UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(MarkOne)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
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Commission file number 0-14273
DCX, INC.
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(Name of small business issuer)
Colorado 84-0868815
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1597 Cole Boulevard, Suite 300B, Golden, Colorado 80401
(Address of principal executive offices) (Zip code)
Issuer's telephone number (303) 274-8708
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of each class
Common Stock, no par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities and Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $71,098.03.
As of December 31, 1997, the aggregate market value of the shares of the
issuer's voting stock held by non-affiliates of the issuer based on the average
of closing bid and asked prices of the Common Stock as reported on the NASDAQ
Small Cap Market sm, was approximately $5,485,775.
As of December 31, 1997, the issuer had outstanding 9,010,776 shares of Common
Stock.
Transitional Small Business Disclosure Format: Yes [ ] ; No [ X ]
Exhibit index begins on page 16 Total number of pages in this report is 47.
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PART I
This annual report contains forward-looking statements that describe the
business and prospects of DCX, Inc. (the "Company") and the expectations of the
Company and management. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
set forth. These risks and uncertainties include but are not limited to: the
timing of and expense associated with, expansion and modification of the
Company's operations in accordance with its business strategy or in response to
competitive pressures or other factors arising in the future. All statements
other than statements of historical fact included in this annual report,
including without limitation, expected growth of the domestic and global
geographical information systems markets, beliefs regarding the strength of the
Company's market position with respect to new or contemplated business
strategies and activities, expectations regarding availability and marketability
of new digital imaging products, anticipated growth in the Company's revenue and
profitability, cash operating costs and certain significant expenses, and
potential acquisitions of, or strategic partnering with, other geographic
information system providers, are forward-looking statements. Factors that could
cause actual results to differ materially include, among others, the entry of
new companies into the geographic information systems business, unanticipated
competition from new strategic alliances in the industry, increased price
competition from software manufacturers and affiliated vendors, decreased
reliance on custom design software services, shifts in governmental policy on
the availability of government-owned data and difficulties in hiring and
retaining sufficient numbers of professional and other skilled personnel. All
forward-looking statements included in this annual report are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update such statements. Although the Company believes that the
assumptions and expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct or that the Company will take any actions that may presently be
planned.
Item 1 - DESCRIPTION OF BUSINESS
(a) Business Development.
DCX, Inc. (the "Company") was incorporated as a Colorado corporation on December
8, 1981. During the past three years the Company has been in the custom design
and contract manufacture of aircraft related electronic interconnect assemblies,
principally under contracts for Department of Defense acquisition programs or
for military aircraft maintenance support. The Company has also sought to expand
and diversify its business and as a result, on September 22, 1997 it acquired
all the outstanding shares of PlanGraphics, Inc. a geographic information
systems ("GIS") company headquartered in Frankfort, Kentucky. Subsequently, on
October 8, 1997 the Company closed the sale of its defense electronics
manufacturing assets which was effective September 30, 1997. Accordingly, as of
the date of this report, the Company's principal business is carried out through
its wholly owned subsidiary, PlanGraphics, Inc. ("PGI"). PGI's principal
business is the design and implementation of geographic information systems for
local, state and foreign governments, gas, electric and telephone utilities, and
other commercial entities. PGI is a Maryland corporation and was originally
incorporated in 1979.
(b) Business of Issuer
Discontinued operations.
Until recently, the Company historically provided custom manufacturing services
and products to the aerospace and commercial markets and was successful in
increasing revenues and diversifying its customer base. The Company focused
primarily on the engineering design, development, test and custom manufacture of
medium technology electrical, electronic and electromechanical assemblies and
systems. The Company also manufactured wire harnesses and cable assemblies for
use by industrial, commercial, computer and communications industries and for
the Federal Government.
Ongoing operations.
The Company specializes in the design and implementation of geographic
information systems ("GIS"). GIS combines computer-based interactive map
displays with database management software to analyze and display spatial data.
The digital GIS files manipulated by software become powerful tools, which
enable public and private sector users to save money and improve operating
efficiencies. GIS is being adopted for an increasing range of commercial
applications as computer technology costs decline. The Company is a fully
integrated GIS implementer providing services in three areas:
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1. Advisory services including strategic planning, feasibility studies,
implementation planning and technology evaluation.
2. Implementation services including the procurement, installation,
training, operation and development of GIS applications for clients.
3. Data integration services including quality control, custom database
construction and maintenance, and data dissemination to facilitate the
use of GIS data by technical and other users with a need for resulting
information.
GIS applications and services have become decision making tools for utilities,
local and state government agencies, and land and resource management
organizations in a wide range of applications, including land management,
mineral exploration, crop management and forecasting, environmental remediation,
military planning and surveillance, infrastructure development and construction,
and business market analysis. The domestic GIS market is presently estimated in
excess of $2 billion and the worldwide market in excess of $6 billion.
The Company has three sales managers and also develops additional business and
follow-on assignments through its account executive managers. In addition, the
Company maintains strategic relationships with substantially all of the major
software manufacturers in the GIS industry.
The market for GIS services is divided into two broad categories--the government
sector, which includes agencies at all levels and is presently the larger of the
two categories, and the commercial sector. The GIS market is highly competitive
and the Company competes with a number of companies engaged in offering similar
services. Competition emanates from four principal sources: competing GIS
services companies with financial ties to software vendors, the internal
consulting practices of GIS software vendors, engineering firms, and small GIS
specialty firms. Some of these competitors are better funded and some of them
are small companies with much lower indirect costs. The Company believes it
competes effectively on the basis of breadth and depth of expertise,
independence, and sensitivity to the client's requirement for responsiveness and
timeliness; however, there can be no assurance that the Company will be able to
compete successfully in the future on these terms.
The Company regards as proprietary certain of its developed software
applications, and attempts to protect these with a combination of copyright,
trademark and trade secret laws, employee and third party nondisclosure
agreements, and other methods of protection. As in any attempt to protect
proprietary matters, despite precautions it may be possible for unauthorized
third parties to copy certain portions of the Company's products or reverse
engineer or obtain and use information the Company regards as proprietary. There
can be no assurance that the Company's intellectual property rights can be
successfully asserted in the future or will not be invalidated, circumvented or
challenged. In addition, the laws of some foreign countries do not protect
proprietary rights to the same extent as do the laws of the United States. Any
misappropriation of the Company's intellectual property could have an adverse
effect on the Company's business and results of operations. Furthermore,
regardless of the degree of caution exercised by the Company, there can be no
assurance that third parties will not assert infringement claims against the
Company in the future with respect to current or future products. Any such
assertion could require the Company to enter into royalty arrangements or defend
its proprietary rights.
Historically PGI has had some concentration of revenue in certain customers.
During the current fiscal year 25 percent of its sales were concentrated in one
customer and during fiscal year 1996 35 percent of its sales were concentrated
in that customer, the loss of which customer could have an adverse impact. Given
the contract awards received subsequent to fiscal year end, management believes
that no single customer will constitute more than 15 percent of revenue during
fiscal year 1998.
The Company has incurred only diminimis costs in complying with environmental
laws.
Presently the Company employs a total of 84 full time employees.
Item 2 - DESCRIPTION OF PROPERTY
The Company leases commercial property suitable for its purposes in several
locations. The Company leases land and a building of approximately 20,500 square
feet in Frankfort, Kentucky under a triple net capital lease. It also leases
office space in Golden, Colorado of approximately 4,918 square feet and in
Silver Spring, Maryland, of approximately 3,854 square feet.
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The Company owns rental property, its former manufacturing facility, which is a
34,000 square foot facility located on a 9.45 acre site on State Highway 83,
north of Franktown, Colorado, between Denver and Colorado Springs. The Company's
property is subject to a mortgage as indicated in the financial statements
included in this report. (See also Note Four to the Financial Statements) The
facilities are leased to a third party through March, 1998 with options to
extend and to an unrelated child care center operator through July, 1998. The
third party has an option to buy the entire facility for $1.5 million through
the earlier of October 31 of 1998 or 60 days following vacation of the portions
occupied by the child care center. In addition, the third party has a right of
first refusal to match any offer through June 30, 2000.
Item 3 - LEGAL MATTERS
The Company has appealed the Government's assessment of excessive reprocurement
costs against the Company on a manufacturing contract terminated for default in
1988. The appeal of the default termination was unsuccessful. The Company has a
reserve of approximately $521,000 for the effect of a possible loss of this
assessment appeal. The trial was scheduled for March 3, 1998, but has been
postponed to an unspecified date. (See Note Six to Financial Statements and Item
6, Management Discussion and Analysis).
The Company is engaged in various other litigation matters from time to time in
the ordinary course of business. The Company believes the outcome of any such
litigation will not have a material effect on the Company.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Since June 10, 1989, the Company's common stock has been traded on the
National Association of Securities Dealers Automated Quotation ("NASDAQ") system
where it now trades on the NASDAQ Small Cap Systemsm under the symbol DCXI. Such
quotations reflect interdealer prices without retail markup, markdown, or
commission, and may not necessarily represent actual transactions. The quarterly
range of high and low bid prices per share for the past two fiscal years have
been as follows:
Bid Price
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Quarter Ended High Low
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September 30, 1995 1.63 .72
December 31, 1995 1.59 1.13
March 31, 1996 1.04 .40
June 30, 1996 6.00 .56
September 30, 1996 3.40 1.24
December 31, 1996 2.56 .44
March 31, 1997 1.46 .48
June 30, 1997 1.56 1.16
September 30, 1997 2.24 1.20
As of December 31, 1997, the Company believes there are approximately 3,800
beneficial owners of the Company's stock of which 2,239 are registered with the
transfer agent and the balance are held in street name. The Company has never
paid a cash dividend on its common stock. The Company currently intends to
retain any earnings for use in business development.
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(b) During fiscal year 1997 the Company sold its Series A 6% cumulative
Convertible Redeemable Preferred Stock par value $.001 ("Series A Preferred") in
several private placements to offshore investors in order to restructure debt
and to carry out its plans to move the Company forward. Terms of the Series A
Preferred provide for cumulative dividends at a 6% annual interest rate payable
payable in cash or, at the option of the Company, in additional shares of Series
A Preferred at the rate of one share of Series A Preferred for each $1,000 of
such dividend not paid in cash. The dividends are cumulative whether or not
earned. The Series A Preferred has a stated value of $1,000 per share. The
Series A Preferred do not have voting rights.
(1) On November 12, 1996, the Company sold a total of 500 shares of Series
A Preferred, pursuant to Regulation S. The total offering price was
$500,000. First Capital Partners, Inc., Atlanta, GA, acted as the
Company's placement agent for the transaction. The sale was made in a
private offshore transaction to two non-US funds who represented to
the Company that they were sophisticated investors. The Company paid a
commission of ten percent of the total offering price, and also agreed
to issue to First Capital Partners warrants to purchase 36,281 shares
of the Company's no par value common stock. The warrants are
exercisable until November 12, 1998, with an exercise price of $1.875
per share. The warrants were issued in a private offering exempt from
registration under Section 4(2) of the Act based on the possession of
relevant investment information by, and the investment intent of, the
warrant recipient. The holders of the warrants, and the holders of the
500 shares of Series A Preferred which have since been converted into
common stock each have a demand and piggy back registration right if
necessary to permit the public sale of the underlying common stock.
(2) On July 31, 1997, the Company sold a total of 650 shares of its Series
A Preferred, pursuant to Regulation S. The total offering price was
$650,000 and the sale was made in a private offshore transaction to
two non-US entities who represented to the Company that they were
sophisticated investors. Intercontinental Holding Corp., Atlanta, GA
acted as the Company's placement agent for the transaction. The
Company paid total commissions of 15% of the total offering price, and
also agreed to issue to Intercontinental Holding Corp. warrants to
purchase 97,500 shares of the Company's no par value common stock. The
warrants are exercisable through August 1, 2000 with an exercise price
of $1.875 per share. The warrants were issued in a private offering
exempt from registration under Section 4(2) of the Act the possession
of relevant investment information by, and the investment intent of,
the warrant recipient. The holder of the warrants and the holders of
the 650 shares of Series A Preferred, which has since been converted
into common stock, each have a demand and piggy back registration
right if necessary to permit the public sale of the underlying common
stock.
(3) On September 9, 1997, the Company sold a total of 800 shares of its
Series A Preferred, pursuant to Regulation S. The total offering price
was $800,000 and the sale was made in a private offshore transaction
to two non-US entities who represented to the Company that they were
sophisticated investors. LH Financial of New York, NY acted as the
Company's placement agent for the transaction. The Company paid total
commissions of 15% of the total offering price. The holders of the 650
shares of Series A Preferred, some of which has since been converted
into common stock each have a demand and piggy back registration right
if necessary to permit the public sale of the underlying common stock.
(4) On September 18, 1997, the Company sold a total of 200 shares of its
Series A Preferred, pursuant to Regulation S. The total offering price
was $200,000 and the sale was made in a private offshore transaction
to a non-US fund who represented to the Company that it was a
sophisticated investor. LH Financial of New York, NY acted as the
Company's placement agent for the transaction. The Company paid total
commissions of 15% of the total offering price. The holders of the 200
shares of Series A Preferred, some of which has since been converted
into common stock, each have a demand and piggy back registration
right if necessary to permit the public sale of the underlying common
stock.
(5) On October 14, 1997, the Company sold a total of 250 shares of its
Series A Preferred, pursuant to Regulation S. The total offering price
was $250,000 and the sale was made in a private offshore transaction
to two non US entities who represented to the Company that they were
sophisticated investors. LH Financial of New York, NY acted as the
Company's placement agent for the transaction. The Company paid total
commissions of 15% of the total offering price. The holders of the 250
shares of Series A Preferred, some of which has since been converted
into common stock, each have a demand and piggy back registration
right if necessary to permit the public sale of the underlying common
stock.
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Shares of Series A Preferred Stock have the following conversion rights:
(1) Each holder of shares of Series A Preferred Stock shall have the right at
any time and from time to time after forty (40) days, or longer period which may
have been agreed to, from the date on which a share of Series A Preferred Stock
was issued, to convert some or all such share into fully paid and non-assessable
shares of Common Stock of the Corporation determined in accordance with the
Conversion Rate provided in Paragraph (b) below (the "Conversion Rate").
(2) The number of shares Common Stock issuable upon conversion of each share of
Series A Preferred Stock shall equal (I) the sum of (A) the Stated Value per
share and (B) accrued and unpaid dividends on such share, divided by (ii) the
Conversion Price. The Conversion Price shall be equal to the lessor of: (I) the
average of the Closing Bid Price (as hereinafter defined) of the Corporation's
Common Stock for the five (5) trading days immediately preceding the date of
issuance of the Series A Preferred Stock; and (ii) seventy five percent (75%) of
the average of the Closing Bid Price for the five trading days immediately
preceding the conversion of the Series A Preferred Stock. The Closing Bid Price
shall mean the Closing bid price of the Corporations Common Stock as reported by
NASDAQ (or if not reported by NASDAQ as reported by such other exchange or
market where traded).
The Series A Preferred is subject to mandatory conversion two years after the
date of issue.
The preceding private sales of the Series A Preferred were exempt from
registration under Regulation S. The sales were made in offshore transactions to
non US persons or entities, and the purchasers made representations to the
Company regarding their status and actions necessary to comply with Regulation
S.
On September 22, 1997, the Company and PGI consummated the transaction whereby
PGI became a wholly-owned subsidiary of the Company, pursuant to an agreement
whereby the existing stockholders of PGI exchanged their shares of PGI common
stock for shares of the common stock of the Company at an exchange ratio of
2.4476 shares of Company common stock for each share of outstanding PGI common
stock. A total of 2,631,145 shares of Company common stock were issued to the
former holders of PGI common stock in a Regulation D transaction exempt from
registration under Section 3(b) of the Act.
The Company has issued shares, and warrants and options to acquire shares, of
its common stock to various persons and entities in connection with the payment
by the Company of consulting fees and other accounts payable or Company debt. In
each instance, the shares, or warrants or options and the underlying shares were
offered by the Company in a private offering exempt from registration under
Section 4(2) of the Act, based upon the possession by the recipient of relevant
investment information regarding the Company, and the investment intent of the
recipient. These shares, warrants and options consist of the following:
1. On February 20, 1997, warrants to Transition Partners Ltd. in connection
with financial advisory services, to acquire up to 111,260 shares of the
Company's common stock at an exercise price of $1.00 per share, exercisable in
full as of the grant date for five years from the grant date.
