<PAGE>
- - -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27102
ROM TECH, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2694937
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2000 Cabot Boulevard West, Suite 110
Langhorne, PA 19047-1833
(address of Principal executive offices)
Issuer's Telephone Number, Including Area Code: 215-750-6606
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report.)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 ( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ( ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 6,187,358 shares of common
stock, no par value per share, as of May 1, 1996. Transitional Small Business
Disclosure Format (check one):
Yes ( ) No ( X )
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<PAGE>
Rom Tech, Inc.
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements:
Balance Sheet as of March 31, 1996....................... 3
Statements of Operations for three months and nine months
ended March 31, 1996 and 1995.......................... 4
Statements of Cash Flows nine months ended
March 31, 1996 and 1995................................ 5
Notes to Financial Statements............................ 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 11-14
Part II. Other Information
Exhibit Index............................................ 15
Signatures............................................... 18
<PAGE>
Rom Tech, Inc.
Balance Sheet
(Unaudited)
March 31,
1996
----
ASSETS
Current assets:
Cash and cash equivalents $1,654,726
Short term investments 792,640
Accounts receivable, net 152,778
Inventory 157,135
Prepaid expenses 72,174
----------
Total current assets 2,829,453
Furniture and equipment, net 78,010
Other assets 300,142
----------
Total assets $3,207,605
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, 8.75% due within one year $200,000
Accounts payable 247,894
Accrued expenses 67,079
Other liabilities 16,450
---------
Total current liabilities 531,423
Notes payable, 8.75% due after one year 100,000
Total liabilities 631,423
Stockholders' equity:
Convertible preferred stock 1,000,000
Common stock, no par value 3,763,177
Additional paid in capital 649,540
Accumulated deficit (2,836,535)
----------
Total stockholders' equity 2,576,182
----------
Total liabilities and stockholders' equity $3,207,605
==========
See accompanying notes to financial statements.
<PAGE>
Rom Tech, Inc.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $525,592 $282,972 $1,031,506 $744,043
Cost of sales 270,375 50,121 448,724 183,158
-------- ------- --------- --------
Gross profit 255,217 232,851 582,782 560,885
Operating expenses:
Product development 94,160 90,629 274,975 266,090
Selling, general and administrative 586,639 102,439 1,025,575 367,742
-------- ------- --------- --------
Total operating expenses 680,799 193,068 1,300,550 633,832
-------- ------- --------- --------
Operating income (loss) (425,582) 39,783 (717,768) (72,947)
Interest income (expense), net 33,110 (46,167) 11,554 (139,989)
-------- ------- --------- --------
Net loss ($392,472) ($6,384) ($706,214) ($212,936)
======== ====== ======== ========
Net loss per common share ($0.08) ($0.00) ($0.19) ($0.11)
Weighted average common
shares outstanding 4,948,803 1,929,166 3,636,657 1,929,166
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Rom Tech, Inc.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
-----------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ($706,214) ($212,936)
Adjustment to reconcile net loss to net cash
from operating activities:
Depreciation and amortization 80,130 7,289
Interest expense incurred but not paid 55,000 137,885
Changes in items affecting operations net of effect
from acquired business:
Accounts receivable 58,339 (29,624)
Prepaid expenses (61,964) 836
Inventory (103,707) -0-
Accounts payable 178,221 39,262
Accrued expenses (91,995) (24,923)
-------- --------
Net cash used in operating activities (592,190) (82,211)
-------- --------
Cash flows from investing activities:
Purchase of short term investments (1,192,404) -0-
Sales and maturities of short term investments 399,764 -0-
Purchase of furniture and equipment (92,393) (2,911)
Purchase of software rights and other assets (43,663) -0-
Loan to Virtual Reality Laboratories, Inc. (250,000) -0-
Loan to related parties (5,500) -0-
--------- --------
Net cash used in investing activities (1,184,196) (2,911)
--------- --------
Cash flows from financing activities:
Net proceeds of initial public offering of common stock 3,623,796 -0-
Proceeds from exercise of warrants 100,000 -0-
Repayment of advance to officers -0- (89,000)
(Repayment of) proceeds from note payable (375,000) 178,532
Repayment of lease obligations (3,612) -0-
Other 755 (3,538)
--------- -------
Net cash provided by financing activities 3,345,939 85,994
---------- -------
Net increase in cash and cash equivalents 1,569,553 872
Cash and cash equivalents:
Beginning of period 85,173 75,667
---------- -------
End of period $1,654,726 $76,539
========== =======
Noncash investing and financing activities:
Settlement of long term debt and officer's notes payable
through issuance of preferred stock, notes payable
and debt forgiveness, net of $50,000 cash payment. $1,886,451 --
==========
Deficiency in net assets acquired through reverse
acquisition by issuance of common stock. $92,219 --
=======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Rom Tech, Inc.
Notes To Financial Statements
March 31, 1996
1. Basis of Presentation
The unaudited balance sheet as of March 31, 1996, and statements of operations
and cash flows for the three months and nine months ended March 31, 1996
represent the merged entity ("the Company") that resulted from the merger of Rom
Tech, Inc. ("Rom Tech") with Applied Optical Media Corporation ("AOMC") on
October 18, 1995 (the "Merger"). The unaudited financial statements for periods
prior to the Merger (Note 2) represent the financial statements of AOMC. The
financial statements of AOMC for periods prior to October 18, 1995 are presented
because the Merger of AOMC with Rom Tech was accounted for as a reverse
acquisition since AOMC was the acquirer for accounting purposes (see Note 2).
The unaudited financial statements presented herein were derived from the
financial statements of the Company and AOMC, and reflect all adjustments
consisting of normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of operations for
the three months and nine months ended March 31, 1996 and 1995 and may not
necessarily be indicative of the results to be expected for the year ending June
30, 1996.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Registration Statement
filed on Form SB-2, which was declared effective by the Securities and Exchange
Commission on October 13, 1995.
2. Merger/Completion of Pubic Offering
On October 18, 1995, Rom Tech merged with AOMC, whereby the shareholders of AOMC
exchanged all their outstanding shares for 1,575,000 common shares of the
Company and 425,000 warrants to purchase common shares at $.50 per share. In
addition, concurrently with the Merger certain shareholders of AOMC exchanged
debt with a carrying value of $1,936,452 for 1,000,000 shares of convertible
preferred stock, a $300,000, 8.75% note payable, a $50,000 cash payment and
forgiveness of $586,451 of debt. The preferred stock has a face value of
$1,000,000 and is convertible into common stock of the Company beginning two
years after October 18, 1995 at a price of $3.30 per share. The Company has the
right to redeem the preferred stock for an aggregate redemption price of
$1,000,000.
As a result of the Merger, the former shareholders of AOMC have a majority of
the voting rights of the combined enterprise on a fully diluted, if converted
basis. Therefore, for accounting purposes, AOMC was considered the acquirer
(reverse acquisition). The cost of acquiring Rom Tech was based on the fair
market value of Rom Tech's net assets which approximated their recorded value.
In connection with the reverse acquisition, the outstanding shares of the
Company and the shares of the Company issued to AOMC shareholders have been
reflected as a recapitalization of the previously outstanding AOMC common stock.
Prior to completion of the Merger, the Rom Tech's authorized capital was
increased to 40,000,000 shares of common stock, no par value, and 10,000,000
shares of preferred stock, no par value. Also, on October 18, 1995, the Company
consummated an initial public offering of 1,550,000 shares of common stock (the
"IPO") at a price of $3.00 per share (the "IPO Price") resulting in net proceeds
of $4,070,500 before deducting offering costs of $446,704.
<PAGE>
Rom Tech, Inc.
Notes To Financial Statements
March 31, 1996
The following unaudited pro forma information presents the results of the
combined operations of the Company, adjusted primarily for the reduction in
interest expense, as if the Merger occurred at the beginning of the respective
periods:
<TABLE>
<CAPTION>
Three months Nine months
ended March 31, ended March 31,
------------------------ ---------------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
---- ---- ---- ----
Net sales $525,592 $578,263 $1,289,215 $1,711,848
Net income (loss) ($392,472) $42,327 ($1,018,479) ($50,674)
Net loss per common share ($0.08) $0.01 ($0.23) ($0.01)
Weighted average common shares 4,948,403 3,806,569 4,345,625 3,806,569
</TABLE>
Management believes that the results of operations for the three months and nine
months ended March 31, 1996 may not be indicative of anticipated future results
because of significant changes to be made in the combined businesses.
Additionally, on April 5, 1996, the Company acquired Virtual Reality
Laboratories, Inc., a California corporation, (see note 7). This acquisition
will be accounted for using the pooling-of-interests method, and accordingly the
Company's historical financial statements presented in future reports will be
restated to include the accounts and results of operations of Virtual Reality.
The pro forma net loss per common share is computed by dividing net loss
attributable to common shareholders by the weighted average number of common
shares outstanding during the period.
The weighted average common shares outstanding retroactively reflect the effect
of the shares issued in the Merger and the outstanding shares of Rom Tech at the
time of the Merger. For periods subsequent to the IPO, common stock equivalents
were considered anti-dilutive for the above periods presented. For periods prior
to the IPO the weighted average number of shares has been adjusted, using the
treasury stock method, to reflect as outstanding all common stock issued at a
price less than the IPO Price during the twelve-month period preceding the
initial public offering of the Company's common stock as well as all stock
issuable upon the exercise of stock options and warrants issued at a price less
than the IPO Price during such twelve-month period. Pursuant to the requirements
of the Securities and Exchange Commission, these securities are reflected in
earnings per share calculations, whether or not the securities are
anti-dilutive.
3. Summary of Significant Accounting Policies
The following summary of significant accounting policies were derived from the
financial statements of the Company for periods after October 18, 1995, and from
the financial statements of AOMC for all periods prior to October 18, 1995 (See
Note 2).
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
instruments purchased with an original maturity of three months or less to be
cash equivalents.
<PAGE>
Rom Tech, Inc.
Notes To Financial Statements
March 31, 1996
Short-term Investments
Short-term investments consist primarily of commercial paper with original
maturities at date of purchase beyond three months and less than twelve months.
Such short-term investments are carried at cost, which approximates fair value,
due to the short period of time to maturity.
Inventory
Inventory is valued at lower of cost or market. Cost is determined by first-in,
first-out method (FIFO).
Furniture and Equipment
Furniture and equipment are stated at cost. Equipment under capital leases is
stated at the present value of the minimum lease payments. Depreciation on
property and equipment is calculated on the straight line method over the
estimated useful lives of the assets. Maintenance and repair costs are expensed
as incurred.
Revenue Recognition
Revenue is recognized upon shipment of products to customers. An allowance for
returned merchandise is provided based on the Company's historical experience.
Software Development Costs
Software development costs are expensed as incurred until technological
feasibility has been established. After technological feasibility has been
established, any additional costs are capitalized in accordance with Statement
of Financial Accounting Standards (SFAS) No. 86. To date, amounts qualifying for
capitalization, net of valuation allowances, have not been material.
Computation of Net Loss Per Share
For the three months and nine months ended March 31, 1995, net loss per common
share is computed using the weighted average number of common shares outstanding
during the period for AOMC retroactively adjusted for the shares and warrants
received in connection with the reverse acquisition, reflected as a
recapitialization of the previously outstanding common stock of AOMC.
For the three months and nine months ended March 31, 1996, net loss per common
share is computed using the weighted average number of common shares outstanding
adjusted to reflect the outstanding shares of Rom Tech at the time of the Merger
and the shares issued in connection with the reverse acquisition reflected as a
recapitalization of the previously outstanding common stock of AOMC. Common
stock equivalents were considered anti-dilutive.
<PAGE>
Rom Tech, Inc.
Notes To Financial Statements
March 31, 1996
4. Commitments
Under various licensing agreements, the Company is required to pay royalties on
the sales of certain products that incorporate licensed content. Royalty
expenses under such agreements, which is recorded in cost of sales, was
approximately $22,358 and $28,133 for the three months ended March 31, 1996 and
1995, respectively, and $40,989 and $62,903 for the nine months ended March 31,
1996 and 1995, respectively.
5. Income Taxes
No income tax expense or benefit was recorded for the periods presented.
However, any deferred tax asset created was offset by a valuation allowance of
equal amount.
As of June 30, 1995, the Company had approximately $2,069,000 of net operating
loss carryforwards ("NOL's") for tax purposes (expiring in years 2003 and 2009),
which may be available to offset future federal taxable income. The Company's
NOL's may be subject to the provisions of IRC Section 382, as established by the
Tax Reform Act of 1986, related to changes in stock ownership. Presently no
determination has been made to evaluate what effect the application of these
regulations may have on the utilization of the NOL's. Should these regulations
apply, the amount of the NOL's that can be utilized to offset taxable income in
future periods may be subject to an annual limitation and it is possible that
some portion of the NOL's may never be utilized.
6. Stockholders' Equity
At March 31, 1996 the following data related to stockholders' equity is
presented:
Shares of common stock outstanding............................ 4,949,603
---------
Shares of convertible preferred stock outstanding............. 1,000,000
---------
Options outstanding and exercisable at $2.00 per share....... 162,000
---------
Options outstanding and exercisable at $3.00 per share....... 60,000
---------
Warrants outstanding and exercisable at $.50 to $3.60 per
share....................................................... 593,800
---------
7. Subsequent Event
On April 5, 1996, the Company acquired Virtual Reality Laboratories, Inc.
("Virtual Reality"), a California corporation, in a transaction structured as a
merger of Virtual Reality with a newly formed subsidiary of the Company ("Rom
Tech subsidiary"), with the Rom Tech subsidiary as the surviving corporation.
Virtual Reality, which is located in San Luis Obispo, California, publishes
software for use on desktop computers. Its products include business forms and
imaging processing software targeted for the small-office/home-office market,
three-dimensional landscape rendering software and astronomy software for
special interest users and the education market. In connection with the
acquisition, the Company issued a total of 1,284,439 shares of its common stock,
in exchange for substantially all of the debt and equity interests of Virtual
Reality, which included common stock, stock options, convertible subordinated
debt and a $100,000 promissory note to an officer and shareholder of Virtual
Reality. In addition, the Company will incur acquisition-related expenses of
approximately $565,000 related to investment banking, consulting, accounting and
legal costs which will be charged to operations during the fourth quarter of
1996.
<PAGE>
Rom Tech, Inc.
Notes To Financial Statements
March 31, 1996
This acquisition will be accounted for using the pooling-of-interests method,
and accordingly the Company's historical financial statements presented in
future reports will be restated to include the accounts and results of
operations of Virtual Reality. The following supplemental unaudited information
summarizes the combined results of operations of the Company, Rom Tech (prior to
October 18, 1995) and Virtual Reality as if the combination occurred at the
beginning of the respective periods presented.
<TABLE>
<CAPTION>
Three months Nine months
ended March 31, ended March 31,
--------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $749,086 $1,162,660 $2,492,445 $3,200,816
Net loss (733,715) (42,545) (1,556,546) (424,983)
Loss per share (.12) (.01) (.28) (.08)
Weighted average common shares 6,232,842 5,091,008 5,630,064 5,091,008
</TABLE>
<PAGE>
Rom Tech, Inc.
March 31, 1996
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of operations for the three months and nine months ended March 31, 1996
reflect the operations of the Company whereas the results of operations for the
three months and nine months ended March 31, 1995 represent the operations of
Applied Optical Media Corporation ("AOMC") because the merger of AOMC with Rom
Tech, Inc. ("Rom Tech") on October 18, 1995 was accounted for as a reverse
acquisition in which AOMC was considered the acquirer for accounting purposes
(See Note 2).
The Company's management believes that the results of operations for the three
months and nine months ended March 31, 1996 may not be indicative of anticipated
future results because of the acquisition on April 5, 1996 of Virtual Reality
Laboratories, Inc. ("Virtual Reality") in a merger of Virtual Reality with a
newly formed subsidiary of the Company (see note 7 to the financial statements).
The acquisition of Virtual Reality will be accounted for using the
pooling-of-interests method, and accordingly the Company's historical financial
statements presented in future reports will be restated to include the accounts
and results of operations of Virtual Reality.
Results of Operations
Historical Three Months ended March 31, 1996 and 1995
Net sales for the three months ended March 31, 1996 were $525,592 compared to
$282,972 in the three months ended March 31, 1995, representing an increase of
$242,620 or 86%. This increase resulted from the sales of Rom Tech (the
"Acquired Business") of $395,437 being offset by the decrease of AOMC sales of
$152,817. The AOMC sales decline related primarily to a decrease in sales to
retail stores of $141,000. The competition for shelf space in retail stores
intensified dramatically during the 1996 fiscal year because of the
proliferation of the number of CD-ROM titles available for sale. This shelf
space competition, along with the delay in the delivery of new CD-ROM titles,
has resulted in a decline of product purchases from the Company by retail
stores. See the Pro Forma sales discussion below for additional comparative
analysis.
Cost of sales consists primarily of packaging costs (boxes and jewel cases),
CD-ROM pressing or replication activities through third party vendors and
royalty expenses. The cost of sales for the three months ended March 31, 1996
was $270,375 compared to $50,121 for the three months ended March 31, 1995,
representing an increase of $220,254. The increased cost of sales relates to the
sales of the Acquired Business ($224,010), offset by a reduction in cost of
sales ( $3,756) due to the decreased sales of AOMC's business. The Company's
gross profit margin decreased to 49% in the three months ended March 31, 1996
from 82% in the three months ended March 31, 1995 primarily because of lower
gross profit margins on the Acquired Business' sales and a decline in AOMC's
gross profit margins. The Acquired Business' sales represent reselling of budget
category jewel case CD-ROM products which has a lower gross profit margin than
boxed CD-ROM products. AOMC's gross profit margins were lower because of
reductions in selling prices of boxed CD-ROM products attributable to increased
competition among older CD-ROM titles. Additionally, many of AOMC's CD-ROM
titles are now sold in jewel cases at lower selling prices.
Product development expenses consist primarily of personnel costs, supplies and
product testing. Product development expenses for the three months ended March
31, 1996 were $94,160 compared to $90,629 for the three months ended March 31,
1995, an increase of $3,531 or 4%.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
Selling, general and administrative expenses consist primarily of (a) salaries,
benefits, and travel expenses for employees of the sales, marketing and
administrative departments; (b) advertising and related marketing materials; (c)
bad debt expenses; (d) selling commissions; and (e) corporate office
administration expenses, including legal and accounting fees, outside services
and rent. The combined expenses ($586,639) of operating two businesses for the
three months ended March 31, 1996, are not comparable to the expenses for the
three months ended March 31, 1995 ($102,439) for the operation of one
independent business. In addition, the current period includes costs associated
with increased personnel, increased advertising and marketing effort,
commissions on the reselling of budget jewel case products, and corporate
overhead costs related to the transition from a privately-held company to a
public company.
Net interest income for the three months ended March 31, 1996 was $33,110
compared to interest expense of $46,167 for the three months ended March 31,
1995, a change of $79,277. This change is due to the reduction of long term debt
related to the Merger and the investment of the proceeds from the IPO.
Pro Forma Three Months ended March 31, 1996 and 1995
The following discussion addresses unaudited pro forma combined information for
the three months ended March 31, 1996 and 1995, adjusted principally for the
reduction in interest expense, as if the Merger of AOMC with Rom Tech occurred
at the beginning of the respective periods. For purposes of pro forma
information presented, the combined business of AOMC and Rom Tech are referred
to as the "Company."
The Company's pro forma net sales for the three months ended March 31, 1996 were
$525,592 compared to $578,263 for the three months ended March 31, 1995,
resulting in a decrease of $52,671. Of such decrease, $152,817 represents a
decline in AOMC's sale of boxed products, primarily to retail stores, offset by
a $101,376 increase in Rom Tech's reselling of budget category jewel case
products.
The change in the Company's pro forma net loss for the three months ended March
31, 1996 of $392,472 compared to a pro forma net income of $42,327 for the prior
period, adjusted for interest expense, resulted from a decline in the gross
profit margins related to a change in the sales mix, and increased combined
operating expenses as described above under the historical data.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
Historical Nine Months ended March 31, 1996 and 1995
Net sales for the nine months ended March 31, 1996 were $1,031,506 compared to
$744,043 for the nine months ended March 31, 1995, representing an increase of
$287,463 or 39%. This increase is due to the sales of the Acquired Business of
$656,033 offset by a decrease in AOMC sales of $368,570. The AOMC sales decline
related primarily to a decrease in sales to retail stores of $199,000 and a
decrease in OEM (bundling) and license revenues of $180,000. The competition for
shelf space in retail stores has intensified dramatically during the 1996 fiscal
year because of the increase in the number of CD-ROM titles available for sale.
This shelf space competition, along with the delay in the delivery of new CD-ROM
titles, has resulted in a decline of product purchases from the Company by the
retail stores. The decrease in OEM and license revenues relates to non-renewal
of business by certain customers. See the Pro Forma net sales discussion below
for additional comparative analysis.
The cost of sales for the nine months ended March 31, 1996 was $448,724 compared
to $183,158 for the nine months ended March 31, 1995, representing an increase
of $265,566. The increased costs of sales relates primarily to the sales of the
Acquired Business ($316,894), offset by the reduction in costs of sales
($51,328) due to the decreased sales of AOMC's business. As a result, the
Company's gross profit margin decreased to 57% in the nine months ended March
31, 1996 from 75% in the nine months ended March 31, 1995 primarily because of
lower gross profit margins on the Acquired Business' sales and a decline in
AOMC's gross profit margins. The Acquired Business' sales represent reselling of
budget category jewel case CD-ROM products which has a lower gross profit margin
than boxed CD-ROM products. AOMC's gross profit margins were lower because of
reduction in selling prices of boxed CD-ROM products attributable to increased
competition among older CD-ROM titles, and a decline in the OEM and license
revenue business which had limited related cost. Additionally, many of AOMC's
CD-ROM titles are now sold in jewel cases at lower selling prices.
Product development expenses for the nine months ended March 31, 1996 were
$274,975 compared to $266,090 for the nine months ended March 31, 1995, an
increase of $8,885 or 3%.
Selling, general and administrative expenses consist primarily of (a) salaries,
benefits, and travel expenses for employees of the sales, marketing and
administrative departments; (b) advertising and related marketing materials; (c)
bad debt expenses; (d) selling commissions; and (e) corporate office
administration expenses, including legal and accounting fees, outside services
and rent. The combined expenses ($1,025,575) of operating two businesses for the
nine months ended March 31, 1996, are not comparable to the prior period
expenses ($367,742) of operating one independent business. In addition, the nine
month period includes costs associated with increased personnel, increased
advertising and marketing effort, commissions on the reselling of budget jewel
case products, and corporate overhead costs related to the transition from a
privately-held company to a public company.
Interest income for the nine months ended March 31, 1996 was $11,554, as
compared to interest expense of $139,989 for the nine months ended March 31,
1995, a change of $151,543. The change is due to the reduction of long term debt
related to the Merger and the investment of the proceeds from the IPO.
Pro Forma Nine Months ended March 31, 1996 and 1995
The following discussion addresses unaudited pro forma combined information for
the nine months ended March 31, 1996 and 1995, adjusted principally for the
reduction in interest expense, as if the Merger of AOMC with Rom Tech occurred
at the beginning of the respective periods. For purposes of pro forma
information presented, the combined business of AOMC and Rom Tech are referred
to as the "Company."
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
The Company's pro forma net sales for the nine months ended March 31, 1996 were
$1,289,215 compared to $1,711,848 for the nine months ended March 31, 1995,
resulting in a decrease of $422,633. Of such decrease, $199,000 represents a
decline in AOMC's sale of boxed CD-ROM products primarily to retail stores, a
decline of $180,000 in OEM and license revenue; while the sales of the Rom Tech
business declined $43,633. Rom Tech sales declined primarily because Rom Tech's
management undertook the responsibility for the preparation and review of the
Company's financial and administrative documents related to the completion of
its initial public offering ("IPO") in October, 1995. The effort related to
completing the IPO diminished the amount of time normally devoted to marketing
and sales activities, resulting in a decrease in sales during the period. The
AOMC sales decline is discussed above under historical data.
The Company's pro forma net loss for the nine months ended March 31, 1996 of
$1,018,479 includes the final amortization of prior debt placement fees of
$268,000 from Rom Tech, compared to a pro forma net loss of $50,674 for the nine
months ended March 31, 1995. The increase in the pro forma net loss, adjusted
for interest and amortization of debt placement fees, resulted from a decline in
sales and change in the types of products sold, and increased combined operating
expenses of the Company as described above under the historical data.
Liquidity and Capital Resources
The financial information presented reflects the Company's financial position at
March 31, 1996.
On October 18, 1995, the Company significantly improved its financial condition
as a result of the Merger and the consummation of an initial public offering.
The Merger resulted in the exchange of $1,936,452 of AOMC debt for 1,000,000
shares of convertible preferred stock, a $300,000, 8.75% note payable, a $50,000
cash payment and forgiveness of $586,451 of debt. The initial public offering
resulted in net proceeds of $3,623,796 of which $300,000 was used to repay
bridge financing, $92,000 was used for capital expenditures, $592,190 was used
to fund operations, $500,000 was provided to Virtual Reality as described below
and the remainder is currently invested in cash equivalents and short term
investments.
The Company has provided Virtual Reality $500,000 of financing, ($250,000 during
the quarter ended March 31, 1996 and $250,000 on April 5, 1996), and anticipates
providing an additional $500,000 in financing during the remainder of calendar
1996. Virtual Reality will use the funds to market and expand its product line.
Management of the Company believes that based upon its current business
strategy, the remaining proceeds of the initial public offering will be
sufficient to fund operations, capital expenditures and the acquisitions of
proprietary products and software development companies for at least the twelve
month period from the quarterly period ended March 31, 1996. Currently, the
Company has no significant capital expenditure commitments.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ROM TECH, INC.
(Registrant)
Date: May 15, 1996 /s/ Joseph A. Falsetti
------------- -----------------------
Joseph A. Falsetti
Chief Executive Officer
/s/ Gerald W. Klein
-----------------------
Gerald W. Klein
Vice President and
Chief Financial Officer
<PAGE>
Rom Tech, Inc.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page Number
----------- ---------------------- -----------
<S> <C> <C>
* 2.1 Agreement and Plan of Reorganization dated April 4, 1996 by
and among the Registrant, the Registrant's wholly-owned
subsidiary and Virtual Reality Laboratories, Inc.
* 2.2 Agreement and Plan of Merger dated April 4, 1996 by and
among the Registrant, the Registrant's wholly-owned subsidiary
and Virtual Reality Laboratories, Inc.
3.1 Amended and Restated By-Laws of the Registrant.
* 4.1 Notice and Agreement to Exchange Convertible Debt of Claire
L. Broline dated April 4, 1996.
* 4.2 Notice and Agreement to Exchange Convertible Debt of John J.
Gardiner III dated April 4, 1996.
* 4.3 Notice and Agreement to Exchange Convertible Debt of Lambert
C. Thom dated April 4, 1996.
* 4.4 Notice and Agreement to Exchange Convertible Debt of Robert Calder
Davis, Jr. dated April 4, 1996.
* 4.5 Registration Rights Agreement dated April 4, 1996 by and
among the Registrant, the former shareholders of Virtual Reality
Laboratories, Inc. and the former holders of convertible
subordinated debt of Virtual Reality Laboratories, Inc.
10.1 Employment Agreement dated April 4, 1996 between Lance H. Woeltjen
and the Registrant.
10.2 Employment Agreement dated April 4, 1996 between Susan H. Woeltjen
and the Registrant.
10.3 Non-Competition and Confidentiality Agreement dated April 4, 1996
between Susan H. Woeltjen and the Registrant.
10.4 Non-Competition and Confidentiality Agreement dated April 4, 1996
between Lance H. Woeltjen and the Registrant.
10.5 Affiliate's Agreement dated April 4, 1996 between the Registrant,
Virtual Reality Laboratories, Inc. and Lance H. Woeltjen.
10.6 Affiliate's Agreement dated April 4, 1996 between the Registrant,
Virtual Reality Laboratories, Inc. and Susan H. Woeltjen.
10.7 Lease Agreement between Knect's Plumbing and Heating and Virtual
Reality Laboratories, Inc. dated December 4, 1995.
</TABLE>
<PAGE>
Rom Tech, Inc.
Exhibit Index - continued
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page Number
----------- ---------------------- -----------
<S> <C> <C>
10.8 License Agreement between Michael Smithwick and Virtual Reality
Laboratories, Inc. dated September 2, 1989.
10.9 License Agreement between Hypercube Engineering and Virtual
Reality Laboratories, Inc. dated February 24, 1990.
10.10 License Agreement between Jean Ames, Lance Woeltjen and Virtual
Reality Laboratories, Inc. dated May 6, 1993.
10.11 Promissory Note in the amount of $350,000 from Virtual Reality
Laboratories, Inc. to Heller First Capital Corporation dated March
25, 1996.
10.12 Commercial Security Agreement dated March 25, 1996 between Virtual
Reality Laboratories, Inc. and Heller First Capital Corporation.
10.13 U.S. Small Business Administration Guaranty dated March 25, 1996.
10.14 Software Development and License Agreement dated January 6, 1995
between Virtual Reality Laboratories, Inc. and A.I. Soft, Inc.
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule
* 99 Escrow Agreement dated April 4, 1996 by and among the Registrant,
Virtual Reality Laboratories, Inc. ("Virtual Reality"), Lance H.
Woeltjen, as representative of the former Virtual Reality
shareholders, the former Virtual Reality shareholders and Main Line
Federal Savings Bank, as escrow agent.
</TABLE>
- - -----------------------
* Incorporated by reference herein from the Registrant's Current Report on
Form 8-K as filed with the Securities and Exchange Commission on April 19,
1996.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
OF
ROM TECH, INC.
Adopted:
June 30, 1995
<PAGE>
TABLE OF CONTENTS
Article 1 OFFICES ..................................................... 1
Article 2 SHAREHOLDER MEETINGS.......................................... 1
Article 3 QUORUM OF SHAREHOLDERS........................................ 3
Article 4 VOTING RIGHTS................................................. 4
Article 5 PROXIES....................................................... 4
Article 6 RECORD DATE................................................... 4
Article 7 SHAREHOLDER LIST.............................................. 5
Article 8 JUDGES OF ELECTION............................................ 5
Article 9 CONSENT OF SHAREHOLDERS IN LIEU OF MEETING.................... 6
Article 10 BOARD OF DIRECTORS............................................ 6
Article 11 REMOVAL OF DIRECTORS.......................................... 7
Article 12 VACANCIES ON BOARD OF DIRECTORS............................... 8
Article 13 POWERS OF BOARD............................................... 8
Article 14 MEETINGS OF THE BOARD OF DIRECTORS............................ 9
Article 15 ACTION BY WRITTEN CONSENT..................................... 9
Article 16 COMPENSATION OF DIRECTORS..................................... 9
Article 17 OFFICERS......................................................10
Article 18 PRESIDENT.....................................................10
Article 19 SECRETARY.....................................................11
Article 20 TREASURER.....................................................11
i
<PAGE>
Article 21 CHAIRMAN OF THE BOARD......................................... 11
Article 22 OTHER OFFICERS................................................ 11
Article 23 LIMITATION OF DIRECTORS' LIABILITY AND
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS.......................................... 12
Article 24 SHARES; SHARE CERTIFICATES.................................... 15
Article 25 TRANSFER OF SHARES............................................ 15
Article 26 LOST CERTIFICATES............................................. 16
Article 27 FINANCIAL REPORTS TO SHAREHOLDERS............................. 16
Article 28 FISCAL YEAR................................................... 16
Article 29 MANNER OF GIVING WRITTEN NOTICE; WAIVERS OF
NOTICE........................................................ 16
Article 30 AMENDMENTS.................................................... 17
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ROM TECH, INC.
ARTICLE 1 - OFFICES
Section 1.1. Registered Office. The Corporation shall have and
continuously maintain in the Commonwealth of Pennsylvania a registered office at
an address to be designated from time to time by the Board of Directors which
may, but need not, be the same as its place of business.
Section 1.2. Other Offices. The Corporation may also have offices at
such other places as the Board of Directors may from time to time designate or
the business of the Corporation may require.
ARTICLE 2 - SHAREHOLDER MEETINGS
Section 2.1. Place of Shareholders' Meetings. All meetings of the
shareholders shall be held at such time and place, within or without the
Commonwealth of Pennsylvania, as may be determined from time to time by the
Board of Directors and need not be held at the registered office of the
Corporation.
Section 2.2. Annual Meeting. An annual meeting of the shareholders for
the election of directors and the transaction of such other business as may
properly be brought before the meeting shall be held in each calendar year at
such time and place as may be determined by the Board of Directors.
Section 2.3. Special Meetings. Special meetings of the shareholders may
be called at any time by (i) the Chairman of the Board, if any, if such officer
is serving as the chief executive officer of the Corporation, and otherwise the
President or (ii) the Board of Directors. The request of any person who has
called a special meeting of shareholders shall be addressed to the Secretary of
the Corporation, shall be signed by the persons making the request and shall
state the general nature of the business to be transacted at the meeting. Upon
receipt of any such request it shall be the duty of the Secretary to fix the
time and provide written notice of the special meeting of shareholders, which,
if called pursuant to a statutory right, shall be held not more than sixty (60)
days after receipt of the request. If the Secretary shall neglect or refuse to
fix the time or provide written notice of the special meeting, the person or
persons making the request may fix the time and provide written notice of the
special meeting.
Section 2.4. Timing of Notice of Shareholders' Meetings. Written notice
of each meeting other than an adjourned meeting of shareholders, stating the
place and time, and, (i) in the case of a special meeting of shareholders, the
general nature of the business to be transacted, and, (ii) in the case of a
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<PAGE>
meeting of shareholders called for the purpose, or one of the purposes, of
considering the amendment or repeal of the Bylaws, written notice of such
proposed action, shall be provided to each shareholder of record entitled to
vote at the meeting at such address as appears on the books of the Corporation.
Such notice shall be given, in accordance with the provisions of Article 29 of
these Bylaws, at least (i) ten days prior to the day named for a meeting to
consider a fundamental change under Chapter 19 of the Pennsylvania Business
Corporation Law of 1988 (the "BCL") or (ii) five days prior to the day named for
the meeting in any other case.
Section 2.5. Notice to Shareholder Not Required. (a) Whenever the
Corporation has been unable to communicate with a shareholder for more than
twenty-four (24) consecutive months because communications to the shareholder
are returned unclaimed or the shareholder has otherwise failed to provide the
Corporation with a current address, the giving of notice to such shareholder
pursuant to Section 2.4 of these Bylaws shall not be required. Any action or
meeting that is taken or held without notice or communication to that
shareholder shall have the same validity as if the notice or communication had
been duly given. Following said twenty-four (24) month period, if a shareholder
provides the Corporation with a current address the giving of notice to such
shareholder pursuant to Section 2.4 of these Bylaws shall again be required.
(b) The Corporation shall not be required to give notice to any
shareholder pursuant to Section 2.4 hereof if and for so long as communication
with such shareholder is unlawful.
Section 2.6. Meeting Using Telecommunications Equipment. The Board of
Directors may provide by resolution with respect to a specific meeting or with
respect to a class of meetings that one or more shareholders may participate in
such meeting or meetings of shareholders by means of conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear one another. Participation in the meeting by such means
shall constitute presence in person at the meeting. Any notice otherwise
required to be given in connection with any meeting at which participation by
conference telephone or other communications equipment is permitted shall so
specify.
Section 2.7. Content of Notice of Shareholders' Meeting. Except as
otherwise provided by law (including but not limited to Rule 14a-8 of the
Securities and Exchange Act of 1934, as amended or any successor provision
thereto), or in these Bylaws, or except as permitted by the presiding officer of
the meeting in the exercise of such officer's sole discretion in any specific
instance, the business which shall be conducted at any meeting of the
shareholders shall (a) have been specified in the written notice of the meeting
(or any supplement thereto) given by the Corporation, or (b) be brought before
the meeting at the direction of the Board of Directors or the presiding officer
of the meeting, or (c) have been specified in a written notice (a "Shareholder
Meeting Notice") given to the Corporation, in accordance with all of the
following requirements, by or on behalf of any shareholder who shall have been a
shareholder of record on the record date for such meeting and who shall continue
to be entitled to vote thereat. Each Shareholder Meeting Notice must be
delivered personally to, or be mailed to and received by, the Corporation,
addressed to the attention of the President at the principal executive offices
of the Corporation not less than fifty (50) days nor more than seventy-five (75)
2
<PAGE>
days prior to the meeting; provided, however, that in the event that less than
sixty-five (65) days notice or prior public disclosure (including but not
limited to mailing of the meeting notice) of the date of the meeting is given or
made to shareholder, notice by the shareholder to be timely must be so received
not later than the close of business on the 10th day following the date on which
such public disclosure was made. Each Shareholder Meeting Notice shall set forth
a general description of each item of business proposed to be brought before the
meeting, the name and address of the shareholder proposing to bring such item of
business before the meeting and a representation that the shareholder intends to
appear in person or by proxy at the meeting. The presiding officer of the
meeting may refuse to consider any business that shall be brought before any
meeting of shareholders of the Corporation otherwise than as provided in this
Section 2.7.
