<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 2, 1998
CHATCOM, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation)
0-20462 95-3746596
(Commission File Number) (I.R.S. Employer Identification No.)
9600 TOPANGA CANYON BOULEVARD 91311
CHATSWORTH, CALIFORNIA (Zip Code)
(Address of principal executive offices)
(818) 709-1778
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
================================================================================
<PAGE>
Item 5. Other Events.
------------
On August 26, 1998, the Company entered into a Purchase and Sale Agreement
(the "Sale Agreement") with Vermont Research Products, Inc. ("VRPI") and High
View Capital ("HVC"). VRPI is a major supplier to the Company of certain
products (which are resold by the Company) and is the holder of the Company's
Series F Convertible Preferred Stock and Series G Convertible Preferred Stock
and is also the Company's single largest trade creditor. HVC (including certain
of its affiliates) is the holder of the Company's Series D Convertible Preferred
Stock and the Company's convertible subordinated debt in the aggregate principal
amount of $890,000. The Sale Agreement provides for the sale by the Company of
its recently announced BrightStar product technology (the "New Product") to VRPI
and HVC (collectively, the "Purchasers") in exchange for $400,000 in cash
($200,000 of which was advanced to the Company by VRPI through July 7, 1998 and
the remaining $200,000 was received by the Company on September 2, 1998), the
cancellation of all outstanding loans and convertible notes made to the Company
by the Purchasers or their affiliates including accrued interest (approximately
$966,000 at August 26, 1998), the cancellation of all trade debt owing by the
Company to the Purchasers (approximately $391,000 at August 26, 1998), the
return of certain equipment by the Company to VRPI in the amount of
approximately $289,000, the cancellation of all shares of preferred stock (and
accrued dividends thereon) owned by the Purchasers or any of their affiliates
(approximately $4.0 million in stated value at August 26, 1998) and the
cancellation of all warrants held by the Purchasers or their affiliates to
purchase shares of the Company's Common Stock (835,000 shares). The Sale
Agreement included certain other conditions, which included the Company's
receipt of a minimum of $300,000 from ALCO Financial Services LLC under a line
of credit (which was effected on September 2, 1998) and the execution of a
license agreement under which the Purchaser would grant the Company an exclusive
license to the New Product (the "License Agreement"). The License Agreement
provides for royalty payments to be made by the Company to the Purchasers in the
amount of 5% of the sales price of New Products sold by the Company. In the
event of any sale or merger of the Company or the licensing by the Company of
the New Product to a third party, the Company may elect to buy-back the New
Product from the Purchasers for $1, provided the sale or merger or licensing
arrangement generates at least $8 million in aggregate proceeds to the Company.
In such an event, the Company would be required to distribute the proceeds from
such a transaction on the following incremental basis: up to $1 million, 75% to
Purchasers, 25% to the Company; $1,000,000 to $5,999,999, 48.5% to Purchasers,
51.5% to the Company; $6,000,000 to $7,999,999, 68% to Purchasers, 32% to the
Company; $8,000,000 to $9,999,999, 60% to Purchasers, 40% to the Company;
$10,000,000 to $12,999,999, 21% to Purchasers, 79% to the Company; $13,000,000
to $16,000,000, 7.5% to Purchasers, 92.5% to the Company; over $16,000,000, 100%
to the Company. In the event the Company enters into a sale, merger or licensing
agreement that generates less than $8 million in aggregate proceeds to the
Company, the license granted to the Company under the License Agreement would
convert to a non-exclusive license. The Purchasers have the right to rescind the
Sale Agreement and License Agreement for a period of one year (until September
2, 1999).
Item 7. Exhibits.
---------
(a) Financial statements of businesses acquired.
Not applicable
2.
<PAGE>
(b) Pro forma financial information.
Not applicable
(c) Exhibits.
10.1 Purchase and Sale Agreement between the Company and Vermont
Research Products, Inc. and High View Capital dated
August 26, 1998.
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 hereunto duly authorized.
CHATCOM, INC.
Date: September 11, 1998 By /s/ E. CAREY WALTERS
----------------------------------
E. Carey Walters
Chief Executive Officer
3.
<PAGE>
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is entered into this day
of August __, 1998, between ChatCom, Inc., 9600 Topanga Canyon Boulevard,
Chatsworth, California 91311 (hereinafter the "Seller"), and High View Capital,
805 3rd Avenue, New York, NY 10022, and Vermont Research Products, Inc., 11
Riverside Street, Nashua, New Hampshire 03062 (hereinafter, collectively, the
"Purchasers").
