<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1995
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file No. 0-13167
TM CENTURY, INC.
(Name of small business issuer in its charter)
DELAWARE 73-1220394
(State of incorporation) (IRS Employer Identification No.)
2002 ACADEMY, DALLAS, TEXAS 75234
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (214) 247-8850
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of issuer's shares of Common Stock outstanding as of January 31,
1996 was 2,537,193.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
TM CENTURY, INC.
BALANCE SHEETS
DECEMBER 31, 1995 (UNAUDITED) AND SEPTEMBER 30, 1995
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1995
------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 265,709 $ 245,812
Accounts and notes receivable
less allowances of $107,000 and $112,000, respectively 696,143 915,798
Inventories, net 1,608,220 1,654,197
Federal income taxes receivable 132,220 132,220
Deferred federal income taxes 153,434 166,063
Prepaid expenses 30,341 22,976
---------- ----------
TOTAL CURRENT ASSETS 2,886,067 3,137,066
PROPERTY AND EQUIPMENT 1,890,759 1,878,452
Less accumulated depreciation (1,067,265) (1,016,452)
---------- ----------
NET PROPERTY AND EQUIPMENT 823,494 862,000
INVENTORIES - NONCURRENT, net 531,940 587,217
OTHER ASSETS 15,388 16,388
---------- ----------
TOTAL $4,256,889 $4,602,671
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 115,101 $ 205,082
Accrued expenses 139,801 201,456
Customer deposits 17,981 151,502
---------- ----------
TOTAL CURRENT LIABILITIES 272,883 558,040
CUSTOMER DEPOSITS - noncurrent 152,714 204,093
DEFERRED FEDERAL INCOME TAXES 50,791 75,510
---------- ----------
TOTAL LIABILITIES 476,388 837,643
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 7,500,000 shares;
2,970,481 shares issued 29,705 29,705
Paid-in capital 2,275,272 2,275,272
Treasury stock - at cost, 433,288 shares (1,250,316) (1,250,316)
Retained earnings 2,725,840 2,710,367
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,780,501 3,765,028
---------- ----------
TOTAL $4,256,889 $4,602,671
---------- ----------
---------- ----------
</TABLE>
See notes to interim financial statements.
2
<PAGE>
TM CENTURY, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
REVENUES $1,515,943 $2,059,388
Less Commissions 114,678 161,903
---------- ----------
NET REVENUES 1,401,265 1,897,485
---------- ----------
COSTS AND EXPENSES:
Production, programming and technical costs 750,263 1,072,150
General and administrative 529,139 726,836
Selling 70,169 204,243
Depreciation 50,813 54,710
---------- ----------
TOTAL 1,400,384 2,057,939
---------- ----------
OPERATING INCOME (LOSS) 881 (160,454)
OTHER INCOME (EXPENSES):
Interest income 2,569 5,664
Other (67) (8,922)
---------- ----------
TOTAL 2,502 (3,258)
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 3,383 (163,712)
INCOME TAX (BENEFIT) PROVISION:
Current - (45,059)
Deferred (12,090) (8,463)
---------- ----------
TOTAL (12,090) (53,522)
---------- ----------
NET INCOME (LOSS) $ 15,473 ($ 110,190)
RETAINED EARNINGS, BEGINNING OF PERIOD 2,710,367 3,297,545
---------- ----------
RETAINED EARNINGS, END OF PERIOD $2,725,840 $3,187,355
---------- ----------
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE $0.01 ($0.04)
---------- ----------
---------- ----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,537,193 2,537,193
---------- ----------
---------- ----------
</TABLE>
See notes to interim financial statements.
3
<PAGE>
TM CENTURY, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ 15,473 $(110,190)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operations:
Depreciation 50,813 54,710
Amortization 92,906 103,463
Deferred income taxes (12,090) (8,463)
Provision for doubtful accounts 24,000 15,000
Payments received on installment receivables - 5,550
Changes in operating assets and liabilities:
Accounts receivable 191,231 (7,170)
Inventories 8,348 (148,104)
Prepaid expenses and other assets (6,365) (4,860)
Accounts payable and accrued expenses (151,636) 122,192
Federal income taxes receivable/payable - (45,059)
Deferred revenue - (10,305)
Customer deposits (184,899) (32,007)
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 27,781 (65,243)
--------- ---------
INVESTING ACTIVITIES:
Purchase of U.S. Treasury Securities - (294,423)
Decrease in other assets - (61)
Purchases of property and equipment (12,307) (88,997)
Principal payments received on notes receivable 4,423 4,326
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (7,884) (379,155)
--------- ---------
INCREASE (DECREASE) IN CASH 19,897 (444,398)
CASH AT BEGINNING OF PERIOD 245,812 746,912
--------- ---------
CASH AT END OF PERIOD $265,709 $302,514
--------- ---------
--------- ---------
</TABLE>
See notes to interim financial statements.
4
<PAGE>
TM CENTURY INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. BASIS OF PRESENTATION
The interim financial statements of TM Century, Inc. (the "Company") at
December 31, 1995, and for the three months ended December 31, 1995 and 1994,
are unaudited, but include all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for a fair
presentation. The September 30, 1995 balance sheet was derived from the
balance sheet included in the Company's audited financial statements as filed
on Form 10-KSB for the year ended September 30, 1995. Certain amounts
previously reported in prior interim financial statements have been
reclassified to conform to the 1995 presentation.
The accompanying unaudited interim financial statements are for interim
periods and do not include all disclosures normally provided in annual
financial statements, and should be read in conjunction with the Company's
audited financial statements. The accompanying unaudited interim financial
statements for the three months ended December 31, 1995 are not necessarily
indicative of the results which can be expected for the entire fiscal year.
2. STOCK OPTION PLAN
On December 3, 1991, the Board of Directors approved a Long Term Incentive
Plan (the "Plan") which provides for grants of Incentive Stock Options to
selected employees and for grants of Nonqualified Stock Options to any
persons who in the opinion of the Board of Directors perform significant
services on behalf of the Company. Each member of the Compensation Committee
who is not an employee or full-time consultant of the Company is
automatically granted in December of each year, commencing in 1991, for five
years (but only for so long as he or she remains a member of the Compensation
Committee), a Nonqualified Stock Option for 2,500 shares. The maximum number
of shares which may be issued pursuant to the exercise of options under the
Plan was 187,500 shares. Effective October 28, 1993, the Board of Directors
approved an amendment to the Plan which increased the total number of shares
which may be issued to 250,000 shares of common stock.
The option price of Incentive Stock Options is not less that the fair market
value of the common stock at the date of grant. All outstanding Incentive
Stock Options vest over a period of five years from the date of grant.
The option price of outstanding Nonqualified Stock Options is $1.20 per
share. All outstanding Nonqualified Stock Options are 20% vested upon grant,
50% vested after year one, and 100% vested after two years.
Option information for the quarter ended December 31, 1995:
<TABLE>
<CAPTION>
At December 31, 1995 Option Price per Share Number of Shares
-------------------- ---------------------- ----------------
<S> <C> <C>
Options outstanding:
Incentive $1.125 - $2.50 160,000
Nonqualified $1.20 25,000
Options exercisable:
Incentive $1.125 - $2.50 59,375
Nonqualified $1.20 18,500
Options granted during the quarter: 5,000
Options exercised during the quarter: None
</TABLE>
5
<PAGE>
3. INCOME TAXES
Deferred income taxes are provided, when applicable, on temporary differences
between the recognition of income and expense for tax and for financial
accounting purposes in accordance with Statement of Financial Accounting
Standards No. 109 ("SFAS 109"). Temporary differences which give rise to
deferred taxes include basis differences of property and equipment,
accelerated tax depreciation in excess of book depreciation, and valuation
allowances provided in excess of amounts deductible for tax purposes. Under
the provisions of SFAS 109, recognition of deferred tax assets is permitted
for such amounts which can be carried forward to future periods. The Company
has recorded a deferred tax asset of $153,000 reflecting the benefit of
$340,000 in net operating losses which is available for carryforward until
2008. Realization is dependent on generating sufficient taxable income prior
to expiration of the loss carryforwards. Although realization is not
assured, management believes it is more likely than not that all of the
deferred tax asset will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
4. SUBSEQUENT EVENTS
On February 9, 1996 the Company entered into a five year marketing agreement
with Electronic Data Systems Corporation ("EDS"), which provides the Company
with the exclusive right to distribute and sublicense the EDS Vamos/CoStar
hard disk audio storage and retrieval system to radio stations within the
United States and its territories. The Vamos/CoStar system is a collection
of integrated software applications that allows a broadcaster to digitally
record and edit material for distribution within a facility on a local area
network (LAN) or to remote sites via a wide area network (WAN). The growing
trend to multi-station facilities and the expansion of broadcast groups allow
broadcasters to take advantage of the cost savings of consolidation and the
marketing opportunities of multimedia technologies. The agreement provides
exclusive distribution rights to the Company through December 31, 2000,
subject to meeting certain annual performance goals. The Company also
anticipates entering into service agreements with end users of the
Vamos/CoStar system. EDS, which is headquartered in Plano, Texas, a suburb
of Dallas, is recognized world wide as a leader in data management and
services.
