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ART MORRIS: “Is a $10.3 million tax break fair to Lancaster residents?”

http://newslanc.com/art-morris-is-a-10-3-million-tax-break-fair-to-lancas

Published by Stan J. Caterbone and the Advanced Media Group

Published by Stan J. Caterbone and the Advanced Media Group

October 8, 2016 Featured, Letters to the Editor, News and Commentary 8 Comments
October 8, 2016
Featured, Letters to the Editor, News and Commentary
8 Comments

Letter to the Editor by former Lancaster mayor Art Morris

Letter to the Editor by former Lancaster mayor Art Morris Art Morris About 10 years ago,

Art Morris

About 10 years ago, Lancaster Newspapers (LNP) and High Associates (High) were given an estimated $43.8 million property tax break to build the downtown Marriott Hotel.Now they want to expand and build an adjoining Marriott Tower. The city is planning to give them, under a state economic development program administered though a city agency, a $5.7 million grant, and, as an added incentive, another $10.3 million property tax break.

Is this fair? Is it fair to other businesses, like the Arts’ Hotel and Hotel Lancaster, who are not getting these same property tax breaks?Is it fair to the city property owners who are asked every year to pay higher school, city or county real estate

taxes, only to hear services need to be cut for lack of funding?

I’m encouraging you to attend the City Council meeting on Tuesday, October 11 at 7:30 pm, in the Council Chambers, City Hall Annex, (Marion Street entrance) 120 N. Duke Street, Lancaster. This real estate tax forgiveness/subsidy is part of a Public Hearing under item VII and Ordinance 10 under item IX A.

Please take a moment to visit my website that provides details on this issue.

If you have any friends or colleagues who might appreciate learning about the Marriott Tower Expansion plan — and the taxpayer subsidy — please click the “ Send To A Friend” button below.

Thank you!

Art Morris

“ Send To A Friend” button below. Thank you! Art Morris Share The Marriott Hotel Expansion

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The Marriott Hotel Expansion & Stan J. Caterbone Page 1 of 446

The Marriott Hotel Expansion

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Monday October 10, 2016

Monday October 10, 2016

Published by Stan J. Caterbone and the Advanced Media Group

Published by Stan J. Caterbone and the Advanced Media Group

LANCASER NEWSPAPERS AND HIGH ASSOCIATES POISED TO RECEIVE CITY AND CITY AGENCY APPROVAL FOR AN ADDITIONAL $16 MILLION TAXPAYER SUBSIDY BRINGING TOTAL TAXPAYER SUBSIDY TO OVER $60 MILLION

About 10 years ago, Lancaster Newspapers (LNP) and High Associates (High) were given an estimated $43.8 million property tax break to build the downtown Marriott Hotel.

Now they want to expand and build an adjoining Marriott Tower. The city is planning to give them, under a state economic development program administered though a city agency, a $5.7 million grant, and, as an added incentive, another $10.3 million property tax break.

Is this fair? Is it fair to other businesses, like the ArtsHotel and Hotel Lancaster, who are not getting these same property tax breaks?

Is it fair to the city property owners who are asked every year to pay higher school, city or county real estate taxes, only to hear services need to be cut for lack of funding?

According to figures released by Arthur Morris, former Lancaster mayor, by approving LNP and High’s new Marriott Tower expansion proposal the City is forgiving real estate tax payments over the next 13 years which total an estimated $7.6 million in school taxes, $1.7 million in city taxes and $1.0 million in county taxes.

In essence,” Morris said, the funding scheme before the City will allow the Lancaster Redevelopment Authority to assume ownership of the real estate in order to allow these two private firms to be treated much like a government entity or a non-profit agency, such as a church, in order to avoid real estate tax payments.

“I know of no other private property owner, residential or business, to receive such favorable treatment,” Morris said.

“This is not the first time that LNP and High have received such favorable treatment,” said Morris. The existing downtown Marriott was given a similar deal, lasting until 2029,” Morris said. “Essentially, LNP and High will pay none of the real estate property taxes, estimated to total $29.3 million in school taxes, $10.2 million in city taxes and $3.9 million in county taxes over that period.

Morris added that he believes that neither the School District of Lancaster nor the County of Lancaster have spoken out publicly objecting to this funding scheme for the new Marriott Hotel Tower.

Morris is speaking out in an effort to assist Lancaster residents in understanding the scale of this taxpayer forgiveness. He is concerned with the lack of local media coverage, including Lancaster Newspapers, on some important details of the project. ”While LNP,he added, has written articles on the project, including saying that the financing of the project through the Lancaster Redevelopment Authority will result in the hotel being tax-exempt, the LNP articles, even though reporters have been provided with this information, have not contained estimates of the total taxpayer forgiveness over the life of this project.

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Published by Stan J. Caterbone and the Advanced Media Group

Published by Stan J. Caterbone and the Advanced Media Group

Morris believes that given that LNP is one of the owners of the Marriott downtown they should exercise much more transparency regarding the financial advantages that are accruing to them as part of this new Hotel Tower and the existing Marriott Tower.

“Is this fair,” Morris asked, reflecting on all aspects of this project.

Please refer to the companion spreadsheet which contains detailed data related to the development of the estimated real estate tax numbers contained in the above narrative.

Questions you may ask:

1. Aren’t the Partners (LNP and High) making payments in lieu of taxes (PILOT)? If so, how does that affect the real estate tax avoidance numbers in the above narrative?

Morris Response: The Partners have agreed to make PILOT payments and those payments are factored into the real estate tax avoidance numbers above. Even with the adjustments for these PILOT payments, by 2029, the net real estate tax avoidance is estimated at $55.3 million dollars.

2. The Partners say that this project does not impact our schools so payment of school taxes should not be a concern. Do you agree?

Morris Response: I do not agree. The law requires all businesses, including hotels, professional offices, industrial and retail businesses to pay school taxes. The same is true for residential properties; even if a resident has no children, they must pay school taxes. Again, Lancaster Newspapers and High are asking for preferential treatment not afforded to any other private sector business or residential property owner.

3. The Partners have agreed to make participation rent payments as a result of sharing earnings exceeding 12% return on investment. Won’t these payments substantially offset the avoided real estate tax payments?

Morris Response: Even if these payments occurred they would not offset all lost real estate taxes. Additionally, based on the past, how can the City, or anyone, be confident that these Participation Rent payments will materialize? A Participation Rent payment arrangement has been in place for the existing Penn Square Marriott but no payment has been forthcoming since the hotel opened in 2009. Any projection showing payments occurring in the future is simply that, a projection. Until the Partners guaranteed these payments of Participation Rent, it is pretty clear that even the Partners aren’t sure if these payments will be made.

4. If the existing Penn Square Marriott and the proposed Marriott Tower are considered exempt from real estate tax payments, are they also exempt from paying the Downtown Investment District (DID) assessment?

Morris Response: Yes, from a legal standpoint, they are exempt. According to a Board Member of the DID, the Penn Square Marriott does not make any contribution to the DID. This particular Board Member did not think it was fair to the other property owners in the DID. Considering that, if the existing Marriott was not tax exempt, the annual DID assessment would total over

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Monday October 10, 2016

Published by Stan J. Caterbone and the Advanced Media Group

Published by Stan J. Caterbone and the Advanced Media Group

$100,000, this financing scheme through the Lancaster Redevelopment Authority once again rewards LNP and High to the detriment of everyone else in downtown.

5. When the City Planning Commission reviewed the new Marriott Tower Redevelopment Proposal you said Mayor Gray stated these kinds of taxpayer subsidies only discourage redevelopment and impede economic growth and job creation in our communities.

Morris Response: Yes, I did say that. I took the quote from the attached article written earlier this year by the mayor. In the article the mayor said that when such projects are constructed, “the need for these taxes doesn’t decrease; there are still police, fire, schools and public works.” The mayor went on further to say that the creation of the CRIZ program grants, which the proposed new Marriott Tower Project is receiving, mitigates the need for property tax forgiveness.

6. Isn’t this project so financially challenging to complete that the real estate tax exemption is essential to its success?

Morris Response: People have made this argument when the first Marriott Tower was proposed. However, now that this hotel has a financial history, I do not believe the proposed New Tower brings the same challenge, or level of risk. The owners, LNP and High, are creating this project as a result of their own financial motivation. There are other projects, such as the Hotel Lancaster, that are as difficult, or more difficult, to complete and they are not being offered a similar deal. It is time to draw the line on financing another Penn Square Partner project on the backs of the taxpayers.

7. If the Partners don’t receive the real estate tax forgiveness, might they decide not to go forward with the project?

Morris Response: I would hope they would not make such a decision. However, this is a business decision. The City, County and School District of Lancaster cannot continue to forgive real estate taxes for such projects. The existing Marriott will receive an estimated $43.8 million in real estate tax relief by 2029. In addition, the proposed new tower will receive $5.7million under a state economic development program administered by an agency of the City. The taxpayers are being burdened sufficiently at this point for what is supposed to be private sector development.

8. Don’t other projects in the City receive real estate tax relief?

Morris Response: Yes, that is true. The Local Economic Revitalization Tax Assistance (LERTA) Program provides tax relief. In the case of commercial projects that are in the designated LERTA area, you can qualify to receive tax relief for that portion of the additional assessment attributable to the actual cost of the improvement. Tax relief is spread out over 8 years with the first year being 100% of the additional assessment attributable to the improvement. The second year is 90% and then the percentage lowers by 15% in each successive year until it reaches 0% property tax relief by the 8 th year. In the case of the Marriott Towers, the tax relief is 100% for the duration of the proposal. I believe this is precedent setting and encourages developers currently using LERTA to request the substantially more favorable property tax relief as that afforded to LNP and High.

