UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 0-14273
DCX, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-0868815
............................... ..................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3002 N. State Highway 83, Franktown, Colorado 80115-0569
....................................................................
(Address of principal executive offices)
(Zip Code)
(303) 688-6070
.............................................
(Registrant's telephone number, including area code)
Not Applicable
..........................................................
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
4,698,840 Common Shares were outstanding as of March 31, 1997.
Transitional Small Business Format: Yes No X
Number of pages in this report is 31.
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Balance Sheets
March 31 September 30
1997 1996
(Unaudited) (Audited)
- --------------------------------------------------------------------------------
Assets
Current:
Cash and cash equivalents $ 428,580 $ 209,637
Accounts receivable 1,634,999 995,040
Inventories 1,266,668 1,103,672
Prepaid expenses 236,556 195,832
- --------------------------------------------------------------------------------
Total current assets 3,566,803 2,504,181
- --------------------------------------------------------------------------------
Property and equipment:
At cost 2,040,246 2,039,534
Less: accumulated depreciation (813,188) (767,233)
- --------------------------------------------------------------------------------
Net property and equipment 1,227,058 1,272,301
- --------------------------------------------------------------------------------
Other assets 44,000 44,000
- --------------------------------------------------------------------------------
$ 4,837,861 $ 3,820,482
================================================================================
See accompanying notes to financial statements
2
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Balance Sheets
March 31 September 30
1997 1996
(Unaudited) (Audited)
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Notes payable $ 1,225,961 $ 1,279,623
Accounts payable 875,302 494,646
Accounts payable - terminated contracts 0 66,377
Accrued expenses 83,573 85,759
Accrued litigation settlement 521,000 521,000
- --------------------------------------------------------------------------------
Total current liabilities 2,705,836 2,447,405
Long-term debt, less current maturities 24,060 24,060
- --------------------------------------------------------------------------------
Total liabilities 2,729,896 2,471,465
- --------------------------------------------------------------------------------
Commitments and Contingencies (Note 5)
Stockholders' Equity:
Preferred stock, $.001 par value,
20,000,000 shares authorized,
250 shares issued and outstanding 1 0
Common stock, no par value, 2,000,000,000
shares authorized; shares issued and
outstanding, 4,698,840 and 4,434,109 at
March 31, 1997 and September 30, 1996,
respectively 5,271,440 5,060,357
Additional paid-in capital
from common stock 329,384 329,384
from convertible preferred stock 269,999 0
Subscriptions receivable (179,000) (179,000)
Accumulated deficit (3,583,859) (3,861,724)
- --------------------------------------------------------------------------------
Total stockholders' equity 2,107,965 1,349,017
- --------------------------------------------------------------------------------
$ 4,837,861 $ 3,820,482
================================================================================
See accompanying notes to financial statements
3
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<TABLE>
<CAPTION>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Statements of Income
(Unaudited)
Six months ended Three months ended
March 31 March 31
1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 2,537,164 $ 2,448,661 $ 1,672,052 $ 1,544,350
Cost of sales 2,059,827 1,729,492 1,369,173 1,121,479
- ----------------------------------------------------------------------------------------------
Gross profit on sales 477,337 719,169 302,879 422,871
- ----------------------------------------------------------------------------------------------
General and administrative expenses 531,631 488,122 206,911 255,424
- ----------------------------------------------------------------------------------------------
Income (loss) from operations (54,294) 231,047 95,968 167,447
Other income (expense):
Interest expense (69,764) (70,824) (39,614) (33,602)
Insurance proceeds & other income 404,658 14,956 403,587 4,599
Other expense (2,735) (4,126) (819) (4,126)
Forgiveness of debt 0 87,826 0 0
- ----------------------------------------------------------------------------------------------
Total other income (expense) 332,159 27,832 363,154 (33,129)
Net Income $ 277,865 $ 258,879 $ 459,122 $ 134,318
- ----------------------------------------------------------------------------------------------
Net Income per share $ .06 $ .06 $ .10 $ .03
==============================================================================================
Weighted average number of shares
of common stock outstanding 4,501,174 4,152,710 4,554,656 4,200,298
==============================================================================================
See accompanying notes to financial statements
4
</TABLE>
<PAGE>
PART I, FINANCIAL INFORMATION
Item 1. Financial Statements
DCX, Inc. and Subsidiaries
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
For the Six-Month Periods Ended March 31, 1997 1996
- --------------------------------------------------------------------------------
Operating activities:
Net income $ 277,865 $ 258,879
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 45,955 50,100
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (639,959) 794,605
Increase in inventory (162,996) (321,422)
(Increase) decrease in prepaid expenses (40,724) (118,583)
(Increase) decrease in other assets 0 (124,516)
(Decrease) increase in accounts payable 380,656 (248,649)
(Decrease) increase in other liabilities (68,563) (147,815)
Decrease in litigation settlement liability (150,000)
- --------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (207,766) 17,602
- --------------------------------------------------------------------------------
Investing activities:
Acquisition of property and equipment (712) 6,998
Restricted cash 0 154,985
- --------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (712) 161,983
- --------------------------------------------------------------------------------
Financing activities:
Payments on long-term debt, net (53,662) (336,341)
Issuance of common stock 31,083 233,371
Issuance of convertible preferred stock 450,000 0
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 427,421 (102,970)
- --------------------------------------------------------------------------------
Net increase in cash 218,943 76,615
- --------------------------------------------------------------------------------
Cash and cash equivalents, beginning of period 209,637 125,844
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 428,580 $ 202,459
================================================================================
See accompanying notes to financial statements
5
<PAGE>
DCX, INC.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Condensed Consolidated Financial Statements
The condensed consolidated financial statements included herein have been
prepared by DCX, INC. without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. DCX, INC. believes that the disclosures
are adequate to make the information presented not misleading. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's consolidated financial position as of March 31,
1997, the consolidated results of its operations for the six-periods ended March
31, 1997, and 1996 and statements of cash flows for the six-month periods then
ended.
The accounting policies followed by the Company are set forth in the annual
report of September 30, 1996, filed on Form 10-KSB, and the audited consolidated
financial statements therein with the accompanying notes thereto. While
management believes the procedures followed in preparing these consolidated
financial statements are reasonable, the accuracy of the amounts are in some
respects dependent upon the facts that will exist, and procedures that will be
accomplished by DCX, INC. later in the year.
The consolidated results of operations for the six-month period ended March 31,
1997, are not necessarily indicative of the results to be expected for the full
year ending September 30, 1997.
New Accounting Pronouncements
On March 3, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS
NO. 128). This pronouncement provides a different method of calculating earnings
per share than is currently used in accordance with Accounting Principles Board
Opinion (APB) No. 15, "Earnings per Share." SFAS 128 provides for the
calculation of "Basic" and "Diluted" earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. The Company will adopt SFAS No. 128 in 1998 and its
implementation is not expected to have a material effect on the consolidated
financial statements.
(2) Accounts Receivable
Accounts receivable contain amounts computed under the cost-to-cost method to
determine percentage of completion as described in the Form 10-KSB for September
30, 1996.
(3) Provision for Income Taxes
At the beginning of the fiscal year the Company had net operating loss
carryforwards of $2,663,000 with expirations through 2011. At March 31, 1997,
the amount of the net operating loss carryforward balance is estimated at
$2,385,135. The Company expects to incur a minimal amount of alternative minimum
tax for the fiscal year. Since the Company is unable to determine that deferred
tax assets exceeding tax liabilities are more likely than not to be realized, it
has recorded a valuation allowance equal to the excess deferred tax assets.
(4) Litigation
Claim for Breach of Contract. Following the termination of merger discussions
between the Company and an unrelated company, Airtech International Corporation
("Airtech"), the Company filed a claim for resulting damages of approximately
$400,000. During January 1997, Airtech filed an answer to the claim denying the
6
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Company's claim and counterclaiming for breach of contract, fraud and negligence
claiming damages exceeding $27 million. The cognizant district court has
recorded the stipulation of all parties dismissing all claims with prejudice.
Terminated Contracts. As reported in the Form 10-K for September 30, 1995, and
on Form 10-KSB 1996, the Company and the Defense Logistics Agency (DLA) agreed
to a final settlement in November, 1995, on two of three terminated contracts.
The last partial payment, therefor, was received in January, 1996, and,
accordingly, was recorded in the prior year's data appearing in this report.
A third contract with DLA required the Company to design, develop test and
manufacture light sets to a specified schedule. Testing of the lights was
subcontracted; scheduling delays caused the Company to miss a required
submission date for the testing and resulted in termination of the contract in
1988. Vigorous litigation asserting the delay was government caused were pursued
to the Untied States Supreme Court where the Company's petition for certiorari
was denied in November, 1996. The Company had recorded a reserve of $521,000 for
the loss in June, 1996; which is believed to be sufficient for the possible
reprocurement costs related to the difference between the Company's contract
price and the price incurred by DLA from the next lowest vendor as provided for
in the Federal Acquisition Regulations. The Company has filed with the Armed
Services Board of Contract Appeals a reinstatement of its appeal of the
propriety of the assessed reprocurement costs which had been held in abeyance
pending the outcome at the Supreme Court. While the discovery process has begun,
no hearing date has been set as yet. (See also Item 3, Legal Matters, and Note
5, Litigation, to the financial statements in Form 10- KSB for September 30,
1996.)
(5) Lease Obligations
The Company leases various equipment under capital leases that expire through
June 2000 as noted in Note 7 to the Financial Statements in Form 10-K, September
30, 1996.