6
<PAGE>
TM CENTURY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
TM Century, Inc. is primarily engaged in the creation, production, marketing,
and worldwide distribution of compact disc music libraries, production
libraries, station identification jingles, computer software used in music
scheduling, specialized computer equipment and software, and compact disc
players for radio stations.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies upon current sales of music libraries, jingles, and
specialized computer equipment and software on terms of cash upon delivery
for operating liquidity. Liquidity is also provided by monthly revenues
under three-year contracts for production libraries and under weekly music
service contracts having one month to three-year terms. The Company is
obligated to provide music updates throughout the contract terms for both
production library and weekly music service contracts. Sales of music
libraries, jingles, and specialized computer equipment and software and the
payments under production library and weekly music service contracts will
provide, in the opinion of management, adequate liquidity to meet operating
requirements at least through the end of fiscal year 1996.
During the quarter, the Company made capital expenditures of $12,000 for the
purchase of property and equipment and incurred product development costs of
$40,000 for software development, new music libraries, and music library
updates. Funds for operating needs, new product development, and capital
expenditures for the period were provided from cash reserves. The Company's
expenditures for property, equipment, and development of new products are
discretionary. Management anticipates that cash flow from operations, cash
reserves, and funds available under the Company's line of credit will be
sufficient to meet these capital requirements at least through the end of
fiscal year 1996. The Company has received approval from the Company's Board
to upgrade its computer hardware and software systems. The upgrade is
estimated to cost approximately $500,000 and is expected to be financed
through a capital lease obligation over a period of three years. The Company
currently has no significant capital commitments.
The Company has a $300,000 revolving line of credit with a bank in which the
Company provides a negative pledge on all accounts receivable, contract
rights, and inventory of the Company. Borrowings under the line of credit
bear a fluctuating interest rate of prime plus 1.5%, payable monthly. The
line of credit, which bears a commitment fee of .5% per annum, is renewable
annually, subject to the consent of both parties. No borrowings were drawn
under the line of credit during the quarter. The line of credit is expected
to be renewed on February 28, 1996.
RESULTS OF CONTINUING OPERATIONS
Revenues declined approximately 26% in the three month period ended December
31, 1995 as compared to the same period for the previous year. The decrease
was due primarily to a decline in specialized computer equipment sales
volume. Revenues also declined due to declines in compact disc music library
sales volume and prices and declines in production library and station
identification jingle sales. Sales of weekly music services increased during
the period partially offsetting the overall decrease in music library
revenues.
Management believes that the decline in specialized computer equipment sales
was due to a restructuring of the marketing staff in the first quarter of
fiscal 1996 to create a separate technical sales department.
During January 1996, the Company finalized discussions to terminate its
agreement with its previous supplier of computer software used by customers
in programming music play sequences and for automated music
7
<PAGE>
playback systems. Negotiations with another supplier were finalized in the
second quarter of fiscal year 1996. Due to the difficulty in transitioning
customers to a new software, revenues from software sales are expected to be
below 1995 levels for the remainder of fiscal year 1996. Revenues of
computer software comprised 7% of revenues during fiscal year 1995.
As the compact disc music library market matures, sales of compact discs are
generated primarily from changes in music formats rather than from
conversions to compact disc music delivery technology. Management believes
that the decline in compact disc music library revenues may continue as the
compact disc music library market has reached a substantial level of maturity
in the United States, which is the market from which the Company derives most
of its music library revenues. A decline in revenues from music library
sales may result in a proportionately greater decline in operating income
because music libraries provide higher margins than the Company's other
products. International markets have not reached maturity for compact disc
technology. Sales of weekly music services, both in the U.S. and in
international markets, increased during the quarter, partially offsetting the
decrease in music library revenues.
The decrease in production library revenue resulted primarily from the
expiration of three-year contracts entered into by the Company with customers
in prior years. The decrease in revenues resulted from a reduced demand for
new contracts and the nonrenewal of expired contracts in the United States.
Although production library revenues may continue to decline as additional
three-year contracts expire, management believes that production libraries
will continue to generate a significant portion of overall revenues from
sales of new products as well as existing products. Renewals and new sales
growth are subject to customer acceptance of the new products.
Production, programming and technical costs decreased as the result of
restructuring and cost reduction measures which were undertaken during the
second quarter of fiscal year 1995. This included a reduction of personnel
and other cost cutting measures as well as the discontinuation of
unprofitable product lines.
Selling costs decreased due to decreases in advertising and promotion
expenses as well as convention and convention-related advertising expenses
incurred in October of the prior year.
General and administrative costs decreased as a result of restructuring and
cost reduction measures discussed above and compensation, legal and other
professional fees associated with the resignation of a director and officer
of the Company in November, 1994.
Other expenses decreased as a result of one-time costs associated with the
resignation of a director and officer of the Company in November, 1994.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings - Not applicable.
Item 2. Changes in securities - Not applicable.
Item 3. Defaults upon senior securities - Not applicable.
Item 4. Submission of matters to a vote of security holders - Not applicable.
Item 5. Other information - Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
MATERIAL CONTRACTS:
1. Software Remarketing Agreement between Electronic Data Systems
Corporation and TM Century, Inc. dated February 9, 1996.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the period October 1,
1995 through December 31, 1995.
9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: February 14, 1996
TM CENTURY, INC.
BY: /s/ JANETTE L. WILLIAMS
-------------------------------
Janette L. Williams
Chief Accounting Officer
(Principal Accounting Officer)
BY: /s/ NEIL W. SARGENT
-------------------------------
Neil W. Sargent
Chief Executive Officer
(Principal Executive Officer)
10
<PAGE>
SOFTWARE REMARKETING AGREEMENT
BETWEEN
ELECTRONIC DATA SYSTEMS CORPORATION
AND
TM CENTURY, INC.
<PAGE>
TABLE OF CONTENTS
FOR
SOFTWARE REMARKETING AGREEMENT
PAGE
ARTICLE I. AGREEMENT, TERM AND DEFINITIONS........................... 1
1.1 Agreement, Term and Limited Exclusivity............................. 1
1.2 Certain Definitions................................................. 2
ARTICLE II. PURCHASE ORDERS........................................... 3
2.1 Preparation of Purchase Orders...................................... 3
2.2 Issuance and Acceptance of Purchase Orders.......................... 4
2.3 Purchase Order Alterations.......................................... 4
2.4 Cancellation of Purchase Orders..................................... 4
ARTICLE III. PROVISION OF LICENSED SOFTWARE AND SERVICES............... 4
3.1 General............................................................. 4
3.2 Delivery of the Licensed Software................................... 4
3.3 Further Acts........................................................ 4
3.4 Remarketing of Licensed Software by SUPPLIER........................ 5
3.5 Time of Performance................................................. 5
ARTICLE IV. PROVISION OF LICENSED SOFTWARE............................ 5
4.1 Acceptance of Licensed Software..................................... 5
4.2 Grant of License.................................................... 6
4.3 Ownership of Licensed Software...................................... 6
4.4 Proprietary Markings................................................ 6
4.5 Duplication of Documentation........................................ 6
4.6 Non-Disclosure...................................................... 6
4.7 Licensed Software Support Service................................... 7
4.8 Termination of Software License..................................... 7
4.9 Discontinuance of Licensed Software................................. 7
4.10 Licensed Software Loading.......................................... 7
ARTICLE V. WARRANTIES, INDEMNITIES AND LIABILITIES................... 7
5.1 Warranty............................................................ 7
5.2 Proprietary Rights Indemnification.................................. 8
5.3 Disclaimer.......................................................... 9
5.4 Limitation of Liability............................................. 9
5.5 Survival of Article V............................................... 9
ARTICLE VI. PAYMENTS TO EDS........................................... 9
6.1 Charges, Prices and Fee for Licensed Software and Services.......... 9
6.2 Payment Through Invoicing........................................... 9
6.3 Taxes...............................................................10
ARTICLE VII. TERMINATION...............................................10
7.1 Termination For Cause...............................................10
7.2 Termination For Insolvency or Bankruptcy............................10
7.3 Termination For Non-Payment.........................................10
i
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PAGE
ARTICLE VIII. MISCELLANEOUS............................................ 11
8.1 Binding Nature, Assignment, and Subcontracting..................... 11
8.2 Confidentiality.................................................... 11
8.3 Media Releases..................................................... 11
8.4 Notices............................................................ 12
8.5 Force Majeure...................................................... 12
8.6 Severability....................................................... 13
8.7 Dispute Resolution................................................. 13
8.8 Waiver............................................................. 13
8.9 Remedies........................................................... 13
8.10 Survival of Terms................................................. 13
8.11 GOVERNING LAW..................................................... 13
8.12 Entire Agreement.................................................. 14
LIST OF EXHIBITS
EXHIBIT A
FORM OF END USER LICENSE
EXHIBIT B
DESCRIPTION, CHARGES, PRICES, AND FEES
ii
<PAGE>
SOFTWARE REMARKETING AGREEMENT
THIS SOFTWARE MARKETING AGREEMENT (the "Agreement"), dated February 9,
1996 (the "Effective Date"), is between TM CENTURY, INC., a Delaware
corporation ("SUPPLIER"), and ELECTRONIC DATA SYSTEMS CORPORATION, a Texas
corporation ("EDS").