The Marriott Hotel Expansion

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Published by Stan J. Caterbone and the Advanced Media Group Published by Stan J. Caterbone

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Published by Stan J. Caterbone and the Advanced Media Group

Published by Stan J. Caterbone and the Advanced Media Group The Marriott Hotel Expansion & Stan
Published by Stan J. Caterbone and the Advanced Media Group The Marriott Hotel Expansion & Stan
Published by Stan J. Caterbone and the Advanced Media Group The Marriott Hotel Expansion & Stan
Published by Stan J. Caterbone and the Advanced Media Group The Marriott Hotel Expansion & Stan
Published by Stan J. Caterbone and the Advanced Media Group The Marriott Hotel Expansion & Stan
Published by Stan J. Caterbone and the Advanced Media Group The Marriott Hotel Expansion & Stan
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The Marriott Hotel Expansion & Stan J. Caterbone Page 5 of 446 The Marriott Hotel
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The Marriott Hotel Expansion
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Lancaster Online.com: News : Businessman, irked by hotelier action, f

http://www.lancasteronline.com/pages/news/local/4/14080

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By Justin Quinn Intelligencer Journal

 

Published: May 06, 2005 9:47 AM EST

LANCASTER COUNTY, PA - A local businessman filed a $100,000 lawsuit last month against Drew Anthon, owner of Eden Resort Inn and Conference Center, claiming Anthon "colluded to sabotage" the proposed Lancaster County Convention Center by announcing his intention to withhold the county hotel room tax.

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Conestoga resident Stan J. Caterbone is asking that a local judge place a "sees (sic) and desist order" on Anthon and the hotel to prevent them from withholding the room tax.

The suit was filed April 26, the day the Intelligencer Journal reported Anthon and several other hoteliers were threatening to withhold payment of the room tax, most of which goes toward a hotel and convention center proposed for Penn Square. The next room tax payment is due May 26.

Caterbone is founder of Advanced Media Group, 1857 Colonial Village Lane, an information technologies company specializing in optical publishing. He claims in the lawsuit that Anthon's actions place "at extreme risk" Caterbone's plans to develop a UPS store and an office complex called "Excelsior Place" across from the proposed convention center.

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"Plaintiff will argue that such financial risk is causing mental stress and duress that otherwise would not be present, had the defendant not engaged (in) the above-mentioned activities," Caterbone says in the suit.

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Advanced Media Group

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Lancaster Online.com: News : Businessman, irked by hotelier action, f

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The suit asks for a court order to force the hoteliers to pay the tax "until the defendants can prove to the commonwealth the said actions are in the best interests of the (plaintiff) and those of all major stakeholders of the proposed downtown Lancaster convention center, including School District of Lancaster, the City of Lancaster, the County of Lancaster, Penn Square Partners, as well as others. Thus, the defendants must prove that the downtown Lancaster convention center will fail."

A person who answered the phone at the number listed in the lawsuit as Caterbone's did

not identify himself.

"All the information is public," the man said when asked about the suit. "You can go there."

As exhibits, the lawsuit includes Web pages from Caterbone's company and a bound volume titled "The Excelsior Place Business Plan." The suit also includes a handwritten agreement between Caterbone and Art Ward, owner of the UPS Store.

Anthon did not return a reporter's phone calls.

A judge has not been assigned to the case.

In another legal front, the owner of Mulberry Art Studios filed a petition with the state demanding it not release funds to project developers.

Planners have applied for tens of millions of state dollars. They project the state's contribution to be $46 million if all of their applications are approved.

Earlier this week, studio owner April Koppenhaver asked state officials to consider that tw lawsuits related to the project are undecided and could upend project construction.

Koppenhaver brought one of the suits against the redevelopment authority. Another pits Mayor Charlie Smithgall against City Controller R.B. Campbell.

"It is imprudent in my judgment for the state to release money to this project," Koppenhaver said. "I want (the state) to be very, very aware and responsive to residents' concerns."

Penn Square Partners is composed of general partner Penn Square General Corp., a High Associates affiliate, and limited partners Fulton Bank and Lancaster Newspapers Inc., publisher of the Intelligencer Journal, Lancaster New Era and Sunday News.

Staff writer Dave Pidgeon contributed to this story.

Justin Quinn's e-mail address is jquinnlnpnews.com.

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Advanced Media Group

Page 2 of 3

5/9/2005 11:01 AM

10/08/2007

Businessman, irked by hotelier action, files suit

By Justin Quinn Intelligencer Journal Published: May 06, 2005 9:47 AM EST

LANCASTER COUNTY, PA - A local businessman filed a $100,000 lawsuit last month against Drew Anthon, owner of Eden Resort Inn and Conference Center, claiming Anthon "colluded to sabotage" the proposed Lancaster County Convention Center by announcing his intention to withhold the county hotel room tax.

Conestoga resident Stan J. Caterbone is asking that a local judge place a "sees (sic) and desist order" on Anthon and the hotel to prevent them from withholding the room tax.

The suit was filed April 26, the day the Intelligencer Journal reported Anthon and several other hoteliers were threatening to withhold payment of the room tax, most of which goes toward a hotel and convention center proposed for Penn Square. The next room tax payment is due May 26.

Caterbone is founder of Advanced Media Group, 1857 Colonial Village Lane, an information technologies company specializing in optical publishing. He claims in the lawsuit that Anthon's actions place "at extreme risk" Caterbone's plans to develop a UPS store and an office complex called "Excelsior Place" across from the proposed convention center. "Plaintiff will argue that such financial risk is causing mental stress and duress that otherwise would not be present, had the defendant not engaged (in) the above-mentioned activities," Caterbone says in the suit.

The suit asks for a court order to force the hoteliers to pay the tax "until the defendants can prove to the commonwealth the said actions are in the best interests of the (plaintiff) and those of all major stakeholders of the proposed downtown Lancaster convention center, including School District of Lancaster, the City of Lancaster, the County of Lancaster, Penn Square Partners, as well as others. Thus, the defendants must prove that the downtown Lancaster convention center will fail."

A person who answered the phone at the number listed in the lawsuit as

Caterbone's did not identify himself. "All the information is public," the man said when asked about the suit. "You can go there."

As exhibits, the lawsuit includes Web pages from Caterbone's company and a bound

volume titled "The Excelsior Place Business Plan."

The suit also includes a handwritten agreement between Caterbone and Art Ward, owner of the UPS Store. Anthon did not return a reporter's phone calls. A judge has not been assigned to the case.

Published by Stan J. Caterbone and the Advanced Media Group

PROJECT

DESCRIPTION

STATUS

FOLLOW UP

NOTES1

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Mansco, Inc.

Develop Images Pre-Qualify Question 2/10/1990

Called 03/07/90 Jim Dering/ In Contact

     

National Assoc Of Watch & Clock

         

Collector Pat Tomes/ Paul Wills

Develop Multimedia Applciation Pre-Qualify Question 1/5/1990

Bid $ 47,500 2/21/1990 Informal Budget Approval

General Council Meeting July Contact 04/05/90 Test Image 05/31/90 Storyboard

02/25/90

Parsons & Brinkerhoff Engineers

 

Project 4th on Priority 6-8 Weeks Meeting 03/28/90 General Discussions

Send ROM Information

   

Develop Technical Application Pre-Qualifying Quest

4/25/1990

Call 05/31/90 Contact Tao /Status

Tao Matlock Marcia Earle

1/27/1990

Ford New Holland Robert Shively Carmen Martin

Replication Bid 2/8/1990

Commitment to DATAWARE

     

Bid W/Steve Swan ?

Keep in Touch

Mobil Oil, Inc. Lynn Hyland

Legal Documentation Bid $47,500 1/13/1990 Develop Software and Technical Docs

Verbal Approval 03/08/90/S. Robertson June or July Start Date

Contacted 06/01/90 Left Message

   

Generic Software, Inc.

CONTACT

Mark Wiley?

Pre-Qualify Question 2/5/1990

Indiana Bell Ref Bruce Kline

CONTACT

       

Congressional Info Systems

CD-DIAGNOSTICS

       

Sent Version 1.2 & Technical Specs

CONTACT

Microsoft, Inc

CD-DIAGNOSTICS License Agreement Evaluate 02/28/90 Tech Docs

CONTACT

     

03/08/90

Bell Atlantic

Develop Directory

Sample Date by

Cost Meeting for

   

Invoice Story

Ken Clark

PAPER GLUT

3/20/1990

Prototype & Present

$1,000

Called 05/31/90

 

Storyboard 04/12/90

CD-ROM $450 Will verify Data & Qty

Left Message Data?

 

Info for Demo

Send "CD-ROM TECH"

3/20/1990

3/26/1990

5/3/1990

Published by Stan J. Caterbone and the Advanced Media Group

PROJECT

DESCRIPTION

STATUS

FOLLOW UP

NOTES1

NOTES2

Tandy Electronics, Inc

Develop 2000 Images

Submit Data ?

Contact D. Williams

CDD Rev 1.4 to Phil

 

Technical Document

M. Grubbs "get data

05/02,03,05/90 No Ans.

Debord 05/31/90

Mike Grubbs

from D. Williams"

Called M. Grubbs Left Mssg

Dave Williams

Meeting 03/15/90

4/29/1990

Letter to Dave Willims

05/31/90

Storyboard Demo

Phil Debord/Cdd

Action Plan 03/22/90

CDD rev1-4

5/8/1990

PBS

Exxon Research And Production Company Dave Benfer

     

to D. Benfer

 

Multimedia Application Technical Application

Action Plan 03/22/90

D. Benfer "having trouble w/security clearance for data"

5/2/1990

06/01/90

Meeting 03/15/90

Sample Data ?? D. Benfer "will deliver soon" 04/09/90

   

Compaq, Inc

CD-DIAGNOSTICS License Agreement 3,000-6,000 users

Revised CDD 1.2 With Tech Docs

     

Ken Shufflebeam

3/7/1990

KEEP IN TOUCH

 

letter 03/29/90

Ipsoa

CD-DIAGNOSTICS License 8,000 Users Send CDD Rev 1.2

       

32939

Veda, Inc.

Air Force Tech Docs

05/31/90 "Moving Slow Writing Specs for Bid"

     

Dave Tuemler

Called 03/26/90 Call back 04/26/90

Will Call when he has any news---influence

Cbis, Inc

Network Solutions

Send Questionairs other Docs

     

Library Of Congress Jim Young Drew Lewis

Refferal Relationship Meeting 04/12/90 Demo Retrieval System to Comittee

4/20/1990

     

Call for Visitation Send Follow Up Package 03/22/90

Wayne Called on 04/25/90 -- Data ???