2. On February 20, 1997, warrants to Copeland Consulting Group, Inc. in
connection with financial advisory services, to acquire up to 111,260 shares of
the Company's common stock at an exercise price of $1.00 per share, exercisable
in full as of the grant date for five years from the grant date.
3. On June 19, 1997, warrants to Spencer Edwards, Inc. in connection with
financial advisory services, to acquire up to 120,000 shares of the Company's
common stock at an exercise price of $2.25 per share, exercisable through the
earlier of June 30, 1999 or a change in control of the Company as defined in the
warrant agreement.
4. On June 26, 1997, non-transferable options to Pension Fund of Steven
R. Perles, P.C. in connection with legal services, to acquire up to 32,510
shares of the Company's common stock at an exercise price of $1.25 per share,
exercisable in full as of the grant date for one year from the grant date.
5. On June 26, 1997, non-transferable options to RDD Enterprises, Inc. in
connection with consulting services, to acquire up to 100,905 shares of the
Company's common stock at an exercise price of $1.54 per share, exercisable in
full as of the grant date for one year from the grant date.
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6. On June 26, 1997, non-transferable options to Hamilton & Faatz, P.C. in
connection with legal services, to acquire up to 24,235 shares of the Company's
common stock at an exercise price of $1.54 per share, exercisable in full as of
the grant date for one year from the grant date.
7. On June 26, 1997, warrants to SKB Corporation in connection with a trade
payable, to acquire up to 74,033 shares of the Company's common stock at an
exercise price of $1.3929 per share, exercisable through July 31, 1998.
8. On September 22, 1997, 170,531 shares of the Company's common stock to
Black & Veatch Holding Company, a creditor and former shareholder of PGI, valued
at the price of $1.70 per share.
11. On September 30, 1997, 100,000 shares of the Company's common stock to
First Capital Partners, a financial advisor to the Company, valued at the price
of $1.6875 per share.
12. On September 16, 1997, 32,895 shares of the Company's common stock to
Transition Partners, Ltd. for acquisition success fees, valued at the price of
$1.52 per share.
13. On September 16, 1997, 32,895 shares of the Company's common stock to
Copeland Consulting Group, Inc. for acquisition success fees, valued at the
price of $1.52 per share.
14. On October 15, 1997, anti-dilution warrants to Transition Partners Ltd.
to acquire up to 193,064 shares of the Company's common stock at an exercise
price of $1.00 per share, exercisable upon and to the extent of additional
issuances of shares of common stock by the Company after January 1, 1997.
15. On October 15, 1997, anti-dilution warrants to Copeland Consulting
Group, Inc. to acquire up to 193,064 shares of the Company's common stock at an
exercise price of $1.00 per share, exercisable upon and to the extent of
additional issuances of shares of common stock by the Company after January 1,
1997.
Item 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition (Liquidity and Capital Resources)
The following discussion of liquidity and capital resources addresses the
combined requirements and sources of the Company and its subsidiary as of
September 30, 1997.
Liquidity
At September 30, 1997, the Company had net working capital of ($413,041) and its
current ratio was .91:1; cash balances available for use amounted to $582,326.
Compare with net working capital in the prior year of $56,776 when the current
ratio was 1.02:1 and cash balances available for use amounted to $209,637. The
decrease in working capital is associated with the assumption of additional
current liabilities in the acquisition of PGI.
Changes in cash during fiscal year 1997 resulted in a net increase of $372,689
as compared to an increase during fiscal year 1996 of $83,793. The primary cause
for the greater increase of cash was $1,838,000 provided by the sale of
convertible preferred stock pursuant to Regulation S which was used to liquidate
a Small Business Administration held note and to provide working capital for the
new subsidiary.
The Company also refinanced its real property in Franktown, Colorado and as a
result realized approximately $195,000 of net proceeds that it used as working
capital for cash needs of the Company.
The Company has, at the end of FY 1997, capital lease payment commitments
through 2002 of $1,850,000 which will require total annual payments of
approximately $410,000 in fiscal year 1998. (See Note Eight to the Financial
Statements) The Company considers its facilities adequate to support anticipated
sales and operations for the next several years; accordingly, no commitments for
additional facilities expansion have been entered into for the twelve months
ending September 30, 1998.
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In order to carry out its plans during fiscal year 1998, the Company believes it
will need to raise additional funds through equity or debt placements in order
to meet its cash needs until it can operate on internally generated cash flows.
There is no guarantee the Company will be successful in raising such additional
funds.
The Company does not believe that its business has been significantly impacted
during the past three years by cost inflation.
As a result of SEC guidance issued in early 1997 with respect to beneficial
conversion features in connection with the issuance of convertible preferred
stock, the Company was deemed to recognize noncash preferred stock dividends
totaling approximately $892,592 in fiscal year 1997. This amount is equivalent
to the discount from the fair market value of the common stock given to the
purchasers of the Preferred Stock calculated as of the date of sale of such
stock.
Going Concern Issues
As a result of losses from operations (including cost of acquisitions and
restructuring), a forthcoming required balloon payment related to the
subsidiary's debt, and the deceleration in fourth quarter revenues, negative
working capital and limited ability to convert certain portions of current
assets into liquid assets, the report of the Company's independent certified
accountant includes a comment concerning substantial doubt about the Company's
ability to continue as a going concern. (See also, Note One to the Financial
Statements).
Management's plan to continue operation of the Company consists of the
following:
The Company has negotiated an agreement with a respected and prominent
investment banking organization and anticipates signing an agreement in the near
term to obtain a credit facility to support operating capital needs and
additional acquisitions.
Raise funds through the placement of additional debt or equity instruments, of
which there can be no assurance.
Expected increases in FY 1998 second quarter cashflows related to revenues
resulting from $4.1 million of new contracts awarded during the first quarter of
FY 1998.
Capital Resources
In order to fund its first successful acquisition as an asset purchase and to
secure working capital required to implement the related business plan to
support Company's capital resource needs, the Company previously took actions to
increase its exposure to the investment banking community by apprising relevant
principals of its diversification activities, acquisition program and other
business development endeavors designed to result in new business. The Company
then secured needed financing through the placement of equity pursuant to
Regulation S, as noted supra. An additional placement of equity or debt or the
successful negotiation of a working line of credit will be needed to meet
projected cash demands, of which there can be no assurance.
Results of Operations
The following discussion of Results of Operations addresses the Company's
operations in three sections in light of: (1) its acquisition of PlanGraphics,
Inc. which constitutes its Continuing Operations, (2) the sale of its defense
electronic manufacturing operations which were sold effective September 30,
1997, and therefore constitute its Discontinued Operations, and (3) the "Pro
Forma" results of operations had the acquisition and the sale occurred at the
beginning of the fiscal year. See also the forward looking statement disclaimer
in Part I as it pertains to nonfactual and nonhistorical statements appearing
within this section.
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Continuing Operations--Fiscal Year 1997 compared to 1996
The financial statements have been presented to display the costs related to the
administrative functions of the Company for both the current and prior year
which are related to those activities continuing in operation and incorporate
the eight days of subsidiary operations in September subsequent to the
acquisition.
Limited revenue of $71,098 was reported for the eight-day period from the
closing date for the purchase of PlanGraphics, Inc. through September 30, 1997
while costs and expenses for the same period amounted to $164,550 and resulted
in an operating loss of $93,452. There was no comparable revenue for the prior
year.
The increase in Costs and Expenses from FY 1996 to FY 1997 results primarily
from two factors: (1) the effects of applying APB 25, Accounting for Stock
Issued to Employees, which resulted in $612,205 of compensation expense related
to stock options granted to PGI employees pursuant to the Acquisition Agreement
and certain stock options granted to the Company's officers and directors which
were below market value on the date of grant; and (2) the effects of applying
FASB 123, Accounting for Stock-Based Compensation, which resulted in $439,106 of
compensation expense for consulting services received by the company during the
fiscal year over that of the prior year. These increases from the prior year
were offset by decreases in administrative salaries, benefits and expenses
during the current fiscal year for the discontinuation of activities and
transfer of certain employees to the purchaser of the manufacturing operation.
Other income increased significantly over the prior year as a result of the
receipt of key man life insurance proceeds of $400,000 due to the death of the
former Chairman of the Company. Concurrently, interest expense declined $29,494
as a result of less interest bearing debt during the year and forgiveness of
debt was $278,069 due to the liquidation of the note held by the SBA, $195,243
higher than the similar type of gain recorded in the prior year.
The loss on discontinued operations of $1,598,313 results from the difference
between the purchase price paid for the manufacturing operations by the buyer
and the net book value of inventories, work in process, capital and leased
equipment given up in the transaction plus the write off of obsolete inventories
and accounts receivable determined to be uncollectible.
During the fourth quarter, the Company recorded approximately $679,000 of
adjustments as delineated in Note 13 of the Financial Statements.
Discontinued Operations--Fiscal Year 1997 Compared to 1996
Sales in the discontinued defense electronic manufacturing operation increased
$717,545 or 16 percent from fiscal year 1996 to fiscal year 1997 reaching
$5,128,137. Management believes the increase resulted from continued
consolidation in the defense arena causing prime contractors to increase
outsourcing of component subassemblies as a means of controlling and reducing
their manufacturing costs. As of November 30, 1997 the Company had already sold
the manufacturing operation and therefore had no open manufacturing contracts.
At the same date a year prior, open contracts were valued at $7.6 million with
$5.7 million of backlog still to be completed
Cost of sales for fiscal year 1997 increased $892,240 over fiscal year 1996 to a
total of $4,435,236 for fiscal year 1997. Considered as a percent of sales the
level, 86.5%, increased slightly from the prior year's 80.3% of sales. The
increase is attributable to work performed on engineering changes which had not
been incorporated into contract changes and therefore did not result in
additional revenue recognition.
General and administrative expenses of $591,728 attributable to discontinued
manufacturing operations reflect a significant decrease in excess of $700,000
from the fiscal year 1996 total of $1,329,002 as a result separating certain
items into the continuing operations category. The prior year total included
approximately $151,319 attributable to costs of attempted acquisitions.
Litigation settlement and related expenses were not repeated and therefore
resulted in a decrease of $446,674 from the prior year.
Pro-Forma - Fiscal Year 1997 Compared to 1996
Following discussion addresses results of operations as presented in the
pro-forma financial statements for the Company and its operating subsidiary,
PlanGraphics. Revenue figures are based upon those of the subsidiary while the
Company's former contract electronics manufacturing revenues are embedded within
the caption for loss from discontinued operations. Readers of this report should
9
<PAGE>
also consider that PGI financial statements represent 12 months of operations
for FY 1997 and only nine months for FY 1996 as PGI changed their fiscal year
end from December 31 to September 30.
Revenue for fiscal year 1997 was $8,204,236 compared with $7,985,750 for the
period ended September 30, 1996, an increase of $218,486 or 2.7% over the prior
year. The limited increase in sales is associated with the winding down of a
significant major contract and the unforeseen delay in the startup of
replacement contract activity.
Total costs and expenses was $8,796,964, or 107.2% of revenue or an increase of
$1,576,493, or 21.8%, over the prior year cost of sales; the cause for this
apparent increase in cost and expenses is two-fold; partially from 12 months of
expenses which are, to a significant degree, fixed costs and the short nine
month fiscal year for 1996.
Marketing and proposal costs increased slightly to a current year cost of
$332,077 as compared to $317,659 for an increase of 4.5% over the prior year.
This increase was due to supporting a more focused marketing activity which has
resulted in the award of $4.1 million of new contract work subsequent to the end
of the fiscal year.
Interest expense amounted to $425,923 during fiscal year 1997 as compared to
$297,064 during the prior year. The reason for this 43.4% increase was a
$107,000 increase in capital lease interest costs arising from the 12 month
occupancy of the PGI Frankfort, KY facilities versus eight months of lease for
the facility during the prior fiscal year. In addition, other interest costs
reflect the differences caused by a 12 month fiscal year rather than nine months
partially offset by a reduction in debt.
Income tax for the year resulted in a benefit of $4,409 as compared to an
expense of $176,469 in the prior year. The change was related to the decline in
profitability.
Primarily as a result of the reduction in accounts receivable from collections
and the decelerated revenue generation, current assets decreased $416,641, or
18.0%, from $2,310,476 in the prior year to $1,893,835 in the current year.
Operations Outlook.
With the move into the GIS industry the Company believes it has entered into a
global market, which is rapidly evolving and becoming the basis for a myriad of
new applications creating additional markets. The Company believes the gross
profit margins are much higher than manufacturing and plans to grow the GIS
business base at rates up to 25 percent per year according to forward looking
statements in its business plan, augmenting growth achieved through
acquisitions.
Subsequent to fiscal year end, the Company has received new contract and project
awards of approximately $4.1 million bringing its backlog of uncompleted GIS
contracts and awarded work to approximately $7.5 million. Management believes
this is a result of a more focused marketing and sales program. As the same date
in the prior year, the Company had approximately $6.3 Million of GIS backlog.
Currently, the Company plans to expand through additional acquisitions.
Tax Valuation Allowance - FY 1997
As discussed in Note Seven in the accompanying financial statements, the Company
has net operating loss carry forwards for income tax purposes of approximately
$2.7 million. The Company has established a 100 percent valuation allowance on
the net deferred tax asset arising from the loss carry forwards in excess of the
deferred tax liability. The valuation allowance has been recorded as the
Company's management has not been able to determine that it is more likely than
not that the deferred tax assets of the Company will be realized.
Year 2000 Effect
The Company presently believes that with planned modifications to existing
software and anticipated conversions to new software, the Year 2000 problem will
not pose significant operational problems for the Company's computer systems as
so modified and converted. However, were such modifications and conversions not
accomplished on a timely basis, the Year 2000 problem may have a material impact
on the operations of the Company.
10
<PAGE>
Effect of Recent Accounting Pronouncements.
The recent issuance of five accounting pronouncements will affect the Company in
FY 1998 (see the Financial Statements, Summary of Accounting Policies). The
adoption of these pronouncements by the Company will occur in fiscal year 1998
and they are not expected to have a material effect on the consolidated
financial statements. The pronouncements are:
Statement of Financial Accounting Standard ("SFAS") No. 128, Earnings per Share.
This pronouncement provides a different method of calculating earnings per share
which requires the calculation of "Basic" and "Dilutive" earnings per share.
SFAS 129, Disclosure of Information About an Entity's Capital Structure,
establishes standards for disclosing information about an entity's capital
structure.
SFAS 130, Reporting Comprehensive Income, establishes standards for reporting
and display of comprehensive income, its components and accumulated balances.
Comprehensive income includes all changes in equity except those resulting from
investments by owners and distributions to owners. SFAS 130 further requires
that all items required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement
displayed with the same prominence as other financial statements.
SFAS 131, Disclosures about Segments of an Enterprise and Related Information,
supersedes SFAS 14 and establishes the way public companies report information
about operating segments in annual financial statements, requires reporting of
selected information about operating segments in interim financial statements
issued to the public, sets standards for disclosures regarding products and
services, geographic areas and major customer. It further defines operating
segments used to allocate resources and assess performance.
Statement of Position 97-2, Software Revenue Recognition, provides guidance on
when revenue should be recognized and in what amounts for licensing, selling,
leasing or other marketing of computer software.
Item 7 - FINANCIAL STATEMENTS
The financial statements required by this item are included at the end of this
Form 10-KSB. An index to such financial statements and applicable schedules is
contained in that separate section.
Item 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 9 - DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of the Company are:
Name Age Position
---- --- --------
Jeanne M. Anderson 46 Director
John C. Antenucci 51 Vice Chairman, President and Director
Frederick G. Beisser 55 Vice President - Finance and
Administration, Secretary, Treasurer
and Director
Stephen Carreker 47 Chairman, CEO and Director
Raymund E. O'Mara 56 Director
J. Gary Reed 49 Director
11
<PAGE>
NOTES:
Ms. Jeanne M. Anderson is a former President and CEO of the Company. She served
as President and Chief Executive Officer from October 1, 1991 through December
31, 1996. She was Chairman of the Board of Directors from January 1, 1997
through October 2, 1997 and has been a Director of the Company continuously
since 1987.
Mr. John C. Antenucci, President, is also founder, president and CEO of
PlanGraphics, Inc. since 1979. He is a former president of AM/FM International,
a professional association for utility industry users of GIS. He is also a
former member of the National Academy of Sciences Advisory Committee for Mapping
Sciences, an advisor to Ohio State University's Center for Mapping and editor of
a leading textbook on geographic information systems. Mr. Antenucci holds an MS
in Civil Engineering/Water Resources from Catholic University of America in
Washington, DC and a Bachelor of Civil Engineering from the same institution.
