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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
--------------------
- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number 0-15113
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VERITEC INC.
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(Exact name of registrant as specified in its charter)
NEVADA
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(State or other jurisdiction of incorporation or organization)
95-3954373
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(IRS Employer Identification Number)
16461 SHERMAN WAY, #125, VAN NUYS, CA. 91406
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(Address of principal executive offices, zip code)
(818) 782-4500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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 No X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock as of the latest
practicable date. As of January 31, 1997 the Company had 2,085,600 shares of
common stock, 1,000 shares of Series Z preferred stock, 56,318 shares of Series
B preferred stock, 300,000 shares of Series D preferred stock and 17,103 shares
of Series E preferred stock issued and outstanding. The preferred stock series
in the aggregate have the equivalent of 2,281,510 common votes.
This document consists of 35 pages, including 24 exhibit pages.
The Exhibit index is on page 11.
1
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
VERITEC INC.
BALANCE SHEET
(Unaudited)
December 31,
1996
----
ASSETS
Current Assets:
Cash 130,785
Inventories 18,262
------
Total current assets 149,047
Intangible asset 7,500
Furniture and equipment, net. (Note 2) 14,821
Note and interest receivable from officer 280,004
Deposits -
-------
451,372
=======
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY):
Current Liabilities:
Convertible subordinated notes payable 556,479
Notes payable 113,801
Notes payable (secured) 350,000
Accounts payable and accrued expenses 604,573
Deferred compensation 791,915
Accounts payable - post bankruptcy 2,102
Notes payable - post bankruptcy 32,500
-------
Total current liabilities 2,451,370
Secured convertible notes payable 875,003
Junior subordinated convertible notes 1,889,108
---------
Total liabilities 5,215,481
---------
Shareholdrs' equity (deficiency)
Preferred stock 441,836
Common stock; $.01 par value, authorized 20,000,000 shares
2,085,600 shares issued and outstanding 183,164
Additional paid in capital 4,104,721
Accumulated deficit -9,493,830
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Net shareholders' equity (deficiency) -4,764,109
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451,372
=======
See Accompanying Notes to the Financial Statements
2
VERITEC INC.
STATEMENT OF OPERATIONS
(Unaudited)
For the three months ended For the six months ended
December 31, December 31,
1996 1995 1996 1995
---- ---- ---- ----
Revenues 203,340 84,505 234,661 124,242
Cost of Sales 3,110 56,638 22,809 88,428
----- ------ ------ ------
Gross profit 200,230 27,867 211,852 35,814
------- ------ ------- ------
Expenses:
General and administrative 22,857 16,711 48,565 44,883
Sales and Marketing 6,910 30,413 10,957 75,405
Engineering, research and
development 24,278 39,173 42,648 75,203
------ ------ ------ ------
54,045 86,297 102,170 195,491
------ ------ ------- -------
Gain(Loss)from operations 146,185 -58,430 109,682 -159,677
Costs associated with bankruptcy 25,065 - 64,922 -
Interest expense, net - 53,894 - 108,699
------- ------ ------ -------
Net loss 121,120 -112,324 44,760 -268,376
======= ======== ====== ========
Net gain (loss) per common share 0.05 -0.05 0.02 -0.13
==== ===== ==== =====
Weighted average common shares
outstanding 2,085,600 2,085,600 2,085,600 2,085,600
========= ========= ========= =========
See Accompanying Notes to the Financial Statements
3
VERITEC INC.
STATEMENTS OF
CASH FLOWS
(Unaudited)
For the six months ended December 31,
1996 1995
---- ----
Cash flow from operating activities:
Net gain (Loss) 44,760 -268,376
------ --------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 19,027 22,050
Notes and interest receivable from Officer - -6,436
(Increase) decrease in assets:
Inventory 2,310 2,310
Prepaid expenses - 2,850
Increase (decrease) in liabilities:
Accounts payable and accrued expenses -16,151 30,819
Deferred compensation 18,253 83,386
Accrued interest - 115,135
------ -------
Total adjustments 23,439 250,114
------ -------
Net cash used by operating activities 68,199 -18,262
------ -------
Cash flow from investing activities:
Purchase of equipment - -
------ -------
Net cash used for investing activities - -
------ -------
Cash flow from financing activities:
Issuance of secured notes 28,661 10,455
Issuance of notes payable 32,500 7,500
Issuance of preferred stock 2,045 -
Net cash provided by financing activities 61,161 19,000
------ ------
Increase (decrease) in cash position 129,360 738
Cash at beginning of period 1,425 364
------- ---
Cash at end of period 130,785 1,102
======= =====
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest - -
Income taxes - -
See Accompanying Notes to the Financial Statements
4
VERITEC INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996
(unaudited)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
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Veritec Inc. (the "Company") was incorporated in Nevada on September 8,
1982. The Company is primarily engaged in development, marketing and sale of a
line of microprocessor-based encoding and decoding system products that utilize
its patented Vericode Symbol technology. The Company's VeriSystem(tm) enables a
manufacturer or distributor to use unique identifiers or coded symbols con-
taining binary encoded data with a product. The VeriSystem(tm) enables automatic
identification and collection of a greater amount of data than conventional bar
codes.
Chapter 11 Bankruptcy
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On February 11, 1996 the Company received notice that a petition filed by
creditors for Relief Under Chapter 7 of Title 11 of the United States Code was
Granted and the Company was placed in Chapter 7 Bankruptcy.
On April 11, 1996 the Bankruptcy court granted the Company's motion to
convert the Chapter 7 to a chapter 11 Bankruptcy. The Court set a date of August
14, 1996 for a scheduling order, when the Company is to have a Plan presented to
the Judge.
Basis of Presentation
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The unaudited financial statements presented herein have been prepared by
the Company, without audit, pursuant to the rules and regulations for interim
financial information and the instructions to Form 10-QSB and Regulation S-B.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principals have been omitted. These unaudited consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997. In the opinion of management, the unaudited consolidated
financial statements reflect all adjustments (consisting of normal recurring
accruals only) which are necessary to present fairly the consolidated financial
position, results of operations, and changes in cash flow of the Company.
Operating results for interim periods are not necessarily indicative of the
results which may be expected for the entire year.
Per Share Computation
- ---------------------
Loss per share is based upon the weighted average number of shares of
common stock outstanding during the respective periods.
Reverse Split
- -------------
On May 9, 1994, the Board of Directors approved a one-for-ten "reverse
stock split" of its outstanding common stock. On January 23, 1995, the Company's
shareholders ratified this reverse stock split at its annual meeting. The shares
outstanding and per share data in the current period financial statements
reflect this reverse stock split.
5
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 is comprised of the following:
Equipment $ 271,559
Furniture and fixtures 60,773
-----------------
332,332
Less accumulated depreciation and amortization 317,511
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$ 14,821
=================
NOTE 3 - COMMITMENTS AND CONTINGENCIES
Contingencies
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BANKRUPTCY - See Note 1 on this 10-QSB for comments.