 

3/14/1990

Called on 04/04/90 for Replication Bid

Sent for RFP'S 05/18/90 -- 05/28/90

Commodore Business Machines, Inc Mike Kawahara Gail Wittenberg

Replicate on 01/15/90

Meeting

Developer Application In 05/22/90

   

3/14/1990

 

Action Plan 04/19/90

Developer Package Out 05/31/90

Published by Stan J. Caterbone and the Advanced Media Group

PROJECT

DESCRIPTION

STATUS

FOLLOW UP

NOTES1

NOTES2

Amp, Inc

Replicate on 03/09/90

PO #30246784 @100 Run 05/04/90 - 05/11/90 $3000 / $7250 PO # N/A @2500 Run 06/11/90 - 06/15/90

     

Ed Beauregard

$3,000

Reorder 100 03/22/90

$200

U. S. Postal Service Paul Jackson

Telephone Tag

       

CONTACT

Arthur Anderson

Replicate 2 IBM Discs Tapes 03/27/90

Bid World Bank Project

     

32952

At&T / Data Dev. Steve Swan

200,000 Images

       

Waiting For Tapes From Steve Swan

Bancroft And Whintney Ddi / Steve Swan

965,000 PAGES OF CA Legal Statutes

Steve visit 04/10/90

     

Specs on 03/31/90

Wayne prepare Demo Never Finished

National Institute Of Standards And Technology John Garfolio

Replication Bid Due

Referrals given 04/25/90

05/09/90 Award Contract

   

3/30/1990

Test Tapes on 04/16/90 To Distics 04/18/90 "ok"

Verify "excellent rec." on 05/03/90

$20,000 Replication Order As Needed

American Bankers Association Lucy Griffen

Complience Manuals & Regulations

Meeting At Helix

Meet At ABA 06/15/90 @11:00

   

5/29/1990

   

GOOD Meeting Schedule at ABA

 

Pa Blue Shield

Develop KIOSK System For Companies

Present Storyboard on 04/30/90 Present Cost on

Logistics 05/08/90

   

Jim Cartmell

Draft Story 05/30/90 'DISASTER" Dave jeff/06/04/90

Frank Ryan

DVI, BENEFITS, ETC

5/4/1990

$4,700 Accepted

American Bond Buyers Slavek Rotkiewicz

Convert Bond Offering Prospectus to CD-ROM 60,000 issues / 120 pp.

Meet 05/26/90 GOOD mtg. \Pentagon Sample Scan $1,000 Proto/Story ??

     

HEARST Publications

Cataloque To CD-ROM

Bid Due Out 06/05/90

     

"Good Things" @ Us

Product KIOSK Systems For

Published by Stan J. Caterbone and the Advanced Media Group

PROJECT

DESCRIPTION

STATUS

FOLLOW UP

NOTES1

NOTES2

   

Systems Retail Merchants

     

Internall Rotory Club Lead Mike Rogers

         

Nasa Replication Bid Space Flight Center 3 Masters @ 21,600 To 27,000

Goddard Due 06/18/90

       

Published by Stan J. Caterbone and the Advanced Media Group

January 22, 1991

Mayor Janice Stork Lancaster Court House Lancaster, PA 17603

Dear Janice:

I am asking you to please advuse your constituents to leave me alone.

anything to anyone, let alone anything criminal. I am tired of being in fear for my life, all because I have been victim to a "herd of white collar crooks".

I have never done

I have finally after three years reached my threshold of pain, suffering and humiliation, all while building successful businesses for others to terrorize.

You may be familiar with the circumstances surrounding my childhood, Jack was my families attorney, my childhood was difficult enough.

I have always conducted my personal and business affairs with honesty and integrety, and most importantly I have always and will always lend a helping hand to those in need.

I have done nothing to deserve what this town has done to me, especially the circumstances of

1987.

I am only human, and I am tired of leaving in fear.

And remember, as far as ISC is concerned, I was merely protecting my investment as a shareholder.

Regretfully,

Stan J. Caterbone, Director

Published by Stan J. Caterbone and the Advanced Media Group

January 22, 1991

Governor Robert Casey Capitol Building Harrisburg, PA

Dear Bobby:

CLEAN UP YOUR DIRTY HOUSE, BEFORE I DO IT FOR YOU! AND IT WILL COST YOU DEARLY!!!

I'm tired of being in fear for my life!

Regrets,

Stan J. Caterbone, Director Enclosure

Tape

Track 1 - 09/29/87 \Howard Eissler, Pennsylvania Securities Commision Recorded with permission

Track 2 - 11/??/87\Detctive Bodan, Pennsylvania Attorney General's Office Recorded in self defense

Published by Stan J. Caterbone and the Advanced Media Group

ADVANCED MEDIA GROUP RECAPITALIZATION PLAN KEY OBJECTIVES/GOALS

To build a profitable company geared toward the design and implementation of products and services for the high end delivery of information.

The following objectives must also be achieved:Attract outside equity dollars for the capitalization of the company.Return to American Helix, approximately 300K of the 600K used to initially fund the Advanced Media Group. American Helix maintains an equity interest in the new company.Eliminate future financial liability to American Helix.Resolve the LASERTEX issue.

OVERVIEW: It has become more and more apparent, that the need for a Full Service Multimedia Publishing Company is needed now more than ever, and that this need will continue to grow as delivery systems become more widely distributed. (More concrete evidence of this will be included in the business plan.) The major reason this need exists is the extreme high cost in technical personnel and equipment to carry such a group within an organization. The only alternative has been to network with other companies.

Networking can create other problems, especially for a company that possesses very few of the necessary skills in house. Problems like losing control of the client, higher costs due to the combined profit margins of the different companies, and the potential lose of those capabilities. An alternative to this, is to establish a Consortium of talent to draw from for the completion of projects, where the Consortium has an on going interest in the evolution of the company. Many relationships have already been established that can be strengthened through a more formalized arrangement. Other relationships need to be established that will give the group additional capabilities in target areas.

MARKETING: We need to capitalize on American Helix existing image of a creative forward thinking company by focusing on project development work that requires a higher level of creative design and implementation. At the same time grow that image through the efforts of the consortium to establish an aura of unparalleled excellence in the industry. One of my largest hurdles to overcome, has been the reluctance of potential clients to do business with a young company, that has no track record in completing CD©ROM projects. This hurdle is only starting to be minimized by the relationships with companies and individuals that are producing demos geared specifically towards our clients needs or particular project, for no cash up front. By drawing these companies in closer to us in a more structured relationship we will be able to use their past successes to eliminate the fear a potential client has in doing business with us. We need to put together a portfolio of products that were produced by the group. This portfolio should consist of a number of different delivery mediums, ie. CD-ROM, Video, Laservideo Disc, Print, Exhibits, DVI, etc. Part of that portfolio should consist of a high impact capabilities presentation on video by the existing consortium of talent to introduce the concep. We need not limit ourselves solely to the CD©ROM markets. The demo, by focusing not only on the technology and the achievements of the existing members of the consortium, will open up brand new markets at a fraction of what it would cost to bring all of the necessary expertise in house.

Projects that utilize Laservideo Disc Technology, DVI, Television, Radio, Videos, Exhibits, as well as Print advertising. As CD©ROM moves more into the multimedia arena, all of these areas of expertise will be necessary. By building a consortium of talent to draw from for CD©ROM, we are also able to produce product for people in any one of these specific areas. We already have the portfolio started with the Yellowman Video and some CD©ROM application demos as well as some of the CDªROM discs that we produced. As we bring people

Published by Stan J. Caterbone and the Advanced Media Group

into the group, the portfolio will grow rapidly by including the groups past successes. A portfolio of this magnitude should be unparalleled in any industry and should eliminate any fears a potential client may have in dealing with a young company. Armed with a portfolio like this, sales people would be easy to attract that would work for a straight commission or draw against commission. Sales people could be recruited from each of the target markets to capitalize on their knowledge of each of their respective industries. They would now be entering a company to make a sale with more capabilities than they could have ever imagined and at the same time broaden their potential customer base. By having the sales people work on commission, the cost of sales will be much easier to control and would reduce the financial exposure to the company.

Some specific target markets interested in the high end delivery of information are:

Large and small corporations for interactive training programs as well as manipulating large amounts of data

Museums for exhibits Advertising agencies to produce product for their clients

Government agencies for contracts to manipulate large amounts of data as well as interactive training programs

Retrieval Software companies that do not have multimedia capabilities

Companies that exhibit at trade shows need Exhibits.

Interactive Exhibits are more dynamic, especially in industries not associated with CD©ROM or multimedia. Publishers of Educational Materials are looking to publish products in a more interactive way. Studies are being done that show children learn faster and retain more when they interact with the delivery medium. This list does not focus on any one particular industry. The delivery of information reaches across almost every industry. Just about anything that involves a transfer of information can be enhanced and become more effective by using a multiple of mediums, and by having the target audience participate in the process. This one sentence is the primary reason for the incredible excitement surrounding this industry. The cost effectiveness of CD©ROM is secondary. The cost effectiveness of CD©ROM is responsible for most of the growth rate, but the blending of mediums is what is responsible for the excitement. This is important to understand because it is not necessary to limit your markets. The process to produce an interactive training program is virtually identical to produce an interactive exhibit, educational program or an advertising kiosk. They all involve the transfer of information. The clients are out there. They are around every corner and under every stone you turn over. The only way to close a sale in this business is to demonstrate your capabilities.

The key word there is demonstrate. We are working in an area that is very new and very expensive. When you are trying to close a sale for a printing job, everyone assumes you know how to print. The criteria for getting the job is different for multimedia, interactive programs. When a company is considering spending possibly hundreds of thousands of dollars on a production, they need to feel comfortable with the producers expertise. These fears are much easier to deal with by demonstrating the skills of the Consortium.

We also need to gain exposure by presenting the technology, (NOT THE CONCEPT) at industry and/or non-industry functions, utilizing the technology in presentations that are consistent with the goals of the group. Typically technology presentations are either boring or they are dealing with a technology that cannot be utilized at this time. We need to focus on the technology that can be utilized, but demonstrate the additional creativity brought by the group that does not come simply by purchasing technology.