(6) Key Man Life Insurance Proceeds.
On January 7, 1997, the Company recorded $400,000 of accounts receivable related
to the proceeds of two Company owned key man life insurance policies on a
director of the Company. All proceeds were received during the current quarter.
(7) Series A, 6% Cumulative Convertible Redeemable Preferred Stock.
Dividends on the convertible preferred stock accrue quarterly at a rate of 6%
per annum and are payable at the election of the Company in cash or in
additional shares of convertible preferred stock. During the current quarter the
holders of convertible preferred stock became entitled to dividends of $7,164.
The Company's Board of Directors has not yet declared the dividend payable and,
accordingly, no related transaction appears in the financial statements.
Subsequent to the end of the current quarter, the holder of Series A, 6%
Cumulative Convertible Redeemable Preferred Stock converted 150 shares into
common stock in accordance with the issue agreement. Accordingly, the Company
issued 139,770 shares of its common stock in exchange.
(8) Employment Agreements.
On March 28, 1997, the Company approved employment agreements for three officers
of the Company which were executed on April 1, 1997. The agreements, are filed
as exhibits 10.6, 10.7, and 10.8 with this report and set base salary for the
President & CEO, Vice President & General Manager, and the Vice President -
Finance & Administration of $120,000; $70,000, and $60,000, respectively. The
agreements grant fully vested nonqualified stock options as incentives to the
officers of 200,000; 70,000 and 70,000 respectively and further grant the
officers 180,000; 50,000 and 50,000 of performance stock options requiring the
attainment of certain goals. The incentive and performance options are priced at
the Company's NASDAQ bid price at close of business on January 2, 1997, which
was $1.125. The employment agreements provide for certain cash bonus payments
upon meeting defined performance goals. The executives are entitled to
continuation of base compensation for a period of three years, two years and two
years, respectively, if employment is terminated for any reason other than
death, disability, cause, voluntary resignation or the expiration of the term of
the employment agreement; otherwise termination for the stated reasons results
in payment of base salary, performance and incentive bonuses for 18 months, 12
months and 12 months, respectively.
7
<PAGE>
PART I, ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition:
Liquidity.
Cash and marketable securities increased $218,943 to $428,580 from $209,637 at
September 30, 1996, primarily as a result of payments received from keyman life
insurance policies carried on a director of the Company and from proceeds of the
sale of convertible preferred stock of the Company.
The Company presently has working capital of $860,967 as compared to $1,377,650
at March 31, 1996, and to $56,776 at the beginning of the fiscal year. The
primary cause is the accrual of $521,000 for litigation settlement related to
the denial of certiorari by the U.S. Supreme Court on the third terminated
contract.
The Company's current ratio, the ratio of total current assets to total current
liabilities, decreased to 1.32:1 from 1.94:1 a year ago and is improved over
1.02:1 at September 30, 1996.
Capital Resources.
During its first fiscal quarter the Company sold a total of 500 shares of
convertible preferred stock which resulted in net funding of $450,000. During
the second quarter it received the proceeds from $400,000 of keyman life
insurance policies carried on a director of the Company.
During the second fiscal quarter the Company retained Transition Partners Ltd
(TPL) to advise the Company in certain matters and to assist in capital
formation efforts. TPL has developed plans addressing the consolidation of the
company's three notes payable into one instrument; the Company is confident the
consolidation will take place and meet the requirement for the June 3, 1997,
balloon payment to the Small Business Administration.
Results of Operations:
First Half of Fiscal Year 1997
During the first six months of fiscal year 1997 net sales increased slightly by
$88,503 or 4 percent, over the same period of the prior year. Cost of sales was
2,059,827, or 81 percent of sales, and resulted in a gross profit of $477,337,
or 19 percent of sales, a decrease from 29 percent for same period of the prior
year. Decrease in gross profit occurred due to learning curve associated with
complex new products in certain new contracts and increased hourly labor costs.
Sales increase resulted from the growing production requirements to meet
increased demand in the defense industry.
General and administrative expenses of $531,631 for the current period increased
from $488,122 a year prior and reflect the increased costs of consulting and
legal advice during the period. Other income had an increase of $389,702 as a
result of proceeds from keyman life insurance policies.
Accrued litigation settlement increased $521,000 as a result of recording a
reserve related to the denial of certiorari on the third terminated contract
during the fourth quarter of fiscal year 1996.
Second Quarter of Fiscal Year 1997.
Second quarter sales for fiscal 1997 of $1,672,052 increased $127,702, or eight
percent, over the same quater of the prior year. Cost of sales was $1,369,173,
or 82 percent of sales, and resulted in a gross profit of $302,879, or 18
percent of sales versus 27 percent for the same period of the prior year. The
decrease in gross profit was attributable to the learning curve effect
associated with new and more complex products, increased hourly labor costs and
slightly tighter margins on a contract coming into full scale production.
8
<PAGE>
Management actions to stem unnecessary costs reduced general and administrative
expenses for the quarter by $48,513 or 39 percent. Interest expense has
increased soemwhat because of imputed interest expense on leased equipment.
Sales increased slightly during the quarter over the prior year's quarter;
however, because of increased cost of sales, income from operations decreased by
43 percent. On the other hand, the Company recorded other income of $403,587
which propeled net income to $459,122, or $.10 per share, as compared to the
prior year's net income of $134,318, or $.03 per share.
Contract Backlog
The Company's manufacturing operation has active funded contracts and awarded
work amounting to $9.7 million as compared to an approximate $8.5 million
backlog with $5.5 million of uncompleted work a year prior. The current backlog
contains approximately $4.2 million of uncompleted work. Deliveries are
scheduled over the next 36 months. The Company is aggressively bidding
opportunities with prime contractors for defense opportunities and sends its
technical staff to meet personally with program managers in order to more
competitively meet their requirements. The Company is confident that during the
ensuing year these projects will result in additional orders as during the past
fiscal year. In addition, the Company continues to be invited to bid on more
projects with new and existing customers.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Index of Exhibits
The exhibits set forth in the following Index of Exhibits are filed as part of
this report.
10. Material Contracts
10.6 Employment Agreement between Stephen Carreker, President and Chief
Executive Officer, and the registrant, dated March 28, 1997, is attached to this
report.
9
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10.7 Employment Agreement between D. Scott McReynolds, Vice President
and General Manager, and the registrant, dated March 28, 1997, is attached to
this report.
10.8 Employment Agreement between Frederick G. Beisser, Vice President
- - Finance & Administration, and the registrant, dated March 28, 1997, is
attached to this report.
(b) Reports on Form 8-K
On Form 8-K, dated January 15, 1997, the Company reported it entered into a
consulting agreement with Transition Partners, Ltd.
On Form 8-K, dated March 28, 1997, the Company established a record date of
close of business, April 30, 1997, for shareholders eligible to vote at the
annual shareholder's meeting which was set for 2:30 PM on June 6, 1997. A board
of four directors was be elected. Subsequently, on Form 8-K, dated April 21,
1997, the Company withdrew that record date and postponed both the record date
and the annual shareholders' meeting to unspecified dates expected to be
approximately 90 days later.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
D C X , I N C .
Dated: May 13, 1997
/S/ FREDERICK G. BEISSER
---------------------------------------
Frederick G. Beisser
Vice President - Finance & Administration,
Secretary & Treasurer and Principal
Accounting Officer
10
EXECUTIVE EMPLOYMENT AGREEMENT
This agreement (the "Agreement") is made effective January 1, 1997, between DCX,
Inc. ("DCXI" or the "Company") and G. Stephen Carreker (the "Executive").
A. Executive is to be employed as President & Chief Executive Officer of DCXI,
has previously rendered valuable services to DCXI, possesses valuable experience
and has acquired valuable background in and knowledge of DCXI's business.
B. DCXI desires to secure the services of Executive, and Executive desires to
serve DCXI as President and Chief Executive Officer.
In consideration of the foregoing recitals and the agreements set forth herein,
DCXI and Executive agree as follows:
1. TERM
DCXI shall employ Executive and Executive accepts such employment for a term
beginning on the date of this Agreement and ending December 31, 1999, upon the
terms and conditions set forth herein, unless earlier terminated in accordance
with the provisions herein.
Notwithstanding the foregoing, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before December 31, 1999, the
remaining term of the Agreement shall be extended such that at each and every
moment of time thereafter, the remaining term shall be three years unless (a)
the Agreement is terminated earlier in accordance with the provisions herein or
(b) on or after November 1, 1999, the Board of Directors notifies Executive in
writing of its determination to have the date of this Agreement expire one year
from the date of such notification.
2. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meaning set
forth in this paragraph 2:
a. "Base Compensation" shall mean an amount per annum equal to the sum of (i)
the annual base salary in effect for Executive immediately preceding termination
of employment (excluding any reduction in base salary made in breech of this
Agreement), (ii) an amount equal to the product of (A) and (b), where (A) equals
the cumulative cash bonus paid to Executive over the three most recently
completed calendar years prior to termination (including any bonus amounts
deferred by Executive under any DCXI deferred compensation plan or arrangement)
divided by the cumulative base salary paid to Executive over the same three year
period (including any base salary deferred by Executive and where (B) equals the
amount set forth in 2.a.(i) above, (iii) continued participation in all basic
and supplemental life, accident, disability, and other Company-sponsored
insurance benefits provided to Executive immediately preceding termination (or,
if continued participation in one or more of these benefits is not possible,
benefits substantially similar to those which Executive would have been entitled
to if he had continued as an employee of the Company at the same compensation
level in effect immediately prior to termination), and (iv) continuance of
vesting and benefit accrual under any Company-sponsored basic and supplemental
retirement programs in effect for Executive immediately prior to termination
(or, if continued participation in such programs is not possible, benefits
substantially similar to those which executive would have been entitled to if he
had continued as an employee of the Company a the same compensation level
immediately prior to termination).
b. "Board" means the Board of Directors of the Company.
c. "Cause" shall mean (I) willful refusal by Executive to follow a lawful
written demand of the Board, (ii) Executive's willful and continued failure to
perform his duties under this Agreement (except due to Executive's incapacity
due to physical or mental illness) after a written demand is delivered to
Executive by the Board specifically identifying the manner in which the Board
believes that Executive has failed to perform his duties, (iii) Executive's
willful engagement in conduct materially injurious to the Company, or (iv)
Executive's conviction for any felony involving moral turpitude. For purposes of
clauses (I), (ii) or (iii) of this definition, no act, or failure to
11
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act on Executive's part shall be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without reasonable belief that
Executive's act, or failure to act, was in the best interests of the Company.
d. "Constructive Termination" shall mean Executive's voluntary termination of
employment within ninety (90) days following the occurrence of one or more of
the following events, unless such event is approved in writing by Executive in
advance of such event:
(I) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive of
such failure, including any violation of Executive's rights as described in
Section 3 of this Agreement unless such rights are replaced by alternative
rights of approximately equal value;
(ii) A reduction in Executive's title or responsibilities below President
and Chief Executive Officer;
(iii) A relocation of Executive's primary place of business more than fifty
(50) miles from its location as of the date of this Agreement.
e. "Disability" shall be deemed to have occurred if Executive makes application
for disability benefits under any Company-sponsored long-term disability program
covering Executive and qualifies for such benefits.
f. "Retirement" shall mean Executive's termination of service with the Company
in accordance with the provisions of any Company retirement plan or the
Company's 401K Retirement Savings Plan in which the Executive is eligible to
participate.
3. EXECUTIVE'S RIGHTS REGARDING BASE SALARY, BONUS AND OTHER BENEFITS WHILE
EMPLOYED BY THE COMPANY
a. Base Salary. The minimum annual base salary payable to Executive upon
commencement of this Agreement shall be $120,000. The Board or its Executive
Compensation Committee of the Board (if one is designated) will review the
Executive's base salary at least annually to determine the amount of any
increase. Upon any such increase in Executive's base salary, such increased rate
shall thereafter constitute Executive's minimum annual base salary for all
purposes of this Agreement, except that the Company may reduce Executives annual
base Salary during any year by not more than 10% below the base salary in effect
at the beginning of the year as part of any general salary reduction which
applies to all officers of the Company and its subsidiaries (if any).
b. Incentive and Performance Bonus.
In recognition of the considerable challenges accepted by him, Executive shall
receive an Incentive Bonus consisting of a stock option grant of 200,000 shares
of the Company's common stock fully vested and priced at the closing bid price
on January 2, 1997, the first business day during which Executive was engaged.
In addition Executive shall receive a stock option grant of 180,000 shares of
the Company's common stock also priced at the bid price on January 2, 1997, and
vesting in accordance with the appropriate portions of the Performance Bonus
schedule delineated below (the "Performance Options).
Executive shall, as provided herein, and subject to paragraph i and ii, below,
receive a Performance Bonus for
(i) The Company's fiscal year ending September 30, 1997, equal to:
Five percent of base salary if the Company achieves net income of one
dollar or more.
Executive shall receive an additional bonus of ten percent of base salary
if the average closing bid price for the last 20 business days on NASDAQ of
DCXI ending September 30, 1997 is equal to or exceeds the closing NASDAQ
bid price on January 2, 1997 plus $1.35.
12
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Further, if the revenue of the Company exceeds $5.0 million at September
30, 1997, executive shall receive an additional bonus equal to 0.75% of the
amount of revenue which exceeds $5.0 million.
(ii) The Company's fiscal years ending September 30, 1998 and later,
An amount equal to 2.0% of that portion of the net income of the Company
for each fiscal year in excess of the amount determined by multiplying
stockholder's equity for each such fiscal year by .11. For purposes of
these calculations of stockholders' equity under this Agreement,
stockholder's equity for any fiscal year shall be the average of the four
quarterly stockholders' equity figures reported by the Company for that
fiscal year.
An amount equal to 21% of base salary if the average closing bid price for
the 20 business days on NASDAQ (or the closing price if listed on another
SEC recognized stock exchange) ending September 30 of such fiscal year
exceeds the previous year's 20 day average for the same period by 51% or
more.
Further, if the consolidated gross revenue of the Company exceeds $10
million by September 30, 1998, the executive shall be deemed vested in 35
percent of the Performance Options; if in excess of $20 million by
September 30, 1999 he will be vested in an additional 35 percent of the
Performance Options, and if in excess of $30 million by September 30, 2000,
he will be vested in the remaining 30 % of the Performance Options.
(iii) Each cash Performance Bonus shall be payable either 30 days following
the date Company's audited consolidated financial statements for the fiscal
year become available or on January 15 following the end of that fiscal
year, whichever is later (the "Bonus Payment Date").
In the event that there shall be a combination of the Company with another
company, or any other occurrence similar to a combination, and as a result
thereof the amount or value of the bonuses payable pursuant to any of the
formulae set forth above could reasonably be expected to be significantly
affected thereby, appropriate changes will, at the request of either party, be
negotiated to establish a substitute formula or formulae satisfactory to both
parties. If an acceptable substitute formula(e) cannot be developed, they shall
submit such matter to arbitration by a qualified investment banker with at least
ten years' experience in corporate finance. Neither party shall have had
dealings with such arbitrator during the preceding three years.
Executive shall be entitled to receive the bonus provided for in the foregoing
paragraphs for each fiscal year during which he is employed hereunder and, in
addition, for the next 18 months after termination of his employment, except
that said post-termination bonus coverage shall only extend for twelve months
after termination if Executive takes employment (other than as an independent
consultant) with another company in the same industry within twelve months of
termination and shall not apply if Executive has been discharged for cause.
Bonus payments shall be in cash for the fiscal years ending September 30, 1997
and 1998; thereafter the bonus payments shall be payable in cash or a
combination of cash and Restricted Stock or stock options at the discretion of
the Executive.
Executive shall participate in any key executive long-term incentive program or
other executive bonus program which the Board or its Executive Compensation
Committee (if any) may define.
c. Registration of Performance and Incentive Stock Options. TheCompany agrees to
register with the Securities and Exchange Commission the performance and
incentive stock options granted under paragraph b, above, within 125 days of
executing this Agreement.
d. Nondilution of Incentive and Performance Options. Options granted with
respect to Section c, above, shall be granted to the Executive on a non-diluted
basis, such that any increase or decrease in the number of shares of common
stock of the Company which occurs during the option period (the time during
which the Executive is an employee and the options remain unexercised for any
reason) will cause the number of options to be proportionately increased or
decreased, commensurate with the change in outstanding shares of the Company.
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e. Vacation. Executive shall receive four weeks of vacation per year. Unused
vacation at the expiration of the Agreement's initial three year period will be
paid in cash at a rate equal to the Base Compensation.
f. Automobile allowance. Executive shall receive an unaccountable automobile
allowance of $400 per month.
g. Relocation allowance. Executive shall be entitled to certain relocation
allowances as may be negotiated by the Company relative to his relocation for
the position in this Agreement and in the event his primary place of business is
subsequently moved in excess of 50 miles from its present location.
h. Executive shall have the right to perform his duties out of any personal
residences he may have, provided that such right does not result in behavior or
actions injurious to the Company.
i. Executive shall be entitled to participate in all perquisites and health and
welfare benefits generally available to other executive officers and employees
of the Company.
j. Reimbursement. Reimbursement of all reasonable expenses incurred by Executive
in connection with performance of his duties upon submission of vouchers.
Reasonable expense shall include, but not be limited to all reasonable
out-of-pocket expenses for entertainment, automobile expenses, travel, meals,
lodging, professional fees, professional dues and the like incurred by Executive
in the interest of the Company, subject to such guidelines and policies as may
be promulgated by the Company for senior executives or employees.
k. Life Insurance. Executive shall be provided with a life insurance policy in
the amount of $250,000 (provided he can meet the medical conditions for such
coverage), payable to such beneficiaries as he shall designate, with an
additional $100,000 of accidental death coverage.
4. EXECUTIVE'S RIGHTS UPON TERMINATION
In the event that Executive's employment at DCXI is terminated for any reason
other than (a) death, (b) Disability, (c) Cause, (d) voluntary resignation by
Executive not constituting Constructive Termination, or (e) the expiration of
the term of this Agreement, DCXI will pay to Executive Base Compensation for a
period continuing three years after the date of termination. In addition, DCXI
will fully vest all stock options and restricted stock awards previously granted
by DCXI to Executive and fully vest and immediately pay to Executive any accrued
award earned by Executive under the Performance Bonus Plan(s), above, or any
other DCXI executive incentive plans which may exist at the time of termination
and in which the Executive is a participant.
Base Compensation payments shall be made when payments would otherwise have been
made to Executive if he were still employed by DCXI, except in such cases where
a different payment schedule is provided for in other Company-sponsored plans or
programs.
In the event Executive's employment at DCXI is terminated for death, Disability,
Cause, voluntary resignation not constituting Constructive Termination, or upon
expiration of the term of this Agreement, Executive shall be entitled to all
benefits under this Agreement, including base salary, performance and incentive
bonuses for 18 months after such event. Stock options vested to date of
termination may be exercised at any time during the 18 months period following
termination.