Mr. Frederick G. Beisser, Vice President - Finance and Administration, joined
the Company as Chief Financial Officer in July, 1990 and was promoted to his
present position on March 28, 1997. He was appointed to the Board of Directors
in March, 1991, at which time he became Treasurer and was appointed Secretary on
October 1, 1991. Mr. Beisser is a Colorado Certified Public Accountant.
Previously he headed Budget & Cost Analysis for the Air Force Accounting &
Finance Center in Denver, Colorado, from 1985 to 1989. He held Air Force budget
management positions in Europe, and controller and accounting positions with the
Air Force in the United States and abroad. Retired with the rank of Major in
1989, he holds a Ph.D. from American International University in Canoga Park,
California, an MBA from Golden Gate University in San Francisco and a BS in
Business Administration from the University of Southern Colorado at Pueblo,
Colorado. In addition he has diplomas from the Air War College and the Air
Command & Staff College.
Mr. Stephen Carreker, Chairman and CEO, became a director of the Company on
December 12, 1995. He was Director of Strategic Planning until he became
President and Chief Executive Officer effective January 1, 1997. On October 2,
1997 he became Chairman and CEO. Prior to joining the Company he was manager of
the geographic information systems department of IDS/IBM Manama, Bahrain; was
Vice President, Geonex Corporation, Inc., and GIS Project Manager for Gwinnet
County, Georgia. Mr. Carreker has over 20 years of domestic and international
GIS experience. He holds a Bachelor of Landscape Architecture from the
University of Georgia and was a Georgia-licensed landscape architect.
Mr. Raymund E. O'Mara was appointed a director on November 3, 1997. He is a
principal with Booz Allen & Hamilton, consultants since 1996. Prior to joining
Booz Allen & Hamilton Mr. O' Mara was vice president of Mason and Hanger
Company, Lexington, Kentucky from 1994 to 1996. Mr. O'Mara retired from the
United States Air Force in 1994 with the rank of major general; from 1993 until
his retirement he was Director, Defense Mapping Agency, Bethesda, Maryland and
prior to that was Vice Commander in Chief, Atlantic Command, Norfolk, Virginia
for two years. Mr. O'Mara holds a Master of Arts from State University of New
York at Plattsburgh, NY and BS in Electrical Engineering from the New Jersey
Institute of Technology at Newark.
Mr. J. Gary Reed, Chief Operating Officer of PlanGraphics, Inc. has been
employed with PlanGraphics in several capacities since 1995. Prior to joining
them he held several executive positions during a 15 year career with Geonex
Corporation and was named President of the corporation in 1994. Mr. Reed holds
an MBA from the Keller Graduate School of Management in Chicago and a BS in
Biology from Virginia Polytechnic Institute and State University in Blacksburg,
Virginia.
All directors hold office until the next annual meeting of shareholders and
serve until their successors are duly elected and qualified or until their
earlier death, resignation or removal.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 submitted to the Company during
and with respect to its most recent fiscal year, the Company believes that with
the exception of Mr. Antenucci, all directors, officers and any beneficial owner
of more than 10 percent of its registered shares are in compliance with Section
16(a) of the Exchange Act. Mr. Antenucci's Form 3 was not timely filed with the
Securities and Exchange Commission.
12
<PAGE>
Item 10 - EXECUTIVE COMPENSATION
The following table sets forth information concerning the cash compensation paid
and accrued by the Company for services rendered during the fiscal year ending
September 30, 1997, to the CEO and other executive officers of the Company who
had aggregate compensation exceeding $100,000. Ms. Anderson was President and
CEO through December 31, 1996 when Mr. Carreker became President and CEO on
January 1, 1997. On November 3, 1997 the position of president was assumed by
Mr. Antenucci while Mr. Carreker remained CEO and became Chairman of the Board
of Directors. Eight days of compensation was paid to Mr. Antenucci as an
employee of DCX, Inc. during fiscal year 1997 subsequent to the acquisition of
PlanGraphics, Inc. although the table, below, reflects his entire compensation
during the year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
- ------------------------------------------------------------------ --------------------------------------------
Name and Other Restricted Stock All Other
Principal Annual Comp- Stock Options Compen-
Position Year Salary ($) Bonus ensation Awards (#) sation ($)
---------- ---- ---------- ----- ---------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeanne M. 1997 $ 48,317 - $58,000# - 111,000 $ 435
Anderson 1996 116,018 - - - - 1,740
1995 116,018 - - - 75,000 1,740
Stephen 1997 $ 106,958 - - - 660,622 -
Carreker
John C.
Antenucci 1997 $114,500 - 20,407* - 531,851 2,361
</TABLE>
# Amount of $58,000 Other Annual Compensation represents severance
payment in connection with Ms. Anderson's resignation as President and
CEO.
* Amount of Other Annual Compensation represents payment of certain
deferred compensation accrued in prior fiscal years for Mr. Antenucci.
@ Amounts of All Other Compensation represents the Company's employer
contribution to 401K Retirement Savings Accounts.
The Company granted a total of 175,000 stock options to officers of the Company
during fiscal year 1995 under the 1991 Stock Option Plan. None were granted in
fiscal year 1996. A total of 30,000 stock options were issued to officers of the
Company under the 1991 Stock Option Plan during fiscal year 1997. In addition,
the Company granted incentive stock options in connection with officers'
employment agreements amounting to 1,490,000 and 61,000 to a director during the
fiscal year. As a result of antidilution provisions in employment agreements,
380,657 additional options were granted to officers of the Company during FY
1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees In Exercise or Base Expiration
Name Granted Fiscal Year Price ($/Sh) Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jeanne M. 61,000 1.9% $1.125/Share March 27, 2002
Anderson 50,000 (3) 1.4% $ 0.71875/Share January 28, 1998
Stephen 30,000 0.8% $0.9375/Share January 6, 2002
Carreker 380,000 (1) 10.9% $1.125/Share March 28, 2002
280,622 (2) 8.0% $1.125/Share March 28, 2002
John C.
Antenucci 525,000 (1) 15.0% $1.75/Share September 30, 2000
6,851 (2) 0.2% $1.75/Share September 30, 2000
</TABLE>
13
<PAGE>
1. Grants to Messrs. Carreker and Antenucci in connection with their
employment agreements consist of fully vested options of 200,000 and
300,000 shares, respectively, which are immediately exercisable, and
performance options of 180,000 and 225,000, respectively, for which
attainment of certain management goals vests 35%, 35%, and 30% for
each of the ensuing three fiscal years at which time they become
exercisable.
2. In addition they became entitled to antidilution options of 280,622
and 6,851, respectively as of fiscal year end, fully vested or subject
to performance vesting in proportion to the allocation of vested
/performance shares in their original option.
3. Grant was an extension of a previous grant of 50,000.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Value of Unexercised
Unexercised In-The-Money
Stock Options Stock Options
at FY-End (#) at FY-End ($)
Shares acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- --------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Jeanne M.
Anderson
Former Presi- - - 125,000/61,000 (1) $ 320,188/69,625
Dent & CEO
Stephen
Carreker
Chairman & CEO - - 510,622/180,000 $ 254,200/202,500-
John C.
Antenucci, Vice
Chairman & President - - 306,851/225,000 $ -0-/-0-
</TABLE>
1. Options for 50,000 shares of DCX common stock were granted under the
Company's 1991 Stock Option Plan on May 15, 1992 at a price of
$1.21875; additional options for 75,000 shares were granted on April
19, 1995 under the 1991 Plan at $.71875. Both grants were at fair
market value; no options have been exercised to date. The grant from
1992 was extended to January 31, 1998.
2. Mr. Carreker was granted options for 30,000 shares of DCX common stock
under the Company's 1991 Stock Option plan on January 2, 1997 at a
price of $1.125. In connection with his employment agreement he
received fully vested stock options for 200,000 shares of the
Company's common stock awarded effective January 7, 1997. In addition
Mr. Carreker is entitled to 280,622 antidilution options related to
his employment agreement.
3. Mr. Antenucci received fully vested stock options for 300,000 of DCX
common stock at a price of $1.75 in connection with his employment
agreement on September 22, 1997. In addition, Mr. Antenucci is
entitled to 6,851 antidilution options related to his employment
agreement.
The Company does not have a long term incentive plan or a defined benefit or
actuarial form of pension plan.
Employment Agreements.
Messrs. Carreker and Antenucci entered into three year employment agreements
effective January 2, 1997 and September 22, 1997, respectively, at salaries of
$175,000 per year with provisions for bonuses of up to 21% of base salary if
14
<PAGE>
certain goals are achieved. The executives received fully vested stock options
of 200,000 for Mr. Carreker and 300,000 for Mr. Antenucci with additional
options of 180,000 and 225,000 for Mr. Carreker and Antenucci, respectively,
which vest upon attainment of certain performance goals. In addition, Mr.
Antenucci received a one-time advance payment of $50,000 of his FY 1998 salary
for entering into the agreement. The employment agreements renew automatically
if the Company does not terminate the agreements by December 31, 1999 (Carreker)
or June 30, 2000 (Antenucci) after which date the agreement will continue to
have a remaining term of three years until the Company notifies the executive of
termination. In addition, both are entitled to continued base compensation for
three years following date of termination if not for death, disability, cause,
voluntary resignation other than constructive termination or the expiration of
the agreement's term; if termination is for one of these reasons then all
benefits including salary are continued for 18 months. Mr. Antenucci is entitled
to a three year consulting period at one half of average annual salary for the
immediately preceding 36 month period should he exercise his option to terminate
voluntarily after June 30, 2000.
Director Compensation.
Directors who are employees of the Company do not receive any additional
compensation above their full time employment compensation. Nonemployee
directors receive reimbursement of expenses incurred in carrying out their
duties. During the fiscal year the Company did not have a standard compensation
arrangement other than reimbursement of actual expenses for non-employee
directors. Ms. Anderson, a non-employee director, received $6,800 for her
services as a director during fiscal year 1997.
Item 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Percentages of shares held by officers and directors of the Company, as well as
those parties owning more than five (5) percent of the Company's common stock as
of the date of this report, are as follows:
Security ownership of certain beneficial owners:
Based on Rule 13d-1 filings under the Exchange Act, the Company there is only
one party other than management owning more than five percent of the common
stock of the Company.
Security ownership of certain beneficial owners:
<TABLE>
<CAPTION>
Title of Name of Beneficial Amount & Nature of Percent
Class (3) Owner (1) Beneficial Ownership
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Black & Veatch Holding Company 608,713 6.8
7500 Ward Parkway
Kansas City, MO 64114
Security ownership of management:
Title of Name of Beneficial Amount & Nature of Percent
Class (3) Owner (1) Beneficial Ownership (2)
- ---------------------------------------------------------------------------------------------------------
Common Jeanne M. Anderson 114,000 1.5
Director
Common John C. Antenucci 1,186,475 15.3
President and Director
Common Stephen Carreker, Chairman of None Nil
The Board of Directors and CEO
Common Frederick G. Beisser 10,400 @
Chief Financial Officer, Secretary
Treasurer, and Director
Common J. Gary Reed None Nil
Director
Common Raymund E. O'Mara None Nil
Director
All Directors and Officers
as a group (6 persons) 1,310,875 16.9%
15
</TABLE>
<PAGE>
NOTES:
@ The number of shares constitutes less than one percent of outstanding
shares.
1. The address for each of the directors of the company is "In Care Of
DCX, Inc., 1597 Cole Boulevard, Suite 300B, Golden, CO 80401.
2. The number of shares beneficially owned does not include 2,035,118
shares which may be acquired under Non Qualified Stock Options held by
Officers and Directors of the Company. Such shares and management
personnel holding them are: Ms. Anderson, 186,000; Mr. Antenucci,
531,851 Mr. Carreker, 690,622; Mr. Beisser, 268,617 shares; Mr.
O'Mara, 2,500 shares; and Mr. Reed, 355,528 shares.
3. If the options denoted in Note 2, above, were exercised, Directors and
Officers would have the following percentages of outstanding common
stock: Ms. Anderson, 3.1 percent; Mr. Antenucci 17.6 percent; Mr.
Beisser, 2.9 percent; Mr. Carreker 7.1 percent; Mr. O'Mara, less than
1%; Mr. Reed, 3.6 percent and Officers and Directors as a group, 34.2
percent.
Item 12- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related party transaction. Mr. Antenucci is a minority partner in the
organization which owns the facilities leased by PlanGraphics, Inc. in
Frankfort, Kentucky, at an annual lease cost to PGI of approximately $320,000.
PART IV
Item 13- EXHIBITS AND REPORTS ON FORM 8-K
(a) The following financial statements, schedules and exhibits are filed as a
part of this report:
1. Financial Statements
2. Exhibit Index
The following exhibits are filed as part of this Report:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page
- ------ ------- ----
<S> <C> <C>
Note 6
2.1a Acquisition Agreement between DCX, Inc. and
PlanGraphics, Inc. Note 7
2.1b Asset Purchase Agreement between DCX, Inc.
DCX-CHOL Enterprises, Inc. Note 8
3.1 Bylaws of DCX, Inc. Note 1
16
<PAGE>
3.2a Amended and Restated Articles of Incorpor-
ation of DCX, Inc., dated July 8, 1991. Note 2
3.2b Articles of Amendment to the Articles
of Incorporation of DCX, Inc., dated November
6, 1996 Note 4
3.2c Articles of Amendment to the Articles of
Incorporation of DCX, Inc., dated July 30, 1997 Note 9
4.1 Specimen Stock Certificate Note 1
4.2 DCX 1991 Stock Option Plan Note 5
4.3 DCX 1995 Stock Incentive Plan Note 5
4.4 DCX, Inc. Equity Incentive Plan Follows
Financial Statements
4.4 Warrant, dated January 15, 1997 issued to Transition
Partners Limited. Note 3
4.5 Warrant, dated October 15, 1997, issued to Transition
Partners Limited. Note 3
4.6 Warrant, dated January 15, 1997, issued to Copeland
Consulting Group, Inc. Note 3
4.7 Warrant, dated October 15, 1997, issued to Copeland
Consulting Group, Inc. Note 3
4.8 Warrant, dated June 19, 1997, issued to Spencer
Edwards, Inc. Note 3
4.9 Warrant, dated November 8, 1996, issued to Coretech, Ltd. Note 3
4.10 Warrant, dated October 10, 1997, issued to
SKB Corporation. Note 3
4.11 Warrant, dated October 24, 1997, issued to
Gerald Alexander. Note 3
4.12 Form of Option Agreement, dated July 31, 1997, between
the Company and the Pension Fund of Steven R. Perles. Note 10
4.13 Form of Option Agreement, dated July 31, 1997,
between the Company and Hamilton & Faatz, P.C. Note 10
10.1 Executive Employment Agreement dated March 28, 1997
between the Company and G. Stephen Carreker. Note 11
10.2 Executive Employment Agreement dated March 28, 1997
between the Company and Frederick G. Beisser. Note 11
10.3 Executive Employment Agreement dated March 28, 1997
between the Company and D. Scott McReynolds. Note 11
10.4 Executive Employment Agreement dated September 22, 1997 Follows
between the Company and John c. Antenucci. Financial Statements
10.5 Executive Employment Agreement dated September 22, 1997 Follows
between the Company and J. Gary Reed. Financial Statements
17
<PAGE>
21.1 List of Subsidiaries Page 18
27.1 Financial Data Schedules Incorporated by reference from Edgar
Filing on January 13, 1998
</TABLE>
NOTE:
1. Incorporated by reference from Registration Statements on Form S-18,
file no. 33-1484.
2. Incorporated by Reference from the definitive Proxy Statement, dated
May 3, 1991
3. Incorporated by Reference from the Company's Registration Statement on
Form S-3 (Registration No. 333-39775) filed with the Commission on
November 7, 1997.
4. Incorporated by Reference from Form 8K, dated November 12, 1996.
5. Incorporated by Reference from Form S-8, dated September 29, 1996
6. Incorporated by Reference from Form 10-Q for June 30, 1996, dated
August 1, 1996. The agreement was terminated prior to completion.
7. Incorporated by Reference from Form 8-K, dated September 22, 1997.
8. Incorporated by Reference from Form 8-K, dated October 8, 1997.
9. Incorporated by Reference from Form 8-K, dated July 31, 1997.
10. Incorporated by Reference from Form S-8 (Registration No. 333-35293)
dated September 5, 1997.
11. Incorporated by Reference from Form 10-QSB for the Quarter ended March
31, 1997.
(b) Reports on Form 8-K.
Following reports were filed on Form 8-K by the Company during fourth quarter of
the fiscal year covered by this annual report.