Published by Stan J. Caterbone and the Advanced Media Group

THE COMPANY Chief Financial Officer The Chief Financial Officer

would be Jim Tritch. Jim's responsibilities would be to establish the financial reporting procedures that the company would operate under as well certain operational procedures. With Jim's background and expertise, the investor will feel comfortable that the financial aspects of the company are under prudent management.

ORGANIZATION:

President: The president of the company would be Scott Robertson. Scott's

responsibilities would be to follow the reporting and operational procedures outlined by Jim as

well as to establish the consortium and the relationships of the participating members. All

arrangements with the members would be subject to the approval of Jim Tritch. In addition to

myself, I would need one other salaried person (25K©30K) that would be responsible for the daily accounting functions of the company. All sales people would be straight commission. As the company grows there may be a need for a sales manager but it would be my preference

that this person would work on a commission override structure. (A more detailed definition of

responsibilities would be included in the business plan.)

BOARD OF DIRECTORS: The Board of Directors would have five seats, to be comprised of Jim Tritch as chairman, Scott Robertson, two seats for the investor and one seat to represent the consortium, which would be established through a vote by the members of the consortium.

THE CONSORTIUM: Below are a few of the companies and/or individuals, along with their respective areas of expertise that could be brought to the group. Although most of these people A are working with us in one capacity or another, before a more formalized arrangement could be made, a much more extensive background check would be necessary.

Esscomp: Skip Langley & Wayne Landis

Esscomp is a company that writes software

and has a full text search engine with retrieval time and size capabilities that are far above

industry standards. Esscomp's capabilities are geared towards the indexing and retrieval of large amounts of data which is important to large corporations and government organizations.

Dering Musser de Nooijer: Dering Musser de Nooijer is a design company recently formed by Jeff Dering, Jerry Musser, and de A Nooijer that can show capabilities in creative design and interactive exhibits. The people involved in this organization are largely responsible for the image that American Helix currently has in the market as a progressive, forward thinking company. This image is probably one of the more valuable assets the Advanced Media Group possess at this time. Jeff Dering has just recently left National

Geographic where he was responsible for the creation and construction of Explorers Hall, an interactive exhibit in Washington, DC. Through his activities at National Geographic, Jeff has been exposed to and worked with a number of different individuals and companies that could be very valuable additions to the Advanced Media Group. This company is also responsible for

the creation of the Yellowman Video which was produced for us as well as the printed

brochures and literature we distribute. Many of the materials produced for us, by this

organization, have won national and international awards.

Sandra Morris: Sandra Morris, currently with Intel, has indicated she will be leaving

Intel in the near future. Sandra has been approached by a number of companies to produce

DVI products for them. She has a background in education and more recently has been the

focal point for much of Intels effort in recruiting DVI developers for what Intel and many other people believe will become the standard in full motion video for computers. Sandra has maintained a very high profile in the industry. She regularly speaks at many of the industry shows, and has a very good reputation.

Published by Stan J. Caterbone and the Advanced Media Group

An executive committee needs to be established which would be made up of members of the respective groups as well as from the company. This committee would be responsible for reviewing and advising on potential jobs, establishing a project manager for each job, reviewing the progress on each job as well as monitoring costs for work performed by the members to protect against overcharging for work performed.

This committee would also have a hand in the direction of marketing and advertising dollars budgeted for the group.

Ä Until a full business plan is written and a proforma produced, I can't say exactly what the start up expense would be. I would estimate that $1,500,000 would need to be raised. This should accomplish the goal of returning $300,000 to American Helix and still leave adequate operating capital. The structure of the company would be very lean and mean. Most of the expenses would be controllable through a commission structure. The goal on projects would be to achieve between a 5% to 20% margin depending on the size of the project. The consortium should have an equity interest (to be determined) in the company. Their equity could be established a number of different ways. The simplest, would be for them to purchase stock. This is also harder to achieve. Another alternative would be to have a percentage of their earnings go towards the purchase of stock. This is a more viable alternative that should be explored in more detail. Another alternative could be that the groups stock would vest over a period of time. Each of these alternatives carry with them advantages and disadvantages for both the members of the group and the company. Probably the best alternative will be a hybrid of the three options just mentioned.

Regardless of how we decide to achieve equity ownership for the members, it is very important that this be a part of the plan. Obviously we would want the members to place the needs of the group over the needs of the individual. This, for the most part goes against human nature. Having an equity interest in the company will help promote the concept of "the needs of the many out weighing the needs of the one". There are a number of other factors that can help to promote this concept. One of those would be to target companies or individuals for the group that do not have a long history of working for themselves and are interested in the sense of security that working with a group provides. We are fortunate that the existing target members meet that criteria. A possible breakdown of equity could be as follows:

Raise 1.5 million paying 300K back to American Helix Investor (1.5 Million 70% AH 300K 20% Consortium 10% It would probably be a good idea to structure some type of option for the Consortium to increase equity ownership.

LASERTEX ISSUEÄ Ä We have a relationship with Network Technology. It is not a good relationship, but never the less it exists. We need to figure out how to get the most out of it. There are two possible primary paths this relationship could go. Either Tom will work with us to complete LASERTEX or we will figure out the most beneficial way to terminate the relationship. Either way it is imperative that we deal with Tom from a position of strength and that we exercise much more control over the future path of the relationship. We are able to do this now that we have officially put Tom on notice and are exercising our rights under the contract. We have sufficient documentation to substantiate our allegations and proof that we held up our end of the contract. Even though I personally feel betrayed by the confidence and trust I placed in Tom, I doubt that he manipulated this situation simply to scam over $275,000 from us. I believe this is more situation where Tom got in over his head and his ego is making some very bad decisions for him with very little regard how it affects

Published by Stan J. Caterbone and the Advanced Media Group

other people other businesses or even the long term effect on his own business. We also can not assume that this entire arrangement was not a scam. As we try to fix the situation, all possibilities must be considered and carefully weighted. I think a trip to Washington to meet with Tom, so a better assessment of the situation can be made, would be the most prudent action at this time. Without good lines of communication, the problem can not be resolved, and could only get worse.

TIME LINE Upon the approval to go ahead, it would take one week to complete a full written business plan. To attract the equity investment for the company it would be advantageous to have a few or all of the members commitment to the group. This would enable us to demonstrate the full capabilities to the potential investor. I would estimate that this could be completed in another two weeks (possibly less). The time needed to complete the funding of the company is a little more difficult to estimate. Utilizing the presentation skills that we would possess as well as the past performance of the members, coupled with the existing excitement surrounding the industry, I believe I could have this company funded in record time.

Published by Stan J. Caterbone and the Advanced Media Group

January 10, 1991

Lt. Madenspacher

MANHIEM TOWNSHIP POLICE DEPARTMENT 1825 Municipal Drive

Lancaster, PA

17601

Dear Lt. Madenspacher:

As per our conversation of January 9, 1991, I welcome you to visit with me on Thursday, the 17th, at 3:00pm, at our facility.

Assuming your interests in "digital technologies" are sincere, I have enclosed some information that will give you some insight into my work, and the technologies at large.

I will assume that our conversations contain a peaceful format, and that I will

discuss any issues that you so desire, with only one exception. I will not be at liberty to discuss any pending or forthcoming legal action on my behalf.

Our agenda will include a tour of our facility to demonstrate to you how we manufacture both CD-Audio and CD-ROM discs. I will also be prepared to demonstrate some of the capabilities of "digital technologies" and some of the applications currently in use today.

Maybe someday, the Manhiem Township Police Department, will be one of my

clients!

As we both know, anything is possible.

If the above meeting date is in conflict with your schedule, please call.

I look forward to our meeting.

Honestly,

Stan J. Caterbone, Director

Published by Stan J. Caterbone and the Advanced Media Group

LASERTEX

FULL MULTIMEDIA ELECTRONIC PUBLISHING AND DELIVERY SYSTEM

*Provides Affordable In-house Optical Publishing

*Enables development of Customized Interactive Information Applications by combining Data, Text, Images, Graphics, Audio and Full Motion Video Information Assets

*Develops Interactive Training and Education Applications

*Provides for Separation of Information from Authoring and Retrieval Software

*Utilizes Open Electronic Publishing Architecture (OEPA)

Published by Stan J. Caterbone and the Advanced Media Group

THE

COMPONENTS

Both expert and novice can easily use the four components of the LASERTEX publishing system.

Application Design:

Enables you to design the specifications for information types, user

interactions, program and device interfaces, screen design, security protection, and compression requirements.

Information Preparation: Enables you to prepare your text, data, graphics, images, audio, and video in standard formats.

Information Organization:

Enables you to create information structures such as indexes,

scripts, and networks to add value to your information.

Application Production:

Enables you to produce the customized runtime version of the

LASERTEX information product.

PUBLISHING SYSTEM FUNCTIONALITY AND CAPABILITIES

The LASERTEX publishing system distinguishes itself above other CD-ROM authoring and retrieval systems

*Low price, low royalties, and free replication enabling you to produce products which can sell at a reasonable price

*Complete publishing capability with over 60 automated software modules accessible through one common interface

*Your information remains separate from the application software and information structures

*LASERTEX can accept source information in many different formats including word processing, popular databases and spreadsheet, paint and draw programs, common graphics, and analog audio formats

*Converts source information into industry standards like SGML (text), dBase and Lotus spreadsheet (data), GKS (graphics), PCX and TIFF (images), and ADPCM (audio)

*Includes software for text and data entry, creation of graphics and images, audio digitization, and development of audio-visual edit decision lists

Published by Stan J. Caterbone and the Advanced Media Group

*Enables you to design with multiple interaction modes such as search (boolean full text and fielded search), browse (structured indexes), linear presentation (slide show), branching presentation (interactive education and expert system), and provides hyper link capabilities to enhance all of these modes

*Permits a you to optimize an application for one particular hardware delivery platform or to create parallel versions for different hardware configurations

*Includes a storyboard prototype and a fully capable functional prototype for testing, refining, and demonstrating an application

*Enables you to customize context sensitive help, on-line documentation, forms, foreign language requirements, and print and display fonts.