See Management Discussion and Analysis section on this Form 10-QSB, which
is incorporated herein by reference.
The Company has numerous commitments and contingent liabilities which are
discussed in the 1994 Form 10-KSB, the June 30, 1997 KSB and elsewhere in the
Management Discussion and Analysis section of this Form 10-QSB, which are
incorporated herein by reference.
Pending Litigation
- ------------------
With the current Bankruptcy situation, all creditors, stockholders, etc.,
are put on hold until such time as the Company has a Confirmed Plan of
Reorganization under Chapter 11 Bankruptcy proceedings.. The Company is
currently a party to several material pending legal proceedings. These legal
issues will also be included in the proposed plan of reorganization.
Default with West America Securities Corp.
- ------------------------------------------
In May 1994, the Board of Directors committed to issue West America
Securities Corp. ("West America"), a Los Angeles-based broker/dealer, 400,000
shares of common stock for services rendered. During the quarter ending
September 30, 1994, West America agreed to cancel this consulting agreement.
However, the Company is in default of certain provisions of this cancellation,
primarily the repayment by the Company to West America and their referrals, of
certain funds, aggregating approximately $50,000, which were invested in the
Company by these respective parties. Three of the parties involved with the
"West America" group were the parties that petitioned the court to place the
Company in Chapter 7 Bankruptcy.
NOTE 4 - GOING CONCERN AND MANAGEMENT'S PLANS
Since the Company has been put into Chapter 11 bankruptcy, there are a
number of issues that must be addressed in order for the Company to have a
Confirmed Plan of Reorganization. In order to do so it will be necessary to have
an agreement with the current creditors and stockholders of the company. Also, a
major funder must be located to assist in funding a Plan of Reorganization. At
January 31, 1997, no funder has agreed to participate with the Company in a
restructuring or reorganizing plan.
6
Sale of Trade Mark and License to Mitsubishi Corporation.
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On October 27, 1996 the Bankruptcy Court granted the Company's motion to
sell its Japanese Trademark on the VERICODE(r) symbol to Mitsubishi Corporation
and to sign a non exclusive License Agreement for sale of the Company's products
in Korea and Taiwan. The Company received payment of $200,000 for the sale of
the Trademark and will receive future royalties on sale of products in Korea and
Taiwan. The $200,000 is intended to be used for continuing operations and to pay
for the expenses relative to legal and other costs associated with the
Bankruptcy. It is also expected that the $200,000 will be adequate funding until
finances are available through the financing included in the Plan of
Reorganization.
The accompanying quarterly unaudited financial statements have been
prepared contemplating continuation of the Company as a going concern.
NOTE 5 - SUBSEQUENT EVENTS
Disclosure Statement on the Plan of Reorganization
- --------------------------------------------------
On January 22, 1997 the Company filed a Disclosure Statement with the
Court. This Disclosure Statement included a preliminary Plan of Reorganization.
HOMETREND and its affiliates, described as follows in the Disclosure Statement:
"HOMETREND Inc. is a Nevada corporation, which in conjunction with
Strategic Alliance Holding Corporation ("SAHC") and various joint venture
partners, will provide the guarantee of payments to be made on the Effective
Date of the Plan and will infuse into the Debtor either $2,000,000 in assets or
an operating company with a net asset value of $2,000,000 (New Capital
Infusion). Neither HOMETREND nor any of its affiliates are insiders or
affiliates of the Debtor".
HOMETREND is also to supply adequate funding to pay the Administrative
costs of the Plan.
Generally, the Plan of Reorganization calls for the exchange of debt for
equity, except for the Gant Group, which is to be paid in cash over a period of
four years. It was considered by the Company that "The Gant Group" had a secured
position on Company patents and therefore received different treatment than
other creditors.
Final details of a Plan proposed for confirmation is currently being worked
on.
PART I. FINANCIAL INFORMATION
ITEM 2. Management' Discussion and Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources - December 31, 1996 compared to June 30, 1996.
- -------------------------------
During the six months ended December 31, 1996, the Company received cash
from revenues totaling $203,340, including the $200,000 for sale of the Trade
Mark to Mitsubishi Corporation.. During the quarterly period, the Company had
borrowed $16,000 from HOMETREND as a short term loan and repaid the money upon
receipt of the money from Mitsubishi Corporation. In the six months ended
7
December 31, 1996 the Company received new loans of $32,500 from the Bridge
Group.
Having received the above noted money from Mitsubishi Corporation, the
Company expects that it will have adequate funds for operations and payment of
legal and other costs associated with the Bankruptcy to carry it until finances
are available from the Plan of Reorganization.
The following schedule shows the Company's debt amounts at December 31,
1996 and June 30, 1996. Except for certain adjustments to interest and the
additional $32,500 received from the "Bridge Group" there have been no
significant additions to debt during this period. Both Principal and Interest
amounts owed are included in this schedule.
Debt category Dec. 31, 1996 June 30, 1996 Incr./(Decr.)
---------------- ---------------- -----------------
Convertible subordinated notes payable $ 556,479 556,479 $
-
Notes payable 146,301 113,801 32,500
Notes payable with warrants 350,000 321,339 28,661
Accounts payable and accrued expenses 606,675 622,826 (16,151)
Deferred compensation 791,915 773,662 18,253
Secured convertible notes payable 875,003 875,003 -
Junior subordinated convertible notes 1,889,108 1,889,108 -
================ ================ =================
$ 5,215,481 $ 5,152,218 $ 63,263
================ ================ =================
The Company's liquidity (working capital) is reflected in the table below
which shows comparative working capital as of December 31, 1996 and June 30,
1996.
Dec. 31, 1996 June 30, 1996
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Working capital (deficit) $ (2,302,323) $ (2,366,110)
Financial and Operational Outlook
- ---------------------------------
Although there is no assurance that the Company will generate any material
revenues or cash flows from operations in the next fiscal year, management
believes the Company has prospects for generating such revenues. Several
developments occurred during the year which the Company believes have increased
that potential. Future royalties from Mitsubishi from the Korea and Taiwan
license agreement are expected to be minimal for the first few quarters and then
show an increasing amount as that business grows. Also, the Company's other non
exclusive license agreements with another party working with several large
companies in Korea with the possibility of business with them.
Results of Operations - The six months ended December 31, 1996 compared to
---------------------
and six months ended December 31, 1995.
8
The Company had revenues of $203,340 during the six months ended December
31, 1996. The revenues for this period was primarily from $K200,000 sale of the
Trademark to Mitsubishi Corporation. This compares to revenues of $124,242 for
the six months ended December 31, 1995, which was derived from engineering
services and from the sale of products. The revenues for the 1995 period was due
to engineering services provided by former employees working on a contract with
an Aerospace company on an experimental use of the Vericode Symbol on aircraft
fueling in flight. The Company is in discussions with several potential
customers for systems sales but cannot project future revenues, if any, at this
time. Because of its cash flow and liquidity problems, there are no assurances
that the Company can ever generate revenues.