W I T N E S S E T H:
WHEREAS, SUPPLIER desires to have the right to obtain certain products
and services from EDS from time to time for the purpose of distribution to
SUPPLIER customers; and
WHERAS, EDS, is willing to provide products and services to SUPPLIER in
accordance with the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration received and to be received, EDS and SUPPLIER hereby
agree as follows:
ARTICLE 1. AGREEMENT, TERM AND DEFINITIONS
1.1 AGREEMENT, TERM AND LIMITED EXCLUSIVITY. The parties agree that the
terms and conditions of this Agreement apply to the provision of Licensed
Software and Services (as later defined) to SUPPLIER by EDS. The term of
this Agreement commences on the Effective Date and the Agreement shall
continue to be in effect until December 31, 2000, or until earlier
terminated by either party as set forth in this Agreement.
EDS agrees that for one year after the Effective Date, SUPPLIER shall
have the exclusive right to distribute and sublicense EDS' Vamos/Costar
Software, including any enhancements, translations, modifications, updates
releases or other changes thereto, to radio stations located in the United
States (Including United States territories). EDS further agrees that, for
the second and succeeding contract years during the term of this Agreement,
SUPPLIER shall have the United States (including United States territories)
if, in the preceding and each prior contract year of the term of this
Agreement SUPPLIER has made payments to EDS, for computer hardware,
Licensed Software and Services under the provisions hereof, of
or more. EDS agrees that, for
each period during which SUPPLIER has the exclusive distribution rights
provided in this Section, EDS shall not, directly or indirectly, sell,
license or distribute the Vamos/Costar Software, or authorize or permit any
other person or entity to sell, license or distribute the Vamos/Costar
Software, to radio stations, in the United States (including United States
territories) other than through SUPPLIER pursuant to this Agreement.
The foregoing agreement to treat Supplier as an exclusive distributor
applies only to (i) Vamos/Costar Software which is distributed to (ii)
radio stations that (iii) are located in the
1
<PAGE>
United States (including United States territories); is not effective after
the first contract year unless the foregoing payment conditions are met;
and is not applicable to any other Licensed Software or Services. Further,
in no event shall EDS be prevented from selling, licensing or distributing
the Vamos/Costar Software, either directly or indirectly, to networks.
1.2 CERTAIN DEFINITIONS. The following definitions shall apply to this
Agreement.
(a) "Applicable Specifications" means the functional, performance,
operational, compatibility, and other specifications or characteristics
of the Licensed Software described in applicable Documentation and such
other specifications or characteristics of the Licensed Software agreed
upon in writing by the parties.
(b) "Documentation" means user guides, operating manuals, education
materials, product descriptions and specifications, technical manuals,
supporting materials, and other information relating to the Licensed
Software or used in conjunction with the Services, whether distributed
in print, magnetic, electronic, or video format, in effect as of the
date the Licensed Software is shipped, or the Service is provided, to
SUPPLIER or an End User.
(c) "Employee" means those employees, agents, subcontractors, consultants,
and representatives of EDS provided or to be provided by EDS to perform
Services pursuant to this Agreement.
(d) "End User" means customers or affiliates to which SUPPLIER distributes
or provides Licensed Software as permitted under this Agreement.
(e) "Licensed Software" means computer programs identified in Exhibit B,
attached hereto, that are provided or to be provided by EDS pursuant to
this Agreement. The definition of Licensed Software also includes the
"Dongel" (encryption device), and any enhancements, translations,
modifications, updates, releases, or other changes to Licensed Software
which are provided or to be provided as part of EDS' performance of
warranty Service obligations or support Services pursuant to this
Agreement.
(f) "Services" means the support and warranty services, provided or to be
provided by EDS pursuant to this Agreement.
(g) "Territory" means the United States, United States territories, and
other geographic locations as mutually agreed to in writing. Each
geographical location other than the United States and its territories
shall be dealt with separately, and the provisions of this Agreement
shall not apply to any such other geographical location unless agreed
to in writing by the parties hereto.
2
<PAGE>
ARTICLE II. PURCHASE ORDERS
2.1 PREPARATION OF PURCHASE ORDERS. EDS agrees that computer software programs
and services which EDS generally makes available to other customers
shall be made available to SUPPLIER and, upon the issuance by SUPPLIER
of a purchase order therefor, shall be deemed to be Licensed Software
and Services under the terms and conditions of this Agreement. SUPPLIER
may request information about computer software programs and services in
order to prepare purchase orders and EDS shall promptly provide to
SUPPLIER, at no charge, sufficiently detailed information which is
responsive to SUPPLIER's request. From time to time and/or at
SUPPLIER's request, EDS shall provide written information to SUPPLIER
about computer software programs and services, and new releases,
versions or options related thereto, available or to be available from
EDS.
2.2 ISSUANCE AND ACCEPTANCE OF PURCHASE ORDERS. References in this Section to
purchase orders also apply to alterations to Purchase Orders (as later
defined in this Section). The following governs the issuance and
acceptance of purchase orders under this Agreement:
(a) SUPPLIER may issue to EDS written purchase orders identifying the
Licensed Software and Services SUPPLIER desires to obtain from EDS.
Each purchase order may include other terms and conditions
applicable to the Licensed Software and Services ordered; such other
terms shall be consistent with the terms and conditions of this
Agreement, or shall be necessary to place a purchase order, such as
billing and shipping information, required delivery dates,
installation locations, and Charges (as later defined in this
Agreement).
(b) EDS shall promptly accept purchase orders by providing to SUPPLIER a
written or an oral acceptance of such purchase order, or by
commencing performance pursuant to such purchase order. EDS shall
accept purchase orders which do not establish conflicting terms and
conditions from those set forth in this Agreement or establish new
terms and conditions other than those contemplated by Section
2.2(a). EDS shall also accept purchase orders incorporating terms
and conditions which have been separately agreed upon in writing by
the parties.
(c) EDS may reject a purchase order which does not meet the conditions
described in subsection (b) above by promptly providing to SUPPLIER
a written explanation of the reasons for such rejection. EDS shall
accept an alteration to the originally issued purchase order if such
alteration remedies the items set forth in EDS' written rejection.
Purchase orders accepted in accordance with this Section are referred to
as "Purchase Orders". EDS shall have no responsibility or liability for
Licensed Software or Services provided without a Purchase Order.
2.3 PURCHASE ORDER ALTERATIONS. SUPPLIER may issue an alteration to a Purchase
Order in order to, without limitation, (i) change a location for
delivery, (ii) modify the quantity or type of Licensed Software and
Services to be delivered or performed, (iii) implement any change or
3
<PAGE>
modification as required by or permitted in this Agreement, (iv) correct
typographical or clerical errors, or (v) order Licensed Software or
Services which are of superior quality, or are enhancements to or are
new releases or new options of the Licensed Software or Services set
forth in the Purchase Order.