1. Current Report on Form 8-K, dated July 31, 1997 reporting sale of
convertible preferred stock under Regulation S.
2. Current Report on Form 8-K, dated August 13, 1997 reporting definitive
agreement between the Company and PlanGraphics, Inc.
3. Current Report on Form 8-K as, dated September 9, 1997, reporting sale
of convertible preferred stock pursuant to Regulation S.
4. Current Report on Form 8-K as amended, dated September 22, 1997,
reporting completion of an acquisition agreement between the Company
and PlanGraphics, Inc.
Reports filed on Form 8-K subsequent to the end of the fiscal year:
1. Current Report on Form 8-K as amended, dated October 8, 1997,
reporting divestiture of certain manufacturing assets to DCX-CHOL
Enterprises, Inc.
2. Current Report on Form 8-K, dated October 14, 1997, reporting sale of
convertible preferred stock pursuant to Regulation S.
3. Current Report on Form 8-K, dated November 3, 1997, reporting
appointment of additional members to the Company's Board of Directors.
4. Current Report on Form 8-K/A, dated September 22, 1997.
5. Current Report on Form 8-K/A, dated October 8, 1997.
18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DCX, INC.
Date: 1/13/98 By: /S/ Stephen Carreker
-----------------------------
Chairman and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated. The signatures below also constitute power of attorney for the
Principal Accounting Officer of the Company with the advice of legal and
accounting advisors to file amendments as required to insure full and complete
disclosure of this form 10-KSB.
Signature Title Date
/S/Jeanne M. Anderson
- -------------------
Jeanne M. Anderson Director 1/13/98
/S/Stephen Carreker
- -------------------
Stephen Carreker Chairman, CEO & Director 1/13/98
/S/ Fred Beisser
- --------------------
Frederick G. Beisser Vice President--Finance and 1/13/98
Administration, Secretary, Treasur-
er, and Director and Principal
Accounting Officer
/S/ John C. Antenucci
- --------------------
John C. Antenucci Vice Chairman, President 1/13/98
and Director
/S/ J. Gary Reed
- --------------------
J. Gary Reed Director 1/13/98
/S/Raymund E. O'Mara
- --------------------- Director 1/13/98
Raymund E. O'Mara
19
<PAGE>
List of Subsidiaries
Registered Name State of Incorporation
- --------------- ----------------------
PlanGraphics, Inc. Maryland
20
<PAGE>
DCX, Inc.
and Subsidiaries
Index to Consolidated Financial Statements
================================================================================
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheet as of
September 30, 1997 F-3 - F-4
Consolidated Statements of Operations
for the Years Ended September 30,
1997 and 1996 F-5
Consolidated Statements of Stockholders'
Equity for the Years Ended
September 30, 1997 and 1996 F-6 - F-7
Consolidated Statements of Cash Flows
for the Years Ended September 30,
1997 and 1996 F-8
Summary of Accounting Policies F-9 - F-13
Notes to Consolidated Financial Statements F-14 - F-28
F-1
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors and Stockholders
DCX, Inc. and Subsidiaries
Golden, Colorado
We have audited the accompanying consolidated balance sheet of DCX, Inc. and
subsidiaries as of September 30, 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the two years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DCX, Inc. and
subsidiaries as of September 30, 1997 and the results of their operations and
their cash flows for each of the two years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
has negative working capital, and may not be able to meet the payment of certain
payables within the contractual terms of the agreements. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/S/ BDO SEIDMAN, LLP
Denver, Colorado
January 9, 1997
F-2
<PAGE>
DCX, Inc.
and Subsidiaries
Consolidated Balance Sheet
================================================================================
September 30, 1997
- --------------------------------------------------------------------------------
Assets (Note 5)
Current:
Cash and cash equivalents $ 582,326
Accounts receivable, less allowance
of $188,161 for possible losses
(Notes 2 and 4) 2,236,568
Amount due from sale of assets (Note 3) 1,100,000
Prepaid expenses and other 201,932
- --------------------------------------------------------------------------------
Total current assets 4,120,826
- --------------------------------------------------------------------------------
Property and equipment (Note 5):
Land and building under capital lease 1,866,667
Land and building held for rental (Note 12) 1,415,058
Equipment and furniture 447,003
Leased assets 183,512
- --------------------------------------------------------------------------------
Less accumulated depreciation 429,597
- --------------------------------------------------------------------------------
Net property and equipment 3,482,643
- --------------------------------------------------------------------------------
Other assets:
Goodwill 5,517,872
Capitalized software 258,855
Other 190,604
- --------------------------------------------------------------------------------
Total other assets 5,967,331
- --------------------------------------------------------------------------------
$13,570,800
================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
<PAGE>
DCX, Inc.
and Subsidiaries
Consolidated Balance Sheet
================================================================================
September 30, 1997
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Checks written against future deposits $ 269,587
Accounts payable 1,351,484
Accrued expenses 1,054,660
Deferred revenue 189,354
Notes payable - current portion (Note 5) 854,060
Notes payable - related party (Note 5) 158,928
Obligations under capital leases - current (Note 8) 134,794
Accrued litigation settlement (Note 6) 521,000
- --------------------------------------------------------------------------------
Total current liabilities 4,533,867
Notes payable, less current maturities (Note 5) 576,000
Notes payable - related party - non-current (Note 5) 446,256
Obligations under capital leases (Note 8) 2,037,673
- --------------------------------------------------------------------------------
Total liabilities 7,593,796
- --------------------------------------------------------------------------------
Contingencies (Notes 1, 6 and 8)
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000 shares
authorized, 1,650 shares issued or outstanding (Note 9) 2
Common stock, no par value, 2,000,000,000 shares
authorized 7,736,380, shares issued and outstanding (Note 9) 9,741,501
Additional paid-in capital 3,550,869
Accumulated deficit (7,315,368)
- --------------------------------------------------------------------------------
Total stockholders' equity 5,977,004
- --------------------------------------------------------------------------------
$ 13,570,800
================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-4
<PAGE>
DCX, Inc.
and Subsidiaries
Consolidated Statements of Operations
================================================================================
Years Ended September 30, 1997 1996
- --------------------------------------------------------------------------------
Revenues (Note 2) $ 71,098 $ --
Cost and expenses:
Salaries and employee benefits 779,934 140,934
Direct contract costs 16,032 --
Other operating expenses 799,556 491,548
- --------------------------------------------------------------------------------
Total costs and expenses 1,595,522 632,482
- --------------------------------------------------------------------------------
Operating loss (1,524,424) (632,482)
Other income (expense):
Other income (Note 5) 297,622 108,762
Interest expense (126,263) (155,757)
Life insurance proceeds (Note 14) 400,000 --
- --------------------------------------------------------------------------------
Total other income (expense) 571,359 (46,995)
- --------------------------------------------------------------------------------
Net loss from continuing operations (953,065) (679,477)
Loss from discontinued operations (Note 3) (1,598,313) (374,177)
- --------------------------------------------------------------------------------
Net loss $(2,551,378) $(1,053,654)
- --------------------------------------------------------------------------------
Preferred stock dividends $ 9,674 $ --
Deemed preferred stock dividends $ 892,592 $ --
- --------------------------------------------------------------------------------
Net loss attributable to common stockholders $(3,453,644) $(1,053,654)
Loss per common share:
Loss from continuing operations $ (.20) $ (.16)
Loss from discontinued operations $ (.33) $ (.09)
Loss attributable to common stockholders $ (.72) $ (.25)
- --------------------------------------------------------------------------------
Weighted average number of shares
of common stock outstanding 4,772,020 4,287,437
================================================================================
See accompanying summary of accounting policies and notes
to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
DCX, Inc.
and Subsidiaries
Consolidated Statements of Stockholders' Equity
====================================================================================
Series A
Years ended Preferred Stock Common Stock
September 30, ------------------------- ------------------------
1997 and 1996 Shares Amount Shares Amount
- ------------------------------------------------------------------------------------
Balance,
<S> <C> <C> <C> <C>
October 1, 1995 -- -- 4,115,621 $ 4,765,540
Sale of stock through
options exercised -- -- 85,000 61,094
Stock issued for
services -- -- 233,488 233,723
Net loss for the year -- -- -- --
- ------------------------------------------------------------------------------------
Balance,
September 30, 1996 -- -- 4,434,109 5,060,357
Sale of stock through
options exercised -- -- 171,394 231,804
Issuance of preferred
stock (net of offering
costs of $312,000) 2,150 2 -- --
Conversion of
preferred stock into
common stock (500) -- 499,732 450,000
Stock issued in
acquisition -- -- 2,631,145 3,999,340
Stock warrants issued
for services -- -- -- --
Stock options issued for:
Acquisitions -- -- -- --
Services -- -- -- --
Forgiveness of subscrip-
tion receivable -- -- -- --
Deemed dividend on
preferred stock -- -- -- --
Deemed dividend on
warrants issued in
connection with
preferred stock -- -- -- --
Net loss for the year -- -- -- --
- ------------------------------------------------------------------------------------
Balance,
September 30, 1997 1,650 $ 2 7,736,380 $ 9,741,501
====================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-6
<PAGE>
DCX, Inc.
and Subsidiaries
Consolidated Statements of Stockholders' Equity
Continued
======================================================================================
Additional
Paid-in Subscriptions Accumulated
Capital Receivable Deficit Total
- --------------------------------------------------------------------------------------
Balance,
October 1, 1995 $ 329,384 $ (179,000) $(2,808,070) $ 2,107,854
Sale of stock through
options exercised -- -- -- 61,094
Stock issued for
services -- -- -- 233,723
Net loss for the year -- -- (1,053,654) (1,053,654)
- --------------------------------------------------------------------------------------
Balance,
September 30, 1996 329,384 (179,000) (3,861,724) 1,349,017
Sale of stock through
options exercised -- -- -- 231,804
Issuance of preferred
stock (net of offering
costs of $312,000) 1,837,998 -- -- 1,838,000
Conversion of
preferred stock into
common stock (450,000) -- -- --
Stock issued in
acquisition -- -- -- 3,999,340
Stock warrants issued
for services 198,464 -- -- 198,464
Stock options issued for:
Acquisitions 296,177 -- -- 296,177
Services 436,580 -- -- 436,580
Forgiveness of subscrip-
tion receivable -- 179,000 -- 179,000
Deemed dividend on
preferred stock 9,674 -- (9,674) --
Deemed dividend on
warrants issued in
connection with
preferred stock 892,592 -- (892,592) --
Net loss for the year -- -- (2,551,378) (2,551,378)
- --------------------------------------------------------------------------------------
Balance,
September 30, 1997 $ 3,550,869 $ -- $(7,315,368) $ 6,052,004
======================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-7
</TABLE>
<PAGE>
DCX, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
================================================================================
Increase (Decrease) In Cash And Cash Equivalents
Years Ended September 30, 1997 1996
- --------------------------------------------------------------------------------
Operating activities:
Net loss $(2,551,378) $(1,053,654)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 98,298 114,202
Asset writedowns 179,000 --
Provision for losses on accounts receivable 158,161 --
Forgiveness of debt (278,069) (82,826)
Provision for litigation -- 521,000
Provision for losses on inventory -- 60,000
Stock issued for services -- 258,723
Stock options issued for acquisitions and
services 635,044 --
Loss on sale of assets 1,261,168 --
Changes in operating assets and liabilities:
Accounts receivable (709,755) 1,066,891
Inventories -- (352,750)
Other assets 178,798 9,915
Accounts payable 95,803 (82,360)
Accrued expenses 526,883 (275,291)
Deferred revenue 156,701 --
- -------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (249,346) 183,850
- -------------------------------------------------------------------------------
Investing activities:
Payments for business acquisitions,
net of cash acquired (689,735) --
Additions to capitalized software (2,564) --
Restricted cash -- 154,985
- -------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (692,299) 154,985
- -------------------------------------------------------------------------------
Financing activities:
Proceeds from debt 576,000 325,000
Payments on debt (1,018,062) (641,136)
Debt issue costs (101,226) --
Proceeds from the issuance of common stock 19,622 61,094
Proceeds from issuance of preferred stock
net of offering costs 1,838,000 --
- -------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,314,334 (255,042)
- -------------------------------------------------------------------------------
Net increase in cash 372,689 83,793
Cash and cash equivalents, beginning of year 209,637 125,844
- -------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 582,326 $ 209,637
===============================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-8
<PAGE>
DCX, Inc.
and Subsidiaries
Summary of Accounting Policies
================================================================================
Organization and
Business These consolidated financial statements include the
accounts of DCX, Inc. and those of its inactive
wholly-owned subsidiaries, GeoStars International, Inc.
and GeoNova US, Inc. ("GeoNova"), d/b/a GeoNova
International, Inc., and PlanGraphics, Inc.
(collectively the "Company"). DCX, Inc. provided
services and products to aerospace, aviation, military,
and commercial industries. DCX, Inc. was engaged in the
engineering design, development, testing, and
manufacturing of electronic and electro- mechanical
devices and assemblies for use in the missile and
aerospace industries, as well as the manufacturing of
wire harnesses and cable assemblies for use by
commercial computer and communications industries and
the U.S. Government.
PlanGraphics, Inc. is an independent consulting firm
specializing in the design and implementation of
Geographic Information Systems ("GIS") as well as
advisory services in the United States and foreign
markets. The customer base consists primarily of
utilities, government agencies, and land and resource
management organizations.
All intercompany balances and transactions have been
eliminated in consolidation.
Cash Equivalents For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments
purchased with an original maturity of three months or
less to be cash equivalents.
Revenue and
Cost Recognition Revenues are recognized as services are rendered.
Contract costs include all direct material and labor
costs and those indirect costs related to contract
performance, such as supplies, tools, repairs and
depreciation costs. General and administrative costs
are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in
the period in which such losses are determined.
Goodwill Goodwill represents the excess of the cost over the
fair value of its net assets acquired at the date of
acquisition and is being amortized on the straight-line
method over fifteen years.
Deferred Revenue Deferred revenue represents amounts received under
certain contracts in excess of revenue recognized.
F-9
<PAGE>
DCX, Inc.
and Subsidiaries
Summary of Accounting Policies
================================================================================
Property,
Equipment and
Depreciation and
Amortization Property and equipment are recorded at cost.
Depreciation is provided on property and equipment by
charging against earnings, amounts sufficient to
amortize the costs of the assets over their estimated
useful lives. The ranges of estimated useful lives in
computing depreciation and amortization are as follows:
-------------------------------------------------------
Building 31 years
Leased assets Life of lease
Furniture and equipment 5 to 7 years
-------------------------------------------------------
Depreciation is computed principally on an accelerated
method.
Taxes on Income The Company accounts for income taxes under SFAS No.
109. Deferred income taxes result from temporary
differences. Temporary differences are differences
between the tax basis of assets and liabilities and
their reported amounts in the financial statements that
will result in taxable or deductible amounts in future
years.
Net Loss Per Share Net loss per common share is based on the weighted
average number of shares outstanding during each period
presented after preferred stock and deemed dividends.
Options to purchase stock are included as common stock
equivalents, when dilutive.
Concentrations of
Credit Risk The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash
and cash equivalent balances in excess of the insurance
provided by governmental insurance authorities. The
Company's cash and cash equivalents are placed with
financial institutions and are primarily in demand
deposit accounts.
Fair Value of
Financial
Instruments Unless otherwise specified, the Company believes the
book value of financial instruments approximates their
fair value.
Use of
Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and
the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from
those estimates.
F-10
<PAGE>
DCX, Inc.
and Subsidiaries
Summary of Accounting Policies
================================================================================
Capitalized
Software Costs Costs incurred internally in creating software products
for resale are charged to expense until technological
feasibility has been established upon completion of a
detail program design. Thereafter, all software
development costs are capitalized until the point that
the product is ready for sale and subsequently reported
at the lower of amortized cost or net realizable value.
In accordance with Statement of Financial Accounting
Standard No. 86, the Company recognizes the greater
amount of annual amortization of capitalized software
costs under 1) the ratio of current year revenues by
product, to the product's total estimated revenues
method or 2) over the products estimated economic
useful life by the straight-line method.
Software
Revenue
Recognition Revenue from licensing of software products is
recognized upon shipment. Revenue from support and
update service agreements is deferred at the time the
agreement is executed and recognized ratably over the
contractual period. The Company recognizes revenues
from customer training and consulting services when
such services are provided. All costs associated with
licensing of software products, support and update
services, and training and consulting services are
expensed as incurred.
