William E. and Barbara J. Flanagin - Page 3




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          Z-100.  Mr. Flanagin was aware that Zenith stopped production of             
          the Z-100.                                                                   
               During the years in issue, a generous estimate of the total             
          number of Z-100 users was a few thousand.  Mr. Flanagin was aware            
          of the limited number of Z-100 users.                                        
               A.  The Floppy Disk Driver                                              
               In the late 1980's, Mr. Flanagin developed a floppy disk                
          device driver (DiskPack) for the Z-100.  He contacted Zenith to              
          inquire whether it was interested in this software.  Zenith                  
          informed Mr. Flanagin it was not interested in DiskPack.                     
               Zenith referred Mr. Flanagin to Paul Herman (Mr. Herman) who            
          owned Paul Herman, Inc. (PHI).  PHI was a one-man, mail-order                
          operation that distributed a newsletter (the Z-100 Lifeline) and             
          Z-100 parts, products, and software to Z-100 users.                          
               In 1988 or 1989, Mr. Flanagin contacted Mr. Herman.  After              
          some correspondence, Mr. Herman informed Mr. Flanagin that he                
          (Mr. Herman) wanted to distribute DiskPack.  In May 1989, Mr.                
          Herman told Mr. Flanagin that he (Mr. Herman) had absolutely no              
          way of knowing what the sales of DiskPack might be.  Mr. Herman              
          suggested a selling price of $39 with Mr. Flanagin receiving a               
          15-percent royalty on gross sales.                                           
               By August 1992, PHI had sold 250 units of the DiskPack                  
          program.  In the fall of 1992, PHI offered an updated version of             







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