Operating expenses of the Company were reduced considerably during the six
months ended December 31, 1996 compared to the six months ended December 31,
1995 due to an decrease in the number of employees in each category of expense.
For the six months ended
Expense category Dec. 31, 1996 Dec. 31, 1995 Incr./(Decr.)
---------------- ---------------- -----------------
General and administrative $ 48,565 $ 44,883 $ 3,683
Marketing and advertising 10,957 75,405 (64,448)
Engineering, research and development 42,648 75,203 (32,555)
================ ================ =================
$ 102,170 $ 195,491 $ (93,321)
================ ================ =================
Due to the Company's financial inability to pay employees, the former
employees in the engineering department left the Company and formed their own
engineering services company. This group has continued to perform services for
Veritec on a contract basis. There is one employee in Administration presently
working in the Company at December 1, 1996.
Capital Expenditures and Commitments
- ------------------------------------
During the six months ended December 31, 1996, the Company had no purchases
of capital equipment.. The Company believes its need for additional capital
equipment will continue because of the need to develop and expand its business.
The amount of such additional capital required is uncertain and may be beyond
that generated from operations. There can be no assurance that the Company will
be able to obtain any such capital on satisfactory terms.
Factors that may effect future results
- --------------------------------------
A number of uncertainties exist that may effect the Company's future
operating results. These uncertainties include the current Bankruptcy situation
and uncertain general economic conditions, market acceptance of the Company's
products and the Company's ability to manage the expense of its business.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Chapter 11 Bankruptcy
- ---------------------
On February 11, 1996 the Company received notice that a petition filed by
creditors for Relief Under Chapter 7 of Title 11 of the United States Code was
Granted and the Company was placed in Chapter 7 Bankruptcy.
9
On April 11, 1996 the Bankruptcy court granted the Company's motion to
convert the Chapter 7 to a chapter 11 Bankruptcy. The Court set a date of August
14 for a scheduling order, when the Company was to have a Plan presented to the
Judge.
A Disclosure Statement was filed with the Court on January 22, 1997.
Amendments to the Disclosure Statement will be made based on review by the
Trustee, the SEC and certain secured and other creditors.
Lawsuit by holders of Notes Payable with Warrants and subsequent agreement
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As discussed in the 1994 Form 10-KSB, the Company has outstanding an
aggregate of $265,400 of notes payable with three common stock purchase warrants
attached for each $10.00 loaned. These "Notes Payable with Warrants" bear
interest at 7% per annum payable annually and mature on various dates from June
1995 to June 1997. The noteholders filed a collateral security interest with the
U.S. Patent Office. At the end of the prior quarter, these notes were in default
due to non-payment of accrued interest which was originally due June 30, 1994.
In December 1994, the noteholders brought action against the Company in the
Superior Court of California for the County of Riverside (case no. 257856) (the
"Action") to foreclose on its alleged security and to sell the patents at public
sale for payment of the amounts due under the Notes Payable with Warrants.
On January 20, 1995, the Company entered into an agreement with the
noteholders wherein the noteholders caused the Action to be dismissed without
prejudice. As consideration for this dismissal, the Company admitted the amount
and validity of the debt and the Security Agreement, and that it has no
affirmative defenses, offsets or counterclaims to the noteholders claims. If the
Note obligation, as defined in the Agreement, was not paid in full on or before
October 1, 1995, the noteholders could cause Action to be filed against the
Company.
On or about October 10, 1995, the Gant Group filed a Complaint for default
under the Security Agreement for a judicial foreclosure of the Patents. The
complaint was captioned, Richard A. Gant Agent, v. Veritec, Inc., et al., Case
No. 272019 in the Superior Court of the State of California, County of
Riverside. However, on October 1, 1995, as an alternative, the Company had been
given an election to pay the accrued interest and one-half of the principal
obligation of the notes and could then extend the balance of payment to April
21, 1996.
Since the Company is under the jurisdiction of the Bankruptcy Court, the
case filed by the "Gant Group" against the Company was remanded from the
Superior Court to the Bankruptcy Court.
In July 1996, the Gant Group filed a motion in the Bankruptcy Court for
Relief from the Automatic Stay provided by Chapter 11 rules. Their filing was to
have a Stipulation of Judgment to Foreclose the Security Interest in the
Company's Patents. On July 25, 1996 the Court denied the motion for Relief of
Stay.
Possible unasserted claims
- --------------------------
The Company expects that any unasserted claims will be included in the Plan
of Reorganization and handled according to the Plan.
10
ITEM 2. CHANGES IN SECURITIES.
On May 9, 1994, the Board of Directors approved a one-for-ten "reverse
stock split" of its outstanding common stock. On January 23, 1995, the Company's
shareholders ratified this reverse stock split at its annual meeting. The shares
outstanding and per share data in the current period financial statements
reflect this reverse stock split.
ITEM 3. DEFAULT UPON SENIOR SECURITIES. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. None
ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
1. Order granting debtor's motion to sell its Japanese Trademark
to Mitsubishi Corporation.
2. A copy of the AGREEMENT - Sale of VERICODE symbol Trademark to
Mitsubishi Corporation.
3. A copy of the TRADEMARK LICENSE AGREEMENT - a non-exclusive license
for sale of products in Korea and Taiwan.
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VERITEC INC.