ARTICLE 3 - QUORUM OF SHAREHOLDERS
Section 3.1. Quorum Generally Required. Except as provided in Sections
3.3 and 3.5, a meeting of shareholders duly called shall not be organized for
the transaction of business unless a quorum is present.
Section 3.2. Quorum Defined. The presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter to be acted upon at the
meeting shall constitute a quorum for purposes of consideration and action on
such matter.
Section 3.3. Quorum Following Shareholder Withdrawals. The shareholders
present at a duly organized meeting can continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
Section 3.4. Adjournments. (a) If a meeting of shareholders cannot be
organized because a quorum is not present, those present in person or by proxy,
may, except as otherwise provided by statute or unless the Board fixes a new
record date for the adjourned meeting, adjourn the meeting to such time and
place as they may determine, without notice other than an announcement at the
meeting, until the requisite number of shareholders for a quorum shall be
present in person or by proxy.
(b) Any meeting, including one at which directors are to be elected,
may be adjourned for such period as the shareholders present and entitled to
vote shall direct.
Section 3.5. Quorum Less Than a Majority. Notwithstanding the
provisions of Sections 3.1, 3.2, 3.3 and 3.4 of these Bylaws:
(a) Those shareholders entitled to vote who attend a meeting called for
election of directors that has been previously adjourned for lack of a quorum,
although less than a quorum as fixed in these Bylaws, shall nevertheless
constitute a quorum for the purpose of electing directors.
3
<PAGE>
(b) Those shareholders entitled to vote who attend a meeting that has
been previously adjourned for one or more periods aggregating at least fifteen
(15) days because of an absence of a quorum, although less than a quorum as
fixed in these Bylaws, shall nevertheless constitute a quorum for the purpose of
acting upon any matter set forth in the notice of the meeting if the notice
states that those shareholders who attend the adjourned meeting shall
nevertheless constitute a quorum for the purpose of acting upon the matter.
ARTICLE 4 - VOTING RIGHTS
Section 4.1. One Vote Per Share. Except as may be otherwise provided by
the Corporation's Articles of Incorporation, at every meeting of shareholders,
every shareholder entitled to vote thereat shall be entitled to one vote for
every share having voting power standing in his name on the books of the
Corporation on the record date fixed for the meeting.
Section 4.2. Majority Vote. Except as otherwise provided by statute,
the Articles of Incorporation or these Bylaws, at any duly organized meeting of
shareholders the vote of the holders of a majority of the votes cast shall
decide any question brought before such meeting. Unless the Pennsylvania
Business Corporation law of 1988 (the "BCL") permits otherwise, this Section 4.2
may be modified only by a Bylaw amendment adopted by the shareholders.
Section 4.3. Ballot Not Required. Unless demand is made before the
voting begins by a shareholder entitled to vote at any election for directors,
the election of such directors need not be by ballot.
ARTICLE 5 - PROXIES
Section 5.1. General. Every shareholder entitled to vote at a meeting
of shareholders, or to express consent or dissent to corporate action in writing
without a meeting, may authorize another person or persons to act for him by
proxy. Every proxy shall be executed in writing by the shareholder or his duly
authorized attorney-in-fact and filed with the Secretary of the Corporation. A
proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until written
notice thereof has been given to the Secretary of the Corporation. An unrevoked
proxy shall not be valid after three years from the date of its execution unless
a longer time is expressly provided therein. A proxy shall not be revoked by the
death of incapacity of the maker, unless before the vote is counted or the
authority is exercised, written notice of such death or incapacity is given to
the Secretary of the Corporation.
ARTICLE 6 - RECORD DATE
Section 6.1. Record Date Fixed By Board. The Board of Directors may fix
a time prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall not be
4
<PAGE>
more than ninety (90) days prior to the date of the meeting of shareholders.
Only shareholders of record on the date so fixed shall be entitled to notice of,
or to vote at, such meeting, notwithstanding any transfer of shares on the books
of the Corporation after any record date fixed as aforesaid. The Board of
Directors may similarly fix a record date for the determination of shareholders
of record for any other purpose, such as the payment of a distribution or a
conversion or exchange of shares.
Section 6.2. Certificate of Ownership. The Board of Directors may by
resolution adopt a procedure whereby a shareholder of the Corporation may
certify in writing to the Corporation that all or a portion of the shares
registered in such shareholder's name are held for the account of a specified
person or persons. Such resolution may set forth: (a) the classification of
shareholder who may certify; (b) the purpose or purposes for which the
certification may be made; (c) the form of certification and information to be
contained therein; (d) if the certification is with respect to a record date,
the time after the record date within which the certification must be received
by the Corporation; and (e) such other provisions with respect to the procedure
as are deemed necessary or desirable. Upon receipt by the Corporation of a
certification complying with the procedure, the persons specified in the
certification shall be deemed, for the purposes set forth in the certification,
to be the holders of record of the number of shares specified in place of the
shareholder making the certification.
ARTICLE 7 - SHAREHOLDER LIST
Section 7.1. Shareholder List - General. The officer or agent having
charge of the share transfer books of the Corporation shall make a complete
alphabetical list of the shareholders entitled to vote at any meeting, with
their addresses and the number of shares held by each. The list shall be
produced and kept open at the time and place of the meeting for inspection by
any shareholder during the entire meeting except that if the Corporation has
5,000 or more shareholders, in lieu of the making of the list the Corporation
may make the information available at the meeting by other means.
Section 7.2. Effect of Non-compliance with Section 7.1. Failure to
comply with the provisions of Section 7.1 of these Bylaws shall not affect the
validity of any action taken at a meeting prior to a demand at the meeting by
any shareholder entitled to vote thereat to examine the list.
Section 7.3. Transfer Books - Prima Facie Evidence. The original
transfer books for shares of the Corporation, or a duplicate thereof kept in the
Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the
shareholders entitled to examine the list or transfer books for shares or to
vote at any meeting.
ARTICLE 8 - JUDGES OF ELECTION
Section 8.1. Appointment. Prior to any meeting of shareholders, the
Board of Directors may appoint judges of election, who may but need not be
shareholders and who will have such duties as provided in the BCL, to act at
such meeting or any adjournment thereof. If judges of election are not
5
<PAGE>
so appointed, the presiding officer of any such meeting may, and on the request
of any shareholder or his proxy shall, make such appointment at the meeting. The
number of judges shall be one or three. No person who is a candidate for an
office to be filled at the meeting shall act as a judge of election.
Section 8.2. Vacancy. In case any person appointed as a judge of
election fails to appear or fails or refuses to act, the vacancy so created may
be filled by appointment made by the Board of Directors in advance of the
convening of the meeting or at the meeting by the presiding officer thereof.
Section 8.3. Amendment of Article 8. Unless the BCL permits otherwise,
this Article 8 may be amended only by a Bylaw amendment.
ARTICLE 9 - CONSENT OF SHAREHOLDERS IN LIEU OF MEETING
Section 9.1. Consent of Shareholders in Lieu of Meeting. Actions of the
shareholders may be taken by written consent in either of the following manners:
(a) Unanimous Consent. Any action required or permitted to be taken at
a meeting of the shareholders, or of a class of shareholders, may be taken
without a meeting if, prior to or subsequent to the action, a consent or
consents thereto signed by all of the shareholders who would be entitled to vote
at a meeting for such purpose shall be filed with the Secretary of the
Corporation. Consents may be executed in any number of counterparts.
(b) Partial Consent. Any action required or permitted to be taken at a
meeting of shareholders, or of a class of shareholders, may be taken without a
meeting upon the written consent of shareholders who would have been entitled to
cast the minimum number of votes necessary to authorize the action at a meeting
at which all shareholders entitled to vote thereon were present and voting. The
consent(s) shall be filed with the Secretary of the Corporation. The action
shall not become effective until at least ten (10) days after written notice of
the action has been given to each shareholder entitled to vote thereon who has
not consented in writing thereto. Such consent may be executed in any number of
counterparts.
ARTICLE 10 - BOARD OF DIRECTORS
Section 10.1. Number. The number of directors shall not be less than
five (5) nor more than twelve (12), as shall from time to time (i) be determined
by the Board of Directors or (ii) be set forth in a notice of a meeting of
shareholders called for the election of the Board of Directors. The Chairman of
the Board of Directors shall preside at all meetings of shareholders and
directors.
Section 10.2. Qualification. Each director shall be a natural person of
full age and need not be a resident of the Commonwealth of Pennsylvania or a
shareholder of the Corporation.
6
<PAGE>
Section 10.3. Shareholder Election; Vote Required. Except as otherwise
provided in Article 12 of these Bylaws, directors shall be elected by the
shareholders. The candidates receiving the highest number of votes from the
shareholders or each class or group of classes, if any, entitled to elect
directors separately up to the number of directors to be elected by the
shareholders, or class or group of classes, if any, shall be elected. Each
director shall be elected for a term of one year and until his successor has
been elected and qualified or until his earlier death, resignation or removal. A
decrease in the number of directors shall not have the effect of shortening the
term of any incumbent director.
Section 10.4. Nominations. Notwithstanding the provisions of Section
2.7 (dealing with the business at shareholders meetings), nominations for the
election of directors may be made by the Board of Directors or a committee
appointed by the Board of Directors or by any shareholder of record entitled to
vote in the election of Directors generally at the record date of the meeting
and also on the date of the meeting at which directors are to be elected.
However, any shareholder entitled to vote in the election of directors generally
may nominate one or more persons for election as directors at a meeting only if
written notice of such shareholder's intention to make such nomination or
nominations has been delivered personally to, or been mailed to and received by
the Corporation at, the principal executive offices of the Corporation addressed
to the attention of the President not less than fifty (50) days nor more than
seventy-five (75) days prior to the meeting; provided, however, that in the
event that less than sixty-five (65) days notice or prior public disclosure
(including but not limited to mailing of the meeting notice) of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such public disclosure was made. Each such notice
shall set forth: (a) the name and address of the shareholder intending to make
the nomination and of the person or persons to be nominated; (b) a
representation that the shareholder intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; (c) the
address and principal occupation for the past five years of each nominee and
such other information regarding each nominee as would have been required to
included in a proxy statement filed pursuant to Regulation 14A promulgated under
the Securities Exchange Act of 1934, as amended, had proxies been solicited with
respect to such nominee by management of the Corporation; and (d) the written
consent of each nominee to serve as a director of the Corporation if so elected.
The presiding officer of the meeting may declare invalid any nomination not made
in compliance with the foregoing procedure.
ARTICLE 11 - REMOVAL OF DIRECTORS
Section 11.1. Removal By Shareholders. The entire board of directors,
or any class of the board, or any individual director may be removed from office
only for cause by vote of the shareholders entitled to vote thereon. In case the
board or a class of the board or any one or more directors are so removed, new
directors may be elected at the same meeting. The repeal of a provision of the
articles or these bylaws prohibiting, or the addition of a provision to the
articles or bylaws permitting, the removal by the shareholders of the board, a
class of the board or a director without assigning any cause shall not apply to
any incumbent director during the balance of the term for which the director was
7
<PAGE>
selected. This Section 11.1 was adopted by the shareholders of the Corporation
on June 30, 1995.
Section 11.2. Removal By Board. The Board of Directors may declare
vacant the office of a director who has been judicially declared of unsound mind
or who has been convicted of an offense punishable by imprisonment for a term of
more than one year.
ARTICLE 12 - VACANCIES ON BOARD OF DIRECTORS
Section 12.1. Board Authorized To Fill Existing Vacancies. Vacancies on
the Board of Directors, including vacancies resulting from an increase in the
number of directors, shall be filled by a majority vote of the remaining members
of the Board of Directors, though less than a quorum, or by a sole remaining
director, and each person so selected shall be a director to serve for the
balance of the unexpired term.
Section 12.2. Board Authorized To Fill Future Vacancies. When one or
more directors resign from the Board of Directors effective at a future date,
the directors then in office, including those who have so resigned, shall have
the power by a majority vote to fill the vacancies, the vote thereon to take
effect when the resignations become effective.
ARTICLE 13 - POWERS OF BOARD
Section 13.1. Board Authority - General. The business and affairs of
the Corporation shall be managed under the direction of the Board of Directors,
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are directed or required to be exercised and done by statute,
the Articles of Incorporation or these Bylaws.
Section 13.2. Board Committees. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees consisting of one or more directors as may be deemed appropriate
or desirable by the Board of Directors to serve at the pleasure of the Board.
Any committee, to the extent provided in the resolution of the Board of
Directors pursuant to which it was created, shall have and may exercise all of
the powers and authority of the Board of Directors, except that no committee
shall have any power or authority as to the following:
(a) The submission to shareholders of any action requiring approval of
shareholders;
(b) The creation or filling of vacancies in the Board of Directors;
(c) The adoption, amendment or repeal of these Bylaws;
(d) The amendment or repeal of any resolution of the Board of Directors
that by its terms is amendable or repealable only by the Board of
Directors; and
(e) Action on matters committed by the Bylaws or resolution of the
Board of Directors to another committee of the Board of Directors.
8
<PAGE>
ARTICLE 14 - MEETINGS OF THE BOARD OF DIRECTORS
Section 14.1. Place of Meeting; Use of Telecommunications Equipment.
Meetings of the Board of Directors shall be held at such times and places within
or without the Commonwealth of Pennsylvania as the Board of Directors may from
time to time appoint or as may be designated in the notice of the meeting. One
or more directors may participate in any meeting of the Board of Directors, or
of any committee thereof, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear one another, provided that the use of such conference telephone
or similar communications equipment shall be at the discretion of the Board of
Directors. Participation in a meeting by such means shall constitute presence in
person at the meeting.
Section 14.2. Regular Meetings. A regular meeting of the Board of
Directors shall be held annually, immediately following the annual meeting of
the shareholders, at the place where such meeting of the shareholders is held or
at such other place and time as a majority of the directors in office after the
annual meeting of shareholders may designate. At such meeting, the Board of
Directors shall elect officers of the Corporation. In addition to such regular
meeting, the Board of Directors shall have the power to fix by resolution the
place and time of other regular meetings of the Board.
Section 14.3. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if any, by the President,
or by a majority of the directors in office on one day's notice to each
director, either by telephone, or, if in writing, in accordance with the
provisions of Article 29 of these Bylaws.
Section 14.4. Quorum. At all meetings of the Board of Directors a
majority of the directors in office shall constitute a quorum for the
transaction of business, and the acts of a majority of the directors present and
voting at a meeting at which a quorum is present shall be the acts of the Board
of Directors, except as may be otherwise specifically provided by statute or by
the Articles of Incorporation or by these Bylaws.
ARTICLE 15 - ACTION BY WRITTEN CONSENT
Section 15.1. Written Consent - General. Any action required or
permitted to be taken at a meeting of the Board of Directors, or at any
committee of the Board of Directors, may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto signed by all of the
directors (or members of the committee with respect to committee action) is
filed with the Secretary of the Corporation.
ARTICLE 16 - COMPENSATION OF DIRECTORS
Section 16.1. Compensation - General. Directors, as such, may receive a
stated salary for their services or a fixed sum and expenses for attendance at
regular and special meetings, or any combination of the foregoing as may be
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determined from time to time by resolution of the Board of Directors, and
nothing contained herein shall be construed to preclude any director from
receiving compensation for services rendered to the Corporation in any other
capacity.
ARTICLE 17 - OFFICERS
Section 17.1. Officers - General. The officers of the Corporation shall
be a Chief Executive Officer, a President, a Chairman of the Board, one or more
Vice Presidents, a Secretary, a Treasurer, and such other officers and assistant
officers as the Board of Directors may from time to time deem advisable. Except
for the Chief Executive Officer, President, Secretary and Treasurer, the Board
may refrain from filling any of the said offices at any time and from time to
time. The same individual may hold any two or more offices. The following
officers shall be elected by the Board of Directors at the time, in the manner
and for such terms as the Board of Directors from time to time shall determine:
Chief Executive Officer, President, Chairman of the Board, Secretary, and
Treasurer. The Chief Executive Officer may, subject to change by the Board of
Directors, appoint such other officers and assistant officers as he may deem
advisable provided such officers or assistant officers have a title no higher
than Vice President, who shall hold office for such periods as the Chief
Executive Officer shall determine. Any officer may be removed at any time, with
or without cause, and regardless of the term for which such officer was elected.
ARTICLE 18 -PRESIDENT
Section 18.1. Chief Executive Officer - General. The Chief Executive
Officer shall have general supervision of all of the departments and business of
the Corporation; he shall prescribe the duties of the other officers and
employees and see to the proper performance thereof. The Chief Executive Officer
shall be responsible for having all orders and resolutions of the Board of
Directors carried into effect. The Chief Executive Officer shall execute on
behalf of the Corporation and may affix or cause to be affixed a seal to all
authorized documents and instruments requiring such execution, except to the
extent that signing and execution thereof shall have been delegated to some
other officer or agent of the Corporation by the Board of Directors or by the
Chief Executive Officer. The Chief Executive Officer shall be a member of the
Board of Directors. In the event of the disability of the Chairman of the Board
or his refusal to act, the Chief Executive Officer shall preside at meetings of
the Board and the shareholders. In general, the Chief Executive Officer shall
perform all the duties and exercise all the powers and authorities incident to
his office or as prescribed by the Board of Directors. Unless otherwise provided
by the Board of Directors, the salaries and compensation of all officers and
assistant officers, except the Chief Executive Officer, President and Chairman
of the Board, shall be fixed by or in the manner designated by the Chief
Executive Officer.
Section 18.2 President - General. The President shall perform such
duties as are prescribed by the Board of Directors or the Chief Executive
Officer. The President shall execute on behalf of the Corporation and may affix
or cause to be affixed a seal to all authorized documents and instruments
requiring such execution, except to the extent that signing and execution
thereof shall have been delegated to some other officer or agent of the
Corporation by the Board of Directors or by the Chief Executive Officer.
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In the event of the disability of the Chief Executive Officer or his refusal to
act, the President shall perform the duties and have the powers and authorities
of the Chief Executive Officer. In the event of the disability of the Chairman
of the Board and the Chief Executive Officer or their refusal to act, the
President shall preside at meetings of the Board and the shareholders.
ARTICLE 19 - SECRETARY
Section 19.1. Secretary - General. The Secretary shall act under the
supervision of the Chief Executive Officer or such other officer as the Chief
Executive Officer may designate. Unless a designation to the contrary is made at
a meeting, the Secretary shall attend all meetings of the Board of Directors and
all meetings of the shareholders and record all of the proceedings of such
meetings in a book to be kept for that purpose. The Secretary shall keep a seal
of the Corporation, and, when authorized by the Board of Directors or the Chief
Executive Officer, cause to be affixed to any documents and instruments
requiring it. The Secretary shall perform such other duties as may be prescribed
by the Board of Directors or Chief Executive Officer, or such other supervising
officer as the Chief Executive Officer may designate.
ARTICLE 20 - TREASURER
Section 20.1. Treasurer - General. The Treasurer shall act under the
supervision of the Chief Executive Officer or such other officer as the Chief
Executive Officer may designate. The Treasurer shall have custody of the
Corporation's funds and such other duties as may be prescribed by the Board of
Directors or the Chief Executive Officer, or such other supervising officer as
the Chief Executive Officer may designate.
ARTICLE 21 - CHAIRMAN OF THE BOARD
Section 21.1. Chairman of the Board - General. The Chairman of the
Board shall be a member of the Board of Directors and shall preside at the
meetings of the Board and the shareholders and perform such other duties as may
be prescribed by the Board of Directors.
ARTICLE 22 - OTHER OFFICERS
Section 22.1. Vice Presidents - General. The Vice Presidents shall
perform such duties, do such acts and be subject to such supervisions as may be
prescribed by the Board of Directors or the Chief Executive Officer. In the
event of the disability of the Chief Executive Officer and the President or
their refusal to act, the Vice Presidents, in the order of their rank, and
within the same rank in the order of their seniority, shall perform the duties
and have the powers and authorities of the Chief Executive Officer and
President, except to the extent inconsistent with applicable law.
Section 22.2 Assistant Officers - General. Unless otherwise provided by
the Board of Directors, each assistant officer shall perform such duties as
shall be prescribed by the Board of Directors, the Chief Executive Officer,
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or the officer to whom he is an assistant. In the event of the absence or
disability of an officer or his refusal to act, his assistant officers shall, in
the order of their rank, and within the same rank in the order of their
seniority, have the powers and authorities of such officer.
ARTICLE 23 - LIMITATION OF DIRECTORS' LIABILITY AND
INDEMNIFICATION OF OFFICERS, DIRECTORS, AND OTHER PERSONS
Section 23.1. Limitation of Liability. No director of the Corporation
shall be personally liable, as such, for monetary damages for any action taken
unless: (a) the director has breached or failed to perform the duties of his or
her office, and (b) the breach or failure to perform constitutes self-dealing,
wilful misconduct or recklessness; provided, however, that the provisions of
this Section 23.1 shall not apply to the responsibility or liability of a
director pursuant to any criminal statute, or to the liability of a director for
the payment of taxes pursuant to local, Pennsylvania or federal law.
Section 23.2. Indemnification. The Corporation shall indemnify and hold
harmless to the fullest extent permitted by Pennsylvania law any director or
officer, and may indemnify any other employee or agent, who was or is a party
to, or is threatened to be made a party to, or who is called as a witness in
connection with, any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
an action by or in the right of the Corporation (collectively, for purposes of
this Article 23, "Proceeding"), by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another domestic or foreign corporation for profit or not-for-profit,
partnership, joint venture, trust or other enterprise, against expenses,
liability and loss including, without limitation, attorneys' fees and
disbursements, punitive and other damages, judgments, fines, penalties, amounts
paid or to be paid in settlement and costs and expenses of any nature incurred
by him in connection with such Proceeding and any appeal therefrom; provided
that such indemnification shall not be made where the act or failure to act
giving rise to the claim for indemnification is determined by a court in a final
binding adjudication to have constituted willful misconduct or recklessness.
Section 23.3. Indemnification and Advancement of Expenses
Non-Exclusive. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article 23 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement, contract, vote of shareholders or directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. It is the policy of the Corporation
that indemnification of, and advancement of expenses to, directors and officers
of the Corporation shall be made to the fullest extent permitted by law. To this
end, the provisions of this Article 23 shall be deemed to have been amended for
the benefit or directors and officers of the Corporation effective immediately
upon any modification of the BCL or any modification, or adoption of any other
law that expands or enlarges the power or obligation of corporations organized
under the BCL to indemnify, or advance expenses to, directors and officers of
corporations.
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Section 23.4. Advancement of Expenses - Repayment Undertaking. The
Corporation shall pay expenses incurred by an officer or director, and may pay
expenses incurred by any other employee or agent, in defending a Proceeding, in
advance of the final disposition of such action or proceeding provided that if
required by the BCL or other applicable law, the payment of such expenses shall
be made only upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation.
Section 23.5. Continuation of Indemnification Following Termination.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article 23 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 23.6. Security For Indemnification Obligation. The Corporation
shall have the authority to create a fund of any nature, which may, but need not
be, under the control of a trustee, or otherwise secure or insure in any manner,
its indemnification obligations, whether arising under these Bylaws or
otherwise. This authority shall include, without limitation, the authority to:
(i) deposit funds in trust or in escrow; (ii) establish any form of
self-insurance; (iii) secure its indemnity obligation by grant of a security
interest, mortgage or other lien on the assets of the Corporation; or (iv)
establish a letter of credit, guaranty or surety arrangement for the benefit of
such persons in connection with the anticipated indemnification or advancement
of expenses contemplated by this Article 23. The provisions of this Article 23
shall not be deemed to preclude the indemnification of, or advancement of
expenses to, any person who is not specified in Section 23.1 of this Article 23
but whom the Corporation has the power or obligation to indemnify, or to advance
expenses for, under the provisions of the BCL, other applicable law or
otherwise. The authority granted by this Section 23.5 shall be exercised by the
Board of Directors of the Corporation.
Section 23.7. Indemnification Agreements. The Corporation shall have
the authority to enter into a separate indemnification agreement with any
officer, director, employee or agent of the Corporation or any subsidiary
providing for such indemnification of such person as the Board of Directors
shall determine up to the fullest extent permitted by law.
Section 23.8. Settlement ; No Presumption. The termination of any
Proceeding by judgment, order, settlement, conviction, or upon a plea of guilty
or nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the person's conduct constituted willful misconduct or
recklessness.
Section 23.9. Repeal of Indemnification Provisions. The indemnification
provisions of this Article 23 shall constitute a contract between the
Corporation and each of its directors, officers, employees and agents who are or
may be entitled to indemnification hereunder and who serve in any such capacity
at any time while such provisions are in effect. Any repeal or modification of
the indemnification provisions of this Article 23 shall not limit any such
person's rights to indemnification (including the advancement of expenses) then
existing or arising out of events, acts or omissions occurring prior to such
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repeal or modification, including, without limitation, the right to
indemnification with respect to Proceedings commenced after such repeal or
modification based in whole or in part upon any such event, act or omission.
Section 23.10. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another domestic or foreign corporation for profit or not-for-profit,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss asserted against him and incurred by him or on his behalf in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article 23 or under any provision of the BCL or other
applicable law.
Section 23.11. Amendment of Article 23; Amendments Not Effective
Retroactively. Notwithstanding any other provision of these Bylaws relating to
their amendment generally, any repeal or amendment of this Article 23 which is
adverse to any director of officer shall apply to such director or officer only
on a prospective basis, and shall not reduce any limitation on the personal
liability of a director of the Corporation, or limit the rights of any person
entitled under Article 23 to indemnification or to the advancement of expenses
with respect to any action or failure to act occurring prior to the time of such
repeal or amendment. Notwithstanding any other provision of these Bylaws, no
repeal or amendment of these Bylaws shall affect any or all of this Article so
as either to reduce the limitation of directors' liability or limit
indemnification or the advancement of expenses in any manner unless adopted by
the affirmative vote of the shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast in the election of
directors; provided that no such amendment shall have retroactive effect
inconsistent with the preceding sentence. The provisions of this Article 23 were
adopted by the shareholders of the Corporation on June 30, 1995.
Section 23.12. Changes to Pennsylvania Law. References in this Article
23 to Pennsylvania law or to any provision thereof shall be to such law as it
existed on the date this Article 23 was adopted or as such law thereafter may be
changed; provided that (a) in the case of any change which expands the liability
of directors or limits the indemnification rights or the rights to advancement
of expenses which the Corporation may provide, the rights to limited liability,
to indemnification and to the advancement of expenses which the Corporation may
provide, the rights to limited liability, to indemnification and to the
advancement of expenses provided in this Article shall continue as theretofore
to the extent permitted by law; and (b) if such change permits the Corporation
without the requirement of any further action by shareholders or directors to
limit further the liability of directors (or limit the liability of officers) or
to provide broader indemnification rights or rights to the advancement of
broader indemnification rights or rights to the advancement of expenses than the
Corporation was permitted to provide prior to such change, then liability
thereupon shall be so limited and the rights to indemnification and the
advancement of expenses shall be so broadened to the extent permitted by law.
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ARTICLE 24 - SHARES; SHARE CERTIFICATES
Section 24.1. Share Certificates. Except as otherwise provided in
Section 24.2, the shares of the Corporation shall be represented by
certificates. Unless otherwise provided by the Board of Directors, every share
certificate shall be signed by two officers and sealed with the corporate seal,
which may be a facsimile, engraved or printed, but where such certificate is
signed by a transfer agent or a registrar, the signature of any corporate
officer upon such certificate may be a facsimile, engraved or printed. In case
any officer who has signed, or whose facsimile signature has been placed upon,
any share certificate shall have ceased to be such officer because of death,
resignation or otherwise, before the certificate is issued, it may be issued
with the same effect as if the officer had not ceased to be such at the date of
its issue. The provisions of this Section 24.1 shall be subject to any
inconsistent or contrary agreement at the time between the Corporation and any
transfer agent or registrar. To the extent the Corporation is authorized to
issue shares of more than one class or series, every certificate shall set forth
upon the face or back of the certificate (or shall state on the fact or back of
the certificate that the Corporation will furnish to any shareholder upon
request and without charge) a full or summary statement of the designation,
voting rights, preferences, limitations and special rights of the shares of each
class or series authorized to be issued so far as they have been fixed and
determined and the authority of the Board of Directors to fix and determine the
designations, voting rights, preferences, limitations and special rights of the
classes and series of shares of the Corporation.
Section 24.2. Uncertificated Shares. Notwithstanding anything herein to
the contrary, any or all classes and series of shares, or any part thereof, may
be represented by uncertificated shares to the extent determined by the Board of
Directors, except that shares represented by a certificate that is issued and
outstanding shall continue to be represented thereby until the certificate is
surrendered to the Corporation. Within a reasonable time after the issuance or
transfer of uncertificated shares, the Corporation shall send to the registered
owner thereof, a written notice containing the information required to be set
forth or stated on certificates. The rights and obligations of the holders of
shares represented by certificates and the rights and obligations of the holders
of uncertificated shares of the same class and series shall be identical.
Notwithstanding anything herein to the contrary, the provisions of Section 24.1
shall be inapplicable to uncertified shares and in lieu thereof the Board of
Directors shall adopt alternative procedures for registration of transfers.
ARTICLE 25 -TRANSFER OF SHARES
Section 25.1. Transfer of Shares - General. Upon surrender to the
Corporation of a share certificate duly endorsed by the person named in the
certificate or with duly executed stock powers attached and otherwise in proper
form for transfer, or by attorney duly appointed in writing and accompanied
where necessary by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto and
the old certificate canceled and the transfer recorded on the share register of
the Corporation. Except as otherwise provided pursuant to Section 6.2 hereof, a
transferee of shares of the Corporation shall not be a record holder of such
shares entitled to the rights and benefits associated therewith unless and until
the share transfer has been recorded on the share transfer books of the
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Corporation. No transfer shall be made if it would be inconsistent with the
provisions of Article 8 of the Pennsylvania Uniform Commercial Code.
ARTICLE 26 - LOST CERTIFICATES
Section 26.1. Lost Certificates - General. Unless waived in whole or in
part by the Board of Directors, any person requesting the issuance of a new
certificate in lieu of an alleged lost, destroyed, mislaid or wrongfully taken
certificate shall (a) give to the Corporation his or her bond of indemnity with
an acceptable surety, and (b) satisfy such other requirements as may be imposed
by the Corporation. Thereupon, a new share certificate shall be issued to the
registered owner or his or her assigns in lieu of the alleged lost, destroyed,
mislaid or wrongfully taken certificate, provided that the request therefor and
issuance thereof have been made before the corporation has notice that such
shares have been acquired by a bona fide purchaser.
ARTICLE 27 - FINANCIAL REPORTS TO SHAREHOLDERS
Section 27.1. Annual Financial Statements. Unless waived in a written
agreement by the shareholders, separate from the Articles of Incorporation or
these By-laws, the Corporation shall furnish to its shareholders annual
financial statements, including at least a balance sheet as of the end of each
fiscal year and a statement of income and expenses for the fiscal year. The
financial statements shall be prepared on the basis of generally accepted
accounting principles, if the Corporation prepares financial statements for the
fiscal year on that basis for any purpose, and may be consolidated statements of
the Corporation and one or more of its subsidiaries. The financial statements
shall be mailed by the Corporation to each of its shareholders entitled thereto
within one hundred and twenty (120) days after the close of each fiscal year
and, after the mailing and upon written request, shall be mailed by the
Corporation to any shareholder or beneficial owner entitled thereto to whom a
copy of the most recent annual financial statements has not previously been
mailed. Statements that are audited or reviewed by a public accountant shall be
accompanied by the report of the accountant; in other cases, each copy shall be
accompanied by a statement of the person in charge of the financial records of
the Corporation stating his reasonable belief as to whether or not the financial
statements were prepared in accordance with generally accepted accounting
principles and, if not, describing the basis of presentation and describing any
material respects in which the financial statements were not prepared on a basis
consistent with those prepared for the previous year.
ARTICLE 28 - FISCAL YEAR
Section 28.1. Fiscal Year. The fiscal year of the Corporation shall be
as determined by the Board of Directors.
ARTICLE 29 - MANNER OF GIVING WRITTEN NOTICE; WAIVERS OF NOTICE
Section 29.1. Manner of Giving Written Notice. Whenever written notice
is required to be given to any person under the provisions of these Bylaws, it
may be given to the person either personally or by sending a copy thereof by
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first class or express mail, postage prepaid, or by telegram (with messenger
service specified), telex or TWX (with answerback received) or courier service,
charges prepaid, or by telecopier, to his address (or to his telex, TWX,
telecopier or telephone number) appearing on the books of the Corporation or, in
the case of written notice to directors, supplied by each director to the
Corporation for the purpose of the notice. If the notice is sent by mail,
telegraph or courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex or TWX, when dispatched.
Section 29.2. Waivers of Notice. Any written notice required to be
given to any person under the provisions of statute, the Corporation's Articles
of Incorporation or these Bylaws may be waived in a writing signed by the person
entitled to such notice whether before or after the time stated therein. Except
as otherwise required by statute, and except in the case of a special meeting,
neither the business to be transacted at, nor the purpose of, a meeting need be
specified in the waiver of notice. In the case of a special meeting of
shareholders, the waiver of notice shall specify the general nature of the
business to be transacted. Attendance of any person, whether in person or by
proxy, at any meeting shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened.
ARTICLE 30 - AMENDMENTS
Section 30.1. Amendment by Shareholders. Except as provided in Section
23.11 hereof, these Bylaws may be amended or repealed, and new Bylaws adopted,
by the affirmative vote of a majority of the votes cast by the shareholders at
any regular or special meeting duly convened after written notice to the
shareholders that the purpose, or one of the purposes, of the meeting is to
consider the amendment or repeal of these Bylaws and the adoption of new Bylaws.
There shall be included in, or enclosed with, the notice, a copy of the proposed
amendment or a summary of the changes to be effected thereby.
Section 30.2. Amendment By Board. Except as provided in Section 23.11
hereof, and except as provided in Section 1504(b) of the BCL, these Bylaws may
be amended or repealed, and new Bylaws adopted, by the affirmative vote of a
majority of the members of the Board of Directors (but not a committee thereof)
at any regular or special meeting duly convened, regardless of whether the
shareholders have previously adopted the Bylaw being amended or repealed,
subject to the power of the shareholders to change such action of the Board of
Directors, provided that the Board of Directors shall not have the power to
amend these Bylaws on any subject that is expressly committed to the
shareholders by the express terms hereof, by Section 1504 of the BCL or
otherwise.
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 4th day
of April 1996 by and between ROM TECH, INC., a Pennsylvania corporation
("Rom Tech"), and LANCE H. WOELTJEN ("Employee").
AGREEMENT
WHEREAS, Employee has been employed by Virtual Reality Laboratories,
Inc. ("Virtual Reality"), and
WHEREAS, Rom Tech, Virtual Reality and VR Acquisition Corporation have
entered into an Agreement and Plan of Reorganization dated as of April 4th, 1996
(the "Reorganization Agreement"), which provides for the exchange of all of the
outstanding shares of Virtual Reality Common Stock for Rom Tech Common Shares
pursuant to a merger (the "Merger"), and
WHEREAS, the agreement of Employee to work for Rom Tech, subject to the
terms of this agreement, is a condition to Rom Tech's willingness and obligation
to close the Merger, and
WHEREAS, Employee holds shares of Virtual Reality Common Stock that
will be acquired by Rom Tech in the Merger.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement, and intending to be legally bound, the parties agree as follows:
Section 1. Employment and Duties. Rom Tech hereby employs Employee, and
Employee hereby accepts employment by Rom Tech, to serve as President of VR
Acquisition Corporation, a wholly-owned subsidiary of Rom Tech. Employee shall
have the powers and shall perform the duties and services consistent with
Employee's position of President of VR Acquisition Corporation. Employee shall
use Employee's best efforts and diligently pursue the business of Rom Tech.
