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FORM 8-K
CURRENT REPORT FOR ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15d of the Securities Exchange Act of 1934,
ErgoBilt, Inc. files this form 8-K. Date of Report (Date of earliest event
reported)-October 16, 1997.
Registrant's exact name: ErgoBilt, Inc.
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Texas 0-22077 75-2600529
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(State of incorporation) (Commission File No.) (IRS Employer ID No.)
Registrant's Address: 9244 Markville Rd, Dallas 75243.
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Registrant's telephone number, including area code: (972) 889-3742.
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This Form 8-K relates to an acquisition by ErgoBilt, Inc ("ErgoBilt").
It does not involve matters under Items 1, 3, 4, 5, 6, or 8 on the Form 8-K,
and for that reason, those items are not applicable to this report.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ErgoFon'iks, Inc., a subsidiary of ErgoBilt (ErgoFon'iks) purchased
from Computer Translations Systems & Support, Inc., a Texas corporation (CTSS),
on October 16, 1997, certain assets involving a computerized phonetic keyboard
system, now marketed by ErgoBilt under the name -Fon'iksWriter. Prior to
entering into the acquisition, ErgoBilt entered into a license relationship
with CTSS and loaned to CTSS approximately $1,736,219 for working capital.
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The assets acquired by ErgoBilt include (a) the FoniksWriter, (b)
CTSS's assets used in the manufacturing \ assembly of the Fon'iksWriter
(including, operation software, hardware integration, user documentation,
keyboard immulator box, technology and know how used in the voice
transcription, and (c) a license to the "Digitext Theory" from Digitext, Inc.
Additionally, ErgoFon'iks acquired a portion of proceeds recovered by CTSS, if
any, in any lawsuit that CTSS brings against EDS.
The purchase price is 100,000 shares of ErgoBilt, Inc. Common Stock
issued out of treasury stock and a contingency payment of $5 million less the
value of the 100,000 shares as of a date in the future when ErgoFon'iks has
achieved certain performance benchmarks. Additionally, ErgoBilt has agreed to
loan to CTSS up to an additional $1.6 Million over the next two years. This
loan is secured by the 100,000 ErgoBilt common stock, any contingency shares
earned by CTSS in the future, all assets of CTSS, and other collateral defined
in the agreement. The repayment of the outstanding balances shall be made on
or before August 22, 1999. Two officers of CTSS have become employees of
ErgoFon'iks.
The Fon'iksWriter is partly based upon patents and copyrights known as
the "Digitext Theory". CTSS was granted a license from Digitext, Inc. on the
Digitext Theory ("Digitext License") which ErgoFon'iks acquired in this
transaction. On August 1, 1997, ErgoBilt obtained an additional license from
Harold I. Schien to the Digitext Theory.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS. ErgoBilt is not filings the required financial statements at the
time of filing this report due to impracticability. ErgoBilt shall file those
financials as an amendment to this report pursuant to Item 7(1)(a)(4)(iv).
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ERGOBILT, INC.
Date: October 31, 1997 By: /s/ GERARD SMITH
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GERARD SMITH
CEO
Exhibits Attached
1. Purchase and Sale Agreement.
2. Employment Agreement of Lawrence West Melquiond.
3. Employment Agreement of Jerold P. Lefler.
4. List of all intellectual property, process and products.
5. Unanimous Consent of Shareholders of CTSS, Inc. (a California Corporation).
6. Unanimous Consent of Shareholders and Directors of CTSS, Inc. (a Texas
Corporation).
7. Promissory Note $1,736,219.
8. Promissory Note-Revolving Line.
9. Conditional Assignment and Security Agreement.
10. Assignment.
11. Schien License.
12. Press Release.
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EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
This is an agreement by and between EB Subsidiary II, Inc., a Texas
Corporation ("EB") and Computer Translation Systems & Support, Inc., a Texas
Corporation ("CTSS"), Jerrold P. Lefler ("Lefler"), Merle Moore ("Moore"), and
Lawrence West Melquiond ("West").
1. GENERAL RECITALS.
1.1. CTSS.
CTSS is a Texas Corporation, with its principal place of
business at 301 Commerce, 3500 City Center II, Fort Worth, Texas
76102. CTSS and/or the shareholders, as defined in Section 1.2,
individually own and manufacture a product known as the Impact Unit.
CTSS desire to sell certain assets of its business to EB ("acquired
assets" as defined in Section 2.1).
1.2. SHAREHOLDERS.
Lefler and Moore are the sole shareholders of CTSS. West is
closely associated with CTSS. (Unless referred to individually,
Lefler, Moore, and West are collectively referred to as "shareholders"
even though West is not a shareholder.) They, along with their
respective spouses and/or common law spouses and/or significant
others, if any (collectively referred to as "spouses"), desire to
approve this transaction. The shareholders' spouses are included in
the definition of "shareholders" with respect to the conveyance of any
and all interest they own in the acquired assets and any warranty
relating thereto, but not otherwise.
1.3. ERGOBILT, INC.
ErgoBilt, Inc. (ErgoBilt) is a Texas Corporation having its
principal place of business at 9244 Markville Drive, Dallas, Texas
75243-4404. ErgoBilt desires to approve the purchase contemplated by
EB in this transaction, and guarantee the performance of EB to CTSS as
contemplated in this Agreement.
1.4. EB SUBSIDIARY II, INC.
EB is a wholly owned subsidiary of ErgoBilt. EB's principal
place of business is at 9244 Markville Drive, Dallas, Texas
75243-4404. EB desires to purchase the Acquired Assets (as
hereinafter defined) of CTSS, the shareholders, as well as any
interest in the Acquired Assets owned or claimed to be owned by the
shareholders' spouses.
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1.5. PRODUCT. "PRODUCT" SHALL MEAN
a. The Fon'iksWriter and Impact operational software and User
Documentation and all Improvements thereto, excluding the
Digitext "chart" tables and the Digitext keyboard as those
terms are defined in the March 21, 1991 agreement by and
between Digitext and CTSS, Inc.;
b. The "keyboard emulator box" and all improvements to items set
forth in paragraph 1.5 a above and the design plans thereto;
c. All other current, pending, and future related products to the
Foniks and Impact Units and User Documentation of CTSS and/or
the shareholders in the field of voice transcription to
computer data, data capture and transcription technology,
voice-to-text technology, machine shorthand to type
phonetically, data capture and shorthand transcription
technology.
d. Any rights to IMPACT trademark name, if any;
e. Product shall not include Real-Time Captioning, Inc.'s
captioning products.
1.6. INTELLECTUAL PROPERTY. "INTELLECTUAL PROPERTY" SHALL MEAN
a. All patents and patent applications of CTSS and/or the
shareholders, including, without limitation, all patents,
their reissue, and pending patents issuing thereon and any
reissue of any such patents relating or referring to the
Product or Process;
b. All software and all improvements, enhancements, conversions,
and modifications thereto of CTSS and/or the shareholders,
including, without limitation, all source codes, flow charts,
executable object code, and all physical embodiments thereof
that have existed in the past and are currently developed or
being developed, including all documentation thereof relating
or referring to the Products and/or Process;
c. All works of authorship owned by CTSS and/or the Shareholders,
and all claims of copyright thereto, as well as all derivative
works, modifications, changes and other embodiments of such
works or authorship which relate or refer to the Products
and/or Process;
d. All current, pending and future trademarks, service marks, and
trade dress and all names used, or to be used by CTSS and/or
the Shareholders or referring to the Products and/or the
Process, and the good will associated therewith;
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e. All technical information and trade secrets of CTSS and/or the
shareholders, including, without limitation, the engineering,
scientific and practical information and formulas, research
data, design and manufacturing procedures, know-how, raw
material, and expertise and all specifications which are
applied to the designs and construction of tooling and
operation of manufacturing/assembling the Product or using the
Process;
f. All User Documentation and literature of CTSS and/or the
shareholders, including but not limited to all user manuals,
supporting materials, training manuals and materials,
workbooks, product description and technical manuals relating
to the Product and/or Process, as well as all copyrights to
the foregoing; and
g. The term "Intellectual property" does not include software
developed by Lefler and/or Realtime Captioning, Inc. which is
used for closed caption purposes.
f. All rights, title and interest of CTSS in (1) the March 21,
1991 license agreement by and between Digitext, Inc. and CTSS,
Inc. and (2) the August 9, 1995 license agreement by and
between Digitext, Inc. and CTSS, Inc.
1.7. PROCESS.
"Process" shall mean any and all current and future processes and all
improvements thereto of CTSS and/or the shareholders for the transcription of
voice to computer data (by keystroke, hand movement or recognition, or
otherwise) except for captioning products.
1.8. IMPROVEMENTS.
"Improvements" shall mean any invention, technology information,
development, technology and modifications of any nature or form, and any part
or combination of parts, or method of using or manufacturing such part or
combination of parts, currently being developed, and which is developed from
the signing of this agreement until West and Lefler execute their respective
employment agreements (the "Employment Agreements") which improves the Process,
including, without limitation, the development of a new Process which affects
the Product in any of the following ways:
a. Reduces production costs;
b. Improves performance;
c. Improves handling in the manufacturing process;
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d. Broadens applicability;
e. Increases marketability; or
f. Improves appearance.
1.9 COLLATERAL.
"Collateral" shall mean all right, title, and interest, including any
reversion and/or future interest in the;
a. Product, Process, Intellectual Property, and Improvements;
c. Any stock actually issued or purchased under the terms and
conditions of this agreement.
1.10. COVENANTS.
In consideration for the mutual covenants and other consideration
provided for in this Agreement, the parties have and agreed to enter into this
Agreement ("Agreement").
2.0 BUY/ SELL.
2.1. BUY/SELL.
CTSS, with the approval of its shareholders, the shareholders
individually, and the shareholders spouses' individually, agree to sell, grant,
transfer and deliver to EB, and do hereby sell, grant, transfer and deliver to
EB, and EB agrees to purchase, the below assets (hereafter and before referred
to as "Acquired Assets"):
a. All Intellectual Property, Process, and Products of CTSS
and/or the shareholders as those terms are defined therein;
b. All royalty fees earned on or after the Closing Date; and
c. A portion of any and all Recovery that CTSS and/or the
shareholders receive in a settlement or judgment against EDS
and/or its affiliates as set out in Section 3.3 of this
Agreement.
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2.2. TRANSFER.
Within ten (10) days following execution of this Agreement, CTSS shall
provide manuals and data for the computer software system and components
thereof. These shall include, but are not limited to, the following:
a. Computer programmer's manuals and computer user's manuals used
by CTSS and/or the shareholders in development of its software
and Intellectual Property, including manuals for any language
for the CPU used by CTSS in its business and instructions for
performing all backup of all software and message libraries.
b. One original copy of the CTSS computer operating system manual
and compiler and assembly language manuals and any translation
sources to object codes.
c. Manufacturer's documentation, if any, (including schematics)
for all plug-in circuits cards used by CTSS in the use of
their Intellectual Property.
d. All CTSS proprietary computer program logic, if any, in the
flow chart form.
e. Narrative description, if any, of programs and input/output
formats used by CTSS with the software, excluding the Digitext
"chart".
f. One complete copy of the proprietary CTSS, Inc. source code,
with all enhancements, shall be provided in print-out form and
encoded on 3-1/2" disks.
g. All object code created from the proprietary CTSS source code,
and its enhancements, on machine readable medium.
2.3. RETAINED ASSETS.
The following assets and properties shall be retained by CTSS and do
not constitute Acquired Assets:
a. All minute books, stock books and the corporate seal of CTSS;
b. All real property;
c. All plant and office supplies, and other miscellaneous
supplies and materials used in the operations of business;
d. All bank accounts, cash, securities, prepaid expenses,
deposits, and security bonds;
e. All fixtures and furniture;
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f. All royalty fees earned prior to the Closing Date;
g. All inventory (including raw materials, work-in process and
finished goods);
h. All machinery, tools, and equipment needed to assemble the
Products;
i. EDS lawsuit, if any;
j. All customer lists, files, papers and business records; and
2.4. ALLOCATION.
The parties agree that the purchase price shall be allocated among the
acquired assets as deemed appropriate by EB and CTSS; however, in the event
there is a dispute regarding the valuation and allocation process, the parties
agree to use Scott D. Hakala of Business Valuation Services, or another person
agreed by the parties, or pursuant to Arbitration under Section V, to perform
the valuation. The valuation will be jointly agreed to and defined in writing
by the time of Closing.
2.5 LIABILITIES
a. ASSUMED LIABILITIES. EB shall in no event assume or be responsible
for any liabilities, liens, loans security interests, claims,
obligations, or encumbrances of CTSS, contingent or otherwise, and all
of the Acquired Assets shall be sold and conveyed to EB free and clear
of all liabilities, liens, loans, security interests, claims,
obligations, and encumbrances. Unless agreed to in writing by EB,
without limiting the generality of the foregoing, in no event shall EB
assume or be responsible for:
(i) any State or Federal income, property, franchise,
sales use or other taxes of CTSS, its shareholders,
the shareholders' spouses, or West, or any filing
requirements or obligations with respect thereto
arising out of the sale of the acquired assets (all
such tax to be paid by CTSS);
(ii) any liabilities, obligations, or costs (1) resulting
from any claim or lawsuit or other proceeding
relating from any claim or lawsuit or (2) relating to
any of the stock or assets of CTSS or (3) the naming
of CTSS or any successor thereof as a party and
arising out of events, transactions, or circumstances
occurring or existing prior to the Closing date;
(iii) any liabilities, obligations or costs resulting from
any claim or lawsuit or other proceeding relating
from any claim or lawsuit or relating to any
Environmental Claim against CTSS relating to CTSS's
operations,
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its actions or failure to act, or its status as an
owner, operator or lessee of any real property; and
(iv) any liabilities, obligations, and outstanding
balances on any promissory notes, debts, or any other
type of financial obligation, which is owed to any
person or entity, including but not limited to any
debts owed to any of the shareholders or West.
b. RETAINED LIABILITIES. CTSS agrees to assume and be obligated to pay
for, perform, or discharge:
(i) All of the liabilities enumerated in Section 2.5 a;
(ii) All liabilities or obligations of CTSS to make
distributions to its shareholders as dividends, in
liquidation or otherwise;
(iii) All liabilities or obligations of CTSS under or with
respect to any transaction occurring after the
Closing Date;
(iv) All liabilities and obligations arising from any
litigation presently threatened or pending from any
litigation which is hereafter instituted against CTSS
and/or the shareholders based upon events prior to
the closing, or which occur hereafter;
(v) Discharge all liabilities relating to the payment and
distribution of royalties to Digitext as outlined in
March 21, 1991 agreement by and between Digitext and
CTSS, Inc.
(vi) All liabilities and obligations which EB has not
specifically assumed.
c. OBLIGATIONS. Nothing contained in this section shall relieve CTSS
from any obligations under any covenant, warranty, or agreement
contained in this Agreement.
2.6. STRUCTURE.
The transaction shall be structured as a limited asset purchase for tax and
financial reporting purposes. It has been structured to be reported for
financial statement purposes as a purchase under Accounting Principals Board
Opinion 16 ("APB-16") and any applicable SEC laws and regulations, and/or to
maximize the tax benefit to ErgoBilt in all of its tax considerations,
including but not limited to the immediate tax benefit in the acquisition and
the ongoing and future tax benefit in the event of a spin-off. CTSS, EB and
ErgoBilt shall mutually agree to modify the structure of the transaction to
achieve these ends up October 1, 1997.
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2.7 CLOSING. THE CLOSING SHALL BE OCTOBER 1, 1997.
a. EB. At the Closing, EB shall deliver to the shareholder
consideration referred to Section 3.1 a. of this Agreement.
b. CTSS AND SHAREHOLDERS. At the Closing, CTSS shall deliver and
convey to EB the Acquired Assets free and clear of any and all
restrictions, voting trusts or agreements, liens, charges,
encumbrances, options, minority shareholder claims, and
adverse claims or rights whatsoever, except that the Lloyd
Rigler note shall be controlled by Section 6.1 f(iii).
Shareholders agree to execute any and all other documents,
transactional and conveyance documents needed to effectuate
the purchase and sale contemplated by this Agreement.
3. PURCHASE PRICE AND OBLIGATIONS.
3.1. PURCHASE PRICE.
The total PURCHASE PRICE is based on a fixed portion payment and a
contingent payment as follows: Upon the terms and subject to the conditions set
forth in this Agreement, EB agrees to provide the following consideration:
a. FIXED PORTION PAYMENT. Contemporaneously with the execution of this
Agreement, EB shall issue to CTSS One Hundred Thousand (100,000)
shares of ErgoBilt, Inc. common stock.
b. CONTINGENT PORTION PAYMENT. Based on the operating performance
benchmarks of EB as measured by:
(i) If at any time prior to August 22, 1999, EB has licensed
thirty-five (35) court reporting, vocational schools and/or
community colleges to teach the Fon'iks system which will
establish the commercial viability of the technology, and
(ii) generates cumulative gross revenue of Ten Million Dollars
($10,000,000) by August 22, 1999, from all direct and
derivative product sales and services; or
(iii) generates value determined by an independent third party,
such as Business Valuation Services, Inc. (BVS), to be
equivalent to the value specified in Section 3.1.b.(i). and
(ii). above
ErgoBilt will pay to CTSS a contingent payment equal to Five Million
Dollars ($5,000,000) less the current market value, as defined in
Section 3.1.c, of the fixed portion payment (assuming such benchmarks
are achieved by August 22, 1999) and that such payment may be in the
form of cash or unrestricted Ergobilt common stock,
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at the discretion of ErgoBilt. If the contingent payment is satisfied
in the form of ErgoBilt common stock, ErgoBilt will purchase common
stock in the open market in order to satisfy any and all additional
consideration due under the Contingent Payment Portion of this
Agreement. In the event that CTTS falls short of the operating
performance benchmarks above, the contingent payment shall be
determined on a pro-rate basis.
