dale R. Hunzelman
------------------------------------------
Dale R. Hunzelman, Director
/s/ Gerald J. Novreske
------------------------------------------
Gerald J. Novreske, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MTX
INTERNATIONAL, INC. SEPTEMBER 30, 1996 AUDITED FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 26,732
<SECURITIES> 0
<RECEIVABLES> 98,040
<ALLOWANCES> 11,265
<INVENTORY> 65,305
<CURRENT-ASSETS> 187,067
<PP&E> 211,920
<DEPRECIATION> 197,508
<TOTAL-ASSETS> 380,796
<CURRENT-LIABILITIES> 280,234
<BONDS> 0
0
0
<COMMON> 107,744
<OTHER-SE> (7,182)
<TOTAL-LIABILITY-AND-EQUITY> 380,796
<SALES> 454,554
<TOTAL-REVENUES> 904,405
<CGS> 112,027
<TOTAL-COSTS> 1,023,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,399
<INTEREST-EXPENSE> 1,707
<INCOME-PRETAX> (119,871)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (119,871)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
