<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended: December 31, 1996
Commission File No. 0-23780
MEDIAX CORPORATION
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(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 84-1107138
- ------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
8522 National Boulevard, Suite 110, Culver City, California 90232
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(Address of Principal Executive Offices, Including Zip Code)
(310) 815-8002
--------------------------
Issuer's Telephone Number
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
SHARES OF COMMON STOCK, $.0001 PAR VALUE
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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 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. [X]
The Issuer's revenues for its most recent fiscal year were $294,184.
The aggregate market value of the Issuer's Common Stock, $.0001 Par Value,
held by non-affiliates of the Issuer, based on the closing sale price of the
Common Stock on April 8, 1997 as reported on the OTC Bulletin Board, was
$4,755,581.
As of April 8, 1997 there were 14,162,139 shares of the Issuer's Common Stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
MediaX Corporation (the "Registrant" or the "Company") was incorporated
under the laws of the State of Colorado on August 15, 1986 under the name Fata
Morgana, Inc. On September 15, 1988, the Company changed its name to
Edinburgh Capital, Inc. On May 13, 1994, the Company merged into Edinburgh
Capital, Inc. (a Nevada corporation) in order to change its state of domicile
to Nevada.
The Company was originally formed for the primary purpose of seeking out
acquisitions of properties, businesses, or merger candidates, without
limitation as to the nature of the business operations or geographic area of
the acquisition candidate. From inception through the date of completion of
its initial public offering of securities, the Company's activities were
directed toward the acquisition of operating capital.
The Company completed its initial public offering in October, 1989,
receiving net proceeds of approximately $245,000 from the sale of 30,000 Units
(each Unit consisting of 1,000 shares of the Company's no par value common
stock, and 100 common stock purchaser warrants exercisable at $.02) at $10 per
Unit. The warrants expired in 1992.
During April 1994, the Company effected a 1 for 300 reverse stock split
and on February 23, 1996, the Company effected a 3.13 for 1 forward stock
split. All financial information and share data in the remainder of this
Report give retroactive effect to these two stock splits.
On February 23, 1996, the name of the Company was changed to Zeitgeist
Werks, Inc. On February 24, 1996, the Company acquired all of the issued and
outstanding shares of Zeitgeist, Inc., a Nevada corporation, in exchange for
12,500,000 shares of its common stock.
On June 27, 1996, MediaX, a California corporation, was merged into
Zeitgeist, Inc., and the Company issued 2,037,500 shares of its common stock
to the former shareholders of MediaX. On August 16, 1996 the Company changed
its name to MediaX Corporation.
The Company is engaged in the business of developing multimedia
products, primarily on a contract basis. These products are developed for the
personal computer market and are primarily designed for entertainment and
informational purposes. MediaX maintains its offices in Culver City and Santa
Cruz, California and has approximately 15 employees.
DESCRIPTION OF BUSINESS
As a result of the Company's acquisition of all of the issued and
outstanding shares of Zeitgeist, Inc. and MediaX, the Company now has new
management and a new business plan. The Company is engaged in the business of
developing, publishing and distributing interactive CD-ROM and Internet
content for the expanding multimedia market. Management believes that due to
the varied and extensive expertise of its President and outside director in
the areas of artist and record company management, film production, software
development and distribution and proprietary technology development, the
Company will bridge the entertainment and technology markets.
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The Company will operate primarily in multimedia services and product
development. It is currently in the process of developing creative authoring
tools, obtaining rights to intellectual properties, producing, publishing and
distributing multimedia software and content. The Company intends to maintain
strict control of both quality and costs and to retain profit margins that are
traditionally dispersed across many small companies, by taking a comprehensive
approach to production and distribution of its products.
PRINCIPAL PRODUCTS AND SERVICES
The Company develops, produces and markets software products for the
information/entertainment and development tool sector of the software industry
in the form of software distributed on floppy disks and CD-ROM's. Two
recently released CD-ROM entertainment products are "On the Road with BB King"
and "Queensryche's Promised Land", and they are being distributed by MCA and
EMI Records, respectively. The gold master (a completed product subject to
final testing by the manufacturer or customer) of a product called "Surf &
Destroy" has been delivered to Grolier Interactive. At this point in time it
is questionable that it will be released, since Grolier is in the process of
closing down (or at least drastically reducing) its game department.
MediaX was selected by Apple Computer to produce the Welcome Experience
for their limited edition Twentieth Anniversary Macintosh which was introduced
on March 19, 1997. MediaX developed the production to capitalize on the
Twentieth Anniversary Macintosh's extreme multimedia capabilities. The
multimedia presentation features leading-edge animation, digital video,
interactive 3D graphics, original soundtrack and theater quality audio.
During December 1996, the Company signed an Electronic Rights License
Agreement with Newspeak Media, Inc., which grants the Company the production
and exclusive publishing rights for George Orwell's novel "1984" dubbed "Big
Brother" in consideration for an agreed upon royalty. Production has
commenced and the product is expected to be released into the market in late
1997 or early 1998.
The Company has signed a contract with Peter Norton and Verbum for the
exclusive distribution rights for a series of five CD-ROM's. The first CD-ROM
will be called "Peter Norton's PC Guru." The Company has commenced work on
the first product out of the series and it is expected to be released late in
1997. Peter Norton's PC Guru is a Windows 3.1 and Windows 95 CD-ROM developed
specifically to help PC owners understand and use their computer systems, to
enhance both work and home life, and to get support when a problem or question
arises. It will introduce the user to key hardware internals and available
software solutions for common personal and professional applications through
illustrated, animated tutorials, and hands-on experience with demonstration
versions of popular software products included on the disc. Software update,
support and other current information will be provided to owners of the CD via
"hot-links" to active third party Internet Web sites and a specific companion
PC Guru website. The information provided on the disc will be comprehensive
and accurate, from top technical experts. The major sections of the disc cover
system software and hardware, peripheral devices, major application categories
(such as "creativity" and "learning"), troubleshooting, hands-on demonstration
software applications, and usable utilities and system customizing elements
such as background graphics and start-up sounds. The additional ability to
connect directly from the CD-ROM to major Internet sites will assure that the
user, even long after the purchase of the CD-ROM, will always have the
opportunity to bring his knowledge up-to-date and in addition, take advantage
of many existing down load opportunities for free software on the Internet.
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The Company is in the early development stage for Media Manager.
Multimedia, Internet and traditional text processing and desktop or printing
productions (accessing data on existing networks or archives, such as legal or
medical documents) almost always involve many individuals or groups of people
with various talents and specialties. Often times these groups work together
on one project, either within the same location or in separate locations,
connected through LANs or wide area networks. A single multi media production
for example can consist of 6,000 to 20,000 files consisting of graphic bitmap
images, sound files and animation. Keeping track of those files or more
importantly, managing modifications to various files and keeping track of
which individual or group is actually working on a file or a set of files at
any given time can be a never-ending and cost intensive task for production
companies, law firms or any large corporation. An absolute crucial task is
indexing, sharing, retrieving and maintaining such files and their multiple
versions. The objective of Media Manager is to manage this process by
cataloging all work, automatically keeping historical information and
maintaining strict version control.
Media Manager should administrate this task in a very transparent and
visual manner, reproducing thumbnails of graphic images, sound files and text
and spreadsheet files among others. File access will be achieved by simply
double clicking those images. Media Manager should store digital data of any
kind in a proprietary storage system, manage and version control it and create
a flexible, transparent and visual archiving/administration system which can
be dynamically used by different individuals or project groups over a LAN
network or over the Internet.
Media Manager will run on a Windows 95 or Windows NT platform and will
also perform the function of a HTML server. Users who are on various other
machines and/or different operating platforms (i.e. Macintoshes or SGIs)
should be able to browse any media regardless of operating system or computing
platform, as well as check in and out files. As an add-on, Media Manager
should provide a stand alone WEB server application, so clients can also run a
simple Web server.
PATENTS, TRADEMARKS AND LICENSES
The Company presently owns no patents, trademarks or licenses. As a
contract developer, the Company intends to develop mainly its own proprietary
titles, which will result in the development of innovative technology
solutions with broad applications in other growing markets, especially in the
on-line environment. The Company will file the appropriate applications for
patents, trademarks or licenses as its products are developed.
COMPETITION
The Company is a minor participant among companies which engage in
multimedia development. Many of these companies have significantly greater
capitalization and greater experience in this industry.
EMPLOYEES
The Company presently has 15 employees and subcontractors.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company maintains its corporate offices at 8522 National Boulevard,
Suite 110, Culver City, California 90232. The Company pays approximately
$2,200 per month for rent pursuant to a lease which expires February 1, 1998.
The Company maintains its software development office at 325A River Street,
Santa Cruz, California 95060. The Company pays approximately $1,200 per month
for rent for its Santa Cruz operations pursuant to a lease which expires in
July 1997.
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ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings, and the Company is not aware of
any threatened legal proceedings to which it is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1996.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) MARKET INFORMATION. The Company's Common Stock is traded on the
over-the-counter market. The following table sets forth the high and low bid
price for the Company's Common Stock for the periods indicated as reported by
the NASD's Electronic Bulletin Board. These prices are believed to be
inter-dealer quotations and do not include retail mark-ups, mark-downs, or
other fees or commissions, and may not necessarily represent actual
transactions.
Quarter Ended High Bid Low Bid
------------------ -------- -------
March 31, 1996 $5.75 $3.25
June 30, 1996 $4.56 $2.90
September 30, 1996 $3.25 $2.00
December 31, 1996 $2.75 $1.50
(b) HOLDERS. As of March 15, 1997, the Company had approximately 41
shareholders of record. This does not include shareholders who hold stock in
their accounts at broker/dealers.
(c) DIVIDENDS. The Company has never paid a cash dividend on its
common stock and does not expect to pay a cash dividend in the foreseeable
future.
(d) RECENT SALES OF UNREGISTERED SECURITIES. During March 1996, the
Company issued 154,000 shares of its Common Stock to Westridge Capital Limited
upon conversion of a $300,000 note and $8,000 of accrued interest at $2.00 per
share. The shares were issued pursuant to the exemption provided by
Regulation S. Westridge is a corporation located in Bermuda and the sale was
made in an offshore transaction.
During April 1996, the Company issued 125,000 shares to CIK Enterprises
for services pursuant to a consulting agreement. The Company relied on the
exemption contained in Section 4(2) of the Securities Act of 1933, as amended.
CIK Enterprises had access to complete information concerning the Company by
virtue of its consulting relationship with the Company and the principals of
CIK are sophisticated and understand the risks associated with the
transaction.
During June 1996, the Company issued 2,037,500 shares of its Common
Stock to the three shareholders of MediaX in connection with the acquisition
of MediaX. The Company relied on the exemption contained in Section 4(2) of
the Securities Act of 1933, as amended. Each of these shareholders
participated in the negotiation of the transaction and received full
disclosure concerning the Company. In addition, they were each sophisticated
and understood the risks of their investment.
During October 1996, the Company sold 25,100 units, each unit consisting
of one share of Common Stock and one warrant exercisable at $3.00 per share.
The units were sold to eleven Canadian investors at a price of $2.00 per unit.
The Company relied on the exemption provided by Regulation S since the eleven
investors are non-U.S. persons and the offers and sales of the units were made
in offshore transactions.
During December 1996, the Company sold 350,000 shares of its Common
Stock to four accredited investors at a price of $1.00 per share. The Company
relied on the exemption provided by Section 4(2) of the Securities Act of
1933, as amended, and Rule 506 under Regulation D. The Company filed a Form D
with the Securities and Exchange Commission to report the sales.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following information should be read in conjunction with the
financial statements and the notes thereto. The analysis set forth below is
provided pursuant to applicable Securities and Exchange Commission regulations
and is not intended to serve as a basis for projections of future events.
FORWARD-LOOKING STATEMENTS
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS FORM 10-KSB ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT
TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE SET FORTH IN SUCH FORWARD LOOKING STATEMENTS. SUCH
RISKS AND UNCERTAINTIES INCLUDE, WITHOUT LIMITATION, THE COMPANY'S DEPENDENCE
ON THE TIMELY DEVELOPMENT, INTRODUCTION AND CUSTOMER ACCEPTANCE OF PRODUCTS,
THE IMPACT OF COMPETITION AND DOWNWARD PRICING PRESSURES, THE ABILITY OF THE
COMPANY TO REDUCE ITS OPERATING EXPENSES AND RAISE ANY NEEDED CAPITAL, THE
EFFECT OF CHANGING ECONOMIC CONDITIONS, AND RISKS IN TECHNOLOGY DEVELOPMENT.