2.4 CANCELLATION OF PURCHASE ORDERS. Except as otherwise agreed upon by the
parties, SUPPLIER may cancel all or a portion of a Purchase Order
relating to Licensed Software or Services, without charge or penalty, at
any time prior to the scheduled delivery date of the affected Licensed
Software or time of performance of the Services specified in such
Purchase Order.
ARTICLE III. PROVISION OF LICENSED SOFTWARE AND SERVICES
3.1 GENERAL. During the term of this Agreement, SUPPLIER shall have a non-
transferable, non-exclusive right to distribute and sublicense the
Licensed Software to End Users within the Territory, in addition to
exclusive rights to distribute the Vamos/Costar Software to the extent
set forth in Section 1.1 EDS agrees that it will consent to a transfer
of the rights of SUPPLIER hereunder to an affiliate of SUPPLIER provided
SUPPLIER remains liable for all performance by the affiliate. Any
distribution of Licensed Software shall be in accordance with the terms
and conditions of this Agreement. EDS shall provide without charge (i)
a reasonable amount of demonstration Licensed Software, and (ii) a
reasonable amount of training of SUPPLIER employees in the use of the
Licensed Software, and will make commercially reasonable efforts to
provide marketing materials to allow SUPPLIER to adequately demonstrate
the Licensed Software and market it to End Users.
3.2 DELIVERY OF THE LICENSED SOFTWARE. EDS shall deliver the Licensed Software
to SUPPLIER on the delivery date set forth in the applicable Purchase
Order or as otherwise agreed upon by the parties. EDS shall deliver to
SUPPLIER, without charge, all upgrades, enhancements, and new versions
of all Licensed Software as they become available. Charges for
transportation of Licensed Software shall be paid by EDS. All risk of
loss of, or damage to, the Licensed Software shall be borne by SUPPLIER
following any delivery by EDS to a common carrier or to SUPPLIER.
SUPPLIER may cancel without charge any Purchase Order for all or any
portion of the Licensed Software or Services at any time prior to
scheduled delivery.
3.3 FURTHER ACTS. During and subsequent to the term of this Agreement, EDS
shall do, or cause to be done, all such further acts and shall execute,
acknowledge, and deliver, or cause to be executed, acknowledged, and
delivered, any and all further documentation or assignments as SUPPLIER
may reasonably require to evidence or perfect SUPPLIER's right to use
and distribute the Licensed Software.
3.4 REMARKETING OF LICENSED SOFTWARE BY SUPPLIER. During the term of this
Agreement, SUPPLIER may market, promote, and distribute the Licensed
Software, separately or in conjunction with other products and services
in accordance with the following terms and conditions:
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(a) SUPPLIER shall cause each End User to execute a standard license
agreement, substantially in the form attached as Exhibit A.
SUPPLIER may also enter into maintenance agreements with End Users.
(b) The term of any warranties and indemnities extended by SUPPLIER to an
End User shall commence upon delivery by SUPPLIER of the Licensed
Software to such End User.
(c) SUPPLIER shall use commercially reasonable efforts to make available
to such End Users all training, technical support and other services
related to the Licensed Software that are currently generally
offered or that may be generally offered by EDS to other end user
customers. Such training, technical support and other services will
be provided to End Users at SUPPLIER's then current rates and
expenses.
(d) Upon request by SUPPLIER, EDS shall provide to SUPPLIER, at no charge,
training (to the extent stated in Section 3.1), marketing and
technical support, and marketing materials as may be reasonably
required by SUPPLIER in connection with the remarketing of the
Licensed Software.
(e) SUPPLIER may refer to itself as EDS' authorized dealer or reseller of
the Licensed Software. Without separate prior written consent,
SUPPLIER shall not use any trademarks or trade names of EDS or
trademarks or trade names of third parties used in connection with
advertising or promoting the Licensed Software; and provided,
further that SUPPLIER shall comply with written guidelines provided
on a timely basis by EDS to SUPPLIER from time to time relating to
any such use.
3.5 TIME OF PERFORMANCE. Time is hereby expressly made of the essence with
respect to each and every term and provision of this Article.
ARTICLE IV. PROVISION OF LICENSED SOFTWARE
4.1 ACCEPTANCE OF LICENSED SOFTWARE. Each End User shall accept delivered
copy(ies) of the Licensed Software on the date (the "Acceptance Date")
when all necessary Licensed Software and Documentation has been received
by it; provided, however, that following the Acceptance Date, SUPPLIER
or the End User may (i) continue to inspect and test the Licensed
Software, with the assistance of EDS if requested, and (ii) return any
faulty, defective or non-conforming Licensed Software and Documentation
to EDS, at EDS' expense and without liability of SUPPLIER or any End
User, and any amounts paid by SUPPLIER for the Licensed Software and
Documentation shall be refunded by EDS to SUPPLIER. SUPPLIER or its End
User shall notify EDS in writing on SUPPLIER's or End User's corporate
letterhead of any rejection of the Licensed Software within thirty (30)
days of the Acceptance Date and failure to so notify EDS shall
constitute acceptance.
4.2 GRANT OF LICENSE. For each item of Licensed Software received by an End
User, SUPPLIER shall grant to the End User a nonexclusive,
nontransferable, perpetual sublicense to use, execute
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and display the object code version of the Licensed Software, on a
single central processing unit or item of equipment in accordance with
the terms and conditions of the standard license agreement attached as
Exhibit A and the terms of this Article. End User may copy the Licensed
Software as necessary for archival, maintenance or back-up purposes
only. If End User desired to run parallel operations in the process of
transferring operations from one CPU to another CPU, End User may permit
the Licensed Software to reside on two (2) CPUs for the period of time
reasonable necessary to complete the transfer. However, each End User
will be provided only one "Dongel" (encryption device) for each copy of
Vamos/Costar software that is procured by the End User.
4.3 OWNERSHIP OF LICENSED SOFTWARE. The Licensed Software shall be and remain
the property of EDS, or third parties which have granted EDS the right
to provide the Licensed Software, and SUPPLIER and End User shall have
no rights or interests therein except as set forth herein or in End
User's license agreement.
4.4 PROPRIETARY MARKINGS. SUPPLIER and End User shall not remove or destroy
any proprietary markings or proprietary legends placed upon or contained
within the Licensed Software.
4.5 DUPLICATION OF DOCUMENTATION. SUPPLIER or End User may duplicate Licensed
Software Documentation, at no additional charge, for SUPPLIER's or End
User's use so long as all required proprietary markings are retained on
all duplicated copies.
4.6 NON-DISCLOSURE. During the term of a License, SUPPLIER or the End User
will treat the Licensed Software with the same degree of care and
confidentiality which SUPPLIER or the End User provides for similar
information belonging to SUPPLIER or End Users which SUPPLIER or the End
User does not wish disclosed to the public, but not less than reasonable
care. This provision shall not apply to Licensed Software, or any
portion thereof, which is (i) already known by SUPPLIER or the End User
without an obligation of confidentiality, (ii) publicly known or becomes
publicly known through no unauthorized act of SUPPLIER or the End User,
(iii) rightfully received from a third party without obligation of
confidentiality, (iv) disclosed without similar restrictions by EDS to a
third party, (v) approved by EDS in writing for disclosure, or (vi)
required to be disclosed pursuant to a requirement of a governmental
agency or law so long as SUPPLIER or the End User provides EDS with
timely prior written notice of such requirement.
4.7 LICENSED SOFTWARE SUPPORT SERVICES. Support services for the Licensed
Software, as contemplated by Section 3.4(c), shall be provided by
SUPPLIER to End Users upon the End User's request at the charges agreed
upon by End User and SUPPLIER.
4.8 TERMINATION OF SOFTWARE LICENSE. Any software license may be terminated by
and End User for any reason by providing to SUPPLIER sixty (60) days'
prior written notice. In the event of any such termination or in the
event of a termination of a software license. End User shall return to
EDS or SUPPLIER or, at End User's option, destroy, all copies of the
Licensed Software and Documentation in the End User's possession
relating to the terminated software license, except
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as may be necessary for archival purposes. In addition, a canceling End
User must return at the End User's expense all "Dongels" (encryption
devices) to EDS or SUPPLIER.