5. DESIGNATION OF BENEFICIARIES
If Executive should die while receiving Base Compensation payments pursuant to
Paragraph 4, the remaining Base Compensation payments which would have been paid
to Executive if he had lived shall be paid as designated by Executive on his
Company Beneficiary Designation Form. Such payments shall be made at the same
time and in the same manner as if Executive were alive to receive the payments,
except in such cases where a different payment schedule is provided, or in other
company-sponsored plans or programs.
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The filing of a new Company Beneficiary Designation Form will cancel all
designations previously filed. Any finalized divorce or marriage (other than a
common-law marriage) of Executive subsequent to the date of filing of a
beneficiary designation shall revoke such designation, unless:
(a) In the case of divorce, the previous spouse was not designated as
beneficiary, and
(b) In the case of marriage, Executive's new spouse had previously been
designated as beneficiary.
The spouse of a married Executive shall join in any designation of a beneficiary
other than the spouse.
If Executive fails to designate a beneficiary as provided for above, or if the
beneficiary designation is revoked by marriage, divorce, or otherwise without
execution of a new designation, then the Company's Board (or its Compensation
Committee it one exists) shall direct the distribution of any benefits under
this Agreement to Executive's estate.
6. DUTIES OF EXECUTIVE
Executive is to be employed by DCXI as its President and Chief Executive.
Executive agrees to devote substantially all of his time and energy to the
performance of the duties of that position so long as his employment in that
position shall be continued by DCXI. Notwithstanding the above, Executive shall
be permitted to serve as a Director or Trustee of other organizations, provided
such service does not prevent Executive from performing his duties under this
Agreement. The Company agrees to nominate Executive for election to the Board as
a member of the management slate at each annual meeting of stockholders during
his employment hereunder, or at which his class, if such class be designated,
comes up for election.
7. MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
8. TAX "GROSS-UP" PROVISION
If any payments due Executive under this Agreement result in Executive's
liability for an excise tax ("parachute tax") under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company will pay to
Executive, after deducting any Federal, state or local income tax imposed on the
payment, an amount sufficient to fully satisfy the "parachute tax" liability.
Such payment shall be made to Executive not later than 30 days prior to the due
date of the "parachute tax."
9. SUCCESSORS
The rights and duties of a party hereunder shall not be assignable by that
party; provided, however, that this Agreement shall be binding upon and inure to
the benefit of any successor of DCXI, and any such successor shall be deemed
substituted for DCXI under the terms of this Agreement. The term successor as
used herein shall include any person, firm, corporation or other business entity
which at any time, by merger, purchase or otherwise, acquires all or
substantially all of the assets or business of DCXI.
This Agreement shall also be binding upon and shall inure to the benefit of
Executive, Executive's heirs, executors, administrators and beneficiaries.
10. ENTIRE AGREEMENT
With respect to the matters specified herein, this Agreement contains the entire
agreement between the parties and supersedes all prior oral and written
agreements, understandings and commitments between the parties. This Agreement
shall not affect the provisions of any other compensation, retirement or other
benefit programs of DCXI to which Executive is a party or of which he is a
beneficiary. No amendments to this Agreement may be made except through a
written documents signed by both parties.
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11. VALIDITY
In the event that any provision of this Agreement is held to be invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Agreement.
12. PARAGRAPHS AND OTHER HEADINGS
Paragraphs and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. NOTICE
Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof is delivered or, if by express delivery service, 24 hours after
placing in the control of the express delivery service; or if mailed, 48 hours
after having been deposited in the United States mail, postage prepaid, and
addressed in the case of DCXI to its then principal place of business, presently
3002 North State Highway 83, Franktown, CO 80116-0569, and in the case of
Executive to:
Stephen Carreker
Queen Harbor
1546 Nottingham Knoll Drive
Jacksonville, Florida 32225
Either party may change the address to which such notices are to be addressed by
giving the other party notice in the manner herein set forth.
14. ATTORNEYS' FEES
In any action at law or in equity to enforce any of the provisions or rights
under this Agreement, the unsuccessful party to such litigation, as determined
by the Court in a final judgment or decree, shall pay the successful party or
parties all costs, expenses and reasonable attorneys' fees incurred therein by
such party or parties (including without limitation such costs, expenses and
fees on any appeals), and if such successful party or parties shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included as part of such judgment.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover any amount from the unsuccessful party for
costs, expenses and attorneys' fees that exceed the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
15. WITHHOLDING TAXES
To the extent required by law, the Company shall withhold from any payments
under this Agreement any applicable federal, state or local taxes.
16. INDEMNIFICATION
So long as Executive is not found by a court of law to be guilty of a willful
and material breach of this agreement, or to be guilty of gross misconduct, he
shall be indemnified from and against any and all losses, liability, claims and
expenses, damages, or causes of action, proceeding or investigations, or threats
thereof (including reasonable attorney fees and expenses of counsel satisfactory
to and approved by Executive) incurred by Executive, arising out of, in
connection with, or based upon Executive's services and the performance of his
duties pursuant to this Employment Agreement, or any other matter contemplated
by this Employment Agreement, whether or not resulting in any such liability
subject to such limitations as are provided by the Colorado Business
Corporations Act; and Executive shall be reimbursed by the Company as and when
incurred for any reasonable legal and other expenses incurred by Executive in
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connection with investigating or defending against any such loss, claim, damage,
liability, action proceeding, investigation or threat thereof, or producing
evidence, producing documents or taking any other action in respect thereto
(whether or not Executive is a defendant in or target of such action, proceeding
or investigation), subject to such limitations as are provided by the Colorado
Business Corporations Act.
17. TRADE SECRETS AND CONFIDENTIAL INFORMATION
As a material inducement to the Company to enter into this Agreement and to pay
Executive the compensation and benefits stated in Section 3, Executive covenants
and agrees that during his employment by the Company and for a period equal to
any period thereafter for which he receives payments as contemplated in Section
4, above, Executive shall not, directly or indirectly, use, disseminate, or
disclose for any purposes other than for the purposes of the Company's business,
any of the Company's confidential information or trade secrets, unless such
disclosure is compelled in a judicial proceeding. Upon termination of this
employment, all documents, records, notebooks, and similar repositories of
records containing information relating to any trade secrets or confidential
information then in the Executive's possession or control, whether prepared by
him or by others, shall be left with the Company or returned to the Company upon
its request. This section shall not restrict the Executive from using his
General Knowledge (the ideas, concepts, know-how and other industry information
which is part of his common knowledge) from pursuit of livelihood subsequent to
any termination of this Agreement.
This covenant of non-disclorure has been negotiated and agreed to by and between
the Company and Executive with the full knowledge of and pursuant to the
Colorado Trade Secrets Act and is deemed by both parties to be fair and
reasonable.
18. APPLICABLE LAW AND DISPUTE RESOLUTION
To the full extent controllable by stipulation of the parties, this Agreement
shall be interpreted under Colorado law. All disputes arising out of this
Agreement will be settled by binding arbitration in Denver, Colorado with a
representative of the American Arbitration Association.
IN WITNESS THEREOF, DCX, Inc. has caused this Agreement to be executed by its
duly authorized representatives and Executive has affixed his signature, with
effect from the date first above written.
Dated: March 28, 1997
For DCX, Inc. Executive
/S/ /S/ /S/
Frederick G. Beisser D. Scott McReynolds G. Stephen Carreker
Chief Financial Officer Vice President and
and Secretary General Manager
17
EXECUTIVE EMPLOYMENT AGREEMENT
This agreement (the "Agreement") is made effective January 1, 1997, between DCX,
Inc. ("DCXI" or the "Company") and D. Scott McReynolds (the "Executive").
A. Executive is to be employed as Vice President & General Manager of DCXI,and
President of Franktwon Business Unit, has previously rendered valuable services
to DCXI since 1991, possesses valuable experience and has acquired valuable
background in and knowledge of DCXI's business.
B. DCXI desires to secure the services of Executive, and Executive desires to
serve DCXI as Vice President & General Manager and President Franktown Business
Unit.
In consideration of the foregoing recitals and the agreements set forth herein,
DCXI and Executive agree as follows:
1. TERM
DCXI shall employ Executive and Executive accepts such employment for a term
beginning on the date of this Agreement and ending December 31, 1999, upon the
terms and conditions set forth herein, unless earlier terminated in accordance
with the provisions herein.
Notwithstanding the foregoing, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before December 31, 1999, the
remaining term of the Agreement shall be extended such that at each and every
moment of time thereafter, the remaining term shall be three years unless (a)
the Agreement is terminated earlier in accordance with the provisions herein or
(b) on or after November 1, 1999, the Board of Directors notifies Executive in
writing of its determination to have the date of this Agreement expire one year
from the date of such notification.
2. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meaning set
forth in this paragraph 2:
a. "Base Compensation" shall mean an amount per annum equal to the sum of (i)
the annual base salary in effect for Executive immediately preceding termination
of employment (excluding any reduction in base salary made in breech of this
Agreement), (ii) an amount equal to the product of (A) and (b), where (A) equals
the cumulative cash bonus paid to Executive over the three most recently
completed calendar years prior to termination (including any bonus amounts
deferred by Executive under any DCXI deferred compensation plan or arrangement)
divided by the cumulative base salary paid to Executive over the same three year
period (including any base salary deferred by Executive and where (B) equals the
amount set forth in 2.a.(i) above, (iii) continued participation in all basic
and supplemental life, accident, disability, and other Company-sponsored
insurance benefits provided to Executive immediately preceding termination (or,
if continued participation in one or more of these benefits is not possible,
benefits substantially similar to those which Executive would have been entitled
to if he had continued as an employee of the Company at the same compensation
level in effect immediately prior to termination), and (iv) continuance of
vesting and benefit accrual under any Company-sponsored basic and supplemental
retirement programs in effect for Executive immediately prior to termination
(or, if continued participation in such programs is not possible, benefits
substantially similar to those which executive would have been entitled to if he
had continued as an employee of the Company a the same compensation level
immediately prior to termination).
b. "Board" means the Board of Directors of the Company.
c. "Cause" shall mean (i) willful refusal by Executive to follow a lawful
written demand of the Board, (ii) Executive's willful and continued failure to
perform his duties under this Agreement (except due to Executive's incapacity
due to physical or mental illness) after a written demand is delivered to
Executive by the Board specifically identifying the manner in which the Board
believes that Executive has failed to perform his duties, (iii) Executive's
willful engagement in conduct materially injurious to the Company, or (iv)
Executive's conviction for any felony involving moral turpitude. For purposes of
clauses (I), (ii) or (iii) of this definition, no act, or failure to
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act on Executive's part shall be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without reasonable belief that
Executive's act, or failure to act, was in the best interests of the Company.
d. "Constructive Termination" shall mean Executive's voluntary termination of
employment within ninety (90) days following the occurrence of one or more of
the following events, unless such event is approved in writing by Executive in
advance of such event:
(I) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive of
such failure, including any violation of Executive's rights as described in
Section 3 of this Agreement unless such rights are replaced by alternative
rights of approximately equal value;
(ii) A reduction in Executive's title or responsibilities below President
and Chief Executive Officer;
(iii) A relocation of Executive's primary place of business more than fifty
(50) miles from its location as of the date of this Agreement.
e. "Disability" shall be deemed to have occurred if Executive makes application
for disability benefits under any Company-sponsored long-term disability program
covering Executive and qualifies for such benefits.
f. "Retirement" shall mean Executive's termination of service with the Company
in accordance with the provisions of any Company retirement plan or the
Company's 401K Retirement Savings Plan in which the Executive is eligible to
participate.
3. EXECUTIVE'S RIGHTS REGARDING BASE SALARY, BONUS AND OTHER BENEFITS WHILE
EMPLOYED BY THE COMPANY
a. Base Salary. The minimum annual base salary payable to Executive upon
commencement of this Agreement shall be $70,000. The Board or its Executive
Compensation Committee of the Board (if one is designated) will review the
Executive's base salary at least annually to determine the amount of any
increase. Upon any such increase in Executive's base salary, such increased rate
shall thereafter constitute Executive's minimum annual base salary for all
purposes of this Agreement, except that the Company may reduce Executives annual
base Salary during any year by not more than 10% below the base salary in effect
at the beginning of the year as part of any general salary reduction which
applies to all officers of the Company and its subsidiaries (if any).
b. Incentive and Performance Bonus.
In recognition of the considerable challenges accepted by him, Executive shall
receive an Incentive Bonus consisting of a stock option grant of 70,000 shares
of the Company's common stock fully vested and priced at the closing bid price
on January 2, 1997, the first business day during which Executive was engaged.
In addition Executive shall receive a stock option grant of 50,000 shares of the
Company's common stock also priced at the bid price on January 2, 1997, and
vesting in accordance with the appropriate portions of the Performance Bonus
schedule delineated below (the "Performance Options).
Executive shall, as provided herein, and subject to paragraph i and ii, below,
receive a Performance Bonus for
(i) The Company's fiscal year ending September 30, 1997, equal to:
Five percent of base salary if the Company achieves net income of one
dollar or more.
Executive shall receive an additional bonus of ten percent of base salary
if the average closing bid price for the last 20 business days on NASDAQ of
DCXI ending September 30, 1997 is equal to or exceeds the closing NASDAQ
bid price on January 2, 1997 plus $1.35.
Further, if the revenue of the Company exceeds $5.0 million at September
30, 1997, executive shall receive an additional bonus equal to 0.35% of the
amount of revenue which exceeds $5.0 million.
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(ii) The Company's fiscal years ending September 30, 1998 and later,
An amount equal to 1.0% of that portion of the net income of the Company
for each fiscal year in excess of the amount determined by multiplying
stockholder's equity for each such fiscal year by .11. For purposes of
these calculations of stockholders' equity under this Agreement,
stockholder's equity for any fiscal year shall be the average of the four
quarterly stockholders' equity figures reported by the Company for that
fiscal year.
An amount equal to 21% of base salary if the average closing bid price for
the 20 business days on NASDAQ (or the closing price if listed on another
SEC recognized stock exchange) ending September 30 of such fiscal year
exceeds the previous year's 20 day average for the same period by 51% or
more.
Further, if the consolidated gross revenue of the Company exceeds $10
million by September 30, 1998, the executive shall be deemed vested in 35
percent of the Performance Options; if in excess of $20 million by
September 30, 1999 he will be vested in an additional 35 percent of the
Performance Options, and if in excess of $30 million by September 30, 2000,
he will be vested in the remaining 30 % of the Performance Options.
(iii) Each cash Performance Bonus shall be payable either 30 days following
the date Company's audited consolidated financial statements for the fiscal
year become available or on January 15 following the end of that fiscal
year, whichever is later (the "Bonus Payment Date").
In the event that there shall be a combination of the Company with another
company, or any other occurrence similar to a combination, and as a result
thereof the amount or value of the bonuses payable pursuant to any of the
formulae set forth above could reasonably be expected to be significantly
affected thereby, appropriate changes will, at the request of either party, be
negotiated to establish a substitute formula or formulae satisfactory to both
parties. If an acceptable substitute formula(e) cannot be developed, they shall
submit such matter to arbitration by a qualified investment banker with at least
ten years' experience in corporate finance. Neither party shall have had
dealings with such arbitrator during the preceding three years.
Executive shall be entitled to receive the bonus provided for in the foregoing
paragraphs for each fiscal year during which he is employed hereunder and, in
addition, for the next 18 months after termination of his employment, except
that said post-termination bonus coverage shall only extend for twelve months
after termination if Executive takes employment (other than as an independent
consultant) with another company in the same industry within twelve months of
termination.
Bonus payments shall be in cash for the fiscal years ending September 30, 1997
and 1998; thereafter the bonus payments shall be payable in cash or a
combination of cash and Restricted Stock or stock options at the discretion of
the Executive.
Executive shall participate in any key executive long-term incentive program or
other executive bonus program which the Board or its Executive Compensation
Committee (if any) may define.
c. Registration of Performance and Incentive Stock Options. TheCompany agrees to
register with the Securities and Exchange Commission the performance and
incentive stock options granted under paragraph b, above, within 125 days of
executing this Agreement.
d. Nondilution of Incentive and Performance Options. Options granted with
respect to Subsection c, above, shall be granted to the Executive on a
non-diluted basis, such that any increase or decrease in the number of shares of
common stock of the Company which occurs during the option period (the time
during which the Executive is an employee and the options remain unexercised for
any reason) will cause the number of unexercised options to be proportionately
increased or decreased, commensurate with the change in outstanding shares of
the Company.
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e. Vacation. Executive shall receive four weeks of vacation per year. Unused
vacation at the expiration of the Agreement's initial three year period will be
paid in cash at a rate equal to the Base Compensation.
f. Automobile allowance. Executive shall receive an unaccountable automobile
allowance of $200 per month.
g. Relocation allowance. Executive shall be entitled to certain relocation
allowances as may be negotiated by the Company relative to his relocation for
the position in this Agreement and in the event his primary place of business is
subsequently moved in excess of 50 miles from its present location.
h. Executive shall have the right to perform his duties out of any personal
residences he may have, provided that such right does not result in behavior or
actions injurious to the Company.
i. Executive shall be entitled to participate in all perquisites and health and
welfare benefits generally available to other executive officers and employees
of the Company.
j. Reimbursement. Reimbursement of all reasonable expenses incurred by Executive
in connection with performance of his duties upon submission of vouchers.
Reasonable expense shall include, but not be limited to all reasonable
out-of-pocket expenses for entertainment, automobile expenses, travel, meals,
lodging, professional fees, professional dues and the like incurred by Executive
in the interest of the Company, subject to such guidelines and policies as may
be promulgated by the Company for senior executives or employees.
k. Life Insurance. Executive shall be provided with a life insurance policy in
the amount of $150,000 (provided he can meet the medical conditions for such
coverage), payable to such beneficiaries as he shall designate, with an
additional $100,000 of accidental death coverage.
l. Executive has requested and the Company agrees that the amount of pay
increase resulting from this Agreement and his pay rate on December 31, 1996 and
the amount of his autombile allowance which would accrue from January 1, 1997
through June 30, 1997 will be deferred until July 1, 1997. On, or about, July 1,
1997 the Company will disburse an amount representing the deferred pay and
allowance no longer defer the pay increase and the allowance.
4. EXECUTIVE'S RIGHTS UPON TERMINATION
In the event that Executive's employment at DCXI is terminated for any reason
other than (a) death, (b) Disability, (c) Cause, (d) voluntary resignation by
Executive not constituting Constructive Termination, or (e) the expiration of
the term of this Agreement, DCXI will pay to Executive Base Compensation for a
period continuing two years after the date of termination. In addition, DCXI
will fully vest all stock options and restricted stock awards previously granted
by DCXI to Executive and fully vest and immediately pay to Executive any accrued
award earned by Executive under the Performance Bonus Plan(s), above, or any
other DCXI executive incentive plans which may exist at the time of termination
and in which the Executive is a participant.