RESULTS OF OPERATIONS
The financial results in the Statements of Operations for the year ended
December 31, 1996, reflect the operations of the Company for the complete year
and the operations for the Company's subsidiary MediaX for the period from
June 27, 1996 through December 31, 1996. Since MediaX is the only operating
business, there are no meaningful comparisons which can be made with the
statements of operations for the year ended December 31, 1995, because the
1995 results reflect only the activities of the Company and its subsidiary
Zeitgeist, Inc. before the transaction with MediaX.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had a negative working capital of
$(435,564). Subsequent to December 31, 1996, the Company raised an additional
$350,000 from the sale of 350,000 shares of the Company's Common Stock at
$1.00 per share.
The Company's success and ongoing financial viability is contingent upon
its selling of its products and the related generation of cash flows. The
Company is currently generating relatively little revenue and related cash
flows and anticipates this trend will continue until such time, if any, new
products are released and accepted in the marketplace. Management believes
that its existing cash and working capital balances will be sufficient to meet
its working capital needs for the balance of the fiscal year ending December
31, 1997. If the Company decides to commence with additional productions, it
may be necessary to raise additional financing.
The Company evaluates its liquidity and capital needs on a continuous
basis and based on the Company's requirements and capital market conditions
may, from time to time, raise working capital through additional debt or
equity financing. There is no assurance that such financing will be available
in the future to meet additional capital needs of the Company, or as to the
terms or conditions of any such financing that is available. Should there be
any significant delays in the release of new products, or lack of acceptance
in the marketplace for such products if released, or the Company's working
capital needs otherwise exceed its resources, the adverse consequences would
be severe. The generation of the Company's current growth and the expansion
of the Company's current business involve significant financial risk and
require significant capital investment.
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As of December 31, 1996 the Company had no material commitments for
capital expenditures.
The Company is planning to do a private placement of common stock to
raise up to approximately $1 million to $2 million to provide working capital
for the Company's planned business activities. The success, or lack thereof,
of this funding may have a material impact on the future of the Company.
ITEM 7. FINANCIAL STATEMENTS.
Please see pages F-1 through F-14.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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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, their ages,
positions held in the Company, and duration as such, are as follows:
NAME AGE POSITION HELD AND TENURE
Nancy Poertner 41 President Secretary and Director since
February 23, 1996
Rainer Poertner 49 Director since February 23, 1996
Matthew MacLaurin 30 Director, Executive V.P since June 27, 1996
BUSINESS EXPERIENCE
The following is a brief account of the education and business
experience during at least the past five years of the Company's directors,
executive officers, and key employees, indicating the principal occupation and
employment during that period, and the name and principal business of the
organization in which such occupation and employment were carried out.
NANCY POERTNER, PRESIDENT, SECRETARY AND DIRECTOR. Nancy Poertner has
been involved in the entertainment industry since 1979. From 1981 to December
1995, she was Vice President for a major artist management company based in
Los Angeles, where she was responsible for all aspects of artist management -
domestic and international touring, marketing, promotion and album recordings.
In addition, from 1991 to December 1995, she led the international department
of a major record label distributed through MCA, resulting in sales generating
five international gold records, five top fifteen singles and two number one
positions. Several of the entertainers she has worked with include Matthew
Broderick, Rod Stewart, Toni Braxton, Suzanne Hoffs (Bangles) and recording
artist Morrissey. As a result of her years in the business, Ms. Poertner has
extensive personal relationships throughout the domestic and international
film and recording industries. Ms. Poertner was educated overseas, graduated
with a Bachelor of Arts in Education and taught in Afghanistan and Turkey
through the Peace Corps.
RAINER POERTNER, DIRECTOR. Mr. Poertner has served as a Director of
the Company since February 23, 1996. Rainer Poertner has a twelve-year track
record of bringing new and innovative computer hardware and software
technology to the international market place. He has served as President and
a Director of Syncronys Softcorp since May 8, 1995, and as Chief Executive
Officer since July 1, 1995. He co-founded Seamless Software Corporation
("Seamless") and served as Director and as President of Seamless from its
inception in May 1993 until its merger with Syncronys Softcorp on May 8, 1995.
After having held several positions in the European and U.S. entertainment
industries, he founded Hybrid Arts, Inc., in 1986 by arranging $3 million of
venture financing for ADAP - the first Direct-to-Disk Digital Recording
System. After arranging Hybrid Art's sale in 1991, Mr. Poertner became CEO of
Hydra Systems, Inc., which developed and marketed ANDOR - a fully functional
Macintosh CPU on a PC peripheral card. Hydra Systems subsequently sold the
technology and the inherent rights to a company in Seoul, South Korea in 1992.
Mr. Poertner received degrees in economics from the University of Frankfurt in
1975 and the Klinger Business School in 1973.
Rainer Poertner and Nancy Poertner are husband and wife.
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MATTHEW MACLAURIN, EXECUTIVE VICE PRESIDENT. Matthew MacLaurin's
experience stretches back to the early days of PCS when, 16 years ago, he
developed games for the Commodore Pet 2001. Later, Matthew joined Sapiens
Software to create tools for artificial intelligence engineering on the IBM PC
XT platform. He was the key engineer for the development and implementation
of Common Lisp, a computer language for the 640K DOS platform. At Apple
Computer he secured funding for, designed and led the development of the
patented GATE system, a leading-edge artificial intelligence testing system.
In Apples Advanced Product Group, he led the development of a revolutionary
pen-based computer called Bauhaus, which incorporated handwriting recognition
and an advanced artificial intelligence memory system. In 1994, Matthew
joined forces with Gaben Chancellor to found the original MediaX.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
No persons who were either a Director, Officer or beneficial owner of
more than 10% of the Company's Common Stock, failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the most recent
fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information regarding the executive
compensation for the Company's President for the years ended December 31,
1996, 1995 and 1994 from the Company and its subsidiaries. No other
executive officer received compensation in excess of $100,000 during these
periods.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
SECURI-
TIES
UNDERLY-
OTHER RE- ING ALL
ANNUAL STRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER) PAYOUTS SATION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nancy Poertner, 1996 $114,583 -- $7,200 -- -- --
President 1995 --
1994 --
</TABLE>
EMPLOYMENT AGREEMENTS
On January 1, 1996, the Company entered into an employment agreement
with Nancy Poertner, the Company's President. The agreement expires December
31, 1999, but is automatically renewable for additional two year terms unless
either party elects to terminate the agreement. The agreement provides for a
monthly salary of $10,417 during the period from January 1, 1996 through
September 30, 1996, and an annual base salary of $155,000 during the period
from October 1, 1996, through September 30, 1997. The salary level increases
by $30,000 for each year thereafter. The agreement also provides that Nancy
Poertner will be paid a bonus within 30 days after the end of each quarter in
amounts to be determined by the Board of Directors. Nancy Poertner can
terminate the agreement at any time.
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On June 26, 1996, the Company entered into an employment agreement with
Matthew MacLaurin, the Company's Executive Vice President. The agreement
expires June 30, 1997, but is automatically renewable for additional two year
terms unless either party elects to terminate the agreement. The agreement
provides for an annual base salary of $100,000 during the period from July 1,
1996 through June 30, 1997, and an annual base salary of $125,000 during the
period from July 1, 1997 through June 30, 1998. The salary level increases by
$30,000 for each year thereafter. The agreement also provides that Matthew
MacLaurin will be paid a bonus within 30 days after the end of each quarter in
amounts to be determined by the Board of Directors. Matthew MacLaurin can
terminate the agreement at any time.
STOCK OPTION PLAN
During April 1996, the Board of Directors adopted a Stock Option Plan
(the "Plan"), and on July 3, 1996, the Corporation's shareholders approved the
Plan. The Plan authorizes the issuance of options to purchase up to 1,000,000
shares of the Company's Common Stock.
The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company. The Board has
the power to determine at the time that the option is granted whether the
option will be an Incentive Stock Option (an option which qualifies under
Section 422 of the Internal Revenue Code of 1986) or an option which is not an
Incentive Stock Option. Vesting provisions are determined by the Board at the
time options are granted. The option price for any option will be no less
than the fair market value of the Common Stock on the date the option is
granted.
Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options. Generally, there will be no federal income
tax consequences to the Company in connection with Incentive Stock Options
granted under the Plan. With regard to options that are not Incentive Stock
Options, the Company will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
Options to purchase a total 678,164 shares at an exercise price of $2.25
per share were granted during April 1996. No options were granted to officers
or directors of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 1997, the stock
ownership of each person known by the Company to be the beneficial owner of
five percent or more of the Company's Common Stock, each Officer and Director
individually, and all Officers and Directors as a group. Each person has sole
voting and investment power over the shares except as noted.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER OWNED BENEFICIALLY OF CLASS
<S> <C> <C>
Nancy Poertner 8,093,750<FN1> 57.15%
8522 National Blvd.
Suite 110
Culver City, CA 90232
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<PAGE>
Rainer Poertner 8,093,750<FN1> 57.15%
3958 Ince Boulevard
Culver City, CA 90232
Assisi Limited Partnership<FN1> 8,093,750 57.15%
10866 Wilshire Blvd., 15th Floor
Los Angeles, CA 90024
Cabana Holdings Ltd.<FN2> 712,500 5.03%
3rd Floor, 25 Church St.
PO Box HM 2903
Hamilton, Bermuda
Mizzentop Holdings Ltd.<FN3> 902,500 6.4%
4 George Street
Nassau, Bahamas
Matthew MacLaurin 956,250 6.75%
325A River Street
Santa Cruz, CA 95060
All Directors and Officers 9,350,000<FN1> 66.02%
as a Group (3 Persons)
______________
<FN>
<FN1>
Assisi Limited Partnership is a Nevada Limited Partnership of which Nancy
Poertner is a General Partner and owns a 100% interest. Rainer Poertner may
be deemed to be a beneficial owner of the shares owned by Assisi Limited
Partnership by virtue of his spousal relationship to Nancy Poertner. Mr.
Poertner disclaims any beneficial interest in such shares.
<FN2>
Cabana Holdings Ltd. is a Bahamas corporation in which Mr. Daniel G. Taylor,
a Canadian citizen, has an indirect beneficial interest. Cabana Holdings Ltd.
and Mr. Taylor, however, disclaim ownership by Mr. Taylor of shares in the
Company.
<FN3>
Mizzentop Holdings Ltd. is a Bahamas corporation in which Mr. Kevin O'Neill, a
Canadian citizen, has an indirect beneficial interest. Mizzentop Holdings
Ltd. and Mr. O'Neill, however, disclaim ownership by Mr. O'Neill of shares in
the Company.
</FN>
</TABLE>
The Company knows of no arrangement or understanding, the operation of
which may at a subsequent date result in a change of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
ACQUISITION OF ZEITGEIST, INC.
On February 24, 1996, the Company acquired all of the outstanding stock
of Zeitgeist, Inc. ("Zeitgeist"). The Company issued a total of 12,500,000
shares (approximately 95%) of its common stock to the shareholders of
Zeitgeist.
The stock issuances were made pursuant to an Agreement (the "Agreement")
among the Company, Zeitgeist and the Zeitgeist shareholders. The terms of the
Agreement were the result of negotiations between the managements of the
Company and Zeitgeist. However, Mark R. Moldenhauer, the Company's President
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and a Director prior to the acquisition, held a 5.6% interest in Zeitgeist and
received 700,000 shares of common stock in the transaction. Further, the
Board of Directors did not obtain any independent "fairness" opinion or other
evaluation regarding the terms of the Agreement due to the cost of obtaining
such opinions or evaluations.
The 12,500,000 shares issued to acquire Zeitgeist were issued to the
following shareholders of Zeitgeist in the amounts set forth:
NAME NUMBER OF SHARES
Assisi Limited Partnership 9,475,000
Cabana Holdings Ltd. 1,162,500
Mizzentop Holdings Ltd. 1,162,500
Mark R. Moldenhauer 700,000
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Total 12,500,000
ACQUISITION OF MEDIAX
On June 27, 1996, the Company completed a transaction in which MediaX, a
California corporation, was merged with and into the Company's wholly-owned
subsidiary, Zeitgeist. The Company issued a total of 2,037,500 shares of its
Common Stock to the shareholders of MediaX at the Closing, and Assisi Limited
Partnership surrendered for cancellation 2,037,500 of its shares of common
stock.
The stock issuances were made pursuant to an Agreement and Plan of
Reorganization ("Agreement") among the Company, Zeitgeist, MediaX and MediaX's
shareholders. The terms of the Agreement were the result of negotiations
between the managements of the Company and MediaX. However, the Board of
Directors did not obtain any independent "fairness" opinion or other
evaluation regarding the terms of the Agreement, due to the cost of obtaining
such opinions or evaluations.