The parties further agree that, subject to proper written notice and
ErgoBilt's right to cure within 30 days of receipt of notice, any
actions taken by ErgoBilt that materially negatively impact the
ability of EB to achieve the operating performance benchmarks
identified in Section 3.1.b. above, as determined by binding
arbitration according to the Rules of the Institute of Christian
Conciliation in Dallas, Texas, then the operating performance
benchmarks shall have been deemed met and all payments called for in
the Contingent Portion Payment section of this Agreement shall become
due and payable in full.
c. MARKET VALUE. The Market Value of the 100,000 shares (including any
adjustments for stock splits) of ErgoBilt common stock will be
determined by the average stock market price (average of the bid/ask
spread) of ERGB common stock, as determined by the NASDAQ National
Market prices published in the Wall Street Journal, during the twenty
(20) day period immediately preceding the date EB achieves the
operating performance benchmarks.
d. Registration Rights. For purposes of this Agreement, "Registrable
Rights" shall mean the (i) shares of Common Stock of ErgoBilt issued
or issuable upon exercise of the Stock Options, (ii) any shares of
Common Stock acquired or issued; and (iii) any other shares of Common
Stock acquired as a result of stock splits, stock dividends,
reclassifications, recapitalization, or similar events relating to the
shares described in clauses (i) and (ii) above until such time as a
registration statement covering such Registrable Securities has been
declared effective and such Registrable Securities are transferred
pursuant to Rule 144 under the Securities Act of 1933, as amended.
(i) Piggyback Registration.
a. Notice . If, at any time, ErgoBilt proposes to file a
registration statement under the Securities Act, other
than a registration relating solely to employee benefit
plans or a transaction falling within the provisions of
Rule 145(a) under the Securities Act (a "Registration
Statement"), with respect to an offering for its own
account or for the account of others of any class of
securities of ErgoBilt, then ErgoBilt shall give written
notice of such proposed filing (a "Piggyback Notice") to
each Stockholder at least thirty (30) days before the
anticipated filing date. The Piggyback Notice shall
describe the intended method of distribution and offer
each Stockholder the opportunity to register pursuant to
such Registration Statement such Registerable Securities
as the Stockholder may request in writing to ErgoBilt
within fifteen (15) days after the date the Stockholder
first received the Piggyback Notice (a "Piggyback
Registration").
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ErgoBilt shall take all necessary steps to include in the
Registration Statement all Registerable Securities which
ErgoBilt has been so requested to register by the
Stockholders.
b. UNDERWRITTEN REGISTRATIONS. In a registration pursuant to this
Section 2 involving an underwritten offering, whether or not
for sale for the account of ErgoBilt, if the managing
underwriter with respect to such offering advises ErgoBilt in
writing that the inclusion of all the Registerable Securities
which the Stockholders have requested to be included in the
Registration Statement would materially jeopardize the success
of the offering then ErgoBilt shall be required to include in
the underwriting only that number, if any, of Registerable
Securities which the underwriter advises ErgoBilt in writing
may be sold without materially jeopardizing the offering. In
the event that the number of Registerable Securities included
in such Piggyback Registration is limited as described above,
then Registerable Securities shall be included on a pro-rata
basis based on the number of Registerable Securities requested
to be registered by each Stockholder. Nothing in this Section
2 shall create any liability on the part of ErgoBilt if
ErgoBilt for any reason should decide not to file such
Registration Statement, or if filed, thereafter terminates the
Registration Statement.
e. LOANS.
(i). Contemporaneously with the Closing of this Agreement, EB shall
loan Two Hundred Thousand Dollars ($200,000).
(ii). CTSS will have the right to borrow from ErgoBilt and ErgoBilt
will loan to CTSS up to Two Hundred Thousand Dollars
($200,000) per quarter beginning January 1, 1998 with the last
loan being made on July 1, 1999 (which is the third quarter of
1999). In the event that Lefler and West are terminated for
cause under their employment agreements, ErgoBilt has no
further obligations to make additional loans after the date of
termination. The loans made to CTSS will be secured by
ErgoBilt common stock issued at the Closing, the contingency
purchase price, the stock options grated to Lefler and West
that have not yet vested under the Employment agreements
(those options which have vested shall be released from the
security agreement), and all of the assets of CTSS, Inc. In
the event that CTSS sells shares in a particular quarter, the
loan for that quarter shall be reduced by the amount of stock
sold.
(iii). In the event that ErgoBilt fails to timely make these loans
when requested by CTSS, ErgoBilt shall have 15 days to cure
and make the requested loans. In the event that ErgoBilt fails
to make the loans after the 15-day cure period, ErgoBilt
agrees to pay a $1,000 per day penalty to CTSS until said
loan(s) are funded.
f. SALE OF ERGOBILT COMMON STOCK. The sale of ErgoBilt common stock by
the Stockholders is subject to the collateral requirements and other
SEC rules and regulations, including Rule 144 under the Securities Act
of 1933, as amended, if applicable.
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g. LOAN REPAYMENT. The outstanding balances on all loans made to CTSS
will accrue interest at 90 day LIBOR plus 200 basis points. The
repayment of the outstanding balances and accrued interest on all
loans made to CTSS shall be made on or before August 22, 1999.
ErgoBilt will have the right of offset against the loan at the
time additional compensation is due under the Contingent Portion
Payment provisions of this Agreement.
(i). All outstanding balances on any loans to CTSS will be
secured by the 100,000 shares of ErgoBilt common stock issued
to CTSS upon Closing of this Agreement.
h. INVESTMENT REPRESENTATION. All shares of ErgoBilt common stock
that CTSS will receive under the terms of this Agreement is for
investment purposes and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intent of
distributing or selling their shares. CTSS and the shareholders have
reviewed the representations in the Prospectus and have made or have
had the opportunity to make inquiry concerning EB and ErgoBilt. CTSS
and the shareholders have sufficient knowledge and experience so as to
be able to evaluate the risks and merits of their investment, and they
are able financially to bear risks thereof. CTSS and the shareholders
are entering into the transactions contemplated herein based on their
own assessments of the merits and risks, upon their own experience as
an officer, director and/or shareholder, and are not relying on any
business plan, projections, valuations or other financial information
provided to them by EB and ErgoBilt. CTSS and the shareholders further
acknowledge and agree that ErgoBilt and EB have made no assurances of
any nature whatsoever regarding the future operations of EB or
ErgoBilt except as set out in this Agreement and have made no
guarantees as to the profitability of any investment therein. CTSS and
the shareholders further acknowledge that EB is a newly-formed entity
with no history of operations.
3.2. OBLIGATIONS AND RESPONSIBILITIES.
a. SHAREHOLDERS. West and Lefler, as employees and under their
Employee Agreements, shall have control of the obligation to
manage, design, assemble, and distribute the Products produced
by EB, design the user documentation, provide and train others
to provide technical support, train the labor to assemble and
repair the Product, unless released in writing by ErgoBilt;
however, unless otherwise agreed by the parties, an ErgoBilt
officer shall act as the comptroller and secretary of EB and
all invoices shall be approved by a West or Lefler and an
ErgoBilt officer with the checks signed in the normal course
of business by EB without unreasonable delay.
b. COMPANY NAME AND PRODUCT MARK. EB and ErgoBilt have the sole
authority to change, modify, and determine the company name of
EB (division
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name) and product marks for all goods and services sold
through and by EB after July 12, 1997.
c. LAWSUIT WITH EDS. After all taxes and expenses have been
netted, all proceeds received by CTSS, the shareholders, and
West from any settlement of judgment of any type of claim
against EDS or its affiliate (collectively referred to as
"Recovery") shall be allocated as follows:
(i) CASH PROCEEDS. Seventy-five percent (75%) of the cash
proceeds as a result of any Recovery, up to a maximum
of Six Million Dollars ($6,000,000), by CTSS in the
EDS action will be retained by CTSS. The remaining
25% of the Cash Recovery proceeds, up to a maximum of
Six Million Dollars ($6,000,000), shall be retained
by EB. If the Cash Recovery proceeds exceeds Six
Million Dollars ($6,000,000), the parties agree to
divide equally, half of the Recovery to CTSS and half
to EB, any and all Cash Recovery proceeds in excess
of Six Million Dollars ($6,000,000).
d. DUE DILIGENCE. ErgoBilt's and EB's authorized representatives
shall have the complete authority to commence immediately an
examination of CTSS, the Shareholders, the Products, Process ,
Intellectual Property, and all matters needed to evaluate this
transaction. CTSS shall bear the expense and cost of its due
diligence. CTSS agrees to fully disclose to EB all
confidential, financial information, Intellectual Property,
Products, Process, Modifications and titles thereto, as well
as all material contracts lenders, investors, software
vendors, employees, and contractors, employment records, and
any other records or information which EB requests. CTSS and
the shareholders agree to cooperate in all ways in providing
this information in a timely manner including extensive
personal and individual character and background
investigations of the shareholders.
e. AUDIT MATERIAL. Within 10 days of executing this Agreement,
CTSS and the shareholders and West shall deliver to EB
whatever financial statements and records, and cooperate fully
in any audit, CTSS has in its possession for the prior 28
months for CTSS' business.
f. EMPLOYMENT AND BENEFITS.
(i). LEFLER AND WEST. Upon the Closing Date, Lefler and
West shall become employees of EB under respective
Employment Agreement attached as Exhibit F.
(ii). OTHER EMPLOYEES. EB will endeavor to employ the
personnel presently employed by CTSS in such
operation. Neither CTSS, nor the shareholders can
hire CTSS employees or former employees to work at
any other business of CTSS or a business owned or
controlled any CTSS or its Shareholders except that
Terry Gursch and Dean Williams can work for RealTime
Captioning, Inc.
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4. MEDIATION AND RESOLUTION.
4.1 ARBITRATION.
The parties agree that any and all claims or disputes between the
parties that arise in the future shall be settled by mediation and if necessary
after a reasonable amount of time for mediation, binding arbitration according
to the Rules of the Institute of Christian Conciliation in Dallas, Texas and
judgment upon an arbitration award may be entered by any court of competent
jurisdiction. "Any claim or dispute" means any and all claims and disputes in
contract or tort or statutory, and without limitation or restriction general to
the foregoing:
(a) Any and all disputes which may arise between the parties
relating to the negotiation, drafting, formation, execution,
and performance of this Agreement.
(b) Any dispute or claim that arises between the parties outside
of this Agreement, and
(c) Any dispute regarding the wording of the covenants,
modifications, clarifications of any additional documents
which are needed to effectuate the purpose of this Agreement.
4.2 CHOICE OF LAW.
It is especially agreed and stipulated that this Agreement shall be
deemed to have been made in the State of Texas. All questions concerning the
validity, interpretation, performance of any of its terms or provisions or of
any rights or obligations of the parties hereto shall be governed by and
resolved by the laws of that jurisdiction.
5.0 CONFIDENTIALITY AND PUBLIC RELATIONS.
5.1. CONFIDENTIALITY.
The parties recognize that certain valuable confidential information
including the source code of CTSS will be disclosed during ErgoBilt's due
diligence of CTSS, EB, ErgoBilt, and all their affiliates agree not to disclose
any confidential information, specifically including without limitation the
source code and to maintain during the entire term of this Agreement the
secrecy and confidentiality of the confidential information, specifically
including without limitation the source code, provided by CTSS.
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5.2. PUBLIC RELATIONS.
The parties recognize that any release of information to the public or
other third parties with respect to these negotiations may cause great
detriment to ErgoBilt and thus agree to keep this proposal confidential. The
parties designate Gerard Smith of ErgoBilt as the sole representative of both
ErgoBilt, CTSS, and the shareholders to communicate information to the public
regarding this transaction.
6.0 WARRANTIES AND REPRESENTATIONS.
6.1. CTSS.
CTSS and the shareholders make the following warrants,
representations, and agreements. For the purpose of this Section VII of this
Agreement, the term CTSS shall mean CTSS and the shareholders. For the purposes
of this Section VII of this Agreement EB shall mean EB and ErgoBilt.
a. EQUITABLE RELIEF. CTSS recognizes and agrees that EB's remedy
at law for any breach of the provisions of this Agreement
would be inadequate and that for breach of such provisions EB
shall, in addition to such other remedies as may be available
to them at law or in equity or as provided in this Agreement,
be entitled to injunctive relief by an action for specific
performance to the extent permitted by law. This Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided
however, this Agreement and all rights hereunder may not be
assigned by CTSS, except by prior written consent of EB.
b. OSHA AND ENVIRONMENTAL. CTSS warrants and represent that it is
in compliance with OSHA and all applicable state and federal
environmental laws and that no state or federal agency is in
discussions with, or made demands/claims against, CTSS
regarding any non-compliance issue.
c. BULK SALES LAW. CTSS warrants and represents that it will take
all necessary steps to comply with all applicable bulk sales
laws, if necessary.
d. TAXES. CTSS warrants:
(i) FILINGS. That it has filed all federal, state, local,
and other tax returns which are required to be filed
by it and which were due prior to the date of this
Agreement and has paid all taxes shown thereon,
including without limitation, all taxes on
properties, income, business and occupation,
licenses, sales and payrolls. The tax returns of CTSS
for the five years fiscal years will be delivered to
EB at closing, as well as all state franchise
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and sales tax returns for the same period. The 1996
tax return for CTSS shall be prepared and delivered
to EB on Closing.
(ii) PAYMENTS MADE. That all Federal, state, local and
other taxes accruable since the end of the respective
periods covered by such returns and up to the closing
have or will have been paid.
(iii) NO AUDITS. That no federal income tax returns of CTSS
have been audited by the IRS and/or the California
Franchise Tax Board, and CTSS has granted no power of
attorney to any person to represent it before the
IRS; that no federal or state tax liabilities have
been assessed or proposed which remain unpaid. CTSS
is not aware of any basis upon which any assessment
for a material amount of additional taxes could be
made.
(iv) WITHHOLD AND COLLECTING TAXES. Present taxes which
CTSS is required by law to withhold or collect have
been withheld or collected and have been paid over to
the proper governmental authorities or are properly
held by CTSS for such payment, and all withholdings,
collections or other payments payable in connection
therewith as of the dates of the unaudited financial
statements are fully reflected or disclosed in the
balance sheets included as a part of the unaudited
financial statements as at such dates and for the
periods than ended. All such taxes are and will be so
withheld, collected, paid over or held for payment as
of the date of this Agreement and the date hereof. No
waivers of statutes of limitations with respect to
any tax returns of CTSS or extensions of time for the
assessment of any tax have been given which are now
in effect.
e. ACCOUNTS RECEIVABLE. Even though EB is not assuming accounts
receivable, EB is granted the right to inspect all accounts
receivable. CTSS shall provide to EB with a list of all
accounts receivable., if any, showing the name and address of
each debtor, the amount due on each account, and any write-off
or reserve against each account, and the date when the account
became due.
f. Financial.
(i) BANK ACCOUNTS AND MONEY MARKET FUNDS. CTSS agrees to
provide to EB for each account and money market funds
all bank statements, canceled checks, debits and
credits, and deposit slips for the period beginning
April 1, 1994 to the effective date of this Agreement
that is in the possession of CTSS. If EB or ErgoBilt
require CTSS to obtain information from financial
institutions, ErgoBilt will pay the cost of such
searches and copies.
(ii) FINANCIAL STATEMENTS. CTSS shall deliver to ErgoBilt
unaudited financial statements of CTSS for each of
its fiscal years since 1991, which include balance
sheet, income statement and statement of cash flow
for the respective
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<PAGE> 16
periods, provided, however, such financial statements
exist. If CTSS is required to prepare such financial
statements, ErgoBilt will pay the cost of such
financial statement preparation.
(iii) DEBTS. CTSS warrants that it is not a party to any
loan, debt instrument or bank credit agreement other
than the Lloyd Rigler debt. CTSS warrants that there
are no claims, debts, or liabilities outstanding,
except for the note owed to Lloyd Rigler, which is
approximately $100,000 ("Lloyd Rigler obligation" or
"note"). CTSS shall cause to be released all Product,
Process, Intellectual Property, and Improvements from
any lien or pledge in the Lloyd Rigler obligation.
(iv) CORPORATE DOCUMENTS. CTSS shall deliver to EB correct
and complete copies of CTSS's Articles of
Incorporation and Bylaws, each as amended to date,
and minutes of meetings, and copies of al actions by
written consent taken by , the directors and
shareholders of CTSS. All actions taken by CTSS'
Board of Directors and shareholders authorizing this
transaction.