4.9 DISCONTINUANCE OF LICENSED SOFTWARE. EDS shall provide SUPPLIER at least
ninety (90) days advance written notice of its intent to discontinue any
Licensed Software covered hereunder. In the event that EDS does
discontinue any Licensed Software it agrees to support such software for
at least one year after the date of notice of discontinuance.
4.10 LICENSED SOFTWARE LOADING. EDS hereby grants permission to SUPPLIER to
load Licensed Software remarketed by SUPPLIER, at no additional charge
for such loaded copies, by any reasonable method, including (i) loading
the Licensed Software on a "golden tape", "golden disk", or other
storage medium and downloading the Licensed Software from such storage
medium to the hard drive, (ii) loading the Licensed Software on a
central server, file server, or other storage devise and downloading the
Licensed Software from such storage device to the hard drive, or (iii)
opening the packaging containing the media on which the Licensed
Software is provided and loading the Licensed Software from such media
to the hard drive. Irrespective of the method used by SUPPLIER in
loading the Licensed Software, SUPPLIER will provide the customer with a
complete package of the media, manuals, documentation, and other
materials provided to SUPPLIER with the Licensed Software.
ARTICLE V. WARRANTIES, INDEMNITIES AND LIABILITIES
5.1 WARRANTY. EDS hereby represents and warrants to SUPPLIER that:
(a) The Licensed Software provided to SUPPLIER is and shall be free and
clear of all liens and encumbrances, and End Users shall be entitled
to use the Licensed Software without disturbance;
(b) No portion of the Licensed Software provided to SUPPLIER contains,
at the time of delivery, any "back door", "time bomb", "Trojan
horse", "worm", "drop dead device", "virus", or other computer
software routines designed to disable, damage or erase the Licensed
Software or any other software or data of SUPPLIER or any End User;
(c) Each item of Licensed Software provided to SUPPLIER and its media
(i) shall be new and shall be free from defects in manufacture, and
materials, (ii) shall be manufactured in a good and workmanlike
manner using a skilled staff fully qualified to perform their
respective duties, and (iii) shall function properly under ordinary
use and operate in conformance with is Applicable Specifications and
Documentation for a period of one (1) year from the applicable
Acceptance Date of the licensed Software by an End User.
EDS will provide to End User or SUPPLIER as appropriate in a timely manner and
at not additional charge, all Services, or replacement Licensed Software
necessary to enable EDS to comply with the warranties set forth herein.
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5.2 PROPRIETARY RIGHTS INDEMNIFICATION. EDS represents and warrants that
(i) at the time of delivery to SUPPLIER, no Licensed Software or
Documentation provided under this Agreement is the subject of any
litigation ("Litigation"), and (ii) EDS has all right, title, ownership
interest, and/or marketing rights necessary to provide the Licensed
Software and Documentation to SUPPLIER for remarketing hereunder and
that the Licensed Software and Documentation and their sale, license,
and use hereunder do not and shall not directly or indirectly violate or
infringe upon any copyright, patent, trade secret, or other proprietary
or intellectual property right of any third party or contribute to such
violation or infringement ("Infringement"). EDS shall indemnify and
hold SUPPLIER and its respective successors, officers, directors,
employees, and agents harmless from and against any and all actions,
claims, losses, damages, liabilities, awards, costs and expenses
(including legal fees) resulting from, arising out of, or relating to
(i) any Litigation, (ii) any breach or claimed breach of the foregoing
warranties, (iii) any claim of an Infringement, or (iv) any failure or
claimed failure of any Licensed Software to perform in accordance with
its Applicable Specifications, and EDS shall defend and settle, at its
expense, all suits or proceedings arising therefrom. SUPPLIER shall
inform EDS of any such suit or proceeding against SUPPLIER and shall
have the right to participate in the defense of any such suit or
proceeding at its expense and through counsel of its choosing. EDS
shall notify SUPPLIER of any actions, claims, or suits against EDS based
on an alleged Infringement of any party's intellectual property rights
in and to the Licensed Software or Documentation. In the event an
injunction is obtained against use of the Licensed Software or
Documentation or in SUPPLIER's opinion is likely to be obtained, EDS
shall promptly, at is option and expense, either (A) procure for
SUPPLIER and End Users of the Licensed Software, or Documentation, the
right to continue to sue the infringing Licensed Software or
Documentation as set forth in this Agreement, or (B) replace or modify
the infringing Licensed Software or Documentation to make its use
non-infringing while being capable of performing the same function
without degradation of performance.
5.3 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS 5.1 AND 5.2, EDS
MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AND
EXPRESSLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
5.4 LIMITATION OF LIABILITY. Neither party shall be liable to the other
pursuant to this Agreement for any amounts representing loss of profit,
loss of business or indirect, consequential, exemplary, or punitive
damages of the other party. The foregoing shall not limit the
indemnification, defense and hold harmless obligations set forth in this
Agreement.
5.5 SURVIVAL OF ARTICLE V. The provisions of this Article V shall survive the
term or termination of this Agreement for any reason.
ARTICLE VI. PAYMENTS TO EDS
6.1 CHARGES, PRICES AND FEE FOR LICENSED SOFTWARE AND SERVICES. Charges,
prices, and fees ("Charges") and discounts, if any, for Licensed
Software and Services shall be determined as set
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forth in Exhibit B, in a Purchase Order, or as otherwise agreed upon by
the parties, unless modified as set forth in this Agreement. Any increase
in a Charge shall not occur more than once annually and shall not exceed
ten percent (10%) of the previously established Charge.
6.2 PAYMENT THROUGH INVOICING. This Section applies to Purchase Orders issued
by SUPPLIER or to any invoice received by SUPPLIER from EDS as permitted
by this Agreement.
(a) Except as otherwise set forth in this Agreement, any undisputed sum
due to EDS pursuant to this Agreement shall be payable within thirty
(30) days after receipt by SUPPLIER of a correct invoice therefor
from EDS. Any amounts that are not paid when due shall bear
interest until paid at the lower of (i) the primer rate as
established from time to time by Citibank, N.A., plus 2% per annum,
or (ii) the maximum rate of interest allowed by applicable law. EDS
shall invoice SUPPLIER on or after SUPPLIER's receipt of the
Licensed Software covered by such invoice.
(b) A "correct" invoice shall contain (i) EDS' name and invoice date,
(ii) the specific Purchase Order number if applicable, (iii)
description including serial number as applicable, price, and
quantity of the Licensed Software actually delivered, (iv) credits
(if applicable), (v) name (where applicable), title, phone number,
and complete mailing address of responsible official to whom payment
is to be sent, and (vi) other substantiating documentation or
information as may reasonably be required by SUPPLIER from time to
time. A correct invoice must be submitted to the appropriate
invoice address listed on the applicable Purchase Order.
6.3 TAXES.
(a) SUPPLIER shall pay or reimburse EDS, where SUPPLIER is liable per
applicable tax statute, amounts equal to taxes based upon SUPPLIER's
purchases of the Licensed Software pursuant to this Agreement,
including federal excise tax, state and local sales or use taxes, or
amounts in lieu thereof paid or payable by EDS in respect of the
foregoing. Notwithstanding the preceding sentence, SUPPLIER shall
not have any obligation to pay any franchise taxes, privilege, gross
receipts, or excise taxes imposed on or payable by EDS, or any taxes
based on the net income of EDS.
(b) EDS agrees to reasonably cooperate with SUPPLIER to minimize any
applicable tax, and shall make available to SUPPLIER, and any taxing
authority, all information, records, or documents relating to any
audits or assessments attributable to or resulting from the payment
process.
(c) Upon written notification by SUPPLIER and subsequent verification by
EDS, EDS shall reimburse or credit, as applicable, SUPPLIER in a
timely manner, for any and all taxes erroneously paid by SUPPLIER to
EDS.
ARTICLE VII. TERMINATION
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7.1 TERMINATION FOR CAUSE. Except as provided by the Section of this Agreement
titled "Termination for Non-Payment", in the event that either party
materially or repeatedly defaults in the performance of any of its
duties or obligations set forth in this Agreement, and such default is
not substantially cured within thirty (30) days after written notice is
given to the defaulting party specifying the default, then the party not
in default may, by giving written notice thereof to the defaulting
party, terminate this Agreement as of a date specified in such notice of
termination.