The 2,037,500 shares issued to acquire MediaX were issued to the
following shareholders of MediaX in the amounts set forth:
NAME NUMBER OF SHARES
Matthew MacLaurin 956,250
Gaben Chancellor 956,250
David Traub 125,000
---------
Total 2,037,500
TRANSACTIONS INVOLVING THE COMPANY
On December 6, 1995, Zeitgeist, Inc. loaned Nancy Poertner, the
Company's President, $50,000 pursuant to an unsecured note bearing interest at
4% and with a due date of January 1, 2000. On February 25, 1996, an
additional $50,000 was loaned to Ms. Poertner on the same terms.
On February 20, 1997, the Company entered into a Disengagement Agreement
with Gaben Chancellor ("Chancellor"), a Vice President of the Company,
pursuant to which Chancellor agreed to resign as an officer of the Company and
to transfer 656,250 of his shares of the Company's common stock to Assisi
Limited Partnership. In addition, Chancellor agreed to enter into a
Consulting Agreement with the Company to act as project manager for the "Apple
Project" and to receive a monthly consulting fee of $6,000 until the
completion of the project. (The
-13-
<PAGE>
project was completed during March 1997.) The Company also agreed to pay
Chancellor a one-time cash compensation of $32,500 for his past contributions
to the Company. Of this amount, $20,000 was paid on the signing of the
agreement and the balance is due on or before June 30, 1997.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 3. EXHIBITS.
NUMBER DESCRIPTION LOCATION
3.1 Certificate of Incorporation Incorporated by reference to
Exhibit 3.1 to the Company's
Registration Statement on
Form S-18 (No. 33-28258)
3.1(a) Articles of Amendment to the Incorporated by reference to
Articles of Incorporation Exhibit 3.1(a) to the Company's
dated February 23, 1996, for Form 10-KSB for the year ended
the name change to Zeitgeist December 31, 1995
Werks, Inc.
3.1(b) Articles of Amendment to the Filed herewith electronically
Articles of Incorporation
dated August 15, 1996, for
the name change to MediaX
Corporation
3.2 Bylaws Incorporated by reference to
Exhibit 3.2 to the Company's
Registration Statement on
Form S-18 (No. 33-28258)
10.1 Disengagement Agreement dated Filed herewith electronically
February 20, 1997, with Gaben
Chancellor
10.2 Employment Agreement dated Filed herewith electronically
January 1, 1996 with Nancy
Poertner
10.3 Employment Agreement dated Filed herewith electronically
June 26, 1996 with Matthew
MacLaurin
27 Financial Data Schedule Filed herewith electronically
(b) REPORTS ON FORM 8-K. No Reports on Form 8-K were filed during the
fourth quarter of the Company's fiscal year ended December 31, 1996.
-14-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
MediaX Corporation
(A Development Stage Company)
We have audited the accompanying balance sheet of MediaX Corporation at
December 31, 1996 and the related statements of changes in stockholders'
equity, operations and cash flows for the period from inception (March 30,
1995) to December 31, 1995, for the year ended December 31, 1996 and for the
period from inception (March 30, 1995) to December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MediaX Corporation at
December 31, 1996 and the results of its operations and its cash flows for the
period from inception (March 30, 1995) to December 31, 1995, for the year
ended December 31, 1996 and for the period from inception (March 30, 1995) to
December 31, 1996 in conformity with generally accepted accounting principles.
The accompanying financial staements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
has minimal capital resources presently available to meet obligations which
normally can be expected to be incurred by similar companies, and has an
accumulated deficit of ($948,855) at December 31, 1996. These factors 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 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Davis & Co., CPAs, P.C.
Davis & Co., CPAs, P.C.
Certified Public Accountants
Englewood, Colorado
April 10, 1997
F-1
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Balance Sheet
December 31, 1996
ASSETS
Current assets
Cash and cash equivalents $ 224,331
Accounts receivable - trade 100,335
Accounts receivable - officer 19,043
Prepaid expenses 15,585
359,294
Property and equipment
Computer and office equipment 170,401
Software 61,344
Furniture and fixtures 5,693
237,438
Less: accumulated depreciation (115,235)
122,203
Other assets
Note and interest receivable - officer 103,830
Goodwill, net of amortization of $25,240 227,157
License agreement and deferred software costs 120,000
Organization costs, net 3,229
Other 927
455,143
$ 936,640
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Notes payable, current portion $ 307,047
Notes payable, to former MediaX shareholders 350,000
Accounts payable - trade 90,429
Accounts payable - related parties 39,248
Obligation under capital lease, current portion 8,134
794,858
Obligation under capital lease, long-term 5,514
800,372
Commitments, contingency and subsequent events
(Notes 5, 6 and 9)
Stockholders' equity (deficit)
Preferred stock, $.0001 par value per
share; 10,000,000 shares authorized
and no shares issued
Common stock, $.0001 par value per share;
75,000,000 shares authorized; 13,812,139
shares issued and outstanding 1,381
Additional paid-in capital 1,083,742
Deficit accumulated during the development stage (948,855)
136,268
$ 936,640
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From Inception (March 30, 1995)
to December 31, 1996
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
(AS RESTATED)
Shares issued in March 1995
for cash of $.000008 per share
to an officer and director 12,500,000 $1,250 $ (1,150)
Net loss for the period from
inception (March 30, 1995)
to December 31, 1995
Balance at December 31, 1995 12,500,000 1,250 (1,150)
Adjustment for shares of Zeitgeist
Werks, Inc. outstanding immediately
prior to reorganization on
February 23, 1996, valued
at net monetary asset amount 658,039 66 249,757
Exchange of 154,000 shares
during March 1996 for notes
and interest payable of $308,000 154,000 15 307,985
Issuance of 125,000 shares to
consultant on April 20, 1996
in exchange for services 125,000 13 124,987
Cancellation of 2,037,500 shares
by majority shareholder on
June 27, 1996 (2,037,500) (204)
Issuance of 2,037,500 shares on
June 27, 1996 in exchange for
all of the stock of MediaX, Inc. 2,037,500 204
Sale of 25,100 shares to unrelated
parties during June and July
1996 at $2 per share 25,100 2 52,198
Sale of 350,000 shares to unrelated
parties during Nov. and Dec.
1996 at $1 per share 350,000 35 349,965
Net (loss) for year ended
Dec. 31, 1996
Balance at December 31, 1996 13,812,139 $1,381 $1,083,742
(Continued)
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From Inception (March 30, 1995)
to December 31, 1996
(Page 2)
DEFICIT ACCUMULATED TOTAL
DURING THE STOCKHOLDERS'
DEVELOPMENT EQUITY
STAGE (DEFICIT)
Shares issued in March 1995
for cash of $.000008 per share
to an officer and director $ $ 100
Net loss for the period from
inception (March 30, 1995)
to December 31, 1995 (37,238) (37,238)
Balance at December 31, 1995 (37,238) (37,138)
Adjustment for shares of Zeitgeist
Werks, Inc. outstanding immediately
prior to reorganization on
February 23, 1996, valued
at net monetary asset amount (268,064) (18,241)
Exchange of 154,000 shares
during March 1996 for notes
and interest payable of $308,000 -- 308,000
Issuance of 125,000 shares to
consultant on April 20, 1995
in exchange for services -- 125,000
Cancellation of 2,037,500 shares
by majority shareholder on
June 27, 1996 -- (204)
Issuance of 2,037,500 shares on
June 27, 1996 in exchange for
all of the stock of MediaX, Inc. -- 204
Sale of 25,100 shares to unrelated
parties during June and July
1996 at $2 per share -- 52,200
Sale of 350,000 shares to unrelated
parties during Nov. and Dec.
1996 at $1 per share -- 350,000
Net (loss) for year ended
Dec. 31, 1996 (643,554) (643,554)
Balance at December 31, 1996 $(948,855) $136,268
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Statements of Operations
FOR THE PERIOD
FOR THE FROM INCEPTION
YEAR ENDED (MAR. 30, 1995)
DEC. 31 TO DEC. 31,
1996 1995 1996
SALES/COST OF SALES
Sales $ 392,125 $ -- $ 392,125
Cost of sales 142,644 -- 142,644
Gross profit 249,481 -- 249,481
GENERAL AND ADMINISTRATIVE
EXPENSES
Amortization 35,939 -- 35,939
Depreciation 28,929 -- 28,929
Insurance 23,043 -- 23,043
Legal and accounting 46,196 1,570 47,766
Other administrative 25,644 854 26,498
Postage and shipping 7,096 -- 7,096
Professional and outside
services 259,793 21,000 280,793
Promotions 27,119 -- 27,119
Rent and utilities 21,524 -- 21,524
Salaries 354,771 -- 354,771
Supplies 13,894 5,309 19,203
Taxes - payroll 16,317 -- 16,317
Taxes and licenses 9,046 -- 9,046
Telephone 11,687 -- 11,687
Travel 11,836 5,585 17,421
892,834 34,318 927,152
OTHER INCOME (EXPENSES)
Interest income 5,403 -- 5,403
Interest expense (7,198) (2,920) (10,118)
Gain on sale of asset 1,000 -- 1,000
Other income 594 -- 594
(201) (2,920) (3,121)
Net (loss) $ (643,554) $ (37,238) $ (680,792)
Weighted average number
of common shares 13,285,972 12,500,000 12,948,004
Net (loss) per common share $ (.05) $ (--) $ (.05)
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
FOR THE PERIOD
FOR THE FROM INCEPTION
YEAR ENDED (MAR. 30, 1995)
DEC. 31 TO DEC. 31,
1996 1995 1996
Cash Flows from Operating
Activities
Net income (loss) $ (643,554) $ (37,238) $ (680,792)
Adjustments to reconcile net
cash provided by operating
activities
Stock issued for services 125,000 -- 125,000
Amortization 35,939 -- 35,939
Depreciation 28,929 -- 28,929
Changes in assets and li-
abilities
(Increase) in accounts
receivable (100,335) -- (100,335)
(Increase) in accounts
receivable - officer (19,043) -- (19,043)
(Increase) in prepaid expense (15,585) -- (15,585)
(Increase) in other assets (582) (344) (926)
(Increase) in note and interest
receivable - officer (53,830) (50,000) (103,830)
Increase in accounts payable -
trade 86,664 3,765 90,429
Increase (decrease) in accounts
payable - related entity 28,658 10,591 39,248
(Decrease) increase in interest
payable (2,920) 2,920 --
Net cash (used) by operating
activities (530,659) (70,306) (600,965)
Cash Flows from Investing
Activities
Deferred software development (100,000) -- (100,000)
Purchase of fixed assets (71,208) -- (71,208)
Proceeds from sale of fixed
assets 1,600 -- 1,600
Net cash (used) by investing
activities (169,608) -- (169,608)
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Page Two)
FOR THE PERIOD
FOR THE FROM INCEPTION
YEAR ENDED (MAR. 30, 1995)
DEC. 31 TO DEC. 31,
1996 1995 1996
Cash Flow from Financing
Activities
Principal payments on capital
lease $ (14,443) $ -- $ (14,443)
Proceeds from sale of stock to
private investors 402,200 100 402,300
Retirement of notes payable (5,150) -- (5,150)
Proceeds received from issuance
of notes payable 312,197 300,000 612,197
Net cash provided by financ-
ing activities 694,804 300,100 994,904
Increase (decrease) in cash and
cash equivalents (5,463) 229,794 224,331
Cash and cash equivalents,
beginning of period 229,794 -- --
Cash and cash equivalents,
end of period $ 224,331 $229,794 $ 224,331
Supplemental Disclosures of Cash
Flow Information
Cash paid during year for:
Interest expense $ 10,188 $ -- $ 10,118
Cash received during the year
for:
Interest income $ 1,573 $ -- $ 1,573
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On June 27, 1996, the Company acquired all of the issued and outstanding
shares of MediaX, Inc. (a California S-corporation) in exchange for a $350,000
note payable to the former MediaX, Inc. shareholders and 2,037,500 shares of
the Company's common stock. The non-cash portion of this acquisition included
$152,517 of net property and equipment, primarily specialized computers and
software used in developing, publishing and distributing interactive CD-Rom
and Internet content for the multi-media market. In addition, the Company
received $24,479 of other non-cash assets, $10,188 of cash and assumed $89,561
of the liabilities of MediaX, Inc. that existed at June 27, 1996.
The accompanying notes are an integral part of this statement.