Employee shall contribute all of Employee's business time, experience, labor,
and energy as necessary to meet these ends. In addition to Employee's duties as
President of VR Acquisition Corportation, Employee shall fully, diligently and
faithfully perform such other duties as may be assigned to him from time to time
by Rom Tech's Board of Directors.
Section 2. Term.
2.1. The term of Employee's employment shall begin on the
date hereof and shall continue thereafter for a period of three (3) years,
unless sooner terminated in accordance with Sections 3 or 4 below. Thereafter,
the term shall automatically continue year-to-year unless terminated by either
party, with or without cause, upon written notice, given three (3) months prior
to the expiration of the current term.
2.2. In the event that Employee is terminated without cause
during the Term of any renewal therof, Employee shall be paid severence
compensation equal to one (1) month's salary for each year of the Term and any
extension thereof, up to a maximum of six (6) month's salary.
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Section 3. Termination By Rom Tech. Rom Tech may not terminate
Employee's employment under this Agreement except in accordance with Section 2
above or this Section 3, as follows:
3.1. If Employee shall die during the Term, Employee's
employment shall terminate, except that Employee's legal representatives shall
be entitled to receive the compensation provided for under Section 5 hereof
prorated to the last day of the month in which Employee's death occurs.
3.2. If during the Term, Employee shall become physically or
mentally disabled whether totally or partially, so that Employee is unable
substantially to perform Employee's services hereunder for a period of three (3)
consecutive months, Rom Tech may, by written notice to Employee, terminate
Employee's employment hereunder.
3.3. Rom Tech may, by written notice to Employee, terminate
Employee's employment hereunder upon the occurrence of any of the following
events: (a) Employee engages in conduct involving deceit, fraud, theft or other
dishonesty; (b) Employee engages in willful misconduct; or (c) Employee fails to
perform any material obligation under this Agreement.
For purposes of this Agreement, "willful misconduct" shall be any act,
or failure to act, by Employee that is in bad faith and/or materially adverse to
the operation and existence of the Employer's business, including, but not
limited to any of the following: dishonesty, fraud, embezzlement, purposeful
destruction of Employer's property, involvement in any material conflict of
interest or self-dealing and continued failure to devote his best efforts on a
full-time basis to his employment hereunder.
For purposes of this Section 3, "material obligation" under this
Agreement shall mean Employee's obligations under Sections 1, 10, 11 and 12 of
this Agreement.
Section 4. Termination By Employee. Employee may not terminate
Employee's employment under this agreement except in accordance with Section 2
above and this Section 4, as follows:
4.1. Employee may terminate this Agreement if Rom Tech breaches
or fails to perform any material obligation under this Agreement.
4.2. Employee may terminate this Agreement, at any time,
without cause, upon 30 days prior written notice to Rom Tech.
For purposes of this Section 4, "material obligation" under this
Agreement shall mean Rom Tech's obligations under Sections 5, 6 and 7.
Section 5. Compensation.
5.1. For all services rendered by Employee under this
Employment Agreement, Employee shall be paid an annual base salary of $86,400,
payable in equal bi-weekly installments, less such deductions as shall be
required by applicable law and government regulations.
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5.2. Employee shall be eligible to receive a bonus payment on
each anniversary of the date of this Agreement as follows:
(i) A bonus of $20,000 on the first day of the second fiscal
quarter if the following revenue targets are achieved by Rom Tech based upon Rom
Tech's audited financial statements for the fiscal year ending immediately prior
to the applicable dates set forth below:
(A) First anniversary - $3,000,000 for the fiscal year
ending June 30, 1996;
(B) Second anniversary - $5,000,000 for the fiscal year
ending June 30, 1997; and
(C) Third anniversary - $8,000,000 for the fiscal year
ending June 30, 1998.
(ii) Provided the aforesaid annual revenue targets are
achieved, Employee shall be eligible to receive an additional bonus on each
corresponding anniversary date. The payment and amount of the additional bonus
shall be determined in the discretion of the Board of Directors and shall be
based upon the profitability of Rom Tech and Employee's contribution to the
achievement of targeted revenue levels and profitability by Rom Tech.
5.3. Employee shall be eligible to receive options, as
determined in the discretion of the Nominating and Compensation Committee of Rom
Tech's Board of Directors, under any option plans of Rom Tech in effect during
the term of this Agreement.
5.4. Rom Tech will reimburse Employee for reasonable documented
expenses incurred in the performance of Employee's duties, consistent with Rom
Tech's policies regarding reimbursement, upon receipt of expense vouchers in a
form satisfactory to Rom Tech.
Section 6. Benefits. Employee shall also receive benefits equivalent to
or greater than those benefits listed on Exhibit "A" of this Employment
Agreement. In addition to the benefits listed on Exhibit "A", Employee shall
receive a vehicle allowance not to exceed $400 per month.
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Section 7. Place of Business. VR Acquisition Corporation's principal
place of business on the date hereof is San Luis Obispo, California. Employee's
principal place of business during the Term and any extensions thereof will be
in San Luis Obispo, California; provided, however, that Employee may be
relocated elsewhere to the extent Employee shall agree to such relocation.
Section 8. Resgistration Rights. In the event that, during the first
two years of the Term, (i) Rom Tech terminates Employee's employment hereunder
without cause, or (ii) Employee terminates his employment pursuant to Section
4.1, Employee shall have the following registration rights:
8.1. In the event that Rom Tech undertakes an underwritten public
offering of its Common Stock for its own account or files a registration
statement on Form S-3 during the period commencing on the date of such
termination and ending on the second anniversary of the date of this Agreement,
Rom Tech shall use its best efforts to cause the Registrable Securities (as
hereinafter defined) with respect to which Employee shall have so requested
registration to be registered, pursuant to the filing of a registration
statement on Form SB-2 or Form S-3, as the case may be, (or on such other
appropriate form as Rom Tech in its sole discretion shall determine), together
with the documents incorporated by reference therein (the "Registration
Statement"). The "Registrable Securities" that Rom Tech shall use its best
efforts to cause to be registered on behalf of Employee shall be all of the
shares of Rom Tech Common Stock acquired by Employee in the Merger (the
"Registrable Securities"); provided, however, that Rom Tech will not be required
to include the Registrable Securities in any such Registration Statement if (i)
Rom Tech continues to pay Employee's base salary and any bonus payment(s) to
which he would be eligible during the first two years of the Term, until the
second anniversary of the date of this Agreement; or (ii) Employee is able to
dispose of the Rom Tech Common Stock issued to him in connection with the Merger
without registration in reliance upon Rule 144.
8.2. Rom Tech shall in each case give written notice of such proposed
filing of a Registration Statement to Employee at least twenty days before the
anticipated filing date, and such notice shall offer Employee the opportunity to
register the Registrable Securities and, upon written request, given within 10
days after receipt of any such notice, of Employee to request the registration
of any of his Registrable Securities, Rom Tech shall use its best efforts to
cause the Registrable Securities to be registered. Rom Tech shall use its best
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit Employee to include such securities in such
offering on the same terms and conditions as any similar securities of Rom Tech
included therein.
8.3. At such time as it shall file the Registration Statement, Rom Tech
agrees to use its best efforts to register or qualify the Registrable Securities
covered by the Registration Statement under the Blue Sky Laws of such
jurisdictions, not to exceed ten in number, as shall be reasonably requested by
Employee in writing to permit Employees to sell or otherwise to dispose of any
and all Registrable Securities in such states, provided that Rom Tech shall not
be obligated to qualify as a foreign corporation to do business under the laws
of any jurisdiction in which it shall not then be qualified.
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8.4. Rom Tech agrees to use its best efforts to cause the Registration
Statement and all such state filings to become effective and to remain effective
until the earlier of (A) the date when all Registrable Securities covered by the
Registration Statement have been sold or (B) nine months after the effective
date of the Registration Statement if the Registration Statement is filed
pursuant to Rule 415 of the Act (or any similar rule that may be adopted by the
SEC).
8.5. Employee undertakes to provide all such information and materials
and take all such actions as may be required in order to permit Rom Tech to
comply with all applicable requirements of the Securities Act and the SEC, to
obtain any desired acceleration of the effective date of such Registration
Statement and to comply with all requirements of applicable Blue Sky Laws or
other administrative agency of any state of the United States.
8.6. Rom Tech agrees to prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement as may be necessary
to keep such Registration Statement effective during the period referred to in
Section 8.4 and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement, and
cause the prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the SEC.
8.7. Rom Tech agrees to furnish to Employee such numbers of copies of
the Registration Statement, each amendment thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus), each
supplement thereto and such other documents as he may reasonably request in
order to facilitate the disposition of Registrable Securities owned by him.
8.8. Rom Tech shall promptly notify Employee at any time when a
prospectus relating to the sale of the Registrable Securities is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading and Rom Tech will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading.
8.9. It shall be a condition precedent to the obligations of Rom Tech
to take any action pursuant to this Section 8 that Employee shall furnish to Rom
Tech such information regarding himself, the Registrable Securities held by him
and the intended method of disposition of such Registrable Securities and
execute such documents regarding the sale of the Registrable Securities as Rom
Tech shall reasonably request and as shall be required in connection with the
action to be taken by Rom Tech.
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8.10. Employee agrees that, upon receipt of any notice from Rom Tech
of the happening of any event of the kind described in Section 8.8 hereof,
Employee will discontinue disposition of Registrable Securities until
Employee's receipt of copies of a supplemented or amended prospectus
contemplated by Section 8.8 hereof, or until it is advised in writing (the
"Advice") by Rom Tech that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the prospectus, and, if so directed by Rom Tech, Employee will
deliver to Rom Tech (at the expense of Rom Tech) all copies, other than
permanent file copies then in Employee's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of such notice. In
the event Rom Tech shall give any such notice, the time periods mentioned in
Section 8.4 hereof shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to Section 8.8
hereof, to and including the date when Employee shall have received the copies
of the supplemented or amended prospectus contemplated by Section 8.8 hereof, or
the Advice.
8.11. Rom Tech shall pay all expenses incurred by Rom Tech in
connection with the preparation and execution of the Registration Statement
referred to in Section 8.1; provided, however, that Rom Tech shall not be
obligated to pay any underwriting or brokerage commissions, discounts or fees
relating to any sale of the Registrable Securities or the fees and expenses of
any counsel to Employee.
8.12. If the Registrable Securities have been registered pursuant to
Rule 415, then if Employee desires to sell or otherwise transfer any of
Employee's Registrable Securities pursuant to the Registration Statement,
Employee shall notify Rom Tech of Employee's intention to do so by written
notice received by Rom Tech at least one business day prior to such sale or
transfer. Employee may effect a sale or transfer within 30 days after the
delivery of such notice unless Rom Tech shall have provided notice to Employee
pursuant to Section 8.8.
8.13. The rights to cause Rom Tech to use its best efforts to register
the Registrable Securities hereunder are not assignable except by prior written
agreement of the parties.
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8.14. In connection with any registration of securities under this
Agreement, Rom Tech hereby agrees to indemnify Employee and each underwriter, if
any, against all losses, claims, damages and liabilities caused by any untrue,
or alleged untrue, statement of a material fact contained in any registration
statement or prospectus (and as amended or supplemented if Rom Tech shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or alleged untrue statement or omission based
upon information furnished in writing to Rom Tech by Employee or, as the case
may be, any underwriter, expressly for use therein, and Rom Tech, each officer,
director and controlling person of Rom Tech and each underwriter, if any, for
Rom Tech shall be indemnified by Employee for all such losses, claims, damages
and liabilities caused by any untrue, or alleged untrue, statement or omission,
or alleged omission, based upon information furnished in writing to Rom Tech or
the underwriter by Employee for any such use.
Promptly upon receipt by a party indemnified under this Section 8.14 of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party otherwise than under this
Section 8.14. In the case that notice of commencement of any such action shall
be given to the indemnifying party as above provided, the indemnifying party
shall be obligated to participate in and, jointly with any other indemnifying
party similarly notified, to assume the defense of such action at its own
expense, with counsel chosen by it and reasonably satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be paid by the indemnified party unless the
indemnifying party either agrees to pay the same or fails to assume the defense
of such action with counsel reasonably satisfactory to the indemnified party. No
indemnifying party shall be liable for any settlement entered into without its
consent, such consent not to be unreasonably withheld.
8.15. Employee may not participate in any underwritten registration
hereunder unless Employee (a) agrees to sell his securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
agreements.
Section 9. Acknowledgments. Employee acknowledges that the following
are highly confidential and constitute trade secrets:
9.1. The particular needs of Rom Tech's and VR Acquisition
Corporation's customers (which are not generally known in the industry);
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9.2. Rom Tech's and VR Acquisition Corporation's proprietary
interest in the identity of its customers, customer lists and suppliers,
providers of content for its multimedia software products, third party software
developers which have developed software for Rom Tech and/or VR Acquisition
Corporation or from which Rom Tech and/or VR Acquisition Corporation has
acquired ownership of software, its products, processes and services, including,
but not limited to, information relating to software development, inventions,
manufacturing, purchasing, accounting, engineering, marketing, merchandising and
selling; and
9.3. Documents and information regarding Rom Tech's and VR
Acquisition Corporation's methods of operation, sales, marketing and pricing
strategies, cost structure, and the specialized requirements of Rom Tech's
customers.
Section 10. Trade Secrets and Confidential Information. During the term
of Employee's employment, Employee will have access to and become familiar with
various trade secrets and confidential information of Rom Tech and VR
Acquisition Corporation, including, but not necessarily limited to, the
documents and information referred to in Section 9 above. Employee acknowledges
that such confidential information and trade secrets are owned and shall
continue to be owned solely by Rom Tech. During the term of Employee's
employment, Employee will not, except as authorized or directed in writing, copy
or make notes of any such confidential information or trade secrets. Upon
termination of Employee's employment, Employee will promptly deliver to Rom Tech
all notes, records or other documents (and all copies thereof) relating to Rom
Tech and VR Acquisition Corporation. During the term of Employee's employment
and for one year after Employee's employment terminates, Employee shall not use,
in whole or in part, any such confidential information or any such trade secret
for any purpose whatsoever nor shall Employee divulge, in whole or in part,
directly or indirectly, any such confidential information or any such trade
secret to any person other than Rom Tech or persons about whom Rom Tech has
given its written consent, unless the confidential information or the trade
secret has already become common knowledge (other than as a result of any breach
of this Agreement), or unless Employee is compelled to disclose it by
governmental process.
Section 11. Intellectual Property.
11.1. Rom Tech shall be the sole owner of all the products and
proceeds of the Employee's services to Rom Tech and VR Acquisition Corporation,
including, but not limited to, all materials, ideas, concepts, formats, designs,
suggestions, developments, arrangements, packages, computer programs,
inventions, patent applications, patents, copyrights, trademarks and other
intellectual properties (collectively, "Intellectual Property") that Employee
may acquire, obtain, develop or create in connection with the employee's
employment hereunder, free and clear of any claims by Employee (or anyone
claiming under Employee) of any kind or character whatsoever (other than
Employee's right to receive payments hereunder).
11.2. Employee shall, at the request of Rom Tech, execute such
assignments, certificates or other instruments as Rom Tech may from time to time
deem necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title and interest in or to any such Intellectual
Property.
11.3. The foregoing will not apply to any inventions which are
described in California Labor Code Section 2870.
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Section 12. Covenant Not to Compete or Solicit. Employee agrees that:
12.1. During the term of Employee's employment, Employee will
not, either solely or jointly with, or as manager or agent for, any person,
corporation, trust, joint venture, partnership, or other business entity,
directly or indirectly, carry on or be engaged or interested in any business
which competes with the business of Rom Tech and VR Acquisition Corporation,
provided that investments constituting less than five percent (5%) of a
publicly-held entity shall be exempt from Employee's covenant.
12.2. For one (1) year after Employee's employment terminates,
Employee will not, either solely or jointly with, or as manager or agent for,
any person, corporation, trust, joint venture, partnership, or other business
entity, directly or indirectly, carry on or be engaged or interested in any
business which competes with Rom Tech and VR Acquisition Corporation, (i.e.
sells software which is directly competitive with software sold by Rom Tech and
VR Acquisition Corporation) ("Competing Business"), provided that investments
constituting less than five percent (5%) of a publicly-held entity shall be
exempt from Employee's covenant.
12.3. During Employee's employment with Rom Tech, and for one
(1) year following the termination of Employee's employment, Employee will not
either solely or jointly with, or as manager or agent for, any person,
corporation, trust, joint venture, partnership, or other business entity,
directly or indirectly, hire or attempt to hire any individuals who are
employees of Rom Tech and/or VR Acquisition Corporation during the term of
Employee's employment.
12.4. During Employee's employment with Rom Tech, and for one
(1) year following the termination of Employee's employment, Employee will not
either solely or jointly with, or as manager or agent for, any person,
corporation, trust, joint venture, partnership or other business entity, either
directly or indirectly, solicit, divert or appropriate, or attempt to solicit,
divert or appropriate to any Competing Business, any of Rom Tech's customers or
suppliers, and/or persons or entities with whom Employee worked or about whom
Employee had access to information (including any prospective customer or
customers) during the term of Employee's employment with Rom Tech.
12.5. The parties acknowledge that the market for products of
the type sold by Rom Tech and Virtual Reality is worldwide, and the area where
the goodwill of Virtual Reality has been established through sales, production,
promotion and marketing of its products includes each of the states and counties
in the United States, including each county in California. Accordingly, in order
to secure to Rom Tech the benefits of the Merger, the parties agree that the
provisions of this Section 12 shall apply to each of the states and counties of
the United States, including each county in California.
12.6. The salary to be paid to Employee and the benefits to be
provided to Employee have been negotiated at arms length as additional
consideration for the covenants in Sections 10, 11 and 12 of this Agreement.
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Section 13. Remedies. Employee acknowledges and agrees to the
reasonableness of the restrictions in Sections 10 and 12, that these
restrictions were negotiated at arms length, that compliance with Sections 10
and 12 is necessary to protect the business and good will of Rom Tech, and that
a breach of any of the covenants in Sections 10 and 12 will irreparably and
continually damage Rom Tech, for which money damages will not be an adequate
remedy. In addition, in the event that Employee breaches or threatens to breach
any of these covenants, Rom Tech shall be entitled apply for: (i) a preliminary
and permanent injunction in order to prevent the continuation of such harm and
(ii) money damages insofar as they can be proved and determined. Nothing in
this Agreement, however, shall be construed to prohibit Rom Tech from also
pursuing any other remedy, the parties having agreed that all remedies are
cumulative.
Section 14. Warranty by Employee. Employee represents and warrants to
Rom Tech that Employee is not a party to any agreement containing a
non-competition provision or other restriction with respect to: (i) the nature
of any services or business which Employee is entitled or required to perform or
conduct under this Agreement or (ii) the disclosure or use of any information
which directly or indirectly relates to the nature of the business of Rom Tech
or the services to be rendered by Employee under this Agreement.
Section 15. Waiver of Rights. If in one or more instances either party
fails to insist that the other party perform any of the terms of this Agreement,
such failure shall not be construed as a waiver by such party of any past,
present, or future right granted under this Agreement and the obligations of
both parties under this Agreement shall continue in full force and effect.
Section 16. Survival. Employee's obligations under Sections 10, 11 and
12 shall continue after and survive the termination of this Agreement, except
upon a termination pursuant to Section 4.1 hereof, in which event only Sections
10 and 11 shall continue to be enforceable. In addition, the termination of
Employee's employment shall not affect any of the rights or obligations of
either party arising prior to or at the time of the termination, or which may
arise by any event causing the termination.
Section 17. Binding Effect. This Agreement shall be binding upon, and
inure to the benefit of, the parties and their respective heirs, successors,
permitted assigns, executors, administrators, and personal representatives.
Section 18. Severability. If any provision, section, paragraph, or
subparagraph of this Agreement is adjudged by any court to be void or
unenforceable in whole or in part, such adjudication shall not affect the
validity of the remainder of the Agreement, including any other provision,
section, paragraph, or subparagraph. Each provision, section, paragraph and
subparagraph of this Agreement is separable from every other provision, section,
paragraph and subparagraph, and constitutes a separate and distinct covenant. If
any term, provision, section, or paragraph of this Agreement shall be determined
by a court of competent jurisdiction to be unenforceable because it is
excessively broad as to time, duration, geographical scope, activity, or
subject, the parties hereby expressly agree that the court making such
determination shall have the power to limit and reduce such term, provision,
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section, or paragraph and/or to delete such specific words or phrases which the
court shall deem necessary to permit enforcement of such term, provision,
section, or paragraph to the maximum extent compatible with applicable law as it
then in effect.
Section 19. Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
delivered (personally, by courier service such as Federal Express, or by other
messenger) or on the second day after being deposited in the United States
mails, registered or certified mail, postage prepaid and return receipt
requested, addressed as set forth below:
(a) If to Rom Tech:
Rom Tech, Inc.
2260 Cabot Blvd., Suite 6
Langhorne, PA 19047
Attention: Joseph A. Falsetti
(b) If to Employee:
Lance H. Woeltjen
2341 Ganador Court
San Luis Obispo, California 93401
a copy of any notice given hereunder shall also be given to:
Ellen Pulver Flatt, Esquire
McCausland, Keen & Buckman
Five Radnor Corporate Center, Suite 500
100 Matsonford Road
Radnor, PA 19087
and James R. Spievak, Esquire
Annis & Spievak
701 "B" Street, Suite 2200
San Diego, CA 92101
In addition, notice by mail shall be by air mail if posted outside the
continental United States.
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of Employee's paragraph for the giving of notice.
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Section 20. Entire Agreement. This Agreement constitutes the complete
understanding between the parties with respect to the employment of Employee and
cannot be changed or modified except by a written agreement signed by the
parties.
Section 21. Headings. The headings in this Agreement are for
convenience only and shall be given no effect in the interpretation of this
Agreement.
Section 22. Presumptions. This Agreement shall be interpreted without
regard to any presumption or rule requiring construction against the party who
caused this Agreement to be drafted.
Section 23. Governing Law. This Agreement is made in the State of
California. It shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts made and to be performed therein
(other than those relating to conflicts of law), irrespective of the fact that
either of the parties now is or may become a resident of a different state.
Section 24. Subsidiaries. For the purposes of this Agreement and, in
particular, Sections 9, 10, 11 and 12, the term "Rom Tech" shall include all
subsidiaries, joint ventures and partnerships in which Rom Tech has a majority
ownership or other controlling interest.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
ROM TECH, INC.
By:
--------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
EMPLOYEE
Witness:
- - ------------------------------ -----------------------------------------
LANCE H. WOELTJEN
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EXHIBIT "A"
Benefits
Health Insurance
Dental Insurance
Life Insurance - $30,000
SEP program - no matching
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 4th day
of April, 1996 by and between ROM TECH, INC., a Pennsylvania corporation ("Rom
Tech"), and SUSAN H. WOELTJEN ("Employee").
AGREEMENT
WHEREAS, Employee has been employed by Virtual Reality Laboratories,
Inc. ("Virtual Reality"), and
WHEREAS, Rom Tech, Virtual Reality and VR Acquisition Corporation have
entered into an Agreement and Plan of Reorganization dated as of April 4, 1996
(the "Reorganization Agreement"), which provides for the exchange of all of the
outstanding shares of Virtual Reality Common Stock for Rom Tech Common Shares
pursuant to a merger (the "Merger"), and
WHEREAS, the agreement of Employee to work for Rom Tech, subject to the
terms of this agreement, is a condition to Rom Tech's willingness and obligation
to close the Merger, and
WHEREAS, Employee holds shares of Virtual Reality Common Stock that
will be acquired by Rom Tech in the Merger.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement, and intending to be legally bound, the parties agree as follows:
Section 1. Employment and Duties. Rom Tech hereby employs Employee, and
Employee hereby accepts employment by Rom Tech to serve as Vice President of VR
Acquisition Corporation, a wholly-owned subsidiary of Rom Tech. Employee shall
have the powers and shall perform the duties and services consistent with
Employee's position of Vice President of VR Acquisition Corporation. Employee
shall use Employee's best efforts and diligently pursue the business of Rom
Tech. Employee shall contribute all of Employee's business time, experience,
labor, and energy as necessary to meet these ends.
Section 2. Term.
(a) The term of Employee's employment shall begin on the
date hereof and shall continue thereafter for a period of three (3) years,
unless sooner terminated in accordance with Sections 3 or 4 below. Thereafter,
the term shall automatically continue year-to-year unless terminated by either
party, with or without cause, upon written notice, given three (3) months prior
to the expiration of the current term.
<PAGE>
Section 3. Termination By Rom Tech. Rom Tech may not terminate
Employee's employment under this Agreement except in accordance with Section 2
above or this Section 3, as follows:
3.1. If Employee shall die during the Term, Employee's
employment shall terminate, except that Employee's legal representatives shall
be entitled to receive the compensation provided for under Section 5 hereof
prorated to the last day of the month in which Employee's death occurs.
3.2. If during the Term, Employee shall become physically or
mentally disabled whether totally or partially, so that Employee is unable
substantially to perform Employee's services hereunder for a period of three (3)
consecutive months, Rom Tech may, by written notice to Employee, terminate
Employee's employment hereunder.
3.3. Rom Tech may, by written notice to Employee, terminate
Employee's employment hereunder upon the occurrence of any of the following
events: (a) Employee engages in conduct involving deceit, fraud, theft or other
dishonesty; (b) Employee engages in willful misconduct; or (c) Employee fails to
perform any material obligation under this Agreement.
For Purposes of this Agreement, "willful misconduct" shall be any act,
or failure to act, by Employee that is in bad faith and/or materially adverse to
the operation and existence of the Employer's business, including, but not
limited to any of the following: dishonesty, fraud, embezzlement, purposeful
destruction of Employer's property, involvement in any material conflict of
interest or self-dealing and continued failure to devote his best efforts on a
full-time basis to his employment hereunder.
For purposes of this Section 3, "material obligation" under this
Agreement shall mean Employee's obligations under Sections 1, 8, 9 and 10 of
this Agreement.
Section 4. Termination By Employee. Employee may not terminate
Employee's employment under this agreement except in accordance with Section 2
above and this Section 4, as follows:
4.1. Employee may terminate this Agreement if Rom Tech breaches
or fails to perform any material obligation under this Agreement.
4.2. Employee may terminate this Agreement, at any time,
without cause, upon 30 days prior written notice to Rom Tech.
For purposes of this Section 4, "material obligation" under this
Agreement shall mean Rom Tech's obligations under Sections 5, 6 and 7.
Section 5. Compensation.
5.1. For all services rendered by Employee under this
Employment Agreement, Employee shall be paid an annual base salary of $57,600,
payable in equal bi-weekly installments, less such deductions as shall be
required by applicable law and government regulations.
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5.2. Employee shall be eligible to receive a bonus payment on
each anniversary of the date of this Agreement as follows:
(i) A bonus of $5,000 on the first day of the second fiscal
quarter if the following revenue targets are achieved by Rom Tech based upon Rom
Tech's audited financial statements for the fiscal year ending immediately prior
to the applicable dates set forth below:
(A) First anniversary - $3,000,000 for the fiscal year
ending June 30, 1996;
(B) Second anniversary - $5,000,000 for the fiscal year
ending June 30, 1997; and
(C) Third anniversary - $8,000,000 for the fiscal year
ending June 30, 1998.
(ii) Provided the aforesaid annual revenue targets are
achieved, Employee shall be eligible to receive an additional bonus on each
corresponding anniversary date. The payment and amount of the additional bonus
shall be determined in the discretion of the Board of Directors and shall be
based upon the profitability of Rom Tech and Employee's contribution to the
achievement of targeted revenue levels and profitability by Rom Tech.
5.3. Employee shall be eligible to receive options, as
determined in the discretion of the Nominating and Compensation Committee of Rom
Tech's Board of Directors, under any option plans of Rom Tech in effect during
the term of this Agreement.
5.4. Rom Tech will reimburse Employee for reasonable documented
expenses incurred in the performance of Employee's duties, consistent with Rom
Tech's policies regarding reimbursement, upon receipt of expense vouchers in a
form satisfactory to Rom Tech.
Section 6. Benefits. Employee shall also receive benefits equivalent to
or greater than those benefits listed on Exhibit "A" of this Employment
Agreement.
Section 7. Place of Business. VR Acquisition Corporation's principal
place of business on the date hereof is San Luis Obispo, California. Employee's
principal place of business during the Term and any extensions thereof will be
in San Luis Obispo, California; provided, however, that Employee may be
relocated elsewhere to the extent Employee shall agree to such relocation.
Section 8. Acknowledgments. Employee acknowledges that the following
are highly confidential and constitute trade secrets:
8.1. The particular needs of Rom Tech's and VR Acquisition
Corporation's customers (which are not generally known in the industry);
8.2. Rom Tech's and VR Acquisition Corporation's proprietary
interest in the identity of its customers, customer lists and suppliers,
providers of content for its multimedia software products, third party software
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developers which have developed software for Rom Tech and/or VR Acquisition
Corporation or from which Rom Tech and/or VR Acquisition Corporation has
acquired ownership of software, its products, processes and services, including,
but not limited to, information relating to software development, inventions,
manufacturing, purchasing, accounting, engineering, marketing, merchandising and
selling; and
8.3. Documents and information regarding Rom Tech's and VR
Acquisition Corporation's methods of operation, sales, marketing and pricing
strategies, cost structure, and the specialized requirements of Rom Tech's
customers.
Section 9. Trade Secrets and Confidential Information. During the term
of Employee's employment, Employee will have access to and become familiar with
various trade secrets and confidential information of Rom Tech and VR
Acquisition Corporation, including, but not necessarily limited to, the
documents and information referred to in Section 7 above. Employee acknowledges
that such confidential information and trade secrets are owned and shall
continue to be owned solely by Rom Tech. During the term of Employee's
employment, Employee will not, except as authorized or directed in writing, copy
or make notes of any such confidential information or trade secrets. Upon
termination of Employee's employment, Employee will promptly deliver to Rom Tech
all notes, records or other documents (and all copies thereof) relating to Rom
Tech and VR Acquisition Corporation. During the term of Employee's employment
and for one year after Employee's employment terminates, Employee shall not use,
in whole or in part, any such confidential information or any such trade secret
for any purpose whatsoever nor shall Employee divulge, in whole or in part,
directly or indirectly, any such confidential information or any such trade
secret to any person other than Rom Tech or persons about whom Rom Tech has
given its written consent, unless the confidential information or the trade
secret has already become common knowledge (other than as a result of any breach
of this Agreement), or unless Employee is compelled to disclose it by
governmental process.
Section 10. Intellectual Property.
10.1. Rom Tech shall be the sole owner of all the products and
proceeds of the Employee's services to Rom Tech and VR Acquisition Corporation,
including, but not limited to, all materials, ideas, concepts, formats, designs,
suggestions, developments, arrangements, packages, computer programs,
inventions, patent applications, patents, copyrights, trademarks and other
intellectual properties (collectively, "Intellectual Property") that Employee
may acquire, obtain, develop or create in connection with the employee's
employment hereunder, free and clear of any claims by Employee (or anyone
claiming under Employee) of any kind or character whatsoever (other than
Employee's right to receive payments hereunder).
10.2. Employee shall, at the request of Rom Tech, execute such
assignments, certificates or other instruments as Rom Tech may from time to time
deem necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title and interest in or to any such Intellectual
Property.
10.3. The foregoing will not apply to any inventions which are
described in California Labor Code Section 2870.
4
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Section 11. Covenant Not to Compete or Solicit. Employee agrees that:
11.1. During the term of Employee's employment, Employee will
not, either solely or jointly with, or as manager or agent for, any person,
corporation, trust, joint venture, partnership, or other business entity,
directly or indirectly, carry on or be engaged or interested in any business
which competes with the business of Rom Tech and VR Acquisition Corporation,
provided that investments constituting less than five percent (5%) of a
publicly-held entity shall be exempt from Employee's covenant.
11.2. For one (1) year after Employee's employment terminates,
Employee will not, either solely or jointly with, or as manager or agent for,
any person, corporation, trust, joint venture, partnership, or other business
entity, directly or indirectly, carry on or be engaged or interested in any
business which competes with Rom Tech and VR Acquisition Corporation, (i.e.
sells software which is directly competitive with software sold by Rom Tech and
VR Acquisition Corporation) ("Competing Business"), provided that investments
constituting less than five percent (5%) of a publicly-held entity shall be
exempt from Employee's covenant.
11.3. During Employee's employment with Rom Tech, and for one
(1) year following the termination of Employee's employment, Employee will not
either solely or jointly with, or as manager or agent for, any person,
corporation, trust, joint venture, partnership, or other business entity,
directly or indirectly, hire or attempt to hire any individuals who are
employees of Rom Tech and/or VR Acquisition Corporation during the term of
Employee's employment.
11.4. During Employee's employment with Rom Tech, and for one
(1) year following the termination of Employee's employment, Employee will not
either solely or jointly with, or as manager or agent for, any person,
corporation, trust, joint venture, partnership or other business entity, either
directly or indirectly, solicit, divert or appropriate, or attempt to solicit,
divert or appropriate to any Competing Business, any of Rom Tech's customers or
suppliers, and/or persons or entities with whom Employee worked or about whom
Employee had access to information (including any prospective customer or
customers) during the term of Employee's employment with Rom Tech.
11.5. The parties acknowledge that the market for products of
the type sold by Rom Tech and Virtual Reality is worldwide, and the area where
the goodwill of Virtual Reality has been established through sales, production,
promotion and marketing of its products includes each of the states and counties
in the United States, including each county in California. Accordingly, in order
to secure to Rom Tech the benefits of the Merger, the parties agree that the
provisions of this Section 10 shall apply to each of the states and counties of
the United States, including each county in California.
11.6. The salary to be paid to Employee and the benefits to be
provided to Employee have been negotiated at arms length as additional
consideration for the covenants in Sections 9, 10 and 11 of this Agreement.
5
<PAGE>
Section 12. Remedies.
12.1. Employee acknowledges and agrees to the reasonableness of
the restrictions in Sections 9 and 11, that these restrictions were negotiated
at arms length, that compliance with Sections 9 and 11 is necessary to protect
the business and good will of Rom Tech, and that a breach of any of the
covenants in Sections 8, 9, 10 and 11 will irreparably and continually damage
Rom Tech, for which money damages will not be an adequate remedy. In addition,
in the event that Employee breaches or threatens to breach any of these
covenants, Rom Tech shall be entitled apply for: (i) a preliminary and permanent
injunction in order to prevent the continuation of such harm and (ii) money
damages insofar as they can be proved and determined. Nothing in this Agreement,
however, shall be construed to prohibit Rom Tech from also pursuing any other
remedy, the parties having agreed that all remedies are cumulative.
Section 13. Warranty by Employee. Employee represents and warrants to
Rom Tech that Employee is not a party to any agreement containing a
non-competition provision or other restriction with respect to: (i) the nature
of any services or business which Employee is entitled or required to perform or
conduct under this Agreement or (ii) the disclosure or use of any information
which directly or indirectly relates to the nature of the business of Rom Tech
or the services to be rendered by Employee under this Agreement.
Section 14. Waiver of Rights. If in one or more instances either party
fails to insist that the other party perform any of the terms of this Agreement,
such failure shall not be construed as a waiver by such party of any past,
present, or future right granted under this Agreement and the obligations of
both parties under this Agreement shall continue in full force and effect.
Section 15. Survival. Employee's obligations under Sections 9, 10 and
11 shall continue after and survive the termination of this Agreement, except
upon a termination pursuant to Section 4.1 hereof, in which event only Sections
9 and 10 shall continue to be enforceable. In addition, the termination of
Employee's employment shall not affect any of the rights or obligations of
either party arising prior to or at the time of the termination, or which may
arise by any event causing the termination.
Section 16. Binding Effect. This Agreement shall be binding upon, and
inure to the benefit of, the parties and their respective heirs, successors,
permitted assigns, executors, administrators, and personal representatives.