-------------------------
(Registrant)
Date: August 15, 1999
-----------------------------
By:____________________________
Jack E. Dahl
Chief Financial Officer
and Chief Accounting Officer
11
|| |
1||LARRY W. SMITH, ESQUIRE, No. 89148 -------------------------------- |
||Member of SMITH & STARK | FILED | |
2||Attorneys at Law | |--------------------------| | |
||3550 Wilshire Blvd., Suite 1760 | | OCT 27 1996 | | |
3||Los Angeles, CA 90010-2524 | |--------------------------| | |
||(213) 383-2222 | CLERK, U.S.BANKRUPTCY COURT | |
4|| |CENTRAL DISTRICT OF CALIFORNIA| |
|| | BY COUNTY CLERK| |
5|| Attorney for Debtor |------------------------------| |
||VERITEC, INC. -------------------------------- |
6|| | ENTERED | |
|| | |--------------------------| | |
7|| | | OCT 30 1996 | | |
|| | |--------------------------| | |
8|| |CLERK, U.S.BANKRUPTCY COURT | |
|| |CENTRAL DISTRICT OF CALIFORNIA| |
9|| |BY COUNTY CLERK| |
10|| |------------------------------| |
11|| UNITED STATES BANKRUPTCY COURT |
|| |
12|| CENTRAL DISTRICT OF CALIFORNIA |
|| |
13|| In Re: ) CASE NO. SV95-17978-AG |
|| ) CHAPTER 11 |
14|| VERITEC, INC., a Nevada ) |
|| corporation, ) ORDER GRANTING DEBTOR'S MOTION TO |
15|| ) SELL ITS JAPANESE TRADEMARK TO |
|| Debtor. ) MITSUBISHI CORPORATION AND REQUEST FOR |
16|| ) PERMISSION TO ENTER INTO AN EXCLUSIVE |
|| ) LICENSING AGREEMENT WITH MITSUBISHI |
17|| ) CORPORATION OTHER THAN IN THE NORMAL |
|| ) COURSE OF BUSINESS |
18|| ) |
|| ) Date: October 9, 1996 |
19|| ) TIME: 2:00 p.m. |
|| ) PLACE: CTRM 302 |
20||__________________________) 21041 Burbank Blvd. |
|| Woodland Hills, CA 91367 |
21|| Debtor's Motion to sell its trademark in Japan to Mitsubishi |
|| |
22|| Corporation and for permission to enter into an exclusive licensing |
|| |
23|| agreement with Mitsubishi for the sale of its products in Japan other |
|| |
24|| than in the normal course of business, came on for hearing before the |
|| |
25|| Honorable Arthur Greenwald, United States Bankruptcy Judge of the above- |
|| |
26|| entitled Court, on October 9, 1996 at 2:00 p.m. |
|| |
27|| Appearances are noted on the record. |
|| Debtor; Alan Sarver, Esquire, appeared |
28|| |
|| 1 |
12
|| |
|| |
1|| The Court having reviewed the Motion and other pleadings |
|| |
2|| filed with respect thereto; having considered the oral |
|| |
3|| presentations of all appearing parties; based upon the other |
|| |
4|| pleadings on file in this case, finding that adequate and proper |
|| |
5|| notice of the Motion has been given as required by the Bankruptcy |
|| |
6|| Code (11 U.S.C.), the Federal Rules of Bankruptcy Procedure and |
|| |
7|| the Local Bankruptcy Rules, and good cause appearing therefore, |
|| |
8|| IT IS HEREBY ORDERED THAT: |
|| |
9|| 1. The Detor is granted permission to sell its trademark |
|| |
10|| in Japan to Mitsubishi Corporation; and |
|| |
11|| 2. The Debtor is granted permission to enter into the |
|| |
12|| licensing agreement with Mitsubishi for the sale of its products |
|| |
13|| in Japan under the terms of the agreement, a copy of which is |
|| |
14|| attached hereto as Exhibit A. |
|| |
15|| |
|| |
16|| DATED: OCT 27 1996 ARTHUR GREENWALD (STAMP) |
|| ------------------------- |
17|| HONORABLE ARTHUR GREENWALD |
|| U.S. BANKRUPTCY JUDGE |
18||VERITEC\licens.ord |
|| |
19|| |
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20|| |
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21|| |
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22|| |
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23|| |
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24|| |
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25|| |
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26|| |
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27|| |
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28|| |
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|| 2 |
13
________________________________________________________________________________
|In re | CHAPTER 11 CASE NUMBER: |
| | SV95-17978-AG |
| VERITEC, INC. | |
|____________________________________________|_________________________________|
NOTICE OF ENTRY OF JUDGMENT OR ORDER
AND CERTIFICATE OF MAILING
TO ALL PARTIES IN INTEREST ON THE ATTACHED SERVICE LIST:
1. You are hereby notified, pursuant to Local Bankruptcy Rule 116(1)(a)(iv),
that an order entitled (specify):
ORDER GRANTING DEBTOR'S MOTION TO SELL ITS JAPANESE TRADEMARK TO
MITSUBISHI CORPORATION AND REQUEST FOR PERMISSION TO ENTER INTO AN
EXCLUSIVE LICENSING AGREEMENT WITH MITSUBISHI CORPORATION OTHER THAN
IN THE NORMAL COURSE OF BUSINESS
was entered on (specify date): OCT 30 1996
2. I hereby certify that I mailed a copy of this notice and a true copy of the
order or judgement to the persons and entities on the attached service list
on (specify date): OCT 30 1996
Dated: OCT 30 1996 JON D. CERETTO
Clerk of the Bankruptcy Court
By: (Signature-Nancy Monroy)
-------------------------
Deputy Clerk
_______________________________________________________________________________
Rev. 6/95 This form is optional. It has been approved for use by the 110
United States Bankruptcy Court for the Central District of California
14
AGREEMENT
This Agreement made and entered into as of this 8th day of August, 1996, by and
--- ------
between Veritec Inc., a corporation duly registered and existing under the laws
of the State of Nevada and duly registered in California having its principal
place of business at 26540 Agoura Rd. Suite 205A, Calabasas, California 91302
USA (hereinafter referred to as "VTC") and Mitsubishi corporation, a corporation
duly organized and existing under the laws of Japan having its principal place
of business at 6-3, Marunouchi 2-chome, Chyoda-ku, Tokyo 100-86, Japan
hereinafter referred to as "MC").
WITNESSETH:
WHEREAS; VTC possesses certain concepts and technical information relating to
the basic structure of VeriCode(R) Symbol, primary technical concept of VeriCode
Symbol readers, and examples of VeriCode System application (all such
information is hereinafter collectively referred to as the "Technical
Information") which is more specifically described in Exhibit A attached hereto,
and owns the trademark for sole and exclusive use only in Japan (hereinafter
called the "Trademark") which is more specifically described in Exhibit B
attached hereto; and
WHEREAS; VTC has provided MC with certain Technical Information in order for MC
to commercialize the VeriCode marking devices, reading devices, encode and
decode software and related application software products (hereinafter called
the "Products"); and
WHEREAS; MC desires to purchase from VTC the Trademark; and
WHEREAS; VTC, being aware of MC's experience, financial capabilities and its
ability to commercialize the Products, is willing to transfer the Trademark to
MC on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants, agreements, representations
and warranties contained in this Agreement, the parties hereto hereby agree as
follows:
Article 1.(Services/Sale and Transfer of the Trademark)
- -------------------------------------------------------
1.1 The parties hereto hereby agree and acknowledge that VTC, pursuant to MC's
request, has provided MC with the Technical Information (hereinafter called
the "Services") for the sole purpose of MC to commercialize the Products,
and MC has developed certain know-how with respect to the Products.
Accordingly, in consideration for the Services
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provided by VTC, MC hereby agrees to pay a service fee as set forth in
Article 2.1 below
1.2 VTC hereby agrees to sell, convey, transfer assign and deliver to MC and MC
hereby agrees to purchase from VTC, all of its rights, title and interest
in the Trademark in accordance with the terms set forth in Article 2.2
below.