F-7
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies are as follows:
a. ORGANIZATION AND MERGER
MediaX Corporation (the "Company") (formerly Zeitgeist Werks, Inc.
and Edinburgh Capital, Inc.) was incorporated as Fata Morgana, Inc. under the
laws of the state of Colorado on August 15, 1986. On September 15, 1988, the
Company amended its Articles of Incorporation to change its name to Edinburgh
Capital, Inc. The Company was in the development stage as more fully defined
in Statement No.7 of the Financial Accounting Standards Board. Planned
principal operations of the Company had not yet commenced, and activities to
February 22, 1996 had been limited to its formation, obtaining initial
capitalization, the completion of a public offering of its common stock and
limited investments and loans.
Prior to 1988, the activity of the Company was limited to its
formation and the issuance of 208,667 shares of its common stock. Such shares
were paid for in September 1988. The Company intended to seek, investigate
and, if such investigation warranted, acquire an interest in business
opportunities presented to it by persons who or firms which desired to employ
the Company's funds in their business or seek the perceived advantages of a
publicly held corporation.
On February 23, 1996, the Company merged with Zeitgeist, Inc.
which was also in the development stage and whose principal operations had not
yet commenced. Zeitgeist's activities up to this time were limited to its
formation, obtaining initial capitalization, and limited investments and
loans.
The acquisition was accomplished through an exchange of 12,500,000
newly-issued shares of the Company's common stock in exchange for all of the
outstanding common stock of Zeitgeist, Inc. Upon completing this transaction,
the stockholders of Zeitgeist, Inc. controlled approximately 95% of the
outstanding common shares of the combined company.
Because the Zeitgeist shareholders obtained a majority of the
voting rights in the Company as a result of this transaction, for financial
reporting purposes, the merger was accounted for as a recapitalization of
Zeitgeist and an acquisition by Zeitgeist, Inc. of the Company. Accordingly,
the accompanying financial statements reflect transactions from March 30,
1995, the inception date of Zeitgeist, Inc. Zeitgeist,Inc., as the acquiror,
continued its business operations under the Company's name which was changed
to Zeitgeist Werks, Inc. effective February 23, 1996. The Company's name was
later changed to MediaX Corporation effective with the acquisition of MediaX
on June 27, 1996 (see Note 6b. herein).
MediaX Corporation is still considered to be in the development
stage because although its principal business activities have commenced, it
had not yet generated significant revenues from these activities.
b. BASIS OF PRESENTATION
The accompanying financial statements include the activities of
Zeitgeist, Inc. from its inception (March 30, 1995) to December 31, 1995 and
for
F-8
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (Continued)
the year ended December 31, 1996; and the activities of the Company from
February 23, 1996, the effective date of the Zeitgeist, Inc. merger to
December 31, 1996. The activities of MediaX have been included from the
effective date of the MediaX acquisition (which was accounted for using the
purchase method of accounting), June 27, 1996, through December 31, 1996.
c. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash and cash
equivalents consist of demand deposits in banks. Cash equivalents are carried
at cost which approximates market.
d. PROPERTY AND EQUIPMENT
Expenditures for property and equipment are capitalized at cost.
Expenditures for maintenance, repairs and other renewals of items are charged
to expense. The provision for depreciation is calculated using the
straight-line method based upon estimated useful lives as follows:
Computer equipment - 5 years
Software - 3 years
Furniture and fixtures - 7 years
e. GOODWILL
Goodwill represents the excess of cost over the fair value of
assets acquired and is amortized using the straight-line method over a period
of 5 years. Management compares the remaining unamortized balance on an
annual basis to see if it still approximates the net present value of expected
future cash flows.
f. DEFERRED SOFTWARE DEVELOPMENT COSTS
Certain development costs for CD-rom masters are capitalized in
accordance with SFAS No. 86 "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed" and are reported at the lower of
unamortized cost or net realizable value. Amortization will be taken using
the straight-line method and asset lives approximating the retail sales life
of the final product, generally three to five years.
g. NET INCOME (LOSS) PER COMMON SHARE
The net income (loss) per common share is computed by dividing the
net income or (loss) for the period by the weighted average number of shares
outstanding.
h. ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
F-9
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, accounts receivable,
short-term debt and accounts payable approximate cost because of the immediate
or short-term maturity of these financial instruments. The fair value of the
Company's long-term receivables is estimated by discounting expected cash
flows at rates currently available to the Company for instruments with similar
risks and maturities. The Company estimates that the fair value of its note
receivable is $78,008 at December 31, 1996.
j. INCOME TAXES
Under SFAS 109, "Accounting for Income Taxes," deferred tax assets
and liabilities are generally determined based on the difference between the
financial statements and the tax bases of assets and liabilities using enacted
tax rates in effect for the years in which the differences are expected to
reverse. Recognition of a deferred tax asset is allowed if future realization
is more-likely than-not. The Company has provided a full valuation allowance
for its deferred tax asset (relative to net operating loss carryforwards)
because its realization is not considered more-likely than-not.
As of December 31, 1996, the Company has a net operating loss
carryforward of approximately $597,000 available for income tax purposes.
This carryforward expires in 2011.
The Company's prior net operating losses totaling $268,000 expire
in years 2003 to 2010. Usage of the earlier net operating losses is limited
based on IRS Code Sec. 382. This code section limits the use of pre-change
losses whenever a stock ownership change of more than 50% occurs within the
"testing period", which is generally a three-year period.
NOTE 2. GOING CONCERN
The Company has minimal capital resources presently available to
meet obligations which normally can be expected to be incurred by similar
companies, and to carry out its planned operations; has an accumulated deficit
of ($948,855) at December 31, 1996; and as of that date its current
liabilities exceeded its current assets by $435,564. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management believes that its cash flow requirements in the next
year can be met from its existing cash and receivables until such time that
the Company can obtain additional equity or debt financing. The Company is
planning to do a private placement of common stock to raise up to $1 million
to $2 million to pay off debt and provide working capital. There is no
assurance that the Company will be able to obtain such financing. However, an
additional $350,000 in funds were obtained subsequent to December 31, 1996 as
discussed in Note 9a., herein. The financial statements herein do not include
any adjustments that might result from the outcome of the uncertainty.
F-10
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
NOTE 3: NOTE RECEIVABLE - OFFICER
On December 6, 1995, $50,000 was loaned to the Company's
President. The uncollateralized note bears interest at 4% per annum and is
due in full, along with interest, on January 1, 2000. Pursuant to the terms
of the note, an additional $50,000 was loaned on February 25, 1996.
NOTE 4: NOTES PAYABLE
a. An uncollateralized note payable to an unrelated party for
$300,000 dated November 15, 1995 bears interest at the bank's prime rate and
was due the earlier of November 15, 1997 or when the Company raises $500,000
or more in a private placement of its common stock. See Note 6c. herein,
regarding subsequent conversion of this $300,000 note and accrued interest
into 154,000 shares of the Company's common stock on March 21, 1996.
Subsequent to this note conversion, additional advances of $297,000 were
received during 1996 under the same terms and conditions.
b. Also included in notes payable to unrealted parties is a $10,047
short-term uncollateralized loan with interest at 9% per annum.
c. The Company also owes $350,000 to the three former shareholders of
MediaX (see Note 6b. herein). This payable is uncollaterlized, non-interest
bearing and due on demand. See Note 9b. regarding subsequent settlement of a
portion of this payable.
NOTE 5: COMMITMENTS AND CONTINGENCIES
a. CAPITAL LEASE COMMITMENT
The Company leases equipment under two capital lease agreements.
Required minimum lease payments under these agreements over the next five
years reconciled to the present value of net minimum capital lease payments as
of December 31, 1996 are as follows:
YEAR AMOUNT
1997 $12,644
1998 4,083
1999 1,952
Total minimum lease payments 18,679
Less: estimated amount representing interest (5,031)
Present value of net minimum capital
lease payments 13,648
Less: current portion (8,134)
Long-term obligations under capital
lease at December 31, 1996 $ 5,514
b. SALES TAX CONTINGENCY
The Company does not pay or charge sales taxes to its customers.
The state of California has indicated that it believes state sales taxes are
applicable to the Company's sales. The Company's position is that it does not
believe sales taxes are applicable to the Company's sales and therefore it has
F-11
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
NOTE 5: COMMITMENTS AND CONTINGENCIES (Continued)
not collected any sales taxes from its customers. The ultimate outcome of
this matter cannot be predicted. No amounts have been accrued in the
financial statements, herein, for any sales taxes which might ultimately be
determined to be owed. If sales taxes were to be owed on all of the Company's
California sales to date, approximately $134,000 of such sales taxes would be
due, plus any applicable interest and penalties.
c. DEVELOPMENT AGREEMENT COMMITMENTS
During the normal course of its business, the Company has entered
into two development/license agreements which require additional payments
totaling $378,000.
NOTE 6: COMMON STOCK AND STOCK OPTIONS
a. REORGANIZATION
On February 24, 1996, the Company acquired all of the issued and
outstanding shares of Zeitgeist, Inc. (a Nevada corporation) in exchange for
12,500,000 shares of its common stock. The effect of this reorganization has
been retroactively restated to the March 30, 1995 inception date of Zeitgeist,
Inc. herein.
b. ACQUISITION OF MEDIAX, INC. BY ZEITGEIST, INC.
On June 27, 1996, the Company issued 2,037,500 shares of its
common stock for all of the issued and outstanding shares of MediaX, Inc., a
California S-corporation engaged in the business of developing, publishing and
distributing interactive CD-rom and Internet content for the fast growing
multimedia market. Pursuant to the merger agreement, the Company's largest
shareholder Assisi Limited Partnership ("Assisi") (owned 100% by the Company's
President) surrendered for cancellation 2,037,500 shares of common stock. In
addition, the Company agreed to pay $350,000 to the three shareholders of
MediaX. As of December 31, 1996, this amount has not been paid and is listed
as a "Note Payable to Former MediaX Shareholders" in the balance sheet herein.
See Note 9b. regarding a settlement agreement relative to a portion of this
note payable.
c. CONVERSION OF NOTE PAYABLE
On March 21, 1996, the Company converted $300,000 of notes payable
and $8,000 of accrued interest due to an unrelated party into 154,000 shares
of common stock at $2 per share (see Note 4a).
d. PRIVATE SALES
During June and July 1996, 25,100 shares were sold to unrelated
private investors for cash proceeds of $52,200. During November and December
of 1996, 350,000 additional shares were sold to unrelated private investors
for cash proceeds of $350,000.
F-12
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
NOTE 6: COMMON STOCK AND STOCK OPTIONS (Continued)
e. STOCK ISSUED FOR CONSULTING SERVICES
On April 20, 1996, the Company issued 125,000 shares of commons
stock to an unrelated third party consultant in exchange for services
rendered. At the same time the consultant was granted options to purchase up
to 250,000 shares of the Company's common stock at $2.00 per share. These
options expire on April 20, 1999.
f. STOCK OPTION PLAN
In April 1996 the Company adopted a stock option plan which
authorized the issuance of options to purchase up to 1,000,000 shares of the
Company's common stock. All options granted must have an exercise price no
less than the stock's fair market value on the date of grant. On April 18,
1996, the Company issued options under this stock option plan to non-officer
employees and consultants for the purchase of up to 678,164 shares of the
Company's common stock at a price of $2.25 per share. The options expire on
April 18, 2001.
NOTE 7: RELATED PARTY TRANSACTIONS
a. The Company rents its office space in two separate locations on a
month-to-month basis for $1,500 per month. The space in one of the locations
is being sublet to the Company by the Company's Executive Vice-President's
brother at $800 per month.
b. LOANS TO OFFICER
See Note 3 herein, regarding loans made to the Company's
President.
c. COMMITMENT - EMPLOYMENT AGREEMENTS
Effective January 1, 1996, the Company entered into a four-year
employment agreement with its President. The Company is obligated to pay base
salary as follows:
$116,250 January 1, 1997 to September 30, 1997
Unless terminated by either party upon 60 days written notice,
this agreement will automatically renew for additional two-year terms after
the initial four-year term expires.
Effective June 26, 1996, the Company entered into a three-year
employment agreement with its Executive Vice-President by which the Company is
obligated to pay base salaries of $100,000, $125,000 and $155,000 for each of
the three years ended June 30, 1997, 1998 and 1999, respectively. Both of
these agreements provide for a bonus at the end of each fiscal quarter as
determined by the Company's Board of Directors. Both the President and
Executive Vice President may voluntarily terminate their employment at any
time.
F-13
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1996
NOTE 8: MAJOR CUSTOMERS
Each year the Company's revenues are typically generated from two
to three major customers located throughout the United States. These
customers usually change from year to year so that the Company believes it is
not dependent upon any one customer but rather must continually seek new
customers each year.