Long-Term
Assets The Company applies SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets." Under SFAS No. 121,
long-lived assets and certain intangibles are reported
at the lower of the carrying amount or their estimated
recoverable amounts.
Stock Option
Plans The Company applied APB Opinion 25, "Accounting for
Stock Issued to Employees", and the related
Interpretation in accounting for all stock option
plans. Under APB Opinion 25, no compensation cost has
been recognized for stock options issued to employees
as the exercise price of the Company's stock options
granted equals or exceeds the market price of the
underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based
Compensation", requires the Company to provide pro
forma information regarding net income as if
compensation cost for the Company's stock options plans
had been determined in accordance with the fair value
based method prescribed in SFAS No. 123. To provide the
required pro forma information, the Company estimates
the fair value of each stock option at the grant date
by using the Black-Scholes option-pricing model.
F-11
<PAGE>
DCX, Inc.
and Subsidiaries
Summary of Accounting Policies
================================================================================
Recent Accounting
Pronouncements The Financial Accounting Standards Board ("FASB")
recently issued Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128") and
Statement of Financial Accounting Standards No. 129
"Disclosure of Information About an Entity's Capital
Structure ("SFAS 129"). SFAS 128 provides a different
method of calculating earnings per share than is
currently used in accordance with Accounting Board
Opinion ("ABP") 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 stockholders 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. SFAS 129 establishes standards for
disclosing information about an entity's capital
structure. SFAS 128 and SFAS 129 are effective for
financial statements issued for periods ending after
December 15, 1997. Their implementation is not expected
to have a material effect on the consolidated financial
statements.
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income (SFAS 130), which
establishes standards for reporting and display of
comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include
all changes in equity except those resulting from
investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that all
items that are required to be recognized under current
accounting standards as components of comprehensive
income be reported in a financial statement that is
displayed with the same prominence as other financial
statements.
F-12
<PAGE>
DCX, Inc.
and Subsidiaries
Summary of Accounting Policies
================================================================================
Also, in June 1997, FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and
Related Information" which supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards for the
way that public companies report information about
operating segments in annual financial statements and
requires reporting of selected information about
operating segments in interim financial statements
issued to the public. It also establishes standards for
disclosures regarding products and services, geographic
areas and major customers. SFAS No. 131 defines
operating segments as components of a company about
which separate financial information is available that
is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in
assessing performance.
SFAS 130 and 131 are effective for financial statements
for periods beginning after December 15, 1997 and
requires comparative information for earlier years to
be restated. Because of the recent issuance of the
standard, management has been unable to fully evaluate
the impact, if any, the standard may have on future
financial statement disclosures. Results of operations
and financial position, however, will be unaffected by
implementation of the standard.
In October 1997, Statement of Position 97-2, Software
Revenue Recognition (SOP 97-2), was issued. The SOP
provides guidance on when revenue should be recognized
and in what amounts licensing, selling, leasing, or
otherwise marketing computer software. SOP 97-2 is
effective for transactions entered into in fiscal years
after December 15, 1997. Because of the recent issuance
of the SOP, management has been unable to fully
evaluate the impact, if any, the SOP may have on future
financial statement disclosure.
Reclassifications Certain items included in the prior year's financial
statements have been reclassified to conform to the
current presentation.
F-13
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
1. Going
Concern and
Continued
Existence As reflected in the accompanying financial statements,
the Company has a working capital deficit of $413,041
and the Company has incurred net losses from operations
of $953,065 and $679,477 for the years ended
September 30, 1997 and 1996. The Company also incurred
net losses from discontinued operations of $1,598,313
and $374,177 for the years ended September 30, 1997 and
1996. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.
Management's plans include, among other items, actively
pursuing additional funding in both the debt and equity
markets in order to meet working capital requirements
and to provide for additional acquisitions.
Additionally, the Company is negotiating the timing of
and payment of certain payables to help improve the
working capital position. There are no assurances that
any of these events will occur or that the Company's
plan will be successful. The accompanying financial
statements do not include any adjustments that might
result from the outcome of these uncertainties.
2. Business
Acquisitions On September 22, 1997, the Company acquired all of the
outstanding stock of PlanGraphics, Inc. for 2,631,145
shares of common stock at the agreed upon rate of $1.52
per share. The acquisition was accounted for under the
purchase method of accounting. The results of
operations of PlanGraphics, Inc. have been included in
the accompanying statement of operations since the
effective date of the acquisition. The total purchase
price, including acquisition costs, was $5,517,872 and
is recorded as goodwill.
Unaudited proforma consolidated results of operations
of the Company are shown in the following table as if
the business was acquired as of the first day of each
period presented, October, 1, 1995. This unaudited
proforma information is based on the Company's
accompanying Statements of Operations and the
historical financial information of the acquired
companies, and includes adjustments to income taxes,
depreciation, and goodwill giving effect of the terms
of the transaction as if the acquisitions had occurred
on the first day presented.
F-14
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Unaudited proforma consolidated results of operations:
September 30, 1997 1996
------------------------------------------------------
Revenue $ 8,204,236 $ 7,985,750
Loss from operations (2,441,497) (178,905)
Net loss (2,174,836) (509,811)
Loss per common share
before discontinued
operations (0.46) (.07)
========================================================
The proforma information is not necessarily inductive
of the combined results of operations that would have
occurred had the acquisitions been completed for such
periods.
PlanGraphics has historically received greater than 10%
of its revenues from one customer. The one customer
accounted for 25% and 35% of revenues for the years
ended September 30, 1997 and the nine month period
ended September 30, 1996.
3. Discontinued
Operations Effective September 30, 1997, the Company sold certain
assets of its defense industry business unit to a third
party for $1,100,000. The Company has subsequently
collected this receivable.
With the disposal of its defense industry business, the
Company discontinued all of its operations in the
defense industry. Therefore, it separately reported the
losses from this business as discontinued operations
for the years ended September 30, 1997 and 1996 as
follows:
September 30, 1997 1996
------------------------------------------------------
Revenues from
discontinued
operations $ 5,186,936 $ 4,403,740
Loss from
discontinued
operations (337,145) (374,177)
Loss on disposal (1,261,168) --
Net loss from
discontinued
operations $ (1,598,313) $ (374,177)
------------------------------------------------------
F-15
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
4. Accounts
Receivable The components of accounts receivable are as follows:
September 30, 1997
-----------------------------------------------------
Contract receivables:
Billed $ 1,228,389
Unbilled 1,196,340
-----------------------------------------------------
2,424,729
-----------------------------------------------------
Less provision for losses 188,161
-----------------------------------------------------
Total accounts receivable $ 2,236,568
=====================================================
5. Notes Payable September 30, 1997
-----------------------------------------------------
Note payable with interest of 14%, with
monthly interest only payments,
collateralized by a first lien on land
and building held for rental and
improvements, maturing on February 21,
2000 $ 576,000
Note payable to bank in monthly
principal installments of $5,000,
interest at 8.5% payable quarterly,
collateralized by equipment, accounts
receivable, a stock pledge agreement of
shares at the PlanGraphics level, and an
assignment of a $500,000 life insurance
policy on an individual. Note matures on
April 24, 1998 650,000
Line of credit with a bank, interest at
9.5% payable at maturity on August 7,
1997 collateralized by equipment and
accounts of PlanGraphics and is
guaranteed by a minority stockholder
180,000
Other 24,060
----------------------------------------------------
1,430,060
Less current maturities 854,060
----------------------------------------------------
Notes payable - less current maturities $ 576,000
====================================================
F-16
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
In June 1997, a discount of $278,019 was granted by the
lender for full settlement of the outstanding balance.
Final liquidation of the balance occurred during the
Company's 4th quarter. In December 1995, a previously
outstanding note payable was settled requiring a cash
payment of $205,000. The settlement gain on forgiven
debt of $82,826 was recorded in the year ended
September 30, 1996.
Notes Payable - Related Party
The notes payable to a minority shareholder consist of
an installment note and a promissory note. The
installment note bears a fixed interest rate of 10% and
is secured by a proxy on shares of Company stock owned
by the former majority shareholder. The promissory note
bears interest at 8.5%. The notes mature December 21,
1998 and are subject to covenants prohibiting further
issuance of voting stock and other such agreements.
Total amounts outstanding under these related party
notes were $605,184 at September 30, 1997.
The Company converted $289,902 of the related party
note payable into 170,531 shares of common stock on
October 10, 1997
Principal payments on all notes payable due subsequent
to September 30, 1997 are as follows:
Due September 30, 1997
-----------------------------------------------------
1998 $ 1,012,989
1999 466,256
2000 576,000
-----------------------------------------------------
$ 2,035,245
=====================================================
6. Litigation The Company had previously filed an appeal before the
U.S. Court of Appeals for the Federal Circuit on a
contract with the Defense Logistics Agency (DLA). The
appeals court held for the DLA in the year ended
September 30, 1996. As such, the Company has recorded a
reserve for $521,000 for potential losses.
F-17
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
The Company is engaged in various litigation matters
from time to time in the ordinary course of business.
In the opinion of management, the outcome of any such
litigation will not materially affect the financial
position or results of operations of the Company.
7. Taxes on
Income The provision for income taxes consisted of the
following:
Year ended September 30, 1997 1995
------------------------------------------------------
Deferred benefit:
Federal $ 1,084,000 $ 301,000
State 104,000 29,000
------------------------------------------------------
1,188,000 330,000
Valuation allowance (1,188,000) (330,000)
------------------------------------------------------
$ -- $ --
------------------------------------------------------
A reconciliation of the effective tax rates and the
statutory U.S. federal income tax rates follows:
1997 1995
-------------------------------------------------------
U.S. federal statutory rates (34.0) % (34.0) %
State income tax benefit, net
of federal tax amount (3.3) (3.3)
Increase in deferred tax asset
valuation allowance 37.3 37.3
-------------------------------------------------------
Effective tax rate -- % -- %
-------------------------------------------------------
F-18
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Temporary differences that give rise to a significant
portion of the deferred tax asset are as follows:
1997
-------------------------------------------------------
Net operating loss carryforward $ 1,472,000
Capital loss carryover 587,000
Compensation expense for common
stock options 237,000
Accrued litigation 194,000
Vacation 159,000
Other 64,000
-------------------------------------------------------
Total gross deferred tax assets 2,713,000
Valuation allowance (2,713,000)
-------------------------------------------------------
Net deferred tax asset $ --
-------------------------------------------------------
A valuation allowance equal to the net deferred tax
asset has been recorded, as management of the Company
has not been able to determine that it is more likely
than not that the deferred tax assets will be realized.
At September 30, 1997, the Company had net operating
loss carryforwards of approximately $4,000,000 with
expirations through 2013. The net operating losses are
limited due to issuances of common stock.
8. Leases Obligation Under Capital Leases - Related Parties
The Company leases an office facility from a related
party, Capitol View Development, LLC, under a triple
net commercial lease. An officer/shareholder owns
approximately ten percent of Capitol View Development.
The lease includes an annual base rent increasing over
the term of the lease plus an adjustment based on
Capitol View Development's rate of interest on its
loan. The initial lease term is for a period of fifteen
years with five renewal options for a term of one year
each. Annual payments approximate $320,000 per year.
F-19
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
The Company also leases certain equipment under capital
leases from a related party. Original lease terms are
for five years.
The following is a schedule, by years, of future
minimum payments required under these leases, together
with their present value as of September 30, 1997.
Land and
September 30, Building Equipment Total
-------------------------------------------------------
1998 $ 327,261 $ 82,331 $ 409,592
1999 330,218 58,411 388,629
2000 335,635 32,523 368,158
2001 337,089 - 337,089
2002 338,133 - 338,133
Thereafter 2,500,429 - 2,500,429
-------------------------------------------------------
4,168,765 173,265 4,342,030
Less: amount
representing
interest 2,155,571 13,992 2,169,563
-------------------------------------------------------
Present value
of minimum
lease payments 2,013,194 159,273 2,172,467
Less: current
portion - - 134,794
-------------------------------------------------------
Obligations under
capital leases
after current
portion $2,037,673
=======================================================
Operating Lease Commitments
The Company leases certain office facilities and
certain furniture and equipment under various operating
leases. Lease terms range from one to five years.
F-20
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Rental expense for the years ending September 30, 1997
and 1996 totaled $10,000 and $0. Minimum annual
operating lease commitments at September 30, 1997 are
as follows:
September 30,
-------------------------------------------------------
1998 $ 119,144
1999 102,365
2000 44,953
2001 12,956
-------------------------------------------------------
$ 279,418
=======================================================
9. Equity
Transactions Preferred Stock
In November 1996, the Company amended its articles of
incorporation to provide for a Series A 6% cumulative
convertible redeemable preferred stock $.001 par value
(Series A). The Company designated 1,000,000 shares
Series A as part of the authorized class of preferred
shares. The Company issued 500 shares of Series A with
a stated value of $1,000 per share, with net proceeds
to the Company of $450,000 in November 1996. The
holders of these 500 shares of Series A converted the
preferred into common stock at various times during the
year in exchange for 499,732 shares of common stock.
In August 1997, the Company sold 650 shares of its
Series A with net proceeds of $547,500. In September
1997, the Company sold 1,000 shares of its Series A
with net proceeds of $840,500. The Series A preferred
stock and any accumulated and unpaid dividends are
convertible at the option of the holder at the lesser
of 75% of the average of the closing bid price per
share of the Company's common stock for the 5 days
prior to issuance or 75% of the average of the closing
bid price per share of the Company's common stock for
the five days preceding the date of conversion.
Subsequent to September 30, 1997 holders of Series A
converted 1,040 shares into 1,293,289 shares of common
stock.
Warrants issued to purchase 233,781 shares of common
stock were issued in connection with the placement of
the Series A. The warrants can be exercised at various
prices from $1.6875 to $1.875 and expire from November
1998 to August 2000. The Company recognized deemed
dividends of $175,925 in connection with issuing these
warrants under the accounting provisions of SFAS 123.
The Company also recognized $716,667 of deemed
dividends due to the convertibility of the preferred
stock at 75%.
F-21
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Subsequent to September 30, 1997, the Company sold 250
more shares of Series A with net proceeds of $212,500
in a continuation of the placement from September 1997.
Common Stock
During fiscal year 1997, the Company exchanged $212,182
in payables for the exercise price of 144,094 shares of
common stock. Employees exercised options to purchase
27,300 shares with the Company recognizing proceeds of
$19,622. The Company forgave the $179,000 subscription
receivable in exchange for services rendered during the
year ended September 30, 1997.
During fiscal year 1996, as consideration for future
service to be performed by the recipient of certain
stock options, the exercise price on a portion of these
stock options was below the fair market value of the
stock on the date the options were granted.
Accordingly, the Company recorded $148,750 in deferred
charges for future services. In addition, the Company
waived the exercise price on 224,000 shares under the
stock option and recorded deferred charges for future
services of $150,000. In March 1995, the Company issued
options to purchase 250,000 shares to the same
individual at an exercise price of $.75 per share and
recorded $31,250 in deferred charges for future
services. The options were exercised in April 1995. The
Company amortized deferred compensation charges on a
straight line basis over the service term. Amortization
of approximately $97,000 and $118,000 was recorded
during the years ended September 30, 1997 and 1996.
At various times throughout the year ended September
30, 1996, options were exercised for a total of 85,000
shares for a total of $61,094.
The Company issued 230,000 shares valued at fair market
value of $231,215 to a financial advisor in exchange
for services to be performed for a period of 12 months
beginning in February 1996.
F-22
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Anti-dilution Provisions
The Company has granted certain officers and
consultants anti-dilution rights in employment and
service agreements. The provision calls for the
issuance of options at fixed prices at each date more
stock is issued to enable the party to retain their
ownership percentage. Under the accounting provisions
of SFAS 123 and APB 25, the Company realized costs of
approximately $406,000 for the 380,340 options and
164,298 warrants issued during the year.
Stock Options
-------------
The Company's Board of Directors have reserved 300,000
and 750,000 shares under two stock option plans (1991
and 1995 respectively). The Company grants options
under the Plan in accordance with the determinations
made by the Option Committee. The Option Committee
will, at its discretion, determine individuals to be
granted options, the time or times at which options
shall be granted, the number of shares subject to each
option and the manner in which options may be
exercised. The option price shall be the fair market
value on the date of the grant and expire five years
subsequent to the date of grant.
1991 Plan
---------
In May 1992, the Company issued options for the
purchase of 140,000 shares at $1.22 per share. Of the
total issued, 125,000 were issued to officers and
directors. In February 1995, 20,000 options were
cancelled. Options to purchase 175,000 shares at
$.71875 were issued to officers of the Company in April
1995. The Company granted 30,000 options to purchase
common stock at $.72 in the year ended September 30,
1997. To date, none of these options have been
exercised.