(v) DOING BUSINESS CERTIFICATES. CTSS shall deliver to EB
true and correct copies of all foreign corporation
and assumed name filings and a list of all States in
which CTSS is doing business.
g. PROPERTY. CTSS and its shareholders warrants it has good and
marketable title to all property owned by it, free of all
encumbrances. CTSS warrants that it owns good and marketable
title to all Intellectual Property, Products, and Process, and
the same is free and clear from any lien or encumbrances. CTSS
warrants and represents that the Intellectual Property,
Process, Products are free from claims, misappropriation or
infringement. The shareholders and the shareholders' spouses
specifically warrant and represent that they have no
individual interest, claim, ownership or title in the
Intellectual Property, Products, or Process which is not being
conveyed to EB in this transaction. CTSS represents and
warrants that none of its employees, agents, or consultants
own any title to or property interest to the Intellectual
Property, Products, or Process. CTSS and the shareholders
represent and warranty that attached as Exhibit G is a
complete list of any and all Intellectual Property, Process,
and Products owned by CTSS and the shareholders.
h. SOURCE CODE.
(i) CTSS and the shareholders warrant that the source
code and enhancements and deliverable object code
based thereon shall not contain anywhere embedded
therein a logic bomb, time bomb, or other drop dead
device which has the purpose to deactivate or
otherwise make useless the computer software
furnished as part of its Intellectual Property in the
Agreement.
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(ii) CTSS and the shareholders agree that when delivering
its software hereunder it shall not embed in any of
its executable software a trapdoor or other means of
access that would enable CTSS to gain access to the
software without the knowledge or consent of
ErgoBilt.
i. NAMES, FRANCHISEES, PERMITS. CTSS warrants that it has not
received any claims that it does not have the right to use its
mane or the name of its Products, Intellectual Property, or
Process in every state in which it now does business. CTSS
warrants that it has no franchises, permits, Intellectual
Property, Process, or Products which are currently being used
in the operation of its business which infringes or violates
the rights of any other person, entity, or business. CTSS has
not infringed or violated in any way any trademark, trade
name, copyright, trade secret rights or contractual
relationships of others, and has not received any notice,
claim or protests respecting any such violations or
infringement. CTSS has not given any indemnification to any
person for any such violations or infringements.
j. CONTRACTS.
(i) MATERIAL CONTRACTS. CTSS agrees to provide EB with
all contracts to which it is a party or by which it
is a party or by which CTSS is and which are material
to CTSS' business and all confidentiality agreements
obtained from parties other than EB. CTSS warrants
that it is not obligated under any contracts or
agreement which materially and adversely affects its
business, properties, prospects, assets or condition
financial or otherwise, including but not limited to,
all debt instruments, contracts with software
companies, employees, contractors notes, collateral
agreements, licenses and development agreements.
(ii) NO DEFAULT. CTSS warrants that it is not in default
under (nor is CTSS aware of any fact or event which
with the lapse of time or the giving of notice or
both would constitute a default under) any contract
made or obligation owed by it which would result in a
liability that would materially adversely affect the
business of CTSS.
(iii) POWER OF ATTORNEY. CTSS has given no power of
attorney to any person or entity, which is presently
outstanding or in force for any purpose whatsoever.
k. LITIGATION.
(i) NO ACTIONS. There are no actions, suits, proceeding
or investigations of any kind pending, or, to the
knowledge of CTSS, threatened before any court,
commission, or other administrative authority against
CTSS, any of its stockholders, or its business, or
its properties, Product, Process, or Intellectual
Property and CTSS is not the subject of any order or
decree.
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(ii) EDS. CTSS warrants and represents to EB that:
1. CTSS has not breached any agreement or any
covenant of any agreement or arrangement that
CTSS had with EDS;
2. CTSS warrants and represents that CTSS is not
a party to any contract, agreement, or any
type of arrangement with EDS which would
limit its right to enter into this, or any
similar, agreement; CTSS, to the best of its
personal knowledge, warrants and represents
that EDS has not made any oral or written
claim against CTSS, nor has EDS sent any
letters to CTSS seeking the return of moneys
or properties to EDS; and
3. EDS does not own any interest in, nor have a
lien or claim against any of CTSS's
intellectual Property, Process, Product,
Improvements.
1. EMPLOYEES. CTSS warrants and represents that:
(i) EMPLOYEE'S HEALTH. Larry West and Jerry Lefler
severally represent that they are in good health to
the best of their knowledge.
(ii) COMPLIANCE. CTSS is in compliance with all federal,
state and municipal laws respecting employment
practice, terms and conditions of employment, and
wages and hours, and is not engaged in any unfair
labor/ employment practice, and there no arrears in
payments of wages or social security taxes.
(iii) NO UNIONS. None of the employees of CTSS are
represented by any labor union; there is no pending
labor strike, or other material labor trouble
affecting CTSS; there is no material labor grievance
pending and no pending collective bargaining
agreement to which CTSS is a party.
(iv) NO EMPLOYEE PLANS. CTSS has no ERISA plan or any
other type of employee benefits plans, stock option
plans employee welfare benefit plan or employee
pensions.
m. AUTHORITY.
(i) APPROVAL. No approval, authorization, order, license
or consent of or registration, qualification or
filing with any governmental authority and no
approvals or consent by any other person or entity is
required in connection with the execution, delivery
or performance by CTSS of this Agreement.
(ii) CTSS'S AUTHORITY. CTSS has full right, power and
authority to execute, deliver and perform this
Agreement. All proper consents of shareholders and
shareholders' spouses have been obtained authorizing
the execution, delivery
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<PAGE> 19
and performance of this Agreement constituting valid
and legally binding obligations of CTSS. There are
pending no proceedings or actions to dissolve or
otherwise terminate CTSS. Attached as Exhibit H is a
Corporate and Shareholders Resolution approving and
consenting to the terms of this Agreement.
(iii) SHAREHOLDER AUTHORITY. The CTSS shareholders have
full right, power and authority to execute, deliver
and perform this Agreement and each related agreement
to which they are parties. This agreement has been
duly executed and delivered by the CTSS shareholders
and constitutes a legally binding obligation of each
of them. Attached as Exhibit H is a Corporate and
Shareholders Resolution approving and consenting to
the terms of this Agreement.
n. DISCLOSURES. The representations and warranties made by CTSS
in this Agreement and any statements by them made in any of
the Exhibits hereto do not contain any untrue statement of a
material fact or omit to state a material fact. There is no
fact or condition particularly related to the business of CTSS
which is known to CTSS, and neither is aware of any fact or
condition particularly related to the business of CTSS which
any of them reasonably believes might adversely affect in a
material fashion the business, property, Intellectual
Property, Process, and Product, condition (financial or
otherwise), or results of operations of CTSS which has not
been set forth in this Agreement or in an Exhibits hereto.
o. INDEMNIFICATION. Subject to all of the limitations and
provisions of this Article, CTSS and the shareholders jointly
and severely agree to indemnify, defend at its costs with
legal representation reasonably satisfactory to EB, save and
hold EB harmless from and against, and compensate them for any
and all demands, claims, actions, causes of action,
assessments, damages, liabilities, losses, diminution in
value, expenses, fees, judgments or deficiencies of any nature
whatsoever (including, without limitation, any unpaid taxes
due from CTSS and reasonable attorneys' fees and other costs
and expenses incident to any suit action or proceeding
including those incurred in connection received, incurred or
sustained by the indemnified parties, or either of them, which
shall arise out of or result from any breach of any
representation, warranty or covenant of this Agreement,
including without limitation those set forth herein) except
that CTSS and the Shareholders shall not have to indemnify
ErgoBilt or EB for any claim made by EDS or one of its
affiliates which arises outside of any breach of any
representation, warranty or covenant of this Agreement,
including without limitation those set forth herein). CTSS and
the shareholders grant to EB and ErgoBilt the right to
directly setoff its claims for indemnification against all
funds due to CTSS under Section 3.01 d 2 of this Agreement.
p. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of CTSS set forth in this
Agreement shall survive the date hereof for
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<PAGE> 20
three years (except that the representations and warranties
regarding taxes and employee benefit plans of this Agreement
shall survive the date hereof for six years), notwithstanding
the establishment of a shorter period by any applicable
statute of limitations, the provisions of which are hereby
waived, provided that liability with respect to any
representation or warranty as to which a claim is made within
such 3-year and 6-year periods, as applicable, shall continue
until finally determined and paid.
q. SET-OFF. Any amount or amounts due from CTSS or its
shareholders to ErgoBilt under the indemnification provision
or any other loss, claim or liability arising from an
obligation or liability of CTSS may be, at EB's option, set-
off against any amounts due or stock to the CTSS under this
Agreement.
r. NO OTHER NEGOTIATIONS. CTSS and its shareholders represents
and warrants (i) that there are no existing letters of intent
to which CTSS or the Shareholders are bound with respect to
the sale of the CTSS or the acquired assets; (ii) that, except
as required by law, CTSS will not provide a copy of this
Agreement to any person other than its legal or financial
advisors, (iii) that the execution of this Agreement is not in
breach of, or contradiction to, any other agreement or
arrangement that the CTSS has with any other individual or
business entity; and (iv) that CTSS shall not discuss or
negotiate with any party, company, or individual until the
time periods allowable for due diligence and EB corporate
approvals have passed.
s. NO FELONY RECORD. Lefler, West, and Moore represent that none
of them have been convicted of a felony.
t. NEGATIVE COVENANT NOT TO COMPETE.
(i) CTSS and/ or the shareholders, jointly and severally,
covenant that none of them, either separately,
jointly, or in association with others, as employees,
owners, partners, shareholders, or consultants, will
enter into or engage in manufacturing, selling,
marketing, or distribution of the Product, Process,
Intellectual Property, or Improvements within the
United States for a period of five (5) years from the
date of the Closing Date.
(ii) CTSS and the shareholders, jointly and severally,
covenant that none of them, either separately,
jointly, or in association with others, as employees,
owners, partners, shareholders, or consultants, will
enter into or engage in "any other associated or
related service or business" within the United States
for a period of three (3) years from the date of the
Closing Date, without prior written permission of EB
or ErgoBilt. The phrase "any other associated or
related service or business" has the broadest
possible meaning including without limitation any
product or service business which (1) trains or
teaches the use of the Product and or Process, (2)
services the after sale repair or
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upgrade market of the Product, (3) uses the Product,
Process or similar/ enhanced Product or the
Intellectual Property to provide transcription
services to any industry or business (including, but
not limited to the legal, insurance, financial/
banking, brokerage, radio, television, media, and
Internet industries). Notwithstanding the forgoing,
(1) Brenda Lefler, Merle Moore and RealTime
Captioning, Inc. are not covered under this clause,
and (2) Jerry Lefler shall be allowed to continue
performing work of RealTime Captioning. Inc. up to
the earlier of October 1,1998 or the date CTSS
receives the maximum consideration specified under
Section 3.1 of this Agreement, but not thereafter.
During this period of time, Lefler agrees that he
shall not perform work for Real Time Captioning, Inc.
during the normal working hours of EB.
(iii) CTSS and the Shareholders acknowledge that this
covenant not to compete is necessary to maintain the
Confidential Information referred to in Section 7.1
u. and is necessary to protect the proprietary
interests of EB, and that the restriction against non
competition is reasonable in light of the
consideration and other value CTSS and the
Shareholders have accepted, and will accept, pursuant
to this Agreement.
u. CONFIDENTIAL INFORMATION.
(i) CTSS and the Shareholders acknowledge that all
information included within and relating to the
Product, Process, Intellectual Property, and
Improvements are valuable, special, and unique assets
of EB (collectively referred to as "Confidential
Information"). In recognition of this, CTSS and the
Shareholders represent and agree that except as
specifically authorized in writing by EB and
ErgoBilt, during the five (5) year period following
the Closing Date, CTSS and the Shareholders shall not
disclose any Confidential Information to any person
or entity, except for disclosure required by law or
by court order, in which event EB and ErgoBilt shall
be given prompt notice of any such compelled
disclosure, and, if possible, an opportunity to
defend its rights hereunder prior to any such
compelled disclosure being made.
(ii) CTSS and the Shareholders acknowledge that this
covenant to maintain Confidential Information is
necessary to protect the proprietary interests of EB,
and that the restriction against disclosure is
reasonable in light of the consideration and other
value CTSS and the Shareholders have accepted, and
will accept, pursuant to this Agreement.
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7.2. ERGOBILT.
EB makes the following warrants, representations, and agreements:
7.3 ORGANIZATION AND AUTHORITY.
EB is a Texas Corporation duly organized, validly existing and in good
standing under the law of the State of Texas, with full power to carry on its
business as such business is now conducted, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby.
7.4 NO VIOLATION.
Neither the execution and delivery by EB of this Agreement or any of
the related agreements to which EB may be a party, nor the consummation of the
transactions herein or therein contemplated, nor compliance with the terms,
conditions and provisions hereof or thereof will conflict with or violate any
provision of law or the Articles of Incorporation or by-laws of EB.
7.5 TAXES.
No state excise or business and occupation tax returns of EB have ever
been audited, no state tax liabilities have been assessed or proposed which
remain unpaid.
7.6 MUTUAL REPRESENTATIONS.
a. NO BROKER COMMISSION. Both ErgoBilt and CTSS represent and
warrant to each other they have not entered into a written,
oral, or implied broker's agreement, which would entitle any
person or entity a commission resulting from this transaction.
b. REPORTS. The parties agree to prepare and promptly file all
reports documents, and notices with all applicable regulatory
and other governmental agencies, as may be required with
respect to this letter of intent.
c. COOPERATION. The parties agree to include within this
agreement all necessary provisions and covenants necessary to
effectuate the purposes and intents of the parties as set
forth in this agreement.
d. COSTS. CTSS shall bear its and its shareholders costs and
expenses as well as the cost and expenses of EB and ErgoBilt,
including all legal accounting and financial fees with respect
to this transaction and the transactions contemplated herein.
e. BINDING. Each party represents that the execution and delivery
of this agreement and the consummation of this transaction
contemplated hereby
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have been duly authorized by all necessary action by each
party, that this agreement constitutes a legal agreement of
valid and binding obligation on each party, enforceable
against each party in accordance with the term of these terms.
Each party represents that neither the execution and delivery
of this Agreement, nor the consummation of this transaction
contemplated by the parties, will constitute a breach of any
agreement to which a party is a party. Specifically, CTSS and
the shareholders warrant that they have no contractual
agreements pending or anticipated with EDS, nor will this
Agreement interfere with any prior or current negotiations
with any third party.
8. MISCELLANEOUS COVENANTS
8.1 Descriptive Heading.
Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement.
8.2 BINDING.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their successors.
8.3 REPRESENTATIVES.
The representations, warranties and covenants set forth in this
agreement shall be continuing and shall be true and correct on and as of this
date in the same force and effect as if made at that time, and all such
representations, warranties of covenant shall survive the execution of this
Agreement.
8.4 EFFECTIVE DATE.
The Effective Date of this Agreement shall be Closing Date except as
it may be extended by the agreement of the parties (the "Effective Date").
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8.5 ASSIGNMENT
EB shall be able to assign this Agreement to a wholly-owned subsidiary
of ErgoBilt, however CTSS and its shareholders shall not be able to assign any
of its rights in this Agreement.
8.6 NOTICES.
All notices, requests, demands and other communications under this
Agreement shall be in writing and delivered by personal delivery, mail,
overnight courier or telecopier. Such communications shall be deemed given, if
by personal delivery, when received; if by mail by certified or registered mail
(postage prepaid and return receipt requested) on the date of receipt as
evidenced by the return receipt; or if by overnight courier or telecopier
(provided that the party giving the notice has confirmation of such delivery or
sending) on the date actually received, and, in each case, addressed to the
party to whom notice is to be given as set forth below:
a. If to EB and ErgoBilt: 9244 Markville Drive, Dallas, Texas
75243-4404, (972) 889-3742 with a copy to Rob H. Holt,
Brantley & Holt LLP, P.O. Box 4627, Bryan, Texas 77805-4627.
b. If to CTSS: CTSS, Inc. 301 Commerce, 3500 City Center II, Fort
Worth, Texas 76102 with a copy to John Allen Chalk, Michener
Larimore Swindle Whitaker Flowers Sawyer Reynolds & Chalk, LLP
301 Commerce, 3500 City Center II, Fort Worth, Texas 76102,
(817) 335-4417 and (817) 335-6935 (fax).
8.7 ENTIRE AGREEMENTS.
All Attachments hereto shall be deemed incorporated into and made part
of this Agreement. This Agreement contains the entire understanding between the
parties relating to the subject matter of this Agreement. There are no
agreements, representations, or warranties by any of the parties, which are not
set forth herein. All prior proposals, discussions and writings by and between
the parties and relating to the subject matter of this Agreement are superseded
by this Agreement.
8.8 GUARANTEE. ErgoBilt guarantees the performance of EB to CTSS as
contemplated in this Agreement.
8.9 AMENDMENT IN WRITING.
All modifications and amendments to this Agreement must be in writing
executed by both parties.
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In witness whereof the parties hereto have executed this Agreement as
of the day and year written nest to their name.
CTSS, INC.
By: ,
----------------------------------------
Chairman of the Board of CTSS, Inc.
CONSENTED TO AND APPROVED BY:
-------------------------------------------- -------------------------
Jerrold P. Lefler, Shareholder of CTSS, Inc. Brenda Sue Lefler
Spouse of Jerrold P. Lefler
-------------------------------------------- -------------------------
Merle Moore, Shareholder of CTSS, Inc. Spouse of Merle Moore
-------------------------------------------- -------------------------
Larry West, Spouse of Larry West
EB SUBSIDIARY, INC.
By:
----------------------------------------
Gerald McMillan
By:
----------------------------------------
Gerard Smith
ERGOBILT, INC.