Base Compensation payments shall be made when payments would otherwise have been
made to Executive if he were still employed by DCXI, except in such cases where
a different payment schedule is provided for in other Company-sponsored plans or
programs.
In the event Executive's employment at DCXI is terminated for death, Disability,
Cause, voluntary resignation not constituting Constructive Termination, or upon
expiration of the term of this Agreement, Executive shall be entitled to all
benefits under this Agreement, including base salary, performance and incentive
bonuses for 12 months after such event. Stock options vested to date of
termination may be exercised at any time during the 12 months period following
termination.
5. DESIGNATION OF BENEFICIARIES
If Executive should die while receiving Base Compensation payments pursuant to
Paragraph 4, the remaining Base Compensation payments which would have been paid
to Executive if he had lived shall be paid as designated by Executive on his
Company Beneficiary Designation Form. Such payments shall be made at the same
time and in the same manner as if Executive were alive to receive the payments,
except in such cases where a different payment schedule is provided, or in other
company-sponsored plans or programs.
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The filing of a new Company Beneficiary Designation Form will cancel all
designations previously filed. Any finalized divorce or marriage (other than a
common-law marriage) of Executive subsequent to the date of filing of a
beneficiary designation shall revoke such designation, unless:
(a) In the case of divorce, the previous spouse was not designated as
beneficiary, and
(b) In the case of marriage, Executive's new spouse had previously been
designated as beneficiary.
The spouse of a married Executive shall join in any designation of a beneficiary
other than the spouse.
If Executive fails to designate a beneficiary as provided for above, or if the
beneficiary designation is revoked by marriage, divorce, or otherwise without
execution of a new designation, then the Company's Board (or its Compensation
Committee it one exists) shall direct the distribution of any benefits under
this Agreement to Executive's estate.
6. DUTIES OF EXECUTIVE
Executive is to be employed by DCXI as its Vice President & General Manager and
President Franktown Business Unit. Executive agrees to devote substantially all
of his time and energy to the performance of the duties of those positions so
long as his employment in that position shall be continued by DCXI.
Notwithstanding the above, Executive shall be permitted to serve as a Director
or Trustee of other organizations, provided such service does not prevent
Executive from performing his duties under this Agreement. The Company agrees to
nominate Executive for election to the Board as a member of the management slate
at each annual meeting of stockholders during his employment hereunder, or at
which his class, if such class be designated, comes up for election.
7. MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
8. TAX "GROSS-UP" PROVISION
If any payments due Executive under this Agreement result in Executive's
liability for an excise tax ("parachute tax") under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company will pay to
Executive, after deducting any Federal, state or local income tax imposed on the
payment, an amount sufficient to fully satisfy the "parachute tax" liability.
Such payment shall be made to Executive not later than 30 days prior to the due
date of the "parachute tax."
9. SUCCESSORS
The rights and duties of a party hereunder shall not be assignable by that
party; provided, however, that this Agreement shall be binding upon and inure to
the benefit of any successor of DCXI, and any such successor shall be deemed
substituted for DCXI under the terms of this Agreement. The term successor as
used herein shall include any person, firm, corporation or other business entity
which at any time, by merger, purchase or otherwise, acquires all or
substantially all of the assets or business of DCXI.
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This Agreement shall also be binding upon and shall inure to the benefit of
Executive, Executive's heirs, executors, administrators and beneficiaries.
10. ENTIRE AGREEMENT
With respect to the matters specified herein, this Agreement contains the entire
agreement between the parties and supersedes all prior oral and written
agreements, understandings and commitments between the parties. This Agreement
shall not affect the provisions of any other compensation, retirement or other
benefit programs of DCXI to which Executive is a party or of which he is a
beneficiary. No amendments to this Agreement may be made except through a
written documents signed by both parties.
11. VALIDITY
In the event that any provision of this Agreement is held to be invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Agreement.
12. PARAGRAPHS AND OTHER HEADINGS
Paragraphs and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. NOTICE
Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof is delivered or, if by express delivery service, 24 hours after
placing in the control of the express delivery service; or if mailed, 48 hours
after having been deposited in the United States mail, postage prepaid, and
addressed in the case of DCXI to its then principal place of business, presently
3002 North State Highway 83, Franktown, CO 80116-0569, and in the case of
Executive to:
D. Scott McReynolds
1672 S. Espana Way
Aurora, CO 80013
Either party may change the address to which such notices are to be addressed by
giving the other party notice in the manner herein set forth.
14. ATTORNEYS' FEES
In any action at law or in equity to enforce any of the provisions or rights
under this Agreement, the unsuccessful party to such litigation, as determined
by the Court in a final judgment or decree, shall pay the successful party or
parties all costs, expenses and reasonable attorneys' fees incurred therein by
such party or parties (including without limitation such costs, expenses and
fees on any appeals), and if such successful party or parties shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included as part of such judgment.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover any amount from the unsuccessful party for
costs, expenses and attorneys' fees that exceed the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
15. WITHHOLDING TAXES
To the extent required by law, the Company shall withhold from any payments
under this Agreement any applicable federal, state or local taxes.
16. INDEMNIFICATION
So long as Executive is not found by a court of law to be guilty of a willful
and material breach of this agreement, or to be guilty of gross misconduct, he
shall be indemnified from and against any and all losses, liability, claims and
expenses, damages, or causes of action, proceeding or investigations, or threats
thereof (including reasonable attorney fees and expenses of counsel satisfactory
to and approved by Executive) incurred by Executive, arising out of, in
connection with, or based upon Executive's services and the performance of his
duties pursuant to this Employment Agreement, or any other matter contemplated
by this Employment Agreement, whether or not resulting in any such liability
subject to such limitations as are provided by the Colorado Business
Corporations Act; and Executive shall be reimbursed by the Company as and when
incurred for any reasonable legal and other expenses incurred by Executive in
connection with investigating or defending against any such loss, claim, damage,
liability, action proceeding, investigation or threat thereof, or producing
evidence, producing documents or taking any other
23
<PAGE>
action in respect thereto (whether or not Executive is a defendant in or target
of such action, proceeding or investigation), subject to such limitations as are
provided by the Colorado Business Corporations Act.
17. TRADE SECRETS AND CONFIDENTIAL INFORMATION
As a material inducement to the Company to enter into this Agreement and to pay
Executive the compensation and benefits stated in Paragraph 3, Executive
covenants and agrees that during his employment by the Company and for a period
equal to any period thereafter for which he receives payments as contemplated in
Section 4, above, Executive shall not, directly or indirectly, use, disseminate,
or disclose for any purposes other than for the purposes of the Company's
business, any of the Company's confidential information or trade secrets, unless
such disclosure is compelled in a judicial proceeding. Upon termination of this
employment, all documents, records, notebooks, and similar repositories of
records containing information relating to any trade secrets or confidential
information then in the Executive's possession or control, whether prepared by
him or by others, shall be left with the Company or returned to the Company upon
its request. This section shall not restrict the Executive from using his
General Knowledge (the ideas, concepts, know-how and other industry information
which is part of his common knowledge) from pursuit of livelihood subsequent to
any termination of this Agreement.
This covenant of non-disclorure has been negotiated and agreed to by and between
the Company and Executive with the full knowledge of and pursuant to the
Colorado Trade Secrets Act and is deemed by both parties to be fair and
reasonable.
18. APPLICABLE LAW AND DISPUTE RESOLUTION
To the full extent controllable by stipulation of the parties, this Agreement
shall be interpreted under Colorado law. All disputes arising out of this
Agreement will be settled by binding arbitration in Denver, Colorado with a
representative of the American Arbitration Association.
IN WITNESS THEREOF, DCX, Inc. has caused this Agreement to be executed by its
duly authorized representatives and Executive has affixed his signature, with
effect from the date first above written.
Dated: March 28, 1997
For DCX, Inc. Executive
/S/ /S/ /S/
Frederick G. Beisser G. Stephen Carreker D. Scott McReynolds
Chief Financial Officer President and CEO
and Secretary
24
EXECUTIVE EMPLOYMENT AGREEMENT
This agreement (the "Agreement") is made effective January 1, 1997, between DCX,
Inc. ("DCXI" or the "Company") and Frederick G. Beisser (the "Executive").
A. Executive is to be employed as Vice President - Finance and Administration
and as Secretary and Treasurer of DCXI, has previously rendered valuable
services to DCXI since 1990, possesses valuable experience and has acquired
valuable background in and knowledge of DCXI's business.
B. DCXI desires to secure the services of Executive, and Executive desires to
serve DCXI as Vice President- Finance and Administration, Secretary and
Treasurer.
In consideration of the foregoing recitals and the agreements set forth herein,
DCXI and Executive agree as follows:
1. TERM
DCXI shall employ Executive and Executive accepts such employment for a term
beginning on the date of this Agreement and ending December 31, 1999, upon the
terms and conditions set forth herein, unless earlier terminated in accordance
with the provisions herein.
Notwithstanding the foregoing, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before December 31, 1999, the
remaining term of the Agreement shall be extended such that at each and every
moment of time thereafter, the remaining term shall be three years unless (a)
the Agreement is terminated earlier in accordance with the provisions herein or
(b) on or after November 1, 1999, the Board of Directors notifies Executive in
writing of its determination to have the date of this Agreement expire one year
from the date of such notification.
2. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meaning set
forth in this paragraph 2:
a. "Base Compensation" shall mean an amount per annum equal to the sum of (i)
the annual base salary in effect for Executive immediately preceding termination
of employment (excluding any reduction in base salary made in breech of this
Agreement), (ii) an amount equal to the product of (A) and (b), where (A) equals
the cumulative cash bonus paid to Executive over the three most recently
completed calendar years prior to termination (including any bonus amounts
deferred by Executive under any DCXI deferred compensation plan or arrangement)
divided by the cumulative base salary paid to Executive over the same three year
period (including any base salary deferred by Executive and where (B) equals the
amount set forth in 2.a.(i) above, (iii) continued participation in all basic
and supplemental life, accident, disability, and other Company-sponsored
insurance benefits provided to Executive immediately preceding termination (or,
if continued participation in one or more of these benefits is not possible,
benefits substantially similar to those which Executive would have been entitled
to if he had continued as an employee of the Company at the same compensation
level in effect immediately prior to termination), and (iv) continuance of
vesting and benefit accrual under any Company-sponsored basic and supplemental
retirement programs in effect for Executive immediately prior to termination
(or, if continued participation in such programs is not possible, benefits
substantially similar to those which executive would have been entitled to if he
had continued as an employee of the Company a the same compensation level
immediately prior to termination).
b. "Board" means the Board of Directors of the Company.
c. "Cause" shall mean (i) willful refusal by Executive to follow a lawful
written demand of the Board, (ii) Executive's willful and continued failure to
perform his duties under this Agreement (except due to Executive's incapacity
due to physical or mental illness) after a written demand is delivered to
Executive by the Board specifically identifying the manner in which the Board
believes that Executive has failed to perform his duties, (iii) Executive's
willful engagement in conduct materially injurious to the Company, or (iv)
Executive's conviction for any felony involving moral turpitude. For purposes of
clauses (I), (ii) or (iii) of this definition, no act, or failure to act on
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that Executive's
act, or failure to act, was in the best interests of the Company.
25
<PAGE>
d. "Constructive Termination" shall mean Executive's voluntary termination of
employment within ninety (90) days following the occurrence of one or more of
the following events, unless such event is approved in writing by Executive in
advance of such event:
(I) A failure by the Company to abide by any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive of
such failure, including any violation of Executive's rights as described in
Section 3 of this Agreement unless such rights are replaced by alternative
rights of approximately equal value;
(ii) A reduction in Executive's title or responsibilities below President
and Chief Executive Officer;
(iii) A relocation of Executive's primary place of business more than fifty
(50) miles from its location as of the date of this Agreement.
e. "Disability" shall be deemed to have occurred if Executive makes application
for disability benefits under any Company-sponsored long-term disability program
covering Executive and qualifies for such benefits.
f. "Retirement" shall mean Executive's termination of service with the Company
in accordance with the provisions of any Company retirement plan or the
Company's 401K Retirement Savings Plan in which the Executive is eligible to
participate.
3. EXECUTIVE'S RIGHTS REGARDING BASE SALARY, BONUS AND OTHER BENEFITS WHILE
EMPLOYED BY THE COMPANY
a. Base Salary. The minimum annual base salary payable to Executive upon
commencement of this Agreement shall be $60,000. The Board or its Executive
Compensation Committee of the Board (if one is designated) will review the
Executive's base salary at least annually to determine the amount of any
increase. Upon any such increase in Executive's base salary, such increased rate
shall thereafter constitute Executive's minimum annual base salary for all
purposes of this Agreement, except that the Company may reduce Executives annual
base Salary during any year by not more than 10% below the base salary in effect
at the beginning of the year as part of any general salary reduction which
applies to all officers of the Company and its subsidiaries (if any).
b. Incentive and Performance Bonus.
In recognition of the considerable challenges accepted by him, Executive shall
receive an Incentive Bonus consisting of a stock option grant of 70,000 shares
of the Company's common stock fully vested and priced at the closing bid price
on January 2, 1997, the first business day during which Executive was engaged.
In addition Executive shall receive a stock option grant of 50,000 shares of the
Company's common stock also priced at the bid price on January 2, 1997, and
vesting in accordance with the appropriate portions of the Performance Bonus
schedule delineated below (the "Performance Options).
Executive shall, as provided herein, and subject to paragraph i and ii, below,
receive a Performance Bonus for
(i) The Company's fiscal year ending September 30, 1997, equal to:
Five percent of base salary if the Company achieves net income of one
dollar or more.
Executive shall receive an additional bonus of ten percent of base salary
if the average closing bid price for the last 20 business days on NASDAQ of
DCXI ending September 30, 1997 is equal to or exceeds the closing NASDAQ
bid price on January 2, 1997 plus $1.35.
26
<PAGE>
Further, if the revenue of the Company exceeds $5.0 million at September
30, 1997, executive shall receive an additional bonus equal to 0.35% of the
amount of revenue which exceeds $5.0 million.
(ii) The Company's fiscal years ending September 30, 1998 and later,
An amount equal to 1.0% of that portion of the net income of the Company
for each fiscal year in excess of the amount determined by multiplying
stockholder's equity for each such fiscal year by .11. For purposes of
these calculations of stockholders' equity under this Agreement,
stockholder's equity for any fiscal year shall be the average of the four
quarterly stockholders' equity figures reported by the Company for that
fiscal year.
An amount equal to 21% of base salary if the average closing bid price for
the 20 business days on NASDAQ (or the closing price if listed on another
SEC recognized stock exchange) ending September 30 of such fiscal year
exceeds the previous year's 20 day average for the same period by 51% or
more.
Further, if the consolidated gross revenue of the Company exceeds $10
million by September 30, 1998, the executive shall be deemed vested in 35
percent of the Performance Options; if in excess of $20 million by
September 30, 1999 he will be vested in an additional 35 percent of the
Performance Options, and if in excess of $30 million by September 30, 2000,
he will be vested in the remaining 30 % of the Performance Options.
(iii) Each cash Performance Bonus shall be payable either 30 days following
the date Company's audited consolidated financial statements for the fiscal
year become available or on January 15 following the end of that fiscal
year, whichever is later (the "Bonus Payment Date").
In the event that there shall be a combination of the Company with another
company, or any other occurrence similar to a combination, and as a result
thereof the amount or value of the bonuses payable pursuant to any of the
formulae set forth above could reasonably be expected to be significantly
affected thereby, appropriate changes will, at the request of either party, be
negotiated to establish a substitute formula or formulae satisfactory to both
parties. If an acceptable substitute formula(e) cannot be developed, they shall
submit such matter to arbitration by a qualified investment banker with at least
ten years' experience in corporate finance. Neither party shall have had
dealings with such arbitrator during the preceding three years.
Executive shall be entitled to receive the bonus provided for in the foregoing
paragraphs for each fiscal year during which he is employed hereunder and, in
addition, for the next 12 months after termination of his employment, except
that said post-termination bonus coverage shall only extend for nine months
after termination if Executive takes employment (other than as an independent
consultant) with another company in the same industry within twelve months of
termination.
Bonus payments shall be in cash for the fiscal years ending September 30, 1997
and 1998; thereafter the bonus payments shall be payable in cash or a
combination of cash and Restricted Stock or stock options at the discretion of
the Executive.
Executive shall participate in any key executive long-term incentive program or
other executive bonus program which the Board or its Executive Compensation
Committee (if any) may define.
c. Registration of Performance and Incentive Stock Options. TheCompany agrees to
register with the Securities and Exchange Commission the performance and
incentive stock options granted under paragraph b, above, within 125 days of
executing this Agreement.
d. Nondilution of Incentive and Performance Options. Options granted with
respect to Section c, above, shall be granted to the Executive on a non-diluted
basis, such that any increase or decrease in the number of shares of common
stock of the Company which occurs during the option period (the time during
which the Executive is an employee and the options remain unexercised for any
reason) will cause the number of options to be proportionately increased or
decreased, commensurate with the change in outstanding shares of the Company.
27
<PAGE>
e. Vacation. Executive shall receive four weeks of vacation per year. Unused
vacation at the expiration of the Agreement's initial three year period will be
paid in cash at a rate equal to the Base Compensation.
f. Automobile allowance. Executive shall receive an unaccountable automobile
allowance of $125 per month.
g. Relocation allowance. Executive shall be entitled to certain relocation
allowances as may be negotiated by the Company relative to his relocation for
the position in this Agreement and in the event his primary place of business is
subsequently moved in excess of 50 miles from its present location.
h. Executive shall have the right to perform his duties out of any personal
residences he may have, provided that such right does not result in behavior or
actions injurious to the Company.
i. Executive shall be entitled to participate in all perquisites and health and
welfare benefits generally available to other executive officers and employees
of the Company.
j. Reimbursement. Reimbursement of all reasonable expenses incurred by Executive
in connection with performance of his duties upon submission of vouchers.
Reasonable expense shall include, but not be limited to all reasonable
out-of-pocket expenses for entertainment, automobile expenses, travel, meals,
lodging, professional fees, professional dues and the like incurred by Executive
in the interest of the Company, subject to such guidelines and policies as may
be promulgated by the Company for senior executives or employees.
k. Life Insurance. Executive shall be provided with a life insurance policy in
the amount of $150,000 (provided he can meet the medical conditions for such
coverage), payable to such beneficiaries as he shall designate, with an
additional $100,000 of accidental death coverage.