*Adds an assortment of program and device interfaces to your application including print, information download, notepad, bookmark, telephone, modem, and FAX

*Enables you to make your own software and third party applications accessible from LASERTEX using the information from the CD-ROM

*Capable of producing integrated multi-volume applications

*Contains Project tracking, management tools and preliminary design guides and checklists

Published by Stan J. Caterbone and the Advanced Media Group

DELIVERY SOFTWARE USER FUNCTIONALITY AND CAPABILITIES

The LASERTEX multimedia publishing system integrates text and data with images, graphics and audio information.

Text: ASCII, SGML, and text frames

Data: Spreadsheet and data base files

Images: TIFF, PCX, and other raster formats

Graphics: GKS, IGES, and other vector formats

Audio: CD-Audio, CD-ROM XA, and other audio formats

Video: Interactive video format standards will be supported

Plus special user defined formats for all information classes

DELIVERY SOFTWARE USER INTERACTIONS

LASERTEX does not force you into a specific style of access or, restrict you to a single view. One set of information assets can be published with multiple modes of interaction bases for the end user's preference.

SEARCH: This includes boolean full text search on text documents and text fields in databases or associated with graphic, image, audio, or video files. It also includes boolean search on fielded information in SGML documents and databases. Features include boolean operators AND, OR, NOT; proximity search; range search (date, time, money, numeric fields); wildcard; truncation; thesaurus; start and stop word lists; concordance browse.

BROWSE: A powerful browse capability enables end users to access all types of information with hierarchical and multidimensional indexes. It offers the capability to cross reference and access information from multiple viewpoints best suited to their knowledge level.

PRESENTATION: Presents all types of information in a variety of ways including a simple slide show format; a connected, branching learning system environment; and a rule based expert system mode.

HYPER LINK:

Enables an end user to traverse directed and undirected links among all six classes of information which form a richly interconnected knowledge network.

Published by Stan J. Caterbone and the Advanced Media Group

*To make LASERTEX information applications more powerful, integrated device interfaces are provided including laserdisc (videodisc), telephone, FAX, modem, and laser printer.

*To support extended end user information access, a variety of program interfaces are provided including context sensitive help, on-line documentation, notepad, bookmark, path, and information download.

*To support an even wider use of information applications, LASERTEX provides direct access to end user or 3rd party applications software. This enables end users to use the information on the CD-ROM in other software programs.

*LASERTEX provides seamless magnetic update of the CD-ROM information and permits use of multiple drive CD-ROM applications.

*Password access, information decryption, security levels, and information audit controls assure that any requirements for application and information security can be satisfied.

*Self configuring delivery software which can run on an IBM AT compatible with 640K RAM, a magnetic hard disk, EGA-CGA-VGA monitor, MS-DOS 3.X, a CD-ROM drive, and a keyboard. LASERTEX is also able to take advantage of more sophisticated hardware platforms up to a 386 base machine with extended memory, a mouse, multiple CD-ROM drives, decompression hardware, and very high resolution monitors.

Published by Stan J. Caterbone and the Advanced Media Group

SUPPORT INFRASTRUCTURE

The support infrastructure is a group of people, and a set of systems and resources designed to help you create quality, cost effective successful CD-ROM applications.

*Extensive hands-on training in every element of the business and technology of optical publishing.

*A customer hotline for resolution of questions and problems.

*Free Replication of CD-ROM discs.

*Total royalties never exceed $13 per Disc.

*A complete set of user manual and system reference documentation.

*A set of operations and procedures manuals.

*An on-line technical support bulletin board for the latest technical information, tips, and problem resolution support.

*Retail dealer and distribution network to provide market channels for your products.

*Full service information preparation and conversion available from LASERTEX service centers; scanning, digitizing, SGML tagging, converting, compressing, and encrypting information, avoiding the high cost of specialized equipment and personnel costs.

Published by Stan J. Caterbone and the Advanced Media Group

AMERICAN HELIX ADVANCED MEDIA GROUP provides products and services to support all facets of the Digital Technology and Optical Publishing environment. Centering around it's state of the art 3rd generation CD-ROM replication facility, The Advanced Media Group is proud to offer the following:

CD-ROM PRODUCT DEVELOPMENT SERVICES

CD-ROM REPLICATION SERVICES

LASERTEX ELECTRONIC OPTICAL PUBLISHING SYSTEMS

ADVANCED TECHNOLOGY WORKSHOPS IN OPTICAL PUBLISHING

ADVANCED MEDIA RESEARCH AND DEVELOPMENT PROJECTS

CD-ROM/WORM TECHNOLOGIES EXHIBIT TECHNOLOGIES INTERACTIVE VIDEO TECHNOLOGIES TECHNOLOGY TRANSFER PROJECTS

LASERTEX is a registrerd trademark of Network Technology, Inc., 7401 F Fullerton Road, Springfield, Virginia 22153-3122. American Technology Corporation is the exclusive authorized distributor of LASERTEX Electronic Optical Publishing Systems.

Published by Stan J. Caterbone and the Advanced Media Group

February 19, 1991

S P Stephton

JUSTAT

P.O. Box 14373 Kenwyn, 7790

Capetown

South Africa

Dear Mr. Stephton:

My sincere apology for not delivering your requested information. Your request was apparently lost in our paper shuffle. We regret any incontinence that this may have caused you.

In appreciation for your patience, please find the enclosed "DRAFT" copy for your evaluation. This copy is fully functional.

I would ask a written evaluation at your earliest convenience. I

have

reference.

also

enclosed

our

capabilities

and

services

for

your

I look forward to hearing from you.

Again, my apologies for not responding earlier.

Sincerely,

Stan J. Caterbone, Director

cc:JUSTAT01

ENCLOSURES

Published by Stan J. Caterbone and the Advanced Media Group

FACSIMILE TRANSMISSION

FROM: STAN CATERBONE of AMERICAN HELIX

FAX NUMBER: (717) 392-7897

TELE: (717) 392-7840

TO: JULIAN OLSON FAX NUMBER: (415) 964-2027 PAGEES: 01

COMPANY: KAware DATE: 08/20/90

Dear Julian:

I appreciate your support and efforts to engage in a mutually profitable and enjoyable relationship. I will certainly do everything in my power to facilitate the above.

In specific regards to our previous agreement, we have yet to recieve the software package. My engineers are anxiously awaiting its arrival. If it has not shipped, I would like to offer my FEDERAL EXPRESS ACCOUNT NUMBER : 1297-5100-2 and ask that you ship it priority overnight.

If it has already been shipped, please advise.

THANKS AGAIN FOR YOUR SUPPORT.

Regards,

Stan J. Caterbone Director, Advanced Media Group, Ltd.,

Published by Stan J. Caterbone and the Advanced Media Group

DATE: May 29, 1991

MEMO: PA Blue Shield Meeting of May 29th

PARTICIPANTS: Frank Ryan, Jim Cartmell, Vic McBride, Stan Caterbone, Bill DeAngelos

AGENDA: Review Storyboard for PA Blue Sheild (PABS) Input Prior to Contract Delivery

The circumstances leading up to this meeting should be known in order to understand the conversations during the meeting. On May 4th, American (AH) Helix was commessioned to produce a "Storyboard Illustration of the multimedia interactive CD-ROM" for (PABS). Dering & Musser (DM) were to provide input to the graphical design of the storyboard. Attached to the contract was a preliminary flow chart of how the linear script of the information would be displayed.

Stan Caterbone immediately suggested that a meeting with (PABS) to collaborate on the linear script and any technology issues be set as soon as possible. Stan also suggested that (DM) and programmer Vic McBride meet to determine the logistics of working the design elements with the computer programming. Both meetings were scheduled for May 8th.

On the mourning of May the 8th, Stan and Jim met at (PABS). The outcome of that meeting was a revised linear script, and dicisions on technology elements regarding the system, of which were to be illustrated in the storyboard (see notes of meeting as per Jim Cartmell).

At 4 o'clock of May the 8th, (DM) met with (AH), Vic McBride and Wayne Landis. Stan presented the revised linear script to all parties. Vic McBride demonstrated the technology used to create our storyboards, along with its capabilities. Jere voiced his concern that this technology was not capable of producing the same fonts and colors of his Macintosh system. Stan elaboarted on the issues that (AH) does not presently support optical publishing projects for the Macintosh platform. There are several reasons for this dicision:

1. The Mac platform represents only 7% of the PC users

2. The number of Mac users with CD-ROM drives is even less

3. The technologies today do not support the capability of producing Mac

projects (CD-ROM) and simply converting them to DOS (IBM Compatible)

platforms.

4. The Mac platform does not currently support Touch Screen technology.

MEETING (Continued)

Several alternatives were suggested to accomodate the project:

1. Jere accompany Vic during production provied design input.

2. Jere produce Mac screens and Vic duplicate within his capabilities.

3. Jere produce hard copy illustrations of screens, and Vic duplicate.

It was Jere's decision not to provide any design elements to the storyboard because of the "Mac" issue. It must be noted that (AH) was trying to be accomodating as possible to this

Published by Stan J. Caterbone and the Advanced Media Group

issue. However (DM) made a decision to have (AH) develop the storyboard in its entirety. As far as (AH) was concerned, and with its knowledge of the technology, the Mac issue was not an issue now, and never has been.

On May the 11th, Stan faxed a revised flow chart and description of the storyboard to Jim asking for "any changes that need to be made". There was no response by (PABS) to this communication.

On or about May 21st Stan called Jere to determine if any date had been set for the presentation. Jere had no knowledge and referred that question to Jeff. During that conversation Jere mentioned that he had discussed with Frank that he was not participating in the design of the storyboard because of (AH)'s "lack of capabilities".

On May 24th Stan, Wayne, and Vic met to review the current storyboard. Several modifications were made. Vic had several questions of which Stan wished to direct to (PABS). Stan also suggest a review meeting with (PABS) be scheduled prior to delivery in order to enable (AH) to provide (PABS) with a storyboard that will accomodate thier needs when presenting the project for approval. Vic talked with Jim on May 25th, and a meeting was scheduled for May 29th.

Published by Stan J. Caterbone and the Advanced Media Group

RECORDED TRANSCRIPT WITH

THE PENNSYLVANIA SECURITIES AND EXCHANGE COMMISSION

"JAMES GUERIN AND ISC OPERATIONS"

November 17, 1990

SEPTEMBER 8, 1987

Subject:

Quotes from a recorded transcript between Stanley J. Caterbone and Howard Eisler, Agent of the Pennsylvania State Securities and Exchange Commission. This transcript was recorded with the approval of all present parties.