By: By:
---------------------------------------- -----------------------
Gerald McMillan Gerard Smith
Chairman of the Board CEO and President
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<PAGE> 1
EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
(Lawrence West Melquiond)
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement"), dated as of October
1, 1997 (the "Effective Date"), is made and entered into by and between EB
Subsidiary II, Inc., a Texas corporation ("Company"), and Larry West, an
individual ("Executive").
W I T N E S S E T H:
WHEREAS, Company and its wholly-owned subsidiary, ErgoBilt, Inc., is a
Texas corporation ("Company's Subsidiary");
WHEREAS, Company is purchasing certain assets from Computer
Translation Systems & Support, Inc. ("CTSS"), and its shareholders pursuant to
a certain Purchase and Sale Agreement dated October 16, 1997 (Purchase and Sale
Agreement);
WHEREAS, Executive has represented to company that he has substantial
experience, skills and expertise relating to the business of CTSS; and
WHEREAS, Company desires to employ Executive on a full-time basis as
an Executive, and Executive is willing to provide such services and take on
such responsibilities for the consideration hereinafter set forth.
NOW, THEREFORE, the parties, for and in consideration of the mutual
promises herein contained, agree as follows:
ARTICLE I
Employment
1.1 General Scope of Employment. Commencing on the "Commencement
Date" (as defined in Article II below), Company shall employ Executive as an
Executive of Company on the terms of and subject of the conditions of this
Agreement. Executive shall report directly to Company's such individual(s) as
determined by the Board and shall perform the principal duties and
responsibilities, set forth in Section 1.2 below and such additional duties and
responsibilities consistent with his professional experience, as may reasonably
be assigned to him from time to time by Company's Board. Executive hereby
accepts such employment and agrees to devote his full time and energy to
Company's business as shall be necessary to perform his duties and
responsibilities in a faithful and competent manner.
1.2 Principal Duties and Responsibilities. Executive shall use
his best efforts to maximize net income after tax of the Company for the
purpose of meeting the purchase price deadlines established in the Purchase and
Sale Agreement.
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1.3 Office Facilities. Company shall furnish Executive with an
office, secretary services, supplies, equipment and such other facilities and
services suitable to his position and adequate for the performance of his
duties.
1.4 Extent of Services. After Closing, Executive shall devote all
of his time, attention and energy to Company's business and shall not engage in
any other business or consulting activity for gain, profit or other pecuniary
advantage except as expressly provided in this Agreement. Nothing herein above
is intended to prevent Executive from making personal passive investments in
other business activities not directly or indirectly competitive with the
business of Company. [Insert for Jerry Lefler Agreement shall include the
following sentence: "Notwithstanding the foregoing, Executive shall be allowed
to continue performing work of Real-Time Captioning, Inc. up to the date that
Executive receives his first $200,000 loan under Section 3.1 d of the Purchase
and Sale Agreement, But not thereafter. Executive agrees that he shall not
perform work for Real-Time during the normal business hours of Company."
1.5 Outside Activities. Subject to the conditions hereinafter set
forth, Executive may, upon prior notice to Company's Board, serve as a member
of no more than two (2) boards of directors, boards of trustees or other
governing bodies of "for profit" companies and/or "non-profit" civic, cultural,
educational and/or charitable organizations, provided that in all cases: (i)
such company or organization is not directly or indirectly engaged in a
business or does not support a business that is competitive, directly or
indirectly, with the business of Company, and (ii) such service does not
interfere with Executive's ability to perform his duties and responsibilities
to Company.
1.6 Outside Income. Absent Company's written consent, all fees,
compensation and other income (collectively "Outside Income") received by
Executive while employed by Company from any source other than personal gifts,
inheritance, or passive investments, including, but not limited to, all fees
for teaching, speaking engagements, acting as an officer, director, trustee,
receiver, executor, administrator or other fiduciary (other than as a trustee,
executor, or administrator of a trust or estate of Executive or a member of his
family) shall be the property of Company and shall be immediately disclosed and
remitted to Company. [Insert for Jerry Lefler Agreement shall include the
following sentence: "Notwithstanding the foregoing, Executive shall be allowed
to retain all outside income earned from Real-Time Captioning, Inc. under the
terms and conditions of Section 1.4 of this Agreement."]
ARTICLE II
Term
Executive's employment shall be for an initial term ("Term") of three
(3) years commencing on August 22, 1997 (the "Commencement Date") and
terminating three (3) years thereafter. In the event that a wind-out occurs
under Section IV of the Purchase and Sale Agreement, this Agreement, regardless
of which party initiates the wind-out, shall be rendered null and void
effective the date that the wind-out is initiated.
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ARTICLE III
Annual Base Salary and Miscellaneous Benefits
3.1 Annual Base Salary. As compensation for all duties and services to
be rendered by Executive hereunder to Company, Company shall pay to Executive
and Annual Base Salary of One Hundred Ten Thousand Dollars ($110,000) for each
twelve (12) month period of the Term. Annual Base Salary shall be paid in
twelve (12) equal monthly installments, payable in accordance with Company's
customary payroll policy in effect at the time such payment is made, or as may
otherwise be mutually agreed upon in writing by the parties. Annual Base
Salary for services rendered for a partial month shall be prorated based on a
thirty (30) day month. Reasonable cost of living increases and incentive
bonuses will be considered and approved at the sole discretion of ErgoBilt
management.
3.2 Stock Options: Executive shall be issued stock options that grant the
right to purchase 150,000 shares of ErgoBilt common stock at the market price
$9.1875 per share. Additional stock options grants to purchase 150,000 shares.
The stock options will be issued subject to the approval of the ErgoBilt
shareholders to increase the number of incentive stock options and nonqualified
stock options authorized in The Stock Option Plan. The stock options will vest
over a period of four years with the initial 25% becoming exercisable on
October 1,1998, the twelve month anniversary of the effective date of your
employment agreement, and an additional 25% becoming exercisable on each of the
subsequent twelve month anniversary of your employment agreement.
3.3 Expenses. During the term of his employment hereunder, Executive
shall be entitled to incur reasonable business expenses ("Business Expenses")
in performing his services hereunder, including transportation, entertainment,
travel, professional dues, professional periodicals, and business promotion.
All Business Expenses shall be subject to the approval of the Company and
reimbursed by Company upon presentation of receipts or other written
documentation establishing the nature of the expense, the time-date-place
incurred, and the business reason for such Business Expense. Company shall
not have any obligation to reimburse any Business Expense not presented for
reimbursement within ninety (90) days of the date on which such Business
Expense was incurred.
3.4 Vacation and Sick Days.
3.4.1 Executive shall be entitled to ten (10) business days of paid
vacation per year (which need not be taken consecutively). Such
vacation shall be scheduled to minimize interference with the
business. Executive shall also be entitled to all paid holidays given
by Company to its employees.
3.4.2 Executive shall be entitled to not more than five (5) days
paid sick days per year.
3.4.3 Vacation and sick day benefits must be taken in the year in
which they accrue and may not be taken in any subsequent year absent
the Company's consent, nor may Executive request payment of the cash
equivalent of accrued vacation or sick days not taken.
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3.5 Other Benefits. Company shall provide to Executive the following
additional benefits:
3.5.1 Miscellaneous Benefits. Executive shall be entitled to
participate in Company major medical and/or dental plans, life insurance
programs, accidental death and dismemberment insurance, retirement benefits,
disability benefits, and other insurance programs provided by the Company, and
any other benefit programs hereafter adopted by the Company consistent with
Company policies, if and when adopted.
ARTICLE IV
Inventions. Competition and Confidentiality
4.1 Inventions. All designs, discoveries, improvements, and
inventions (collectively, "Invention"), whether patentable or unpatentable,
whether copyrightable or uncopyrightable, whether of a business or technical
nature, made or conceived by Executive alone or with others, during the Term of
this Agreement shall be owned exclusively by Company whether or not such
Inventions are along the lines of the actual or anticipated business, work,
research or investigations of Company or which result from or are suggested by
any work done for Company or which relate to Company's business. Executive
shall promptly disclose such Inventions to Company. In addition, Executive
shall perform all actions (without any expense to Executive) reasonably
requested by Company to establish and confirm such ownership including, but not
limited to, assigning to Company, without additional compensation, the entire
worldwide rights to such Inventions, signing all necessary papers, instruments
and other documents and giving sworn testimony in support thereof, subject of
the terms and conditions of the "wind-out" provision of the Purchase and Sale
Agreement.
4.2 Non-Competition. Executive covenants and agrees with Company
that, except as otherwise consented to, approved or permitted in writing by
Company's Board, at any time while employed as an executive employee of Company
and for a period of two (2) years after the termination of Executive's
employment hereunder, Executive will not, directly or indirectly, whether as an
officer, director, employee, independent contractor, or whether acting alone or
as a member of a partnership, joint venture or as a holder or investor in any
security or other financial interest of any corporation or other business
entity, engage in any "Competitive Activity" as defined herein. For the
purposes of this Agreement, "Competitive Activity" shall mean:
(a) the solicitation of any customers of Company who were
customers of Company on date Executive left the Company to
purchase any product or services in direct competition with
the products and services provided by Company;
(b) requesting any actual customer or supplier, who was a customer
or supplier of Company at date Executive left the Company, to
curtail or cancel their business with Company;
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(c) except as provided by law or in any other contract or
agreement of even date herewith executed and delivered
pursuant hereto, the disclosure to any person, firm or
corporation, any secret or substantially secret details of the
organization, business affairs, intellectual property or
technology of Company; or
(d) any action designed to induce any employee of Company to
terminate his or her employment with Company or employ or
assist anyone else in the employment of any of the employees
of Company.
The restrictions of this section shall apply only to the United States counties
in which Company had customers as of the Termination Date. Competitive
Activity shall not include Executive's mere ownership of securities in any
publicly- traded company in which Executive holds or controls less than five
percent (5%) of the issued and outstanding securities.
The parties agree that the duration and geographic scope of the non-competition
provision set forth in this section are reasonable. In the event that any
court determines that the duration or the geographic scope, or both, are
unreasonable and that such provision is to that extent unenforceable, the
parties agree that the provision shall remain in full force and effect for the
greatest time period and in the greatest area that would not render it
unenforceable. The parties intend that this non-competition provision shall be
deemed to be a series of separate covenants, one for each and every county of
each and every state of the United States of America and each and every
political subdivision of each and every country outside the United States of
America where this provision is intended to be effective. Executive agrees
that damages are an inadequate remedy for any breach of this provision and that
the Company shall, whether or not it is pursuing any potential remedies at law,
be entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this non-competition provision. This entire Section 4.2 is subject to the
"wind-out" provision of the Purchase and Sale Agreement.
4.3 Non-Disclosure. Executive shall execute and deliver,
contemporaneous with the execution and delivery of this Agreement, Company's
standard form Non-Disclosure Agreement in the form attached hereto as Exhibit
4.3.
4.4 Enforcement. Executive and Company agree that the purpose of
the Non-Competition provisions are designed to enforce the Executive's promise
not to disclose confidential information. Executive and company further agree
and acknowledge that Company does not have an adequate remedy at law for the
breach or threatened breach by Executive of the covenants and agreements set
forth in Section 4.1, 4.2 and the Non-Disclosure Agreement executed pursuant to
Section 4.3 above. Accordingly, Executive further agrees that Company may, in
addition to the other remedies, which may be available to it hereunder, file
suit in equity to enjoin Executive from such breach or threatened breach.
4.5 Disclosure of Competitive Investments. Save and except
Real-Time Captionings, Inc., to the best of Executive knowledge, Executive does
not own or hold directly, indirectly or beneficially by Executive any
investments competitive with the business of Company. In the event that
Company determines that Executive holds a material interest in a competitive
investment, Company may require Executive to divest himself of such interest is
held in a publicly traded mutual
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fund in which Executive holds less than five percent (5%) of the issued and
outstanding shares or is held in a portfolio account over which Executive has
no power to exercise any investmen5t or management portfolio account over which
Executive has no power to exercise any investment or management decisions.
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ARTICLE V
Termination
5.1 Termination by Company upon Executive's Death or Disability.
Company has the right to terminate this Agreement and Executive's employment
hereunder in the event of Executive's death or disability as provided below.
5.1.1 Death. If Executive dies during the term of this
Agreement, then this Agreement shall terminate immediately effective on the
date of Executive's death ("Termination Date") without notice.
5.1.2 Disability. If, during the term of this Agreement,
Company's Board reasonably determines that Executive has become physically or
mentally disabled, whether totally or partially, so that he is prevented from
performing fully his usual duties and services hereunder, Company may provide
written notice to Executive and terminate Executive's employment hereunder,
effective on such date specified in such notice (also "Termination Date").
"Disability" shall mean Executive's permanent inability to perform the duties
and responsibilities required hereunder due to Executive's physical or mental
condition as determined by a licensed physician selected by Company's Board in
consultation with Executive's personal physicians.
5.1.3 Payment of Compensation and Other Benefits on Death
or Disability. In the event of the termination of this Agreement by reason of
Executive's death or disability, Executive (or his estate) shall be entitled to
payment of amounts due under this Agreement as follows:
(i) Annual Base Salary. Company shall pay in full
and complete satisfaction of amounts due under Section 3.1 as Annual Base
Salary: (i) upon death, paid through the last day of the calendar month in
which death occurs and (ii) upon disability, six (6) monthly payments in the
amount of monthly base salary paid in the immediately preceding month in which
disability is determined under Section 5.1.2, less any monthly disability
payments, if any, for such period which could be claimed.
5.2 Termination by Company for Due Cause.
5.2.1 "Due Cause". Company shall have the right to
terminate this Agreement and Executive's employment hereunder for "Due Cause"
upon written notice to Executive, effective upon such date specified in such
notice (also "Termination Date"). Executive shall not be deemed to have been
terminated for "Due Cause" hereunder unless and until notice of such
termination stating the grounds therefore has been delivered to Executive and
Executive, together with his counsel, has had an opportunity to be heard by a
panel of no less than two (2) senior officers and three (3) board members, who
find in good faith that Executive committed an act or omission set forth below
in this Section 5.2.1. Nothing herein shall limit the right of Executive to
contest the validity or propriety of any such determination.
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"Due Cause" shall mean that Executive has:
(i) committed an intentional act of fraud, embezzlement or theft
in connection with his duties or in the course of his
employment with Company.
(ii) wrongfully disclosed "Confidential Information" of Company as
defined in the Non-Disclosure Agreement executed by Executive
pursuant to Section 4.3, which materially adversely affects
the profitability of the Company;
(iii) engaged in any Competitive Activity;
(iv) Willfully engaged in conduct that could reasonably be found to
materially adversely affect the profitability of the Company
or the value of its stock;
5.2.2 Effect on Compensation and Benefits. In the event of
termination for Due Cause, Company shall pay to Executive: (i) Annual Base
Salary under Section 3.1 on a pro rata basis to the applicable Termination
Date.
5.3 Breach of Agreements. Executive acknowledges that a material
part of the inducement for Company to enter into this Agreement is Executive'
covenant set forth in Article IV Company shall have no further obligation to
pay Executive any amounts or benefits otherwise payable hereunder (except as
may otherwise be required at law) and shall be entitled to such other legal and
equitable relief as a court or arbitrator shall reasonably determine unless
such breach is an inadvertent breach that does not result in any material harm
to Company.
5.4 No Negative Public Comments. Upon the expiration or earlier
termination of this Agreement for any reason, Executive agrees not to make any
false, misleading or negative statement, either orally or in writing, about
Company or its directors or organizations or its directors or organizations or
its offenses, shareholders or any affiliates of the same or to otherwise
disparage them or any of them.
ARTICLE VI
General
6.1 Notice. All notices and other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when: (i) delivered personally; (ii) mailed by United States registered mail
or certified mail, return receipt requested, postage prepaid, addressed as
set forth below; or (iii) mailed by Federal Express, DHL or such other nation
recognized overnight courier service, addressed as setting forth below :
Address for Company:
EB Subsidiary II, Inc.
9244 Markville Drive
Dallas, Texas 75243-4404
Attention: Gerard Smith
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Address for Executive:
------------------------------
------------------------------
or to such, address as a party may furnish to the others in writing in
accordance herewith except that notice of change of address shall be effective
only upon receipt.
6.2 Binding Effect. This Agreement shall insure to the benefit of
and be enforceable by the parties and their respective successors' heirs,
representatives and permitted assigns.
6.3 No Waiver; Entire Agreement.
6.3.1 This Agreement and the attachment are being executed
as part of the larger transaction set out in the Purchase and Sale Agreement.
In the event that there is conflict between any of the terms of this Agreement
and the Purchase and Sale Agreement, the terms of the Purchase and Sale
Agreement shall control.
6.3.2 No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by Executive and Company. No waiver by any party at any
time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by any party which are not expressly set forth in this Agreement.
6.4 Headings. Section and paragraph headings are used herein for
convenience of reference only and shall not affect the meaning of any provision
of this Agreement.
6.5 Assignments. This Agreement is personal to Executive and may
not be assigned by Executive or the duties delegated without the prior written
consent of Company. Also ,Executive may not assign transfer, hypothecate or
dispose of any interest in compensation or payments without Company's prior
written consent.
6.6 Governing Law and Venue. This Agreement has been executed
in Dallas County, State of Texas, and the substantive laws of the State of
Texas shall govern the validity, construction, enforcement and interpretation
of this agreement .