NOTE 9: SUBSEQUENT EVENTS
a. STOCK ISSUANCES
In February 1997, the Company sold an additional 350,000 shares of
its common stock to unrelated private investors for total cash proceeds of
$350,000.
b. SETTLEMENT AGREEMENT WITH FORMER MEDIAX SHAREHOLDER
In February 1997, the Company entered into a settlement agreement
with one of the three former shareholders of MediaX who was also an officer of
the Company. Pursuant to the terms of this agreement, the former shareholder
agreed to resign as an officer of the Company, give 656,250 shares of his
common stock of the Company to Assisi, and settle the $166,250 debt owed to
him in exchange for $32,500 cash plus computer equipment with a net book value
of $12,536 (at December 31, 1996).
F-14
<PAGE>
MEDIAX CORPORATION
(A Development Stage Company)
Pro-Forma Condensed Statements of Operations
(Unaudited)
On February 23, 1996, Zeitgeist Werks, Inc. (formerly Edinburgh Capital,
Inc.) (the "Company") was effectively acquired by Zeitgeist, Inc., a Nevada
corporation which began operations on March 30, 1995. In connection with this
acquisition which was accounted for as a reverse acquisition of the Company by
Zeitgeist, Inc., all of the Zeitgeist, Inc. shareholders agreed to exchange
their 1,000 total shares of stock in Zeitgeist, Inc. for a total of 12,500,000
shares of the Company's common stock.
In addition, on June 27, 1996, there was another acquisition, accounted
for using the purchase method of accounting, whereby the Company acquired 100%
of the shares of MediaX, a previously unrelated entity, which operates in the
multimedia industry.
The following pro-forma condensed statements of operations for the
period from inception (March 30, 1995) to December 31, 1995 and for the year
ended December 31, 1996 give effect to both acquisitions discussed above as if
they had occurred on March 30, 1995. The pro-forma information is based upon
the historical financial statements of the Company, Zeitgeist, Inc. and
MediaX, giving effect to the reverse acquisition and the June 27, 1996
purchase transaction and the adjustments described below to the pro-forma
condensed statements of operations. These pro-forma statements may not be
indicative of the results that actually would have occurred had the
acquisition taken place on the dates indicated or the results which may be
obtained in the future.
HISTORICAL
------------------------------
ZEITGEIST, PRO-FORMA
EDINBURGH INC. MEDIAX CONSOLIDATED
--------- ---------- --------- ------------
For the period from inception
(March 30, 1995) to December
31, 1995 (unaudited)
Revenues,net of cost of sales $ -- $ -- $ 354,723 $ 354,723
Selling, general and
administrative expenses 17,979 37,238 328,721 421,801 *
Net income (loss) (17,979) (37,238) 26,002 (67,078)*
Net income (loss) per common
share (--)
Weighted average number of
shares 12,500,000
For the year ended
December 31, 1996 (unaudited)
Revenues,net of cost of sales -- -- 370,424 370,424
General and administrative
expenses 3,700 130,407 904,517 1,063,866**
Net loss (3,700) (130,407) (534,093) (693,442)**
Net loss per common share (.05)
Weighted average number of
shares 13,285,972
_______________
* Reflects a pro-forma adjustment of $37,863 for nine months of goodwill
amortization.
** Reflects a pro-forma adjustment of $25,242 for an additional six months of
goodwill amortization.
S-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: April 25, 1997 MEDIAX CORPORATION
By:/s/ Nancy Poertner
Nancy Poertner, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Nancy Poertner President, Secretary and April 25, 1997
Nancy Poertner Director
/s/ Rainer Poertner Director April 25, 1997
Rainer Poertner
/s/ Matthew MacLaurin Executive V.P and April 25, 1997
Matthew MacLaurin Director
<PAGE>
CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
ZEITGEIST WERKS, INC.
CHANGING ITS NAME TO
MEDIAX CORPORATION
Zeitgeist Werks, Inc., a corporation organized and existing under the
Nevada General Corporation Law, does hereby certify as follows:
FIRST: ARTICLE I - NAME of the Articles of Incorporation is hereby
amended to read as follows:
ARTICLE I
NAME
The name of the Corporation shall be: MediaX Corporation.
SECOND: The foregoing Amendment was adopted by written unanimous
consent of the Board of Directors of the Corporation on July 3, 1996, in
accordance with the provisions of Section 78.315.2 of the Nevada General
Corporation Law.
THIRD: The foregoing Amendment was adopted by written consent of
Stockholders holding at least a majority of the voting power of the
Corporation on July 3, 1996, in accordance with the provisions of Section
78.320.2 of the Nevada General Corporation Law.
FOURTH: Written consent and notice has been given in accordance with
the provisions of Section 78.320.3 of the Nevada General Corporation Law.
IN WITNESS WHEREOF, Zeitgeist Werks, Inc. has caused this Certificate of
Amendment to be signed and acknowledged by its President and Secretary this
15th day of August, 1996.
ZEITGEIST WERKS, INC.
(Changing its name to MediaX Corporation)
ATTEST: By /s/ Nancy Poertner
Nancy Poertner, President
/s/ Nancy Poertner
Nancy Poertner, Secretary
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I, Margaret A. Beck, a Notary Public, hereby certify that on the 15th
day of August, 1996, personally appeared before me Nancy Poertner, who being
by me first duly sworn, declared that she signed the foregoing document as
both President and Secretary of the corporation named therein and that she is
above the age of eighteen years and that the statements contained therein are
true and correct to the best of her knowledge and belief.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Margaret A. Beck
Notary Public
[ S E A L ]
My commission expires: 7/21/98
<PAGE>
EXHIBIT 10.1
DISENGAGEMENT AGREEMENT
Agreement between Gaben Chancellor ("Chancellor") and MediaX Corporation
("MediaX") made this 20th day of February, 1997.
Chancellor, as a principal founder of MediaX in Santa Cruz, California,
has entered with Matthew MacLaurin, the other principal founder of MediaX,
into an Agreement and Plan of Reorganization ("Merger Agreement") with
ZeitGeist Werks ("ZeitGeist"), which, after the merger, has been renamed
MediaX Corporation. The parties also had contemplated an employment agreement
between MediaX and Chancellor. The Merger Agreement has been concluded and
will remain valid and unchanged, except as modified by the provisions of this
Agreement. The employment agreement with Chancellor will not be executed.
In consideration of the promises and the mutual agreements and covenants
herein contained and the payment of $1.00 made by each party to the other (the
receipt and adequacy of such consideration is hereby mutually acknowledged by
each party), the parties hereby covenant and agree as follows:
1. INTERPRETATION.
For the purposes of this Agreement, except as otherwise expressly
provided herein:
(a) "this Agreement" means this Agreement as it may from time to
time be supplemented or amended in a signed writing and in effect;
(b) all references in this Agreement to a designated "Section",
"paragraph", "subparagraph", or other subdivision, is to the designated
Section, paragraph, subparagraph, or other subdivision of this Agreement
unless otherwise specifically stated;
(c) the words "herein", "hereof" and "hereunder", and other
words of similar import, refer to this Agreement as a whole and not to any
particular Section, paragraph, subparagraph, or other subdivision;
(d) the singular of any term includes the plural and vice versa
and the use of any term is equally applicable to any gender and where
applicable a body corporate;
(e) the word "or" is not exclusive and the word "including" is
not limiting (whether or not non-limiting language such as "without
limitation" or "but not limited to" or other words of similar import is used
with reference thereto); the headings to the paragraphs and subparagraphs of
this Agreement are inserted for convenience only and do not form a part of
this Agreement and are not intended to interpret, define or limit the scope,
extent or intent of this Agreement, or any provision hereof;
(f) any reference to a corporate entity includes and is also a
reference to any corporate entity that is a successor to such entity; and
(g) the language in all parts of this Agreement shall, in all
cases, be construed as a whole and neither strictly for nor against either of
the parties.
2. AGREEMENT.
(a) It is herewith agreed that there will be no employment
agreement between Chancellor and MediaX, and that MediaX has no continuing
salary obligation in regards to Chancellor as an employee.
(b) Chancellor hereby resigns as an officer of MediaX.
(c) Chancellor will release to Assisi (Nancy Poertner) 656,250
shares of his 956,250 shares of MediaX common stock issued to him individually
based on the Merger Agreement between ZeitGeist and MediaX, made on the 4th
day of April. Assisi (Nancy Poertner) will take legal possession of those
shares. In consideration of the promises and the mutual agreements and
covenants herein contained and the payment of $1.00 made by each party to the
other (the receipt and adequacy of such consideration is hereby mutually
acknowledged by each party), Chancellor will remain in possession of 300,000
shares as an appreciation of his value in co-founding MediaX. This share
transaction shall be executed in a way that no tax liability for either party
will be construed or result.
(d) Chancellor has entered into a Consulting Agreement with
MediaX as Project Manager on MediaX's "Apple Project", and will receive a
consulting fee of Six Thousand Dollars ($6,000.00) per month during the
execution of the Apple Project. Chancellor agrees to maintain the agreed upon
milestone time lines and no additional compensation will be owed, due to time
overruns that are the sole responsibility of Chancellor. In the event MediaX
or Apple requests any adjustments or changes to the Apple Project, including
but not limited to the time lines and/or milestones, then Chancellor shall be
compensated for such additional work based on the same fee structure as
provided in this subparagraph 2(d) and in the Consulting Agreement between
Chancellor and MediaX on the Apple Project. MediaX remains the sole
contractual partner with Apple and retains sole ownership of the Apple
Project, and Chancellor agrees to implement MediaX's instructions with respect
to the Apple Project to the best of his abilities and knowledge, provided
MediaX, in a timely manner, supplies Chancellor with written copies of such
instructions. Chancellor will receive a credit on the Apple Project to be
mutually agreed upon, such credit being, for example: "Produced and Directed
by Gaben Chancellor." Chancellor's credit shall appear prominently in the
packaging and advertising, if any, for the product that is the Apple Project,
and in the screen displays for the content of the Apple Project.
(e) Chancellor also will receive as compensation one (1) SGI
work station and one (1) Apple Macintosh computer to be selected by MediaX
("Equipment"). Chancellor acknowledges that this Equipment has been delivered
to Chancellor and that it will be used by Chancellor in providing his services
for the Apple Project. Immediate transfer of property rights in the Equipment
to Chancellor depends on the original lease conditions or third party
limitations on ownership transfer of the Equipment. MediaX will make every
effort to transfer ownership of this Equipment to Chancellor. Should transfer
of ownership not be possible, MediaX will loan this Equipment to Chancellor
indefinitely, with no right of, or obligation for, reversion.
(f) Chancellor will also receive a one-time cash compensation of
Thirty-Two Thousand Five Hundred Dollars ($32,500.00) in consideration of his
contributions to MediaX, this amount to be paid Twenty Thousand Dollars
($20,000.00) on signing this Agreement and the balance at any time in one (l)
lump sum or in equal monthly installments, but in any event in full by no
later than June 30, 1997.
(g) MediaX, on a timely basis, agrees to pay in full the
American Express charges incurred on the American Express account of
Chancellor on behalf of MediaX, as more specifically detailed in Exhibit "A"
to this Agreement (but not any private charges of Chancellor, if any, with
Chancellor hereby representing that none of the outstanding charges on the
American Express account were for any private expenses of Chancellor), or to
promptly transfer same to the account of MediaX, and to pay the legal and
accounting fees and expenses incurred by Chancellor and Matthew MacLaurin in
connection with the Merger Agreement, and to hold Chancellor harmless from the
referenced charges and fees.
(h) Neither Chancellor nor any company or organization in which
Chancellor has a direct or indirect financial interest will directly or
indirectly own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of or be connected in any manner
with, any business conducted under any corporate or trade name now utilized by
MediaX or any name confusingly similar to MediaX, Media Corporation, MediaX
Studio, or ZeitGeist.
(i) Each party to this Agreement shall hold in confidence all
knowledge and information of a confidential nature with respect to the
business of the other party and any affiliate ("Information"), and will not
disclose, publish, or make use of the same without the prior written consent
of the other party.
(j) Each party shall hold in confidence indefinitely any and all
technology, trade secrets, and know-how ("Information") of the other party or
any affiliate, identified to the other and marked as confidential, and shall
not disclose, publish, or make use of the Information, including the terms of
this Agreement, without the prior written consent of the other party. A
specific listing of the Information proprietary to each of Chancellor and
MediaX, respectively, is recited in Exhibits "B" and "C" to this Agreement.
The provisions of subparagraphs 2(i) and 2(j) shall not apply in the following
events:
(i) The Information is or subsequently becomes available to
the public other than through breach of this Agreement;
(ii) The Information was properly in the party's possession
prior to obtaining it from the other party;
(iii) The Information otherwise lawfully becomes available
to the party without restriction from a third party who did not acquire it
directly or indirectly from the other party;
(iv) The Information is independently developed by the
party; or
(v) The Information is required by law to be disclosed.