7.2 TERMINATION FOR INSOLVENCY OR BANKRUPTCY. Either party may immediately
terminate this Agreement and any Purchase Order by giving written notice
to the other party in the event of (i) the liquidation or insolvency of
the other party, (ii) the appointment of a receiver or similar officer
for the other party, (iii) an assignment by the other party for the
benefit of all or substantially all of its creditors, (iv) entry by the
other party into an agreement for the composition, extension, or
readjustment of all or substantially all of its obligations, or (v) the
filing of a meritorious petition in bankruptcy by or against the other
party under any bankruptcy or debtors' law for its relief or
reorganization.
7.3 TERMINATION FOR NON-PAYMENT. EDS may terminate this Agreement by giving
written notice if SUPPLIER fails to pay when due any undisputed amounts
due and such failure continues for a period of thirty (30) days after
the last day payment is due.
ARTICLE VIII. MISCELLANEOUS
8.1 BINDING NATURE, ASSIGNMENT, AND SUBCONTRACTING. This Agreement shall be
binding on the parties and their respective successors in interest and
assigns, but neither party has the power to assign this Agreement
without the prior written consent of the other. If EDS subcontracts or
delegates any of its duties or obligations of performance in this
Agreement or in a Purchase Order to any third party, EDS shall remain
fully responsible for complete performance of all of EDS' obligations
set forth in this Agreement or in such Purchase Order, including, but no
limited to, warranty and indemnification obligations, and for any such
third party's compliance with the provisions set forth in this Agreement.
8.2 CONFIDENTIALITY. Each party acknowledges that in the course of performance
of its obligations pursuant to this Agreement, it may obtain
confidential and/or proprietary information of the other party or its
affiliates or customers. "Confidential Information" includes information
relating to development plans, costs, finances, marketing plans,
equipment configurations, data access or security codes or procedures
utilized or acquired, business opportunities, names of customers,
research, and development; the terms, conditions and existence of this
Agreement; any information designated as confidential in writing or
identified as confidential at the time of disclosure if such disclosure
is verbal or visual; and any copies of the prior categories or excerpts
included in other materials created by the recipient party. Each party
hereby agrees that all Confidential Information communicated to it by
the other, its affiliates, or customers, whether before or after the
Effective Date, shall be and was received in strict confidence, shall be
used
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only for purposes of this Agreement, and shall not be disclosed
without the prior written consent of the other party. This provision
shall not apply to Confidential information which is (i) already known
without an obligation of confidentiality, (ii) publicly known or becomes
publicly known through no unauthorized act, (iii) rightfully received
from a third party without obligation of confidentiality, (iv) disclosed
without similar restrictions to a third party, (v) approved for
disclosure, or (vi) required to be disclosed pursuant to a requirement
of a governmental agency or law so long as the provider gives the other
party timely prior notice of such requirement. The provision of this
Section shall survive the term or termination of this Agreement for any
reason.
8.3 MEDIA RELEASES. Except for any announcement intended solely for internal
distribution by SUPPLIER or any disclosure required by legal,
accounting, or regulatory requirements beyond the reasonable control of
SUPPLIER, all media releases, public announcements, or public
disclosures (including, but no limited to, promotional or marketing
material) by SUPPLIER or its employees or agents relating to this
Agreement or its subject matter, or including the name, trade name,
trade mark, or symbol of EDS or any affiliate of EDS, shall be
coordinated with and approved in writing by EDS prior to the release
thereof.
8.4 NOTICES. Wherever one party is required or permitted to give notice to the
other pursuant to this Agreement, such notice shall be deemed given when
delivered in hand, when mailed by registered or certified mail, return
receipt requested, postage prepaid, or when sent by a third party
courier service where receipt is verified by the receiving party's
acknowledgment, and addressed as follows:
In the case of EDS:
Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Attn: Mr. Steve West, Group Executive, Infotainment Division
With a copy to:
Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
Attn: General Counsel
In the case of SUPPLIER:
TM Century Inc.
2002 Academy
Dallas, Texas 75234
Attn: Neil Sargent, Chief Executive Officer
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Either party may from time to time change its address for notification
purposes by giving the other party written notice of the new address and
the date upon which it will become effective; first class, postage prepaid,
mail shall be acceptable for provision of change of address notices.
8.5 FORCE MAJEURE. The term "Force Majeure" shall be defined to include fires
or other casualties or accidents, acts of God, severe weather conditions,
strikes or labor disputes, war or other violence, or any law, order,
proclamation, regulation, ordinance, demand, or requirement of any
governmental agency. A party whose performance is prevented, restricted,
or interfered with by reason of a Force Majeure condition shall be
excused from such performance to the extent of such Force Majeure
condition so long as such party provides the other party with prompt
written notice describing the Force Majeure condition and takes all
reasonable steps to avoid or remove such causes of nonperformance and
immediately continues performance whenever and to the extent such causes
are removed.
8.6 SEVERABILITY. If, but only to the extent that, any provision of this
Agreement is declared or found to be illegal, unenforceable, or void, then
both parties shall be relieved of all obligations arising under such
provision, it being the intent and agreement of the parties that this
Agreement shall be deemed amended by modifying such provision to the
extent necessary to make it legal and enforceable while preserving its
intent. If that is not possible, another provision that is legal and
enforceable and achieves the same objective shall be substituted. If the
remainder of this Agreement is not affected by such declaration or finding
and is capable of substantial performance, then the remainder shall be
enforced to the extent permitted by law.
8.7 DISPUTE RESOLUTION. In the event of any disagreement regarding performance
under or interpretation of this Agreement and prior to the commencement of
any formal proceedings, the parties shall continue performance as set
forth in this Agreement and shall attempt in good faith to reach a
negotiated resolution by designating a representative of appropriate
authority to resolve the dispute. Any dispute, controversy or claim
arising out of or related to this Agreement, or the creation, validity,
interpretation, breach or termination of this Agreement which is not
resolved by such representatives of EDS and SUPPLIER will, on the written
demand of either party to the other, be determined and settled by
mandatory and binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Any award
rendered will be final and conclusive on the parties and may be enforce in
any court having jurisdiction. This section shall survive the expiration
or termination of this Agreement for any reason.
8.8 WAIVER. Any waiver of this Agreement or of any covenant, condition, or
agreement to be performed by a party under this Agreement shall (i) only
be valid if the waiver is in writing and signed by an authorized
representative of the party against which such waiver is sought to be
enforced, and (ii) apply only to the specific covenant, condition or
agreement to be performed, the specific instance or specific breach
thereof and not to any other instance or breach thereof or subsequent
instance or breach.
8.9 REMEDIES. All remedies set forth in this Agreement, or available by law or
equity shall be cumulative and not alternative, and may be enforced
concurrently or from time to time.
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8.10 SURVIVAL OF TERMS. Termination or expiration of this Agreement for any
reason shall not release either party from any liabilities or obligations
set forth in this Agreement which (i) the parties have expressly agreed
shall survive any such termination or expiration, or (ii) remain to be
performed or by their nature would be intended to be applicable following
any such termination or expiration.
8.11 GOVERNING LAW. THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS, OTHER THAN CHOICE OF LAW RULES,
OF THE STATE OF TEXAS.
8.12 ENTIRE AGREEMENT. This Agreement constitutes the entire and exclusive
statement of the agreement between the parties with respect to its subject
matter and there are no oral or written representations, understandings or
agreements relating to this Agreement which are not fully expressed in the
Agreement. This Agreement shall not be amended except by a written
agreement signed by both parties. All exhibits, documents, and schedules
referenced in this Agreement or attached to this Agreement, and each
Purchase Order are an integral part of this Agreement. In the event of
any conflict between the terms and conditions of this Agreement and any
such exhibits, documents, or schedules, the terms of this Agreement shall
be controlling unless otherwise stated or agreed. In the event of a
conflict between the terms and conditions of this Agreement and a
Purchase Order, the Purchase Order shall be controlling with respect to
those transactions covered by that Purchase Order. Any other terms or
conditions included in any shrink-wrap license agreements, quotes,
invoices, acknowledgments, bills of lading, or other forms utilized or
exchanged by the parties shall not be incorporated in this Agreement or
be binding upon the parties unless the parties expressly agree in writing
or unless otherwise provided for in this Agreement.
IN WITNESS WHEREOF, EDS and SUPPLIER have each caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.
ELECTRONIC DATA SYSTEMS CORPORATION TM CENTURY, INC.