6.7 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
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6.8 Mediation/Arbitration/Legal Fees. If any dispute
controversy, or claim arises among the parties with respect to this Agreement,
or the breach thereof, as well as any other dispute then the parties shall
submit such dispute to mediation according to the Commercial Mediation Rules of
the American Arbitration Association ("AAA"). If the parties are unable to
resolve the dispute through mediation after 3 days of mediation, they shall
then submit the dispute to binding arbitration pursuant to the Commercial
Arbitration Rules of AAA and judgment upon the award rendered by the arbitrator
may be interested in any court of competent jurisdiction thereof. The party's
award rendered by the arbitrator may be entered in any court of competent
jurisdiction thereof. The parties agree that if arbitration becomes necessary,
they will utilize and comply with the Commercial Arbitration Rule of AAA for
expediting such arbitration. The site of the arbitration will be the City of
Dallas, Dallas County, Texas, and will commence as soon as possible but in no
event later than thirty (30) days after a party files it's request for
arbitration. The prevailing party therein shall be entitled to recover all
reasonable court costs and arbitration administrative expenses incurred,
including reasonable attorneys' fees. The arbitration shall be conducted by
one arbitrator appointed as-provided in the can AAA Commercial Arbitration
Rules.
6.9 Confidentiality. To the fullest extent permitted by law, the
parties agree not to disclose any provision of this Agreement to any third
party except if required in response to litigation among the parties, a
subpoena governmental inquiry or other legal process.
IN WITNESS HEREOF, the parties have duly executed this Agreement as of
the Effective Date.
COMPANY :
EB Subsidiary II, INC.
A Texas Corporation
By: -------------------------------
Its: President
EXECUTIVE :
-----------------------------------
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EXHIBIT 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
(JEROLD P. LEFLER)
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement"), dated as of October
1,1997 (the "Effective Date"), is made and entered into by and between EB
Subsidiary II, Inc., a Texas corporation ("Company"), and, Jerold P. Lefler, an
individual ("Executive").
W I T N E S S E T H:
WHEREAS, Company and its wholly-owned subsidiary, ErgoBilt, Inc., is a
Texas corporation ("Company's Subsidiary");
WHEREAS, Company is purchasing certain assets from Computer
Translation Systems & Support, Inc. ("CTSS"), and its shareholders pursuant to
a certain Purchase and Sale Agreement dated October 16, 1997 (Purchase and Sale
Agreement);
WHEREAS, Executive has represented to company that he has substantial
experience, skills and expertise relating to the business of CTSS; and
WHEREAS, Company desires to employ Executive on a full-time basis as
an Executive, and Executive is willing to provide such services and take on
such responsibilities for the consideration hereinafter set forth.
NOW, THEREFORE, the parties, for and in consideration of the mutual
promises herein contained, agree as follows:
ARTICLE I
Employment
1.1 General Scope of Employment. Commencing on the "Commencement
Date" (as defined in Article II below), Company shall employ Executive as an
Executive of Company on the terms of and subject of the conditions of this
Agreement. Executive shall report directly to Company's such individual(s) as
determined by the Board and shall perform the principal duties and
responsibilities, set forth in Section 1.2 below and such additional duties and
responsibilities consistent with his professional experience, as may reasonably
be assigned to him from time to time by Company's Board. Executive hereby
accepts such employment and agrees to devote his full time and energy to
Company's business as shall be necessary to perform his duties and
responsibilities in a faithful and competent manner.
1.2 Principal Duties and Responsibilities. Executive shall use his
best efforts to maximize net income after tax of the Company for the purpose of
meeting the purchase price deadlines established in the Purchase and Sale
Agreement.
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1.3 Office Facilities. Company shall furnish Executive with an
office, secretary services, supplies, equipment and such other facilities and
services suitable to his position and adequate for the performance of his
duties.
1.4 Extent of Services. After Closing, Executive shall devote all
of his time, attention and energy to Company's business and shall not engage in
any other business or consulting activity for gain, profit or other pecuniary
advantage except as expressly provided in this Agreement. Nothing herein above
is intended to prevent Executive from making personal passive investments in
other business activities not directly or indirectly competitive with the
business of Company. [Insert for Jerry Lefler Agreement shall include the
following sentence: "Notwithstanding the foregoing, Executive shall be allowed
to continue performing work of Real-Time Captioning, Inc. up to the date that
Executive receives his first $200,000 loan under Section 3.1 d of the Purchase
and Sale Agreement, But not thereafter. Executive agrees that he shall not
perform work for Real-Time during the normal business hours of Company."
1.5 Outside Activities. Subject to the conditions hereinafter set
forth, Executive may, upon prior notice to Company's Board, serve as a member
of no more than two (2) boards of directors, boards of trustees or other
governing bodies of "for profit" companies and/or "non-profit" civic, cultural,
educational and/or charitable organizations, provided that in all cases: (i)
such company or organization is not directly or indirectly engaged in a
business or does not support a business that is competitive, directly or
indirectly, with the business of Company, and (ii) such service does not
interfere with Executive's ability to perform his duties and responsibilities
to Company.
1.6 Outside Income. Absent Company's written consent, all fees,
compensation and other income (collectively "Outside Income") received by
Executive while employed by Company from any source other than personal gifts,
inheritance, or passive investments, including, but not limited to, all fees
for teaching, speaking engagements, acting as an officer, director, trustee,
receiver, executor, administrator or other fiduciary (other than as a trustee,
executor, or administrator of a trust or estate of Executive or a member of his
family) shall be the property of Company and shall be immediately disclosed and
remitted to Company. [Insert for Jerry Lefler Agreement shall include the
following sentence: "Notwithstanding the foregoing, Executive shall be allowed
to retain all outside income earned from Real-Time Captioning, Inc. under the
terms and conditions of Section 1.4 of this Agreement."]
ARTICLE II
Term
Executive's employment shall be for an initial term ("Term") of three
(3) years commencing on August 22, 1997 (the "Commencement Date") and
terminating three (3) years thereafter. In the event that a wind-out occurs
under Section IV of the Purchase and Sale Agreement, this Agreement, regardless
of which party initiates the wind-out, shall be rendered null and void
effective the date that the wind-out is initiated.
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ARTICLE III
Annual Base Salary and Miscellaneous Benefits
3.1 Annual Base Salary. As compensation for all duties and services to be
rendered by Executive hereunder to Company, Company shall pay to Executive and
Annual Base Salary of One Hundred Ten Thousand Dollars ($110,000) for each
twelve (12) month period of the Term. Annual Base Salary shall be paid in
twelve (12) equal monthly installments, payable in accordance with Company's
customary payroll policy in effect at the time such payment is made, or as may
otherwise be mutually agreed upon in writing by the parties. Annual Base Salary
for services rendered for a partial month shall be prorated based on a thirty
(30) day month. Reasonable cost of living increases and incentive bonuses will
be considered and approved at the sole discretion of ErgoBilt management.
3.2 Stock Options: Executive shall be issued stock options that grant the
right to purchase 150,000 shares of ErgoBilt common stock at the market price
$9.1875 per share. The stock options will be issued subject to the approval of
the ErgoBilt shareholders to increase the number of incentive stock options and
nonqualified stock options authorized in The Stock Option Plan. The stock
options will vest over a period of four years with the initial 25% becoming
exercisable on October 1,1998, the twelve month anniversary of the effective
date of your employment agreement, and an additional 25% becoming exercisable
on each of the subsequent twelve month anniversary of your employment date.
3.3 Expenses. During the term of his employment hereunder, Executive shall
be entitled to incur reasonable business expenses ("Business
Expenses") in performing his services hereunder, including
transportation, entertainment, travel, professional dues, professional
periodicals, and business promotion. All Business Expenses shall be
subject to the approval of the Company and reimbursed by Company upon
presentation of receipts or other written documentation establishing
the nature of the expense, the time-date-place incurred, and the
business reason for such Business Expense. Company shall not have any
obligation to reimburse any Business Expense not presented for
reimbursement within ninety (90) days of the date on which such
Business Expense was incurred.
3.4 Vacation and Sick Days.
3.4.1 Executive shall be entitled to ten (10) business days of paid
vacation per year (which need not be taken consecutively). Such
vacation shall be scheduled to minimize interference with the
business. Executive shall also be entitled to all paid holidays given
by Company to its employees.
3.4.2 Executive shall be entitled to not more than five (5) days
paid sick days per year.
3.4.3 Vacation and sick day benefits must be taken in the year in
which they accrue and may not be taken in any subsequent year absent
the Company's consent, nor may Executive request payment of the cash
equivalent of accrued vacation or sick days not taken.
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3.5 Other Benefits. Company shall provide to Executive the following
additional benefits:
3.5.1 Miscellaneous Benefits. Executive shall be entitled to
participate in Company major medical and/or dental plans, life insurance
programs, accidental death and dismemberment insurance, retirement benefits,
disability benefits, and other insurance programs provided by the Company, and
any other benefit programs hereafter adopted by the Company consistent with
Company policies, if and when adopted.
ARTICLE IV
Inventions. Competition and Confidentiality
4.1 Inventions. All designs, discoveries, improvements, and
inventions (collectively, "Invention"), whether patentable or unpatentable,
whether copyrightable or uncopyrightable, whether of a business or technical
nature, made or conceived by Executive alone or with others, during the Term of
this Agreement shall be owned exclusively by Company whether or not such
Inventions are along the lines of the actual or anticipated business, work,
research or investigations of Company or which result from or are suggested by
any work done for Company or which relate to Company's business. Executive
shall promptly disclose such Inventions to Company. In addition, Executive
shall perform all actions (without any expense to Executive) reasonably
requested by Company to establish and confirm such ownership including, but not
limited to, assigning to Company, without additional compensation, the entire
worldwide rights to such Inventions, signing all necessary papers, instruments
and other documents and giving sworn testimony in support thereof, subject of
the terms and conditions of the "wind-out" provision of the Purchase and Sale
Agreement.
4.2 Non-Competition. Executive covenants and agrees with Company
that, except as otherwise consented to, approved or permitted in writing by
Company's Board, at any time while employed as an executive employee of Company
and for a period of two (2) years after the termination of Executive's
employment hereunder, Executive will not, directly or indirectly, whether as an
officer, director, employee, independent contractor, or whether acting alone or
as a member of a partnership, joint venture or as a holder or investor in any
security or other financial interest of any corporation or other business
entity, engage in any "Competitive Activity" as defined herein. For the
purposes of this Agreement, "Competitive Activity" shall mean:
(a) the solicitation of any customers of Company who were
customers of Company on date Executive left the Company to
purchase any product or services in direct competition with
the products and services provided by Company;
(b) requesting any actual customer or supplier, who was a customer
or supplier of Company at date Executive left the Company, to
curtail or cancel their business with Company;
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(c) except as provided by law or in any other contract or
agreement of even date herewith executed and delivered
pursuant hereto, the disclosure to any person, firm or
corporation, any secret or substantially secret details of the
organization, business affairs, intellectual property or
technology of Company; or
(d) any action designed to induce any employee of Company to
terminate his or her employment with Company or employ or
assist anyone else in the employment of any of the employees
of Company.
The restrictions of this section shall apply only to the United States counties
in which Company had customers as of the Termination Date. Competitive Activity
shall not include Executive's mere ownership of securities in any publicly-
traded company in which Executive holds or controls less than five percent (5%)
of the issued and outstanding securities.
The parties agree that the duration and geographic scope of the non-competition
provision set forth in this section are reasonable. In the event that any court
determines that the duration or the geographic scope, or both, are unreasonable
and that such provision is to that extent unenforceable, the parties agree that
the provision shall remain in full force and effect for the greatest time
period and in the greatest area that would not render it unenforceable. The
parties intend that this non-competition provision shall be deemed to be a
series of separate covenants, one for each and every county of each and every
state of the United States of America and each and every political subdivision
of each and every country outside the United States of America where this
provision is intended to be effective. Executive agrees that damages are an
inadequate remedy for any breach of this provision and that the Company shall,
whether or not it is pursuing any potential remedies at law, be entitled to
equitable relief in the form of preliminary and permanent injunctions without
bond or other security upon any actual or threatened breach of this non-
competition provision. This entire Section 4.2 is subject to the "wind-out"
provision of the Purchase and Sale Agreement.
4.3 Non-Disclosure. Executive shall execute and deliver,
contemporaneous with the execution and delivery of this Agreement, Company's
standard form Non-Disclosure Agreement in the form attached hereto as Exhibit
4.3.
4.4 Enforcement. Executive and Company agree that the purpose of
the Non-Competition provisions are designed to enforce the Executive's promise
not to disclose confidential information. Executive and company further agree
and acknowledge that Company does not have an adequate remedy at law for the
breach or threatened breach by Executive of the covenants and agreements set
forth in Section 4.1, 4.2 and the Non-Disclosure Agreement executed pursuant to
Section 4.3 above. Accordingly, Executive further agrees that Company may, in
addition to the other remedies, which may be available to it hereunder, file
suit in equity to enjoin Executive from such breach or threatened breach.
4.5 Disclosure of Competitive Investments. Save and except Real-
Time Captionings, Inc., to the best of Executive knowledge, Executive does not
own or hold directly, indirectly or beneficially by Executive any investments
competitive with the business of Company. In the event that Company determines
that Executive holds a material interest in a competitive investment, Company
may require Executive to divest himself of such interest is held in a publicly
traded mutual fund in which Executive holds less than five percent (5%) of the
issued and outstanding shares or is held in a portfolio account over which
Executive has no power to exercise any investment or management portfolio
account over which Executive has no power to exercise any investment or
management decisions.
5
<PAGE> 6
ARTICLE V
Termination
5.1 Termination by Company upon Executive's Death or Disability.
Company has the right to terminate this Agreement and Executive's employment
hereunder in the event of Executive's death or disability as provided below.
5.1.1 Death. If Executive dies during the term of this
Agreement, then this Agreement shall terminate immediately effective on the
date of Executive's death ("Termination Date") without notice.
5.1.2 Disability. If, during the term of this Agreement,
Company's Board reasonably determines that Executive has become physically or
mentally disabled, whether totally or partially, so that he is prevented from
performing fully his usual duties and services hereunder, Company may provide
written notice to Executive and terminate Executive's employment hereunder,
effective on such date specified in such notice (also "Termination Date").
"Disability" shall mean Executive's permanent inability to perform the duties
and responsibilities required hereunder due to Executive's physical or mental
condition as determined by a licensed physician selected by Company's Board in
consultation with Executive's personal physicians.
5.1.3 Payment of Compensation and Other Benefits on Death
or Disability. In the event of the termination of this Agreement by reason of
Executive's death or disability, Executive (or his estate) shall be entitled to
payment of amounts due under this Agreement as follows:
(i) Annual Base Salary. Company shall pay in full and
complete satisfaction of amounts due under Section 3.1 as Annual Base Salary:
(i) upon death, paid through the last day of the calendar month in which death
occurs and (ii) upon disability, six (6) monthly payments in the amount of
monthly base salary paid in the immediately preceding month in which disability
is determined under Section 5.1.2, less any monthly disability payments, if
any, for such period which could be claimed.
5.2 Termination by Company for Due Cause.
5.2.1 "Due Cause". Company shall have the right to
terminate this Agreement and Executive's employment hereunder for "Due Cause"
upon written notice to Executive, effective upon such date specified in such
notice (also "Termination Date"). Executive shall not be deemed to have been
terminated for "Due Cause" hereunder unless and until notice of such
termination stating the grounds therefore has been delivered to Executive and
Executive, together with his counsel, has had an opportunity to be heard by a
panel of no less than two (2) senior officers and three (3) board members, who
find in good faith that Executive committed an act or omission set forth below
in this Section 5.2.1. Nothing herein shall limit the right of Executive to
contest the validity or propriety of any such determination.
6
<PAGE> 7
"Due Cause" shall mean that Executive has:
(i) committed an intentional act of fraud, embezzlement or theft
in connection with his duties or in the course of his
employment with Company.
(ii) wrongfully disclosed "Confidential Information" of Company as
defined in the Non-Disclosure Agreement executed by Executive
pursuant to Section 4.3, which materially adversely affects
the profitability of the Company;
(iii) engaged in any Competitive Activity;
(iv) Willfully engaged in conduct that could reasonably be found to
materially adversely affect the profitability of the Company
or the value of its stock;
5.2.2 Effect on Compensation and Benefits. In the event of
termination for Due Cause, Company shall pay to Executive: (i) Annual Base
Salary under Section 3. 1 on a pro rata basis to the applicable Termination
Date.
5.3 Breach of Agreements. Executive acknowledges that a material
part of the inducement for Company to enter into this Agreement is Executive'
covenant set forth in Article IV Company shall have no further obligation to
pay Executive any amounts or benefits otherwise payable hereunder (except as
may otherwise be required at law) and shall be entitled to such other legal and
equitable relief as a court or arbitrator shall reasonably determine unless
such breach is an inadvertent breach that does not result in any material harm
to Company.
5.4 No Negative Public Comments. Upon the expiration or earlier
termination of this Agreement for any reason, Executive agrees not to make any
false, misleading or negative statement, either orally or in writing, about
Company or its directors or organizations or its directors or organizations or
its offenses, shareholders or any affiliates of the same or to otherwise
disparage them or any of them.
ARTICLE VI
GENERAL
6.1 Notice. All notices and other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when: (i) delivered personally; (ii) mailed by United States registered mail or
certified mail, return receipt requested, postage prepaid, addressed as set
forth below; or (iii) mailed by Federal Express, DHL or such other nation
recognized overnight courier service, addressed as setting forth below :
Address for Company:
EB Subsidiary II, Inc.