(k) After the sale to Assisi (Nancy Poertner) of a portion of
Chancellor's shares of stock in MediaX and after the termination of his
officer status in MediaX, Chancellor may not, for the purpose of rendering the
services of Chancellor, solicit or seek to solicit on his behalf or on behalf
of any other person, firm, or corporation, any project proposed by MediaX to
any customer of MediaX, and not rejected by such customer, during the period
of Chancellor's employment with MediaX and Chancellor's consulting
arrangements with MediaX under the Consulting Agreement, which customer is
still a current customer of MediaX.
(1) If a judicial determination is made that any of the
provisions in this Agreement constitutes an unreasonable or otherwise
unenforceable restriction against Chancellor, the provision of this Section
shall be rendered void only to the extent such judicial determination finds
such provisions to be unreasonable or otherwise unenforceable. In this regard,
MediaX and Chancellor hereby agree that any judicial authority construing this
Agreement shall be empowered to sever or modify any portion of the territory,
any prohibited business activity, or any time period from the coverage of this
Agreement, and to apply the provisions of this Agreement to the remaining
portion of the territory, the remaining business activities, or the remaining
time period not so severed or modified by such judicial authority.
(m) Chancellor hereby agrees to indemnify and defend MediaX and
its affiliates and to hold MediaX and its affiliates wholly harmless from and
against any and all losses, liabilities, damages, deficiencies, costs
(including, without limitation, court costs), and expenses (including, without
limitation, attorneys' fees) incurred by MediaX or its affiliates and arising
out of or due to any breach of any covenant or agreement of Chancellor
contained in this Section 2.
(n) MediaX hereby agrees to indemnify and defend Chancellor and
its affiliates and to hold Chancellor and its affiliates wholly harmless from
and against any and all losses, liabilities, damages, deficiencies, costs
(including, without limitation, court costs), and expenses (including, without
limitation, attorneys' fees) incurred by Chancellor or its affiliates and
arising out of or due to any breach of any covenant of this Agreement by
MediaX.
3. MUTUAL RELEASE.
(a) Chancellor, for himself and his heirs, successors, and
assigns, absolutely and forever unconditionally releases and discharges
MediaX, and its predecessors and successors, and all of its employees,
officers, directors, shareholders, attorneys, and other representatives of and
from any claim, debt, suit, action, or cause of action which he ever had, now
has, or may hereafter acquire, whether known or not suspected to exist, and
arising from or connected in any way to all issues between Chancellor and
MediaX, whether oral or written, and any other act, omission, cause, or thing
whatsoever having occurred prior to the execution of this Agreement
(collectively the "Released Matters"), provided, however, that this release
shall not apply to the respective rights and obligations of the parties under
this Agreement and the Consulting Agreement.
(b) MediaX, for itself and for its successors and assigns,
absolutely and forever unconditionally releases and discharges Chancellor, and
his attorneys and other representatives, employees, officers, directors, and
shareholders of and from any claim, debt, suit, action, or cause of action
which it ever had, now has, or may hereafter acquire, whether known or not
suspected to exist, and arising from or connected in any way to all issues
between Chancellor and MediaX, whether oral or written, and any other act,
omission, cause, or thing whatsoever having occurred prior to the execution of
this Agreement, i.e. the Released Matters, provided, however, that this
release shall not apply to the respective rights and obligations of the
parties under this Agreement and the Consulting Agreement.
(c) It is the intention of the parties in executing this
Agreement and receiving the consideration called for by this Agreement that
this Agreement shall be effective as a full and final mutual release with
respect to all of the Released Matters. Each of the parties acknowledges that
it/he is familiar with Section 1542 of the Civil Code of the State of
California which provides as follows:
"A general release does not extend to claims which a creditor does not
know or suspect to exist in his favor at the time of executing the release,
which, if known by him must have materially affected his settlement with the
debtor."
Each of the settling parties waives and relinquishes any rights or benefits
which it/he has or may have under Section 1542 of the Civil Code of the State
of California, any other similar law, federal or state, to the full extent
that each may lawfully waive all such rights and benefits pertaining to the
Released Matters.
(d) The provisions of this Agreement and the releases contained
herein shall extend to, and inure to the benefit of, and be binding on, in
addition to the named parties, their respective present or future affiliates,
servants, agents, employees, partners, principals, officers, attorneys,
indemnitors, heirs, and legal successors and assigns of each of the parties
hereto.
(e) Each party warrants and represents to the others that it/he
is the sole and lawful owner of all right, title, and interest in and to all
of the Released Matters released herein by such party, and that it/he has not
heretofore voluntarily, by operation of law or otherwise, assigned,
encumbered, or transferred or purported to assign, encumber, or transfer to
any person any interest or right of action as against any other party. Without
limitation of the foregoing, each party further represents and warrants to the
other that it/he has full right, power, and authority to enter into this
Agreement and to perform all of its obligations hereunder. The parties'
respective representations, warranties, covenants, and affirmations set forth
in this subparagraph 3(e) are expressly intended to survive and remain
unaffected by the granting of the general releases set forth in this
Agreement.
(f) No party shall make any press or other public announcement
of or concerning this Agreement or the Released Matters, which gave rise to
this Agreement. Without limiting the generality of the foregoing, no party
shall reveal to any third party, other than an attorney, accountant, or other
financial advisor to a party to this Agreement, any of the terms or conditions
of this Agreement, except that a party may disclose such information as shall
be required in a proceeding to enforce this Agreement, or as otherwise
compelled by a court or tribunal with competent jurisdiction, or as required
by the rules of the Securities and Exchange Commission.
(g) Each party acknowledges to the other that it/he has been
represented by independent legal counsel or a representative of such party's
own choice throughout the negotiations which preceded the execution of this
Agreement, and that such party has executed this Agreement with the consent
and on the advice of such independent legal counsel or representative. Each
party further acknowledges that such party and such party's counsel of
representative has had an adequate opportunity to make whatever investigation
or inquiry they may deem necessary or desirable in connection with the subject
matter of this Agreement prior to the execution hereof and the delivery and
acceptance of the consideration specified herein. In making this Agreement, it
is understood and agreed that the parties have not been influenced to any
extent whatsoever by any alleged representations or statements of any other
party hereto or by the persons representing them which are not expressly set
forth as warranties and representations in this Agreement.
4. GENERAL.
(a) All notices, requests, demands, or directions relating to
this Agreement shall be in writing and delivered via courier addressed to the
appropriate party at the address of such party set out on the signature page
of this Agreement, or to such other addresses as may be specified by one (1)
party to the other by notice in writing. Any notice, request, demand,
direction, authorization, or other communication given shall be deemed to have
been received by the party to whom it was given on the third business day
following the sending thereof by courier.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
(c) Any controversy or claim arising out of or relating to this
Agreement or the alleged breach hereof shall be resolved by arbitration in
accordance with the rules and regulations of the Judicial Arbitration and
Mediation Services, and judgment upon the award rendered by the arbitrators in
any such arbitration, including, without limitation, specific performance of
this Agreement, may be entered in any federal or state court having
jurisdiction thereof. The prevailing party in any such arbitration shall be
entitled to recover from the nonprevailing party, in addition to all other
relief, all reasonable costs and expenses actually incurred by such party in
connection with such arbitration.
(d) If any one (1) or more of the provisions contained in this
Agreement should be invalid, illegal, or unenforceable in any respect in any
jurisdiction, the validity, legality, and enforceability of such provision or
provisions shall not in any way be affected or impaired thereby in any other
jurisdiction, and the validity, legality, and enforceability of the remainLng
provisions contained herein shall not in any way be affected or impaired
thereby.
(e) The parties hereto shall, with reasonable diligence, do all
such things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated hereby, and each party hereto shall
provide such further documents or instruments required by the other party as
may be reasonably necessary or desirable to effect the purpose of this
Agreement.
(f) This Agreement constitutes the entire initial agreement
between the parties hereto concerning the disengagement of Chancellor from
MediaX and supersedes all prior agreements, whether written or oral, made
between the parties hereto, and there do not exist any representations,
warranties, terms, or conditions, expressed or implied, statutory or
otherwise, and no agreements collateral hereto, other than as expressly set
forth or referred to in this Agreement. A more formal Agreement, especially in
regards to the actual reversion of the shares released by Chancellor to Assisi
(Nancy Poertner) will need to be drawn and executed. The parties agree that
neither party can unreasonably withhold the approval to such an agreement.
(g) This Agreement and each of the terms and provisions hereof
shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors, and permitted assigns; provided, however, that neither party shall
be entitled to assign or delegate any of its/his rights or obligations
hereunder without the prior written consent of the other.
(h) This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(i) Time is of the essence with this Agreement. Each party will
assume its own legal cost incurred in connection with this Agreement.
IN WITNESS WHEREOF, the parties have hereunto duly executed this
Agreement as of the day and year first above written.
GABEN CHANCELLOR
117 Colorado Street
Santa Cruz, CA 95060
/s/ Gaben Chancellor
Gaben Chancellor
MEDIAX CORPORATION
3960 Ince Boulevard
Culver City, CA 90232
By: /s/ Nancy Poertner By: /s/ Rainer Poertner
Nancy Poertner Rainer Poertner
Title: President Title: Chairman
Date: 2/26/97 Date: 2/26/97
By: /s/ Matthew MacLaurin
Matthew MacLaurin
Title: Director
Date: 2/25/97
<PAGE>
EXHIBIT A
DISENGAGEMENT AGREEMENT
Gaben Chancellor's American Express Account Bills
Incurred by Gaben Chancellor for MediaX
See Attached
Attached are copies of American Express
reports and backup dated September 14,
1996 and October 15, 1996.
<PAGE>
EXHIBIT B
DISENGAGEMENT AGREEMENT
Gaben Chancellor's Proprietary Information
1. The Buzz.
(a) Role: concept and writing.
(b) Percentage of involvement: fifteen percent (15%).
(c) Other owners:
(i) Doug Rhodes: sixty percent (60%).
(ii) Tom Calderon: twenty-five percent (25%).
2. WildFire.
(a) Role: concept and writing.
(b) Percentage of involvement: fifty percent(50%).
(c) Other owners: Chris Culp: fifly percent (50%).
3. Adventure Valley.
(a) Role: concept and writing.
(b) Percentage of involvement: twenty-five percent (25%).
(c) Other owners:
(i) Bill Davidson: forty-five percent (45%).
(ii) Chris Ramey: fifteen percent (15%).
(iii) David Minassian: fifteen percent (15%).
4. Dramatis.
(a) Role: concept and writing.
(b) Percentage of involvement: one hundred percent (100%).
(c) Other owners: none.
5. Pythagrean and the Polygoblin:.
(a) Role: concept and writing.
(b) Percentage of involvement: one hundred percent (100%).
(c) Other owners: none.
6. Tower of Babel.
(a) Role: concept and writing.
(b) Percentage of involvement: one hundred percent (100%).
(c) Other owners: none.
7. Conflict.
(a) Role: concept and writing.
(b) Percentage of involvement: fifty percent (50%).
(c) Other owners: Chris Rarney: fifty percent (50%).
<PAGE>
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Agreement is made as of the 1st day of January, 1996.
BETWEEN: Nancy Poertner, 13322 Maxella Avenue, Marina del Rey, California
90292 ("Poertner")
AND:
ZEITGEIST WERKS, a Nevada company having its office at 3960 Ince Boulevard,
Culver City, California, 90232 (the "Company")
WHEREAS Poertner entered into an employment agreement with Zeitgeist Werks,
and the Company desires to employ Poertner and Poertner desires to be employed
by the Company on those same terms and conditions contained therein;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises
and the mutual agreements and covenants herein contained and the payment of $1
made by each party to the other (the receipt and adequacy of such
consideration is hereby mutually acknowledged by each party), the parties
hereby covenant and agree as follows:
1. INTERPRETATION
1.1 Interpretation - For the purposes of this Agreement, except as otherwise
expressly provided herein:
(a) "this Agreement" means this Agreement as it may from time to time be
supplemented or amended and in effect;
(b) all references in this Agreement to a designated "Section", "paragraph",
it subparagraph" or other subdivision, is to the designated Section,
paragraph, subparagraph or other subdivision of this Agreement unless
otherwise specifically stated;
(c) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section,
paragraph, subparagraph or other subdivision;
(d) the singular of any term includes the plural and vice versa and the use
of any terms equally applicable to any gender and where applicable a body
corporate;
(e) the word "or" is not exclusive and the word "including" is not limiting
(whether or not non-limiting language such as "without limitation" or "but not
limited to" or other words of similar import is used with reference thereto);
the headings to the paragraphs and subparagraphs of this Agreement are
inserted for convenience only and do not form a part of this Agreement and are
not intended to interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof;
(f) the term "territory" shall mean the universe;
(g) any reference to a corporate entity includes and is also a reference to
any corporate entity that is a successor to such entity; and
(h) the language in all parts of this Agreement shall in all cases be
construed as a whole and neither strictly for nor against either of the
parties.