1995 Plan
---------
In April 1995, the Company issued options to purchase
269,000 shares at $.71875 per share, of the total
issued, 60,000 were issued to an officer. Through
September 30, 1996, options to purchase 85,000 shares
were exercised resulting in proceeds to the Company of
$61,094. The Company granted 169,789 options to
purchase common stock at prices ranging from $.72 to
$1.75. Options to purchase 46,589 shares were exercised
during the year.
F-23
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
FASB Statement 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123"), requires the Company to
provide pro forma information regarding net income and
net income per share as if compensation costs for the
Company's stock option plans and other stock awards had
been determined in accordance with the fair value based
method prescribed in SFAS No. 123. The Company
estimated the fair value of each stock award at the
grant date by using the Black-Scholes option-pricing
model with the following weighted-average assumptions
used for grants in the year ended September 30, 1997:
dividend yield of 0 percent for all years; expected
volatility of 45 percent; risk-free interest rates
between 6 and 6.4 percent; and expected option lives of
five years. The Company did not grant any options in
1996.
Under the accounting provisions for SFAS No. 123, the
Company's net loss and net loss per share would have
been adjusted to the following pro forma amounts:
Years Ended September 30, 1997 1996
-----------------------------------------------------
Net loss
As reported $ (2,551,378) $ (1,053,654)
Pro forma (3,908,402) (1,053,654)
Net loss per share
As reported $ (.72) $ (.25)
Pro forma (.89) (.25)
=====================================================
A summary of the status of the Company's stock option
plans and outstanding options as of September 30, 1997
and 1996 and changes during the years ending on those
dates is presented below:
F-24
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
1997 1996
================================================================================
Weighted Weighted
Average Average
Range of Exercise Range of Exercise
Shares Price Shares Price
- --------------------------------------------------------------------------------
Outstanding, beginning
of year 478,000 $ 0.84 564,000 $ 0.83
Granted 3,495,623 1.38 -- N/A
Cancelled 312,000 0.81 1,000 0.72
Exercised 195,729 1.39 85,000 0.72
- --------------------------------------------------------------------------------
Outstanding, end of year 3,465,894 $ 1.36 478,000 $ 0.84
================================================================================
Options exercisable, end
of year 3,465,894 $ 1.36 478,000 $ 0.84
Weighted average fair
value of options granted
during the year 2,002,367 $ 0.72 N/A $ N/A
================================================================================
The following table summarizes information about stock
options outstanding at September 30, 1997:
F-25
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Options Outstanding Options Exercisable
--------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 9/30/97 Life Price at 9/30/97 Price
--------------------------------------------------------------------
$0.58-1.00 836,603 3.41 $ 0.89 836,603 $ 0.89
1.13-1.39 1,243,658 4.27 1.15 1,013,658 1.16
1.63-4.25 1,385,633 4.76 1.83 1,160,633 1.97
---------------------------------------------------------------------
$0.58-4.25 3,465,894 4.22 $ 1.36 3,010,894 $ 1.35
=====================================================================
10. Employee
Benefit Plans 401(k) Plan
DCX has a Section 401(k) profit sharing plan covering
substantially all employees. Participants in the plan
may contribute up to 15% of their compensation, subject
to certain limitations. Under the plan, the Company
makes matching contributions equal to 25% of the
participants elected deferred contribution up to a
maximum of 6% of compensation. Company matching
contributions vest ratably over 5 years. Additional
contributions may be made at the Company's discretion
based upon the Company's performance. Total Company
contributions under the plan were approximately $8,854
and $9,700 in 1997 and 1996.
PlanGraphics has a qualified profit sharing plan with a
401(k) deferred compensation provision covering
substantially all employees. The plan allows employees
to defer up to 21% of their annual salary with a tiered
matching contribution by the Company up to 1.75%.
Additional contributions are at the Company's
discretion.
F-26
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
11. Committments Self Insurance
The Company is partially self insured for employee
medical liabilities which covers risk up to $20,000 per
individual covered under the plan. The Company has
purchased excess medical liability coverage for
individual claims in excess of $20,000 and
approximately $250,000 in aggregate with a national
medical insurance carrier. Premiums and claim expenses
associated with the medical self insurance program are
included in the accompanying statements of income.
Employment Agreements
The Company has entered into employment agreements that
extend from December 31, 1999 through June 30, 2000
with four of its officers. The employment agreements
set forth annual compensation to the four officers of
between $60,000 and $175,000 each.
12. Lease
Agreement
of former
Manufacturing
Facility The buyer of the certain assets of the Company has
agreed to lease the manufacturing facility for 6 months
at a rate of $16,500 (for a total of $99,000 over the
term). The buyer also holds options to renew the lease
at terms similar to the original term for 32 months.
The buyer also holds an option to purchase the
buildings and real property for $1,500,000 during the
original term or any extensions of the lease.
13. Significant
Fourth Quarter
Adjustments During the quarter ended September 30, 1997, the
Company recorded an expense for the forgiveness of the
subscription receivable in the amount of $179,000. The
Company also recorded approximately $500,000 in expense
for stock options granted throughout the year.
During the quarter ended September 30, 1996, the
Company recorded consulting fees expense of
approximately $118,000 relating to the amortization of
deferred marketing expense.
14. Life
Insurance The Company recorded other income of $400,000 related
to the proceeds of two company owned key man life
insurance policies on a director of the Company during
the year ended September 30, 1997.
F-27
<PAGE>
DCX, Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
15. Supplemental
Schedule of
Non-Cash
Investing and
Financing
Activities
1997 1996
------------------------------------------------------
Business acquired with
common stock $ 3,999,340 $ -
======================================================
Preferred stock converted
into common stock $ 450,000 $ -
======================================================
Common stock issued for
services and debt $ 508,359 $ 233,723
======================================================
Cash paid for interest $ 126,000 $ 114,000
======================================================
F-28
DCX, Inc.
EQUITY COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of the DCX, Inc. Equity Compensation Plan (the "Plan") is to
attract and retain directors, officers, other employees and consultants of DCX,
Inc. and its Subsidiaries and to provide such persons with incentives to
continue in the long-term service of the Company and to create in such persons a
more direct interest in the future success of the operations of the Company by
relating incentive compensation to increases in stockholder value.
ARTICLE II
STRUCTURE OF THE PLAN
The Plan is divided into three separate programs:
A. The Discretionary Stock Option Grant Program under which eligible
persons may, at the discretion of the Committee or the Board, be granted Stock
Options;
B. The Restricted Stock Program under which eligible persons may, at the
discretion of the Committee or the Board, be granted rights to receive shares of
Common Stock, subject to certain restrictions; and
C. The Supplemental Bonus Program under which eligible persons may, at the
discretion of the Committee or the Board, be granted a right to receive payment,
in cash, shares of Common Stock, or a combination thereof, of a specified
amount.
ARTICLE III
DEFINITIONS
As used in this Plan:
"10% Stockholder" shall mean any owner of stock (as determined under
Section 424(d) of the Code) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Subsidiary.
"Award" shall mean a grant made under this Plan in the form of Stock
Options, Restricted Stock or Supplemental Bonuses.
"Board" shall mean the Company's Board of Directors.
<PAGE>
"Change in Control" shall mean a change in ownership or control of the
Company effected through any of the following transactions:
(i) the acquisition, directly or indirectly by any person or group
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more
than thirty percent (30%) of the total combined voting power of the
Company's outstanding securities;
(ii) a change in the composition of the Board over a period of
eighteen (18) consecutive months or less such that fifty percent (50%) or
more of the Board members cease to be directors who either (A) have been
directors continuously since the beginning of such period or (B) have been
unanimously elected or nominated by the Board for election as directors
during such period;
(iii) a stockholder-approved merger or consolidation to which the
Company is a party and in which (A) the Company is not the surviving entity
or (B) securities possessing more than thirty percent (30%) of the total
combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction; or
(iv) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or dissolution of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Employee Committee and/or the Incentive Plan
Committee, as applicable.
"Common Stock" shall mean the Company's common stock, no par value.
"Company" shall mean DCX, Inc.
"Date of Grant" shall mean the date specified by the Committee on which a
grant of an Award shall become effective, which shall not be earlier than the
date on which the Committee takes action with respect thereto.
"Employee" shall mean an individual who is in the employ of the Company or
any Subsidiary.
2
<PAGE>
"Employee Committee" shall mean a committee composed of at least one member
of the Board of Directors who may, but need not, be a Non-Employee Director. The
Employee Committee is empowered hereunder to grant Awards to Eligible Employees
who are not directors or "officers" of the Company as that term is defined in
Rule 16a-1(f) of the Exchange Act nor "covered employees" under Section 162(m)
of the Code, and to establish the terms of such Awards at the time of grant, but
shall have no other authority with respect to the Plan or outstanding Awards
except as expressly granted by the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FairMarket Value" of a share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the Common Stock is at the time listed on any stock exchange,
or traded on the Nasdaq National Market, or any other securities trading
market that reports daily the closing selling price per share of Common
Stock, the Fair Market Value shall be deemed equal to the closing selling
price per share of Common Stock on the date in question on the stock
exchange or other securities trading market determined by the Committee to
be the primary market for the Common Stock, as such price is officially
quoted on such exchange or trading market.
(ii) If there is no closing selling price for the Common Stock on the
date in question, or if the Common Stock is neither listed on a stock
exchange or traded on a securities trading market that reports daily the
closing selling price per share of the Common Stock, then the Fair Market
Value shall be deemed to be the average of the representative closing bid
and asked prices on the date on question as reported by the Nasdaq Stock
Market or other reporting entity selected by the Committee.
(iii) In the event the Common Stock is not traded publicly, the Fair
Market Value of a share of Common Stock shall be determined, in good faith,
by the Committee after such consultation with outside legal, accounting and
other experts as the Committee may deem advisable, and the Committee shall
maintain a written record of its method of determining such value.
"Incentive Plan Committee" shall mean a committee consisting entirely of
Non-Employee Directors of the Board, who are empowered hereunder to take all
action required in the administration of the Plan and the grant and
administration of Awards hereunder. The Incentive Plan Committee shall be so
constituted at all times as to permit the Plan to comply with Rule 16b-3 or any
successor rule promulgated under the Exchange Act. Members of the Incentive Plan
Committee shall be appointed from time to time by the Board, shall serve at the
pleasure of the Board and may resign at any time upon written notice to the
Board. Notwithstanding the foregoing, at any time that there are fewer than two
Non-Employee Directors on the Board or when no Incentive Plan Committee has been
appointed by the Board, all powers of the Incentive Plan Committee shall be
vested in the Board.
3
<PAGE>
"Incentive Stock Option" shall mean a Stock Option that (i) qualifies as an
"incentive stock option" under Section 422 of the Code or any successor
provision and (ii) is intended to be an incentive stock option.
"Non-Employee Director" shall mean a director of the Company who meets the
definition of (i) a "non-employee director" set forth in Rule 16b-3 under the
Exchange Act, as amended, or any successor rule and (ii) an "outside director"
set forth in Treasury Regulation 1.162-27, as amended, or any successor rule.
"Non-Statutory Option" shall mean a Stock Option that (i) does not qualify
as an "incentive stock option" under Section 422 of the Code or any successor
provision or (ii) is not intended to be an incentive stock option.
"Optionee" shall mean the person so designated in an agreement evidencing
an outstanding Stock Option.
"Option Price" shall mean the purchase price payable by a Participant upon
the exercise of a Stock Option.
"Participant" shall mean a person who is selected by the Committee to
receive benefits under this Plan and (i) is at that time a director, officer or
other Employee of the Company or any Subsidiary, (ii) is at that time a
consultant or other independent advisor who provides services to the Company or
a Subsidiary, or (iii) has agreed to commence serving in any capacity set forth
in (i) or (ii) of this definition.
"Plan" shall mean the Company's Equity Incentive Plan as set forth herein.
"Plan Effective Date" shall mean October 31, 1997, the date on which this
Plan was approved by the Company's Board of Directors.
"Redemption Value" shall mean the amount, if any, by which the Fair Market
Value of one share of Common Stock on the date on which the Stock Option is
exercised exceeds the Option Price for such share.
"Restricted Stock" shall mean shares of Common Stock granted under Article
VII that are subject to restrictions imposed pursuant to said Article.
"SEC" shall mean the U.S. Securities and Exchange Commission and any
successor thereto.
4
<PAGE>
"Stock Option" shall mean a right granted under the Plan to a Participant
to purchase Common Stock at a stated price for a specified period of time.
"Subsidiary" shall mean a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest; provided, however, for purposes of
determining whether any person may be a Participant for purposes of any grant of
Incentive Stock Options, "Subsidiary" means any subsidiary corporation of the
Company as defined in Section 424(f) of the Code.
"Supplemental Bonus" shall mean the right to receive payment in cash of an
amount determined pursuant to Article IX of this Plan.
"Term" shall mean the length of time during which a Stock Option may be
exercised.
ARTICLE IV
ADMINISTRATION OF THE PLAN
A. Delegation to the Committee. This Plan shall be administered by the
Incentive Plan Committee. References herein to the "Committee" shall mean the
Employee Committee and/or the Incentive Plan Committee, as applicable.
References herein to the Incentive Plan Committee refer solely to the Incentive
Plan Committee.
Members of the Incentive Plan Committee and the Employee Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The action of a majority of the members of the Incentive
Plan Committee and the Employee Committee present at any meeting, or acts
unanimously approved in writing, shall be the acts of the Incentive Plan
Committee and the Employee Committee, respectively.
B. Powers of the Committee. The Incentive Plan Committee shall have full
power and authority, subject to the provisions of this Plan, to establish such
rules and regulations as it may deem appropriate for proper administration of
this Plan and to make such determinations under, and issue interpretations of,
the provisions of this Plan and any outstanding Awards as it may deem necessary
or advisable. In addition, the Incentive Plan Committee shall have full power
and authority to administer and interpret the Plan and make modifications as it
may deem appropriate to conform the Plan and all actions pursuant to the Plan to
any regulation or to any change in any law or regulation applicable to this
Plan.
C. Actions of the Committee. All actions taken and all interpretations and
determinations made by the Committee in good faith (including determinations of
Fair Market Value) shall be final and binding upon all Participants, the Company
and all other interested persons. No director or member of the Committee shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan, and all directors and members of the
Committee shall, in addition to their rights as directors, be fully protected by
the Company with respect to any such action, determination or interpretation.
5
<PAGE>
D. Awards to Officers and Directors.
1. All Awards to officers shall be determined by the Incentive Plan
Committee. If the Incentive Plan Committee is not composed as prescribed in the
definition of Incentive Plan Committee in Article III, the Board shall have the
right to take such action with respect to any Award to an officer as it deems
necessary or advisable to comply with Rule 16b-3 of the Exchange Act and any
related rules, including but not limited to seeking stockholder ratification of
such Award or restricting the sale of the Award or any shares of Common Stock
underlying the Award for a period of six-months.
2. Discretionary awards to Non-Employee Directors, if any, shall be
determined by the Board.
ARTICLE V
ELIGIBILITY
A. Discretionary Stock Option Grant Program, Restricted Stock Program and
Supplemental Bonus Program. The persons eligible to participate in the
Discretionary Stock Option Grant Program, the Restricted Stock Program and the
Supplemental Bonus Program are as follows:
1. Employees of the Company or a Subsidiary;
2. Members of the Board; and
3. Consultants and other independent advisors who provide services to
the Company or a Subsidiary.
B. Selection of Participants. The Committee shall from time to time
determine the Participants to whom Awards shall be granted pursuant to the
Discretionary Stock Option Grant Program, the Restricted Stock Program and the
Supplemental Bonus Program.
ARTICLE VI
SHARES AVAILABLE UNDER THE PLAN
A. Maximum Number. The number of shares of Common Stock issued or
transferred and covered by outstanding awards granted under this Plan shall not
in the aggregate exceed 4,000,000 shares of Common Stock, which may be Common
Stock of original issuance or Common Stock held in treasury, or a combination
thereof. This authorization shall be increased automatically on each succeeding
annual anniversary of the Plan Effective Date by an amount equal to that number
of shares equal to one-half of one percent of the Company's then issued and
outstanding shares of Common Stock. The shares may be divided among the various
6
<PAGE>
Plan components as the Incentive Plan Committee shall determine, except that no
more than 3,500,000 Shares shall be issued in connection with the exercise of
Incentive Stock Options under the Plan. Any portion of the shares added on each
succeeding anniversary of the Plan Effective Date which are unused during the
Plan year beginning on such anniversary date shall be carried forward and be
available for grant and issuance in subsequent Plan years, while up to 100% of
the shares to be added in the next succeeding Plan year (calculated on the basis
of the current Plan year's allocation) may be borrowed for use in the current
Plan year. Shares of Common Stock that may be issued upon the exercise of Stock
Options shall be applied to reduce the maximum number of shares remaining
available for use under the Plan. The Company shall at all times during the term
of the Plan and while any Stock Options are outstanding retain as authorized and
unissued Common Stock, or as treasury Common Stock, at least the number of
shares of Common Stock required under the provisions of this Plan, or otherwise
assure itself of its ability to perform its obligations hereunder.