Section 17. Severability. If any provision, section, paragraph, or
subparagraph of this Agreement is adjudged by any court to be void or
unenforceable in whole or in part, Employee's adjudication shall not affect the
validity of the remainder of the Agreement, including any other provision,
section, paragraph, or subparagraph. Each provision, section, paragraph and
subparagraph of this Agreement is separable from every other provision, section,
paragraph and subparagraph, and constitutes a separate and distinct covenant. If
any term, provision, section, or paragraph of this Agreement shall be determined
by a court of competent jurisdiction to be unenforceable because it is
excessively broad as to time, duration, geographical scope, activity, or
subject, the parties hereby expressly agree that the court making such
determination shall have the power to limit and reduce such term, provision,
6
<PAGE>
section, or paragraph and/or to delete such specific words or phrases which the
court shall deem necessary to permit enforcement of such term, provision,
section, or paragraph to the maximum extent compatible with applicable law as it
then in effect.
Section 18. Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
delivered (personally, by courier service such as Federal Express, or by other
messenger) or on the second day after being deposited in the United States
mails, registered or certified mail, postage prepaid and return receipt
requested, addressed as set forth below:
(a) If to Rom Tech:
Rom Tech, Inc.
2260 Cabot Blvd., Suite 6
Langhorne, PA 19047
Attention: Joseph A. Falsetti
(b) If to Employee:
Susan H. Woeltjen
2341 Ganador Court
San Luis Obispo, California 93401
a copy of any notice given hereunder shall also be given to:
Ellen Pulver Flatt, Esquire
McCausland, Keen & Buckman
Five Radnor Corporate Center, Suite 500
100 Matsonford Road
Radnor, PA 19087
and James R. Spievak, Esquire
Annis & Spievak
701 "B" Street, Suite 2200
San Diego, CA 92101
In addition, notice by mail shall be by air mail if posted outside the
continental United States.
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of Employee's paragraph for the giving of notice.
7
<PAGE>
Section 19. Entire Agreement. This Agreement constitutes the complete
understanding between the parties with respect to the employment of Employee and
cannot be changed or modified except by a written agreement signed by the
parties.
Section 20. Headings. The headings in this Agreement are for
convenience only and shall be given no effect in the interpretation of this
Agreement.
Section 21. Presumptions. This Agreement shall be interpreted without
regard to any presumption or rule requiring construction against the party who
caused this Agreement to be drafted.
Section 22. Governing Law. This Agreement is made in the State of
California. It shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts made and to be performed therein
(other than those relating to conflicts of law), irrespective of the fact that
either of the parties now is or may become a resident of a different state.
Section 23. Subsidiaries. For the purposes of this Agreement and, in
particular, Sections 8, 9, 10 and 11, the term "Rom Tech" shall include all
subsidiaries, joint ventures and partnerships in which Rom Tech has a majority
ownership or other controlling interest.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
ROM TECH, INC.
By:
--------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
EMPLOYEE
Witness:
- - ------------------------------ -----------------------------------------
SUSAN H. WOELTJEN
8
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EXHIBIT "A"
Benefits
Health Insurance
Dental Insurance Life
Insurance - $30,000
SEP program - no matching
9
<PAGE>
EXHIBIT 10.3
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of April 4, 1996, between SUSAN H. WOELTJEN,
an individual resident of San Luis Obispo, California ("Shareholder"), and ROM
TECH, INC., a Pennsylvania corporation (the "Company").
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution and delivery hereof, the
Company is acquiring all of the outstanding shares (the "Stock") of Virtual
Reality Laboratories, Inc., a California corporation ("Virtual Reality"),
pursuant to an Agreement and Plan of Reorganization, dated as of April 4, 1996,
to which the Company, VR Acquisition Company ("Sub"), Virtual Reality and
Shareholder are parties (the "Reorganization Agreement"); and
WHEREAS, execution by Shareholder of this Agreement is a condition
precedent to the Company's and Sub's respective obligations to perform under the
Reorganization Agreement; and
WHEREAS, by virtue of the purchase of the Stock, the Company and/or Sub
are and will be engaged throughout the Area (as hereinafter defined) in the
Business (as hereinafter defined) of the Company which was formerly conducted by
Virtual Reality throughout the Area (the "Business"); and
WHEREAS, prior to the consummation of such purchase, Shareholder was an
owner of Virtual Reality and as a stockholder, director and officer of Virtual
Reality served in various and significant capacities for Virtual Reality and,
<PAGE>
as such, had control over and was familiar with the business and affairs of
Virtual Reality; and
WHEREAS, the parties to this Agreement acknowledge that the market for
products of the type sold by Virtual Reality is worldwide, and the area where
the goodwill of Virtual Reality has been established through sales, production,
promotion and marketing of its products includes each of the states and counties
in the United States, including each county in California; and
WHEREAS, competition by Shareholder with the Company and/or Sub or use
or disclosure by Shareholder of confidential and proprietary information of
Virtual Reality will result directly in damage to the Company and/or Sub and
their respective businesses, properties, assets, and goodwill and will cause the
loss by the Company of the benefit of its bargain with Virtual Reality;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The following terms shall have the definitions set forth below:
(a) "Area" shall mean anywhere within the United States.
(b) "Business" shall mean and include the business of selling or
otherwise providing the same or similar goods and/or services sold or provided
by Virtual Reality.
(c) "Closing Date" shall mean the date of this Agreement.
2
<PAGE>
(d) "Competing Business" shall mean any business, person or entity
which is engaged in a business substantially the same as the Business.
(e) "Confidential Information" shall mean and include, but shall
not be limited to, all of the following materials and information (whether or
not reduced to writing and whether or not patentable) pertaining to Virtual
Reality, to which Shareholder has received access or develops or has developed
in whole or in part as (i) a direct or indirect result of her performance of
services for Virtual Reality or through the use of any of Virtual Reality's
facilities or resources, or (ii) as a direct or indirect result of having been
a shareholder, director, officer, partner or employee of Virtual Reality:
(1) All items of information that could be classified as a
trade secret pursuant to law;
(2) The names and addresses of the customers, (not including
distributors), of Virtual Reality and the nature and amount of business done
with such customers;
(3) The names and addresses of employees, suppliers and other
business contacts of Virtual Reality;
(4) The particular names, methods and procedures utilized by
Virtual Reality in the conduct and advertising of its Business;
(5) The discoveries, concepts and ideas, whether patentable or
not, including without limitation, the nature and results of research and
development activities, processes, techniques, "know-how", designs, drawings and
specifications of Virtual Reality;
3
<PAGE>
(6) Application, operating system, communication and other
computer software and derivatives thereof, including without limitation, source
and object codes, flowcharts, algorithms, coding sheets, routines, subroutines,
compilers, assemblers, design concept and related documentation and manuals of
Virtual Reality;
(7) Production processes, marketing techniques, purchasing
information, price lists, pricing policies, quoting procedures, financial
information, customer names and requirements, customer data and other materials
or information relating to Virtual Reality's manner of doing business;
(8) Any other materials or information related to the Business
or activities of Virtual Reality which are not generally known to others engaged
in similar business activities; and
(9) All inventions and ideas which are derived from or relative
to Shareholder's access to or knowledge of any of the above enumerated materials
and information.
Company's, Sub's or Virtual Reality's failure to make and keep any of
the foregoing confidential shall not affect its status as part of the
Confidential Information under the terms of this Agreement.
2. Shareholder covenants that she shall, for a period of three (3)
years from and after the Closing Date, observe the following separate and
independent covenants:
(a) Agreement Not to Compete. Shareholder shall not within the
Area, directly or indirectly, on her own behalf or in the service or on behalf
of others, become financially interested in a Competing Business (other than
4
<PAGE>
as a holder of less than five percent of the outstanding voting securities of
any entity whose voting securities are listed on a national securities exchange
or quoted by the National Association of Securities Dealers, Inc. Automated
Quotation System), or render any services to any Competing Business as an
employee, consultant, partner, officer, director or in any other relationship
whatsoever.
(b) Agreement Not to Solicit Customers. Shareholder shall not,
either directly or indirectly, on her own behalf or in the service or on behalf
of others, solicit, divert, or appropriate, or attempt to solicit, divert, or
appropriate, to any Competing Business, any person or entity whose account with
Virtual Reality was sold or serviced by or under her direction or supervision
while she was associated with Virtual Reality at any time prior to the Closing
Date.
(c) Agreement Not to Solicit Employees. Shareholder shall not,
either directly or indirectly, on her own behalf or in the service or on behalf
of others, solicit, divert or hire away, or attempt to solicit, divert, or hire
away, to any Competing Business, any person employed by Virtual Reality, the
Company or Sub, whether or not such employee is a full-time employee or a
temporary employee of the Company, Sub or Virtual Reality and whether or not
such employment is pursuant to written agreement and whether or not such
employment is for a determined period or is at will.
(d) Ownership and Non-Disclosure and Non-Use of Confidential
Information. Shareholder acknowledges and agrees that all Confidential
Information, and all physical embodiments thereof, are confidential to and
5
<PAGE>
shall be and remain the sole and exclusive property of the Company. Shareholder
agrees that she will not: (i) disclose or make available any Confidential
Information to any person or entity, or (ii) make or cause to be made, or
permit, either on her own behalf or in the service or on behalf of others, any
use of such Confidential Information.
3. Shareholder acknowledges that Virtual Reality has been for many
years, and that the Company and/or Sub are now, engaged in the Business
throughout the Area; that as a stockholder, director or officer of Virtual
Reality, she acquired unique knowledge of the customers, Business, and
operations of the Virtual Reality; that the within and foregoing covenants are
made by her in consequence of and as an inducement to the Company to acquire the
Stock and to protect and preserve to the Company the benefit of its bargain in
the acquisition of the Stock; that each of the above and foregoing covenants is
reasonable and necessary to protect and preserve the benefits of such purchase;
and that irreparable loss and injury would result should Shareholder breach any
of the foregoing covenants.
4. Each of the covenants hereinabove contained shall be deemed
separate, severable, and independent covenants, and in the event any covenant
shall be declared invalid by any court of competent jurisdiction, such
invalidity shall not in any manner affect or impair the validity or
enforceability of any other part or provision of such covenant or of any other
covenant contained herein.
5. If any of the covenants contained in Section 2, or any part thereof,
is held to be unenforceable because of the duration of such provision or the
scope of the subject matter thereof or the area covered thereby, the parties
6
<PAGE>
agree that the court making such determination shall have the power to reduce
the duration, scope and/or area of such provision and, in its reduced form,
said provision shall then be enforceable.
6. In addition to all other remedies provided at law or in equity, the
Company shall be entitled to both preliminary and permanent injunctions against
Shareholder to prevent a breach or contemplated or threatened breach by
Shareholder of any of the foregoing covenants, without the necessity of proving
actual damages; and the existence of any claim, demand, cause of action, or
action of Shareholder against the Company and/or Sub, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of any such covenants. In the event of an actual breach of any of
the foregoing covenants, the Company shall have the right to recover damages for
all losses, actual and contingent, and the right to require Shareholder to
account for and pay over to the Company all profits or other benefits
(collectively "Benefits") derived or received by Shareholder as a result of any
transactions constituting such breach, and Shareholder hereby agrees to account
for and pay over such Benefits to the Company. Each of the rights and remedies
enumerated above shall be independent of the other, and shall be severally
enforceable, and all of such rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Company at law or
equity.
7. The provisions of Sections 2 through 5 hereof shall be deemed to
supplement the provisions of the Employment Agreement of even date between the
Company and Shareholder ("Employment Agreement"). In the event of inconsistency
between the terms of this Agreement and the Employment Agreement, this
7
<PAGE>
Agreement and the Employment Agreement shall be construed together so as to
provide the broadest possible protection to the Company.
8. This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
9. This Agreement may be executed and delivered in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but all of which shall together constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date first above written.
___________________________________ ________________________________________
Witness SUSAN H. WOELTJEN
ROM TECH, INC.
By:_____________________________________
Joseph A. Falsetti, Chairman and
Chief Financial Officer
8
<PAGE>
EXHIBIT 10.4
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
---------------------------------------------
THIS AGREEMENT is made as of April 4, 1996, between LANCE H. WOELTJEN,
an individual resident of San Luis Obispo, California ("Shareholder"), and ROM
TECH, INC., a Pennsylvania corporation (the "Company").
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution and delivery hereof, the
Company is acquiring all of the outstanding shares (the "Stock") of Virtual
Reality Laboratories, Inc., a California corporation ("Virtual Reality"),
pursuant to an Agreement and Plan of Reorganization, dated as of April 4, 1996,
to which the Company, VR Acquisition Company ("Sub"), Virtual Reality and
Shareholder are parties (the "Reorganization Agreement"); and
WHEREAS, execution by Shareholder of this Agreement is a condition
precedent to the Company's and Sub's respective obligations to perform under the
Reorganization Agreement; and
WHEREAS, by virtue of the purchase of the Stock, the Company and/or Sub
are and will be engaged throughout the Area (as hereinafter defined) in the
Business (as hereinafter defined) of the Company which was formerly conducted by
Virtual Reality throughout the Area (the "Business"); and
WHEREAS, prior to the consummation of such purchase, Shareholder was an
owner of Virtual Reality and as a stockholder, director and officer of Virtual
Reality served in various and significant capacities for Virtual Reality and,
<PAGE>
as such, had control over and was familiar with the business and affairs of
Virtual Reality; and
WHEREAS, the parties to this Agreement acknowledge that the market for
products of the type sold by Virtual Reality is worldwide, and the area where
the goodwill of Virtual Reality has been established through sales, production,
promotion and marketing of its products includes each of the states and counties
in the United States, including each county in California; and
WHEREAS, competition by Shareholder with the Company and/or Sub or use
or disclosure by Shareholder of confidential and proprietary information of
Virtual Reality will result directly in damage to the Company and/or Sub and
their respective businesses, properties, assets, and goodwill and will cause the
loss by the Company of the benefit of its bargain with Virtual Reality;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The following terms shall have the definitions set forth below:
(a) "Area" shall mean anywhere within the United States.
(b) "Business" shall mean and include the business of selling or
otherwise providing the same or similar goods and/or services sold or provided
by Virtual Reality.
(c) "Closing Date" shall mean the date of this Agreement.
2
<PAGE>
(d) "Competing Business" shall mean any business, person or entity
which is engaged in a business substantially the same as the Business.
(e) "Confidential Information" shall mean and include, but shall not
be limited to, all of the following materials and information (whether or not
reduced to writing and whether or not patentable) pertaining to Virtual Reality,
to which Shareholder has received access or develops or has developed in whole
or in part as (i) a direct or indirect result of his performance of services for
Virtual Reality or through the use of any of Virtual Reality's facilities or
resources, or (ii) as a direct or indirect result of having been a shareholder,
director, officer, partner or employee of Virtual Reality:
(1) All items of information that could be classified as a trade
secret pursuant to law;
(2) The names and addresses of the customers, (not including
distributors), of Virtual Reality and the nature and amount of business done
with such customers;
(3) The names and addresses of employees, suppliers and other
business contacts of Virtual Reality;
(4) The particular names, methods and procedures utilized by
Virtual Reality in the conduct and advertising of its Business;
(5) The discoveries, concepts and ideas, whether patentable or
not, including without limitation, the nature and results of research and
development activities, processes, techniques, "know-how", designs, drawings and
specifications of Virtual Reality;
3
<PAGE>
(6) Application, operating system, communication and other
computer software and derivatives thereof, including without limitation, source
and object codes, flowcharts, algorithms, coding sheets, routines, subroutines,
compilers, assemblers, design concept and related documentation and manuals of
Virtual Reality;
(7) Production processes, marketing techniques, purchasing
information, price lists, pricing policies, quoting procedures, financial
information, customer names and requirements, customer data and other materials
or information relating to Virtual Reality's manner of doing business;
(8) Any other materials or information related to the Business
or activities of Virtual Reality which are not generally known to others engaged
in similar business activities; and
(9) All inventions and ideas which are derived from or relative
to Shareholder's access to or knowledge of any of the above enumerated materials
and information.
Company's, Sub's or Virtual Reality's failure to make and keep any of
the foregoing confidential shall not affect its status as part of the
Confidential Information under the terms of this Agreement.
2. Shareholder covenants that he shall, for a period of three (3) years
from and after the Closing Date, observe the following separate and independent
covenants:
(a) Agreement Not to Compete. Shareholder shall not within the Area,
directly or indirectly, on his own behalf or in the service or on behalf of
4
<PAGE>
others, become financially interested in a Competing Business (other than as a
holder of less than five percent of the outstanding voting securities of any
entity whose voting securities are listed on a national securities exchange or
quoted by the National Association of Securities Dealers, Inc. Automated
Quotation System), or render any services to any Competing Business as an
employee, consultant, partner, officer, director or in any other relationship
whatsoever.
(b) Agreement Not to Solicit Customers. Shareholder shall not,
either directly or indirectly, on his own behalf or in the service or on behalf
of others, solicit, divert, or appropriate, or attempt to solicit, divert, or
appropriate, to any Competing Business, any person or entity whose account with
Virtual Reality was sold or serviced by or under his direction or supervision
while he was associated with Virtual Reality at any time prior to the Closing
Date.
(c) Agreement Not to Solicit Employees. Shareholder shall not,
either directly or indirectly, on his own behalf or in the service or on behalf
of others, solicit, divert or hire away, or attempt to solicit, divert, or hire
away, to any Competing Business, any person employed by Virtual Reality, the
Company or Sub, whether or not such employee is a full-time employee or a
temporary employee of the Company, Sub or Virtual Reality and whether or not
such employment is pursuant to written agreement and whether or not such
employment is for a determined period or is at will.
(d) Ownership and Non-Disclosure and Non-Use of Confidential
Information. Shareholder acknowledges and agrees that all Confidential
5
<PAGE>
Information, and all physical embodiments thereof, are confidential to and shall
be and remain the sole and exclusive property of the Company. Shareholder agrees
that he will not: (i) disclose or make available any Confidential Information to
any person or entity, or (ii) make or cause to be made, or permit, either on his
own behalf or in the service or on behalf of others, any use of such
Confidential Information.
3. Shareholder acknowledges that Virtual Reality has been for many
years, and that the Company and/or Sub are now, engaged in the Business
throughout the Area; that as a stockholder, director or officer of Virtual
Reality, he acquired unique knowledge of the customers, Business, and operations
of the Virtual Reality; that the within and foregoing covenants are made by him
in consequence of and as an inducement to the Company to acquire the Stock and
to protect and preserve to the Company the benefit of its bargain in the
acquisition of the Stock; that each of the above and foregoing covenants is
reasonable and necessary to protect and preserve the benefits of such purchase;
and that irreparable loss and injury would result should Shareholder breach any
of the foregoing covenants.
4. Each of the covenants hereinabove contained shall be deemed
separate, severable, and independent covenants, and in the event any covenant
shall be declared invalid by any court of competent jurisdiction, such
invalidity shall not in any manner affect or impair the validity or
enforceability of any other part or provision of such covenant or of any other
covenant contained herein.
5. If any of the covenants contained in Section 2, or any part thereof,
is held to be unenforceable because of the duration of such provision or the
6
<PAGE>
scope of the subject matter thereof or the area covered thereby, the parties
agree that the court making such determination shall have the power to reduce
the duration, scope and/or area of such provision and, in its reduced form, said
provision shall then be enforceable.
6. In addition to all other remedies provided at law or in equity, the
Company shall be entitled to both preliminary and permanent injunctions against
Shareholder to prevent a breach or contemplated or threatened breach by
Shareholder of any of the foregoing covenants, without the necessity of proving
actual damages; and the existence of any claim, demand, cause of action, or
action of Shareholder against the Company and/or Sub, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of any such covenants. In the event of an actual breach of any of
the foregoing covenants, the Company shall have the right to recover damages for
all losses, actual and contingent, and the right to require Shareholder to
account for and pay over to the Company all profits or other benefits
(collectively "Benefits") derived or received by Shareholder as a result of any
transactions constituting such breach, and Shareholder hereby agrees to account
for and pay over such Benefits to the Company. Each of the rights and remedies
enumerated above shall be independent of the other, and shall be severally
enforceable, and all of such rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Company at law or
equity.
7. The provisions of Sections 2 through 5 hereof shall be deemed to
supplement the provisions of the Employment Agreement of even date between the
Company and Shareholder ("Employment Agreement"). In the event of inconsistency
7
<PAGE>
between the terms of this Agreement and the Employment Agreement, this Agreement
and the Employment Agreement shall be construed together so as to provide the
broadest possible protection to the Company.
8. This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
9. This Agreement may be executed and delivered in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but all of which shall together constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date first above written.
- - ------------------------------- -----------------------------------
Witness LANCE H. WOELTJEN
ROM TECH, INC.
By:
--------------------------------
Joseph A. Falsetti, Chairman and
Chief Financial Officer
8
<PAGE>
EXHIBIT 10.5
AFFILIATE'S AGREEMENT
THIS AFFILIATE'S AGREEMENT ("Affiliate's Agreement") is made as of the
4th day of April, 1996 between Rom Tech, Inc., a Pennsylvania corporation
("Parent"), Virtual Reality Laboratories, Inc., a California corporation (the
"Company"), and the undersigned shareholder (the "Shareholder") of the Company.
The Company, Parent, and VR Acquisition Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Parent ("Sub"), have entered into
an Agreement and Plan of Reorganization dated as of April 4, 1996 (the
"Reorganization Agreement"), and Parent, Sub and the Company have entered into a
related Agreement and Plan of Merger dated as of April 4, 1996 (the "Merger
Agreement"), providing for the merger of the Company with and into Sub (the
"Merger"). Upon the consummation of the Merger and in connection therewith, the
undersigned Shareholder will become the owner of common shares of Parent (the
"Parent Shares"). It is intended that the Merger will be treated as a "pooling
of interests" in accordance with generally accepted accounting principles and
the applicable General Rules and Regulations published by the Securities and
Exchange Commission (the "SEC").
1. The undersigned Shareholder hereby represents, warrants and agrees
that:
(a) The undersigned Shareholder may be deemed to be an "affiliate"
of the Company within the meaning of Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act"), and Accounting Series Release No. 130, as
amended, of the SEC ("Release No. 130").
(b) The undersigned Shareholder has not sold, exchanged,
transferred, pledged, disposed of or otherwise reduced his relative risk to any
shares of the Parent owned by the undersigned (the "Parent Shares") in violation
of Accounting Series Release No. 135, as amended by Staff Accounting Bulletins
No. 65 and 76 within 30 days prior to the Effective Time of the Merger (as
defined in the Merger Agreement).
(c) The undersigned Shareholder will not sell, exchange, transfer,
pledge or dispose of the Parent Shares or any part thereof until such time after
the Effective Time of the Merger as financial results covering at least thirty
(30) days of the combined operations of Parent and the Company after the
Effective Time of the Merger have been, within the meaning of Release No. 130,
filed by Parent with the SEC or published by Parent in an Annual Report on Form
10-KSB, a Quarterly Report on Form 10-QSB, a Current Report on Form 8-K, a
quarterly earnings report, a press release or other public issuance which
includes combined sales and income of the Company and Parent. Parent agrees to
make such filing or publication as soon as practicable after thirty (30) days
after the Effective Time of the Merger.
<PAGE>
(d) Subject to the limitations set forth in paragraph 1(c) above,
the undersigned Shareholder also agrees not to offer, sell, exchange, transfer,
pledge or otherwise dispose of any of the Parent Shares unless at that time
either:
(i) such transaction shall be permitted pursuant to the
provisions of Rule 144 under the Securities Act; or
(ii) counsel representing the undersigned Shareholder,
satisfactory to Parent, shall have advised Parent in a
written opinion letter reasonably satisfactory to Parent
and Parent's counsel, and upon which Parent and its
counsel may rely, that no registration under the
Securities Act would be required in connection with the
proposed sale or other transfer; or
(iii) a registration statement under the Securities Act
covering the Parent Shares proposed to be sold or
otherwise transferred, describing the manner and terms of
the proposed sale or other transfer, and containing a
current prospectus, shall have been filed with the SEC
and declared effective under the Securities Act; or
(iv) an authorized representative of the SEC shall have
rendered written advice to the undersigned Shareholder
(sought by the undersigned Shareholder or counsel to the
undersigned Shareholder, with a copy thereof and of all
other related communications delivered to Parent) to the
effect that the SEC would take no actions, or that the
staff of the SEC would not recommend that the SEC take
action, with respect to the proposed sale or other
transfer if consummated.
(e) All certificates representing the Parent Shares deliverable to
the undersigned Shareholder pursuant to the Merger Agreement and in connection
with the Merger and any certificates subsequently issued to the undersigned
Shareholder with respect thereto or in substitution therefor shall, unless one
or more of the alternative conditions set forth in subparagraphs (i) - (iv) of
paragraph (d) of this Section 1 shall have occurred, bear a legend substantially
as follows:
-2-
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE OTHER CONDITIONS
SPECIFIED IN THAT CERTAIN AFFILIATE'S AGREEMENT DATED AS OF APRIL __,
1996 AMONG ROM TECH, INC., VIRTUAL REALITY LABORATORIES, INC., AND
CERTAIN OF THE SHAREHOLDERS OF VIRTUAL REALITY LABORATORIES, INC. A
COPY OF SUCH AFFILIATE'S AGREEMENT MAY BE INSPECTED BY THE HOLDER OF
THIS CERTIFICATE AT THE OFFICES OF ROM TECH, INC., OR ROM TECH, INC.
WILL FURNISH, WITHOUT CHARGE, A COPY THEREOF TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
Parent, at its discretion, may cause stop transfer orders to be placed
with its transfer agent(s) with respect to the certificates for the Parent
Shares but not as to the certificates for any part of the Parent Shares as to
which the foregoing legend is no longer appropriate when one or more of the
alternative conditions set forth in subparagraphs (i)-(iv) of paragraph (d) of
this Section 1 shall have occurred. Parent covenants that upon the request of
the undersigned Shareholder, it will remove the foregoing legend when one or
more of the alternative conditions set forth in subparagraphs (i)-(iv) of
paragraph (d) of this Section 1 shall have occurred.
(f) The undersigned Shareholder will observe and comply with the
Securities Act and the General Rules and Regulations thereunder, as now in
effect and as from time to time amended and including those hereafter enacted or
promulgated, in connection with any offer, sale, pledge, transfer or other
disposition of the Parent Shares or any part thereof.
2. Reports. From and after the Effective Time of the Merger and for so
long as necessary in order to permit the undersigned Shareholder to sell the
Parent Shares pursuant to Rule 144 under the Securities Act, to the extent
applicable, Parent will use its best efforts to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, referred to in paragraph (c)(1) of Rule 144
under the Securities Act (or, if applicable, Parent will use its best efforts to
make publicly available the information regarding itself referred to in
paragraph (c)(2) of Rule 144), in order to permit the undersigned Shareholder
to sell, pursuant to the applicable provisions of Rule 144, the Parent Shares.
3. Waiver. No waiver by any party hereto of any condition or of any
breach of any provision of this Affiliate's Agreement shall be effective unless
in writing.
-3-
<PAGE>
4. Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Affiliate's
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or (except where receipt thereof is specifically required for
purposes of this Affiliate's Agreement) mailed by registered or certified mail,
postage prepaid, as follows:
4.1 If to the Shareholder, at the address set forth below the
Shareholder's signature at the end hereof.
4.2 If to Parent:
Rom Tech, Inc.
2000 Cabot Blvd., Suite 110
Langhorne, PA 19047
Attention: Joseph A. Falsetti
With a copy to:
McCausland, Keen & Buckman
Five Radnor Corporate Center
100 Matsonford Road
Radnor, Pennsylvania 19087
Attention: Ellen Pulver Flatt, Esquire
4.3 If to the Company:
Virtual Reality Laboratories, Inc.
3534 Empleo, Suite A
San Luis Obispo, California 93401
Attention: Lance H. Woeltjen
With a copy to:
Annis & Spievak
701 "B" Street, Suite 2200
San Diego, California 92101
Attention: James R. Spievak, Esquire
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
-4-
<PAGE>
5. Counterparts. For the convenience of the parties hereto, this
Affiliate's Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same agreement.
6. Successors and Assigns. This Affiliate's Agreement shall be
enforceable by, and shall inure to the benefit of and be binding upon, the
parties hereto and their respective successors and assigns. As used herein, the
term "successors and assigns" shall mean, where the context so permits, heirs,
executors, administrators, trustees and successor trustees, and personal and
other representatives.
7. Governing Law. This Affiliate's Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Pennsylvania without regard to its rules and principles relating
to conflicts of laws.
8. Severability. This Affiliate's Agreement shall become effective at
the Effective Time of the Merger. If a court of competent jurisdiction
determines that any provision of this Affiliate's Agreement is not enforceable
or enforceable only if limited in time and/or scope, this Affiliate's Agreement
shall continue in full force and effect with such provisions stricken or so
limited.
9. Attorneys' Fees. In the event of any legal action or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding results in
a final judgment.
10. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Affiliate's
Agreement.
11. Definitions. All capitalized terms used herein shall have the
meaning defined in the Reorganization Agreement, unless otherwise defined
herein.
12. Third Party Reliance. Counsel to and accountants for the parties
shall be entitled to rely upon this Affiliate's Agreement as needed.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Affiliate's Agreement
to be executed as of the date first set forth above.
ROM TECH, INC.
By:
--------------------------------------
Name: Joseph A. Falsetti
Title: Chief Executive Officer
VIRTUAL REALITY LABORATORIES,
INC.
By:
--------------------------------------
Name:
Title: President
SHAREHOLDER
-----------------------------------------
Name:
-6-
<PAGE>
EXHIBIT 10.6
AFFILIATE'S AGREEMENT
THIS AFFILIATE'S AGREEMENT ("Affiliate's Agreement") is made as of the
4th day of April, 1996 between Rom Tech, Inc., a Pennsylvania corporation
("Parent"), Virtual Reality Laboratories, Inc., a California corporation (the
"Company"), and the undersigned shareholder (the "Shareholder") of the Company.
The Company, Parent, and VR Acquisition Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Parent ("Sub"), have entered into
an Agreement and Plan of Reorganization dated as of April 4, 1996 (the
"Reorganization Agreement"), and Parent, Sub and the Company have entered into a
related Agreement and Plan of Merger dated as of April 4, 1996 (the "Merger
Agreement"), providing for the merger of the Company with and into Sub (the
"Merger"). Upon the consummation of the Merger and in connection therewith, the
undersigned Shareholder will become the owner of common shares of Parent (the
"Parent Shares"). It is intended that the Merger will be treated as a "pooling
of interests" in accordance with generally accepted accounting principles and
the applicable General Rules and Regulations published by the Securities and
Exchange Commission (the "SEC").
1. The undersigned Shareholder hereby represents, warrants and agrees
that:
(a) The undersigned Shareholder may be deemed to be an "affiliate" of
the Company within the meaning of Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), and Accounting Series Release No. 130, as
amended, of the SEC ("Release No. 130").
(b) The undersigned Shareholder has not sold, exchanged, transferred,
pledged, disposed of or otherwise reduced his relative risk to any shares of the
Parent owned by the undersigned (the "Parent Shares") in violation of Accounting
Series Release No. 135, as amended by Staff Accounting Bulletins No. 65 and 76
within 30 days prior to the Effective Time of the Merger (as defined in the
Merger Agreement).
(c) The undersigned Shareholder will not sell, exchange, transfer,
pledge or dispose of the Parent Shares or any part thereof until such time after
the Effective Time of the Merger as financial results covering at least thirty
(30) days of the combined operations of Parent and the Company after the
Effective Time of the Merger have been, within the meaning of Release No. 130,
filed by Parent with the SEC or published by Parent in an Annual Report on Form
10-KSB, a Quarterly Report on Form 10-QSB, a Current Report on Form 8-K, a
quarterly earnings report, a press release or other public issuance which
includes combined sales and income of the Company and Parent. Parent agrees to
make such filing or publication as soon as practicable after thirty (30) days
after the Effective Time of the Merger.
<PAGE>
(d) Subject to the limitations set forth in paragraph 1(c) above,
the undersigned Shareholder also agrees not to offer, sell, exchange, or
otherwise transfer of any of the Parent Shares unless at that time either:
(i) such transaction shall be permitted pursuant to the
provisions of Rule 144 under the Securities Act; or
(ii) counsel representing the undersigned Shareholder, shall have
advised Parent in a written opinion letter reasonably
satisfactory to Parent, shall have advised Parent in a
written opinion letter reasonably satisfactory to Parent and
Parent's counsel, and upon which Parent and its counsel may
rely, that no registration under the Securities Act would be
required in connection with the proposed sale or other
transfer; or
(iii) a registration statement under the Securities Act covering
the Parent Shares proposed to be sold or otherwise
transferred, describing the manner and terms of the proposed
sale or other transfer, and containing a current prospectus,
shall have been filed with the SEC and declared effective
under the Securities Act; or
(iv) an authorized representative of the SEC shall have rendered
written advice to the undersigned Shareholder (sought by the
undersigned Shareholder or counsel to the undersigned
Shareholder, with a copy thereof and of all other related
communications delivered to Parent) to the effect that the
SEC would take no actions, or that the staff of the SEC
would not recommend that the SEC take action, with respect
to the proposed sale or other transfer if consummated.
(e) All certificates representing the Parent Shares deliverable to the
undersigned Shareholder pursuant to the Merger Agreement and in connection with
the Merger and any certificates subsequently issued to the undersigned
Shareholder with respect thereto or in substitution therefor shall, unless one
or more of the alternative conditions set forth in subparagraphs (i) - (iv) of
paragraph (d) of this Section 1 shall have occurred, bear a legend substantially
as follows:
-2-
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE OTHER CONDITIONS
SPECIFIED IN THAT CERTAIN AFFILIATE'S AGREEMENT DATED AS OF APRIL __,
1996 AMONG ROM TECH, INC., VIRTUAL REALITY LABORATORIES, INC., AND
CERTAIN OF THE SHAREHOLDERS OF VIRTUAL REALITY LABORATORIES, INC. A
COPY OF SUCH AFFILIATE'S AGREEMENT MAY BE INSPECTED BY THE HOLDER OF
THIS CERTIFICATE AT THE OFFICES OF ROM TECH, INC., OR ROM TECH, INC.
WILL FURNISH, WITHOUT CHARGE, A COPY THEREOF TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
Parent, at its discretion, may cause stop transfer orders to be placed
with its transfer agent(s) with respect to the certificates for the Parent
Shares but not as to the certificates for any part of the Parent Shares as to
which the foregoing legend is no longer appropriate when one or more of the
alternative conditions set forth in subparagraphs (i) - (iv) of paragraph (d) of
this Section 1 shall have occurred. Parent covenants that upon the request of
the undersigned Shareholder, it will remove the foregoing legend when one or
more of the alternative conditions set forth in subparagraphs (i) - (iv) of
paragraph (d) of this Section 1 shall have occurred.
(f) The undersigned Shareholder will observe and comply with the
Securities Act and the General Rules and Regulations thereunder, as now in
effect and as from time to time amended and including those hereafter enacted or
promulgated, in connection with any offer, sale, pledge, transfer or other
disposition of the Parent Shares or any part thereof.
2. Reports. From and after the Effective Time of the Merger and for so
long as necessary in order to permit the undersigned Shareholder to sell the
Parent Shares pursuant to Rule 144 under the Securities Act, to the extent
applicable, Parent will use its best efforts to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, referred to in paragraph (c) (1) of Rule 144
under the Securities Act (or, if applicable, Parent will use its best efforts to
make publicly available the information regarding itself referred to in
paragraph (c) (2) of Rule 144), in order to permit the undersigned Shareholder
to sell, pursuant to the applicable provisions of Rule 144, the Parent Shares.
3. Waiver. No waiver by any party hereto of any condition or of any
breach of any provision of this Affiliate's Agreement shall be effective unless
in writing.
-3-
<PAGE>
4. Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Affiliate's
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or (except where receipt thereof is specifically required for
purposes of this Affiliate's Agreement) mailed by registered or certified mail,
postage prepaid, as follows:
4.1 If to the Shareholder, at the address set forth below the
Shareholder's signature at the end hereof.
4.2 If to Parent:
Rom Tech, Inc.
2000 Cabot Blvd., Suite 110
Langhorne, PA 19047
Attention: Joseph A. Falsetti
With a copy to:
McCausland, Keen & Buckman
Five Radnor Corporate Center
100 Matsonford Road
Radnor, Pennsylvania 19087
Attention: Ellen Pulver Flatt, Esquire
4.3 If to the Company:
Virtual Reality Laboratories, Inc.