RECITALS
--------
A. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of California. The Seller has its principal office
and place of business at 9600 Topanga Canyon Boulevard, Chatsworth, California.
B. Seller is engaged in the manufacture and sale of computer processing
systems and desires to sell to the Purchasers all of the intellectual property
rights to the BrightStar product line upon the terms and conditions set forth
below.
For consideration, the receipt and adequacy of which is acknowledged by the
parties, the parties hereby agree as follows:
ARTICLE I
---------
Purchase and Sale
-----------------
1.0 The Seller grants, sells, transfers and assigns to the Purchasers
jointly, all of the Seller's interest in the BrightStar computer server,
described in Exhibit A attached hereto and incorporated herein by reference, and
any and all associated upgrades, modifications, options, subassemblies, tools,
spare tools, and publications as are, or will be subsequently announced
(hereinafter the "Product"). The Seller expressly agrees that except to the
extent permitted by the license agreement between the Seller and Purchasers in
the form attached hereto as Exhibit B (the "License Agreement"), they will not
attempt until the termination of this Agreement to transfer, pledge,
hypothecate, license, sub-license, transfer or otherwise assign, any other
interest in the Product and the associated intellectual property, without the
prior written consent of the Purchasers. The closing of the sale of the Product
to the Purchasers (the "Closing") shall occur as soon as possible following
execution of this Agreement, subject to satisfaction of the closing conditions
set forth in Article II hereto.
1.1 In the event the Seller, during the term of this Agreement or any
extension thereof, develops new options, improvements to, or new models of the
Product which extend its range or capability while retaining substantially the
same technology as described in Exhibit A, the Purchasers shall acquire all
title to, and be entitled to manufacture and distribute such new options,
improvements and new models, which shall be subject to the terms of the License
Agreement. In the event the Seller shall make improvements to the Product
during its development and manufacturing processes, all such improvements and
modifications shall be at the expense of the Seller (except to the extent that
such items are requested by the Purchasers) and all such improvements,
modifications and changes, including proprietary technology, shall immediately
become the exclusive property of the Purchasers, which shall be subject to the
terms of the License Agreement.
1.
<PAGE>
1.2 The Purchasers shall form a new corporation ("Newco") that is wholly
owned by the Purchasers and shall transfer ownership of the Product into Newco
and assign this Agreement to Newco (which shall then be deemed the Purchasers
for purpose of this Agreement) within 10 days following execution of this
Agreement.
1.3 The purchase price for the Product and the consideration for the
Seller entering into this Agreement shall consist of the payment of $400,000 to
the Seller by the Purchasers at the Closing (of which $200,00 was advanced to
the Seller prior to the Closing), the cancellation of all loans and convertible
notes or debentures evidencing loans made to the Seller by the Purchasers or any
of their affiliates (including accrued interest), the cancellation of all trade
debt owing by the Seller to the Purchasers and the cancellation of all of the
shares of preferred stock (and accrued dividends thereon), common stock and
warrants of the Seller owned by the Purchasers or any of their affiliates. All
agreements, covenants and restrictions relating to the Purchasers' investments
in or loans to the Seller (other than this Agreement) shall be cancelled and of
no further force and effect upon the Closing.
ARTICLE II
----------
Closing Conditions
------------------
2.0 The funding to the Seller of a minimum of $300,000 by Alco Financial
in receivables and inventory financing shall be a condition precedent to the
Closing. The Purchasers shall use their reasonable best efforts to cause Alco
Financial to provide the Seller with the foregoing financing.
2.1 The Purchasers and the Seller will enter into the License Agreement
concurrently with the Closing.
ARTICLE III
-----------
Proprietary Information
-----------------------
3.0 The Seller shall make available to the Purchasers certain information
relating to the Product, including, but not limited to, engineering and
technical data, test and analysis data, marketing, application and customer
information, on magnetic, optical or other data media, as reasonably requested
by the Purchasers. This data shall be automatically deemed confidential at the
time of its transmission to the Purchasers, and the Purchasers shall not release
any confidential information to others without the prior written consent of the
Seller. All data transmitted by the Seller to the Purchasers shall be treated
by the Purchasers in the same manner and the Purchasers shall exercise the same
care as they would in the handling of their own information. It is expressly
agreed that all patents, trademarks and proprietary technology associated with
the Product and the BrightStar technology, whether developed by the Seller or
the Purchasers, are the sole and exclusive property of the Purchasers, subject
to the terms of the License Agreement. During the term of this Agreement, the
Seller's rights to the Products and the BrightStar technology are expressly
limited to those set forth in the License Agreement.