By: /s/ STEVEN M. WEST By: /s/ NEIL W. SARGENT
-------------------------------- ----------------------------------
Printed Name: Steven M. West Printed Name: Neil W. Sargent
Title: SBU President Title: President/CEO
Date: 2/9/96 Date: 2/9/96
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EXHIBIT A
FORM OF END USER LICENSE
LICENSE AGREEMENT
TM CENTURY, INC.
VAMOS/COSTAR
TM Century, Inc. ("TMC"), a Delaware corporation with offices at 202 Academy,
Dallas, Texas 75234 and _______________ ("End User") with offices at
______________ , hereby agree as follows:
1. DELIVERY OF VAMOS SOFTWARE
1.1 TMC shall deliver one copy of the software described in Annex A, including
one "Dongel" (encryption key) and the related documentation (hereafter the
"VAMOS Software") in the current version to an address to be specified by
End User, on or about the agreed-upon date.
2. GRANT OF LICENSE FOR USE
2.1 TMC grants to End User only the non-exclusive and non-transferable right
to use the VAMOS Software for its own use on the computer configuration
further described in Annex A (hereinafter the "License"). This computer
configuration may not be changed or moved without the prior consent of
TMC. Consent will no be withheld on unreasonable grounds.
2.2 The license shall commence on the date of delivery and shall be valid
under the conditions set forth in this Agreement.
2.3 If the VAMOS Software can temporarily not be sued on the specified computer
configuration as a result of circumstances which are not the fault of End
User, End User shall have the right to use the VAMOS Software on another
computer configuration during the period that the originally-intended use
is not possible. Immediately upon the termination of use on the alternate
computer configuration, End User shall ensure that the VAMOS Software is
completely removed from that computer configuration.
2.4 End User is not permitted to copy the VAMOS Software in any way, provided
that End User is permitted for each copy of the VAMOS Software for which a
license is granted to make one (1) copy for back-up purposes. The copy
shall carry the same notices with respect to copyright and trade-mark,
identification symbols, marks and numbers as are shown on the original.
End User is also not permitted to remove or change any notices with respect
to copyright, trademarks, tradenames, or other intellectual or industrial
property rights which appear on the VAMOS Software, hardware and/or other
materials.
A-1
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3. MAINTENANCE AND SUPPORT
3.1 End User hereby subscribes for maintenance and support of the VAMOS
Software as set forth in and under the conditions of this article.
3.2 End User shall have the right to receive the following maintenance and
support services (the "Services") from TMC, subject to the other
provisions of this Agreement and payment of the compensation set forth
in Annex A.
(a) delivery of new versions, as available, of the VAMOS Software that the
End User has a license for,
(b) telephone and on-site technical support (consisting of responses to
technical inquiries relating to the operation of the VAMOS Software);
and
(c) the submission of incident reports (IR's).
3.3 The Services with respect to a specific version of the VAMOS Software will
be provided for a maximum of one year after the last delivery of that
version.
3.4 The Services will be provided during the period of 1 January through 31
December of each calendar year and will be renewable at the option of the
End User, subject to Section 3.3. The compensation payable to TMC for the
Services shall be a rates established by TMC from time to time, provided
that the compensation for the Services relating to a specific version of
the VAMOS Software shall not be increased more than once annually and any
such increase shall be within reasonable limits.
3.5 Notification by either TMC or End User of termination of the Service must
be in writing and delivered three months in advance of the termination
date.
3.6 TMC represents and warrants to End User that the media in which each item
of VAMOS Software is delivered to End User will be free of defects in
manufacture and materials, and TM will replace, at no additional charge,
any item that contains such defects. Such replacement shall be End User's
sole remedy for such defects.
4. PREPARATION OF THE LOCATION; DELIVERY AND INSTALLATION
4.1 End User is obligation to prepare the installation location and to maintain
it in accordance with the requirements set forth by TMC. The delivery of
hardware and/or of VAMOS Software is dependent upon the availability and
the preparation of the installation location by End User and of that which
has been agreed between the parties with respect to the delivery and
installation schedule. Delivery will take place at the premises of End
User. Costs of transport and insurance are of the account of End User.
A-2
<PAGE>
4.2 End User shall pay for any of the services and any costs which are caused
by End User's failure to prepare the location for delivery of the hardware
and/or VAMOS Software on a timely basis.
4.3 TMC or a representative appointed by TMC shall install the hardware and/or
the VAMOS Software and TMC shall notify End User by means of written
confirmation of the date of installation("installation date") that the
hardware and/or the VAMOS Software is ready for use.
4.4 Prior to this written notice the delivered hardware and or the VAMOS
Software will be deemed to have been installed if End User puts these into
use in the normal course of business. TMC does not accept any
responsibility for the installation of hardware of third parties not
supplied by TMC.
4.5 Installation will take place on Monday through Friday during TMC's normal
office hours with the exception of generally-recognized holidays. TMC is
in principle prepared to perform the work on other days or during other
hours at End User's request. In that event TMC shall provide End User
with a quotation for the additional costs.
5. INTELLECTUAL AND INDUSTRIAL PROPERTY RIGHTS
5.1 End User acknowledges that all intellectual and industrial property
rights to the VAMOS Software, hardware or other materials such as
analyses, designs, documentation and reports, as well as all preparatory
material with respect thereto, are held exclusively by TMC or its
licensors. End User is granted only the rights of use set forth in
these terms and conditions. End User shall not copy the Software or
other materials in any way except as set forth herein.
5.2 End User acknowledges that the VAMOS Software, hardware, and other
materials provided to it contain confidential information and trade
secrets of TMC and its licensors. End Users agrees to maintain the
confidentiality of the VAMOS Software, hardware and materials and not to
make these known to or available for use of third parties and further to
limit the use thereof to the purposes for which they were made available.
5.3 Making the VAMOS Software available for use does not imply transfer of the
copyright or other intellectual or industrial property right to the VAMOS
Software.
5.4 TMC will indemnify and hold End User harmless against any claim that the
software and/or materials developed by TMC or its licensors infringe any
intellectual or industrial property right valid in the United States,
provided that End User immediately notifies TMC in writing of the existence
and substance of such a claim and relinquishes the handling of the matter,
including any settlement to TMC. The indemnification obligation by TMC
will not apply if and to the extent that the claimed infringement arises
in connection with or is caused by changes which End User has made or
permitted third parties to make to the software and/or materials.
A-3
<PAGE>
6. RISK OF LOSS
6.1 The risk of damage, theft or loss of objects which are covered by this
license agreement passes to End User as of the moment that these objects
are delivered into End User's control or the control of a third party
engaged by End User.
7. PRICES AND FEES
7.1 TMC shall indicate the amounts set forth in Annex A on its invoice for the
License referred to in Article 2 and for the Services referred to in
Article 3.
7.2 TMC shall have the right to adjust the amounts referred to in Article 8.1
on a yearly basis within reasonable limits.
8. PAYMENT
8.1 TMC shall send a single copy of all invoices for the amounts referred to
in Article 8.1 to End User setting forth the date and other information
requested by End User in writing.
8.2 End User shall pay the invoiced amount to TMC based on the following
terms:
--------------------------------------------------------------- .
8.3 In the event that End User does not pay the relevant invoice without valid
reason within the period of time set forth in Section 8.2, it shall be
liable automatically by operation of law for interest on the amount due
to TMC at the prevailing maximum legal interest rate.
8.4 All amounts shall be paid without discount, set-off or postponement for any
reason, unless permitted by a final judicial or arbitral judgment.
9. LIABILITY
9.1 The total liability of TMC for any default by it in the performance of this
license agreement is limited to direct damages to a maximum of the amount
that End User has actually paid pursuant to this license agreement as of
the moment of occurrence of the event causing damages. In no event shall
the total compensation for direct damages be greater than $50,000.
9.2 Liability of TMC for indirect damages, including but not limited to
consequential damages, loss of profits, lost savings, losses caused by
interruption of operations and the costs of reproduction or repair of
wholly or partially lost data and/or information is excluded.
9.3 Any right to compensation for damages is conditioned upon End User giving
notice of damages in writing to TMC as soon as possible after such damages
are incurred.
A-4
<PAGE>
10. FORCE MAJEURE
10.1 Neither of the parties shall be held to the performance of any obligation
in the event that such performance is prevented by force majeure. Force
majeure shall include any failure to perform of any supplier of TMC.