2. EMPLOYMENT
2.1 Employment. The Company hereby employs Poertner and Poertner hereby
accepts such employment on the terms contained herein. Poertner shall serve as
the President of the Company and shall devote her full business time and best
efforts to rendering services on behalf of Company. Services to be rendered
in Los Angeles with no more than one week per month in travel or other
locations with reasonable but limited exceptions.
2.2 Term. The employment of Poertner hereunder shall commence as of the date
hereof and shall continue until the earlier of:
(1) December 31, 1999 (the "Initial Term"), or
(2) the occurrence of any of the following events:
(a) the death or the failure of Poertner to perform his normal required
services hereunder for a period of twelve months by reason of mental or
physical disability (a "Disability Termination Event");
(b) termination by the Company of Poertner's employment hereunder, upon 10
days prior written notice to Poertner for "good cause" which shall exist upon
the occurrence of any of the following:
(i) Poertner is convicted of, pleads guilty to, or confesses to any
workplace related felony or any act of fraud, misappropriation or
embezzlement;
(ii) Poertner has engaged in a fraudulent act to the material damage or
prejudice of the Company or any affiliate or in conduct or activities
materially damaging to the property, business or reputation of the Company or
any affiliate;
(iii) any material act or omission by Poertner involving malfeasance or
gross negligence in the performance of his duties to the Company to the
material detriment of the Company and, within ten (10) days after written
notice from the Company of any such act or omission, Poertner has not
corrected such act or omission; or
(iv) Poertner otherwise fails to comply with the terms of this
Agreement or deviates from any reasonable written policies or directives of
the Board of Directors, and, within thirty (30) days after written notice from
Company of such failure, Poertner has not corrected such failure (in any such
case, a "Good Cause Termination Event"); or
(c) voluntary termination by Poertner of his employment hereunder (a
"Voluntary Termination Event").
2.3 Renewal. Unless terminated by either party hereto upon sixty (60) days
prior written notice to the other party hereto, this Agreement shall
automatically renew at the end of the Initial Term and any each renewal
thereof for an additional two-year term.
3. COMPENSATION
3.1 Base Salary. During the term of his employment hereunder, Poertner
shall receive an annual base salary ("Base Salary") less any applicable
withholding taxes, paid monthly in arrears, by the Company as follows:
(a) $125,000 - January 1, 1996 to September 30, 1996;
(b) $155,000 - October 1, 1996 to September 30, 1997;
(c) $30,000 additional for each fiscal year following the Initial Term.
3.2 Bonus. During the term of his employment hereunder, Poertner shall be
paid a bonus (the "Bonus") within 30 days after the end of each fiscal
quarter. The bonus shall be in amounts to be determined by the Board of
Directors or as the Company may maintain from time to time for the benefit of
executive employees.
3.3 Option to Purchase Employee Shares. If Employee's employment hereunder
is terminated upon the occurrence of a Good Cause Termination Event, then,
with respect to any shares of capital stock of the Company owned by Employee
as of the date of the termination of his employment hereunder (the "Employee
Shares"), the Company shall have the option to purchase all, but not less than
all, of the Employee Shares for the Fair Market Value of such shares, the fair
market value being the trading price of the shares at the occurrence.
3.4 Expenses. Poertner shall be reimbursed for all reasonable expenses
incurred by Poertner at the request and on behalf of Company.
3.5 Benefits. Poertner shall be entitled to participate in such medical,
dental, disability, hospitalization, life insurance and other benefit plans
(such as pension and profit sharing plans) as the Company shall maintain from
time to time for the benefit of executive employees.
3.6 Vacation. Poertner shall receive four (4) weeks of paid vacation time
each calendar year during the term of his employment hereunder or at
Poertner's option base pay in lieu thereof for all or any vacations not taken.
4. TERMINATION
4.1 Voluntary or Good Cause Termination Events. If Poertner's employment
hereunder is terminated as a result of the occurrence of a Good Cause
Termination Event, Poertner shall only be entitled to receive the Base Salary
or Bonus prorated to the termination date.
The Company shall thereafter have no further obligation to pay to Poertner any
Base Salary, Bonus or any other compensation pursuant to this Agreement,
including stock options.
4.2 No Cause. If Poertner's employment hereunder is terminated as a result
of the occurrence of a No Cause Termination Event, (a) the Company shall pay
to Poertner in equal semi-annual installments commencing ten (10) days after
termination during the remainder of the Initial Term or such renewal term, as
the case may be, an amount equal to the aggregate Base Salary and Bonus that
would have been payable to Poertner pursuant to this Agreement if Poertner had
remained employed by the Company for the remainder of the Initial Term or such
renewal term, as the case may be; (b) in addition, if Poertner's employment
hereunder is terminated as a result of the occurrence of a No Cause
Termination Event, the Company must obtain the release of Poertner from all
personal guaranties by Poertner relating to any outstanding indebtedness of
the Company.
5. CONFIDENTIALITY AND NON-COMPETITION
5.1 Confidential Information. Poertner hereby agrees that except as
otherwise required in the course of his performance of any duties he may have
as an employee of the Company, during the period commencing on the date hereof
and ending on the first anniversary of the date on which Poertner's employment
is terminated for any reason (the "Covenant Period").
(a) Neither Poertner nor any company or organization in which Poertner has a
direct or indirect financial interest (a "Related Party"), will directly or
indirectly own, manage, operate, join, control or participate in the
ownership, management, operation or control of or be connected in any manner
with, any business conducted under any corporate or trade name utilized by the
Company or any name confusingly similar thereto without the prior written
consent of the Company; and
(b) Each Related Party shall hold in confidence all knowledge and
information of a confidential nature with respect to the business of the
Company and any affiliate and will not disclose, publish or make use of the
same without the prior written consent of the Company,
These restrictions do not apply if there is a no-cause termination AND if the
financial obligations set forth in this agreement for this event are not met
by ZeitGeist.
5.2 Trade Secrets. Each Related Party shall hold in confidence indefinitely
any and all technology, trade secrets and know-how of the Company or any
affiliate and shall not disclose, publish or make use of the same, including
the terms of this agreement without the prior written consent of the Company.
(a) In consideration of the Company's employment of the Employee pursuant to
the terms of this Agreement, the Employee hereby agrees that no Related Party
shall, during the Covenant Period, in any manner (other than as an employee of
or a consultant to the Company), directly or indirectly:
(i) engage in, have any equity or profit interest in, make any loan to
or for the benefit of, or guarantee any obligation of or with respect to, or
render services (of any executive, advertising, marketing, sales,
administrative, supervisory or consulting nature to, any business engaged in
the Company Activities that is conducting operations in the Territory;
(ii) employ, or seek to employ on his or its own behalf or on behalf of
any other person, firm or Corporation, any person who was employed during the
Covenant Period by the Company and who has not thereafter ceased to be
employed by the Company for a period of at least one (1) year, except if
employee has been terminated by Company for no-cause; or
(iii) after the termination of the Employee's employment hereunder,
solicit or seek to solicit on his or its own behalf or on behalf of any other
person, firm or corporation, any customer of the Company who is a customer of
the Company at any time during the Employee's employment by the Company for
the purpose of rendering Company Activities in the Territory.
5.3 Severability. If a judicial determination is made that any of the
provisions of this Section 5 constitutes an unreasonable or otherwise
unenforceable restriction against Poertner, the provisions of this Section
shall be rendered void only to the extent that such judicial determination
finds such provisions to be unreasonable or otherwise unenforceable. In this
regard, the Company and Poertner hereby agree that any judicial authority
construing this Agreement shall be empowered to sever or modify any portion of
the Territory, any prohibited business activity or any time period from the
coverage of this Section and to apply the provisions of this Section to the
remaining portion of the Territory, the remaining business activities or the
remaining time period not so severed or modified by such judicial authority,
Moreover, notwithstanding the fact that any provision of this Section is
determined not to be specifically enforceable, the Company shall nevertheless
be entitled to recover monetary damages as a result of the breach of such
provision by Poertner. The time period during which the prohibitions set
forth in this Section shall apply shall be tolled and suspended as to each
Related Party for a period equal to the aggregate quantity of time during
which the affected Related Party violates such prohibitions in any respect.
5.4 Company Indemnification. Poertner hereby agrees to indemnify and defend
the Company and its affiliates and to hold the Company and its affiliates
wholly harmless from and against any and all losses, liabilities, damages,
deficiencies, costs (including, without limitation, court costs), and expenses
(including, without limitation, attorneys' fees) incurred by the Company or
its affiliates and arising out of or due to any breach of any covenant or
agreement of Poertner contained in this Section 5.
5.5 Employer Indemnification. Company hereby agrees to indemnify and defend
Poertner and its affiliates and to hold Poertner and its affiliates wholly
harmless from and against any and all losses, liabilities, damages,
deficiencies, costs (including, without limitation, court costs), and expenses
(including, without limitation, attorneys' fees) incurred by the Poertner or
its affiliates and arising out of or due to any breach of any covenant or
agreement of the Company contained in this Section 5.
6. GENERAL
6.1 Notices. All notices, requests, demands or directions relating to this
Agreement shall be in writing and delivered via courier addressed to the
appropriate party at the address of such party as set out on the first page of
this Agreement, or to such other addresses as may be specified by one party to
the other parties by notice in writing. Any notice, request, demand,
direction, authorization or other communication given shall be deemed to have
been received by the party to whom it was given on the third business day
following the sending thereof by courier.
6.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
6.3 Arbitration. Any controversy or Claim arising out of or relating to this
Agreement or the alleged breach hereof shall be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, and judgment upon the award rendered by the
arbitrators in any such arbitration, including, without limitation, specific
performance of this Agreement, may be entered in any federal or state court
having jurisdiction thereof. The prevailing party in any such arbitration
shall be entitled to recover from the non prevailing party in addition to all
other relief, all reasonable costs and expenses actually incurred by such
party in connection with such arbitration.
6.4 Severability. If any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions shall not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
6.5 Further Assurances. The parties hereto shall with reasonable diligence
do all such things and provide all such reasonable assurances as may be
required to consummate the transactions contemplated hereby, and each party
hereto shall provide such further documents or instruments required by the
other party as may be reasonably necessary or desirable to effect the purpose
of this Agreement.
6.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, whether
written or oral, made between the parties hereto, and there do not exist any
representations, warranties, terms or conditions, expressed or implied,
statutory or otherwise, and no agreements collateral hereto, other than as
expressly set forth or referred to in this Agreement.
6.7 Enurement. This Agreement and each of the terms and provisions hereof
shall enure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns; provided, however, that Poertner shall not
be entitled to assign or delegate any of his rights or obligations hereunder
without the prior written consent of Company.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
WITNESS WHEREOF the parties hereto have hereunto duly executed this Agreement
as of the day and year first above written.
Nancy Poertner
/s/ Nancy Poertner
ZEITGEIST WERKS
Rainer Poertner, Chairman
/s/ Rainer Poertner
<PAGE>
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Agreement is made as of the 26th day of June, 1996.
BETWEEN: Matthew MacLaurin ("MacLaurin")
AND:
ZEITGEIST WERKS, a Nevada company having its office at 3960 Ince Boulevard,
Culver City, California, 90232 (the "Company")
WHEREAS MacLaurin entered into an employment agreement with Zeitgeist Werks, and
the Company desires to employ MacLaurin and MacLaurin desires to be employed by
the Company on those same terms and conditions contained therein;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the mutual agreements and covenants herein contained and the payment of $1 made
by each party to the other (the receipt and adequacy of such consideration is
hereby mutually acknowledged by each party), the parties hereby covenant and
agree as follows:
1. INTERPRETATION
1.1 Interpretation - For the purposes of this Agreement, except as otherwise
expressly provided herein:
(a) "this Agreement" means this Agreement as it may from time to time be
supplemented or amended and in effect;
(b) all references in this Agreement to a designated "Section", "paragraph",
it subparagraph" or other subdivision, is to the designated Section, paragraph,
subparagraph or other subdivision of this Agreement unless otherwise
specifically stated;
(c) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section,
paragraph, subparagraph or other subdivision;
(d) the singular of any term includes the plural and vice versa and the use of
any terms equally applicable to any gender and where applicable a body
corporate;
(e) the word "or" is not exclusive and the word "including" is not limiting
(whether or not non-limiting language such as "without limitation" or "but not
limited to" or other words of similar import is used with reference thereto);
the headings to the paragraphs and subparagraphs of this Agreement are
inserted for convenience only and do not form a part of this Agreement and
are not intended to interpret, define or limit the scope, extent or intent
of this Agreement or any provision hereof;
(f) the term "territory" shall mean the universe;
(g) any reference to a corporate entity includes and is also a reference to any
corporate entity that is a successor to such entity; and
(h) the language in all parts of this Agreement shall in all cases be construed
as a whole and neither strictly for nor against either of the parties.