1.3 VTC hereby agrees to grant MC, upon MC's request, with a non-exclusive
license to use VTC's patent owned by VTC in the United States of America or
the same patent to be registered in any other countries, territories,
nations or areas (hereinafter called the "Patents") to develop and
manufacture the Products in the United States of America or such other
countries, nations, territories or areas including the right to grant a
sublicense thereof to develop and manufacture the Products. The term of
the Patents license shall be at least ten (10) years which the license
be automatically renewed for another period of ten (10) years and any
extension thereof. VTC and MC hereby agree that the consideration
stipulated in Article 2 below shall be the sole consideration payable by MC
and other than the payments in Article 2 hereof, MC shall not be obligated
or liable in any way to pay any other sum, amounts, royalty or payments to
VTC for the Patens license hereunder. for avoidance of doubt, the non-
exclusive license granted to MC under this Article 1.4 shall be limited to
the development and manufacture of the Products and shall not include the
license to sell the Products unless otherwise set forth in this Agreement.
1.4 VTC hereby acknowledges and agrees that MC has sold and can sell the
Products in Japan. VTC further acknowledges and agrees that MC has sold
and can sell the Products to the liquid crystal display panel market in
Korea and Taiwan. For these purposes, VTC shall cause the same trademark
in English and in Korean or Chinese as the case may be, as the Trademark to
be registered within the Republic of Korea and Taiwan under the name of VTC
at the costs of VTC. VTC hereby grant a non-exclusive license to MC with
the right to grant a sublicense to use such trademards on or in connection
with certain Products in Korea or Taiwan as the case may by. The term of
the trademark license in Korea shall be and Taiwan shall be at least ten
(10) years following the execution of this Agreement. VTC agrees to
register the trademark license at the Patent Office or other relavant
agency of Korea and Taiwan as the case may be, at the costs of MC as soon
as practically possible after the completion of the trademark registration.
VTC and MC hereby agree that the consideration for the trademark license
hereunder shall be separately agreed by the parties hereto. For this
purpose, the parties shall enter into a trademark license agreement.
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Article 2. (Payment)
- --------------------
2.1 As full and entire consideration for the Services provided by VTC, MC shall
pay to VTC the total sum of fifty-five thousand and five hundred United
States Dollars only (US$55,500.00)
2.2 As full and entire consideration for the transfer of the Trademark by VTC
to MC, MC shall pay to VTC the total sum of one hundred sixty-six thousand
and five hundred United States Dollars only (US$166,600.00)
2.3 Notwithstanding Article 2.2 above, MC hereby agrees that in the event VTC
determines to make fully public domain certain Technical Information, which
is more specifically described in Exhibit C attached hereto (the "Public
Domain Information"),by means of applying automatic Identification
Manufacturers International (the "AIMI") which costs and expenses shall be
borne and paid by VTC, MC hereby agrees to pay an additional amount of
one hundred and twenty-four thousand United States Dollars only
(US$166,500.00) set forth in Article 2.2 above.
2.4 The payments under Articles 2.1 and 2.2 shall be effected by MC within
fourteen (14) days after the date of MC's receipt from VTC of bills of sale
and other instruments of assignment and transfer of the Trademark, by means
of telegraphic transfer remittance to the bank account designated by VTC in
writing. In the event VTC determines to make fully public domain certain
Technical Information in accordance with Article 2.3 above, the payments
under Articles 2.3 shall be effected by MC within fourteen (14) days after
the date of MC's receipt from VTC of all the necessary documents and
information for the application to AIMI of the Public Domain Information.
VTC shall, upon its receipt of each payment hereof, deliver to MC a receipt
of each price referred to in Articles 2.1, 2.2 and 2.3 of this Agreement.
2.5 If the withholding tax is levied by the Japanese Government in connection
with the payment under this Article 2, MC shall deduct such withholding tax
respectively from the amount of payment, and shall send to VTC, without
delay, a certificate which shows the payment of such withholding tax.
Article 3. (Representations and Warranties)
- -------------------------------------------
3.1 Each party represents and warrants to the other party as follows:
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3.1.1 It is duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and has full corporate power
and authority to conduct its business as now conducted, and, if
applicable, is qualified to do business in each state in which it is
required to be qualified to carry on its business as conducted on the
date of execution of this Agreement.
3.1.2 It has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, and
the execution, delivery and performance of this Agreement has been
duly authorized by all necessary corporate action by it, and has been
duly executed and delivered by it, and constitutes the legal, valid
and binding obligation of it enforceable against it in accordance with
its terms.
3.1.3 Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will conflict
with or violate (a) any provision of its certificate or articles of
incorporation or by-laws, (b) any law, regulation, order of judgement
aplicable to it, or (c) any contract, agreement, license or other
instrument or obligation to which it is a party or by which it or its
assets are bound.
3.2 The parties hereby agree that the Products, any and all patent, utility
model right, design right, copyright and other intellectual properties
developed by MC in the course of or in connection with the development of
the Products shall belong to MC.
Article 4. (Prepresentations and Warranties of VTC)
- ---------------------------------------------------
VTC represents and warrants to MC as follows:
4.1 VTC has the full and unrestricted right and power to sell, convey, transfer
and assign the Trademark to MC and to grant non-exclusive license to use
the Patents in a manner set forth herein. The use of the Trademark and/or
the Patents has not infringed and is not now infringing any trademark,
patent or other proprietary rights belonging to any third party. VTC is
not a party to any license or otherwise, with respect to the Trademark.
4.2 VTC shall have pssession of and good and marketable title to the Trademard
and the Patents free and clear of any mortgages, pledges, liens,
encumbrances, charges, title retention arrangements or other security
arrangements, or any other debts whatsoever.
4.3 The consummation of the transactions contemplated by this Agreement; (a)
will not result in any violation or breach of, or of the terms, conditions
or provisions of any indenture, mortgage, deed of trust, security, lease,
or other agreement or instrument to
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which VTC is a party or by which any of its properties are bound; and (b)
is not prohibited by or has violated or will violate any law or any order,
regulation, judgement, writ or injunction of any court, commision,
regulatory body, administrative agency or other governmental body having
jurisdiction over VTC or any of its properties, assets or operations.
Article 5, (Conditions Precedent to MC's Performance)
- -----------------------------------------------------
The obligation of MC to purchase the Trademark pursuant to this Agreement are
subject to the satisfaction at or before the date of this Agreement (hereinafter
defined) of all the conditions set out below. MC may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that no
such waiver of condition shall constitute a waiver by MC of any other rights or
remedies, at law or in equity, warranties or covenants under this Agreement.
5.1 All of the representations and warranties of VTC set forth in this
Agreement shall be true in all material respects, both on the date hereof
and at the date of this Agreement.
5.2 No litigation or other proceeding shall have been instituted or threatened
pertaining to the transaction thereof.
5.3 The execution and delivery of this Agreement and the performance of its
covenants and obligations under it shall have been duly authorized by all
necessary corporate action and MC shall have received copies of all
resolutions pertaining thereto, certified by VTC's secretary.