3.1 The Seller agrees that it will continue the development of the Product
and BrightStar technology, including Phase 1 and Phase 2 (with Phase 2 requiring
additional funding and an extended development schedule), and will use its best
efforts to deliver an initial working prototype of the Product to the
Purchasers by no later than October 1, 1998 for Phase 1, taking
2.
<PAGE>
into account the severe limitations on the Seller's ability to complete such
development work caused by the Seller's impaired financial condition.
ARTICLE IV
----------
Covenants
---------
4.0 During the first twelve months of the term of this Agreement, the
Purchasers shall have the option to rescind and unwind this transaction and
revert their positions back to those of preferred shareholders, noteholders and
trade creditors, all in their previous amounts, together with accrued interest.
In the event of such a rescission, (i) the Seller will be the sole owner of the
Product and the Bright Star Technology (including all patents, trademarks,
tradenames and other related intellectual property rights) and will be
reimbursed by the Purchasers for all royalty and option purchase payments made
by the Seller under the License Agreement and (ii) the mutual releases set forth
in this Agreement shall remain valid and in full force and effect.
4.1 The Seller and the Purchasers shall use their best efforts to sell the
Seller or the assets of the Seller, to cause the merger of the Seller with a
third party or to sell or license to a strategic partner the Product on
commercially reasonable terms as soon as reasonably possible.
4.2 The Seller shall not sell the Seller or issue any further stock or
long term indebtedness, except for the proposed Alco financing, without prior
written notice to the Purchasers.
4.3 In the event Tail Wind and Martin Stern as the holders of the Series E
Preferred Stock of the Seller wish to participate in this transaction, the
Purchasers will offer them participation in Newco on a pro rata basis (with the
contribution made by Tail Wind and Stern to be paid to the Seller). The parties
will restructure the distribution of proceeds to reflect Tall Wind's or Martin
Stern's participation.
4.4 The parties agree to act in good faith with one another to resolve any
issues which may occur or which have not been anticipated by this Agreement.
ARTICLE V
---------
Training and Support
--------------------
5.0 The Seller shall train two technically competent engineers selected by
the Purchasers for the operation of the Product at its manufacturing facility in
Chatsworth, California, at no cost to the Purchasers. All compensation,
transportation and living expenses of the trainees shall be borne by the
Purchasers.
5.1 The Seller shall test the Product if manufactured by the Purchasers in
compliance with the License Agreement for the functionality and performance
compliance of the Product. Such testing shall be performed at the Seller's
facility in Chatsworth, California. During the testing period, the Purchasers'
engineers shall work directly with the Seller's manufacturing personnel.
5.2 From time to time, the Purchasers may request additional manufacturing
or technical support. Subject to availability of appropriate personnel, the
Seller agrees to reasonably provide such support. All costs associated with
such support shall be borne by the Purchasers.
3.
<PAGE>
ARTICLE VI
----------
Publications and Drawings
-------------------------
6.0 The Seller shall furnish to the Purchasers one complete set of
reproducible drawings required for the manufacture and testing of the Product.
6.1 The Seller shall furnish to Purchasers one complete set of
manufacturing documentation required for the manufacture and testing of the
Product.
6.2 The Seller shall furnish to Purchasers one complete set of designing
tool documentation including, but not limited to, the circuit simulation used by
the Seller with the associated simulation data.
6.3 All materials described in Articles 6.0, 6.1 and 6.2 above are
provided solely for the use of the Purchasers, and may not be reproduced in
whole or in part for any other use without the prior written consent of the
Seller.
6.4 All materials furnished hereunder are subject to the provisions of
Article III of this Agreement.
6.5 All materials and all dimensional information furnished hereunder
shall be in English.
ARTICLE VII
-----------
Warranties
----------
7.0 The Seller warrants that the Product, including all intellectual
property rights and materials furnished under the terms of this Agreement are
free of any liens and encumbrances whatsoever, except to the extent of a lien to
Prototech and certain liens on inventory associated with settlements of certain
trade debt.
7.1 The Seller warrants that the Product furnished under this Agreement
shall meet the specifications contained in Exhibit A hereto, as modified from
time to time.