Date of

Conference:

September 8, 1987

Place of

Conference:

2323 New Danville Pike

Conestoga,

PA 17512

Relationship to James Guerin:ISC Shareholder Debtor to Parent Federal Savings and Loan

The following transcriptsd represent a few of the converstions recorded during the meeting.

Stan Caterbone - " Chem Con is the big local minority-held corporation that was doing a lot of Defense contracts-it was associated with ISC. They went under last spring, beginning of the summer, and there was a lot of criminal allegations made, none of them substantiated. And I was connected with that. They sent a board member in to see me a week before this happened. Why. I don't know."

Stan Caterbone - "Jim Christian owned it - now I hear rumors that I was tied to ISC and I am close to several people in that organization. Why they sent someone in to California to see me, I don't know. They won,t answer me."

Stan Caterbone - "they wanted me to talk to a guy from D.C., New York, a guy from the Caribbean. I don't know what the hell is going on."

Howard Eisler - "the supposition was - I don't know how true it was a front for ISC."

Stan Caterbone - "It was, I'll tell you why.

Because when Chem Con was started, back to

their inception, you look at ISC's books. They didn't have any money.

Well, the first thing Chem Con did was they went and got all that free

money from the government and you look where that money went.

I

Published by Stan J. Caterbone and the Advanced Media Group

bet I know where it went."

Stan Caterbone"this guy named Geurin, James Geurin. And I know that they were selling contracts back. He runs ISC and he also has his fingers pretty deeply into Chem Con. He's the one who started Chem Con, Guerin is the one who started it."

Howard Eisler - " Wasn't there some allegations about a tie to Wedteck?" (Defence Contractor of New York)

Stan Caterbone - "You bet. They were tied, you'd better believe they were tied with Wedtech. The same guys in Wedtech were involved with ISC and Chem Con."

Stan Caterbone -"ISC is sold over the London Exchange. Armstrong) I owned a thousand shares."

(I bought my shares from Gib

Stan Caterbone -" I sold it when things started to hit the

"

Stan Caterbone -"Now they just did a multimillion dollar merger with a company in London. They probably think this is going to cover their tracks."

Stan Caterbone -"What they did was, they fronted all that money and started the contracts, went bankrupt, and now the government is stuck for $18,000,000."

Stan Caterbone -"I know right now in this town's viewpoint, I stole money, I am insane, and I am a lunatic. I tell you I will not condemn Jim Christian until he tells to my face what happened."

Stan Caterbone -"I was framed and set up

"

Stan Caterbone -"I don"t know maybe Jim Christian doesn't have the money. Maybe Guerin has it or somebody else"

Published by Stan J. Caterbone and the Advanced Media Group

November 20, 1990

List:

Murray Horton, District Justice Detective Larry Mathias, MTPD Chuck Smith, Lancaster Aviation Mike Wolfe, Loan Officer, Commonwealth Bank Joe Roda, Attorney At Law Gib Armstrong, Senetor Peggy Steniman, LNP Robert Kauffman, Formerly of FMG, Ltd., Michael Hartlett, Formerly of FMG, Ltd., Craig Russel, Attorney at Law

YOU HAVE LOCKED ME UP AND PUT ME IN JAIL & CALLED ME A CRIMINAL

YOU HAVE TAKEN EVERYTHING I OWN

YOU HAVE RUINED MY PERFECT CREDIT RATING

YOU HAVE CALLED ME INSANE BECAUSE OF MY INTERESTS IN A "DIGITAL MOVIE"

YOU HAVE AIDED IN THE COVERUP OF JAMES GUERIN & ISC

YOU HAVE TAKEN AWAY MY BUSINESS INTERESTS

YOU HAVE RUINED MY REPUTATION

"WHAT GOES AROUND MUST COME AROUND"

Published by Stan J. Caterbone and the Advanced Media Group

August 9, 1990

David C. Hostetter

Executive Vice President Fulton Bank One Penn Square

Lancaster, PA

17602

Dear Mr. Hostetter:

I have become very disappointed in your ability to correct a problem that your bank has made regarding my personal banking account #0118-74848. In fact, your actions have not only caused me great concern for my investments that I have entrusted in your institution, but I am now being humiliated and intimidated by your lack of concern. This incident has now caused me to question whether you have simply stolen my assets. The amount of money in question is some $5,000. I,m sure not one of your larger accounts, however I'll fight like hell for $5,000.

You must be aware of the implications of this incident with regards to the past performance of both commercial and, savings and loan institutions. The public has already grown insecure and has lost a great deal of confidence in the banking community at large. And maybe this is an example of how mismanagement and abuse can cause some of the same public insecurities as the actual failures themselves.

The following will depict a chronological accounting of the above mentioned incident:

On July 31, 1990 at 2:18pm (see MAC receipt) I was denied withdraw privileges from my checking and Fulton Fund accounts at the Greenfield center. After another unsuccessful attempt, I decided to inquire inside to a teller. I could not understand the problem, knowing that I should have at least $5,000 in the accounts.

The teller began an inquire on my accounts in the computer system. After 15 minuets, she informed me that my checking account had a 0 balance. I informed her that I also had a Fulton Fund account with sweep, and maybe there was a problem with that fund. Again after 15 minuets she came back with the same answer. The manager began to become annoyed with my problem and my concern over the situation. I asked to see some accounting, and she said she could provide an account activity report.

As she began scrolling transactions over the screen, I began peering over the counter trying to review the account. I had noticed a check for $6,250.00. I asked her if that was in fact a check for that amount. She said "yes, number 470, made out in June". I quite excitedly stated that I had never made out a

Published by Stan J. Caterbone and the Advanced Media Group

check for six thousand dollars in June. SHE LOOKED AT ME, QUITE IRRITATED, AND SAID, "WE'LL SIR, YOU MOST CERTAINLY DID". August 9, 1990, David C. Hostetter

Now, I was emotionally shook, I had just lost $5,000 or $6,0000, and I had no idea how. I would certainly remember any check written for $6,000. The manager had no right to even question my ability to recollect such an incident. Instead of receiving support, and help in dealing with my problem, I received harassment. Does the word CUSTOMER SUPPORT mean anything to your organization?.

The only advice that was given by your staff was "to go home and check your statement". Now I must question whether you provide any training or education to your employees.

Well, I proceeded back to my business meeting. I was quite upset and disturbed the rest of the day, trying to determine how someone could have stolen one of my checks without my knowledge. This was my only logical explanation, of which the manager suggested that the only way to recover the funds was to prosecute. That was even more encouraging.

That evening I rushed home and proceeded to review my statements for check #470. The statement showed a debit for $6,250. Corresponding to the computer inquiry of that day.

However, the canceled check #470 was for "TWELVE HUNDRED AND FIFTY DOLLARS". I will admit that the $1,250.00 could look like a six (SEE COPY). But isn't that why we write the amount out in longhand?? At this point I was just elated to have recovered my lost $5,000, (for approximately 37 days).

The next day I had made copies of the check at my office, and proceeded to the Greenfield branch at noon, on August 1st. I took the original check and copies of my statement. Before I reached the counter, the teller asked "if I had found my problem?" I said "no, I found your problem". I went on to display the check, and also give my dissatisfaction with the attitude by the Manager that I had forgotten about a $6,000 check, and that the customer service was really customer intimidation. Never once did anyone mention or suggest that there could be an error in the accounts, and that maybe because I had never remembered writing a check out for $6,000, that maybe I never did.

The teller was polite and understanding, she proceeded with my check to the Manager's office, and returned notifying me that she would need to take possession of the actual check for verification.

Published by Stan J. Caterbone and the Advanced Media Group

August 9, 1990,

David C. Hostetter

She informed me that the account would be brought current that day, August 1, 1990. I asked her how I could withdraw cash, being I still had no means of getting cash. She asked me to write a check out made payable for cash (see check #486). She handed me $50.00 in cash.

Excluding the lost interest and any cancelled check fees, - I thought I was made almost whole.

TODAY IS AUGUST 9,1990

I HAVE A CURRENT BALANCE OF $ 129.61-

I STILL RECEIVE CANCELLED CHECK NOTICES

I CONTINUE TO HAVE CREDITORS NOT BEING PAID

I CONTINUE TO HAVE MY CREDIT ADVERSELY AFFECTED BY YOUR ACTIONS AND NEGLECT

YOUR INSTITUTION REFUSES TO RETURN MY ASSETS

I CONTINUE TO EXPERIENCE STRESS AND INTIMIDATION FROM YOUR LACK OF CONCERN FOR ME - YOUR CUSTOMER

NOW, YOU HAVE A PROBLEM.

Regards,

Stan J. Caterbone "Just" a Customer

ENCLOSURES

cc:

Published by Stan J. Caterbone and the Advanced Media Group

Date:

April 17, 1989

To:

Scott Robertson, American Helix Technology Corporation

From:

Tom Vreeland, Network Technology Corporation

Subject: LASERTEX License Program - Outline

I have attached an outline of my current thinking on the Franchise program. I think I've covered just about everything we have discussed.

I will send you the draft of our proposed Business Agreement in the morning.

NETWORK TECHNOLOGY CORPORATION LASERTEX FRANCHISE PROGRAM OVERVIEW

This outline is provided to describe the business goals, structure, organization, and scope of the LASERTEX franchise program. It should provide the basis for the agreements between American Helix Technology Corporation and Network Technology Corporation, serve as the guidelines for the Franchise Agreements, Offering Statements, and filings, and provide the basic information for use in the "Business Opportunities in Optical Publishing" courses. It contains the following elements:

Business Objectives

LASERTEX Franchise Concepts

Franchise License Structure

Franchise License Fees

Franchise License Royalties

Franchise Examples

Franchisee Qualifications

Franchise Training Programs

LASERTEX Distribution System

Published by Stan J. Caterbone and the Advanced Media Group

LASERTEX Hardware Sales

Other Collateral Activities

Franchisor owned sites

LASERTEX BUSINESS OBJECTIVES

Network Technology Corporation has a number of important business objectives in marketing the LASERTEX business license concept:

1) Fundamentally changing the CDROM industry to facilitate

2) Providing a framework of standards which will foster

its rapid growth

the growth described above.