2. EMPLOYMENT
2.1 Employment. The Company hereby employs MacLaurin and MacLaurin hereby
accepts such employment on the terms contained herein. MacLaurin shall serve as
the Executive Vice President of the Company and shall devote his full business
time and best efforts to rendering services on behalf of Company. Services to
be rendered in Santa Cruz with no more than one week per month in travel or
other locations with reasonable but limited exceptions.
2.2 Term. The employment of MacLaurin hereunder shall commence as of the date
hereof and shall continue until the earlier of:
(1) June 30, 1999 (the "Initial Term"), or
(2) the occurrence of any of the following events:
(a) the death or the failure of MacLaurin to perform his normal required
services hereunder for a period of twelve months by reason of mental or physical
disability (a "Disability Termination Event");
(b) termination by the Company of MacLaurin's employment hereunder, upon 10
days prior written notice to MacLaurin for "good cause" which shall exist upon
the occurrence of any of the following:
(i) MacLaurin is convicted of, pleads guilty to, or confesses to any
workplace related felony or any act of fraud, misappropriation or embezzlement;
(ii) MacLaurin has engaged in a fraudulent act to the material damage or
prejudice of the Company or any affiliate or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate;
(iii) any material act or omission by MacLaurin involving malfeasance
or gross negligence in the performance of his duties to the Company to the
material detriment of the Company and, within ten (10) days after written
notice from the Company of any such act or omission, MacLaurin has not
corrected such act or omission; or
(iv) MacLaurin otherwise fails to comply with the terms of this Agreement
or deviates from any reasonable written policies or directives of the Board of
Directors, and, within thirty (30) days after written notice from Company of
such failure, MacLaurin has not corrected such failure (in any such case, a
"Good Cause Termination Event"); or
(c) voluntary termination by MacLaurin of his employment hereunder (a
"Voluntary Termination Event").
2.3 Renewal. Unless terminated by either party hereto upon sixty (60) days
prior written notice to the other party hereto, this Agreement shall
automatically renew at the end of the Initial Term and any each renewal thereof
for an additional two-year term.
3. COMPENSATION
3.1 Base Salary. During the term of his employment hereunder, MacLaurin shall
receive an annual base salary ("Base Salary") less any applicable withholding
taxes, paid monthly in arrears, by the Company as follows:
(a) $100,000 - July 1, 1996 to June 30, 1997;
(b) $125,000 - July 1. 1997 to June 30, 1998;
(c) $155,000 - July 1, 1998 to June 30, 1999;
(d) $30,000 additional for each fiscal year following the Initial Term.
3.2 Bonus. During the term of his employment hereunder, MacLaurin shall be paid
a bonus (the "Bonus") within 30 days after the end of each fiscal quarter. The
bonus shall be in amounts to be determined by the Board of Directors or as the
Company may maintain from time to time for the benefit of executive employees.
3.3 Option to Purchase Employee Shares. If Employee's employment hereunder is
terminated upon the occurrence of a Good Cause Termination Event, then, with
respect to any shares of capital stock of the Company owned by Employee as of
the date of the termination of his employment hereunder (the "Employee
Shares"), the Company shall have the option to purchase all, but not less
than all, of the Employee Shares for the Fair Market Value of such shares,
the fair market value being the trading price of the shares at the occurrence.
3.4 Expenses. MacLaurin shall be reimbursed for all reasonable expenses
incurred by MacLaurin at the request and on behalf of Company.
3.5 Benefits. MacLaurin shall be entitled to participate in such medical,
dental, disability, hospitalization, life insurance and other benefit plans
(such as pension and profit sharing plans) as the Company shall maintain
from time to time for the benefit of executive employees.
3.6 Vacation. MacLaurin shall receive four (4) weeks of paid vacation time
each calendar year during the term of his employment hereunder or at MacLaurin's
option base pay in lieu thereof for all or any vacations not taken.
4. TERMINATION
4.1 Voluntary or Good Cause Termination Events. If MacLaurin's employment
hereunder is terminated as a result of the occurrence of a Good Cause
Termination Event, MacLaurin shall only be entitled to receive the Base
Salary or Bonus prorated to the termination date.
The Company shall thereafter have no further obligation to pay to MacLaurin any
Base Salary, Bonus or any other compensation pursuant to this Agreement,
including stock options.
4.2 No Cause. If MacLaurin's employment hereunder is terminated as a result of
the occurrence of a No Cause Termination Event, (a) the Company shall pay to
MacLaurin in equal semi-annual installments commencing ten (10) days after
termination during the remainder of the Initial Term or such renewal term, as
the case may be, an amount equal to the aggregate Base Salary and Bonus that
would have been payable to MacLaurin pursuant to this Agreement if MacLaurin
had remained employed by the Company for the remainder of the Initial Term or
such renewal term, as the case may be; (b) in addition, if MacLaurin's
employment hereunder is terminated as a result of the occurrence of a No
Cause Termination Event, the Company must obtain the release of MacLaurin
from all personal guaranties by MacLaurin relating to any outstanding
indebtedness of the Company.
5. CONFIDENTIALITY AND NON-COMPETITION
5.1 Confidential Information. MacLaurin hereby agrees that except as otherwise
required in the course of his performance of any duties he may have as an
employee of the Company, during the period commencing on the date hereof and
ending on the first anniversary of the date on which MacLaurin's employment is
terminated for any reason (the "Covenant Period").
(a) Neither MacLaurin nor any company or organization in which MacLaurin has
a direct or indirect financial interest (a "Related Party"), will directly or
indirectly own, manage, operate, join, control or participate in the ownership,
management, operation or control of or be connected in any manner with, any
business conducted under any corporate or trade name utilized by the Company or
any name confusingly similar thereto without the prior written consent of the
Company; and
(b) Each Related Party shall hold in confidence all knowledge and information
of a confidential nature with respect to the business of the Company and any
affiliate and will not disclose, publish or make use of the same without the
prior written consent of the Company,
These restrictions do not apply if there is a no-cause termination AND if the
financial obligations set forth in this agreement for this event are not met by
ZeitGeist.
5.2 Trade Secrets. Each Related Party shall hold in confidence indefinitely
any and all technology, trade secrets and know-how of the Company or any
affiliate and shall not disclose, publish or make use of the same, including the
terms of this agreement without the prior written consent of the Company.
(a) In consideration of the Company's employment of the Employee pursuant to
the terms of this Agreement, the Employee hereby agrees that no Related Party
shall, during the Covenant Period, in any manner (other than as an employee of
or a consultant to the Company), directly or indirectly:
(i) engage in, have any equity or profit interest in, make any loan to or
for the benefit of, or guarantee any obligation of or with respect to, or render
services (of any executive, advertising, marketing, sales, administrative,
supervisory or consulting nature to, any business engaged in the Company
Activities that is conducting operations in the Territory;
(ii) employ, or seek to employ on his or its own behalf or on behalf of
any other person, firm or Corporation, any person who was employed during the
Covenant Period by the Company and who has not thereafter ceased to be employed
by the Company for a period of at least one (1) year, except if employee has
been terminated by Company for no-cause; or
(iii) after the termination of the Employee's employment hereunder,
solicit or seek to solicit on his or its own behalf or on behalf of any other
person, firm or corporation, any customer of the Company who is a customer of
the Company at any time during the Employee's employment by the Company for
the purpose of rendering Company Activities in the Territory.
5.3 Severability. If a judicial determination is made that any of the
provisions of this Section 5 constitutes an unreasonable or otherwise
unenforceable restriction against MacLaurin, the provisions of this Section
shall be rendered void only to the extent that such judicial determination
finds such provisions to be unreasonable or otherwise unenforceable. In this
regard, the Company and MacLaurin hereby agree that any judicial authority
construing this Agreement shall be empowered to sever or modify any portion
of the Territory, any prohibited business activity or any time period from
the coverage of this Section and to apply the provisions of this Section to
the remaining portion of the Territory, the remaining business activities or
the remaining time period not so severed or modified by such judicial
authority, Moreover, notwithstanding the fact that any provision of this
Section is determined not to be specifically enforceable, the Company shall
nevertheless be entitled to recover monetary damages as a result of the
breach of such provision by MacLaurin. The time period during which the
prohibitions set forth in this Section shall apply shall be tolled and
suspended as to each Related Party for a period equal to the aggregate
quantity of time during which the affected Related Party violates such
prohibitions in any respect.
5.4 Company Indemnification. MacLaurin hereby agrees to indemnify and defend
the Company and its affiliates and to hold the Company and its affiliates wholly
harmless from and against any and all losses, liabilities, damages,
deficiencies, costs (including, without limitation, court costs), and
expenses (including, without limitation, attorneys' fees) incurred by the
Company or its affiliates and arising out of or due to any breach of any
covenant or agreement of MacLaurin contained in this Section 5.
5.5 Employer Indemnification. Company hereby agrees to indemnify and defend
MacLaurin and its affiliates and to hold MacLaurin and its affiliates wholly
harmless from and against any and all losses, liabilities, damages,
deficiencies, costs (including, without limitation, court costs), and
expenses (including, without limitation, attorneys' fees) incurred by the
MacLaurin or its affiliates and arising out of or due to any breach of any
covenant or agreement of the Company contained in this Section 5.
6. GENERAL
6.1 Notices. All notices, requests, demands or directions relating to this
Agreement shall be in writing and delivered via courier addressed to the
appropriate party at the address of such party as set out on the first page of
this Agreement, or to such other addresses as may be specified by one party to
the other parties by notice in writing. Any notice, request, demand, direction,
authorization or other communication given shall be deemed to have been received
by the party to whom it was given on the third business day following the
sending thereof by courier.
6.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
6.3 Arbitration. Any controversy or Claim arising out of or relating to this
Agreement or the alleged breach hereof shall be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, and judgment upon the award rendered by the
arbitrators in any such arbitration, including, without limitation, specific
performance of this Agreement, may be entered in any federal or state court
having jurisdiction thereof. The prevailing party in any such arbitration shall
be entitled to recover from the non prevailing party in addition to all other
relief, all reasonable costs and expenses actually incurred by such party in
connection with such arbitration.
6.4 Severability. If any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions shall not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
6.5 Further Assurances. The parties hereto shall with reasonable diligence do
all such things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated hereby, and each party hereto shall
provide such further documents or instruments required by the other party as may
be reasonably necessary or desirable to effect the purpose of this Agreement.
6.6 Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto and supersedes all prior agreements, whether written or oral,
made between the parties hereto, and there do not exist any representations,
warranties, terms or conditions, expressed or implied, statutory or otherwise,
and no agreements collateral hereto, other than as expressly set forth or
referred to in this Agreement.
6.7 Enurement. This Agreement and each of the terms and provisions hereof
shall enure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns; provided, however, that MacLaurin shall
not be entitled to assign or delegate any of his rights or obligations
hereunder without the prior written consent of Company.
6.8 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
WITNESS WHEREOF the parties hereto have hereunto duly executed this Agreement as
of the day and year first above written.
Matthew MacLaurin
/s/ Matthew MacLaurin
ZEITGEIST WERKS
Nancy Poertner, President
/s/ Nancy Poertner
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheets and statement of operations found on pages F-2 and F-5 of the Company's
Form 10-KSB for the fiscal year ended December 31, 1996, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 224,331
<SECURITIES> 0
<RECEIVABLES> 100,335
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 359,294
<PP&E> 237,438
<DEPRECIATION> 115,235
<TOTAL-ASSETS> 936,640
<CURRENT-LIABILITIES> 794,858
<BONDS> 0
0
0
<COMMON> 1,381
<OTHER-SE> 134,887
<TOTAL-LIABILITY-AND-EQUITY> 936,640
<SALES> 392,125
<TOTAL-REVENUES> 392,125
<CGS> 142,644
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 892,834
<LOSS-PROVISION> (643,554)
<INTEREST-EXPENSE> (7,198)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (643,554)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