3534 Empleo, Suite A
San Luis Obispo, California 93401
Attention: Lance H. Woeltjen
With a copy to:
Annis & Spievak
701 "B" Street, Suite 2200
San Diego, California 92101
Attention: James R. Spievak, Esquire
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
-4-
<PAGE>
5. Counterparts. For the convenience of the parties hereto, this
Affiliate's Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same agreement.
6. Successors and Assigns. This Affiliate's Agreement shall be
enforceable by, and shall inure to the benefit of and be binding upon, the
parties hereto and their respective successors and assigns. As used herein, the
term "successors and assigns" shall mean, where the context so permits, heirs,
executors, administrators, trustees and successor trustees, and personal and
other representatives.
7. Governing Law. This Affiliate's Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Pennsylvania without regard to its rules and principles relating
to conflicts of laws.
8. Severability. This Affiliate's Agreement shall become effective at
the Effective Time of the Merger. If a court of competent jurisdiction
determines that any provision of this Affiliate's Agreement is not enforceable
or enforceable only if limited in time and/or scope, this Affiliate's Agreement
shall continue in full force and effect with such provisions stricken or so
limited.
9. Attorneys' Fees. In the event of any legal action or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding results in
a final judgment.
10. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Affiliate's
Agreement.
11. Definitions. All capitalized terms used herein shall have the
meaning defined in the Reorganization Agreement, unless otherwise defined
herein.
12. Third Party Reliance. Counsel to and accountants for the parties
shall be entitled to rely upon this Affiliate's Agreement as needed.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Affiliate's Agreement
to be executed as of the date first set forth above.
ROM TECH, INC.
By:
--------------------------------------
Name: Joseph A. Falsetti
Title: Chief Executive Officer
VIRTUAL REALITY LABORATORIES, INC.
By:
--------------------------------------
Name:
Title:
SHAREHOLDER
-----------------------------------------
Name:
-6-
<PAGE>
EXHIBIT 10.7
L E A S E
THIS LEASE is made by and between Knecht' s Plumbing & Heating, a
general partnership organized under the laws of the State of California,
composed of JACK H. KNECHT, GERALD L. KNECHT, and BLAINE ENNINGA (hereinafter
called "Lessor"), and Virtual Reality Laboratories, Inc., a California
corporation.
1. Term and Premises. Lessor hereby leases to Lessee the real property
located at 3534 "A" Empleo, San Luis Obispo, California, consisting of
approximately 2,300 square feet, and more particularly described as follows:
Lot 19 of tract No. 703, in the City of San Luis Obispo, County of San
Luis Obispo, State of California, according to the map thereof recorded
October 31, 1980, in Book 10, at Page 50 of Maps.
The term of the Lease shall commence on January 1, 1996 for a period of
one year to December 31,1996.
2. Option to Rent. Lessee shall have the first option to renew the term
of this Lease for an additional two year period, commencing on the expiration of
the full term specified herein, provided Lessee shall have fully and faithfully
performed all the terms, covenants, and conditions of this Lease for the full
term specified herein.
3. Rent. Lessee shall pay rent to Lessor, for and during the term of
this Lease the sum of $1,680.00 per month. In the event the Lessee exercises the
option to extend the Lease term for the additional two year period of time, the
monthly rental for the extended term shall be $1,600.00 per month.
Lessee shall pay the fixed rent amount in monthly installments
on the first day of each month, without deduction or offset. Rent due on the
first day of the month shall be deemed by Lessor to be delinquent if not
received by the fifth (5th) day of each month. Commencing with the sixth (6th)
day of the month, Lessee shall pay to Lessor a late charge of $100.00 per month.
Lessor and Lessee agree that the late charge as set forth herein is a reasonable
sum of damages due Lessor because of Lessee's late payment of rent, and is
intended to compensate Lessor for expenses incurred as the result of Lessee's
late payment. By execution of this agreement Lessee agrees that it is
impracticable or extremely difficult to fix actual damages or late payment of
rent, and Lessee acknowledges that $100.00 is a reasonable sum for those
damages. The damages incurred by Lessor as set forth herein include but are not
limited to administrative fees, staff time, lost revenue on income.
1
<PAGE>
B. All rentals shall be paid in lawful money of the United States of
America to Lessor, without deduction or offset, at such place or places as may
be designated from time to time by Lessor.
C. At the time of executing this Lease, the Lessee shall pay to the
Lessor the sum of $3,200.00 representing payment of rent for the first and last
month of the lease term.
4. Use of Premises.
A. The premises may be used and occupied solely for a software
publishing company, and for no other purpose or purposes, without Lessor's prior
written consent. Lessee shall not do or permit anything to be done in or about
the premises or bring or keep anything therein which, will in any way increase
the rate of insurance on the building wherein the premises are situated. No
auction, fire or bankruptcy sale or sales may be conducted by Lessee without
Lessor's prior written consent.
B. Lessee shall not use or permit the use of any portion of the
premises as sleeping apartments. Lessee shall not commit or suffer to be
committed any acts or practices which may injure the building of which the
premises form a part, or be a public or private nuisance, menace to, or may
disturb the quiet enjoyment of the other tenants in the building or adjacent to
the premises. Lessee shall keep the premises and walkways adjacent thereto, and
any portion thereof used for loading and unloading, clean and free from rubbish
and dirt at all times, and shall store all trash within the premises occupied by
Lessee or within a trash area designated by Lessor and shall arrange for the
regular pickup of such trash at Lessee's expense. Lessee shall not burn any
trash of any kind.
5. Partnership. Lessor does not in any way or for any purpose hereby
become a partner of Lessee in it's business or otherwise, or a joint venturer or
a member of any joint enterprise with Lessee. Lessor shall not by virtue of
this Lease be liable for any debts, obligations or liabilities of any kind of
Lessee.
6. Utilities and services. Lessee agrees to pay for utility services,
except water, including without limitation, electricity and gas, as well as all
materials and services which may be furnished to or about the premises during
the lease term unless ordered by Lessor or other tenants of Lessor. Lessor shall
pay for water for the building as well as the Landscaping outside of the
building. Lessee shall keep the premises free and clear of any lien or
encumbrance of any kind whatsoever created or incurred by Lessee's acts or
omissions.
2
<PAGE>
7. Reasonable Inspection and Notices. Lessor shall have the right to
enter the premises at all reasonable times to inspect the same to see that the
provisions of the Lease are being carried out, to protect and secure any and all
rights of Lessor and to post such reasonable notices as Lessor may desire, to
protect the rights of Lessor against so-called mechanics liens.
8. Maintenance, Improvements and Surrender of the Premises.
A. Lessee hereby agrees that by taking possession of the premises,
he admits that the premises and the appurtenances are delivered in a safe and
tenantable condition and he agrees to exercise all reasonable care and
diligence in the occupation, use and repair thereof to avoid injury to person or
property. Lessee shall keep the premises in good condition and repair, including
without limitation, all heating and plumbing facilities, and equipment and the
interior walls and ceiling. Lessee shall be responsible for all damage or
breakage to glass, whether interior or exterior. Lessee shall also be
responsible for keeping exterior of windows and area below windows clean. The
plumbing facilities shall not be used for any purpose other than for which they
were constructed. No foreign substances of any kind shall be thrown therein. The
expense of any breakage, stoppage or damages resulting from a violation of this
provision, shall be borne by Lessee. Lessee further agrees that any damage or
injury done to the premises shall be paid for by Lessee unless caused by Lessor
or other tenants of Lessor.
B. Any improvements made to the leased premises, by Lessee, shall
become part of the real property, with the exception of trade fixtures, which
include but are not limited to cabinetry, shelving, counters and tops which are
necessary for Lessee's business operation.
C. Upon termination of this Lease, Lessee shall surrender the
premises in a good and clean condition and repair, subject to reasonable wear.
Any part or all property remaining on the premises subsequent to termination of
the lease term at Lessor's option shall automatically become Lessor's property
without cost or expense to Lessor and any part or all such property at Lessor's
option may be removed and stored at the expense and risk of Lessee.
D. Lessee shall not mark, paint, drill or in any way deface any
walls, ceilings, partitions, floors, wood, stone or iron work without Lessor's
prior written consent, which shall not be unreasonably withheld.
E. Lessee shall observe, comply with and execute all present and
future orders, regulations, directions, rules, laws, ordinances, and
3
<PAGE>
requirements of all governmental authorities and the Board of Fire Underwriters
and any other board or organization exercising similar functions relating to
the use, occupancy or insurability of the premises.
F. Lessee agrees to pay for any labor, services, materials, supplies
and equipment which Lessee permits or causes to be furnished with respect to
the premises, and which may be secured by any lien against the premises. Any
such liens which may attach shall be promptly caused to be released by Lessee.
G. Lessor shall at any and all times have the rights, but not
obligation, to maintain, alter, repair or improve the premises or the building
in which the premises are located, or to add thereto and may for that purpose,
after giving at least thirty (30) days prior written notice, erect scaffolding
and all other necessary structures about and upon the premises and Lessor may
enter in or about the premises and with such material as Lessor may deem
necessary therefor. Lessee waives any claim to damages, including loss of
business or loss of quiet enjoyment resulting therefrom.
9. Indemnification, Non-Liability of Lessor and Insurance.
A. This Lease is made upon the express condition that Lessor is to
be free from all liability, expense and claim for damages by reason of any
injury or death to any person or persons, including Lessee, or property of any
kind whatsoever and to whomever belonging, including Lessee, from any cause or
causes whatsoever during the term of this Lease or any extension thereof, or any
occupancy or use hereunder. Lessee hereby covenants and agrees to indemnify and
save Lessor harmless from all liability, loss, cost and obligations on account
of or arising out of any such injuries or losses howsoever occurring.
B. During the lease term, Lessee shall, at his own expense,
maintain in full force a policy or policies of comprehensive liability
insurance, including property damage, written by one or more responsible
insurance companies licensed to do business in California, that will insure
Lessee and Lessor (and such other persons, firms or corporations that are
designated by Lessor) against liability for any injury to persons and property,
and for death of any person or persons occurring in or about the premises, or
occurring whether as a result of the business operations, including but not
limited to, delivery of merchandise, by Lessee. Each such policy shall be
subject to approval by Lessor as to form and as to insurance company. The
liability under such insurance shall be not less than $500,000.00 for any one or
more persons injured or killed in each occurrence and not less than $100,000.00
for property damage in each occurrence. If, in the considered opinion of
Lessor's insurance advisor, the amount of such coverage is not adequate or
becomes inadequate, Lessee shall increase the coverage to such amounts as
Lessor's advisor shall reasonably deem adequate. Lessee shall also maintain and
keep in force plate glass coverage insurance coverage on all exterior and
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<PAGE>
interior plate glass in the premises, or in the alternative, by execution of
this Lease, be responsible for any damage and/or breakage to any plate glass on
the leased premises. Lessee shall provide Lessor with copies of certificates of
all policies, including in each instance, an endorsement providing that such
insurance shall not be cancelled, except after fifteen (15) days prior written
notice to Lessor. If Lessee does not keep such insurance in full force and
effect, Lessor may take out the necessary insurance and pay the premiums and the
repayment thereof shall be deemed to be part of the rental and payable as such
on the next day upon which rent becomes due.
C. Any insurance policy insuring Lessee against claims, expense or
liability for injury or death to person or property in, about or with respect
to the premises, for business interruption, or for all physical loss coverage,
shall provide that the insurer shall not acquire by subrogation any right of
recovery which Lessee has expressly waived in writing prior to occurrence of the
loss. Lessee hereby waives any right of recovery against Lessor for any such
claims, expenses, liability or business interruption.
D. Lessee will also maintain all physical loss coverage insurance
on its personal property, fixtures and leasehold improvements to the degree of
at least 80% of the insurable value thereof. Any proceeds payable during the
term of this Lease shall be used for the repair or replacement thereof.
10. Parking Spaces. Lessee shall have the exclusive use of the six (6)
parking spaces directly in front of the premises identified as 3534 "A"
Empleo, San Luis Obispo, California.
11. Assignment. Lessee shall not assign or hypothecate this Lease nor
any interest thereunder, nor permit or license the use of or sublet the promises
or any part thereof, without the prior written consent of Lessor. No consent to
any assignment or hypothecation or any permission to use, license or sublet,
shall constitute a waiver or discharge of the provisions of this paragraph,
except as to the specific instance covered thereby. Neither this Lease nor any
interest therein shall be assignable involuntarily, by action of law or
otherwise. Any violation of the terms of this paragraph shall, at the option of
the Lessor, be deemed a breach of this Lease entitling Lessor to terminate this
Lease.
12. Termination. The voluntary or other surrender of this Lease by
Lessee or a mutual cancellation thereof, shall not work a merger and shall, at
the option of Lessor, terminate all or any existing subleases or subtenancies,
or may, at the option of Lessor, operate as an assignment to it of any or all
such subleases or subtenancies. No termination of this Lease shall release
Lessee from any liability that may have attached or accrued, in whole or in
part, previous to or at the time of any termination.
5
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13. Unlawful Detainer and Receiver. If a receiver be appointed at the
instance of Lessor and an action against Lessee to take possession of the
premises, and/or to collect the rents or profits derived therefrom, the receiver
may, if it becomes necessary or convenient in order to collect such rents and
profits, conduct the business of Lessee then being carried on in the premise,
and may take possession of any personal property or trade fixtures or both
belonging to Lessee and used in the conduct of such business on the premisses
without compensation to Lessee for such use. Neither the application for the
appointment of a receiver, nor the appointment of such a receiver, shall be
construed as an election on Lessor's part to terminate this Lease, unless a
written notice of such intention is given to Lessee.
14. Waivers and Consents. The consent or approval by Lessor of any act
by Lessee requiring Lessor's consent or approval, shall not waive or render
unnecessary Lessor's consent or approval to any subsequent act by Lessee. One or
more waivers by Lessor of the Lessee's breach of any term, covenant or
conditions shall not be construed as a waiver of a subsequent breach of the same
or of any other term, covenant or condition.
15. Condemnation. In the event the premises or any substantial portion
thereof shall be condemned or threatened with condemnation by any public
authority or body, individual or corporate, authorized under any law, with the
power of eminent domain, and by reason thereof the premises or any substantial
part thereof are taken by, sold, exchanged or otherwise transferred to such
governmental or other duly constituted authority pursuant to such condemnation
or threat thereof, this Lease shall thereupon terminate, and all further rights
and/or obligations of either party under this Lease shall thereupon ceases;
however, this shall not release either party from any breach of this Lease which
theretofore may have occurred or accrued. Lessee shall have no right to receive
any part of any condemnation proceeds.
16. Notices. Any notices, demand or communication under or in
connection with this Lease may be served upon Lessor by personal service upon
Lessor, or by mailing the notices by registered mail with return receipt
requested, with postage thereupon fully prepaid in the United States mail,
directed to Lessor at 60 Zaca Way, San Luis Obispo, CA 93401. Notices may
likewise be served on Lessee by personal service or by mailing the notices as
set forth above, addressed to Lessee at 3534 Empleo, "A", San Luis Obispo, CA
93401. Either Lessor or Lessee may change such address by giving notice to the
other party in writing of such different address as the notifying party desires
to be used, and the different address shall continue as the address to which
notices are to be sent until further written notice.
17. Bankruptcy and Insolvency. Each of the following shall be deemed
a default by the Lessee and a breach of this Lease:
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A. (1) The filing of a petition by or against Lessee for
adjudication as a bankrupt under the Bankruptcy Act of the United States as now
or hereafter amended or supplemented, or for reorganization within the meaning
of Chapter X of said Bankruptcy Act, or for arrangement within the meaning of
Chapter XI of said Bankruptcy Act, or the filing of any petition by or against
Lessee under any future bankruptcy act for the same or similar release;
(2) The dissolution or commencement of any action or proceeding
for the dissolution or liquidation of Lessee, whether instituted by or against
the Lessee, or for the appointment of a receiver or trustee of the property of
Lessee;
(3) The taking possession of the property of Lessee by any
governmental officer or agency pursuant to statutory authority for the
dissolution or liquidation of Lessee; and
(4) The making by Lessee of any assignment for the benefit of
creditors.
B. (1) A default in the payment of the rent herein reserved or any
part thereof, for a period of five 95) days; and
(2) A default in the performance of any other covenant or
condition of this Lease on the part of Lessee for a period of ten (10) days
after service of notice thereof by Lessor on Lessee.
18. Breach by Lessee.
A. In the event of a breach of this Lease by Lessee, if such
breach is not cured by Lessee within ten (10) days following written notice from
Lessor specifying such breach, Lessor may at any time thereafter cure such
breach for the account and at the expense of Lessee without further notice. Any
amount Lessor is compelled to, or elects to, pay and any expenses incurred by
Lessor, including reasonable attorneys fees, with respect to any such breach,
shall be deemed to be additional rent and shall be due from Lessee to Lessor on
the first day of the month following notice to Lessee that Lessor has incurred
such costs and expenses, and the amount thereof.
B. In the event of a breach of this Lease by Lessee, Lessor in
addition to any other rights or remedies they way have, shall have the
immediate right to re-entry if such breach is not cured within ten (10) days
after written notice by Lessor specifying the breach. Lessor may then remove all
persons and property from the premises. Such property may be stored in any
public warehouse or elsewhere at the cost and risk of and for the account of
Lessee. Should Lessor elect to re-enter as herein provided or should it retake
possession pursuant to legal proceedings, or pursuant to any notice provided
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of by law, it may either terminate this Lease and recover from Lessee all
damages it may incur by reason of such breach, including recovery of possession
and reasonable attorney's fees, or may from time to time without terminating
this Lease relet the premises or any part thereof for all or any portion of the
lease term to a tenant or tenants satisfactory to Lessor at such rentals or
rental as Lessor may with reasonable diligence secure with the right to make
alterations and repairs. Should any such rental or rents actually received
during any month be less than agreed to be paid during that month by Lessee
hereunder, Lessee shall pay such deficiency to Lessor and shall pay to Lessor,
as soon as ascertained, the costs and expenses incurred by Lessor in such
re-letting. Such deficiency shall be calculated and paid at least monthly. No
such re-entry or taking of possession of the promises by Lessor shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention is given to Lessee, or unless the termination thereof
be decreed by a court of competent jurisdiction. Notwithstanding any such
re-letting without termination, Lessor may at any time thereafter elect to
terminate this Lease for such previous breach.
19. Damage or Destruction of Premises and Building. If the premises are
damaged or destroyed, Lessee shall give immediate notice thereof to Lessor, who
shall forthwith repair the same, provided such repairs can be made within
fifteen (15) days by working in the usual and ordinary manner and under the laws
and regulations of applicable governmental authorities. However, such
destruction or damage shall in no way annul or void this Lease, except that
Lessee shall be entitled to a proportionate deduction of rent from the time such
damage or destruction occurs until the repairs are substantially complete, said
proportionate deduction to be based upon the extent to which the making of
repairs shall interfere with the business carried on by Lessee in the premises.
20. Taxes, Fees and Charges. Lessee will pay, before delinquency, any
and all license fees and public charges which become payable during the lease
term and arising out of or relating to Lessee's activities in the premises.
Lessee shall pay all taxes charged against personal property, inventory, trade
fixtures and leasehold improvements placed by Lessee or its predecessors in, on
or about the promises, including without limitation, shelves, counters, wall
safes, fixture, machinery and equipment. If any such taxes are levied against
Lessor or Lessor's property, and if Lessor pays the same, or if the assessed
value of the Lessor's premises is increased by the inclusion thereof of a value
placed on such property and if Lessor pays the taxes based on such increased
assessment, Lessee, upon demand, shall either repay to Lessor the tax so levied,
or the proportion of such taxes resulting from such increase in the assessment,
on a percentage basis of what the within leased premises bears to the entire
premises.
21. Successors, Time. The terms, covenants and conditions herein
contained shall, subject to the provisions as to assignment, apply to and bind
the heirs, successors, executors, administrators and assigns of all of the
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parties hereto. From and after the date of any transfer by Lessor of its
interest in the premises, Lessor shall be released and discharged from any and
all obligations and responsibilities. Time is of the essence in this Lease.
22. Miscellaneous.
A. Various terms have been used in this Lease without limitation
as to number or gender.
B. This Lease contains the entire agreement of the parties and may
be modified only in writing signed by all parties or their authorized
representatives.
C. Each provision and each term of this Lease performable by
Lessee shall be construed as both a condition and a covenant.
D. Lessee warrants that he has incurred no obligation to any
realtor, broker or agent with respect to this Lease which may affect the
premises, and agrees to hold Lessor harmless from any cost, expense, or
liability in connection with their procurement of this Lease.
E. In the event suit is brought for unlawful detention of the
premises, for recovery of any rent or other sum due under the provisions of this
Lease, for the breach of any of the terms, covenants or condition herein
contained, or for any other violation of this Lease the prevailing party is
entitled to reasonable attorney's fees.
THIS LEASE has been executed in triplicate originals this 4th day of
December, 1995.
LESSOR: LESSEE:
Knecht's Plumbing & Heating, Virtual Reality Laboratories, Inc.
a General Partnership, a California Corporation
composed of Jack H. Knecht
and Gerald L. Knecht
____________________________________ ___________________________________
Jack H. Knecht Lance H. Woeltjen, President
____________________________________
Gerald L. Knecht
____________________________________
Blaine Enninga
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GUARANTEE OF LEASE PAYMENTS
The undersigned, Lance M. Woeltjen, hereby endorses, guaranties, and
promises to pay the lease payments, and any charges incident thereto, as set
forth in the Lease agreement between Lessor Knecht's Plumbing & Heating a
General partnership composed of Jack H. Knecht, Gerald L. Knecht, and Blaine
Enninga, and Virtual Reality Laboratories, Inc., a California corporation, in
the event of a breach for any reason in the terms and conditions of the Lease.
Dated: December 12, 1995
___________________________________
Lance H. Woeltjen
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EXHIBIT 10.8
LICENSE AGREEMENT
I. INTRODUCTION
This is a licensing agreement between Michael Smithwick (Developer) and
Virtual Reality Laboratories, Inc. (Publisher), in which Developer grants
Publisher certain rights in the software program formerly known as Galileo and
related data disks (Programs).
II. DEFINITIONS.
A. "Supporting Documentation" shall mean information that describes
the format, organization, and content of machine-readable
diskettes to be supplied to Publisher under the terms of this
Agreement.
B. "Manual" shall mean an instruction manual designed to teach an
inexperienced user how to operate the Programs.
C. "Gross Receipts" shall mean the amount collected by Publisher or
any sublicensee of Publisher for each copy of the Program sold
minus freight, allowances and returns.
D. "Errors" shall mean the failure of any of the Programs to operate
in conformance with the Supporting Documentation, the Manuals, or
in accordance with commonly accepted standards for microcomputer
software.
III. ITEMS PROVIDED BY DEVELOPER.
A. Developer shall furnish Publisher with computer readable programs
in object code form and in source code form. These Programs shall
be the (Galileo) Program and additional astronomical data disks
as described in Attachment A, which is hereby incorporated into
this Agreement.
B. Developer shall furnish Publisher a complete user's Manual for
the Programs as described in Attachment 3, which is hereby
incorporated into this Agreement.
C. Developer shall furnish Publisher with the Program registered
user list.
D. Developer shall furnish Publisher with any available performance
data, productivity data, and economic (marketing) data on the
Programs. At Publisher's request, Developer shall also supply
samples of existing advertising, training, or sales material that
may aid Publisher in marketing the Programs.
<PAGE>
IV. DELIVERY SCHEDULE.
A. Developer shall provide all items to be furnished under Section
III of this Agreement according to the time schedule set out in
Attachment C, which is hereby incorporated into this Agreement.
V. MAINTENANCE, MODIFICATION, AND TRAINING.
A. For the duration of this Agreement, if Publisher notifies
Developer of program Error(s) or Developer has other reason to
believe that Error(s) exist(s) in the Programs, Developer shall
use his best efforts to verify and fix the Error(s) within 15
business days after notification. If a verified Error cannot be
fixed within business 15 days, Developer shall devote five hours
per day toward correcting the Error until the Error has been
corrected. Developer shall promptly notify Publisher if an Error
cannot be verified within a reasonable time. Error corrections
shall be machine-readable and shall be such that Publisher can
update the Programs immediately. Developer shall be required to
correct the Error(s) in each new version of the program for no
more than 6 months following release of the version.
B. For the duration of this Agreement, Developer shall supply at no
charge to Publisher any program enhancements that improve
performance, utility, or existing syntax, and that improve or
reduce storage requirements.
C. For the duration of this Agreement, Developer shall supply at no
charge to Publisher any new astronomical data disks or other
related accessories that are developed.
D. If Developer fails to comply with any of the provisions of this
Section V by failing to fix Errors or provide upgrades as
specified in this Section V, Publisher may modify the source code
directly and charge the costs of this development to Developer as
specified in Section XV.
E. If Developer fails to comply with any of the provisions of this
Section V, Publisher may withhold royalty payments until the
provisions of this Section V have been met.
VI. EXCLUSIVE LICENSE.
A. Developer hereby grants to Publisher the worldwide, exclusive
license to reproduce, distribute, market, and exploit copies of
the Programs (including all upgrades) and User Manuals for use on
the Commodore Amiga computer. This shall cover English and German
language versions only.
Developer retains the right to license non-English or non-German
language amiga versions. The license granted to Publisher
hereunder shall include the right of Publisher to grant
<PAGE>
sublicenses to other parties subject to the limitations of this
license.
B. The license granted under Clause A of this Section shall begin on
the date of signing of this Agreement, and expire five (5) years
from that date.
C. Developer is granted the right to handle Program upgrades to
current owners, from version 2.0 to 3.0. Developer also has the
right to supply the current owners with the new data disks.
VII. ACCEPTANCE.
A. After Developer delivers Programs, Publisher shall have 15
business days to test the Programs. If Developer is not notified
in writing within 20 business days of delivery of the Programs
that the Programs are unacceptable, Publisher shall be deemed to
have accepted the Programs.
B. Publisher shall also be deemed to have accepted the Programs if
the Publisher makes the Programs available for sale.
C. If Publisher determines that Programs are unacceptable, Publisher
shall notify Developer in writing of what changes must be made in
the Programs to make them acceptable. Developer shall have 15
business days from receipt of the notification to make these
changes. If they are not made within the 15 business day period,
Publisher may terminate this Agreement. If after the period of
one (1) year, the program is still deemed unacceptable, this
Agreement is terminated.
VIII. ROYALTIES.
A. Subject to the conditions expressed elsewhere in this Agreement
and in consideration for the rights and license granted herein,
Publisher shall pay Developer a royalty 15% for the first 2,000
units sold, 20% for the next 2,000 units (units 2,001 to 4,000),
and 25% afterwards, on Gross Receipts of the Programs as defined
in Section II of this Agreement. Units are defined as the main
program formerly called "Galileo", and not the extra data disks.
B. Royalty payments for the preceding month shall be made to
Developer within 30 calendar days after the last day of each
month during the term of this Agreement.
C. Notwithstanding the provisions of this section, the minimum
yearly royalty payments for the Programs shall total at least
$11,500 for the English language version. This shall increase to
an additional $11,500 to a total of $23,000 for the first full
year that the German language version is available based on the
date of the English language introduction. For the year of
introduction, the additional $11,500 is prorated based on the
percentage of the year left.
<PAGE>
The year ends on each anniversary of the date of acceptance of
the Program. An additional 60 calendar days following the end of
the year shall be given Publisher to make good on the minimum
yearly royalty. Should the royalties and advances accrued or paid
be less than the minimum yearly royalty payments, Publisher shall
pay, in addition to the accrued royalties, the amount necessary
to reach the minimum yearly royalty amount. This additional
amount, if paid, shall be regarded as nonrefundable compensation
in addition to royalties and shall not be considered an advance
on royalties. Alternatively, Publisher may opt to terminate this
Agreement, paying nothing in excess of the accrued royalties.
D. If Publisher is more than 30 calendar days late on any one
payment, Developer may cancel the license granted in Section VI
of this Agreement provided that Developer sends written notice by
certified mail to Publisher of his intention to cancel and
provided that Publisher does not make full payment within 15
calendar days of receipt of notice.
E. Upon execution of this Agreement, Publisher shall pay Developer a
$2,500 advance on royalties.
F. Any advances paid to Developer shall apply to the minimum yearly
royalty as described in Section C above.
G. No further royalty payments shall be made until the amount of
royalties accrued exceeds the amount of the advances made under
Clauses E and F of this section.
H. The advances on royalties shall be refunded to the Publisher if
this Agreement should be terminated as a result of the fault or
breach of Developer before the royalties accrued or paid to
Developer equal or exceed the amount of the advance. Any refund
shall be paid by Developer within 30 calendar days after
Developer receives a written demand for payment from Publisher.
I. Notwithstanding the other clauses of this section, no royalties
shall be paid for dealer demonstration programs, promotional
copies, or review copies which Publisher gives away.
J. No royalties shall be paid to Developer for the sale of any
Manuals unless they are sold or transferred independently of the
Programs. For each copy of the Manual transferred without a
simultaneous transfer of a copy of the Program. Publisher shall
pay Developer a royalty of the current rate of Gross Receipts of
the Manual.
IX. ACCOUNTING.
A. Publisher shall keep accurate records covering all transactions
relating to Program sales and transfers. At the time each royalty
payment is due, Publisher shall furnish Developer with a
statement setting forth the number of Programs sold or
<PAGE>
sublicensed, the amount charged, and the Gross Receipts received.
Developer and/or Developer's agent, upon giving 30 calendar days
written notice, shall have the right to inspect these records
during business hours at Publisher's place of business. Developer
agrees to sign or require agent to sign nondisclosure agreements
obligating Developer and agent not to disclose matters that do
not pertain to Developer or Programs.
B. Developer may not audit records that are more than two years old
at the time of the audit.
X. WARRANTIES.
A. Developer warrants that Developer has the legal right to grant
Publisher the license rights as set out in Section VI of this
Agreement and that the exercise of such rights shall not infringe
any third parties' property or personal rights, nor do the
Programs violate the copyright, trademark, or proprietary right
of any third party.
B. Developer warrants that the Programs and the data contained
therein are accurate and not injurious.
C. Developer warrants that there are no pending lawsuits concerning
any aspect of the Programs and that the Programs have not been
published in such a way as to lose any of their copyright
protections.
D. Developer warrants that it owns the copyright to the Programs and
User Manuals that are being licensed to Publisher.
XI. INDEMNIFICATION.
A. Developer shall indemnify Publisher (including Publisher's
officers, employees, agents, and customers) and save and hold
Publisher harmless from and against any damages, liability, loss,
cost, or deficiency (including, but not limited to, reasonable
attorneys' fees and other costs and expenses incident to
proceedings or investigations or the defense of any claims
arising out of, any actual or alleged breach of any
representation, warranty, or covenant of Developer contained in
this Agreement.
XII. COPYRIGHTS AND TRADEMARKS.
A. All copies of the Programs and Manual shall contain an
appropriate copyright notice in the name of the Developer for the
content of the Manual and in the name of the Publisher for the
layout of the Manual.
B. All copies of the Programs and Manual shall contain appropriate
trademark notices in the name of the Developer.
<PAGE>
C. If the Programs and Manual have not been registered previously in
the U.S. Copyright Office, Developer will register the
aforementioned items within 15 calendar days of the first
shipment of the Product.
XIII. TERMINATION.
A. Either party shall have the right to terminate this Agreement in
the event that the other party commits a material breach of its
obligations. Intent to terminate shall be made by a written
notice, sent by certified mail to the breaching party at the
address set forth in Section XVI-D hereof, that sets forth the
details of the breach. Termination shall become effective 30
calendar days from the date that the notification of intent to
terminate was mailed, unless the breaching party has corrected
the breach prior to that 30 calendar day period.
B. Notwithstanding Clause A above, termination shall be effective if
one or more of the following events occurs:
1. A petition of bankruptcy is filed by or against Publisher
which is not discharged in 90 calendar days.
2. Publisher notifies Developer in writing that it intends to
cease publishing Programs. Such termination shall be effective
as of the date specified by Publisher.
3. Upon acceptance of Programs the Publisher fails to provide
finished units of the English version ready for sale within 90
calendar days of the signing of this Agreement, or finished
units of the German version for sale within 12 months of the
date of signing.
C. Notwithstanding termination of this Agreement by either party,
the following obligations and rights shall continue in full
force:
1. All obligations under Sections X, XI, XVI and IX shall survive
and continue to bind the parties, notwithstanding the
termination.
2. Persons and companies who obtained the Programs prior to
termination and under paragraph XIII.C.4 below shall continue
to have the right to use the Programs.
3. Publisher shall honor any remaining obligations under the
section of this Agreement titled "Royalties."
D. In the event that this Agreement is terminated because of a
breach of this Agreement by Developer, Publisher may continue to
reproduce and to sell the Programs and Manuals for the remainder
of the term otherwise applicable.
<PAGE>
E. In the event that this Agreement is terminated because of a
breach of this Agreement by Publisher, the exclusive license as
specified in Section VI shall revert to Developer. Developer
shall have the right for 60 calendar days after termination to
purchase all unsold copies of the Program at the manufacturing
cost, and any packaging materials and manuals at manufacturing or
printing cost. F.O.B. point of shipment from the Publisher. Under
such terms of purchase, the Developer would have the right to
distribute Programs and packaging with the Publisher's name. If
Developer fails to purchase the unsold copies, the Publisher may
continue to sell the Programs and Manuals, and continue to honor
the current royalty percentage.
XIV. ARBITRATION.
A. Any dispute relating to the interpretation or performance of this
Agreement shall be resolved at the request of either party
through binding arbitration. Arbitration shall be conducted in
the city where Publisher's headquarters is located, which is
currently San Luis Obispo, California. In accordance with the
then-existing rules of the American Arbitration Association,
judgment upon any award by the arbitrators may be entered by the
state or federal court having jurisdiction. The parties intend
that this Agreement to arbitrate be irrevocable.
XV. SOURCE CODE.
A. Developer will provide to Publisher in computer readable form,
the most current version of the source code (including
programmer's notes and comments) for the Programs within five
business days of acceptance of the Programs, and within five
business days of acceptance of any upgrades of the Programs.
B. Publisher shall have the right to use or modify the source code
to develop, produce, and sell new versions of the Programs after
Publisher notifies Developer in writing of a breach of Section V
of this Agreement that allows Publisher to use the source code,
unless Developer has corrected the breach within 30 business days
of receipt of the notification.
C. If Publisher gains the right to use the source code, Publisher
may modify the source code to correct Errors or develop
enhancements and upgrades to the Programs, which Publisher may
then reproduce, distribute, and market as specified in this
Agreement. All development costs, including a programmer's fees
or salary will be charged to Developer. These costs will be
deducted from royalties.
D. Publisher may withhold royalty payments during the time that it
is modifying the source code and until a new version of the
Program that is being modified has been released. At the time of
release, Publisher shall determine the costs of development,
deduct 1/3rd that amount from royalties due, and pay Developer
the difference (or withhold future royalty payments until the
development costs haves been recouped). All accrued royalties
<PAGE>
shall be counted toward the minimum yearly royalty as specified
in Section VII, even if those royalties were not directly paid to
Developer but went to pay for development of the Programs as
provided in paragraph XV.C above.
E. At the expiration of this Agreement, all Program modifications
made by the Publisher shall become the property of the Developer,
provided that the Developer is in full compliance with this
Agreement and that the Developer pays any unrecouped development
costs (development costs that have not yet been fully deducted
from royalties as provided in paragraph XV.C above) to Publisher.
XVI. GENERAL.
A. Publisher shall have full freedom and flexibility in marketing
efforts for the Programs, including the freedom to decide its
method of marketing, terms, conditions, and prices.
B. Publisher shall provide Developer an electronic version of the
Program registered user list with each royalty payment. Developer
may not make use of this information unless and until this
Agreement is terminated.
C. Neither party may sell, transfer, or assign any rights or
obligations under this Agreement without the prior written
consent of the other party, except that Publisher may assign this
Agreement as part of a sale or transfer of substantially all the
assets to a third party.
D. Developer has the right to market and sell Programs for other
languages and computer versions not specified in this Agreement
under the name selected for the Program.
E. Any notice from one party to the other required by this Agreement
shall be deemed made on the date of mailing if sent by certified
mail, return receipt requested and mailed to the address
specified below.
Virtual Reality Laboratories, Inc.