9244 Markville Drive
Dallas, Texas 75243-4404
Attention: Gerard Smith
7
<PAGE> 8
Address for Executive:
-------------------------
-------------------------
or to such, address as a party may furnish to the others in writing in
accordance herewith except that notice of change of address shall be effective
only upon receipt.
6.2 Binding Effect. This Agreement shall insure to the benefit of
and be enforceable by the parties and their respective successors' heirs,
representatives and permitted assigns .
6.3 No Waiver; Entire Agreement .
6.3.1 This Agreement and the attachment are being executed
as part of the larger transaction set out in the Purchase and Sale Agreement.
In the event that there is conflict between any of the terms of this Agreement
and the Purchase and Sale Agreement, the terms of the Purchase and Sale
Agreement shall control.
6.3.2 No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by Executive and Company. No waiver by any party at any
time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by any party which are not expressly set forth in this Agreement.
6.4 Headings . Section and paragraph headings are used herein for
convenience of reference only and shall not affect the meaning of any provision
of this agreement.
6.5 Assignments . This Agreement is personal to Executive and may
not be assigned by Executive or the duties delegated without the prior written
consent of Company. Also, Executive may not assign transfer, hypothecate or
dispose of any interest in compensation or payments without Company's prior
written consent.
6.6 Governing Law and Venue . This Agreement has been executed in
Dallas County, State of Texas, and the substantive laws of the State of Texas
shall govern the validity, construction, enforcement and interpretation of this
agreement .
6.7 Severability. If any provision of this Agreement is held to be
unenforceable, this agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
8
<PAGE> 9
6.8 Mediation/Arbitration/Legal Fees . If any dispute controversy,
or claim arises among the parties with respect to this Agreement, or the breach
thereof, as well as any other dispute then the parties shall submit such
dispute to mediation according to the Commercial Mediation Rules of the
American Arbitration Association ("AAA"). If the parties are unable to resolve
the dispute through mediation after 3 days of mediation, they shall then submit
the dispute to binding arbitration pursuant to the Commercial Arbitration Rules
of AAA and judgment upon the award rendered by the arbitrator may be interested
in any court of competent jurisdiction thereof. The party's award rendered by
the arbitrator may be entered in any court of competent jurisdiction thereof.
The parties agree that if arbitration becomes necessary, they will utilize and
comply with the Commercial Arbitration Rule of AAA for expediting such
arbitration. The site of the arbitration will be the City of Dallas, Dallas
County, Texas, and will commence as soon as possible but in no event later than
thirty (30) days after a party files it's request for arbitration. The
prevailing party therein shall be entitled to recover all reasonable court
costs and arbitration administrative expenses incurred, including reasonable
attorneys' fees. The arbitration shall be conducted by one arbitrator appointed
as-provided in the can AAA Commercial Arbitration Rules.
6.9 Confidentiality . To the fullest extent permitted by law, the
parties agree not to disclose any provision of this Agreement to any third
party except if required in response to litigation among the parties, a
subpoena governmental inquiry or other legal process.
IN WITNESS HEREOF, the parties have duly executed this Agreement as of
the Effective Date.
COMPANY:
EB Subsidiary II, Inc.
A Texas Corporation
By:
----------------------------
Its: President
EXECUTIVE:
----------------------------
9
<PAGE> 1
EXHIBIT 10.4
Below is a listing of the intellectual and physical documentation that will be
sold to Ergobilt:
1. Program source code with internal programmer notes.
2. Compiler to compile (1) above.
3. Gerber file for steno board mother board.
4. Program file for cpu chip for steno board.
5. Complete parts list for FoniksWriter (Ergobilt already has).
6. Complete parts list for steno keyboard (Ergobilt already has).
7. Complete client list in data base format.
8. Exception table to be used for Digitext trained writers in Fon'iksWriter.
9. Drawings for metal housing of Fon'iksWriter.
10. List of vendors and suppliers (Ergobilt already has).
11. Will execute assignment of all existing copyrights, if applicable.
12. Left and right-hand chart files.
I believe this list is complete. We can amend if necessary.
<PAGE> 1
EXHIBIT 10.5
UNANIMOUS CONSENT
OF
SHAREHOLDERS
OF
COMPUTER TRANSLATION SYSTEMS & SUPPORT, INC.
(a California Corporation)
The undersigned being all the shareholders of Computer Translation
Systems & Support, Inc., a California corporation (the "Corporation"), hereby
give their unanimous consent without a called meeting of the shareholders for
the adoption of the following resolutions:
RESOLVED, that the Corporation redomicile itself in the State of Texas
and that this be done prior to April 1, 1997, by the creation of a new Texas
corporation which shall be and is hereby designated the successor corporation
of the Corporation;
RESOLVED, the officers of the Corporation are hereby authorized to
execute any and all documents which shall effect the incorporation of a new,
successor Texas corporation to the Corporation;
RESOLVED, that all the cash, securities, real and personal property,
other assets, rights, interests, intellectual property, processes, products,
licenses, patents, of every kind and nature, held by the Corporation shall be
and is hereby assigned to the Texas successor corporation;
RESOLVED, that all the liabilities, contingent or otherwise, shall be
and are hereby assigned to the Texas successor corporation;
RESOLVED, that all actions by the Board of Directors of the Corporation
since the last meeting of the shareholders are hereby ratified, adopted, and
confirmed.
Effective this 26th day of March, 1997.
SHAREHOLDERS
----------------------------
Jerold P. Lefler
----------------------------
Merle Moore
AGREED:
- ----------------------------
Lawrence West Melquiond
a/k/a Larry West
<PAGE> 1
EXHIBIT 10.6
UNANIMOUS CONSENT
OF
SHAREHOLDERS AND DIRECTORS
OF
COMPUTER TRANSLATION SYSTEMS & SUPPORT, INC.
(a Texas Corporation)
Computer Translation Systems & Support, Inc., a Texas corporation
whose charter number is 01439524 (the "Corporation"), without a called meeting
of the shareholders and/or the directors, hereby give the unanimous consent of
all shareholders and all directors to the following resolutions:
RESOLVED, that the Shareholders, Jerold P. Lefler and Merle Moore,
hereby cast all their shares of common stock in the Corporation for the
election of Jerold P. Lefler, Merle Moore, and Larry West as Directors of the
Corporation;
RESOLVED, that the Directors hereby elect Larry West as President and
Jerold P. Lefler as Vice President, Secretary, and Treasure of the Corporation
until their successors are elected;
RESOLVED, that the Corporation sell its Impact Unit and User
Documentation and related Product, Intellectual Property, Process and
Improvements, as defined in that one certain Purchase and Sale Agreement to EB
Subsidiary II, Inc. for the consideration expressed in the Purchase and Sale
Agreement between the Corporation and EB Subsidiary II, Inc. and Ergobilt
Corporation;
RESOLVED, that the Corporation's officers are hereby authorized to
sign the Purchase and Sale Agreement and all other documents required to effect
the sale of the Acquired Assets, as defined in the Purchase and Sale Agreement
as the act and deed of the Corporation;
RESOLVED, that the Corporation retain the law firm of Michener
Larimore Swindle Whitaker Flowers Sawyer Reynolds & Chalk, LLP, to represent
the Corporation in the transaction with EB Subsidiary II, Inc. and that the
Corporation pay the necessary and reasonable legal fees and expenses involved
in forming the Corporation and documenting the transaction and otherwise
representing the Corporation in the sale of the defined assets to EB Subsidiary
II, Inc.;
RESOLVED, that the Corporation has borrowed or will borrow certain
funds from BodyBilt Seating, Inc. for which loans the officers of the
Corporation are hereby authorized to sign all documents required to evidence
the obligation of the Corporation for those loans and as the act and deed of
the Corporation;
RESOLVED, that the Corporation's secretary is hereby authorized to
execute the Secretary's Certificate indicating that all the actions of these
resolutions are the act and deed of the Corporation.
Dated May 1, 1997
<PAGE> 2
SHAREHOLDERS AND DIRECTORS
----------------------------
Jerold P. Lefler
----------------------------
Merle Moore
----------------------------
Lawrence West Melquiond
a/k/a Larry West
<PAGE> 1
EXHIBIT 10.7
PROMISSORY NOTE
For value received, on or before August 22, 1999, Computer Translation
Systems & Support, Inc. (maker) promises to pay ErgoBilt, Inc. (ErgoBilt), or
its order, the sum of One Million, Seven Hundred Thirty Six Thousand, Two
Hundred Nineteen Dollars and No Cents ($1,736,219) with interest at a rate
of LIBOR plus 200 basis points from the date of the loan and each subsequent
advance or readvance until paid in full. This note is secured by a Conditional
Assignment and Security Agreement.
The maker of this note waives demand, presentment for payment, notice
of dishonor, protest and notice of protest, diligence in collecting or in
bringing suit against any party to this note. The failure to pay any
installment of principal or interest when due and/or a breach of the Assignment
and Security Agreement gives the holder the right to declare the balance
immediately due and payable.
In no event will the interest to be paid on this note exceed the
maximum rate provided by law. It is the intent of the parties to comply fully
with the usury laws of the State of Texas. Debtor is under no obligation to
pay any excess interest, and the provisions of this agreement will be deemed
amended to conform to legal requirements, should any violation occur.
Maturity date: August 22, 1999.
Executed this .
-----------------
Computer Translation Systems & Support, Inc.
By:
---------------------------
President
<PAGE> 1
EXHIBIT 10.8
PROMISSORY NOTE-REVOLVING LINE
For value received, Computer Translation Systems & Support, Inc.
(maker) promises to pay to ErgoBilt, Inc. ("ErgoBilt") or to the order of
ErgoBilt, at 9244 Markville Drive, in the City of Dallas, State of Texas, or
such other place as the holder of this note may from time to time designate, on
the maturity date:
a) The principal sum of Two Thousand Dollars ($200,000) or the aggregate
unpaid principal amount of all advances or readvances by ErgoBilt to
Section 3.1.e. of the Purchase and Sale Agreement (collectively referred to
as "principal"), executed on the same date, and
b) All accrued interest at a rate of LIBOR plus 200 basis points from the date
of the $200,000 loan and each subsequent advance or readvance until paid in
full. No penalty for payment prior to due date. Principal and interest
shall be due and payable on the Maturity Date. This note is secured by a
Conditional Assignment and Security Agreement.
The maker of this note waives demand, presentment for payment, notice
of dishonor, protest and notice of protest, diligence in collecting or in
bringing suit against any party to this note. The failure to pay any
installment of principal or interest when due and/or a breach of the
Conditional Assignment and Security Agreement gives the holder the right to
declare the balance immediately due and payable.
In no event will the interest to be paid on this note exceed the
maximum rate provided by law. It is the intent of the parties to comply fully
with the usury laws of the State of Texas. Debtor is under no obligation to
pay any excess interest, and the provisions of this agreement will be deemed
amended to conform to legal requirements, should any violation occur.
Maturity date: August 22, 1999.
Executed this .
-----------------
Computer Translation Systems & Support, Inc.
By:
-------------------------------
CEO and Chairman of Board
<PAGE> 1
EXHIBIT 10.9
CONDITIONAL ASSIGNMENT AND SECURITY AGREEMENT
ErgoBilt, Inc. ("Secured Party" or "Lender") (a) has already loaned
$1,736,219 ("First Loan") and (b) has agreed to make a $200,000 loan and a
series of loans to Computer Translation Systems & Support, Inc. ("Debtor" or
"CTSS") pursuant to Section 3.1.e. of the Purchase and Sale Agreement (Second
Loan"). In consideration thereof, Debtor has agreed to grant this assignment
and security agreement to Lender to secure the First and Second Loans, as well
as any other loans Lender makes to Debtor.
I. OBLIGATIONS SECURED. The assignment and security agreement created by
this document is being granted to secure each and all of the following:
(a) FIRST LOAN. The Debtor's note in the original amount of
$1,736,219 to the Secured Party payable as to principal and
interest as provided in the note, and all indebtedness and
liabilities of the Debtor to the Secured Party at any time arising
under the terms of the note.
(b) SECOND LOAN. The Debtors note in the original amount of $200,000
to the Secured Party payable as to principal and interest as
provided in the note, and all indebtedness and liabilities of the
Debtor to the Secured Party at any time arising under the terms of
the note.
(c) COSTS. All costs, expenses, attorney's fees, and court costs
incurred by the Secured Party in the collection and enforcement of
the First and Second Loans, as well as the disposition and or
liquidation of the Collateral.
II. CREATION OF ASSIGNMENT AND SECURITY INTEREST.
(a) ASSIGNMENT. For value received, the Debtor assigns to the
Secured Party, its successors and assigns all its right, title,
and interest, in the 100,000 shares of ErgoBilt's common stock
issued to CTSS pursuant to Section 3.1.a. of the Purchase and Sale
Agreement. This assignment is made as security to repay Secured
Party for the First and Second Loans, including loans made in the
future to Debtor under Section 3.1.e. of the Purchase and Sale
Agreement, as well as any other loans made to the Debtor at
Lender's discretion. Contemporaneously with the execution of this
agreement, Lender is delivering the stock certificate to the
Secured Party.
(b) SECURITY AGREEMENT. As additional security, the Debtor grants to
the Secured Party a security interest in all of the Debtor's
rights, title, and interest in (1) the contingency purchase payment
under Section 3.1.b. of the Purchase and Sale Agreement, (2) the
employee stock options granted to Jerold Lefler and Larry West
(150,000 options each) that have not yet vested under the
Employment agreements (those options which have vested shall be
released from the security agreement), and (3) all of the assets
(as defined below) of CTSS, Inc. This assignment is made as
security to repay Secured Party for the First and Second Loans,
including loans made in the future to Debtor
<PAGE> 2
under Section 3.1.e. of the Purchase and Sale Agreement, as well
as any other loans made to the Debtor at Lender's discretion.
"Assets" shall mean all assets of any nature and kind (personal,
real, and intangible), including, but not limited to all
intellectual property, patents, trademarks, inventory, notes, debt
instruments, causes of actions, insurance and insurance proceeds,
and receivables.
(c) TERMINATION OF INTEREST. The assignment in Section II. (a) and the
Security Interest in Section II. (b) terminate upon the complete
and full repayment of all loans to CTSS.
(d) COLLATERAL. The assignment and security agreement created in
Sections II (a) and (b) are hereafter refereed as "Collateral".
(e) POWER OF ATTORNEY Debtor by this Assignment constitutes and
appoints ErgoBilt as its true and lawful attorney to the
Collateral.
III. WARRANTIES AND REPRESENTATIONS OF THE DEBTOR.
(a) Debtor has full title to the Collateral free from any lien,
security interest, encumbrances, or claim.
(b) Except by the written consent of Secured Party, no other security
agreement or assignment, has been, or will be, made by the Debtor
of the Collateral.
(c) Within Debtor's knowledge, no dispute, right of setoff,
counterclaim, or defense exists with respect to any part of the
Collateral.
(d) The warranties and representations made herein survive the
closing.
IV. EVENTS OF DEFAULT. The occurrence of any of the following events or
conditions is an event of default under this agreement:
(a) The Debtor's failure to pay when due any indebtedness secured by
this Agreement, whether principal or interest.
(b) The Debtor's business failure, insolvency, or the appointment of a
receiver or institution of either voluntary or involuntary
bankruptcy procedures concerning the Debtor.
(c) A breach of the warranties and representations made the Debtor in
this Agreement.
<PAGE> 3
V. REMEDIES.
(a) On or after the occurrence of any event of default, as specified
in Section IV. of this Agreement, the Secured Party may declare
all obligations secured immediately due and payable and may
proceed to enforce the payment. The Secured Party may exercise
any and all of the rights and remedies provided by the Texas
Business and Commerce Code, as well as other rights and remedies
at law or in equity possessed by the Secured Party.
(b) All rights and remedies of the Secured Party under this Security
Agreement are cumulative of each other and of every other right or
remedy the Secured Party may otherwise have at law or equity or
under any other contract or document for the enforcement of its
security interest or the collection of the debt. The exercise of
one or more rights or remedies will not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
Agreed to this day of , 1997.
------- -----------
Computer Translation Systems & Support, Inc.
By:
-----------------------------
CEO and Chairman of the Board
- ---------------------------------
Jerold Lefler, Individually
- ---------------------------------
Larry West, Individually
<PAGE> 1
EXHIBIT 10.10
ASSIGNMENT
STATE OF TEXAS
COUNTY OF DALLAS
Computer Translation Systems & Support, Inc. ("CTSS"), Jerrold P.
Lefler ("Lefler"), Merle Moore ("Moore"), Lawrence West Melquiond ("West"), and
the respective wives and / or common law wives and / or significant others,
assignors (collectively referred to as "Assignors"), for Ten Dollars ($10.00)
and other valuable consideration, by this instrument hereby grant and convey to
ErgoFon'iks, Inc, assignee, all of its right, title, and interest in the
Intellectual Property, Product, Process, and Improvements described in Exhibit
A attached hereto.
This assignment is made subject to the following terms:
1. WARRANTY. CTSS, Lefler, Moore, and West expressly warrant that
they have good title to the property conveyed by this Assignment, and that the
property is free from any prior claim or encumbrances of any nature or kind.
2. BINDING EFFECT. This Assignment and all of its terms and
conditions, are binding on the Assignors and their successors and assigns, and
on ErgoFon'iks, Inc. and its successors and assigns.
Executed this 15th day of October, 1997.
Computer Translation Systems & Support, Inc.