7.2 The warranty obligation of the Seller is expressly limited to the
warranties set forth in this Article. Any other warranties, whether statutory
or implied, including but not limited to merchantability or fitness for a
particular purpose, are the sole responsibility of the Purchasers and the Seller
makes no other warranties or representations as to the Products, their
performance or functionality and the Seller shall have no other liability
whatsoever to Purchasers or any party claiming by, through or under Purchasers.
7.3 The Seller assumes no liability in regard to representations made
concerning the Product by the Purchasers that are not contained in Exhibit A or
expressly stated elsewhere in this Agreement.
ARTICLE VIII
------------
Patents, Trademarks, Copyrights
-------------------------------
4.
<PAGE>
8.0 Subject to the terms of the License Agreement, the Seller agrees to
defend any litigation arising from the licensing, manufacture or sale of the
Product by the Purchasers which results in claims for patent, trademark or
copyright infringement. The Purchasers must notify the Seller promptly upon
their receipt of notice of such impending claim, and shall cooperate fully with
the Seller in preparing a defense.
8.1 The Purchasers are authorized to use the trademarks, trade names,
advertisements, and other material related to the Product, provided that such
use does not abuse or depreciate the value of such items. Such use shall not
imply that the Purchasers are agents of the Seller and shall not obligate the
Seller in any manner. The Purchasers shall inform Seller of their use of any
and all trademarks, trade names, advertisements and other material related to
the Product, which shall not be inconsistent with the terms or purpose of the
License Agreement.
ARTICLE IX
----------
Manufacturing License
---------------------
9.0 In the event the Seller repurchases the Product from the Purchasers
pursuant to its option as set forth in the License Agreement, the aggregate
proceeds to the Seller from the sale or merger of the Seller or license of the
Product to a strategic partner will be distributed when paid by the acquiror or
licensee (in the form of cash, securities or other property as so paid by the
acquiror or licensee) to the Purchasers and the creditors and shareholders of
the Seller (with the Purchasers not being deemed to be creditors or shareholders
for this purpose) as set forth in Exhibit C hereto.
9.1 The Seller shall forward to the Purchasers any requests for Product
information within 30 days of its receipt by the Seller if Seller is no longer
entitled to market the Product.
9.2 The Seller shall furnish the Purchasers all appropriate jigs,
fixtures, and test equipment required for the manufacture of the Product at
mutually agreed upon prices.
9.3 Termination of this Agreement shall not relieve the Seller of its
obligations under this Agreement so long as the Purchasers or the Seller, or
their assigns, continue to manufacture, license or sell the Product.
9.4 In the event of any controversy or conflict between the provisions of
this Article IX and the laws of any country pertaining to manufacturing or
marketing rights, the provisions of Article IX shall be reasonably construed, if
possible, so as to be in conformity with such law or laws. If reasonable
construction of Article IX or any of its provisions cannot be made so as to be
in conformity with the applicable laws, this Agreement shall be savable as to
any offending provision and the severance of the offending provision shall be
binding upon the Seller and the Purchasers.
9.5 The Seller shall keep correct, complete and accurate records and books
of account containing all information required for the computation and
verification of the number of units of the Product manufactured or sold pursuant
to the License Agreement. The Seller shall permit the Purchasers or any of
their agents or representatives to have access during ordinary business hours to
such records for inspection upon reasonable notice in writing from the
Purchasers.
5.
<PAGE>
ARTICLE X
---------
Deliveries
----------
10.0 Upon request, the Seller shall test at the Purchaser's expense any
BrightStar product manufactured by the Purchasers (to the extent such
manufacture is permitted by the License Agreement) and promptly return such
product to the Purchasers.
10.1 The Seller shall manufacture and deliver to the Purchasers a limited
number of initial production units of the Product at the Purchasers' request and
expense.
10.2 The Seller shall deliver all equipment FOB, the Seller's plant.
ARTICLE XI
----------
Terms of Payment
----------------
11.0 All payments required pursuant to this Agreement shall be payable in
U.S. currency.
ARTICLE XII
-----------
Terms
-----
12.0 This Agreement shall terminate on December 31, 2018, unless sooner
terminated by default by the Seller or Purchasers or by the mutual written
consent of both parties.
ARTICLE XIII
------------
Assignment of Agreement
-----------------------
13.0 This Agreement may not be assigned without the mutual written consent
of the parties hereto. Such consent shall not be unreasonably withheld except
for good and just cause and shall not be deemed a waiver of this Article for any
proposed subsequent assignments.