4. EXECUTIVE'S RIGHTS UPON TERMINATION
In the event that Executive's employment at DCXI is terminated for any reason
other than (a) death, (b) Disability, (c) Cause, (d) voluntary resignation by
Executive not constituting Constructive Termination, or (e) the expiration of
the term of this Agreement, DCXI will pay to Executive Base Compensation for a
period continuing three years after the date of termination. In addition, DCXI
will fully vest all stock options and restricted stock awards previously granted
by DCXI to Executive and fully vest and immediately pay to Executive any accrued
award earned by Executive under the Performance Bonus Plan(s), above, or any
other DCXI executive incentive plans which may exist at the time of termination
and in which the Executive is a participant.
Base Compensation payments shall be made when payments would otherwise have been
made to Executive if he were still employed by DCXI, except in such cases where
a different payment schedule is provided for in other Company-sponsored plans or
programs.
In the event Executive's employment at DCXI is terminated for death, Disability,
Cause, voluntary resignation not constituting Constructive Termination, or upon
expiration of the term of this Agreement, Executive shall be entitled to all
benefits under this Agreement, including base salary, performance and incentive
bonuses for 12 months after such event. Stock options vested to date of
termination may be exercised at any time during the 12 month period following
termination.
5. DESIGNATION OF BENEFICIARIES
If Executive should die while receiving Base Compensation payments pursuant to
Paragraph 4, the remaining Base Compensation payments which would have been paid
to Executive if he had lived shall be paid as designated by Executive on his
Company Beneficiary Designation Form. Such payments shall be made at the same
time and in the same manner as if Executive were alive to receive the payments,
except in such cases where a different payment schedule is provided, or in other
company-sponsored plans or programs.
28
<PAGE>
The filing of a new Company Beneficiary Designation Form will cancel all
designations previously filed. Any finalized divorce or marriage (other than a
common-law marriage) of Executive subsequent to the date of filing of a
beneficiary designation shall revoke such designation, unless:
(a) In the case of divorce, the previous spouse was not designated as
beneficiary, and
(b) In the case of marriage, Executive's new spouse had previously been
designated as beneficiary.
The spouse of a married Executive shall join in any designation of a beneficiary
other than the spouse.
If Executive fails to designate a beneficiary as provided for above, or if the
beneficiary designation is revoked by marriage, divorce, or otherwise without
execution of a new designation, then the Company's Board (or its Compensation
Committee it one exists) shall direct the distribution of any benefits under
this Agreement to Executive's estate.
6. DUTIES OF EXECUTIVE
Executive is to be employed by DCXI as its Vice President - Finance and
Administration, Secretary and Treasurer. Executive agrees to devote
substantially all of his time and energy to the performance of the duties of
that position so long as his employment in that position shall be continued by
DCXI. Notwithstanding the above, Executive shall be permitted to serve as a
Director or Trustee of other organizations, provided such service does not
prevent Executive from performing his duties under this Agreement. The Company
agrees to nominate Executive for election to the Board as a member of the
management slate at each annual meeting of stockholders during his employment
hereunder, or at which his class, if such class be designated, comes up for
election.
7. MITIGATION AND OFFSET
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking employment or otherwise, nor to offset the
amount of any payment provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period he is
entitled to such payment.
8. TAX "GROSS-UP" PROVISION
If any payments due Executive under this Agreement result in Executive's
liability for an excise tax ("parachute tax") under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company will pay to
Executive, after deducting any Federal, state or local income tax imposed on the
payment, an amount sufficient to fully satisfy the "parachute tax" liability.
Such payment shall be made to Executive not later than 30 days prior to the due
date of the "parachute tax."
9. SUCCESSORS
The rights and duties of a party hereunder shall not be assignable by that
party; provided, however, that this Agreement shall be binding upon and inure to
the benefit of any successor of DCXI, and any such successor shall be deemed
substituted for DCXI under the terms of this Agreement. The term successor as
used herein shall include any person, firm, corporation or other business entity
which at any time, by merger, purchase or otherwise, acquires all or
substantially all of the assets or business of DCXI.
This Agreement shall also be binding upon and shall inure to the benefit of
Executive, Executive's heirs, executors, administrators and beneficiaries.
10. ENTIRE AGREEMENT
With respect to the matters specified herein, this Agreement contains the entire
agreement between the parties and supersedes all prior oral and written
agreements, understandings and commitments between the parties. This Agreement
shall not affect the provisions of any other compensation, retirement or other
benefit programs of DCXI to which Executive is a party or of which he is a
beneficiary. No amendments to this Agreement may be made except through a
written documents signed by both parties.
29
<PAGE>
11. VALIDITY
In the event that any provision of this Agreement is held to be invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Agreement.
12. PARAGRAPHS AND OTHER HEADINGS
Paragraphs and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. NOTICE
Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof if delivered or, if by express delivery service, 24 hours after
placing in the control of the express delivery service; or if mailed, 48 hours
after having been deposited in the United States mail, postage prepaid, and
addressed in the case of DCXI to its then principal place of business, presently
3002 North State Highway 83, Franktown, CO 80116-0569, and in the case of
Executive to:
Frederick G. Beisser
796 Tioga Trail
Parker, CO 80134
Either party may change the address to which such notices are to be addressed by
giving the other party notice in the manner herein set forth.
14. ATTORNEYS' FEES
In any action at law or in equity to enforce any of the provisions or rights
under this Agreement, the unsuccessful party to such litigation, as determined
by the Court in a final judgment or decree, shall pay the successful party or
parties all costs, expenses and reasonable attorneys' fees incurred therein by
such party or parties (including without limitation such costs, expenses and
fees on any appeals), and if such successful party or parties shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included as part of such judgment.
Notwithstanding the foregoing provision, in no event shall the successful party
or parties be entitled to recover any amount from the unsuccessful party for
costs, expenses and attorneys' fees that exceed the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
15. WITHHOLDING TAXES
To the extent required by law, the Company shall withhold from any payments
under this Agreement any applicable federal, state or local taxes.
16. INDEMNIFICATION
So long as Executive is not found by a court of law to be guilty of a willful
and material breach of this agreement, or to be guilty of gross misconduct, he
shall be indemnified from and against any and all losses, liability, claims and
expenses, damages, or causes of action, proceeding or investigations, or threats
thereof (including reasonable attorney fees and expenses of counsel satisfactory
to and approved by Executive) incurred by Executive, arising out of, in
connection with, or based upon Executive's services and the performance of his
duties pursuant to this Employment Agreement, or any other matter contemplated
by this Employment Agreement, whether or not resulting in any such liability
subject to such limitations as are provided by the Colorado Business
Corporations Act; and Executive shall be reimbursed by the Company as and when
incurred for any reasonable legal and other expenses incurred by Executive in
connection with investigating or defending against any such loss, claim, damage,
liability, action proceeding, investigation or threat thereof, or producing
evidence, producing documents or taking any other action in respect thereto
(whether or not Executive is a defendant in or target of such action, proceeding
or investigation), subject to such limitations as are provided by the Colorado
Business Corporations Act.
30
<PAGE>
17. TRADE SECRETS AND CONFIDENTIAL INFORMATION
As a material inducement to the Company to enter into this Agreement and to pay
Executive the compensation and benefits stated in Paragraph 3, Executive
covenants and agrees that during his employment by the Company and for a period
equal to any period thereafter for which he receives payments as contemplated in
Section 4, above, Executive shall not, directly or indirectly, use, disseminate,
or disclose for any purposes other than for the purposes of the Company's
business, any of the Company's confidential information or trade secrets, unless
such disclosure is compelled in a judicial proceeding. Upon termination of this
employment, all documents, records, notebooks, and similar repositories of
records containing information relating to any trade secrets or confidential
information then in the Executive's possession or control, whether prepared by
him or by others, shall be left with the Company or returned to the Company upon
its request. This section shall not restrict the Executive from using his
General Knowledge (the ideas, concepts, know-how and other industry information
which is part of his common knowledge) from pursuit of livelihood subsequent to
any termination of this Agreement.
This covenant of non-disclorure has been negotiated and agreed to by and between
the Company and Executive with the full knowledge of and pursuant to the
Colorado Trade Secrets Act and is deemed by both parties to be fair and
reasonable.
18. APPLICABLE LAW AND DISPUTE RESOLUTION
To the full extent controllable by stipulation of the parties, this Agreement
shall be interpreted under Colorado law. All disputes arising out of this
Agreement will be settled by binding arbitration in Denver, Colorado with a
representative of the American Arbitration Association.
IN WITNESS THEREOF, DCX, Inc. has caused this Agreement to be executed by its
duly authorized representatives and Executive has affixed his signature, with
effect from the date first above written.
Dated: March 28, 1997
For DCX, Inc. Executive
/S/ /S/ /S/
G. Stephen Carreker D. Scott McReynolds Frederick G. Beisser
President and CEO Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 428,580
<SECURITIES> 0
<RECEIVABLES> 1,634,999
<ALLOWANCES> 0
<INVENTORY> 1,266,668
<CURRENT-ASSETS> 3,455,803
<PP&E> 2,040,246
<DEPRECIATION> 813,188
<TOTAL-ASSETS> 4,837,861
<CURRENT-LIABILITIES> 2,705,836
<BONDS> 24,060
270,000
0
<COMMON> 5,271,440
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<TOTAL-LIABILITY-AND-EQUITY> 4,837,861
<SALES> 2,537,164
<TOTAL-REVENUES> 2,537,164
<CGS> 2,059,827
<TOTAL-COSTS> 531,631
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 69,764
<INCOME-PRETAX> (54,294)
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<INCOME-CONTINUING> (54,294)
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