By:
----------------------
President
- --------------------------- ---------------------------
Jerold P. Lefler Wife of Jerold P. Lefler
- --------------------------- ---------------------------
Merle Moore Wife of Merle Moore
- ---------------------------
Lawrence West Melquiond
<PAGE> 2
EXHIBIT A. TO ASSIGNMENT
1. PRODUCT. "PRODUCT" SHALL MEAN
a. The Foniks and Impact operational software and User
Documentation and all Improvements thereto, excluding the
Digitext "chart" tables and the Digitext keyboard as those
terms are defined in the March 21, 1991 agreement by and
between Digitext and CTSS, Inc.;
b. The "keyboard emulator box" and all improvements to items set
forth in paragraph 1.5 a above;
c. All other current, pending, and future related products to the
Foniks and Impact Units and User Documentation of CTSS and/or
the shareholders in the field of voice transcription to
computer data, data capture and transcription technology,
voice-to-text technology, machine shorthand to type
phonetically, data capture and shorthand transcription
technology.
d. Any rights to IMPACT trademark name, if any;
e. Product shall not include Real-Time Captioning, Inc.'s
captioning products.
2. INTELLECTUAL PROPERTY. "INTELLECTUAL PROPERTY" SHALL MEAN
a. All patents and patent applications of CTSS and/or the
shareholders, including, without limitation, all patents,
their reissue, and pending patents issuing thereon and any
reissue of any such patents relating or referring to the
Product or Process;
b. All software and all improvements, enhancements, conversions,
and modifications thereto of CTSS and/or the shareholders,
including, without limitation, all source codes, flow charts,
chart tables, look-up tables, exception tables, executable
object code, program source code with internal programmer
notes, and all physical embodiments thereof that have existed
in the past and are currently developed or being developed,
including all documentation thereof relating or referring to
the Products and/or Process;
c. All works of authorship owned by CTSS and/or the Shareholders,
and all claims of copyright thereto, as well as all derivative
works, modifications, changes and other embodiments of such
works or authorship which relate or refer to the Products
and/or Process;
<PAGE> 3
d. All current and pending trademarks, service marks, and trade
dress and all names used, or to be used by CTSS and/or the
Shareholders or referring to the Products and/or the Process,
and the good will associated therewith;
e. All technical information and trade secrets of CTSS and/or the
shareholders, including, without limitation, the engineering,
scientific and practical information and formulas, compliers,
Gerber file for steno mother board, program file for cup chip
for steno board, complete parts list for Fon'iksWriter,
complete parts list for steno keyboard, drawings for metal
housing for the Fon'ik's Writer, left and righ hand chart
tables, research data, design and manufacturing procedures,
know-how, raw material, and expertise and all specifications
which are applied to the designs and construction of tooling
and operation of manufacturing/assembling the Product or using
the Process;
f. All User Documentation and literature of CTSS and/or the
shareholders, including but not limited to all user manuals,
supporting materials, training manuals and materials,
workbooks, product description and technical manuals relating
to the Product and/or Process, as well as all copyrights to
the foregoing;
a. The term "Intellectual property" does not include software
developed by Lefler and/or Realtime Captioning, Inc. which is
used for closed caption purposes; and
a. All rights, title and interest of CTSS in (1) the March 21,
1991 license agreement by and between Digitext, Inc. and CTSS,
Inc. and (2) the August 9, 1995 license agreement by and
between Digitext, Inc. and CTSS, Inc.
3. PROCESS.
"Process" shall mean any and all current and future processes and all
improvements thereto of CTSS and/or the shareholders for the transcription of
voice to computer data (by keystroke, hand movement or recognition, or
otherwise) except for captioning products.
4. IMPROVEMENTS.
"Improvements" shall mean any invention, technology information,
development, technology and modifications of any nature or form, and any part
or combination of parts, or method of using or manufacturing such part or
combination of parts, currently being developed, and which is developed from
the signing of this agreement until West and Lefler execute their respective
employment agreements (the "Employment Agreements")
<PAGE> 4
which improves the Process, including, without limitation, the development of a
new Process which affects the Product in any of the following ways:
a. Reduces production costs;
b. Improves performance;
c. Improves handling in the manufacturing process;
d. Broadens applicability;
e. Increases marketability; or
f. Improves appearance.
<PAGE> 1
EXHIBIT 10.11
LICENSING AGREEMENT
This is a five year agreement ("AGREEMENT") between Harold I. Schein, an
individual with an office at One Richmond Square, Providence, Rhode Island
02906 ("SCHEIN") and ErgoBilt, Inc., a corporation of Texas, with an office at
5000 Quorum, Suite 147, Dallas, Texas 75240 ("ERGOBILT"), effective August 1,
1997.
A. Whereas, SCHEIN is the sole and absolute owner of the following
patents, copyrights and inventions: a patent relating to a stenographic
translation system and patents for this invention, such patents being United
States Patent No. Re 33,337, United States Patent No. 4,724,285, Ireland Patent
No. 59659, Canada Patent No. 1,274,019, South Africa Patent No. 86/8447 and
being entitled "Stenographic Translation System," and a patent and invention
relating to a keyboard, such patent being United States Patent No. 4,765,764
and being entitled "Keyboard" and a patent relating to a printing system
entitled "Computerized Printing System," said patent being United States
4,632,578; and Copyright No. TX-1686-606 for Registration of Digitext writing
theory, Copyright No. TX-53-883 for Dictionary and Copyright TX-I 16-456 for
Dictionary (all the inventions, patents and copyrights, and any and all further
related patents, copyrights and patent and copyright applications and related
inventions in the United States and all foreign countries being collectively
referred to as PROPERTY");
B. Whereas, SCHEIN is desirous of licensing all rights in and related to
the PROPERTY both in the United States and in all foreign countries and
ERGOBILT is desirous of receiving a license of these rights;
TERMS
It is hereby agreed as follows:
1. SCHEIN, for good and valuable consideration, which shall include a
non-refundable deposit of Twenty-Five Thousand Dollars ($25,000.00) to be
applied in full toward ERGOBILT's first annual minimum payment and to be paid
upon execution of this AGREEMENT, hereby grants an exclusive license to
ERGOBILT under the PROPERTY rights of SCHEIN and all improvements in the
PROPERTY and any and all further related patents, copyrights and patent and
copyright applications in the United States and in all foreign countries.
SCHEIN further agrees that he shall not, either personally or through his
representatives, utilize the PROPERTY and/or improvements during the term of
this AGREEMENT, and will not compete with ERGOBILT regarding the PROPERTY. This
AGREEMENT is a license to ERGOBILT to utilize the PROPERTY and should not be
construed as an assignment or any other granting of a PROPERTY interest in the
PROPERTY beyond a license. The term of this AGREEMENT is five years.
2. SCHEIN represents that he has and during the entire term of this
AGREEMENT will continue to have sole and absolute ownership of the PROPERTY and
the full right to grant this license for the use of the PROPERTY and that he
has not executed either individually or jointly, and will not execute for the
term of this AGREEMENT, any conflicting license or agreements and there is
<PAGE> 2
SCHEIN/ERGOBILT AGREEMENT
PAGE 2
no other license or agreement in existence which gives any other person or
entity any rights to any of the PROPERTY, except that there exist end-users
such as stenographers who utilize the Property having previously purchased the
machines discussed herein and currently use the technology discussed herein
SCHEIN expressly represents and warrants that he has made no conveyance of any
interest, license or other arrangement regarding the PROPERTY. SCHEIN has no
knowledge of any infringement of or claim by any person or entity with respect
to, any of the PROPERTY.
3. SCHEIN agrees to cooperate with ERGOBILT and in that regard agrees
to testify in any legal proceedings, sign all lawful papers, execute all
substitute, re-examination and reissue applications and make such oaths or
declarations.
4. In each twelve (12) month period of this AGREEMENT commencing
August 1, 1997 ERGOBILT shall pay as follows:
(a) Combined Machine and Keyboard Sales. For each of the
three-month periods ending October 31, January 31, April 30 and July 31 of
each year during the term of this AGREEMENT, beginning with the period ending
October 31, 1997, ERGOBILT shall pay to SCHEIN a payment of One Hundred Forty
Dollars ($140.00) not later than 30 days after the end of such three-month
period for each combined machine and keyboard assembly ("Combined Sale") which
are in any way based upon or derived from any of the patents or copyrights
defined collectively herein as the PROPERTY, (including but not limited to
those patents relating to the Digitext Chart Information), that is sold, leased
or put into operation for any and all ERGOBILT and ERGOBILT affiliate internal
application, including but not limited to an ERGOBILT transcription service
business which in any manner utilizes the PROPERTY and the rights licensed
hereunder, and also includes training situations or company operated schools.
"Put into operation" in this context shall mean any time a machine and/or
keyboard or other products as described in this AGREEMENT is used where
ERGOBILT receives any form of compensation for such use. "Put into operation"
shall not mean the use by ERGOBILT of machines and/or keyboards or other
products for demonstration purposes and also shall not include finished goods
inventory. The terms of this sub-section refer to combined sales of a keyboard
assembly and a machine as one sale.
(b) Separate Sales of Keyboards, Keyboard Assemblies, Machines
or Other Products. For each of the three-month periods ending October 31,
January 31, April 30 and July 31 of each year during the term of this
AGREEMENT, beginning with the period ending October 31, 1997, ERGOBILT shall
pay to SCHEIN a payment of One Hundred Dollars ($100.00) not later than 30 days
after the end of such three-month period for each machine, keyboard assembly or
other product which is in any way based upon or derived from any of the patents
or copyrights defined collectively herein as the PROPERTY, (including but not
limited to those patents relating to the Digitext Chart Information), that is
sold, leased or put into operation for any and all ERGOBILT and ERGOBILT
affiliate internal application, including but not limited to an ERGOBILT
transcription service business which in any manner utilizes the PROPERTY and
the rights licensed hereunder, and also includes training situations or company
operated schools. "Put into operation" in this context shall mean any time a
machine, keyboard and/or other product as described in this AGREEMENT is used
where ERGOBILT receives any form of compensation for such use. "Put into
operation" shall not mean the use by ERGOBILT of machines, keyboards or other
products for demonstration purposes and also shall not include finished
<PAGE> 3
SCHEIN/ERGOBILT AGREEMENT
PAGE 3
goods inventory. The terms of this sub-section refer to sales of keyboards or
machines sold separately and not as a set.
(c) In the first year of this AGREEMENT beginning August 1, 1997,
ERGOBILT agrees to pay to SCHEIN a minimum of Two Hundred Fifty Thousand
Dollars ($250,000.00) Including the payments that ERGOBILT shall have paid for
each three-month period) prior to August 30, 1998, regardless of the number of
new units using the PROPERTY that have been sold, leased or put into operation
for any and all ERGOBILT and ERGOBILT affiliate internal application, including
but not limited to an ERGOBILT transcription service business which in any
manner utilizes the PROPERTY and the rights licensed hereunder, and also
includes training situations or company operated schools. "Put into operation"
in this context shall mean any time a machine and/or keyboard or other product
as described in this AGREEMENT is used where ERGOBILT receives any form of
compensation for such use. "Put into operation" shall not mean the use by
ERGOBILT of machines and/or keyboards or other products for demonstration
purposes and also shall not include finished goods inventory. Such amount shall
include and is not in addition to the initial deposit of Twenty Five Thousand
Dollars ($25,000.00) however, there will be no credit applied against the
Twenty Five Thousand Dollar ($25,000.00) deposit unless and until the quarterly
payments exceed Two Hundred and Twenty Five Thousand Dollars ($225,000.00).
(d) In years two, three, four and five of this AGREEMENT, ERGOBILT
agrees to pay to SCHEIN a minimum of Two Hundred and Fifty Thousand Dollars
($250,000.00) per year including the payments that ERGOBILT shall have paid for
each three-month period during such year) prior to August 30 of years 1999,
2000, 2001 and 2002 respectively, regardless of the number of new units using
the PROPERTY that have been sold, leased or put into operation for any and all
ERGOBILT and ERGOBILT affiliate internal application, including but not limited
to an ERGOBILT transcription service business which in any manner utilizes the
PROPERTY and the rights licensed hereunder, and also includes training
situations or company operated schools. "Put into operation" in this context
shall mean any time a machine and/or keyboard or other product as described in
this AGREEMENT is used where ERGOBILT receives any form of compensation for
such use. "Put into operation" shall not mean the use by ERGOBILT of machines
and/or keyboards or other products for demonstration purposes and also shall
not include finished goods inventory.
(e) At such time as SCHEIN shall have received One Million Two
Hundred and Fifty Thousand Dollars in licensing payments, no further minimum
annual requirements during the five (5) year term of the AGREEMENT as described
in Sections 4(c) and 4(d) of this Agreement shall apply. However, for the term
of this five year AGREEMENT ERGOBILT shall continue to be obligated to pay
license payments based upon unit sales of the keyboards and/or machines or
other products as described in Sections 4(a) and 4(b) of this AGREEMENT.
(f) All payments by ERGOBILT under this AGREEMENT will be by check
made payable to HAROLD SCHEIN and delivered to SCHEIN via first class mail to 1
Richmond Square, Providence, Rhode Island 02906.
(g) ERGOBILT shall furnish to SCHEIN on or before the date each
quarterly payment is due during the term of this AGREEMENT a statement showing
the number of machines,
<PAGE> 4
SCHEIN/ERGOBILT AGREEMENT
PAGE 4
keyboards and/or keyboard assemblies or other products that during the previous
three-month period have either been sold, leased or put into operation for any
and all ERGOBILT and ERGOBILT affiliate internal application, including but not
limited to an ERGOBILT transcription service business which in any manner
utilizes the PROPERTY and the rights licensed hereunder, and also includes
training situations or company operated schools. "Put into operation" in this
context shall mean any time a machine and/or keyboard or other product as
described in this AGREEMENT is used where ERGOBILT receives any form of
compensation for such use. "Put into operation" shall not mean the use by
ERGOBILT of machines and/or keyboards or other product for demonstration
purposes and also shall not include finished goods inventory. Such statement
shall contain the serial numbers of all machines, keyboard, and/or keyboard
assemblies or other product sold and the date each machine and/or keyboard
assembly or other product was sold. Payments of any sums due SCHEIN under the
AGREEMENT shall be made to SCHEIN concurrently with the furnishing of such
statement.
5. This AGREEMENT shall have a term of five years beginning on August 1,
1997. The term of this AGREEMENT shall terminate on July 31, 2002. Upon
expiration of the initial term, and providing ERGOBILT is not then in default
of the terms and conditions of this AGREEMENT, ERGOBILT shall have the right to
continue this AGREEMENT for an additional five (5) year term with the same
terms and conditions of this AGREEMENT except that the minimum annual payment
for each successive year of this AGREEMENT shall be equal to the average of the
actual amounts paid to SCHEIN in years three, four and five of the present
AGREEMENT, but shall in no case be less than Two Hundred Fifty Thousand Dollars
($250,000.00) per year.
6. Except as otherwise provided herein, during the term of this
AGREEMENT, all legal fees incurred by SCHEIN including patent maintenance fees
will be paid by SCHEIN and all legal fees incurred by ERGOBILT will be paid by
ERGOBILT. SCHEIN shall keep in force all patents by proper and timely payments
of all maintenance fees and annuities in all applicable jurisdictions. SCHEIN,
upon notice in writing from ERGOBILT as described in this AGREEMENT of any
lapse in payment of maintenance fees or failure to keep any patents in force
shall have thirty (30) days to cure such lapse or failure, or in the event such
process takes longer due to circumstances beyond SCHEIN's control, SCHEIN shall
be allowed as much time as necessary to cure such lapse or failure provided
that SCHEIN apprises ERGOBILT of his progress in curing this defect in a
reasonable time and manner. Any such failure or lapse by SCHEIN shall not be
grounds for EROOBILT to terminate this AGREEMENT unless such failure or lapse
materially affects ERGOBILT's exclusivity to sell, lease or put into operation
any machines or keyboards or other products based upon the PROPERTY.
7. Time is of the essence with regard to this and all future agreements
relating to this transaction.
8. ERGOBILT agrees to maintain books of account and records regarding
every machine, keyboard, and/or keyboard assembly or other product that is
sold, leased, and/or put into operation for any and all ERGOBILT and ERGOBILT
affiliate internal application, including but not limited to an ERGOBILT
transcription service business which in any manner utilizes the PROPERTY and
the rights licensed hereunder, and also includes training situations or company
operated schools. "Put into operation" in this context shall mean any time a
machine and/or keyboard or other product as described in this AGREEMENT is used
where ERGOBILT receives any form of compensation for such use. "Put into
operation" shall not mean the use by ERGOBILT of machines and/or keyboards or
other
<PAGE> 5
SCHEIN/ERGOBILT AGREEMENT
PAGE 5
products for demonstration purposes and also shall not include finished goods
inventory. SCHEIN, his duly appointed representative, or a reputable firm of
certified public accountants on behalf of SCHEIN at SCHEIN's sole cost may,
upon ten (10) days prior written notice, during reasonable business hours and
in such a manner as to not interfere with ERGOBILT's normal business
activities, examine ERGOBILT's books and records at ERGOBILT's principal place
of business, but only insofar as they pertain to the PROPERTY and the sales
derived therefrom, and SCHEIN may make copies and take excerpts from such books
and accounts. Neither SCHEIN, his representative, nor such firm of certified
public accountants shall have the right to make such examination more
frequently than three (3) times in any twelve (12) month period. In the event
that such examination reveals an underpayment of more than Ten Percent (10%) of
monies due to SCHEIN, then the cost of said audit and/or examination shall be
paid by ERGOBILT.