10.2 If circumstances of force majeure extend longer that ninety days, the
parties shall have the right to terminate the agreement by written notice.
Any work already performed under the agreement shall be compensated
proportionally and the parties shall have no further liability to each
other.
11. TERMINATION
11.1 TMC shall have the right to terminate this license agreement by means of
written notice without any prior notice of termination or judicial action
being required in the event that:
(a) End User has submitted a petition in bankruptcy or is declared
bankrupt;
(b) End User's business is liquidated;
(c) End User ceases its current business activities; or
(d) a substantial part of the property of End User is attached.
11.2 This software license may be terminated by End User for any reason by
providing to TMC sixty (60) days' prior written notice. In the event of
any such termination, End User shall return to TMC or, at End User's
option, destroy all copies of the VAMOS Software and Documentation in the
End User's possession, except as may be necessary for archival purposes.
In addition, a canceling End User must return at the End User's expense
all "Dongels" (encryption devices) to TMC.
11.3 Termination of this agreement shall not discharge parties from those
obligations which by their nature are intended to survive termination,
including provisions with respect to:
(a) resolution of disputes
(b) applicable law and court having jurisdiction
(c) the obligation to by for services performed and/or goods delivered.
A-5
<PAGE>
12. DISPUTES, APPLICABLE LAW AND COURTS HAVING JURISDICTION
12.1 Any dispute between the parties with regard to this license agreement
shall be submitted to the exclusive jurisdiction of any district court
of Dallas County, Texas, unless the parties subsequently agree to
arbitration or binding advice.
12.2 This license agreement and all disputes arising out of or relating to it
are governed by the laws of the State of Texas.
13. GENERAL TERMS
13.1 Whenever one party is required or permitted to give notice to the other
pursuant to this Agreement, such notice shall be deemed given when
delivered in hand, when mailed by registered or certified mail, return
receipt requested, postage prepaid, or when sent by a third party
courier service where receipt is verified by the receiving party's
acknowledgment, and addressed to the recipient party at the address
set forth in the first paragraph of this license agreement or such
other address as a party may hereafter specify by written notice to
the other party.
13.2 In the event that any provision of this license agreement is invalid or
declared unenforceable, the remaining provisions of this license
agreement shall remain in full force and effect and TMC and End User
shall negotiate with each other to reach agreement on new provisions
or replace the invalid or unenforceable provisions shall be taken into
account as much as possible.
13.3 EXCEPT AS EXPRESSLY SET FORTH HEREIN, TMC MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIMS THE IMPLIED
WARRANTIES OF MERCHANTABLITY AND FITNESS FOR A PARTICULAR PURPOSE.
Entered into this ________ day of ___________________, 19__.
TM CENTURY, INC. END USER
Name: Name:
------------------------------ -----------------------------
Position: Position:
-------------------------- -------------------------
Date: Date:
------------------------------ -----------------------------
Signature: Signature:
------------------------- ------------------------
A-6
<PAGE>
ANNEX A
END USER, LICENSE(S) AND COMPUTER CONFIGURATION(S)
1. END USER
- --------------------------------------------------------------------------------
Company
- --------------------------------------------------------------------------------
Contact Person
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Zipcode and Place
- --------------------------------------------------------------------------------
Telephone
- --------------------------------------------------------------------------------
Facsimile
- --------------------------------------------------------------------------------
2. LICENSE, MAINTENANCE AND SUPPORT, AND FEES
The compensation for license is a one-time fee.
The yearly compensation for maintenance and support shall equal of the
initial License fee (including customization charges) as set forth in the
following table.
The compensation for onsite maintenance and support shall equal per day
plus expenses.
- --------------------------------------------------------------------------------
Name of Product Version Description License Fee Computer Configuration
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-7
<PAGE>
EXHIBIT B
DESCRIPTION, CHARGES, PRICES, AND FEES
DESCRIPTION OF LICENSED SOFTWARE:
SYSTEM OVERVIEW
The audio server for the Maycom System (Vamos/CoStar) is based on a common
hardware and software platform. The hardware system utilizes the Intel 386,
486, or Pentium processor architecture. The operating system is Windows NT
which will allow for multitasking and networking capabilities. All client
workstations and PC's run on Windows 3.1 or Windows NT, and Novell Netware
depending on the work environment.
The basic audio server supports audio playback, LAN interface, terrestrial
network interface. Other options include station automation integration (LAN
interface), Multiple audio I/O's (play and record simultaneously two or more
sources), and local archiving.
The network approach has taken in consideration the wide range of technical
expertise, bandwidth,and cost requirements of radio stations. The system is
designed to allow for simple installation, remote software upgrade, diagnostics
and management. The flexible network architecture will support a wide range of
remote network access devices and protocols that will operate on may different
connective solutions form ATM to a simple 14.4 modem dial up.
SYSTEM APPLICATION SOFTWARE
The VAMOS (Video and Audio Management of Systems) Product, also known as CoStar
(Complete Solution to Automated Radio) is a full suite of software applications
that allow for radio station automation. This includes digital audio capture
(recording), content editing and management, playback, and broadcast. Although
the VAMOS/CoStar System was designed for the commercial radio station
environment, the application should also apply to any multimedia industry
segment where digital audio content management and distribution would be of
value.
Currently, there are twelve (12) modules in service and they are listed as
follows:
- - Digitrans - News Collector
- - Audio Express - CoStar
- - Supervisor - Audio Recorder/Editor
- - Multi Track Editor - Group/Block Manager
- - Play List Editor - Broadcast System Module
- - Cart System - Recording Station
A detailed description of each module and its features is available through EDS'
Broadcast Technologies Division.
B-1
<PAGE>
PRICING FOR INITIAL COPIES OF LICENSED SOFTWARE:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
DESCRIPTION END USER
PRICING
- ----------------------------------------------------------
<S> <C>
- ----------------------------------------------------------
CoStar multi-User Database Options:
(Management Software)
3 User License with System Supervisor
10 User License with System Supervisor
20 User License with System Supervisor
20-40 User License with System Supervisor
40 + User License with System Supervisor
- ----------------------------------------------------------
- ----------------------------------------------------------
Group/Block Manager (Data Base Manager)
- ----------------------------------------------------------
- ----------------------------------------------------------
Recorder/Editor Module
Multi-Track Editor Module
Playlist Module
Broadcast System Module(Automatic Player)
2nd Broadcast System Module as Backup
Cart System Module (Cart Players)
Text Module with Auto Cue On Screen
Programmable Small Keyboard with Jog Shuttle
CD Jukebox System Module
News Collector Module with ISDN Board
- ----------------------------------------------------------
</TABLE>
This system is multi user, multi tasking and multi language. The system
operates under MS-DOS Windows 3.1 with a compatible 80486-33 MHZ computer or
faster, with 4 MB of memory. For edit and play stations 8 MB is recommended
with a 17" monitor.
DIVISION OF MAINTENANCE FEES:
For each End User who purchases maintenance and support services from SUPPLIER,
EDS shall receive an annual fee equal to of the initial License fee.
DISCOUNT LEVELS FOR SALES BY SUPPLIER OF LICENSED SOFTWARE:
This Discount levels for the VAMOS.COSTAR Software are as follows:
<TABLE>
<CAPTION>
DISCOUNT LEVEL MINIMUM LEVEL MAXIMUM LEVEL
- --------------------------------------------------------------------------------
<S> <C> <C>
$=US$
</TABLE>
B-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheets and Statements of Operations and Retained Earnings of
the Company's Form 10QSB for the quarterly period ended December 31,
1995 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 265,709
<SECURITIES> 0
<RECEIVABLES> 803,143
<ALLOWANCES> 107,000
<INVENTORY> 1,608,220
<CURRENT-ASSETS> 2,886,067
<PP&E> 1,890,759
<DEPRECIATION> 1,067,265
<TOTAL-ASSETS> 4,256,889
<CURRENT-LIABILITIES> 272,883
<BONDS> 0
0
0
<COMMON> 29,705
<OTHER-SE> 3,750,796
<TOTAL-LIABILITY-AND-EQUITY> 4,256,889
<SALES> 1,515,943
<TOTAL-REVENUES> 1,515,943
<CGS> 801,076
<TOTAL-COSTS> 801,076
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,383
<INCOME-TAX> (12,090)
<INCOME-CONTINUING> 15,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,473
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
