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software research and development work. Approximately 75 percent
of the money raised, or $15 million was supposed to be used for
the development of CPG’s software. In return, the syndicates
owned the rights to the software technology and licensed those
rights to CPG.
On August 10, 1993, petitioner, CPSG, Inc., and CPG entered
into a Software Marketing and Management Agreement (the
management agreement) whereby CPSG, Inc. licensed certain rights
to market CPG’s software technology and products, including
InTEXT, Today, and Operating Control Systems.5 The management
agreement contemplated that CPSG, Inc. would form three
subsidiaries, InTEXT Systems, Inc., Today Systems, Inc., and
Operating Control Systems, Inc., to market specific lines of
CPG’s software products.
The management agreement purported to grant CPSG, Inc. the
right to market CPG’s software products as they existed before
the development work funded by the syndicates. In exchange,
CPSG, Inc. agreed to pay CPG a royalty. Under the terms of the
management agreement, CPG agreed to use its best efforts to
provide funds for software product development; the funds were to
be obtained from the syndicates.
5The agreement had a retroactive effective date of Sept. 30,
1992.
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