3) Receiving revenues from the Licensing of LASERTEX and Workstation products.

Electronic

Publishing

Arts

4) Receiving royalties on every disc produced using

LASERTEX

and

Electronic

Publishing Arts Workstation

products.

5) Receiving a percentage of hardwware sales to LASERTEX

Licensees.

6) Receiving a percentage of the Marketing and Distribution produced by licensees.

LASERTEX LICENSE DETAILS

revenues on products

The license under which the LASERTEX Universal Information Retrieval system and Electronic Publishing Arts Workstation tools will be provided will include many details designed to create a certain amount of uniformity in LASERTEX products. These details will include things like:

1) Requirement for use of LASERTEX logo on discs, packaging, promotional literature.

2) Licensees agree not to mark-up or discount LASERTEX

3) Licensees agree not to develop competitive retrieval or

documentation

and

standard royalty fees

tool software.

Published by Stan J. Caterbone and the Advanced Media Group

4) Licensees agree to basic terms, turnaround times, and for use in LASERTEX projects.

5) Licensees agree to use standard ISBN on all their discs. 6) Licensees agree to pay LASERTEX replicator/distributor at time of disc delivery.

7) Licensees agree to replicate at least a minimum quantity

to use LASERTEX distribution

channels.

data transfer formats

the LASERTEX royalties

of discs if they wish

8) Licensees agree to participate in required training and of quality assurance

to meet minimum standards

LASERTEX FRANCHISE PROGRAM

CONCEPT:

The concept of franchising electronic publishing capabilities is new to the world of advanced information technology and computing services. Franchises in the world of computer retailing are well established. The LASERTEX Franchise Program is contemplated as a comprehensive, integrated support system which provides potential franchisees with tools, capabilities, training, and an infrastructure to enable them to make money in the optical publishing business. The Franchise program is designed to include four major elements:

Developers and Publishers - LASERTEX Franchises

Service and Info Preprarers - LASERTEX Service Centers

Distribution and Retail Sales - LASERTEX Retail Licenses

Franchise Sales and Marketing - LASERTEX Sales Reps

In addition there are a number of collateral revenue generation opportunities associated with the Franchise. These include sales of hardware, supplies, discvertising, etc.

Published by Stan J. Caterbone and the Advanced Media Group

The LASERTEX Electronic Publishing Tools will be marketed under a hierarchical franchise arrangement. Franchisees will pay a one time franchise/license fee and an annual maintenance fee of 10-15 percent of the maintenance fee. In return they will receive tools, training, documentation, standards, checklists, standards, replication, packaging, and coop advertising incentives. They will subscribe to a set of royalty and premastering price guidelines and will agree to master all LASERTEX discs at a licensed LASERTEX facility. Licensed replication facilities will provide consistent pricing and services to LASERTEX franchisees. Hardware configurations to support the tools will be available from the distributor. Master franchisees will have to have a specific minimum hardware configuration. All licenses from Master/Replicator down are site licenses for one location only.

FRANCHISE LICENSE STRUCTURE:

American Helix Distributor License

Can develop LASERTEX products Hires Distributor Sales Representatives Sells Master and Replicator Licenses worldwide Sells Service Center Licenses worldwide Sells Dealer/Retail Licenses worldwide Sells Publisher Licenses worldwide Sells Developer Licenses worldwide

Distributor Sales Representative

Master-Replicator License

Can develop LASERTEX products Hires Master Sales Representatives Sells Service Center Licenses Sells Dealer/Retail Licenses Sells Publisher Licenses Sells Developer Licenses

Master Sales Representative

Published by Stan J. Caterbone and the Advanced Media Group

Publisher License

Can develop LASERTEX products Sells Service Center Licenses Sells Dealer/Retail Licenses Sells Developer License Standalone Publisher License

Can develop LASERTEX products

Standalone Developer License

Can develop LASERTEX products

Service Center License

Provides specialized data prep, scanning, digitizing licensees

LASERTEX Dealer/Retail License

Sells LASERTEX products and products distributed through

LASERTEX Franchise Program LICENSE FEES:

American Helix Distributor License Distributor's Representative

Master-Replicator License

$ 275,000

?

$ 100,000

Replicator's Representative

?

Master License

$ 50,000

Master Representative

?

Publisher License

$ 35,000

services

to

LASERTEX

the LASERTEX network

Published by Stan J. Caterbone and the Advanced Media Group

Service Center License

$ 10,000-

 

25,000

Standalone Developers License

$ 10,000-

 

35,000

LASERTEX Retail License

$

5,000-

15,000

LASERTEX Franchise Program FRANCHISE LICENSE SALES COMMISSIONS:

American Helix Distributor License

Distributor's Representative

Master-Replicator License

Master-Replicator's Representative

Publisher License

Publisher's Representative

50%

~ 20%

30%

~ 15%

20%

~ 10%

LASERTEX Franchise Program FRANCHISE LICENSE ROYALTIES:

LASERTEX ROYALTIES: Disc royalties are paid to the LASERTEX Replicator for every disc mastered. This royalty covers the use of LASERTEX delivery software and/or data prep using EPAW tools.

Published by Stan J. Caterbone and the Advanced Media Group

The replicator pays the distributor and Network Technology their share of disc royalties. Royalties are allocated as follows:

Network Technology

$ 4.00

Distributor

2.00

Master

1.50

Publisher

.50

---------------------------------------

Paid by developer/customer

$ 8.00

American Helix Distributor License

Disc royalty $4 to NTC for each LASERTEX disc produced

Master-Replicator License

Disc royalty $6 to Distributor

Publisher License

Disc royalty $7.50 to Master Replicator

Standalone Publisher License

Disc royalty $7.50 to Master Replicator

Standalone Developer License

Disc royalty $8.00

Service Center License

Royalty 4% of gross data prep revenues

LASERTEX Dealer/Retail License

Percentage of sales revenue

-----------------

QUANTITY DISCOUNTS ON ROYALTIES

During any annual period for serial disc publications, or for any one time project the following

Published by Stan J. Caterbone and the Advanced Media Group

royalty discounts shall apply:

50,000-100,000

$6.00 prorated

100,000-500,000

$5.00 prorated

more than 500,000-

$4.00 prorated

LASERTEX Franchise Program OTHER PUBLISHING FEES:

The following fees may be part of the project costs for a LASERTEX project. These fees are in addition to the LASERTEX royalty.

FEES TO SECURE DATA RIGHTS: These fees are the responsibility of the publisher or developer. LASERTEX licensees will understand that they will imdemnify the replicator/distributor/franchisor against all claims of intellectual property rights in connection with their products.

DATA PREPARATION AND CONVERSION CHARGES: Developers and Publishers will be responsible for all data handling, preparation and conversion charges. LASERTEX Service Centers and Master Sites may be able to provide these services.

ELECTRONIC PUBLISHING FEES: Since the use of the LASERTEX Universal Delivery Software is provided as part of the Licenses the additional costs for publishing include:

Indexing Services Video and Data Compression Services Encryption Services Pre-Mastering and Mastering Providing Proof discs

The replicator will quote prices and schedules for these services for LASERTEX licensees.

Published by Stan J. Caterbone and the Advanced Media Group

LASERTEX Franchise Program FRANCHISE EXAMPLES

LASERTEX ROYALTIES: Disc royalties are paid to the LASERTEX Replicator for every disc mastered. This royalty covers the use of LASERTEX delivery software and/or data prep using EPAW tools.

The replicator pays the distributor and Network Technology their share of disc royalties. Royalties are allocated as follows:

Network Technology American Helix Master Publisher

Network Technology American Helix Master Publisher
Network Technology American Helix Master Publisher
Network Technology American Helix Master Publisher

$ 3.00

3.00

1.50

.50

---------------------------------------

Paid by developer/customer

$ 8.00

EXAMPLE: Distributor A sells the following:

$ 200,000 Each Master License sells 5

Publisher Lic.

----------------------------------------------------------- Sales commission to Distributor A

80,000

4 Master Licenses @ $ 100,000 each

100,000

Each Publisher sells 2 Developer Licenses

380,000

There are now 64 locations developing LASERTEX products. Let's say each site produces 4 products with 200 discs each per year.

256 products @ 200 discs ea

= 51,200 discs

Distributor makes $ 102,400 in royalties plus $380,000 in commissions. This doesn't count mastering, indexing, hardware and other revenues.

Furthermore the prime distributor will offer a marketing and retail distribution channel for the products the franchisees develop through the licensed network of LASERTEX dealers and through direct contracts with major computer chains. The prime distributor will also provide group buying power for drives and other hardware to reduce costs for holders of LASERTEX licenses. Network Technology will receive a share of the collateral revenues derived from the product distribution and hardware sales operations.

Published by Stan J. Caterbone and the Advanced Media Group

QUALIFICATION FOR LASERTEX LICENSES

An important element in the success of the LASERTEX Licensing Program will be the qualifications which those granted licenses will initially have to meet, and the ongoing standards of performance they will have to sustain. A part of the sales and marketing approach will have to describe these qualifications and standards and the needs for them. We should set up a set of procedures that will allow us to determine when a licensee falls below a minimum set of performance standards so that we can provide training and other remedial support. If performance levels do not improve a license can be terminated or not renewed. Typical qualifications might include:

MASTER-REPLICATOR LICENSEES

Hardware System Requirements Facility Requirements Staff Requirements Administrative Requirements

PUBLISHER LICENSEES

Hardware System Requirements Staff Requirements (Training)

DEVELOPER LICENSEES

Hardware System Requirements Staff Requirements (Training)

DEALER/RETAIL LICENSEES

Hardware System Requirements (Kiosk) Maintenance of Inventory Staff Requirements (Training)

DISTRIBUTOR and MASTER SALES REPS

Staff Requirements - Qualifications/Training Demonstration Hardware Requirements

Published by Stan J. Caterbone and the Advanced Media Group

LASERTEX SERVICE CENTER LICENSE

Hardware System Requirements Staff Requirements (Training) Quality Assurance Review

LASERTEX FRANCHISE PROGRAM LASERTEX DISTRIBUTION SYSTEM

Here are some random thoughts on setting up

distribution channels.:

TOP DOWN CHANNELS - Meet with reps of major computer store chains There are only a handful of them. Set up CD ROM retailing concept

THE OFFICE WORKS CHAIN - Set it up as a model of the procedures, training, support, etc. Then apply the model to larger chains.