9. This AGREEMENT may be terminated by ERGOBILT for any reason upon
thirty (30) days prior written notice to SCHEIN; PROVIDED HOWEVER, THAT
ERGOBILT SHALL BE OBLIGATED TO MAKE ALL MINIMUM PAYMENTS REQUIRED BY SECTIONS
4(c) AND 4(d)OF THIS AGREEMENT UNLESS ERGOBILT TERMINATES THIS AGREEMENT
BECAUSE SCHEIN HAS MATERIALLY BREACHED ANY OF THE MATERIAL REPRESENTATIONS MADE
IN THIS AGREEMENT, IN WHICH CASE THE MINIMUM PAYMENTS SHALL BE PRORATED AS OF
THE DATE OF THE TERMINATION. If ERGOBILT fails either in the making of any
payments herein provided for and the same shall remain unpaid ten (10) days
after notice from SCHEIN or in the performance of any of the agreements
contained herein and the same shall remain uncured for a period of thirty (30)
days after notice from SCHEIN, then, in that event SCHEIN may, by notice served
to ERGOBILT, terminate this AGREEMENT without prejudice to the recovery of any
monies already due SCHEIN, including all annual minimum payments due under
Sections 4(c) and 4(d) of this AGREEMENT UNLESS ERGOBILT TERMINATES THIS
AGREEMENT BECAUSE SCHEIN HAS MATERIALLY BREACHED ANY OF THE MATERIAL
REPRESENTATIONS MADE IN THIS AGREEMENT, IN WHICH CASE THE MINIMUM PAYMENTS
SHALL BE PRO RATED AS OF THE DATE OF THE TERMINATION.
10. In the event either party defaults in any of the obligations in this
AGREEMENT, upon notice of such default in the manner provided in this AGREEMENT
such defaulting party shall have thirty (30) days to cure such default prior to
any right of termination by the non-defaulting party. This is a general right
to cure provision and shall not supersede any specific right to cure provision
found in this AGREEMENT.
11. Any notice given to a party with respect to this AGREEMENT and any
future agreement shall be in writing and delivered in person or sent by (a)
certified first class mail, return receipt requested, postage prepaid; or (b)
other receipted express delivery service. Notices to the parties shall be
addressed as follows:
<PAGE> 6
SCHEIN/ERGOBILT AGREEMENT
PAGE 6
If to ERGOBILT:
Gerard Smith
President and CEO
ErgoBilt Incorporated
5000 Quorum, Suite 147
Dallas, Texas 75240
If to SCHEIN:
Harold I. Schein
One Richmond Square
Providence, Rhode Island 02906
With a copy to:
Michael L. Schein, Esq.
One Richmond Square
Providence, Rhode Island 02906
12. The invalidity or unenforceability of any particular provision of this
AGREEMENT shall not affect the other provisions, and this AGREEMENT shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
13. This AGREEMENT is the entire agreement of the parties with respect to
the subject matter herein and supersedes all prior agreements and
understandings whether written or oral. Any modifications and/or substitutions
must be in writing and signed by all the parties hereto.
14. The parties make no representations or warranties except as to those
expressly stated herein.
15. Nothing herein shall be deemed to constitute any party as the agent or
representative of any other party for any purpose. No party shall be
responsible for the acts or omissions of any other party, and no party will
have the authority to speak or act for, represent or obligate any other party
in any way without prior written express authority from such other party.
16. It is expressly understood that the failure of either party to enforce
any rights arising from the failure of the other party to perform, or perform
properly, shall not constitute a waiver of its rights arising from such failure
or improper performance, and that enforcement of any right hereunder shall not
preclude exercise of any other remedies available at law. All rights and
remedies shall be cumulative, and may be exercised singularly or concurrently.
17. It is expressly understood that this AGREEMENT confers no ownership
interest in the PROPERTY to ERGOBILT beyond a license to utilize the PROPERTY.
If ERGOBILT is adjudged a bankrupt in proceedings instituted by or against it,
or if it takes advantage of any insolvency laws of any state, territory or
country, or if a receiver trustee or other court officer of its property is
appointed, or if
<PAGE> 7
SCHEIN/ERGOBILT AGREEMENT
PAGE 7
there is a voluntary or involuntary dissolution of ERGOBILT, this License shall
terminate. In such event all the rights, licenses, and privileges of ERGOBILT
hereunder, and those claiming them, shall in all respects cease, terminate and
come to an end, such rights licenses and privileges shall forthwith revest to
SCHEIN.
18. If ERGOBILT files a petition in bankruptcy, or consents to an
involuntary petition in bankruptcy or to any reorganization under the
insolvency law of any jurisdiction or is adjudicated a bankrupt or insolvent,
or makes an assignment for the benefit of creditors, or applies for or consents
to the appointment of any receiver or trustee for itself, or a substantial part
of its property, ERGOBILT shall forthwith segregate SCHEIN's share of the
monies ERGOBILT collects from the sale, lease or putting into operation for any
and all ERGOBILT and ERGOBILT affiliate internal application, including but not
limited to an ERGOBILT transcription service business which in any manner
utilizes the PROPERTY and the rights licensed hereunder, and also includes
training situations or company operated schools ("Putting into operation" in
this context shall mean any time a machine and/or keyboard or other product as
described in this AGREEMENT is used where ERGOBILT receives any form of
compensation for such use. "Putting into operation" shall not mean the use by
ERGOBILT of machines and/or keyboards or other product for demonstration
purposes and also shall not include finished goods inventory) of machines,
keyboards, and/or keyboard assemblies or other products and the rights licensed
hereunder and shall place the monies so segregated into a separate trust
account so that such monies shall not be commingled with ERGOBILT's other
funds, and shall become the property of SCHEIN immediately upon collection by
ERGOBILT.
19. (a) Upon receipt of ERGOBILT's request in writing, SCHEIN will:
undertake at SCHEIN's own expense the defense of any suit or action for
infringement of patents covered hereunder brought against either SCHEIN or
ERGOBILT, which suit or action results from ERGOBILT's use of the PROPERTY
during the term of this AGREEMENT provided that ERGOBILT's use of the PROPERTY
has been in accordance with this AGREEMENT and provided ERGOBILT shall have
promptly advised SCHEIN in writing of each notice or claim of infringement
received by ERGOBILT and of the commencement of the suit or action; and
(b) hold ERGOBILT free and harmless from damages or other sums
which may be assessed or may become payable under any final decree or judgment
in any such suit or action for infringement of patent or under any settlement
thereof, but only to the extent that said decree or judgment is based upon
ERGOBILT's use of the PROPERTY. SCHEIN shall have sole charge and direction of
the defense of any such suit or action and of all negotiations for such
settlement, but ERGOBILT shall be obligated to render all reasonable assistance
which may be required by SCHEIN. ERGOBILT may retain counsel of its own
selection and at its own expense to advise and consult with SCHEIN's counsel.
(c) In the event the amount of money SCHEIN shall spend on court
costs and attorneys' fees defending such suit(s) or action(s) for infringement
Two Hundred and Fifty Thousand Dollars ($250,000.00), SCHEIN shall have the
right to terminate this AGREEMENT and ERGOBILT shall be obligated to
immediately cease the sale, lease or putting into operation of all keyboards
and/or machines or other products. In the event ERGOBILT does not wish to
cease the sale, lease or putting into operation of such machines and/or
keyboards or other products, ERGOBILT may continue to sell, lease
<PAGE> 8
SCHEIN/ERGOBILT AGREEMENT
PAGE 8
or put the keyboards and machines or other products into operation, however,
ERGOBILT agrees to pay for any and all continued defense of any suits or claims
regarding the PROPERTY and any and all future claims regarding the use of the
PROPERTY by ERGOBILT. ERGOBILT agrees to pay any and all amounts found to be
owed by either SCHEIN or ERGOBILT as a result of such suit(s) or claim(s).
ERGOBILT further agrees to hold SCHEIN free and harmless from damages or other
sums which may be assessed or may become payable under any final decree or
judgment in any such suit or action or under any settlement thereof, if, after
ERGOBILT has been apprised of SCHEIN's termination of the AGREEMENT and at such
time ERGOBILT fails to cease the sale, lease or putting into operation of such
machines and/or keyboards or other products.
(d) Neither SCHEIN nor ERGOBILT may settle any suit or action without the
consent of the other party if by such settlement the other party is obligated
to make any monetary payment, to part with any property or any interest
therein, to assume any obligation, to be subject to any injunction, or to grant
any license or other rights under its patent rights. However, such consent may
not be unreasonably withheld.
(e) In the event that ERGOBILT undertakes, at its own expense, the defense
of any suit or action against it involving any operations covered by this
AGREEMENT, SCHEIN shall not be obligated to pay or contribute toward the
defense of such suit or action nor in any manner to indemnify ERGOBILT against
any damages or sums assessed in or resulting directly or indirectly from such
suit or action or under any settlement thereof, but SCHEIN shall have the right
to retain counsel of its own selection and at its own expense to advise and
consult with ERGOBILT's counsel.
20. In the event of an alleged infringement of the PROPERTY by a third
party, neither SCHEIN nor ERGOBILT shall be obligated to prosecute legal
proceedings to enforce such rights under the PROPERTY. Either SCHEIN or
ERGOBILT shall have the right, at the party's own expense, to prosecute legal
proceedings against any such third party. The prosecuting party shall have the
exclusive right to all recoveries, including actual and punitive damages, court
costs and attorneys' fees. In the event either party prosecutes such legal
proceedings, the non-prosecuting party agrees to render to the prosecuting
party all reasonable assistance in the prosecution of such suit or claim. The
prosecuting party shall reimburse the non-prosecuting party for reasonable
expenses incurred in complying with such request.
In the event both ERGOBILT and SCHEIN desire to prosecute the same third
party which they believe infringes on the PROPERTY, the parties shall at that
time agree in writing to a sharing of legal fees and sharing of any and all
recoveries shall be pro-rata.
21. In the event of termination of the licensing rights contained under
this AGREEMENT, this AGREEMENT shall remain in force as to any claim for
payments which SCHEIN may have against ERGOBILT earned up to the date of the
termination of said Licensing; and, as against such claims relating to earned
amounts due to SCHEIN, ERGOBILT shall have neither the defense of invalidity
nor question the prima facie scope of any claims of any patent or copyright
coming under this AGREEMENT unless ERGOBILT terminates the AGREEMENT and the
reason for termination is a suit is filed against ERGOBILT by an unrelated
third party alleging patent or copyright infringement relating to the PROPERTY.
<PAGE> 9
SCHEIN/ERGOBILT AGREEMENT
PAGE 9
22. The parties agree that this AGREEMENT shall be governed, construed,
applied and enforced in accordance with the laws of the State of Rhode Island
without resort to its conflict of laws rules. Any and all disputes regarding
this AGREEMENT shall be resolved in the appropriate court either federal or
state in the State of Rhode Island or through arbitration proceedings in Rhode
Island and governed by Rhode Island law. Resort to arbitration shall be made
only upon written consent of both parties.
23. In the event any suit or action is brought by either party hereto
alleging breach by the other party of any representation, warranty. covenant or
other provision of this AGREEMENT, the prevailing party in such action shall be
entitled to recover all of its costs and expenses in such action. Including
reasonable attorneys' fees.
24. In the event that ERGOBILT fails to make any payment under this
AGREEMENT, ERGOBILT agrees to pay any and all costs of collection incurred by
SCHEIN including reasonable attorney's fees.
25. Neither this AGREEMENT or any licenses or rights hereunder, in whole
or in part, shall be assignable by ERGOBILT except that ERGOBILT shall have the
right to assign this AGREEMENT and the licenses and rights hereunder to a
successor in the event of a merger, non-bankruptcy sale of assets or
non-bankruptcy reorganization of ERGOBILT; and ERGOBILT shall have, with the
consent of SCHEIN, which may not be unreasonably withheld, the right to
sublicense any of its rights hereunder to any other person or entity.
26. This AGREEMENT may be executed in any number of counterparts, each of
which shall be deemed to be one and the same instrument.
IN WITNESS HEREOF, Parties have hereto set their hands and seals as of
the 3rd day of July, 1997.
ErgoBilt, Inc.
By:
---------------------------- ---------------------------
GERARD SMITH Notary Public
President and Chief Executive Officer
---------------------------- ---------------------------
HAROLD I. SCHEIN Notary Public
<PAGE> 1
EXHIBIT 99
FOR IMMEDIATE RELEASE
October 17, 1997
ERGOBILT COMPLETES ACQUISITION OF CTSS ASSETS
ERGOBILT, INC. (NASDAQ STOCK MARKET: ERGB), today announced it has completed
the acquisition of the proprietary assets of Computer Translation Systems and
Support, Inc. ("CTSS"). CTSS is the developer of a proprietary computerized
phonetic keyboard system, currently marketed under the name - Fon'iksWriter,
ErgoBilt noted.
The company said that with the Fon'iksWriter trained operators can
achieve significant increases in word- processing, deposition services and text
transcription productivity. Although computer-processing speeds have increased
enormously, typing is still the primary method of entering data - one
stroke/one character at a time, it stated. A single stroke on a Fon'iksWriter
keyboard equals up to 4.5 strokes on a standard typewriter (QWERTY) keyboard.
Thus, trained Fon'iks operators can achieve speeds in excess of 200 words per
minute, approximately the speed of normal conversation, with the first pass
accuracy of a typist, the company explained. "If our experience marketing
the Fon'iksWriter over the past few months is indicative of its future
potential, we believe that the CTSS acquisition provides our company with an
excellent growth opportunity," said Gerard Smith, president and chief executive
officer of ErgoBilt. "The commercial applications for the Fon'iksWriter extend
to any business that requires high speed, high volume documentation, such as
insurance, legal support services, and the health care industries, to name a
few," Smith added.
"Under the terms of the agreement, the proprietary assets of CTSS have
been acquired for 100,000 shares of ErgoBilt common stock and other
consideration paid over the next two years based on the performance of the
operations being acquired. The total consideration will not exceed $5.0
million, including the value of the 100,000 shares of ErgoBilt common stock
issued at closing. Prior to the closing, ErgoBilt made loans to CTSS, which
provided the working capital for, among other things, product improvements in
design and functionality, cost reduction Fon'iksWriter, creation and
development of training manuals, and ensuring the commercial viability and
marketplace acceptance of the Fon'iksWriter," Smith added. The agreement also
calls for the company to make additional loans not to exceed $2,200,000 to CTSS
over the next two years, Smith noted. The repayment of the outstanding
balances and accrued interest on all loans made to CTSS will be made on or
before October 15, 1999, he concluded.
<PAGE> 2
The assets being acquired from CTSS include the following: operation
software, hardware integration and user documentation, "keyboard emulator box,"
all current, pending and future related products in the field of voice
transcription to computer data, data capture and transcription technology,
voice-to-text technology, machine shorthand to type phonetically, data capture
and shorthand transcription technology, all software and improvements, all
patent and patent applications, all works of authorship and claims of
copyright, and all current, pending and future trademarks, Smith related.
"Additionally, the company will acquire the CTSS license to the
patents on the Digitext theory and keyboard. Digitext, Inc. issued this
license to CTSS in 1995. Also, as previously announced, ErgoBilt acquired a
worldwide license to the Digitext theory and keyboard from Harold I. Schein who
holds title to the patents. Schein, a former director of Digitext, Inc.,
acquired the patents in a default judgment against the now defunct, former
public company, Digitext, Inc., in a lawsuit for unpaid debt. Under the terms
of the license agreement with ErgoBilt, Schein will receive a royalty of
$140.00 per unit sold and is guaranteed a minimum annual payment of $250,000.
The agreement has a term of five years (ending July 31, 2002) and provides
ErgoBilt with a right to extend the agreement for an additional five years
(ending July 31, 2007). While employing the patented theory, the Fon'iksWriter
represents a technological advancement over earlier versions of products that
also used the Digitext theory. The company believes that the Fon'iksWriter
would not be a commercially viable product without the inclusion of the
proprietary assets of CTSS and the "know-how" of the inventor and creator of
the Fon'iksWriter and Digitext theory, Jerrold P. Lefler."
"As previously disclosed, the principals of CTSS, Jerrold P. Lefler
who, as noted above, is inventor and creator of Fon'iksWriter and the Digitext
theory, and Lawrence West Melquiond, who is known in the business community as
Larry West, have executed three-year employment contracts and will become
executive vice president of technology and president, respectively, of
ErgoBilt's new wholly-owned subsidiary, ErgoFon'iks, Inc.," Smith concluded.
ErgoBilt, with headquarters in Dallas, is a rapidly growing developer
and marketer of ergonomic products and technology that improve workplace
productivity. The company's common shares are traded on the Nasdaq National
Market System under the symbol ERGB.
Note: Except for historical information contained herein, the matters set forth
in this news release are forward-looking statements that are dependent on
certain risks and uncertainties including, but not limited to, such factors as
the number of new orders received and shipped,
<PAGE> 3
continued consumer acceptance of the company's products, the availability of
the product components, stable labor relations, the timely roll-out of new
products, the company's ability to identify and acquire commercially viable
ergonomic products and the continued availability of credit to the company on
reasonable terms. Investors should also consider other risks and uncertainties
set forth in documents filed by the company with the Securities and Exchange
Commission.
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