2341 Ganador Court
San Luis Obispo, CA 93401
Attn: Lance Woeltjen
Michael Smithwick
035 Aster Avenue, #1117
Sunnyvale, CA 94086
<PAGE>
F. This Agreement shall be construed under the law of the State of
California. Both parties waive any objection to the personal
jurisdiction and venue of the State and Federal Courts of the
State of California.
G. This Agreement sets forth the entire understanding between the
parties: it may be changed or modified only in writing and must
be signed by both parties.
H. This Agreement is binding upon and shall inure to the benefit of
the legal successors, heirs, administrators, and permitted
assigns of the parties.
I. If any provision or term of this Agreement is held to be invalid,
void, or unenforceable, the remainder of the provisions shall
remain in full force and effect and shall in no way be affected,
impaired, or invalidated.
The parties set their hands and seals to this Agreement as of the day and year
written below.
_________________________ Developer ______________________ Publisher
__________________ Date ____________________ Date
<PAGE>
Attachment A
The programs to be supplied to Publisher are:
1. The Program version 3.0 with all of the features in the "Version 2.1 Beta"
version that has been supplied to Publisher, but thoroughly tested.
2. An installation program for installing Program on a hard disk.
3. The Yale Bright Star Catalog that is currently available.
4. The SkyMap Star Catalog.
5. The first digitized data disk consisting of 200 digitized stellar objects.
6. A self-running demonstration of Program.
7. Additional data disks.
8. The complete, compilable source code for the Program.
<PAGE>
Attachment B
The Manual to be furnished shall include:
1. An ASCII text file on an Amiga or IBM disk containing the entire
contents of the Manual that is currently on the market and including any
modifications necessary for version 3.0. This text should not include page
numbers but should including markings for chapter headings, subheadings, etc.
This text should also including markings specifying words to be included in the
Index.
2. A printed copy of the text file with markings indicating any special
provisions.
3. Illustrations, preferably camera ready.
<PAGE>
Attachment C
The Programs shall be delivered to Publisher according to the following
schedule:
Upon signing this Agreement - the most current version of Program
and the User Manual
_____________ - the final User Manual
_____________ - A final, tested version of Program
for approval
_____________ - A sample digitized data disk for
approval
_____________ - The final version of Program programs
The Program source code
_____________ - The Yale data disk
The SkyMap data disk
The digitized data disk
<PAGE>
First Amendment to the License Agreement signed September 2, 1989
between R. Michael Smithwick, Developer, and Virtual Reality Laboratories, Inc.,
Publisher.
The Developer and Publisher amend the September 2, 1989 License
Agreement as follows:
The first paragraph of VIII C shall be deleted and replaced with the
following:
"Notwithstanding the provisions of this section, the minimum yearly
royalty payment for the Programs shall total at least $13,500 for the English
and German language versions for the first year. Each year thereafter, the
minimum yearly royalty payment shall total at least $11,500 per year."
XVI D shall be deleted and replaced with the following:
"Developer has the right to market and sell Programs for other
languages and computer versions not specified in this agreement under the name
selected for the Program, and the Publisher has the first right of refusal for
such other languages and computer versions."
The parties set their hands and seals to this amendment to the
Agreement as of the day and year written below:
_______________________ Developer _____________________ Publisher
_________________ Date __________________ Date
<PAGE>
Attachment D
The Programs shall be delivered to the Publisher, and royalty advances
shall be paid by Publisher upon successful completion of the milestones,
according to the following milestone schedule:
Event Milestone Date Royalty Advance
- - ----- -------------- ---------------
User Manual Complete ____________ ______________
Beta Version of Program ____________ ______________
Program Duplication Master ____________ ______________
Expansion Disks ____________ ______________
Program Source Code ____________ ______________
<PAGE>
Second Amendment to the License Agreement signed September 2, 1989
between R. Michael Smithwick, Developer, and Virtual Reality Laboratories, Inc.,
Publisher.
The Developer and Publisher amend the September 2, 1989 License
Agreement as follows:
Section III shall be amended to add paragraph E which states:
III. E. Developer shall furnish Publisher with items listed in III A.B.
and C. suitable to make the program useable on IBM PC's and IBM PC clones and
look alikes.
Section IV shall be amended to add a paragraph B which states:
IV. B. Developer shall provide all items to be furnished under Section
III of this Agreement according to the time schedule set out in Attachment D.
which is hereby incorporated into this Agreement.
The first paragraph of Section VI. A. shall be replaced with the
following paragraph:
Developer hereby grants to Publisher the worldwide, exclusive license
to reproduce, distribute, market, and exploit copies of the Programs (including
all upgrades) and User Manuals for use on the Commodore Amiga computer and the
IBM PC computer including all PC clones and PC look alikes. This shall cover the
English and German language versions only.
Section VIII. A. shall add the following sentence at the end of
paragraph A:
A royalty of 25% of Gross receipts for sales of Program for IBM PC, PC
clone, and PC look alikes shall be paid by the Publisher to the Developer.
Section VIII. C. shall add the following sentence at the end of
paragraph C:
A separate minimum annual royalty of $20,000 shall be paid by the
Publisher to the Developer for sales of Program for IBM PC, PC clone, and PC
look alikes.
Section VIII. E. shall add the following sentence at the end of
paragraph E:
Upon the execution of this second amendment to the License Agreement,
Publisher agrees to pay royalty advances to the Developer, contingent upon
successful milestone completion, as set out in Attachment D.
The parties set their hands and seals to this second amendment to the
Agreement as of the day and year written below:
_______________________ Developer _____________________ Publisher
_________________ Date __________________ Date
<PAGE>
Third Amendment to the License Agreement signed September 2, 1989
between R. Michael Smithwick, Developer, and Virtual Reality Laboratories, Inc.,
Publisher.
The Developer and Publisher amend the September 2, 1989 License
Agreement as follows:
The purpose of this Amendment is to provide a 6 month period during
which the Developer receives royalties, including advances if necessary, of
$3,000 per month so that he may complete the port of Distant Suns to the IBM
platform granted in the second amendment and so that he may complete a version 4
of Distant Suns for the Amiga platform. It is envisioned that such work will be
complete in 4 months, on or around April 30, 1991. The extra two months are for
unexpected contingency and to allow the Publisher to release version 4 and the
IBM port thereby providing the Developer with an enhanced royalty stream by the
time this amendment expires.
It is the further purpose of this amendment to hire the Developer for
the six month period as an employee of Virtual Reality Laboratories, Inc. with a
salary of $1,000 per month with three deductions. The total cost of such salary
shall reduce the $3,000 per month royalty by the exact amount of such cost.
Therefore, the Developer agrees to make his best effort to complete a
port of Distant Suns to the IBM platform and version 4 of Distant Suns by June
30, 1990.
Therefore, the Publisher agrees to pay at least $3,000 per month of
royalty and royalty advance as necessary, commencing on the last day of
December, 1990 and ending after 6 payments on the last day of May, 1991. If the
amount of royalty earned during any month is less than $3,000, the Publisher
will advance the amount necessary to make up $3,000. The amount of the advance
will be made up on any months which exceed $3,000 before May 31, 1991 if such
months occur. If not, the amount of the advance shall be made up as quickly as
possible by the royalty stream after May 31, 1991. Excess royalty, above $3,000,
if earned during the period of the amendment will be retained by the Publisher
and used to make up the $3,000 amount if a subsequent short fall arises. If
there is any excess royalty due on May 31, 1991 it will be paid on that date.
The Developer desires to be hired, and the Publisher agrees to hire R.
Michael Smithwick, commencing January 1, 1991 for a period of 6 months ending
June 30, 1990. Payment will be in advance each month and shall be comprised of:
$852.58 paycheck to Mike Smithwick
$.92 California state income tax withholding
$61.00 Federal income tax withholding
$-6.50 Employee FICA contribution
$9.00 State disability insurance
$-6.50 Employer FICA contribution
$3.00 SUI
<PAGE>
$35.00 FUTA
$1,880.50 Royalty
----------
$3,000.00 Charge to royalty account per month
The distribution above is for a single person with one deduction
earning a salary of $1,000 per month in the State of California.
In agreement hereto, Publisher and Developer set their hand herewith:
- - ---------------------------- -------------------------------
R. Michael Smithwick Lance H. Woeltjen, President
Developer Virtual Reality Laboratories, Inc.
Publisher
- - --------------------- -----------------------
Date Date
<PAGE>
Fourth Amendment to the License Agreement signed September 2, 1989
between R. Michael Smithwick, Developer, and Virtual Reality Laboratories, Inc.,
Publisher.
The Developer and Publisher amend the September 2, 1989 License
Agreement as follows:
The purpose of this Amendment is to encourage the sales of Space
Visions as expansions to Distant Suns 4.0 by reducing its price. The Developer
agrees to reduce the royalty amount due for sale of Space Visions to 20%. The
Publisher agrees to make a separate accounting of Space Visions for royalty
calculation purposes and that all other versions of Distant Suns and Distant
Suns expansions shall retain a royalty of 25% as agreed in the original License
Agreement.
In agreement hereto, Publisher and Developer set their hand herewith:
- - ---------------------------- -------------------------------
R. Michael Smithwick Lance H. Woeltjen, President
Developer Virtual Reality Laboratories, Inc.
Publisher
- - --------------------- -----------------------
Date Date
<PAGE>
Fifth Amendment to the License Agreement signed September 2, 1989
between R.Michael Smithwick, Developer, and Virtual Reality Laboratories, Inc.,
Publisher.
The Developer and Publisher amend the September 2, 1989 License
Agreement as follows:
Royalty due for the net sales of Distant Suns for the IBM PC Windows
platform shall be paid as follows:
16.67% to Mike Smithwick
8.33% to Zack Gray
Mike Smithwick will provide Zack Gray's address before the first
royalty payment is due on the Windows version, or VRLI will send Zack Gray's
check care of Mike Smithwick.
In agreement hereto, Publisher and Developer set their hand herewith:
- - ---------------------------- -------------------------------
R. Michael Smithwick Lance H. Woeltjen, President
Developer Virtual Reality Laboratories, Inc.
Publisher
- - --------------------- -----------------------
Date Date
<PAGE>
Sixth Amendment to the License Agreement signed September 2, 1989
between R. Michael Smithwick, Developer, and Virtual Reality Laboratories, Inc.,
Publisher.
The Developer and Publisher amend the September 2, 1989 License
Agreement as follows:
Royalty due for the net sales of Distant Suns and Space Visions for all
platforms shall be capped at 20%. The split of royalty for sales of Distant Suns
Windows shall be:
10.00% to Mike Smithwick and 10.00% to Zack Gray.
In return for the cap of the royalty rate at 20%, Virtual Reality
Laboratories, Inc. Agrees to pay Mike Smithwick 5% royalty above the cap in
common stock of Virtual Reality Laboratories, Inc. as follows:
An accrual of the cash value of the 5% royalty will be made. On
December 31st and June 30th of each year the stock will be valued by dividing
the number of outstanding shares into the last 12 months sales to provide the
price per share. The cash value of the accrued royalty will be divided by the
price per share to yield the number of shares which will be accrued. Shares will
be issued upon the sooner of the first private offering of VRLI stock or the
expiration of this agreement on September 2, 1994 or upon its renewal. Virtual
Reality Laboratories, Inc. Shall have first right of refusal to repurchase VRLI
stock which Mike Smithwick desires to sell. Transfer of stock shall be
restricted by applicable Federal and State laws and regulations. Effective date
of this amendment shall be March 31, 1992.
In agreement hereto, Publisher and Developer set their hand herewith:
- - ---------------------------- -------------------------------
R. Michael Smithwick Lance H. Woeltjen, President
Developer Virtual Reality Laboratories, Inc.
Publisher
- - --------------------- -----------------------
Date Date
<PAGE>
Seventh Amendment to the License Agreement signed September 2, 1989
between R. Michael Smithwick, Developer, and Virtual Reality Laboratories, Inc.,
Publisher.
The Developer and Publisher amend the September 2, 1989 License
Agreement as follows:
The term of the Agreement is extended, without lapse, for seven years,
until September 2, 2001.
Royalty for continuing sales of Distant Suns will be split 7.5% to Mike
Smithwick and 7.5% to Zachary Gray. Publisher will calculate stock earned by
Mike Smithwick and Zachary Gray and provide amounts not later than August 4,
1995 and certificates not later than August 18, 1995.
Royalties earned for First Light shall be 13% to Mike Smithwick, 3% to
Clint Woeltjen and 1/2% to John Hinkley. If Clint Woeltjen does not provide a
simplified Vistapro rendering engine for First Light within 6 months of the date
that Publisher accepts a 32 bit version of First Light, then his royalty shall
be reduced to 1.5%.
The Publisher's agreement to provide $4,500.00 royalty plus pre-paid
royalty during the development of First Light shall conclude with a $5,500
royalty plus pre-paid royalty payment at the end of July, 1995. Publisher will
return half of any accrued overages in August, 1995 and the balance in
September.
- - ---------------------------- -------------------------------
R. Michael Smithwick Lance H. Woeltjen, President
Developer Virtual Reality Laboratories, Inc.
Publisher
- - --------------------- -----------------------
Date Date
<PAGE>
EXHIBIT 10.9
License Agreement
I. INTRODUCTION
This is a licensing agreement between Virtual Reality Laboratories, Inc.
(Publisher) 2341 Ganador Court, San Luis Obispo, CA 93401 and Hypercube
Engineering, a partnership, (Developer) 140 Barber Street, Livermore, CA 94550.
In this licensing agreement, the Developer grants the Publisher rights to
produce and sell the Developer s programs currently called Fractal Flights and
Vista.
II. DEFINITIONS
A. Supporting Documentation shall mean information that describes
the format, organization, and content of machine readable diskettes to be
supplied to the Publisher under the terms of this Agreement.
B. "Manual" shall mean an instruction manual design to teach an
inexperienced user how to operate the Programs.
C. "Gross Receipts" shall mean the amount collected by the
Publisher for each copy of the program minus freight and handling paid by the
Publisher and returns.
D. "Errors" shall mean the failure of any of the Programs to
operate in conformance with the Supporting Documentation, the Manuals, or in
accordance with commonly accepted standards for microcomputer software.
III. ITEMS PROVIDED BY THE DEVELOPER
A. Developer shall furnish Publisher with computer readable
programs in object code form and source code form. These programs shall be
Fractal Flights and Vista.
B. Developer shall furnish Publisher a complete User's Manual for
Fractal Flights and Vista in ASCII files on diskette.
C. Developer shall furnish the Publisher with any available
performance data. training data, and economic or marketing data which the
Developer has for the programs which may be used by the Publisher to increase or
enhance the sales of the programs.
IV. DELIVERY SCHEDULE
A. Developer shall provide Vista by April 16, 1990; and shall
provide Fractal Flights no later than December 31, 1990. Developer shall notify
the Publisher of a firm date for delivery of Fractal Flights no later than
June 1, 1990.
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<PAGE>
V. MAINTENANCE, MODIFICATION, AND TRAINING
A. For the duration of this Agreement, if Publisher notifies
Developer of program Errors) or if Developer has other reason to believe that
Error(s) exist(s) in the Programs, Developer shall use his best efforts to
verify and repair the Error(s) within 15 days after notification in writing by
the Publisher. If a verified Error cannot be repaired within 15 days, Developer
shall devote full time to repair of the Error(s) until Error(s) has(have) been
corrected. Developer shall promptly notify the Publisher if an Error cannot be
verified within a reasonable time. Error corrections shall be machine-readable
and shall be such that Publisher can update the Programs immediately. Developer
shall be required to correct the Errors) in each new version of the programs for
no more than 6 months after the following release of the new version for sale.
B. For the duration of this Agreement, Developer shall supply at
no charge to Publisher any program enhancements that improve performance,
utility, or existing syntax, and that improve or reduce storage requirements.
C. If Developer fails to comply with any provisions of Section V
by failing to repair Error(s) or provide upgrade versions as specified in
Section V, then the Publisher may modify the source code directly and charge the
expense of this development not to exceed $500 per instance, to Developer as
specified in Section XV.
VI. EXCLUSIVE LICENSE
A. Developer hereby grants to the Publisher the worldwide,
exclusive license to reproduce. distribute, market. and otherwise exploit copies
of the Programs and User Manuals for use on Commodore products. IBM PC's under
MS-DOS. Apple Products, during the term of this Licensing Agreement.
Notwithstanding the above list of platforms, Publisher shall leave first right
of refusal for any port produced for the programs by the Developer. The License
granted to the Publisher hereunder shall include the right of the Publisher to
grant sublicenses to other parties subject to the limitations of this license.
B. The license granted under paragraph A of Section VI shall
begin on the date of signing this Agreement, and it shall expire seven (7) years
from that date. The Developer is not required to provide any ports or programs
beyond the Commodore platform.
VII. ACCEPTANCE
A. After the Developer delivers the Programs, Publisher shall
have 30 days to test the Programs. If Developer is not notified in writing
within 45 days of delivery of the Programs that the Programs are unacceptable,
Publisher shall be deemed to have accepted the Programs.
2
<PAGE>
B. Publisher shall be deemed to have accepted the Programs if the
Publisher is selling the Programs.
C. If the Publisher deems the Programs unacceptable, Publisher
shall notify Developer in writing of what changes must be made in the Programs
to make them acceptable. Developer shall have 15 days from the receipt of the
notification to make the required changes. or the Publisher may terminate this
Agreement, If after the period of one (1) year, the Programs are still deemed
unacceptable, this Agreement is terminated.
VIII. ROYALTIES
A. Subject to the conditions expressed elsewhere in this
Agreement and in consideration for the rights and license granted herein.
Publisher shall pay Developer a royalty of 10% for the first $100,000 of Gross
Receipts from the sale and/or sublicensing of the Programs; a royalty of 15% for
Gross Receipts from $100,001 to $1,000,000; and a royalty of 20% for gross
Receipts of $1,000.001 and greater.
B. Royalty payments shall be calculated monthly by the Publisher.
and the amount calculated for the month shall be due and payable 30 days after
said calculation.
C. If Publisher is more than 30 days late on any payment, the
Developer may cancel the license granted in Section VI of this Agreement
provided that the Developer sends written notice of his intent to cancel by
certified mail to the Publisher, and provided that the Publisher fails to make
payment in full within 15 calendar days of receipt of notice.
D. Upon execution of this Agreement. Publisher shall pay
Developer a $1,000 advance on royalties as earnest money to secure the
Agreement.
E. The advance on royalty shall be refunded to the Publisher by
the Developer if the Agreement is terminated by the Developer before royalties
are earned from Gross Receipts. Such refund will be made within 30 days of such
termination.
F. Notwithstanding the other clauses of this section. no
royalties shall be paid for dealer demonstration programs, promotional copies,
copies traded for advertising of the Programs, or review copies given away by
the Publisher.
G. Minimum annual royalty paid for the Programs shall be $10,000.
IX. ACCOUNTING
A. Publisher shall keep accurate records covering all
transactions related to sale of the Programs. At the time each royalty payment
is due. Publisher shall furnish Developer with a statement setting forth the
Gross Receipts received from sales and sublicensing of the Programs. Developer,
upon giving 30 days written notice. shall have the right to inspect the
accounting records of the Publisher related to the sale and sublicensing of the
3
<PAGE>
Programs. This inspection shall be at the Publisher's place of business
indicated in Section 1. Developer agrees to sign nondisclosure statements
obligating the Developer not to disclose matters not pertaining to the licensed
Programs of the Developer. Alternatively, Developer may request, and Publisher
shall provide, photocopies of accounting records related to the sale of the
programs. Such photocopies shall be provided within 10 days.
B. Developer may not audit records that are more than two years
old at the time of the audit.
X. WARRANTIES
A. Developer warrants that it has the legal right to grant
Publisher the license rights set forth in Section VI, and that the exercise of
such rights shall not infringe any third party property or personal rights.
B. Developer warrants that there are no pending lawsuits
pertaining to any aspect of the Programs and that the Programs have not been
published in any way such as to lose their copyright protections.
C. Developer warrants that it owns the copyright to the Programs
and User Manuals that are being licensed to the Publisher.
XI. INDEMNIFICATION
A. Developer shall indemnify Publisher, and save and hold
Publisher harmless from and against any damages. liability, loss, cost, or
deficiency arising out of any misrepresentation. warranty, or covenant of
Developer contained in this Agreement.
XII. COPYRIGHTS AND TRADEMARKS
A. All copies of the Programs and User Manuals shall contain an
appropriate copyright notice in the name of the Developer for content of the
User Manuals and Programs.
B. All copies of the Programs and User Manuals shall contain
trademark notices in the name of the Publisher for the trade names of the
Programs which are currently Vista and Fractal Flight, but which may be changed
at the sole discretion of the Publisher for marketing purposes.
C. If the Programs and User Manuals have not been registered
previously in the U. S. Copyright Office. Developer will register the Programs
and User Manuals within 15 days of the first shipment of the Programs for sale.
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<PAGE>
XIII. TERMINATION
A. Either party shall have the right to terminate this Agreement
in the event the other party commits a material breach of its obligations.
Intent to terminate shall be made by written notice, sent by certified mail to
the breaching party at the address set for in Section 1. Termination shall
become effective 30 days from the date of mailing the notification of intent to
terminate unless the breaching party has corrected the breach prior to the end
of that 30 day period,
B. Notwithstanding Section XIII; paragraph A, termination shall
be effective if one or more of the following events occurs:
1. Publisher notifies the Developer in writing that it intends
to cease publishing the Programs. Such termination shall be effective as of the
date specified by the Publisher.
2. Publisher falls to provide Programs for sale within 120
days after acceptance of the Programs as defined in Section VI 1.
C. In the event that this Agreement is terminated through breach
by the Developer, Publisher may continue to reproduce and sell the Programs and
User Manuals for the remainder of the term otherwise applicable.
D. In the event that this Agreement is terminated through breach
by the Publisher. the exclusive license shall revert to the Developer.
XIV. ARBITRATION
A. Any dispute relating to the interpretation or performance of
this Agreement shall be resolved at the request of either party though binding
arbitration. Arbitration shall be conducted in the city of San Luis Obispo,
California, in accordance with the then existing rules of the American
Arbitration Association. judgment upon any award by the arbitrators may be
entered by the state or federal court having jurisdiction. The parties intend
that this agreement to arbitrate shall be irrevocable.
XV. SOURCE CODE
A. Developer will provide to the Publisher in computer readable
form, the most current version of the source code, including programmer's notes
and comments, for the Programs within five days of acceptance of the Programs
and upgrades of the Programs.
B. Publisher shall have the right to use or modify the source
code to develop, produce, and sell new versions (subject to the limitations of
Section XV, paragraph F) of the Programs after Publisher notifies the Developer
in writing of a breach of Section V of this Agreement, unless the Developer has
corrected the breach within 15 days of receipt of the notification.
5
<PAGE>
C. If Publisher gains right to use the source code, Publisher may
modify the source code to correct Errors or develop enhancements and upgrades to
the Programs, which the Publisher may then reproduce, distribute, and market as
specified in this Agreement. All development costs, including programmer's fee
or salary, up to the maximum indicated in section 5 paragraph C. shall be
deducted from the royalty otherwise due to the Developer.
D. Publisher may withhold royalty payments during the time that
it is modifying the source code until a new version of the Program using the
modified source code is released. Royalties, up to the maximum indicated in
section 5 paragraph C, withheld or deducted under Section XV paragraphs C and D
shall be counted toward the minimum annual royalty as specified in Section VIII.
E. At the expiration, or termination by the Publisher, of this
Agreement, all Program modifications made by the Publisher shall become the
property of the Developer, provided that the Developer is in full compliance
with this Agreement and that the Developer pays the Publisher any unrecouped
development cost, up to the maximum indicated in section 5 paragraph C, not yet
deducted from royalties as provided in Section XV paragraph C.
F. Software and source codes shall remain the intellectual
property of Developer. Any source codes provided to Publisher are for the sole
purpose of recreating the executable form of the software, or for fixing minor
bugs. Any modifications or enhancements, or other changes (other than minor bug
fixes) to the software are to be made at Developer discretion. No part of the
source code may be used in, or used to product, any other programs or products,
without the express written permission of the Developer. Publisher will not
disclosure source code to any third parties without signed non-disclosure
documents which will be immediately mailed to Developers.
XVI. GENERAL
A. Publisher shall have full freedom and flexibility in
determining how the Programs should be marketed, including, but not limited to,
freedom to decide its method of marketing, price and trade names for the
Programs.
B. Neither party may sell, transfer, or assign any rights or
obligations under this Agreement, without prior written consent of the other
party, except that the Publisher may assign this Agreement as part of a sale or
transfer of substantially all its assets to a third party.
C. Any notice from one party to the other required by this
Agreement shall be deemed made on the date of mailing if sent by certified mail,
return receipt requested, and mailed to the addresses specified in Section 1.
D. This Agreement shall be construed under the law of the State
of California, United States of America. Both parties waive any objection to the
personal jurisdiction and venue of the State and Federal courts of the State of
California.
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E. This Agreement sets forth the entire understanding between the
parties. It may be changed or modified only in writing and must be signed by
both parties.
F. This Agreement is binding upon and shall inure to the benefit
of the legal successors, heirs, administrators, and permitted assigns of the
parties.
G. If any provision or term of this Agreement is held to be
invalid, void, or unenforceable, the remainder of the provisions shall remain in
full force and effect and shall in no way be affected, impaired, or invalidated.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AGREEMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ ____________________________________
Mr. Brick Eksten Mr. Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
The Developer The Publisher
_____________________________________ Date
_____________________________________
John Hinkley
Hypercube Engineering
The Developer
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<PAGE>
AMENDMENT A TO LICENSE AGREEMENT
Section III. ITEMS PROVIDED BY THE DEVELOPER shall be amended to include
Vistapro.
Section III. ITEMS PROVIDED BY THE DEVELOPER shall be amended to make it
clear that the Developer's responsibility is limited to providing an English
language User's Manual. It shall be the responsibility of the Publisher to make
translations to any other language.
Section VIII. ROYALTIES shall be amended to state that the Publisher
shall pay Developer royalties on any foreign language versions of Vista or
Vistapro published. Section VIII shall be further amended to state that the
Publisher shall pay Developer royalties on any expansion disks which it
publishes. whether or not produced by the Developer. for use on Vista or
Vistapro,
Section VIII. ROYALTIES shall be amended to state that the Publisher
shall pay the Developer a royalty of 15% for Gross Receipts received from the
date November 1, 1990 until $1,000.000 of Gross Receipts are received.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF THE DAY AND
YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
Brick Eksten Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
The Developer The Publisher
_____________________________________ Date
_____________________________________
John Hinkley
Hypercube Engineering
The Developer
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<PAGE>
AMENDMENT B TO LICENSE AGREEMENT
Beginning with the royalty payment due 2/28/91, Virtual Reality
Laboratories, Inc. agrees to pay the sum of the royalty due and a prepaid
royalty amount so that the sum of the royalty due and the prepaid amount is
$6,000 per month for 6 months including the 2/28/91 payment.
The prepaid royalty amount will be recouped from royalty amounts due
after the first sales of the IBM PC version have been collected. An amount of
20% per month of the royalty due to Hypercube Engineering after the first sales
of an IBM PC version have been collected will be used to pay down the prepaid
royalty accumulated until all prepaid royalty has been recouped by Virtual
Reality Laboratories Inc.
If Hypercube Engineering should fail to produce a marketable IBM PC
version of VISTA by August 31, 1991, then Virtual Reality Laboratories, Inc.
will begin recouping prepaid royalties at 20% of royalties due per month
beginning August 31st.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
Brick Eksten Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
The Developer The Publisher
_____________________________________
Date
John Hinkley
Hypercube Engineering
The Developer
9
<PAGE>
AMENDMENT C TO LICENSE AGREEMENT
Virtual Reality Laboratories, Inc. shall pay a royalty rate of 22.5% on
gross receipts as defined above for Pathmaker for Vista and Vistapro. This
royalty rate is limited to Pathmaker.
Hypercube Engineering shall deliver the software and any documentation
required to use the software. Pathmaker shall be supported in the same manner as
Vistapro and Vista by Hypercube Engineering.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
Brick Eksten Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
The Developer The Publisher
_____________________________________ Date
_____________________________________
John Hinkley
Hypercube Engineering
The Developer
10
<PAGE>
AMENDMENT D TO LICENSE AGREEMENT
Virtual Reality Laboratories, Inc. "VRLI" shall, at its sole expense,
undertake a port of the Vistapro program to the Apple Macintosh platform.
Accordingly, it shall assume the responsibilities of the Developer for this
port, and, in consideration of producing this port, royalties (as set forth in
the master agreement) for the Macintosh port shall be apportioned as follows:
50% Virtual Reality Laboratories, Inc.
40% John Hinkley, Hypercube
10% Brick Eksten, Hypercube
The copyright for the Vistapro Macintosh port shall remain with John Hinkley,
Hypercube Engineering.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
John Hinkley Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
_____________________________________ Date
_____________________________________
Brick Eskten
Hypercube Engineering
11
<PAGE>
AMENDMENT E TO LICENSE AGREEMENT
Virtual Reality Laboratories, Inc. "VRLI" shall prepay David Warthen
$3000 per month prepaid royalty for a period of six months beginning February
15, 1993 to undertake a port of the Vistapro PC program to the Microsoft
Windows platform. In consideration of producing this port, royalties (as set
forth in the master agreement) for the Windows port shall be apportioned as
follows:
50% John Hinkley
50% David Warthen
The prepaid royalty shall be recovered from sales before royalties are
distributed.
The copyright for the Windows port shall remain with John Hinkley.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
John Hinkley Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
_____________________________________ Date
_____________________________________
David Warthen
12
<PAGE>
AMENDMENT F TO LICENSE AGREEMENT
Royalties (as set forth in the master agreement) for the Amiga Vista
Lite port shall be apportioned as follows:
47.5% John Hinkley
47.5% Clint Woeltjen
5.0% Brick Eksten
There are no prepaid royalties involved in this port. Brick Eksten
verbally agreed with VRLI, to take 5% of royalties due on this port as an
honorarium.
The copyright for the Vista Lite port shall remain with John Hinkley.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
John Hinkley Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
_____________________________________ Date
_____________________________________
Clint H. Woeltjen
Chaocity
13
<PAGE>
AMENDMENT G TO LICENSE AGREEMENT
Virtual Reality Laboratories, Inc. "VRLI" shall pay Michael Bass $10,000
and royalties as defined below to undertake a port of the Vistapro program to
the Apple Macintosh platform. In consideration of producing this port,
royalties (as set forth in the master agreement - currently 20% of adjusted
sales) for the Macintosh port shall be apportioned as follows:
50% John Hinkley
25% Michael Bass
Amendment G supercedes and replaces Amendment D. Brick Eksten has
verbally given notice to VRLI on November 1, 1993 that he releases any claim
to the port set forth in Amendment D, and that he will return equipment to VRLI
with the understanding that the port will be reassigned. He never returned a
signed copy of Amendment D, so that amendment was never in force.
The copyright for the Vistapro Macintosh port shall remain with
John Hinkley.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
John Hinkley Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
_____________________________________ Date
_____________________________________
Michael A. Bass
14
<PAGE>
AMENDMENT H TO THE LICENSE AGREEMENT
John Hinkley, majority holder in the license of Vistapro PC DOS CD ROM,
hereby grants license to VRLI to publish Vistapro PC DOS CD ROM in accordance
with the master license agreement to which this amendment is attached. VRLI
agrees royalties on adjusted gross sales shall be paid at the following rates
to the following persons:
John Hinkley 14.91% Part Vistapro + part Makepath
Brick Eksten 1.52% Part Vistapro
Vince Lee .42% Part Makepath
Jean Ames 1.55% Part Vistamorph
Tim Finer .39% Part Vistamorph
Copyrights in each of the programs shall remain in the name of the person
holding them for each separate program.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
John Hinkley Lance H. Woeltjen, President
Hypercube Engineering Virtual Reality Laboratories, Inc.
15
<PAGE>
AMENDMENT "I" TO THE LICENSE AGREEMENT
Effective May 1, 1995, VRLI agrees to pay John Hinkley, the majority
holder in the license of Vistapro a royalty of 45% of any republished versions
of Vistapro. Said 45% is to be paid to John Hinkley for his portion of sales
only since a representation was made to him prior to this agreement and because
John Hinkley has explicitly asked for this and because he has offered to reduce
the overall rate of royalty for Vistapro from 20% to 18% herewith. The 45%
royalty rate on republished items is for John Hinkley only and is not extended
to those who have ported other versions of Vistapro, but John Hinkley will
maintain the 45% rate for his portion of shared royalty streams. This agreement
does not reflect the general policy of VRLI, but is being extended to John
Hinkley because of the verbal understanding between VRLI and John Hinkley in
1990. This agreement is not retroactive but begins with royalty earned May 1,
1995, The term of this agreement is extended 3 years from the date of its
current termination.
VRLI will not place Vistapro in a shell corporation.
A republished version is defined as a version of Vistapro which has been
localized and in which the republisher has been allowed a license to reproduce
Vistapro, its manual and its box. This currently applies to Visual Media in
France and, shortly, to Al Soft in Japan. Not included are down level demo
versions included with magazines and books where the primary purpose is
advertising and producing an upgrade path to the current VRLI version of the
program.
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AMENDMENT AS OF
THE DAY AND YEAR WRITTEN BELOW:
_____________________________________ Date ________________________________ Date
_____________________________________ _____________________________________
John Hinkley Lance H. Woeltjen, President
Virtual Reality Laboratories, Inc.
16
<PAGE>
EXHIBIT 10.10
License Agreement
I. INTRODUCTION
This is a licensing agreement between Virtual Reality Laboratories,
Inc., (Publisher) 2341 Ganador Court, San Luis Obispo, CA 93401, and Jean Ames,
(Developer), and Lance Woeltjen (Designer). Hereinafter, the Designer and
Developer shall be jointly referred to as "Developer." In this licensing
agreement, the Developer grants the Publisher rights to produce and sell the
Developer's program called Formbuster.
II. DEFINITIONS
A. "Supporting Documentation" shall mean information that describes the
format, organization, and content of machine readable diskettes to be supplied
to the Publisher under the terms of this Agreement.
B. "Manual" shall mean an instruction manual designed to teach an
inexperienced user how to operate the Program.
C. "Gross Receipts" shall mean the amount collected by the Publisher
for each copy of the program minus channel promotion, freight and handling paid
by the Publisher, and returns.
D. "Errors" shall mean the failure of any of the Program to operate in
conformance with the Supporting Documentation, the Manual, or in accordance with
commonly accepted standards for microcomputer software.
III. ITEMS PROVIDED BY THE DEVELOPER
A. Developer shall furnish Publisher with computer readable program in
object code form and source code form. This program shall be Formbuster.
B. Developer shall furnish Publisher a complete User's Manual for
Formbuster.
<PAGE>
C. Developer shall furnish the Publisher with any available performance
data, training data, and economic or marketing data which the Developer has for
the program which may be used by the Publisher to increase or enhance the sales
of the program.
IV. DELIVERY SCHEDULE
A. Formbuster shall be delivered for publication on or before June
1,1993.
V. MAINTENANCE, MODIFICATION, AND TRAINING
A. For the duration of this Agreement, if Publisher notifies Developer
of program Error(s) or if Developer has other reason to believe that Error(s)
exist(s) in the Program, Developer shall use his best efforts to verify and
repair the Error(s) within 15 days after notification in writing by the
Publisher. If a verified Error cannot be repaired within 15 days, Developer
shall devote full time to repair of the Error(s) until Error(s) has(have) been
corrected. Developer shall promptly notify the Publisher if an Error cannot be
verified within a reasonable time. Error corrections shall be machine-readable
and shall be such that Publisher can update the Program immediately. Developer
shall be required to correct the Error(s) in each new version of the program for
no more than 6 months after the following release of the new version for sale.
B. For the duration of this Agreement, Developer shall supply at no
charge to Publisher any program enhancements that improve performance, utility,
or existing syntax, and that improve or reduce storage requirements.
C. If Developer fails to comply with any provisions of Section V by
failing to repair Error(s) or provide upgrade versions as specified in Section
V, then the Publisher may modify the source code directly and charge the expense
of this development, not to exceed $500 per instance, to Developer as specified
in Section XV.