Article 6. (Sale of Products to VTC)
- ------------------------------------
Upon VTC's request, MC hereby agrees to sell on the most favorable terms and
conditions and VTC agrees to purchase the Products including any Products to be
developed and manufactured by MC from time to time, provided, however, that the
both parties have agreed on such terms and conditions.
Article 7. (Indemnity)
- ----------------------
VTC shall hold MC harmless from any claims, demands, losses, costs expenses,
obligations, liabilities, damages, recoveries and deficiencies including
interest, penalties and reasonable attorney's fees, that it shall incur or
suffer, which may arise, result from or relate to any breach of or failure by
VTC to perform any of its representtions, warranties, covenants or agreements in
this Agreement or in any schedule, certificate, exhibit or other instrument
furnished or to be furnished by them under this Agreement.
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Article 8. (Third Party Claims)
- -------------------------------
VTC shall fully cooperate with and assist MC in defending against any and all
third party claims resulting from any actual or alleded infringement of
intellectual property rights of any third party due to MC's use of the Trademark
or the Patents, licensed by VTC to MC pursuant to Articles 1.2 and 1.4 above.
Specifically, VTC shall provide MC with any and all documentary evidence
available to VTC, as well as oral testimony, which may serve to prove MC's
ownership of the Trademark and the right to use the Patents, as the case may be.
Article 9.(Assignment)
- ----------------------
Neither this Agreement nor any right or benefits hereunder shall be assignable
or transferable to any third party, in whole or in part, by either party without
the prior written consent of the other party.
Article 10. (Waiver of Compliance)
- ----------------------------------
Any failure by either party hereto to enforce, at any time or for any period of
time, any of the provisions of this Agreement shall not constitute or be
construed as a waiver of that party's right thereafter to enforce each and every
provision of this Agreement.
Article 11. (Termination)
- -------------------------
If any party materially defaults in the due and timely performance of any of its
warranties, covenants or agreements under this Agreement, non-defaulting party
may give notice of termination of this agreement, in the manner provided for in
Article 15 below. The notice sall specify with particularity the default or
defaults on which the notice is based. the termination shall be effective
thirty (30) days after the date of such notice, unless the specified default or
defaults have been cured on or before this effective date for termination.
Article 12. (Arbitration)
- -------------------------
All disputes that may arise underor in relation to this Agreement shall be
settled exclusively by arbitration. the arbitration shall be conducted in Los
Angeles, California in accordance with the Rule of Arbitration and Conciliation
of the International Chamber of Commerce, Paris, by one or more arbitrators
appointed in accordance with said Rules. the arbitration proceedings shall be
conducted in English except for any documentary evidence which may be submitted
in its original language. the arbitration decision or award shal be final and
binding on the parties and enforceable by any court with jurisdiction over the
parties.
Article 13. (Negation of Agency Relationship)
- ---------------------------------------------
Nothing contained in this Agreement nor anything done by either party in the
discharge of its obligations hereunder shall be deemed to constitute either
party the agent of the other in any sense.
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Article 14. (Competition)
- --------------------------
The parties hereby agree and acknowledge that neither VTC nor MC is prohibited
from selling, handling or otherwise dealing in any products which are directly
or indirectly competitive with the Products, provided, however, that MC shall
not develop any multi dimensional, machine-readable matrix symbology and sell
products related to such symbology developed by MC (the "Related Products") for
the period of ten (10) years from the date of this Agreement without the prior
written consent of VTC. Notwithstanding the foregoing, the parties hereby agree
that the following products are excluded from the Related Products and that MC
shall neither be prohibited nor restricted from developing, selling or otherwise
handling such products so excluded from the Related Products:
(a) one dimensional bar-codes;
(b) public domain 2D codes, including, without limitation, code 16K, Code
One, MaxiCode, Data Matrix and PDF 417; (for avoidance of doubt, public
domain code by Automatic Identification Manufacturers International
("AIMI");
(c) optical character recognition; and
(d) Related Products already handled by MC on the date of this Agreement.
Article 15. (Notices)
- ---------------------
any notice required or contemplated hereunder shall be in english and shall be
deemed given when sent by registered airmail, telex, telegram or telecopy, and
properly addressed as follows:
If to VTC: Veritec, Inc.
26540 Agoura Rd. Suite 205A, Calabasas, CA 91302 USA
Attention: Jack E. Dahl, President
Telecopier: (818)880-4637
If to MC: Mitsubishi Corporation
6-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo, 100-86 Japan
Attention: General Manager, Motor Vehicle Dept. D
Telex: MCTOK X J 33333
Telecopier: (813)3210-8849
Article 16. (Secrecy)
- ---------------------
VTC and MC shall treat as confidential any and all the verbal and written
information designated as confidential, exchanged between the parties hereto and
shall not disclose to any
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third party without obtaining prior written consent of the other party. The
parties further agree that the confidential obligation set forth in the
immediately preceding sentence shall not apply to any information which (i) is
known to the parties hereto at the time of its receipt; (ii) is or becomes
generally available to the public through no fault of the parties hereto; (iii)
is received from any third party having the right to disclose such information;
or (iv) is approved for release by written authorization of the other party.
Article 17. (Governing Language and Law)
- ----------------------------------------
17.1 This Agreement is executed in English as the controlling text, and it shall
be governed by and interpreted in accordance with the laws of the United
States and the State of California.
17.2 This Agreement shall be construed no more strictly against one party than
the other party, regardless of which party drafted this Agreement.
Article 18 (Entire Agreement and Modification)
- ----------------------------------------------
This Agreement constitutes the entire and only agreement between the parties
hereto relative to the subject matter hereof and supersedes and cancels all
previous agreements, negotiations, commitments and writings relative to the
subject matter hereof entered into between the parties hereto and my not be
changed or modified in any manner other than in a writing signed by the
authorized officer or representative on behalf of each of the parties hereto on
or after the date of execution of this Agreement.
Article 19. (Severability of Provisions)
- ----------------------------------------
If any of the provisions of this Agreement shall be declared to be invalid or
unenforceable by judicial or administrative decision, any such provision shall
be deemed deleted and shall not in any way affect the validity or enforceability
of any other provision of this Agreement. The remaining provisions shall remain
in full force and effect, provided that to the extent practicable any invalid or
unenforceable provision shall have been replaced by a valid and enforceable
provision which comes closest to the original intention of the parties.
Article 20. (Effect of Headings)
- --------------------------------
The headings of the Articles of this Agreement are for the convenience of
reference only, and shall not in any way affect the meaning or interpretation of
any of the provisions of this Agreement.
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Article 21. (Counterparts)
- --------------------------
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute a single
agreement.
Article 22. (Approval)
- ----------------------
This Agreement is all subject to the approval of the United States bankruptcy
Court.
INWITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate originals by their duly authorized representatives as of the day
and year first above written.