B. Unused and Forfeited Stock. The following shares of Common Stock shall
automatically become available for use under the Plan: (i) any shares of Common
Stock that are subject to an Award under this Plan that are not used because the
terms and conditions of the Award are not met, including any shares of Common
Stock that are subject to a Stock Option that expires or is terminated for any
reason, (ii) any shares of Common Stock with respect to which a Stock Option is
exercised that are used for full or partial payment of the Option Price, and
(iii) any shares of Common Stock withheld by the Company in satisfaction of the
withholding taxes incurred in connection with the exercise of a Non-Statutory
Option.
C. Capital Changes. If any change is made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Company's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which grants are
subsequently to be made pursuant to Article VI of this Plan, and (iii) the
number and/or class of securities then included in each Award outstanding
hereunder and the Option Price per share in effect under each outstanding Stock
Option under this Plan. Such adjustments to the outstanding Stock Options are to
be effected in a manner that shall preclude the enlargement or dilution of
rights and benefits under such Stock Options. The adjustments determined by the
Committee shall be final, binding and conclusive.
7
<PAGE>
ARTICLE VII
DISCRETIONARY STOCK OPTION GRANT PROGRAM
A. Discretionary Grant of Stock Options to Participants. The Committee may
from time to time authorize grants to Participants of options to purchase shares
of Common Stock upon such terms and conditions as the Committee may determine in
accordance with the following provisions (in connection with any grants under
this paragraph VII.A to Non-Employee Directors, "Committee" shall mean the
entire Board of Directors):
1. Each grant shall specify the number of shares of Common Stock to
which it pertains;
2. Each grant shall specify the Option Price per share;
3. Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Company, (ii) shares of Common Stock
that are already owned by the Optionee and have a Fair Market Value at the time
of exercise that is equal to the Option Price, (iii) shares of Common Stock with
respect to which a Stock Option is exercised, (iv) a recourse promissory note in
favor of the Company, (v) any other legal consideration that the Committee may
deem appropriate and (vi) any combination of the foregoing;
4. Any grant may provide for deferred payment of the Option Price from
the proceeds of sale through a broker of some or all of the shares of Common
Stock to which the exercise relates;
5. Any grant may provide that shares of Common Stock issuable upon the
exercise of a Stock Option shall be subject to restrictions whereby the Company
has the right or obligation to repurchase all ora portion of such shares if the
Participant's service to the Company is terminated before a specified time, or
if certain other events occur or conditions are not met;
6. Successive grants may be made to the same Participant regardless of
whether any Stock Options previously granted to the Participant remain
unexercised;
7. Each grant shall specify the conditions to be satisfied before the
Stock Option or installments thereof shall become exercisable, which conditions
may include a period or periods of continuous service by the Optionee to the
Company or any Subsidiary, the attainment of specified performance goals and
objectives, or the occurrence of specified events; as may be established by the
Committee with respect to such grant;
8. All Stock Options that meet the requirements of the Code for
incentive stock options shall be Incentive Stock Options unless (i) the option
agreement clearly designates the Stock Options granted thereunder, or a
specified portion thereof, as a Non-Statutory Option, or (ii) a grant of
Incentive Stock Options to the Participant would be prohibited under the Code or
other applicable law;
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9. Each grant shall specify the Term of the Stock Option, which Term
shall not be greater than 10 years from the Date of Grant; and
10. Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Company by any officer thereof and delivered to and
accepted by the Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Plan.
B. Special Terms Applicable to Incentive Stock Options. The following
additional terms shall be applicable to all Incentive Stock Options granted
pursuant to this Plan. Stock Options that are specifically designated as
Non-Statutory Options shall not be subject to the terms of this paragraph VII.B.
1. Incentive Stock Options shall be granted only to Employees of the
Company or a Subsidiary;
2. The Option Price per share shall not be less than the Fair Market
Value per share of Common Stock on the Date of Grant;
3. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective Date(s) of Grant) with respect to which
Incentive Stock Options granted to any Employee under the Plan (or any other
plan of the Company or a Subsidiary) are exercisable for the first time during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such Stock Options
that become exercisable for the first time in the same calendar year, the
foregoing limitation on the treatment of such Stock Options as Incentive Stock
Options shall be applied on the basis of the order in which such Stock Options
are granted; and
4. If any Employee to whom an Incentive Stock Option is granted is a
10% Stockholder, then the Option Price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the Date of Grant, and the option Term shall not exceed five (5) years measured
from the Date of Grant.
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ARTICLE VIII
RESTRICTED STOCK PROGRAM
A. Awards Granted. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Restricted
Stock Awards consisting of shares of Common Stock. The number of shares granted
as a Restricted Stock Award shall be determined by the Committee.
B. Restrictions. A Participant's right to retain a Restricted Stock Award
granted to such Participant under Article VII.A shall be subject to such
restrictions, including but not limited to his or her continuous employment by
the Company for a restriction period specified by the Committee or the
attainment of specified performance goals and objectives, or the occurrence of
specified events, as may be established by the Committee with respect to such
Award. The Committee may in its sole discretion require different periods of
employment or different performance goals and objectives with respect to
different Participants, to different Restricted Stock Awards or to separate,
designated portions of the shares constituting a Restricted Stock Award.
C. Privileges of a Stockholder, Transferability. A Participant shall have
all voting, dividend, liquidation and other rights with respect to shares of
Common Stock in accordance with its terms received by him or her as a Restricted
Stock Award under this Article VIII upon his or her becoming the holder of
record of such shares; provided, however, that the Participant's right to sell,
encumber or otherwise transfer such shares shall be subject to the restrictions
established by the Committee with respect to such Award.
D. Enforcement of Restrictions. The Committee may in its sole discretion
require a legend to be placed on the stock certificates referring to the
restrictions referred to in paragraphs VIII.B and VIII.C., in order to enforce
such restrictions.
ARTICLE IX
SUPPLEMENTAL BONUS PROGRAM
A. Non-Statutory Stock Options. The Committee, at the time of grant or at
any time prior to exercise of any Non-Statutory Option, may provide for a
Supplemental Bonus from the Company or a Subsidiary in connection with a
specified number of shares of Common Stock then purchasable, or which may become
purchasable, under such Non-Statutory Option. Such Supplemental Bonus shall be
payable in cash upon the exercise of the Non-Statutory Option with regard to
which such Supplemental Bonus was granted. A Supplemental Bonus shall not exceed
the amount necessary to reimburse the Participant for the income tax liability
incurred by him or her upon the exercise of the Non-Statutory Option, calculated
using the maximum combined federal and applicable state income tax rates then in
effect and taking into account the tax liability arising from the Participant's
receipt of the Supplemental Bonus.
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B. Restricted Stock Awards. The Committee, either at such time as the
restrictions with respect to a Restricted Stock Award lapse or a Section 83(b)
election is made under the Code by the Participant with respect to shares issued
in connection with a Restricted Stock Award, may provide for a Supplemental
Bonus from the Company or a Subsidiary. Such Supplemental Bonus shall be payable
in cash and shall not exceed the amount necessary to reimburse the Participant
for the income tax liability incurred by him or her with respect to shares
issued in connection with a Restricted Stock Award, calculated using the maximum
combined federal and applicable state income tax rates then in effect and taking
into account the tax liability arising from the Participant's receipt of the
Supplemental Bonus.
ARTICLE X
TERMINATION OF SERVICE
A. Incentive Stock Options. The following provisions shall govern the
exercise of any Incentive Stock Options held by any Employee whose employment is
terminated:
1. If the Optionee's employment with the Company is terminated for any
reason other than such Optionee's death, disability or retirement, all Incentive
Stock Options held by the Optionee shall terminate on the date and at the time
the Optionee's employment terminates, unless the Committee expressly provides in
the terms of the Optionee's Stock Option Agreement that such Stock Options shall
remain exercisable, to the extent vested on such termination date, for a period
of three (3) months following such termination of employment.
2. If the Optionee's employment with the Company is terminated because
of such Optionee's death or disability within the meaning of Section 22(e)(3) of
the Code, all Incentive Stock Options held by the Optionee shall become
immediately exercisable and shall be exercisable for a period of twelve (12)
months following such termination of employment.
3. In the event Optionee's employment is terminated due to retirement,
all Incentive Stock Options held by the Optionee shall remain exercisable, to
the extent such Stock Options were exercisable on the date the Optionee's
employment terminated, for a period of three (3) months following such
termination of employment.
4. In no event may any Incentive Stock Option remain exercisable after
the expiration of the Term of the Stock Option. Upon the expiration of any three
(3) or twelve (12) month exercise period, as applicable, or, if earlier, upon
the expiration of the Term of the Stock Option, the Stock Option shall terminate
and shall cease to be outstanding for any shares for which the Stock Option has
not been exercised.
B. Non-Statutory Options. The following provisions shall govern the
exercise of any Non-Statutory Options:
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1. If the Optionee's employment, service on the Board or consultancy
is terminated for any reason other than such Optionee's death, disability or
retirement, all Non-Statutory Options held by the Optionee shall terminate on
the date of such termination, unless the Committee expressly provides in the
terms of the Optionee's Stock Option Agreement, that such Stock Options shall
remain exercisable, to the extent vested on such termination date, for a
specified period following such termination.
2. If the Optionee's employment, service on the Board or consultancy
is terminated because of such Optionee's death or disability, all Non-Statutory
Options held by the Optionee shall become immediately exercisable and shall be
exercisable until the expiration of the Term of such Stock Options.
3. If the Optionee's employment service on the Board or consultancy is
terminated because of such Optionee's retirement, all Non-Statutory Options held
by the Optionee shall remain exercisable, to the extent such Stock Options were
exercisable on the date of such termination, until the expiration of the Term of
such Stock Options.
4. In no event may any Non-Statutory Option remain exercisable after
the expiration of the Term of the Stock Option. Upon the expiration of any
specified exercise period following termination of Optionee's employment,
service on the Board or consultancy, or, if earlier, upon the expiration of the
Term of the Stock Option, the Stock Option shall terminate and shall cease to be
outstanding for any shares for which the Stock Option has not been exercised.
C. Restricted Stock Awards. In the event of the death or disability (within
the meaning of Section 22(e) of the Internal Revenue Code) or retirement of a
Participant, all employment period and other restrictions applicable to
Restricted Stock Awards then held by him or her shall lapse, and such Awards
shall become fully nonforfeitable. Subject to Articles X and XIV, in the event
of a Participant's termination of employment for any other reason, any
Restricted Stock Awards as to which the employment period or other restrictions
have not been satisfied shall be forfeited.
ARTICLE XI
TRANSFERABILITY OF STOCK OPTIONS
During the lifetime of the Optionee, Incentive Stock Options shall be
exercisable only by the Optionee and shall not be assignable or transferable. In
the event of the Optionee's death prior to the end of the Term, any Stock Option
may be exercised by the personal representative of the Optionee's estate, or by
the person(s) to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution. Upon the prior
written consent of the Board and subject to any conditions associated with such
consent, a Non-Statutory Option may be assigned in whole or in part during the
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Optionee's lifetime to one or more members of the Optionee's immediate family
(as that term is defined in Rule 16a-1(e) of the Exchange Act) or to a trust
established exclusively for one or more such family members. In addition, the
Board, in its sole discretion, may allow a Non-Statutory Option to be assigned
in other circumstances deemed appropriate. The terms applicable to the assigned
portion shall be the same as those in effect for the Stock Option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Committee may deem appropriate. Notwithstanding any assignment
or transfer of a Stock Option, in no event may any Stock Option remain
exercisable after the expiration of the Term of the Stock Option.
ARTICLE XII
STOCKHOLDER RIGHTS
The holder of a Stock Option shall have no stockholder rights with respect
to the shares subject to the Stock Option until such person shall have exercised
the Stock Option, paid the Option Price and become a holder of record of the
purchased shares of Common Stock.
ARTICLE XIII
ACCELERATION OF VESTING
The Committee may, at any time in its sole discretion, accelerate the
vesting of any Award made pursuant to this Plan by giving written notice to the
Participant. Upon receipt of such notice, the Participant and the Company shall
amend the agreement relating to the Award to reflect the new vesting schedule.
The acceleration of the exercise period of an Award shall not affect the
expiration date of such Award.
ARTICLE XIV
CHANGE IN CONTROL
In the event of a Change in Control of the Company, all Awards outstanding
under the Plan as of the day before the consummation of such Change in Control
shall automatically accelerate for all purposes under this Plan so that each
Stock Option shall become fully exercisable with respect to the total number of
shares subject to such Stock Option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock as of such date, without regard to
the conditions expressed in the agreements relating to such Stock Option, and
the restrictions on each Restricted Stock Award shall lapse and such shares of
Restricted Stock shall no longer be subject to forfeiture.
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ARTICLE XV
CANCELLATION AND REGRANT OF OPTIONS
The Committee shall have the authority, at any and from time to time, with
the consent of the affected Optionees, to effect the cancellation of any or all
outstanding Stock Options and/or any Restricted Stock Awards and grant in
substitution new Stock Options and/or Restricted Stock Awards covering the same
or different number of shares of Common Stock. In the case of such a regrant of
a Stock Option, the Option Price shall be set in accordance with Article VII on
the new Date of Grant.
ARTICLE XVI
FINANCING
The Committee may, in its sole discretion, authorize the Company to make a
loan to a Participant in connection with the exercise of a Stock Option, and may
authorize the Company to arrange or guaranty loans to a Participant by a third
party in connection with the exercise of a Stock Option.
ARTICLE XVII
TAX WITHHOLDING
A. Tax Withholding. The Company's obligation to deliver shares of Common
Stock upon the exercise of Stock Options under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.
B. Surrender of Shares. The Committee may, in its discretion, provide any
or all holders of Non-Statutory Options under the Discretionary Stock Option
Grant Program with the right to use shares of Common Stock in satisfaction of
all or part of the taxes incurred by such holders in connection with the
exercise of such Stock Options. Such right may be provided to any such holder in
either or both of the following formats:
1. The election to have the Company withhold, from the shares of
Common Stock otherwise issuable upon the exercise of such Non-Statutory Option,
a portion of those shares with an aggregate Fair Market Value less than or equal
to the amount of taxes due as designated by such holder; or
2. The election to deliver to the Company, at the time the
Non-Statutory Option is exercised, one or more shares of Common Stock previously
acquired by such holder with an aggregate Fair Market Value less than or equal
to the amount of taxes due as designated by such holder.
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<PAGE>
ARTICLE XVIII
EFFECTIVE DATE AND TERM OF THE PLAN
This Plan shall become effective on the Plan Effective Date. This Plan
shall terminate upon the earliest of (i) ten (10) years after the Plan Effective
Date or (ii) the termination of all outstanding Awards in connection with a
Change in Control. Upon such plan termination, all outstanding Awards shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such Awards.
ARTICLE XIX
AMENDMENT OF THE PLAN
A. The Incentive Plan Committee shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects, unless stockholder
approval of such amendments or modifications is required under applicable law.
No such amendment or modification shall adversely affect the rights and
obligations with respect to Awards outstanding under the Plan at the time of
such amendment or modification, unless the Participant consents to such
amendment or modification.
B. Stock Options in excess of the number of shares of Common Stock then
available for issuance may be granted under this Plan, provided any excess
shares actually issued under this Plan shall be held in escrow until such
further action, necessary to approve a sufficient increase in the number of
shares available for issuance under the Plan, is taken. If such further action
is not obtained within 12 months after the date the first such excess issuances
are made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding, and (ii) the Company shall
promptly refund to the Optionees the exercise price paid for any excess shares
issued under the Plan and held in escrow, together with interest for the period
the shares were held in escrow, and such shares shall thereupon be automatically
cancelled and cease to be outstanding. If stockholder approval of a sufficient
increase in the number of shares subject to the Plan does not occur within 12
months of the grant of any Stock Option intended to be an Incentive Stock Option
which is granted pursuant to this Article XIX.B, such Stock Option shall be
deemed to be a Non-Statutory Option.