13.1 In the event either or both of the parties to this Agreement are
acquired, whether by purchase, merger, consolidation or other form of
reorganization, the purchasing company, individual or organization or the
surviving entity shall assume all the obligations of this Agreement and be
entitled to all the rights and privileges hereof.
ARTICLE XIV
-----------
Agreement Termination
---------------------
14.0 This Agreement shall terminate upon any material default or breach of
any of the terms, conditions, or obligations hereunder by either party in the
event the other party delivers written notice of such default that is not cured
within 15 days of such notice. Notwithstanding the foregoing, the License
Agreement shall only terminate in the event of a default thereunder and in
accordance with the terms thereof.
14.1 Termination of this Agreement by default shall not relieve the
defaulting party of its obligations hereunder.
6.
<PAGE>
ARTICLE XV
----------
MISCELLANEOUS
-------------
15.0 All notices, demands, and other communications shall be in writing and
shall be deemed to have been given if delivered or mailed registered or
certified mail, postage prepaid, to the specified address of the other party.
15.1 All materials delivered in conjunction with this Agreement will be
considered confidential by both parties and shall not be revealed to any third
parties. Seller shall make all product documentation, including but not limited
to, object code, source code and all specifications, available to the Purchasers
on magnetic, optical or other reproducible media.
ARTICLE XVI
-----------
Arbitration
-----------
16.0 Any controversy or a claim arising out of or related to this
Agreement, or the breach thereof, shall he settled by arbitration in accordance
with the rules, then obtaining, of the American Arbitration Association, and
judgment upon the award rendered may be entered in any United States Court
having jurisdiction thereof.
ARTICLE XVII
------------
Attorney's Fees
---------------
17.0 If any litigation is commenced between the parties to this Agreement
or their personal representatives concerning any of the provisions of this
Agreement or the rights and duties of any person in relation hereto, the party
or parties prevailing in such litigation shall be entitled, in addition to such
other relief as may be granted, to a reasonable sum for their attorneys' fees,
which shall be determined by the court in such litigation or in a separate
action brought for that purpose.
ARTICLE XVIII
-------------
Force Majeure
-------------
18.0 The parties shall not incur liability for failing to perform any
obligation under this Agreement if such failure results from force majeure, as
defined by applicable law.
ARTICLE XIX
-----------
Governing Law
-------------
19.0 This Agreement, and all of the rights and duties in connection
therewith, shall be governed by and construed under the internal laws of the
State of California, U.S.A.
ARTICLE XX
----------
Compliance with Governmental Authorities
----------------------------------------
20.0 No party to this Agreement shall be required to do anything contrary
to any applicable directive or obligation of any competent governmental
authority, and shall promptly notify the other parties if compelled by law, act
or government decree to act otherwise than in accordance with this Agreement.
7.
<PAGE>
ARTICLE XXI
-----------
Non-representation
------------------
21.0 This Agreement in no way confers upon any party the right to act as
the legal representative or agent of another party, nor shall any party have the
right or authority to assume any liability or obligation of any kind on behalf
of another party.
ARTICLE XXII
------------
Amendments
----------
22.0 This Agreement may be amended only by the mutual written consent of
the parties hereto.
ARTICLE XXIII
-------------
Notices
-------
23.0 All notices, demands, and other communications shall be in writing and
shall be deemed to have been given if delivered or mailed registered or
certified mail, postage prepaid, to the specified address of the receiving
party.
ARTICLE XXIV
------------
Counterparts
------------
24.0 This Agreement may be executed in counterparts, all of which taken
together shall be deemed one original.
ARTICLE XXV
-----------
Captions
--------
25.0 Paragraph titles or captions contained herein are inserted only as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement, nor the intent of any provision thereof.
ARTICLE XXVI
------------
Sole and Only Agreement
-----------------------
26.0 This Agreement and the License Agreement contain the sole and only
agreements of the parties relating to the subject matter of this Agreement and
correctly set forth the rights, duties and obligations of each to the other as
of the date hereof. In the event of any inconsistency between this Agreement
and the License Agreement, the terms of the License Agreement shall govern.
The parties agree that they will deal with each other in good faith to
resolve any issues which may arise as a result of the actions intended by the
execution of this Agreement, in a reasonable and timely manner.
8.