Veritec, Inc. Mitsubishi Corporation
(Signature-Jack E. Dahl)
Jack E. Dahl G. Shintani
President and CEO General Manager
Motor Vehicle Department D
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EXHIBIT A
Technical Information
1. Basic structure of VeriCode Symbol.
o
2. Primary technical concept of 360 rotation decoding.
3. Various methods of marking VeriCode Symbol.
4. Primary technical concept of VeriCode Symbol readers.
5. Examples of VeriCode System application.
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EXHIBIT B
(This page is mostly in Japanese)
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EXHIBIT C
Public Domain Information
[TO BE PROVIDED]
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TRADEMARK LICENSE AGREEMENT
This Agreement made and entered into as of this 8th day of August, 1996, by and
---
between Veritec Inc., a corporation duly registered and existing under the laws
of the state of Nevada and duly registered in California having its principal
place of business at 26540 Agoura Rd. Suite 205A, Calabasas, California 91302
USA (herinafter called "VTC") and Mitsubishi Corporation, a corporation duly
organized and existing under the laws of Japan having its principal place of
business at 6-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-86, Japan
(hereinafter called "MC").
WITNESSETH:
WHEREAS; VTC possesses all right, title and interest in and to the Trademark (as
hereinafter defined) and has the right to grant license under such Trademark;
and
WHEREAS; MC desires to secure certain license to use the Trademark including the
right to sublicense thereunder; and
WHEREAS, VTC, being aware of MC's experience, financial capabilities and its
marketing ability of the Products (as hereinafter defined), is willing to grant
certain license to MC on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
Article 1 (Definitions)
- -----------------------
The following terms as used in this Agreement shall have the meanings specified
below:
(a) "Products" shall mean the VeriCode marking devices, encode and decode
software and related application software products sold or to be sold
by MC.
(b) "Territory" shall mean the territories of the Republic of Korea and
Taiwan.
(c) "Trademark" shall mean VTC's registered Trademark "VeriCode" as shown
in the Exhibit attached hereto.
(d) "Decoding Software" shall mean VeriCode decoding softwares which are
developed for the general image processing boards and devices.
(e) "Reading Devices" shall mean reading devices which are developed for
decoding VeriCode symbol.
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(f) "Net Sales Amount" shall mean the aggregate sales price of the
Decoding Software and the Reading Devices sold and delivered by MC in
each of the calendar quarters during the term of this Agreement.
Article 2 (License of Trademark)
- --------------------------------
2.1 VTC hereby grants MC a non-exclusive license,with the right to grant
sublicense, to use the Trademark in conjunction with the distribution,
sale, offering for sale, advertisement and promotion of the Products in the
Territory subject to the provisions hereof during the term of this
Agreement. VTC hereby agrees to register the Trademark license hereunder
at the Patent Office or other relevant agency of Korea and Taiwan. MC
shall bear and pay for all the costs and expenses for the said registration
of the Trademark license.
2.2 During the term of this Agreement or after the expiration or termination
thereof, MC shall not sell or offer for sale the Products and any other
products under the Trademark, labels, markings or package designs
confusingly similar to any of the Trademark, labels, markings or package
designs used by MC hereunder.
2.3 VTC hereby represents and warrants that VTC has an exclusive right, title
and interest in and to the Trademark and validly regitered at the relevant
Korean and Taiwanese Trademarks Offices.
2.4 Any permit or other approval required by the governmental authorities in
the Territory, if any, for the license of the Trademark granted hereunder
shall be obtained by MC at its expenses.
Article 3 (Consideration)
- -------------------------
3.1 In consideration of the non-exclusive license granted to MC purusant to
Article 2.1 above, MC shall pay to VTC the following royalty (hereinafter
called the "License Fee"):
(a) The total sum of one thousand seven hundred and fifty United States
Dollars only (US#1,750.00) for the Products (ten (10) VS-F200s and
eight (8) VS-F300s) sold and delivered by MC (hereinafter called the
"Front End License Fee").
(b) Three point three percent (3.3%) of the Net Sales Amount of all the
Decoding Software and Reading Device sold my MC (herinafter called
the "Running License Fee").
3.2 (a) MC shall, within fourteen (14) days after the date of this Agreement,
pay to VTC the Front End License Fee in accordance with the terms set
forth in Article 3.3 below.
(b) MC shall, within thirty (30) days after the end of each calendar
quarter pay to VTC the
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aggregate amount of the Running License Fee which has been accrued
during such calendar quarter in accordance with the terms set forth in
Article 3.3 below.
3.3 The License Fee to be paid by MC to VTC under this Agreement shall be made
in United States Dollars to VTC's bank account as designated by VTC in
writing. VTC may audit MC's books and records to confirm the correctness
and completeness of the License Fee payable to VTC. Such an audit will
occur not more frequently than once every twelve (12) month period. VTC
will give MC at least fifteen (15) days prior written notice of such audit.
Audits will be conducted during the normal business hours at a pace and in
a manner that minimizes disruption to MC's business activities. All
information ov MC available to VTC or its auditors is deemed as the
confidential information. VTC shall bear and pay for all the costs and
expenses associated with the audit (hereinafter called the "Audit
Expenses"), provided, however, that in the event that VTC discloses that
unpaid License Fee during the prior twelve (12) months period exceeds
US$5,000.00, MC shall bear and pay for the Audit Expenses.
3.4 If the withholding tax is levied by the Japanese Government in connection
with the payment of the License Fee, MC shall deduct such withholding tax
respectively from the amount of payment, and shall send to VTC, without
delay, a certificate of showing the payment of such withholding tax.
Article 4 (Term and Termination)
- --------------------------------
4.1 This Agreement shall become effective on the date of this Agreement and
shall remain in full force for a period of ten (10) years.
4.2 Each party shall, without prejudice to any other remedies available to such
party, have the right to terminate this Agreement at any time by giving the
other party a written notice, if the other party commits any breach or
fails to observe or to perform any of the provisions of this Agreement, and
such breach or failure shall not have been cured within sixty (60) days
after the date of a written notice of such breach or failure given by the
non-defaulting party.
4.3 VTC shall have the right to terminate this Agreement, without liability for
indemnification to MC, by giving MC a written notice to the effect, in case
any of the following events shall have occurred on the part of MC:
a) Insolvency, bankruptcy, corporate reorganization or liquidation or
appointment of receiver or trustee;
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b) Attachment, sequestration, garnishment or seizure of MC's assets;
c) Assignment or transfer of all or part of MC's business; or
d) Any important changes affecting the ownership, management or control
of MC which VTC judges after a careful consideration to be adverse to
the performance of provisions of this Agreement or otherwise
detrimental to VTC's interests.
4.4 The party who is not in default in Article 4.2 above shall have the right
to suspend its performance or fulfillment of any obligation set forth in
this Agreement, without liability for indemnification to the defaulting
party, for the period from the date of the written notice of Article 4.2
above to the date of the adequate correction of the failure, delay and/or
violation by such defaulting party.