ARTICLE XX
REGULATORY APPROVALS
The implementation of the Plan, the granting of any Award under the Plan
and the issuance of any shares of Common Stock under any Award shall be subject
to the Company's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the Awards granted pursuant to
the Plan and the shares of Common Stock issued pursuant to any Award under the
Plan. No Stock Option shall be exercisable, no shares of Common Stock or other
assets shall be issued or delivered under the Plan, and no transfer of any
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Non-Statutory Option shall be approved by the Committee, unless and until there
shall have been compliance with (i) all applicable requirements of Federal and
state securities laws, if applicable, including the filing and effectiveness of
a registration statement on Form S-8 under the Securities Act of 1933, as
amended, covering the shares of Common Stock issuable under the Plan, and (ii)
all applicable listing requirements of any stock exchange or securities market
on which the shares of Common Stock are listed or traded.
ARTICLE XXI
NO EMPLOYMENT/SERVICE RIGHTS
Nothing in this Plan shall confer upon any Participant any right to
continue in service for any period or specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any Subsidiary
employing or retaining such person) or of the Participant, which rights are
hereby expressly reserved by each, to terminate such person's service at any
time for any reason, with or without Cause.
16
Addendum
Executive Employment Agreement
This addendum is a supplement to the Employment Contract between DCX, Inc.
(the "Company") and John C. Antenucci (the "Executive") dated July 28, 1997.
Pursuant to Paragraph 3 (a) Base Salary, the minimum annual base salary
payable to the Executive upon commencement of this Agreement shall be $175,000.
This addendum further stipulates that the Company will, within 5 business days
of the effective date of the Articles of Merger make a single and non refundable
payment of $50,000 to the Executive as an advance against the first year's
compensation related to his duties as President and Vice-Chairman of the
Company.
The advance payment will be charged to the Company and the remainder of the
first year's Base Salary will be paid by and charged against PlanGraphics, Inc.,
a subsidiary of the Company. The remainder payments will be made to the
Executive pursuant to PlanGraphics' standard payroll practices compensating him
for his duties as President and Chief Executive Officer.
All other terms and conditions and conditions of the Employment are
affirmed.
Date: September 22, 1997
For DCX, Inc. Executive
Stephen Carreker John C. Antenucci
July 17, 1997
<PAGE>
Executive Employment Agreement
This agreement (the "Agreement") is made effective September 22, 1997,
between DCX, Inc. ("DCXI" or the "Company") and John C. Antenucci (the
"Executive").
A. Executive is to be employed as President and Vice-Chairman of DCXI and
Chief Executive Officer and President of PlanGraphics, has previously rendered
valuable services in operating PlanGraphics Inc., possesses valuable experience
and has acquired valuable background in and knowledge of the Geographic
Information System and related industries.
B. DCXI desires to secure the service of Executive, and Executive desires
to serve as President of DCXI and Vice-Chairman and as Chief Executive Officer
and President of PlanGraphics or their respective successors.
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 June 30, 2000, upon the
terms and conditions set forth herein, unless earlier terminated in accordance
with the provisions herein.
Notwithstanding the foregoing, if the Agreement shall not have been
terminated in accordance with the provisions herein on or before June 30, 2000,
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 December 31, 1999, the Board of Directors notifies
Executive in writing of its determination to have the date of this Agreement
expire six months 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 breach
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)
<PAGE>
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,
it 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 at the same compensation level
immediately prior to termination).
b. "Board" means the Board of Directors of the Company.
c. "Cause" shall mean (1) 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
purpose 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, 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 of DCXI or its successors and Chief Operating Officer and
President of PlanGraphics or its successors; and/or
(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.
<PAGE>
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.
g. "[Exchange Value]" shall mean the bid price of DCXI stock on the
date the PlanGraphics' Board of Directors recommends approval of the Exchange
Agreement to the shareholders of PlanGraphics, Inc.
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 $175,000. 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 hereafter constitute Executive's minimum annual base salary for all
purposes of this Agreement, except that the Company may reduce Executive's
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 300,000 shares of the Company's common
stock fully vested and priced at the [Exchange Value]. In addition Executive
shall receive a stock option grant of 225,000 shares of the Company's common
stock also priced at the [Exchange Value], 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 (5%) of base salary if PlanGraphics achieves net income of one
hundred thousand dollars ($100,000) or more.
Executive shall receive an additional bonus of ten percent (10%) 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
[Exchange Value], plus $1.35.
<PAGE>
Further, if the revenue of PlanGraphics exceeds $15.0 million on September
30, 1997, or the annualized revenue of the Company considering acquisitions
that may be made between the effective date of this Agreement and September
30, 1997 exceeds $15 million, the Executive shall receive an additional
bonus equal to 0.75% of the amount of revenue which exceeds $15.0 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 $20
million by September 30, 1998, the Executive shall be deemed vested in 35
percent of the Performance Options; if in excess of $30 million by
September 30, 1999, he will be vested in an additional 35 percent of the
Performance Options, and if in excess of $40 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
<PAGE>
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 year's 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 eighteen (18) months after
termination of his employment, except that said post-termination bonus
coverage shall only extend for twelve (12) months after termination if
Executive takes employment (other than as an independent consultant
pursuant to paragraph 17) with another company in the same industry within
twelve (12) months of termination and shall not apply if Executive has been
discharged for cause.
Bonus payments shall be 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. The
Company 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.
e. Vacation. Executive shall receive four (4) weeks of vacation per
year. Unused vacation at the expiration of the Agreement's initial three (3)
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 allowance as may be negotiated by the Company relative to his in the
event his primary place of business is subsequently moved in excess of 50 miles
from its present location.
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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 but at no time shall these be less than the perquisites
and health and welfare benefits enjoyed by the Executive on December 31, 1996
during his employment with PlanGraphics.
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. In addition to any coverage required by the
Company, Executive shall be provided with a life insurance policy in the amount
of $500,000 (provided he can meet the medical conditions for such coverage),
payable to such beneficiaries as he shall designate, with an additional $250,000
of accidental death coverage in.
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 his Agreement, DCXI will pay to Executive Base
Compensation for a period continuing three (3) 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 the 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 eighteen (18) months after such event.
Stock options vested to date of termination may be exercised at any time during
the eighteen (18) months period following termination and may be exercised by
the estate of the Executive in the event of his death during the same time
period.
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Should the Executive exercise his option to terminate his Executive
Employment voluntarily after June 30, 2000, the Company shall continue to employ
the Executive as an advisor and consultant ("Consulting Employment") for a
period of five years. During the period of Consulting Employment, the Executive
shall at all reasonable times, to the extent his physical and mental condition
permits, be available to consult with and advise the Company's officers,
directors, representatives and clients. In addition to all other forms of
compensation otherwise conferred in this Agreement, the Company shall pay to the
Executive during the period of Consulting Employment, a minimum annual
compensation equal to one half of the average annual salary paid to him during
the last thirty six month period of his Executive Employment subject to increase
from time to time at the discretion of the Company.
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 the 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.
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 Comittee if 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 as Vice-Chairman
and Chief Executive Officer and President of its subsidiary corporation
PlanGraphics. Executive agrees to devote substantially all of his time and
energy to the performance of the duties of those positions so long as his
<PAGE>
employment in that position shall be continued by DCXI or its successors.
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 of the Company during his employment
hereunder, or at which his class, if such class be designated, comes up for
election and shall perform likewise for election to the Board of its subsidiary
company, PlanGraphics.
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 thirty (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 insure
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 insure 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
benefits program 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 document 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:
John C. Antenucci
112 E. Main Street
Frankfort, Kentucky 40601
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 a 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.
<PAGE>
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 form 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 an when incurred for any reasonable legal and other
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.
During the term of this Agreement and for a period of one (l) year
following the termination of the Agreement, the Executive shall not pursue
business opportunities with or serve as a Consultant or member of the staff in
any capacity to any of the following firms: the Convergent Group, UGC
Consulting, EMA, Berger Associates, firms generally known as "data conversion
<PAGE>
firms" and firms specializing in geographic information system software products
and any other companies with whom the Company or PlanGraphics has had a prime or
subcontractor role during the prior year of employment, without the prior
written permission of the Company. For one year following termination of
employment, the Executive confirms that he will not, without prior written
consent, perform work that PlanGraphics holds in backlog or is pursing at the
time of termination, whether by independent contract, through a competitor, or
by direct employment with client or prospect.
During the period of Consulting Employment, the Executive shall be
permitted to engage in any business practice so long as such business practice
is not in competition with the Company. The parties agree that the Executive's
performance of services for his own account, his writing, teaching or
consulting, his employment by any company other than a competitor and his
employment by a government agency shall not be considered competition with the
Company.
This covenant of non-disclosure 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.
Date:
For DCX, Inc. Executive
Stephen Carreker
President/CEO John C. Antenucci
Executive Employment Agreement
This agreement (the "Agreement") is made effective September 22, 1997,
between DCX, Inc. ("DCXI" or the "Company") and J. Gary Reed (the "Executive").
A. Executive is to be employed as Chief Operating Officer of PlanGraphics,
Inc. a subsidiary of the Company, has previously rendered valuable services in
operating PlanGraphics Inc., possesses valuable experience and has acquired
valuable background in and knowledge of the Geographic Information System and
related industries.
B. DCXI desires to secure the service of Executive, and Executive desires
to serve as Chief Operating Officer of PlanGraphics or its respective
successors.
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 June 30, 2000, upon the
terms and conditions set forth herein, unless earlier terminated in accordance
with the provisions herein.
Notwithstanding the foregoing, if the Agreement shall not have been
terminated in accordance with the provisions herein on or before June 30, 2000,
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 December 31, 1999, the Board of Directors notifies
Executive in writing of its determination to have the date of this Agreement
expire three months 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 breach
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)
<PAGE>
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,
it 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 at the same compensation level
immediately prior to termination).
b. "Board" means the Board of Directors of the Company.
c. "Cause" shall mean (1) 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
purpose 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, 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 Chief
Operating Officer of PlanGraphics or its successors; and/or
(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.
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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. b.
"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.
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.
g. "[Exchange Value]" shall mean the bid price of DCXI stock on the
date the PlanGraphics' Board of Directors recommends approval of the Exchange
Agreement to the shareholders of PlanGraphics, Inc.
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 $115,000. 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 hereafter constitute Executive's minimum annual base salary for all
purposes of this Agreement, except that the Company may reduce Executive's
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 [Exchange Value]. In addition Executive
shall receive a stock option grant of 145,000 shares of the Company's common
stock also priced at the [Exchange Value], 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 (5%) of base salary if PlanGraphics achieves net income of one
hundred thousand dollars ($100,000) or more.
Executive shall receive an additional bonus of ten percent (10%) 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
[Exchange Value], plus $1.35.
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<PAGE>
Further, if the revenue of PlanGraphics exceeds $10.0 million on September
30, 1997, or the annualized revenue of the Company considering acquisitions
that may be made between the effective date of this Agreement and September
30, 1997 exceeds $10 million, the Executive shall receive an additional
bonus equal to 0.75% of the amount of revenue which exceeds $10.0 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 $20
million by September 30, 1998 and the consolidated gross revenue of
PlanGraphics exceeds 13.2 million, the Executive shall be deemed vested in
35 percent of the Performance Options; if the consolidated gross revenue of
the Company exceeds $30 million by September 30, 1999 and the consolidated
gross revenue of PlanGraphics exceeds 16.5 million, he will be vested in an
additional 35 percent of the Performance Options, and if the consolidated
gross revenue of the Company exceeds $40 million by September 30, 2000 and
the consolidated gross revenue of PlanGraphics exceeds 20.6 million, 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,
4
<PAGE>
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 year's 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 eighteen (18) months
after termination of his employment, except that said post-termination
bonus coverage shall only extend for twelve (12) months after
termination if Executive takes employment (other than as an
independent consultant pursuant to paragraph 17) with another company
in the same industry within twelve (12) months of termination and
shall not apply if Executive has been discharged for cause.
Bonus payments shall be 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. The
Company 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.
e. Vacation. Executive shall receive an annual vacation consistent
with the policies and practices of PlanGraphics, Inc. Unused vacation at
the expiration of the Agreement's initial three (3) 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 allowance as may be negotiated by the Company relative to his in
the event his primary place of business is subsequently moved in excess of
50 miles from its present location.
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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 but at no time shall these be less than the
perquisites and health and welfare benefits enjoyed by the Executive on
December 31, 1996 during his employment with PlanGraphics.
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. In addition to any coverage required by the
Company, 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 in.
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 his Agreement, DCXI will pay to Executive Base
Compensation for a period continuing three (3) 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 the 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 eighteen (18) months after such event.
Stock options vested to date of termination may be exercised at any time during
the eighteen (18) months period following termination and may be exercised by
the estate of the Executive in the event of his death during the same time
period.
6
<PAGE>
Should the Executive exercise his option to terminate his Executive
Employment voluntarily after June 30, 2000, the Company shall continue to employ
the Executive as an advisor and consultant ("Consulting Employment") for a
period of three years. During the period of Consulting Employment, the Executive
shall at all reasonable times, to the extent his physical and mental condition
permits, be available to consult with and advise the Company's officers,
directors, representatives and clients. In addition to all other forms of
compensation otherwise conferred in this Agreement, the Company shall pay to the
Executive during the period of Consulting Employment, a minimum annual
compensation equal to one half of the average annual salary paid to him during
the last thirty six month period of his Executive Employment subject to increase
from time to time at the discretion of the Company.
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 the 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.
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 Comittee if 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 the Chief Operating of its
subsidiary corporation PlanGraphics. 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 or its
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<PAGE>
successors. 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 of the Company during
his employment hereunder, or at which his class, if such class be designated,
comes up for election and shall perform likewise for election to the Board of
its subsidiary company, PlanGraphics.
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 thirty (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 insure
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 insure 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
8
<PAGE>
benefits program 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 document 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:
J. Gary Reed
112 E. Main Street
Frankfort, Kentucky 40601
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 a 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.
9
<PAGE>
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 form 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 an when incurred for any reasonable legal and other
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.
During the term of this Agreement and for a period of one (l) year
following the termination of the Agreement, the Executive shall not pursue
business opportunities with or serve as a Consultant or member of the staff in
10
<PAGE>
any capacity to any of the following firms: the Convergent Group, UGC
Consulting, EMA, Berger Associates, firms generally known as "data conversion
firms" and firms specializing in geographic information system software products
and any other companies with whom the Company or PlanGraphics has had a prime or
subcontractor role during the prior year of employment, without the prior
written permission of the Company. For one year following termination of
employment, the Executive confirms that he will not, without prior written
consent, perform work that PlanGraphics holds in backlog or is pursing at the
time of termination, whether by independent contract, through a competitor, or
by direct employment with client or prospect.
During the period of Consulting Employment, the Executive shall be
permitted to engage in any business practice so long as such business practice
is not in competition with the Company. The parties agree that the Executive's
performance of services for his own account, his writing, teaching or
consulting, his employment by any company other than a competitor and his
employment by a government agency shall not be considered competition with the
Company.
This covenant of non-disclosure 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.
Date:
For DCX, Inc. Executive
Stephen Carreker
President/CEO J. Gary Reed
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 582,326
<SECURITIES> 0
<RECEIVABLES> 3,524,729
<ALLOWANCES> 188,161
<INVENTORY> 0
<CURRENT-ASSETS> 4,120,826
<PP&E> 201,932
<DEPRECIATION> 429,597
<TOTAL-ASSETS> 13,570,800
<CURRENT-LIABILITIES> 4,533,865
<BONDS> 0
2
0
<COMMON> 9,741,501
<OTHER-SE> (3,764,497)
<TOTAL-LIABILITY-AND-EQUITY> 13,570,800
<SALES> 0
<TOTAL-REVENUES> 71,098
<CGS> 0
<TOTAL-COSTS> 1,595,522<F1>
<OTHER-EXPENSES> (571,359)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,263
<INCOME-PRETAX> (953,065)
<INCOME-TAX> 0
<INCOME-CONTINUING> (953,065)
<DISCONTINUED> (1,598,313)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,453,644)<F2>
<EPS-PRIMARY> (.72)
<EPS-DILUTED> (.72)
<FN>
<F1>Includes parent Company full year expenses for administration, acquisitions,
legal and audit, and investment banking.
<F2>Includes $892,592 of "deemed" dividend expenses computed on possible conversion
of convertible preferred stock.
</FN>
</TABLE>