<PAGE>
ARTICLE XXVII
-------------
Mutual Releases
---------------
27.0 Except with respect to breaches of representations contained in this
Agreement or obligations created by or arising out of this Agreement or the
License Agreement, which shall survive the releases contained herein, the
Seller, on the one hand, does hereby release, acquit and forever discharge the
Purchasers and each of their present and former officers, directors,
shareholders, employees, agents, attorneys, representatives, successors and
assigns, and any affiliates of each of the foregoing, and the Purchasers on the
other hand, do hereby release, acquit and forever discharge the Seller, and each
of their present and former directors, officers, employees, agents, attorneys,
heirs, representatives, successors and assigns, in each case, of and from all
debts, demands, actions, causes of action, suits, accounts, covenants,
contracts, promises, agreements (oral or written), damages, and any and all
claims (including without limitation claims for attorneys' fees and costs), and
liabilities whatsoever of every kind and nature, which said parties ever had,
now may have, or hereafter can, shall or may have, by reason of any matter
relating to any loans to or investments in or other transactions with the Seller
by the Purchasers or any of their affiliates.
27.1 This Agreement and the releases contained herein are not to be
construed as an admission on the part of any party of the validity of any
contention made or position taken by any of the parties of any unlawful or
wrongful conduct, or of any liability, or lack thereof, to any other party, all
of which is expressly denied. The parties intend that this Agreement shall be
effective as a full and final accord and satisfaction of each and every released
matter. In furtherance of this intention, they acknowledge they are familiar
with Section 1542 of the Civil Code of the State of California, which provides
as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release which if known by him must have
materially affected his settlement with the debtor."
The releasing parties respectively waive and relinquish to the fullest extent
possible every right or benefit which they have or may have under Section 1542
and under any similar or analogous law of any other applicable jurisdiction with
regard to the subject matter of this Agreement. The parties acknowledge they
are aware they may hereafter discover facts in addition to or different
9.
<PAGE>
from those which they now know or believe to be true with respect to the subject
matter of this Agreement.
ARTICLE XXVIII
--------------
Anti-dilution
-------------
28.0 During the first twelve months of the term of this Agreement, if the
Seller has issued any stock, options, warrants or convertible debentures (other
than pursuant to a grant or exercise of an option under the Company's stock
option plan) without the consent of the Purchasers, the Purchasers shall have
the right to rescind and unwind pursuant to Section 4.0 of this Agreement the
transactions effectuated by this Agreement and to have their preferred stock,
convertible notes and warrants reissued to them at the same prices and terms as
any stock sold by the Seller after the date of this Agreement. The foregoing
right to rescind and unwind must be exercised by the Purchasers within 15 days
of receipt by the Purchasers of written notice of such issuance by the Seller.
Seller: ChatCom, Inc.
By:
---------------------------------
Purchasers:
Vermont Research Products, Inc.
By:
---------------------------------
James C. Louney, CFO
High View Capital
By:
---------------------------------
Ernest Werlin
10.
<PAGE>
EXHIBIT A
---------
BrightStar
----------
BrightStar is a modular consolidated server system incorporating Seller's
RAINS (Redundant Array of Independent Network Servers) technology. Provides for
the collocating of multiple Servers within a single, standard-sized 19 inch
chassis and allows for an environment of disparate server technologies.
Packaging consists of multiple servers sharing peripherals, power supplies and
other resources delivering enhanced management and easier upgrades or
replacements. The midplane is designed for "hot-swappable" modules, isolated
from system peripherals providing a flexible, open architecture computing
environment.
----------------- END EXHIBIT A -----------------
11.
<PAGE>
EXHIBIT C
---------
DISTRIBUTION OF PROCEEDS
------------------------
<TABLE>
<CAPTION>
Distribution of % of Incremental % of Incremental
Proceeds Proceeds Proceeds
- ----------------------------- ---------------- ----------------
<S> <C> <C>
Up to $1,000,000 75%-Purchasers 25%-Seller
$1,000,000 to $5,999,999 48.5%-Purchasers 51.5%-Seller
$6,000,000 to $7,999,999 68%-Purchasers 32%-Seller
$8,000,000 to $9,999,999 60%-Purchasers 40%-Seller
$10,000,000 to $12,999,999 21%-Purchasers 79%-Seller
$13,000,000 to $16,000,000 7.5%-Purchasers 92.5%-Seller
Over $16,000,000 All to Seller
</TABLE>
Example:
A sale generating $9,000,000 of proceeds will be distributed as follows:
Purchasers - $5,135,000
Seller - 3,865,000
12.