Article 5 (Effect of Termination)
- ---------------------------------
5.1 No expiration or earlier termination of this Agreement shall release either
party from any liability which at such time has already accrued to the
other party, or in any way affect the survival of any right, duty or
obligation of either party which is intended to survive termination;
privided, however, that upon termination of this Agreement by VTC or MC
pursuant to Article 4.2 or 4.3 the other party shall immediately perform
and fulfill all the outstanding monetary obligations under this Agreement.
5.2 Upon termination of this Agreement, MC shall remove or withdraw or cause to
be removed or withdrawn immediately all advertisement, notices, references
and representation with respect to the Products (except to the extent
allowed by Article 5.3 below), at its own expense, and shall discontinue
the use of the Trademark which is permitted to be used pursuant to Article
2, for any purpose whatsoever except for the purpose of and to the extent
necessary for the sale of the Products permitted under Article 5.3 below.
5.3 Notwithstanding anything to the contrary herein contained, except in the
case of the earlier termination due to causes attributable to VTC, MC may,
during the period of six (6) months from the termination, sell, advertise
or solicit orders for the Products, which remain unsold or in the
production process at the time of termination of this Agreement. MC shall
refrain from selling, advertising and soliciting orders for the Products in
any manner whatsoever after such six (6) month period elapses or after such
earlier termination due to causes attributable to MC, as the case may by.
The terms and conditions set forth in Articles 2,3,4,5,6,7,8,9,10,11,12 and
13 of this Agreement shall apply mutatis mutandis to said sales,
----------------
advertising and soliciting orders. The permission for sales, advertising
and soliciting orders hereunder after the termination of this Agreement
shall not be construed as a renewal or extension of this
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Agreement nor as a waiver of termination.
Article 6 (Force Majeure)
- -------------------------
Neither party shall be responsible for failure or delay to comply with this
Agreement, in case such failure or delay is caused by fire, flood, strikes,
labor trouble or other industrial disturbances, inevitable accidents, war riots,
civil commotion, embargoes, blockades, prohibition of civil, naval,or military
authorities, or any other causes beyond the control of the party. In such cases,
performance by such party of this Agreement shall be suspended with out
liability for indemnification to the extent of affected performance and for the
period of delay reasonably attributable to such causes, including without
limitation recovery time. the provisions of this Article 6 shall not apply to
any monetary obligation hereunder.
Article 7 (Hold Harmless and Limitation of Liability)
- -----------------------------------------------------
7.1 During the term of this Agreement and thereafter, MC agrees to hold VTC
harmless against claim or demand for damages, losses or costs and any other
claim or demand of third parties, arising out of the sale of, improper
repair or replacement service of, or advertising of the Pruducts made by MC
or in connection wiht this Agreement, or the Products or for whatever
reason. MC shall pay and indemnify VTC for any awards assessed against VTC
and/or expense of defense in any suits or proceedings instituted against
VTC.
7.2 During the term of this Agreement and thereafter, unless otherwise
specifically and explicitly set forth in this Agreement, VTC shall not be
liable for any damage or loss of whatever kind, direct or indirect,
including but not limited to loss of profit, or consequential or incidental
damage, arising out of or in connection with this agreement, the Products
or for whatever reason.
7.3 The remedies provided for in this Agreement shall be cumulative.
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Article 8 (Legal Relationship Between VTC and MC)
- -------------------------------------------------
This Agreement shall not constitute either of VTC and MC the legal
representative or agent of te other, nor shall either of VTC and MC have the
right to assume, create or incur any liability or any obligation of any kind,
express or implied, against or in behalf of the other.
Article 9 (Non-waiver)
- ----------------------
No failure to exercise or no delay in exercixing any right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such rights thereunder preclude any other or further exercise of
such rights or the exercise of any other rights.
Article 10 (Headings)
- ---------------------
The headings to Articles or elsewhere in this Agreement are only for convenience
of reference without forming a part of this Agreement and shall not in any way
affect the interpretation thereof.
Article 11 (Governing Language and Law)
- ---------------------------------------
11.1 This Agreement is executed in English as the controlling text, and it shall
be governed by and interpreted in accordance with the laws of the United
States and the State of California.
11.2 This Agreement shall be construed no more strictly against one party than
the other party, regardless of which party drafted this Agreement.
Article 13 (Arbitration)
- ------------------------
all disputes, controversies or differences which may arise, during the term of
this Agreement or thereafter, between the parties hereto out of or in connection
with this Agreement or for the breach thereof, shall be finally settled by
arbitration in Los Angeles, California in accordance with the Rules of
Arbitration and Conciliation of the International Chamber of Commerce, Paris, by
one or more arbitrators appointed in accordance with said Rules. The
arbitration proceedings shall be conducted in English except for any documentary
evidence which may be submitted in its original language. the arbitration
decision or award shall be final and binding on the parties hereto and
enforceable by any court with jurisdiction over the parties hereto.
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Article 14 (Notice)
- -------------------
All notices, purchase orders, acceptance thereof, request, demands and other
communications required by this Agreement shall be in writing in English and
shall be sent by registered airmail or by telex or cable subject to confirmation
by registered mail, tot he following address, unless otherwise designated or
changed by written notice of the other party:
If to VTC: Veritec Inc.
26540 Agoura Rd., #205A
Calabasas, California 91302 U.S.A.
Attention: Jack E. Dahl, President
Telefax: (818) 880-4637
If to MC: Mitsubishi Corporation
6-3 Marunouchi 2-chome
Chiyoda-ku, Tokyo, Japan
Attention: General Manager, Motor Vehicle Dept. D
Telefax: (813)3210-8849
The communications shall be deemed to have been duly given and made, unless
otherwise specifically provided in this Agreement, (i) when such registered
airmail shall have been deposited in the mail, postage prepaid, or (ii) when
such telex or cable shall have been received by the other party, subject to the
confirmation thereof by registered mail, postage prepaid, within fifteen (15)
days.
Article 14 (Entire Agreement And Modification)
- ----------------------------------------------
This Agreement is the final expression of the entire and only agreement of the
parties with respect to the subject matter covered in this Agreement and
supersedes all prior oral and written agreements, negotiations, commitments and
representations with respect thereto, and is executed in duplicate originals of
which one is left with VTC and the other with MC. This Agreement can not be
modified except by mutual agreement signed by duly authorized representatives of
the parties hereto.
Article 15 (Assignment)
- -----------------------
Neither party may, in whole or in part, assign this Agreement or any rights or
obligations created thereunder to any third party, without the prior written
consent of the other party.
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Article 16. (Approval)
- ----------------------
This Agreement is all subject to the approval of the United States bankruptcy
Court.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
Veritec, Inc. Mitsubishi Corporation
(signature - Jack E. Dahl)
Jack E. Dahl G. Shintani
President and CEO General Manager
Motor Vehicle Department D
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EXHIBIT
(This page is basically in Japanese)
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