VI. EXCLUSIVE LICENSE
A. Developer hereby grants to the Publisher the worldwide, exclusive
license to reproduce, distribute, market, and otherwise exploit copies of the
<PAGE>
Program and User Manual for use on Commodore products, IBM PC's under MS-DOS and
Windows, Apple Products, during the term of this Licensing Agreement.
Notwithstanding the above list of platforms, Publisher shall have first right of
refusal for any port produced for the programs by the Developer. The license
granted to the Publisher hereunder shall include the right of the Publisher to
grant sublicenses to other parties subject to the limitations of this license.
B. The license granted under paragraph A of Section VI shall begin on
the date of signing this Agreement, and it shall expire seven (7) years from
that date. The Developer is not required to provide any ports or programs beyond
the PC MS-DOS platform.
VII. ACCEPTANCE
A. Publisher shall be deemed to have accepted the Program if the
Publisher is selling the Program.
VIII. ROYALTIES
A. Subject to the conditions expressed elsewhere in this Agreement and
in consideration for the rights and license granted herein, Publisher shall pay
Developer a royalty of 15% for the Gross Receipts from the sale and/or
sublicensing of the Program.
B. Royalty payments shall be calculated monthly by the Publisher, and
the amount calculated for the month shall be due and payable 30 days after said
calculation.
C. If Publisher is more than 30 days late on any payment, the Developer
may cancel the license granted in Section VI of this Agreement provided that the
Developer sends written notice of his intent to cancel by certified mail to the
Publisher, and provided that the Publisher fails to make payment in full within
15 calendar days of receipt of notice.
D. Any prepaid royalty will be collected by the Publisher before any
royalty is paid to the Developer.
<PAGE>
E. Developer agrees to loan all amounts of royalty earned back to the
Publisher at prime rate established at the date of the first royalty due and
annually thereafter. Publisher agrees to pay the Developer 25% of royalty and
interest accrued for each year through December 31st, no later than April 1st of
the following year in order to pay taxes due on the royalty and interest amounts
earned. Such loaning of royalty earned shall continue for a period of 36 months
from the first date that prepaid royalty is repaid and a royalty amount becomes
due to the Developer. At the end of the 36 month period the balance in the
account will be converted into a 3 year long term note paying prime rate plus
6%. Interest on the long term note shall be paid on a monthly basis and
royalties from the 37th month forward shall be directly to the Developer.
F. Notwithstanding the other clauses of this section, no royalties
shall be paid for dealer demonstration programs, promotional copies, copies
traded for advertising of the Programs, or review copies given away by the
Publisher.
G. No minimum annual royalty agreed.
H. Royalty shall be shared equally by Developer (Jean Ames) and
Designer (Lance Woeltjen).
IX. ACCOUNTING
A. Publisher shall keep accurate records covering all transactions
related to sale of the Program. At the time each royalty payment is due,
Publisher shall furnish Developer with a statement setting forth the Gross
Receipts received from sales and sublicensing of the Program. Developer, upon
giving 30 days written notice, shall have the right to inspect the accounting
records of the Publisher related to the sale and sublicensing of the Program.
This inspection shall be at the Publisher's place of business indicated in
Section 1. Developer agrees to sign nondisclosure statements obligating the
Developer not to disclose matters not pertaining to the licensed Program of the
Developer. Alternatively, Developer may request, and Publisher shall provide,
photocopies of accounting records related to the sale of the programs. Such
photocopies shall be provided within 10 days.
B. Developer may not audit records that are more than two years old at
the time of the audit.
<PAGE>
X. WARRANTIES
A. Developer warrants that it has the legal right to grant Publisher
the license rights set forth in Section VI, and that the exercise of such rights
shall not infringe any third party property or personal rights.
B. Developer warrants that there are no pending lawsuits pertaining to
any aspect of the Program and that the Program has not been published in any way
such as to lose its copyright protections.
C. Developer warrants that it owns the copyright to the Program and
User Manual that are being licensed to the Publisher.
XI. INDEMNIFICATION
A. Developer shall indemnify Publisher, and save and hold Publisher
harmless from and against any damages, liability, loss, cost, or deficiency
arising out of any misrepresentation, warranty, or covenant of Developer
contained in this Agreement.
XII. COPYRIGHTS AND TRADEMARKS
A. All copies of the Program and User Manuals shall contain an
appropriate copyright notice in the name of the Developer for content of the
User Manuals and Program.
B. All copies of the Program and User Manual shall contain trademark
notices in the name of the Publisher for the trade name of the Program which is
Formbuster, but which may be changed at the sole discretion of the Publisher for
marketing purposes.
C. Under current U. S. laws, copyright resides with the creator without
registration, so Developer's warranty that the material is their creation is
sufficient copyright protection for the Publisher.
<PAGE>
XIII. TERMINATION
Either party shall have the right to terminate this Agreement in the
event the other party commits a material breach of its obligations. Intent to
terminate shall be made by written notice, sent by certified mail to the
breaching party at the address set for in Section I. Termination shall become
effective 30 days from the date of mailing the notification of intent to
terminate unless the breaching party has corrected the breach prior to the end
of that 30 day period.
B. Notwithstanding Section XIII, paragraph A, termination shall be
effective if one or more of the following events occurs:
1. Publisher notifies the Developer in writing that it intends to
cease publishing the Program. Such termination shall be effective as of the date
specified by the Publisher.
C. In the event that this Agreement is terminated through breach by the
Developer, Publisher may continue to reproduce and sell the Program and User
Manual for the remainder of the term otherwise applicable.
D. In the event that this Agreement is terminated through breach by the
Publisher, the exclusive license shall revert to the Developer.
XIV. ARBITRATION
A. Any dispute relating to the interpretation or performance of this
Agreement shall be resolved at the request of either party through binding
arbitration. Arbitration shall be conducted in the city of San Luis Obispo,
California, in accordance with the then existing rules of the American
Arbitration Association. Judgment upon any award by the arbitrators may be
entered by the state or federal court having jurisdiction. The parties intend
that this agreement to arbitrate shall be irrevocable.
XV. SOURCE CODE
A. Developer will provide to the Publisher in computer readable form,
the most current version of the source code, including programmer's notes and
comments, for the Program within five days of acceptance of the Program and
upgrades of the Program.
<PAGE>
B. Publisher shall have the right to use or modify the source code to
develop, produce, and sell new versions (subject to the limitations of Section
XV, paragraph F) of the Program after Publisher notifies the Developer in
writing of a breach of Section V of this Agreement, unless the Developer has
corrected the breach within 15 days of receipt of the notification.
C. If Publisher gains right to use the source code, Publisher may
modify the source code to correct Errors or develop enhancements and upgrades to
the Program, which the Publisher may then reproduce, distribute, and market as
specified in this Agreement. All development costs, including programmer's fee
or salary, up to the maximum indicated in section 5 paragraph C, shall be
deducted from the royalty otherwise due to the Developer.
D. Publisher may withhold royalty payments during the time that it is
modifying the source code until a new version of the Program using the modified
source code is released. Royalties, up to the maximum indicated in section 5
paragraph C, withheld or deducted under Section XV paragraphs C and D shall be
counted toward the minimum annual royalty as specified in Section VIII.
E. At the expiration, or termination by the Publisher, of this
Agreement, all Program modifications made by the Publisher shall become the
property of the Developer, provided that the Developer is in full compliance
with this Agreement and that the Developer pays the Publisher any unrecouped
development cost, up to the maximum indicated in section 5 paragraph C, not yet
deducted from royalties as provided in Section XV paragraph C.
F. Software and source codes shall remain the intellectual property of
Developer. Any source codes provided to Publisher are for the sole purpose of
recreating the executable form of the software, or for fixing minor bugs. Any
modifications or enhancements, or other changes (other than minor bug fixes) to
the software are to be made at Developer's discretion. No part of the source
code may be used in, or used to produce, any other programs or products, without
the express written permission of the Developer. Publisher will not disclose
source code to any third parties without signed non-disclosure documents which
will be immediately mailed to Developers.
<PAGE>
XVI. GENERAL
A. Publisher shall have full freedom and flexibility in determining how
the Program should be marketed, including, but not limited to, freedom to decide
its method of marketing, price and trade name for the Program.
B. Neither party may sell, transfer, or assign any rights or
obligations under this Agreement without prior written consent of the other
party, except that the Publisher may assign this Agreement as part of a sale or
transfer of substantially all its assets to a third party.
C. Any notice from one party to the other required by this Agreement
shall be deemed made on the date of mailing if sent by certified mail, return
receipt requested, and mailed to the addresses specified in Section 1.
D. This Agreement shall be construed under the law of the State of
California, United States of America. Both parties waive any objection to the
personal jurisdiction and venue of the State and Federal courts of the State of
California.
E. This Agreement sets forth the entire understanding between the
parties. It may be changed or modified only in writing and must be signed by
both parties.
F. This Agreement is binding upon and shall inure to the benefit of the
legal successors, heirs, administrators, and permitted assigns of the parties.
G. If any provision or term of this Agreement is held to be invalid,
void, or unenforceable, the remainder of the provisions shall remain in full
force and effect and shall in no way be affected, impaired, or invalidated.
<PAGE>
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AGREEMENT AS OF THE DAY AND YEAR
WRITTEN BELOW:
Date Date
- - --------------------------- ---------------------------------
- - --------------------------- ---------------------------------
Jean Ames Lance H. Woeltjen, President
The Developer Virtual Reality Laboratories, Inc.
The Publisher
Date
- - ----------------------------
- - ----------------------------
Lance H. Woeltjen
The Designer
<PAGE>
AMENDMENT A TO FORMBUSTER AGREEMENT
The first two sentences of section I shall be amended to read:
This is a licensing Agreement between Virtual Reality Laboratories, Inc.,
(Publisher) 2341 Ganador Court, San Luis Obispo, CA 93401, and Jean Ames
(Developer) and Jim Heintz (Developer of Windows version), and Lance Woeltjen
(Designer). Hereinafter, the Designer and Developers shall be jointly referred
to as "Developer."
The second sentence of section VI, paragraph A, shall be amended to read:
All rights in Formbuster and its derivatives reside in the Publisher and
Developer shall not license Formbuster or any derivative of Formbuster to any
other entity without written permission of Publisher, its successors or assigns.
The first sentence of Section VI, paragraph B, shall be amended to read:
The license granted under Section VI, paragraph A, shall begin on the date of
the signing of this Agreement, and it shall expire fifty (50) years from that
date.
The first sentence of Section VIII, paragraph C, shall be amended to read:
If Publisher is more than 90 days late on any payment, the Developer may cancel
the license granted in Section VI of this Agreement provided that the Developer,
or their successors or assigns, send written notice of intent to cancel to the
Publisher, and provided the Publisher fails to make payment within 30 calendar
days of receipt of notice. Such notice of intent to cancel must be submitted by
Lance Woeltjen, Jean Ames, and Jinx Heintz, their successors or assigns, jointly
and unanimously, in the case of the Windows or Windows-like version of
Formbuster, or by Lance Woeltjen and Jean Ames, jointly and unanimously, in the
case of all other versions of Formbuster.
Section VIII, paragraph E, shall be deleted.
Section VIII, paragraph H, shall be amended to read:
<PAGE>
Royalty for Windows or Windows-like versions of Formbuster shall be shared
equally by Developer as follows: 5% Jean Ames, 5% Lance Woeltjen, 5% Jim Heintz.
Royalty for all other versions of Formbuster shall be shared by Developer as
follows: 7.5% Jean Ames, 7.5% Lance Woeltjen.
Section VIII shall be amended to add paragraph I as follows:
If any individual Developer or group of Developers produces and licenses a forms
filling program which is deemed in a court of law to be competing with
Formbuster, anywhere in the world, he or they will immediately forfeit all
rights to royalty from the Publisher in addition to any other damages awarded to
the Publisher.
Section XIII, paragraph A, shall be amended to read:
Either the Publisher or the Developer (Lance Woeltjen, Jean Ames, and Jim
Heintz, their successors or assigns, jointly and unanimously, in the case of the
Windows or Windows-like version of Formbuster, or by Lance Woeltjen and Jean
Ames, jointly and unanimously, in the case of all other versions of Formbuster),
shall have the right to terminate this Agreement in the event the other party
commits a material breach of its obligations.
Section XVI, paragraph B, shall be amended to read:
Developer, jointly or severally, may not sell, transfer, or assign any rights or
obligations under this Agreement without prior written consent of the Publisher.
The Publisher may sell, transfer, or assign this Agreement so long as the
Developer receives a royalty payment as outlined in Section VIII, as amended,
upon any cash, stock, or other value received in such a sale, transfer, or
assignment of this Agreement. In the event of the sale of Virtual Reality
Laboratories as a whole, the value of the Agreement upon which the royalty
percentages shall be paid, shall be in direct ratio to the sales of Formbuster
to total sales of the company for the 365 days immediately preceding the sale of
the company. Sales of the Windows or Windows-like version of Formbuster shall be
broken out of total Formbuster sales and royalties shall be distributed
proportionately between the Windows or Windows-like sales and all other sales of
Formbuster for the period 365 days immediately preceding the sale of the
company.
<PAGE>
THE PARTIES SET THEIR HANDS AND SEALS TO THIS AGREEMENT AS OF THE DAY AND YEAR
WRITTEN BELOW:
Date Date
- - --------------------------------- --------------------------------
Jean Ames, Developer all versions Lance H. Woeltjen, President
Virtual Reality Laboratories, Inc.
Publisher
Date
- - ---------------------------------
Lance H. Woeltjen, Developer all versions
- - ---------------------------------
Jim Heintz, Developer Windows versions
<PAGE>
EXHIBIT 10.11
U.S. Small Business Administration
NOTE
--------------------
(city and state)
$350,000.00 (Date) March 25, 1996
For value received, the undersigned promises to pay to the order of
HELLER FIRST CAPITAL CORP., a Delaware corporation, at its office in the city of
SAN FRANCISCO, State of CALIFORNIA or at holder's option, at such other place
as may be designated from time to time by the holder THREE HUNDRED FIFTY
THOUSAND AND 00/100 dollars, with interest on unpaid principal computed from the
date of each advance to the undersigned at the rate of PRIME +2.75 percent per
annum, payment to be made in installments as follows:
Installments, including principal and interest, each in the amount of
five thousand nine hundred ninety-three dollars ($5,993), commencing one month
from the first day of the month following first disbursement and continuing due
and payable monthly thereafter until seven years from the date of Note, when the
full unpaid balance of principal and interest shall become due and payable. Each
installment shall be applied to interest accrued as of date of receipt and the
balance, if any, to principal.
THIS IS A VARIABLE INTEREST RATE NOTE. Interest on unpaid principal
shall accrue at the initial rate of eleven percent (11.00%) per annum.
Commencing on the first calendar date of the calendar month following first
disbursement, and monthly thereafter, the interest rate shall increase or
decrease to two and three-quarters percent (2.75%) above the prime rate in
effect on the first business day of the month, as published in the Money Rates
Section of The Wall Street Journal published each business day.
NOTE: The amount of the monthly payment shown above is based upon the
prime interest rate as of the date of the receipt of the loan application by SBA
of eight and one-quarter percent (8.25%), plus a spread of two and
three-quarters percent (2.75%).
The amount of monthly installments of principal and interest required
herein shall be increased or decreased, as appropriate, to an amount necessary
to amortize principal remaining unpaid as of the date of the change in the
interest rate over the remaining term of this Note.
The Lender shall give the Borrower written notice of any change in the
interest rate of this Note and of any change (either an increase or decrease) in
the amount of the principal and interest installments required herein within
thirty (30) days after the effective date of any such change.
<PAGE>
If the Borrower shall be in default in payment due on the indebtedness
herein and the Small Business Administration (SBA) purchases its guaranteed
portion of said indebtedness, the rate of interest on both the guaranteed and
unguaranteed portion herein shall become fixed at the rate in effect as of the
first date of uncured default. If the Borrower shall not be in default in
payment when SBA purchases its guaranteed portion, the rate of interest on both
the guaranteed and unguaranteed portion shall be fixed at the rate in effect as
of the date of purchase by SBA.
LATE CHARGE: If a payment is more than 10 days late, Borrower will be
charged 5.0% of the unpaid portion of the regularly scheduled payment. (LATE
CHARGE MAY NOT EXCEED 5.0% AND MAY NOT BE CHARGED TO SBA IF SBA PURCHASES THE
LOAN PURSUANT TO ITS GUARANTY.)
Continued on Note addendum attached hereto and made a part hereof.
If this Note contains a fluctuating interest rate, the notice provision
is not a pre-condition for fluctuation (which shall take place regardless of
notice). Payment of any installment of principal or interest owing on this Note
may be made prior to the maturity date thereof without penalty. Borrower shall
provide lender with written notice of intent to prepay part or all of this loan
at least three (3) weeks prior to the anticipated prepayment date. A prepayment
is any payment made ahead of schedule that exceeds twenty (20) percent of the
then outstanding principal balance. If borrower makes a prepayment and fails to
give at least three weeks advance notice of intent to prepay, then,
notwithstanding any other provision to the contrary in this note or other
document, borrower shall be required to pay lender three weeks interest on the
unpaid principal as of the date preceding such prepayment.
The term "Indebtedness" as used herein shall mean the indebtedness
evidenced by this Note, including principal, interest, and expenses, whether
contingent, now due or hereafter to become due and whether heretofore or
contemporaneously herewith or hereafter contracted. The term "Collateral" as
used in this Note shall mean any funds, guaranties, or other property or rights
therein of any nature whatsoever or the proceeds thereof which may have been,
are, or hereafter may be, hypothecated, directly or indirectly by the
undersigned or others, in connection with, or as security for, the Indebtedness
or any part thereof. The Collateral, and each part thereof, shall secure the
Indebtedness and each part thereof. The covenants and conditions set forth or
referred to in any and all instruments of hypothecation constituting the
Collateral are hereby incorporated in this Note as covenants and conditions of
the undersigned with the same force and effect as though such covenants and
conditions were fully set forth herein.
The Indebtedness shall immediately become due and payable, without
notice or demand, upon the appointment of a receiver or liquidator, whether
voluntary or involuntary, for the undersigned or for any of its property, or
upon the filing of a petition by or against the undersigned under the provisions
of any State insolvency law or under the provisions of the Bankruptcy Reform Act
of 1978, as amended, or upon the making by the undersigned of an assignment for
the benefit of its creditors. Holder is authorized to declare all or any part of
the Indebtedness immediately due and payable upon the happening of any of the
<PAGE>
following events: (1) failure to pay any part of the Indebtedness when due; (2)
nonperformance by the undersigned of any agreement with, or any condition
imposed by, Holder or Small Business Administration (hereinafter called "SBA"),
with respect to the Indebtedness; (3) Holder's discovery of the undersigned's
failure in any application of the undersigned to Holder or SBA to disclose any
fact deemed by Holder to be material or of the making therein or in any of the
said agreements, or in any affidavit or other documents submitted in connection
with said application or the Indebtedness, of any misrepresentation by, on
behalf of, or for the benefit of the undersigned; (4) the reorganization (other
than a reorganization pursuant to any of the provisions of the Bankruptcy Reform
Act of 1978, as amended) or merger or consolidation of the undersigned (or the
making of any agreement therefor) without the prior written consent of Holder;
(5) the undersigned's failure duly to account, to Holder's satisfaction, at such
time or times as Holder may require, for any of the Collateral, or proceeds
thereof, coming into the control of the undersigned; or (6) the institution of
any suit affecting the undersigned deemed by Holder to affect adversely its
interest hereunder in the Collateral or otherwise. Holder's failure to exercise
its rights under this paragraph shall not constitute a waiver thereof.
Upon the nonpayment of the Indebtedness, or any part thereof, when due,
whether by acceleration or otherwise, Holder is empowered to sell, assign, and
deliver the whole or any part of the Collateral at public or private sale,
without demand, advertisement or notice of the time or place of sale or of any
adjournment thereof, which are hereby expressly waived. After deducting all
expenses incidental to or arising from such sale or sales, Holder may apply the
residue of the proceeds thereof to the payment of the Indebtedness, as it shall
deem proper, returning the excess, if any, to the undersigned. The undersigned
hereby waives all right of redemption or appraisement whether before or after
sale.
Holder is further empowered to collect or cause to be collected or
otherwise to be converted into money all or any part of the Collateral, by suit
or otherwise, and to surrender, compromise, release, renew, extend, exchange, or
substitute any item of the Collateral in transactions with the undersigned or
any third party, irrespective of any assignment thereof by the undersigned, and
without prior notice to or consent of the undersigned or any assignee. Whenever
any item of the Collateral shall not be paid when due, or otherwise shall be in
default, whether or not the Indebtedness, or any part thereof, has become due,
Holder shall have the same rights and powers with respect to such item of the
Collateral as are granted in this paragraph in case of nonpayment of the
Indebtedness, or any part thereof, when due. None of the rights, remedies,
privileges, or powers of Holder expressly provided for herein shall be
exclusive, but each of them shall be cumulative with and in addition to every
other right, remedy, privilege, and power now or hereafter existing in favor of
Holder, whether at law or equity, by statute or otherwise.
The undersigned agrees to take all necessary steps to administer,
supervise, preserve, and protect the Collateral; and regardless of any action
taken by Holder, there shall be no duty upon Holder in this respect. The
undersigned shall pay all expenses of any nature, whether incurred in or out of
court, and whether incurred before or after this Note shall become due at its
maturity date or otherwise, including but not limited to reasonable attorney's
fees and costs, which Holder may deem necessary or proper in connection with the
satisfaction of the Indebtedness or the administration, supervision,
<PAGE>
preservation, protection of (including, but not limited to, the maintenance of
adequate insurance) or the realization upon the Collateral. Holder is authorized
to pay at any time and from time to time any or all of such expenses, add the
amount of such payment to the amount of Indebtedness, and charge interest
thereon at the rate specified herein with respect to the principal amount of
this Note.
The security rights of Holder and its assigns hereunder shall not be
impaired by Holder's sale, hypothecation or rehypothecation of any note of the
undersigned or any item of the Collateral, or by any indulgence, including but
not limited to (a) any renewal, extension, or modification which Holder may
grant with respect to the Indebtedness or any part thereof, or (b) any
surrender, compromise, release, renewal, extension, exchange, or substitution
which Holder may grant in respect of the Collateral, or (c) any indulgence
granted in respect of any endorser, guarantor, or surety. The purchaser,
assignee, transferee, or pledgee of this Note, the Collateral, and guaranty, and
any other document (or any of them), sold, assigned, transferred, pledged, or
repledged, shall forthwith become vested with and entitled to exercise all the
powers and rights given by this Note and all applications of the undersigned to
Holder or SBA, as if said purchaser, assignee, transferee, or pledgee were
originally named as Payee in this Note and in said application or applications.
This promissory note is given to secure a loan with SBA is making or in
which it is participating and, pursuant to Part 101 of the Rules and Regulations
of SBA (13 C.F.R. 101.1(d)), this instrument is to be construed and (when SBA is
the Holder or a party in interest) enforced in accordance with applicable
Federal law.
VIRTUAL REALITY LABORATORIES, INC.
-----------------------------------
Lance Hudson Woeltjen, President
-----------------------------------
Susan H. Woeltjen, Vice President
<PAGE>
This Addendum shall be attached to and made part of that certain SBA
Form 147 (Note) dated March 25, 1996, in the amount of $350,000.00 between
Heller First Capital Corp., a Delaware corporation and Virtual Reality
Laboratories, Inc.
Borrower acknowledges this Note is secured by these Deeds of Trust in
favor of Lender on real property located in Santa Barbara and San Luis Obispo
Counties, State of California. These deeds of trust contains the following due
on sale provision:
Lender may, at its option, declare immediately due and payable all sums
secured by these Deeds of Trust upon the sale or transfer, without the Lender's
prior written consent, of all or any part of the Real Property, or any interest
in the Real Property. A "sale or transfer" means the conveyance of Real Property
or any right, title or interest therein; whether legal, beneficial or equitable,
whether voluntary or involuntary; whether by outright sale, deed, installment
sale contract, land contract, contract for deed, leasehold interest with a term
greater than three (3) years, lease-option contract, or by sale assignment, or
transfer of any beneficial interest in or to any land trust holding title to the
Real Property, or by any other method of conveyance of Real Property interest.
If any Trustor is a corporation, partnership or limited liability company,
transfer also includes any change in ownership of more than twenty-five percent
(25%) of the voting stock, partnership interests or limited liability company
interests, as the case may be of Trustor. However, this option shall not be
exercised by Lender if such exercise is prohibited by applicable law.
By:
------------------------------
Lance Hudson Woeltjen, President
By:
------------------------------
Susan H. Woeltjen, Vice President
Date March 25, 1996
- - ---------------------------------
<PAGE>
EXHIBIT 10.12
COMMERCIAL SECURITY AGREEMENT
===============================================================================
Borrower: Virtual Reality Laboratories, Inc. Lender: Heller First Capital Corp.
3534 Empleo A San Francisco Regional Office
San Luis Obispo, CA 93401 650 California Street, 23rd Floor
San Francisco, CA 94108-2604
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between VIRTUAL
REALITY LABORATORIES, INC. (referred to below as "Grantor"); and Heller First
Capital Corp. (referred to below as "Lender"). For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to secure the
Indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or modified from
time to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired, whether now
existing or hereafter arising, and wherever located:
ALL MACHINERY, EQUIPMENT, FURNITURE, FIXTURES, INVENTORY, ACCOUNTS, AND
GENERAL INTANGIBLES WHEREVER LOCATED AND MORE THOROUGHLY DESCRIBED ON EXHIBIT
"A" ATTACHED HERETO AND MADE A PART HEREOF.
In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and
substitutions for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or
other disposition of any of the property described in this
Collateral section.
<PAGE>
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together
with all of Grantor's right, title, and interest in and to all
computer software required to utilize, create, maintain, and
process any such record or data on electronic media. The record
owner of the real property is GERALD L. KNECHT.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"Events of Default."
Grantor. The word "Grantor means Virtual Reality Laboratories, Inc.,
its successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under this
Agreement or under any of the Related Documents.
Lender. The word "Lender" means Heller First Capital Corp., its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated March
25, 1996, in the principal amount of $350,000.00 from VIRTUAL REALITY
LABORATORIES, INC. to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions for the
note or credit agreement.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as
follows:
Perfection of Security Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are requested by Lender
to perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the documents
evidencing or constituting the Collateral, and Grantor will note Lender's
interest upon any and all chattel paper if not delivered to Lender for
possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to perfect
or to continue the security interest granted in this Agreement. Lender may at
any time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse Lender for
all expenses for the perfection and the continuation of the perfection of
Lender's security interest in the Collateral. Grantor promptly will notify
Lender before any change in Grantor's name including any change to the assumed
business names of Grantor.
<PAGE>
No Violation. The execution and deliver of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a party,
and its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is enforceable
in accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral.
Location of the Collateral. Grantor, upon the request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real properties
and Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d) all
other properties where Collateral is or may be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at such
other locations as are acceptable to Lender. Some or all of the Collateral may
be located at the real property described above. Except in the ordinary course
of its business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
California, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, Grantor shall
not sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to buyers
who qualify as a buyer in the ordinary course of business. A sale in the
ordinary course of Grantor's business does not include a transfer in partial or
total satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to any lien,
security interest, encumbrance, or charge, other than the security interest
provided for in this Agreement, without the prior written consent of Lender.
This includes security interests even if junior in right to the security
interests granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be held in
trust for Lender and shall not be commingled with any other funds; provided,
however, this requirement shall not constitute consent by Lender to any sale or
other disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
<PAGE>
Collateral Schedules and Locations. Insofar as the Collateral consists
of inventory, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit or
permit damage to or destruction of the Collateral or any part of the Collateral.
Lender and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral; of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor may withhold any such payment
or may elect to contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long as Lender's
interest in the Collateral is not jeopardized in Lender's sole opinion. If the
Collateral is subjected to a lien which is not discharged within fifteen (15)
days, Grantor shall deposit with Lender cash, a sufficient corporate surety bond
or other security satisfactory to Lender in an amount adequate to provide for
the discharge of the lien plus any interest, costs or other charges that could
accrue as a result of foreclosure or sale of the Collateral. In any contest
Grantor shall defend itself and Lender and shall satisfy any final adverse
judgement before enforcement against the Collateral. Grantor shall name Lender
as an additional obligee under any surety bond furnished in the contest
proceedings.
Compliance with Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in good
faith any such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's interest in the
Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement remains a
lien on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. The terms "hazardous waste" and
"hazardous substance" shall also include, without limitation, petroleum and
petroleum by-products or any fraction thereof and asbestos. The representations
and warranties contained herein are based on Grantor's due diligence in
investigating the Collateral for hazardous wastes and substances. Grantor hereby
(a) releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other costs
under any such laws, and (b) agrees to indemnify and hold harmless Lender
against any and all claims and losses resulting from a breach of this provision
of this Agreement. This obligation to indemnify shall survive the payment of the
Indebtedness and the satisfaction of this Agreement.
<PAGE>
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with respect
to the Collateral, in form, amounts, coverages and basis reasonably acceptable
to Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be canceled or diminished without at least
ten (10) days' prior written notice to Lender and not including any disclaimer
of the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Grantor or any other person. In connection with all policies covering assets in
which Lender holders or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if it so chooses "single interest
insurance," which will cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender
of any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of
any insurance on the Collateral, including accrued proceeds thereon, shall be
held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent to
repair or replacement of the Collateral, Lender shall retain a sufficient amount
of the proceeds to pay all of the Indebtedness, and shall pay the balance to
Grantor. Any proceeds which have not been disbursed within six (6) months after
their receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created by
monthly payments from Grantor of a sum estimated by Lender to be sufficient to
produce, at least fifteen (15) days before the premium due date, amounts at
least equal to the insurance premiums to be paid. If fifteen (15) days before
payment is due, the reserve funds are insufficient, Grantor shall upon demand
pay any deficiency to Lender. The reserve funds shall be held by Lender as a
general deposit and shall constitute a non-interest-bearing account which Lender
may satisfy by payment of the insurance premiums required to be paid by Grantor
as they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon the request of Lender, shall furnish
to Lender reports on each existing policy of insurance showing such information
as Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the property
insured; (e) the then current value on the basis of which insurance has been
obtained and the manner of determining that value; and (f) the expiration date
of the policy. In addition, Grantor shall upon request by Lender (however not
more often than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. If Lender at any time has possession of any Collateral, whether
<PAGE>
before or after an Event of Default, Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral if Lender
takes such action for that purpose as Grantor shall request or as Lender, in
Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may
(but shall not be obligated to) discharge or pay any amount required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when
due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the Note or
the Related Documents is false or misleading in any material respect, either now
or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or lien)
at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Grantor or by any governmental agency
against the Collateral or any other collateral securing the Indebtedness. This
includes a garnishment of any of Grantor's deposit accounts with Lender.
<PAGE>
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies or
becomes incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under
this Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its own
name or that of Grantor. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days, or such
lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right, (b) the
receiver may be an employee of Lender and may serve without bond, and (c) all
fees of the receiver shall become part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate from
date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor, receive,
<PAGE>
open and dispose of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any deficiency
remaining on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement. Grantor
shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform Commercial
Code, as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other writing,
shall be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit, Grantor
agrees upon Lender's request to submit to the jurisdiction of the courts of San
Francisco County, State of California. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor shall
mean each and every Grantor. This means that each of the Borrowers signing below
is responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Grantor, notice to any Grantor will
constitute notice to all Grantors. For notice purposes, Grantor will keep Lender
informed at all times of Grantor's current address(es).
<PAGE>
Power of Attorney. Grantor hereby appoints Lender as its true
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim; and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings, either in its own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
Preference Payments. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the Indebtedness
and, at Lender's option, shall be payable by Borrower as provided above in the
"EXPENDITURES BY LENDER" paragraph.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretoin of Lender.
Waiver of Co-obligor's Rights. If more than one person is obligated for
the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes all
claims against such other person which Borrower has or would otherwise have by
virtue of payment of the Indebtedness or any part thereof, specifically
including but not limited to all rights of indemnity, contribution or
exoneration.
<PAGE>
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS
AGREEMENT IS DATED MARCH 25, 1996.
GRANTOR:
VIRTUAL REALITY LABORATORIES, INC.
By:___________________________________ By:___________________________________
Lance Hudson Woeltjen, President Susan H. Woeltjen, Vice President
<PAGE>
EXHIBIT "A"
All present and future accounts, contract rights, chattel paper,
security agreements and debts secured thereby, documents, notes, drafts,
instruments, general intangibles (including, but not limited to tax refunds,
insurance refunds, intellectual property and franchises) and returned goods. All
present and hereafter acquired equipment, furniture, furnishings and wherever
located, including but not limited to machinery and machine tools with motors,
controls, attachments, parts, tools and accessories incidental thereto. All
present and future fixtures. All present and future tools, dies, drawings,
blueprints, catalogs and computer programs. All present and hereafter acquired
inventory wherever located, including but not limitd to raw materials, work in
process and finished goods. All proceeds and products of the foregoing,
including but not limitd to money, deposit accounts, goods, insurance proceeds,
and other tangible or intangible property received upon the sale or disposition
of the foregoing. All present and future patents, trademarks and trade names.
All present and future books and records pertaining to the foregoing and the
equipment containing said books and records.
Except as to inventory held for sale, the debtor has no right to sell
or otherwise dispose of any of the Collateral.
Including but not limited to the following:
<PAGE>
EXHIBIT 10.13
U.S. SMALL BUSINESS ADMINISTRATION (SBA)
GUARANTY
March 25, 1996
In order to induce Heller First Capital Corp. (hereinafter called
---------------------------------
"Lender") to
(SBA or other lending institution)
make a loan or loans, or renewal or extension thereof, to Virtual Reality
Laboratories, Inc. (hereinafter called Debtor), the Undersigned hereby
unconditionally guarantees to Lender, its successors and assigns, the due and
punctual payment when due, whether by acceleration or otherwise, in accordance
with the terms thereof, of the principal of and interest on and all other sums
payable, or stated to be payable, with respect to the note of the Debtor made by
the Debtor to Lender, dated March 25, 1996 in the principal amount of
$350,000.00 with interest at the rate of Prime +2.75 per cent per annum. Such
note, and the interest thereon and all other sums payable with respect thereto
are hereinafter collectively called "Liabilities." As security for the
performance of this guaranty the Undersigned hereby mortgages, pledges, assigns,
transfers and delivers to Lender certain collateral (if any), listed in the
schedule on the reverse side hereof. The term "collateral" as used herein shall
mean any funds, guaranties, agreements or other property or rights or interests
of any nature whatsoever, or the proceeds thereof, which may have been, are, or
hereafter may be, mortgaged, pledged, assigned, transferred or delivered
directly or indirectly by or on behalf of the Debtor or the Undersigned or any
other party to Lender or to the holder of the aforesaid note of the Debtor, or
which may have been, are, or hereafter may be held by any party as trustee or
otherwise, as security, whether immediate or underlying, for the performance of
this guaranty or the payment of the Liabilities or any of them or any security
therefor.
The Undersigned waives any notice of the incurring by the Debtor at any
time of any of the Liabilities, and waives any and all presentment, demand,
protest or notice of dishonor, nonpayment, or other default with respect to any
of the Liabilities and any obligation of any party at any time comprised in the
collateral. The Undersigned hereby grants to Lender full power, in its
uncontrolled discretion and without notice to the undersigned, but subject to
the provisions of any agreement between the Debtor or any other party and Lender
at the time in force, to deal in any manner with the Liabilities and the
collateral, including, but without limiting the generality of the foregoing, the
following powers:
(a) To modify or otherwise change any terms of all or any part of the
Liabilities or the rate of interest thereon (but not to increase
the principal amount of the note of the Debtor to Lender). To
grant any extension or renewal thereof and any other indulgence
with respect thereto, and to effect any release, compromise or
settlement with respect thereto.
(b) To enter into any agreement of forbearance with respect to all or
any part of the Liabilities, or with respect to all or any part
of the collateral, and to change the terms of any such agreement.
<PAGE>
(c) To forbear from calling for additional collateral to secure any
of the Liabilities or to secure any obligation comprised in the
collateral;
(d) To consent to the substitution, exchange, or release of all or
any part of the collateral, whether or not the collateral, if
any, received by Lender upon any such substitution, exchange or
release shall be of the same or of a different character or value
than the collateral surrendered by Lender.
(e) In the event of the nonpayment when due, whether by acceleration
or otherwise, of any of the Liabilities, or in the event of
default in the performance of any obligation comprised in the
collateral, to realize on the collateral or any part thereof, as
a whole or in such parcels or subdivided interests as Lender may
elect, at any public or private sale or sales, for cash or on
credit or for future delivery, without demand, advertisement, or
notice of the time or place of sale or any adjournment thereof
(the Undersigned hereby waiving any such demand, advertisement or
notice to the extent permitted by law), or by foreclosure or
otherwise, or to forbear from realizing thereon, all as Lender,
in its uncontrolled discretion may deem proper, and to purchase
all or any part of the collateral for its own account at any such
sale or foreclosure, such powers to be exercised only to the
extent permitted by law.
This Addendum shall be attached to and made a part of that certain SBA
Form 148 (Guaranty) dated March 25, 1996, between Heller First Capital Corp., a
Delaware corporation and Lance Hudson Woeltjen and Susan H. Woeltjen.
Guarantor acknowledges this Guaranty is secured by a Deed of Trust in
favor of Lender on real property located in San Luis Obispo County, State of
California. That deed of trust contains the following due on sale provision:
Lender may, at its option, declare immediately due and payable all sums secured
by this Deed of Trust upon the sale or transfer, without the Lender's prior
written consent, of all or any part of the Real Property, or any interest in the
Real Property. A "sale or transfer" means the conveyance of Real Property or any
right, title or interest therein; whether legal, beneficial or equitable,
whether voluntary or involuntary; whether by outright sale, deed, installment
sale contract, land contract, contract for deed, leasehold interest with a term
greater than three (3) years, lease-option contract, or by sale assignment, or
transfer of any beneficial interest in or to any land trust holding title to the
Real Property, or by any other method of conveyance of Real Property interest.
If any Trustor is a corporation, partnership or limited liability company,
transfer also includes any change in ownership of more than twenty-five percent
(25.00%) of the voting stock, partnership interests or limited liability company
interests, as the case may be of Trustor. However, this option shall not be
exercised by Lender if such exercise is prohibited by applicable law.
- - ---------------------------------
Lance Hudson Woeltjen
- - ---------------------------------
Susan H. Woeltjen
Date: March 25, 1996
- - ---------------------------------
<PAGE>
EXHIBIT 10.14
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
------------------------------------------
This Agreement, made and entered into this 6th day of January, 1995
("Effective Date") by and between Virtual Reality Laboratories, Inc. ("VRL"), a
California corporation having its head office at 2341 Ganador Court, San Luis
Obispo, CA 93401 U.S.A. and A.I. Soft, Inc. ("AI"), a Japanese corporation
having its registered office at 3-5, 3-Chome, Owa, Suwa-shi, Nagano-ken, Japan,
WITNESSETH:
WHEREAS, VRL has been engaged in the design and development of various
software products, particularly software of visual three dimensional images,
animation and computer training and VRL owns certain valuable, proprietary and
copyrightable software products;
WHEREAS, VRL and AI desire to develop the Japanese version of such
software owned by VRL; and
WHEREAS, AI desires to obtain from VRL and VRL is willing to grant to
AI, a license to use, reproduce, sell and distribute such Japanese version to
their customers in Japan.
NOW, THEREFORE, the parties hereto agree as follows:
Article 1. Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Original Software" shall mean certain application software owned
and developed by VRL. "Original Software" shall be more specifically described
in each Individual Contract defined in Article 2.1 hereof.
1.2 "Software" shall mean the software to be developed by VRL and AI
under this Agreement based on Original Software.
1.3 "Alpha (a) version" of Software shall mean pre-version of the
Software which includes all of functions specified in the Specifications. Each
of functions in the Alpha (a) version can be operated correctly on at least one
of the platforms specified in the Specifications.
1.4 "Beta (b) version" of Software shall mean pre-version of the
Software which includes all of functions specified in the Specifications. All of
functions in the Beta (b) version can be operated correctly on at least one of
the platforms specified in the Specifications at the same time.
<PAGE>
1.5 "Final version" of Software shall mean copy master of the Software.
All of functions specified in the Specifications can be operated correctly on
all of the platforms specified in the Specifications at the same time.
1.6 "Original Manuals" shall mean certain written materials concerning
the Original Software, including without limitation, user manuals, instruction
manuals, technical references and handbooks thereto.
1.7 "Manuals" shall mean certain written materials concerning the
Software in Japanese language to be made and translated by AI hereunder based on
the Original Manuals.
1.8 "Specifications" shall mean the specifications for the development
of Software. The Specifications for each Software shall be described in the
relevant Individual Contract.
1.9 "Territory" shall mean the country of Japan.
1.10 "Customers" shall mean customers of AI in the Territory to whom AI
will sell and distribute the Software pursuant to this Agreement.
1.11 "Distributors" shall mean distributors authorized by AI to sell
and distribute the Software purchased from AI in the Territory.
1.12 "Intellectual Property Right" shall mean any and all intellectual
property rights, including without limitation, copyrights, patents, trademarks,
know how, trade secrets and other proprietary rights.
1.13 "Confidential Information" shall mean the proprietary information
of the parties hereto which shall be disclosed to the other parties hereto
during the term of this Agreement and which shall be marked as confidential or
proprietary.
Article 2. Individual Contract.
2.1 When VRL and AI desire to develop and distribute certain Software,
VRL and AI shall enter into an individual contract ("Individual Contract") for
each Software by signing an Appendix to this Agreement in the form attached as
Exhibit 1 to this Agreement. The terms and conditions concerning development and
distribution for each Individual Contract shall be specifically described in
each Appendix.
2.2 Each development of Software pursuant to a relevant Individual
Contract shall be a separate and independent transaction.
2
<PAGE>
Article 3. Specifications.
3.1 VRL and AI shall agree on the relevant Specifications before the
execution of Individual Contract, based on marketing information provided by AI,
the Original Software and technical information provided by VRL.
3.2 If VRL and AI need to change the contents of the Specifications in
the course of the development, VRL and AI shall discuss the need for the change
in the Specifications. If the parties decide to change Specifications, such
change shall be made by written statements signed by both parties.
Article 4. Development Schedule.
4.1 VRL and AI shall decide to schedule for the development of each
Software before the execution of the Individual Contract.
4.2 If VRL and AI need to change the development schedule in the course
of the development, VRL and AI shall discuss the need to change the development
schedule. If the parties decide to change the development schedule, such change
shall be made by a written statement signed by both parties.
Article 5. Tasks of the Parties
VRL and AI shall perform the development of each Software by
undertaking the following respective tasks.
I. VRL's tasks:
(1) development of Alpha (a) version of Software;
(2) development of Beta (b) version of Software; and
(3) development of Final version of Software by producing a master copy
of the Final version of the Software.
II. AI's tasks:
(1) translation of the text files of the Original Software into the
Japanese language and development of the resource file of the text form of
Software;
(2) testing and evaluation of the Alpha (a) version, the Beta (b)
version and the Final version of the Software and reporting of the result of
such tests and evaluations; and
3
<PAGE>
(3) translation of Original Manuals into Japanese language and
production of Manuals.
The more detailed tasks of each party shall be set forth in the
relevant Individual Contract.
Article 6. Expenses of the Parties.
6.1 VRL and AI shall bear all the expenses incurred in connection with
the performance of their own tasks pursuant to Article 5 hereof and each
Individual Contract. No development fee shall be charged to either party
hereunder.
6.2 Notwithstanding the foregoing, the parties may, in certain cases,
choose a different method for sharing the development expense as specified in
the respective Individual Contract.
Article 7. Delivery and Acceptance of Software.
7.1 VRL shall deliver to AI a master copy of the Final version of each
Software, which shall be stored in the media as decided between VRL and AI on or
before the expected delivery date under the relevant Individual Contract.
7.2 Within fifteen (15) days of AI's receipt of a master copy of the
Final version of each Software pursuant to Article 7.1 hereof, AI shall perform
the appropriate acceptance tests for such master copy and shall notify VRL of
the results of each acceptance test in writing. In the event that AI finds any
defects within the fifteen (15) day period and VRL shall then promptly repair
such defects and deliver to AI a non-defective master copy of the Final version
of the Software; provided that such master copy shall be deemed accepted by AI
unless the Software is rejected by AI within the fifteen (15) day period. The
foregoing procedure shall be repeated until AI accepts a master copy of the
Final version of Software.
Article 8. Completion and Discontinuance of the Development.
8.1 The development of each Software hereunder shall be completed when
a master copy of each Software is accepted by AI pursuant to Article 7.2 hereof.
8.2 If either party encounters unexpected difficulties in developing
the Software hereunder, the party shall notify the other party of the problem,
and VRL and AI shall discuss whether to continue the development. If VRL and AI
deem it impossible to proceed with the development, VRL and AI may discontinue
such development by signing a written statement setting forth the ownership of
such Software in process and any other terms, if necessary.
4
<PAGE>
Article 9. Grant of License.
9.1 Upon the completion of the development of Software pursuant to
Article 8.1 hereof, VRL agrees to grant to AI an exclusive and nontransferable
license to use, reproduce, sell, and distribute the Software to Customers in the
Territory. Except as provided in Section 9.2 below, VRL shall not reproduce,
have reproduced or distribute the Software, directly or indirectly, to any third
party in the Territory. If VRL finds any potential Customer in Territory, VRL
shall promptly inform AI of the name and address of such potential Customer.
9.2 Notwithstanding the above, AI agrees that VRL may license to Fujita
Research, its parent corporation Fujita Corporation, and their affiliates VRL's
Vistapro software from VRL, without payment of commission or royalty to AI, for
Japanization, use, distribution, sale or sublicense in Japan as an add-on or
bunded application with Fujita Corporation's LASCUL software. AI further agrees,
,on a case-by-case basis, to consider in good faith additional requests by
Fujita Research or Fujita Corporation for permission to directly license and
Japanize certain VRL software programs for use or distribution in Japan in
conjunction with Fujita's own software. AI shall not unreasonably withhold its
consent to such requests.
Article 10. Royalty.
10.1 In consideration of a license for the Software granted hereunder,
AI shall pay VRL a royalty ("Royalty") per sale of each Software. The Royalty
rate per each Software shall be stipulated in each relevant Individual Contract.
The Royalty shall be calculated and paid on a quarterly basis on the following
formula:
X=Y x Z
X: Royalty
Y: Unit sales price of Software sold by AI to Customer
Z: Rate of Royalty stipulated in relevant Individual Contract.
If Customers or the Distributors return to AI the Software purchased
from AI, VRL shall credit the Royalty already paid by AI for such returned
Software.
10.2 AI shall, on the last day of every calendar quarter, calculate the
total amount of the Royalty for the quarter based on the number of each Software
sold and the unit price of the Software, and report to VRL as soon as possible.
VRL shall bill AI for the Royalty amount due. AI shall pay the Royalty within
thirty (30) days thereafter the date of the bill from VRL to AI, by wire
transfer to the bank account separately designated in writing by VRL. Any
overdue amounts shall bear interest at the rate of one percent (1%) per month
during the overdue period. The payment shall be made in U.S. dollars. The
exchange rate between Japanese Yen and U.S. dollar to be applied for each
payment shall be the Telegraphic Transfer Selling Rate (TTS) of the Bank of
Tokyo in Japan on the date of each payment.
5
<PAGE>
10.3 AI may withhold from any payment to VRL hereunder all sums
required to be withheld by the Japanese government and shall keep complete books
and records with respect to such withholding statements and shall cooperate with
VRL in filing for a reduction of the withholding tax rate from twenty percent
(20%) to ten percent (10%, obtaining tax credit certificate, refunds, etc. from
the Japanese government.
Article 11. Records and Audit.
11.1 During the period of this Agreement AI shall keep accurate records
and accounts as may be necessary for the calculation of Royalties due in each
calendar quarter, specifying the number of each Software sold and the unit price
of the Software in each calendar quarter.
11.2 During the period of this Agreement or one (1) year thereafter,
upon ten (10) days prior written request by VRL, AI agrees to permit VRL and its
independent certified public accountant appointed by VRL and reasonably
acceptable to AI adequate access during AI's regular working hours to such
records and accounts reasonably requested by VRL at VRL's expense; provided that
if VRL finds an under payment of more than five percent (5%) of the Royalty due
hereunder as the result of such inspection and AI confirm such shortage, then AI
shall bear all expenses of such inspection.
Article 12. Trademark.
VRL agrees that AI may use any and all of VRL's trademarks that appear
on Original Software, Original Manuals or VRL's brochures, package or
advertisement thereof, whether registered or unregistered, without registration,
for the purpose of promotion and distribution of the Software.
Article 13. Ownership.
13.1 AI agrees that all Original Software and Original Manuals are the
sole property of VRL and that VRL owns and retains the ownership of Intellectual
Property Rights in or to Original Software and Original Manuals. VRL shall also
own all Intellectual Property Rights in or to the modifications to the Original
Software performed by VRL (which shall not include AI's Japanese language
translations) in order to create the Software.
13.2 VRL agrees that AI owns the ownership of Intellectual Property
Rights in or to AI's Japanese language translations of the Original Software and
Original Manuals resulting from performing its own tasks stipulated in each
relevant Individual Contract. AI agrees that any part of Software and manuals,
except for a part in or to which AI owns the ownership of Intellectual Property
Rights pursuant to this Article 13.2, is the sole property of VRL and that VRL
owns and retains the ownership of Intellectual Property Rights in or to such
part of Software.
6
<PAGE>
Article 14. Technical Support.
14.1 During the term of this Agreement, VRL and AI shall, without
charge, provide each other with technical support necessary and useful for the
purpose of this Agreement.
14.2 AI shall be primarily responsible for technical support to its
Customers. VRL agrees to make its best efforts to provide AI with back-up
technical support to assist in the customer support service to be provided by AI
to Customers relating to Software. Such technical support shall be provided,
without charge, by facsimile or electronic-mail, promptly after VRL receives
requests from AI.
Article 15. Exchange of Information.
VRL and AI shall periodically exchange technical and marketing
information necessary and useful for the development and marketing of Software
and any other information relating thereto. If VRL plans to release any Original
Software in U.S.A., VRL shall provide AI with the information about such
Original Software on or before its market release.
Article 16. Warranty.
16.1 VRL hereby represents and warrants that VRL owns, or otherwise has
rights necessary for any development of Software to be performed hereunder and
any license for Software to be granted hereunder. VRL hereby further represents
and warrants that any Original Software will be free from any infringement or
threatened infringement of any U.S. or Japanese Intellectual Property Rights.
16.2 VRL will indemnify, defend and hold AI harmless against any
actions, demands, claims, investigations, suits, proceedings brought against AI
by a third party in connection with such Intellectual Property Rights, and VRL
will pay any costs (including reasonable attorneys fee), liabilities and damages
awarded against AI as a result of such actions, demands, claims, investigations,
suits and proceedings and/or incurred by AI in or through settlement thereof.
16.3 In case any Software developed hereunder becomes or is likely to
become, the subject of any actions, demands, claims, investigations, suits or
proceedings, AI will permit VRL, at VRL's option and expense, to (1) procure for
AI the right to continue the use, reproduction, sale and distribution of such
Software, or (2) replace or modify such Software so that they become non-
infringing, or (3) provide an alternative software which is equivalent to such
Software in function, performance and content.
Article 17. Confidentiality.
17.1 Neither party shall use nor disclose the other party's
Confidential Information except as permitted by this Agreement. The receiving
party, however, shall have no obligations concerning the disclosing party's
Confidential Information if the disclosing party's Confidential Information:
7
<PAGE>
(a) is made public before the disclosing party discloses it to the
receiving party;
(b) is made public after the disclosing party discloses it to the
receiving party (unless its publication is a breach of this Agreement);
(c) is rightfully in the possession of the receiving party before the
disclosing party discloses it to receiving party; or,
(d) is rightfully obtained by the receiving from a third party who is
lawfully in possession of the information and not in violation of any
contractual, legal or fiduciary obligation to the disclosing party with respect
to the information, and who does not require the receiving party to refrain from
disclosing the information to others.
17.2 If the disclosing party provides its Confidential Information
orally or in another intangible form, it shall be considered confidential and
proprietary if it is treated as confidential or proprietary at the time of
disclosure and describe in a writing provided to the receiving party within
thirty (30) days of the oral or other intangible disclosure, which writing shall
be marked as confidential or proprietary.
17.3 The receiving party will be under no obligation concerning the
other party's Confidential Information if the receiving party can show by
documentary evidence to have already been in the lawful possession of the
disclosing party's Confidential Information or that the receiving party has
independently developed the other party's Confidential Information.
Article 18. Term.
This Agreement shall be effective for a term of three (3) years from
the date hereof and shall be renewed for additional one (1) year terms
automatically unless either party gives notice to the other party not later than
sixty (60) days prior to the expiration date of the then current term.
Article 19. Termination.
19.1 If either party defaults in the performance of any of its
obligations pursuant to this Agreement and fails to correct the default within
sixty (60) days after the non-defaulting party gives to the defaulting party a
written notice of the default, then the non-defaulting party may immediately
terminate this Agreement by written notice thereof.
19.2 Either party shall have the right to immediately terminate this
Agreement upon:
(i) the insolvency or voluntary or involuntary bankruptcy of the other
party; or
8
<PAGE>
(ii) the appointment of any receiver, trustee or custodian for all or a
substantial part of the assets of the other party, or an assignment by the other
party for the benefit of creditors; or
(iii) the voluntary or involuntary dissolution of the other party.
19.3 Even if VRL terminates this Agreement because of AI's default
pursuant to Article 19.1 hereof, AI may continue to reproduce and distribute all
Software for a period of ninety (90) days after such termination to the extent
that VRL has actually granted license to AI prior to such termination.
Article 20. Assignment.
Neither party shall assign this Agreement nor assign, transfer or
sublicense any rights given in it without the prior written consent of the other
party, which consent shall not be unreasonably withheld. Any attempted
assignment without the consent of the other party shall be void. This Agreement
shall be binding upon and benefit the successors and assignees of the parties.
Article 21. Waiver.
If either party fails to require performance by the other party
pursuant to this Agreement or fails to claim that the other party has breached
any provision of this Agreement, this failure will not be construed as a waiver
or release of any right accruing pursuant to this Agreement, nor will it affect
any subsequent breach or the effectiveness of this Agreement or any part of it,
or prejudice either party with respect to any subsequent action. A waiver of any
right accruing to either party shall not be effective unless given in writing.
Article 22. Force Majeure.
If:
Except for the obligation to pay money, neither party shall be
liable for its failure to delay in performing its obligations pursuant to this
Agreement if the failure or delay was caused by act of God, war, riot, fire,
sabotage, explosion, governmental orders or restrictions, strikes or other labor
trouble or by interruption of or delay in transportation, inadequacy or failure
of supply of materials or equipment or other causes beyond the reasonable
control of the affected party. A party who is delayed in performing its
obligations pursuant to this Agreement because of one of these events shall
promptly notify the other party of the delay and the reason for the delay and
shall exert its best efforts to recommence the performance of its obligations as
soon as possible.
Article 23. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of Japan.
9
<PAGE>
Article 24. Arbitration.
All disputes in connection with this Agreement that cannot be settled
between the parties shall be settled by arbitration in Tokyo, Japan before the
Rules of Japan Commercial Arbitration Association in accordance with the
UNCITRAL Commercial Arbitration rules by one (1) arbitrator fluent in English.
English language documents may be submitted without the need for translation.
The arbitration award shall be final and binding upon the parties and may be
entered into any court having jurisdiction or application may be made to a court
for a judicial acceptance of the award and an order of enforcement.
Article 25. Notices.
Any notice required or permitted to be given shall be in the English
language and be sent by registered airmail or by facsimile addressed to:
If to VRL: 2341 Ganador Court, San Luis Obispo, CA 93401 USA
Tel: 1-805-545-8515
Fax: 1-805-545-8515
If to AI: 7F Honmachi Daiichi-Seimei Bldg. 2-1-27 Chuoh,
Matsumoto-City, Nagano Japan
Tel: 81-263-36-1212
Fax: 81-263-36-5751
Any notice sent by registered airmail shall be deemed to have been
received ten (10) days after the date mailed, unless it was actually received
earlier.
Article 26. Entire Agreement.
This Agreement sets forth the entire agreement and understanding
between the parties as to its subject matter and supersedes all prior
agreements, understanding and memoranda between the parties, if any, on the same
subject matter of this Agreement. No amendments or supplements to this Agreement
shall be effective for any purpose except by a written agreement signed by the
parties.
Article 27. Severability.
If any provision of this Agreement is invalid or unenforceable, then
that provision shall be given no effect and shall be deemed not to be included
within the terms of this Agreement, without invalidating any of the remaining
terms of this Agreement. The parties hereto shall then try to replace the
invalid or unenforceable provision by a clause that is closest to the contents
of the invalid or unenforceable provision.
10
<PAGE>
Article 28. Language.
The controlling version of this Agreement shall be in English and all
communications pursuant hereto shall be in the English language, which language
shall control and any version in any other language shall be for accommodation
only and not bind the parties hereto.
Article 29. Headings.
The headings of article and paragraphs used in this Agreement are
inserted for convenience of reference only and shall not affect the
interpretation of the respective articles and paragraphs of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement and in duplicate to be executed by the duly authorized officers or
representatives as of the date first above written.
Virtual Reality Laboratories, Inc. A.I. Soft, Inc.
By:_______________________ By:___________________________
Name:_____________________ Name:_________________________
Title:______________________ Title:__________________________
11
<PAGE>
EXHIBIT 1
APPENDIX
TO
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN VIRTUAL REALITY LABORATORIES, INC. AND A.I. SOFT, INC.
1. Subject Software
(1) Software:
(2) Original Software:
2. Specifications
(1) Software shall operate on the following platforms:
(2) Software shall include a resource data of text file to support
Japanese character code.
(3)
(4)
3. Development Schedule and Tasks of VRL and AI:
(1) VRL shall deliver the resource file in the text form of the
Original Software to AI by _______, ___________;
(2) AI shall translate resource file in the text form of the Original
Software delivered by VRL into the Japanese language, to support the _____
Japanese character code, and deliver such translated text to VRL by ___________,
______________;
(3) VRL shall compile the translated resource file in the text form
delivered by AI, develop the Alpha (a) version of the Software, and deliver the
Alpha (a) version of Software stored in __________ to AI by ____________,
___________;
(4) AI shall test and evaluate the Alpha (a) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by ____________, ____________;
12
<PAGE>
(5) VRL shall develop the Beta (b) version of Software, and deliver the
Beta (b) version of Software stored in ___________ to AI by _________,
___________;
(6) AI shall test and evaluate the Beta (b) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by ____________, ____________;
(7) VRL shall develop the Final version of Software, and deliver a
master copy of the Final version of Software stored in _____________ to AI by
___________, _________; and
(8) AI shall test and evaluate the Final version of Software delivered
by VRL and report the result of such test and evaluation to VRL in writing, by
facsimile or telephone by ____________, ____________.
4. Royalty.
The rate of Royalty shall be as follows:
Total number of Sales(*) Rate of Royalty
from to
from to
*"Total number of Sales" shall mean the total number of
Software sold by AI.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in duplicate by its duly authorized officers or
representatives as of the date first above written.
Virtual Reality Laboratories, Inc. A.I. Soft, Inc.
By:_______________________ By:___________________________
Name:_____________________ Name:_________________________
Title:______________________ Title:__________________________
13
<PAGE>
APPENDIX NO. 1
TO
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN VIRTUAL REALITY LABORATORIES, INC. AND A.I. SOFT, INC.
(DISTANT SUNS FOR WINDOWS)
This Appendix, made and entered into this 6th day of January, 1995 by
and between VIRTUAL REALITY LABORATORIES, INC. and A.I. SOFT, INC. pursuant to
the Software Development and License Agreement dated January 6, 1995 ("Basic
Agreement") between the parties,
1. Subject Software
(1) Software : Distant Suns/J for Windows Ver3.0
(2) Original Software : Distant Suns for Windows Ver3.0
2. Specifications
(1) Software shall operate on the following platforms:
(a) IBM's personal computers or IBM compatible personal computers
(on which Microsoft Windows Ver3.1J can be operated).
(b) NEC's PC-98 series personal computers or NEC compatible
personal computers (on which Microsoft Windows Ver3.1J can be operated).
(c) Fujitsu's FM-Towns series personal computers (on which
Microsoft Windows Ver3.1J can be operated)
(2) Software shall include a resource data in text form to
support double-byte ASCII Japanese character code.
3. Development Schedule and Tasks of VRL and AI for Software:
(1) VRL shall deliver the resource file in text form of Original
Software to AI by January 7, 1995;
(2) AI shall translate the resource file in text file of Original
Software delivered by VRL into the Japanese language in double-byte ASCII
Japanese character code format, and deliver such translated resource file in
text form to VRL by January 21, 1995;
(3) VRL shall compile the translated resource file in text form
delivered or transferred by AI and develop the Alpha (a) version of Software,
and deliver the Alpha (a) version of Software stored in floppy disks to AI by
January 31, 1995;
14
<PAGE>
(4) AI shall test and evaluate the Alpha (a) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by February 7, 1995.
(5) VRL shall develop the Beta (b) version of Software, and
deliver the Beta (b) version of Software stored in CD-R disk to AI by February
15, 1995;
(6) AI shall test and evaluate the Beta (b) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by February 21, 1995;
(7) VRL shall develop the Final version of Software, and deliver
a master copy of the Final version of Software stored in CD-R disk to AI by
February 28, 1995; and
(8) AI shall test and evaluate the Final version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by March 7, 1995.
4. Royalty.
The rate of Royalty shall be as follows:
Total Number of Sales (*) Rate of Royalty
From 0 to 2,000 26% of AI sales price
from 2,001 to 4,000 24% of AI sales price
from 4,001 to 6,000 22% of AI sales price
from 6,001 to 8,000 20% of AI sales price
from 8,001 to 10,000 19% of AI sales price
10,001 and up 18% of AI sales price
* "Total number of Sales" shall mean the total number of Software sold by AI.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in duplicate by its duly authorized officers or
representatives as of the date first above written.
Virtual Reality Laboratories, Inc. A.I. Soft, Inc.
By:_______________________ By:___________________________
Name:_____________________ Name:_________________________
Title:______________________ Title:__________________________
15
<PAGE>
APPENDIX NO. 2
TO
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN VIRTUAL REALITY LABORATORIES, INC. AND A.I. SOFT, INC.
(VISTA PRO FOR WINDOWS)
This Appendix, made and entered into this 6th day of January, 1995 by
and between VIRTUAL REALITY LABORATORIES, INC. and A.I. SOFT, INC. pursuant to
the Software Development and License Agreement dated January 6, 1995 ("Basic
Agreement") between the parties,
1. Subject Software
(1) Software : Vista Pro/J for Windows Ver3.0
(2) Original Software : Vista Pro for Windows Ver3.0
2. Specifications
(1) Software shall operate on the following platforms:
(a) IBM's personal computers or IBM compatible personal computers
(on which Microsoft Windows Ver3.1J can be operated).
(b) NEC's PC-98 series personal computers or NEC compatible
personal computers (on which Microsoft Windows Ver3.1J can be operated).
(c) Fujitsu's FM-Towns series personal computers (on which
Microsoft Windows Ver3.1J can be operated)
(2) Software shall include a resource data in text form to
support double-byte ASCII Japanese character code.
3. Development Schedule and Tasks of VRL and AI for Software:
(1) VRL shall deliver the resource file in text form of Original
Software to AI by February 7, 1995;
(2) AI shall translate the resource file in text file of Original
Software delivered by VRL into the Japanese language in double-byte ASCII
Japanese character code format, and deliver such translated resource file in
text form to VRL by February 21, 1995;
(3) VRL shall compile the translated resource file in text
form delivered or transferred by AI and develop the Alpha (a) version of
Software, and deliver the Alpha (a) version of Software stored in floppy disks
to AI by February 28, 1995;
16
<PAGE>
(4) AI shall test and evaluate the Alpha (a) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by March 7, 1995.
(5) VRL shall develop the Beta (b) version of Software, and
deliver the Beta (b) version of Software stored in CD-R disk to AI by March 15,
1995;
(6) AI shall test and evaluate the Beta (b) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by March 22, 1995;
(7) VRL shall develop the Final version of Software, and deliver
a master copy of the Final version of Software stored in CD-R disk to AI by
March 31, 1995; and
(8) AI shall test and evaluate the Final version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by April 7, 1995.
4. Royalty.
The rate of Royalty shall be as follows:
Total Number of Sales (*) Rate of Royalty
From 0 to 2,000 26% of AI sales price
from 2,001 to 4,000 24% of AI sales price
from 4,001 to 6,000 22% of AI sales price
from 6,001 to 8,000 20% of AI sales price
from 8,001 to 10,000 19% of AI sales price
10,001 and up 18% of AI sales price
* "Total number of Sales" shall mean the total number of Software sold by AI.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in duplicate by its duly authorized officers or
representatives as of the date first above written.
Virtual Reality Laboratories, Inc. A.I. Soft, Inc.
By:_______________________ By:___________________________
Name:_____________________ Name:_________________________
Title:______________________ Title:__________________________
17
<PAGE>
APPENDIX NO. 3
TO
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN VIRTUAL REALITY LABORATORIES, INC. AND A.I. SOFT, INC.
(DISTANT SUNS FOR MACINTOSH)
This Appendix, made and entered into this 6th day of January, 1995 by and
between VIRTUAL REALITY LABORATORIES, INC. and A.I. SOFT, INC. pursuant to the
Software Development and License Agreement dated January 6, 1995 ("Basic
Agreement") between the parties,
1. Subject Software
(1) Software : Distant Suns/J for Macintosh Ver2.0
(2) Original Software : Distant Suns for Macintosh Ver2.0
2. Specifications
(1) Software shall operate on the following platforms:
(a) Apple's Macintosh series personal computers (on which Apple's
Kanji Talk 7 can be operated).
(2) Software shall include a resource data in text form to
support double-byte ASCII Japanese character code.
3. Development Schedule and Tasks of VRL and AI for Software:
(1) VRL shall deliver the resource file in text form of Original
Software to AI by March 7, 1995;
(2) AI shall translate the resource data of Original Software
delivered by VRL into the Japanese language in double-byte ASCII Japanese
character code format, and deliver such translated resource file in text form to
VRL by March 21, 1995;
(3) VRL shall compile the translated resource file in text form
delivered or transferred by AI and develop the Alpha (a) version of Software,
and deliver the Alpha (a) version of Software stored in floppy disks to AI by
March 31, 1995;
(4) AI shall test and evaluate the Alpha (a) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by April 7, 1995.
18
<PAGE>
(5) VRL shall develop the Beta (b) version of Software, and
deliver the Beta (b) version of Software stored in CD-R disk to AI by April 14,
1995;
(6) AI shall test and evaluate the Beta (b) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by April 21, 1995;
(7) VRL shall develop the Final version of Software, and deliver
a master copy of the Final version of Software stored in CD-R disk to AI by
April 28, 1995; and
(8) AI shall test and evaluate the Final version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by May 10, 1995.
4. Royalty.
The rate of Royalty shall be as follows:
Total Number of Sales (*) Rate of Royalty
From 0 to 2,000 26% of AI sales price
from 2,001 to 4,000 24% of AI sales price
from 4,001 to 6,000 22% of AI sales price
from 6,001 to 8,000 20% of AI sales price
from 8,001 to 10,000 19% of AI sales price
10,001 and up 18% of AI sales price
* "Total number of Sales" shall mean the total number of Software sold by AI.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in duplicate by its duly authorized officers or
representatives as of the date first above written.
Virtual Reality Laboratories, Inc. A.I. Soft, Inc.
By:_______________________ By:___________________________
Name:_____________________ Name:_________________________
Title:______________________ Title:__________________________
19
<PAGE>
APPENDIX NO. 4
TO
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN VIRTUAL REALITY LABORATORIES, INC. AND A.I. SOFT, INC.
(VISTA PRO FOR MACINTOSH)
This Appendix, made and entered into this 6th day of January, 1995 by
and between VIRTUAL REALITY LABORATORIES, INC. and A.I. SOFT, INC. pursuant to
the Software Development and License Agreement dated January 6, 1995 ("Basic
Agreement") between the parties,
1. Subject Software
(1) Software : Vista Pro/J for Macintosh Ver3.0
(2) Original Software : Vista Pro for Macintosh Ver3.0
2. Specifications
(1) Software shall operate on the following platforms:
(a) Apple's Macintosh series personal computers (on which Apple's
Kanji Talk 7 can be operated).
(2) Software shall include a resource data in text form to
support double-byte ASCII Japanese character code.
3. Development Schedule and Tasks of VRL and AI for Software:
(1) VRL shall deliver the resource file in text form of Original
Software to AI by April 7, 1995;
(2) AI shall translate resource data of Original Software
delivered by VRL into the Japanese language in double-byte ASCII Japanese
character code format, and deliver such translated resource file in text form to
VRL by April 21, 1995;
(3) VRL shall compile the translated resource file in text form
delivered or transferred by AI and develop the Alpha (a) version of Software,
and deliver the Alpha (a) version of Software stored in floppy disks to AI by
April 28, 1995;
(4) AI shall test and evaluate the Alpha (a) version of
Software delivered by VRL and report the result of such test and evaluation to
VRL in writing, by facsimile or telephone by May 10, 1995.
20
<PAGE>
(5) VRL shall develop the Beta (b) version of Software, and
deliver the Beta (b) version of Software stored in CD-R disk to AI by May 16,
1995;
(6) AI shall test and evaluate the Beta (b) version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by May 23, 1995;
(7) VRL shall develop the Final version of Software, and deliver
a master copy of the Final version of Software stored in CD-R disk to AI by May
31, 1995; and
(8) AI shall test and evaluate the Final version of Software
delivered by VRL and report the result of such test and evaluation to VRL in
writing, by facsimile or telephone by June 7, 1995.
4. Royalty.
The rate of Royalty shall be as follows:
Total Number of Sales (*) Rate of Royalty
From 0 to 2,000 26% of AI sales price
from 2,001 to 4,000 24% of AI sales price
from 4,001 to 6,000 22% of AI sales price
from 6,001 to 8,000 20% of AI sales price
from 8,001 to 10,000 19% of AI sales price
10,001 and up 18% of AI sales price
* "Total number of Sales" shall mean the total number of Software sold by AI.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in duplicate by its duly authorized officers or
representatives as of the date first above written.
Virtual Reality Laboratories, Inc. A.I. Soft, Inc.
By:_______________________ By:___________________________
Name:_____________________ Name:_________________________
Title:______________________ Title:__________________________
21
<PAGE>
EXHIBIT 11.1
Rom Tech, Inc.
Computation of Loss Per Share
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
-------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss ($392,472) ($6,384) ($706,214) ($212,936)
-------- ------ -------- --------
Common and common equivalent shares outstanding:
Weighted average common shares outstanding
represented by the shares received by the stockholders
of AOMC in connection with the reverse acquisition,
and recorded as arecapitalization of the previously
outstanding common stock of AOMC. Such shares have been
retroactively restated to reflect the effectof the
recapitalization for all periods presented. 1,575,000 1,575,000 1,575,000 1,575,000
Weighted average common shares outstanding of the Company
at the time of the Merger and shares issued in connection
with the IPO and the exercise of warrants. 3,373,803 2,061,657
Additional shares assumed to be outstanding resulting from
the exercise of the warrants received by the stockholders
of AOMC in connection with thereverse acquisition (computed
using the treasury stock method). 354,166 354,166
----------- ---------- ----------- -----------
4,948,803 1,929,166 3,636,657 1,929,166
----------- ---------- ----------- -----------
Net loss per common and common equivalent share ($0.08) ($0.00) ($0.19) ($0.11)
----- ----- ----- -----
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,654,726
<SECURITIES> 792,640
<RECEIVABLES> 152,778
<ALLOWANCES> 0
<INVENTORY> 157,135
<CURRENT-ASSETS> 2,829,453
<PP&E> 78,010
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,207,605
<CURRENT-LIABILITIES> 531,423
<BONDS> 0
0
1,000,000
<COMMON> 3,763,177
<OTHER-SE> 649,540
<TOTAL-LIABILITY-AND-EQUITY> 3,207,605
<SALES> 1,031,506
<TOTAL-REVENUES> 1,031,506
<CGS> 448,724
<TOTAL-COSTS> 448,724
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (706,214)
<INCOME-TAX> (706,214)
<INCOME-CONTINUING> (706,214)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (706,214)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