BOTTOM UP CHANNELS - By letting Publishers and Developers set up dealer licenses we can reach the grass roots independent specialty retailers.

-----------------------------------------------------------------

It is also desirable to use the marketing channels set up in this way to market other peoples existing products. As the LASERTEX publishers get going their products should be more competitive and they should get more of the retail market share.

We can't wait till there is a critical mass of LASERTEX discs to go with the whole distribution and retailing concept. We also need to develop a LASERTEX presence in the market quickly even if we have to do it by publishing products ourselves.

BASIC LASERTEX PRODUCT: We need to define a simple set of consistent criteria for a basic LASERTEX product aimed at the retail market. It should be:

Distributed in a shrink wrapped Jewel case or other simple packaging concept

Published by Stan J. Caterbone and the Advanced Media Group

Contain well designed cover and spine printing

Contain full documentation on the Disc - it can be printed if needed

If supplemental printed information is required it can

be provided on a small insert in the package. Specs,copy,

and layout will be done by Publisher and printed by

Replicator

-------------

Another major distribution possibility is to work with the existing mega-software distributors. They now distribute exclusively software products. Work a deal with them to publish their catalogs on CD-ROM (with pictures, fact sheets, samples, demos, and all) and sell them kiosks for their dealer locations and give them a deal to distribute our CD-ROMs.

DISC DISTRIBUTION SERVICES TO PUBLISHERS AND DEVELOPERS

The

publishers:

distributor

(American

Helix) will

provide

the

following

services to developers and

o

Publish a print and CDROM catalog of available CDROM titles

o

Handle direct sales and order fulfillment (800 number)

o

Distribute catalog - direct mail, etc

o

Set up retail marketing channels

o

Stock product inventory

o

Provide accounting, reports, and payments

o

Assist publisher with pricing decisions

o

Co-op advertising program

In return, the developer or publisher will:

Published by Stan J. Caterbone and the Advanced Media Group

o

Pay distributor 50% of the retail price

o

agree not to sell discs for less than some minimum price or not to sell at all

o

agree to LASERTEX packaging and documentation spec

* o

agree to master a specific minimum quantity

* Quantity to be determined based on marketing channels available. Initially 1000. This permits dealers to stock copies of discs for immediate sales. Other discs could be stocked at a central site for quick shipment to dealers.

Dealers would pay distributor 10% of retail price to stock a disc and would have a requirement to stock and sell a minimum number of discs.

NOTE: Wistful thinking. After a year or two, and success of the concept, with expected growth of the industry, we may be ready for franchising a chain of LASERTEX stores with desktop publishing, desktop video, CD-ROM multimedia titles, CD-ROM information titles, CD-ROM Entertainment titles - CD-I or DVI consumer equipment (whichever makes it) - Reference Disc and Entertainment Disc Rentals [and marketing of Disc Rentals through Video Rental Chains]. We can also provide at that time CD information distribution services through Cable TV, etc.

DISTRIBUTOR DISCOUNT STRUCTURE

AMERICAN HELIX

DEVELOPER

==========================================================

=======

DISTRIBUTOR

DEALERS

RETAIL CUSTOMER

|

50%

|

|

20%*

| |

|

| Retail Sale

0 - 30%

|

| 70%-100% of List

----------------------------------------------------------------

Published by Stan J. Caterbone and the Advanced Media Group

|

50%

|

|

|

10%*

|

|

| Sale through

?

| third party

| distributor

----------------------------------------------------------------

|

50%

|

|

|

40%*

|

|

| Mail order

0%

| catalog &

| direct sales

----------------------------------------------------------------

* 5% to Network Technology

LASERTEX FRANCHISE PROGRAM HARDWARE SALES STRATEGIES

American Helix should set up hardware marketing channels. Licensees will not be required to buy general computer hardware through us but there will be some specialized hardware they will have to buy from us. By doing so they will get a discount and be assured that the hardware will work with the LASERTEX and EPAW software.

This will provide opportunities for working closely with the Office Works. It will also make it imperative that we talk with drive manufacturers.

*********

We should prepare a hardware catalog containing:

CD-ROM delivery systems CD-ROM server systems CD-ROM portable systems CD-ROM drives CD-I machines DVI machines (whenever)

Published by Stan J. Caterbone and the Advanced Media Group

Workstation Components and Systems Scanners Image Capture Audio Hardware Video Hardware Meridian, TOPIX, and Ref Tech hardware Yamaha Hardware Worm Hardware WORM Media Magnetic Media (Tapes, cartridges, disks) Caddys Documentation and Tutorials etc.

The

procedures.

catalog should be on CD-ROM as well as in print.

It

should

contain easy ordering

Network Technology will receive 5% of hardware sales.

LASERTEX FRANCHISE PROGRAM OTHER COLLATERAL REVENUE GENERATING ACTIVITIES

It is contemplated that other revenue generating activities may be created to utilize the LASERTEX distribution network or LASERTEX licensee base. These activities may include discvertising, free disc distribution activities, disc catalog distribution and sales, etc.

A

Technology to benefit from these activities.

structure

should be provided which will allow

LASERTEX FRANCHISE PROGRAM FRANCHISOR OWNED SITES

both

American

Helix and Network

There should be no restriction on Franchisor (Network Technology) owned, or Distributor (American Helix) owned LASERTEX sites. The distributor owned sites would be available to American Helix at 50% of the license fee and would pay $4.00 royalties. Franchisor owned sites would not pay license fees to the Distributor and would pay $6.00 royalties to the replicator against which a credit of $4.00 would be applied, resulting in a net payment of $2.00 per disc from Network Technology to American Helix.

Published by Stan J. Caterbone and the Advanced Media Group

Date:June 18, 1990 From:Stan Caterbone To:Dave Shirk, David Dering

Subject:Government Bids for CD-ROM Premastering, Mastering, & Replication

Summary: In order to receive the considerations necessary to win any of the many government projects utilizing CD-ROM, it is necessary to prepare a very detailed, methodical, and concise bid proposal. These proposals are intended to define all processes, procedures, and most importantly quality assurance controls. A "Statement of Work" from the NASA Solicitation RFP5-76373/206 is attached for your reference.

There are 5 (five) primary processes that must be described in a technical proposal that will demonstrate an overall understanding of the requirements necessary to deliver a CD- ROM. According to the "technical approach", and in accordance with all technical specifications cited, the following processes must be defined:

1. Premastering/DMI-Stan Caterbone

2. Mastering/DMI-Stan Caterbone

3. Replication/David Dering

4. Quality Assurance/Dave Shirk-Beth Eller-David Dering

5. File Validation/DMI-Stan Caterbone

Government Bids,

June 18, 1990

(Continued)

Plan of Action: The importance of the lack of this information has already cost us the opportunity to bid on a $60,000 plus contract with NASA. There are other government bids that I am preparing that must be delivered next week. We only have to

Published by Stan J. Caterbone and the Advanced Media Group

prepare this information one time, and then only the pricing/cost proposals will need to be added for future government contracts. This information will also help me to market CD-ROM Replication services in the commercial market as well.

In order to complete this task as efficiently as possible, and with information that will insure our success in government bids, I have prepared an "INFORMATION QUESTIONNAIRE" for each individual according to the primary process.

Due Date: Each person is asked to complete the required questionnaire and deliver it by Friday, June 22, 1990.

I will be available for consultation, and will review the information on Thursday.

I thank you for your cooperation regarding this matter.

Government Bids,

PREMASTERING -

June 18, 1990

(Continued)

1.Accepted Media

2.Hardware Configuration/Specifications 3.Software (Name, Version)

4. Validation Process (Files vs. CD-ROM Image)

MASTERING -

1.Media Used

2.Equipment Used

3. Quality Control Procedures

Published by Stan J. Caterbone and the Advanced Media Group

4. Shipping Procedures

REPLICATION -

1.Injection Molding Process & Procedures 2.Metalizing Process

QUALITY CONTROL PROCEDURES

1. Process to Verify Stamper 2.CD-CATS Analysis, (Parameters that are analyzed)

3.CD-ANALYZER, (Parameters that are analyzed after injection molding)

4. Manual Inspection process of Printing, and flaws.

CD-ROM vs. ORIGINAL DATA FILES

1. Process to validate file transfer to CD-ROM image file format.

Published by Stan J. Caterbone and the Advanced Media Group

FACSIMILE TRANSMISSION

FROM: STAN CATERBONE of AMERICAN HELIX

FAX NUMBER: (717) 392-7897

TELE: (717) 392-7840

TO: GISELE V. DATE: 08/20/90 PAGEES: 01

COMPANY: DMI, INC. FAX NUMBER: (714)630-1025

Dear Gisele:

PLEASE SHIP THE TAPES FOR AMP, INC. FEDERAL EXPRESS PRIORITY DELIVERY.

THEY WILL BE HERE IN THE MOURNING FOR A MEETING.

THANKS FOR YOUR HELP!!!!!

Regards,

Stan J. Caterbone Director, Advanced Media Group, Ltd.,

Published by Stan J. Caterbone and the Advanced Media Group

EVALUATION PROGRAM

PROGRAM INTRODUCTION: The LASERTEX EVALUATION PROGRAM is intended to offer developers and publishers the opportunity to take advantage of using the LASERTEX ELECTRONIC PUBLISHING SYSTEM and its supportive infrastructure at a fraction of its cost. The program will allow the use of the complete system for one commercial application. Included in addition to the LASERTEX Software is the following:

1. LASERTEX operations training workshop (5-10 days)

for 2 persons.

2. Product planning, design, and project management

Support.

3. Customer service and technical support

4. Marketing support for commercial products through the

LASERTEX distribution network.

5.

Optional information preparation and conversion.

6.

Support for the procurement of delivery system

hardware and

CD-ROM drives.

7.

Recieve support in the selection and training of

publishing

personel.

8.

Receive artwork and packaging design support for the

commercial products.

9. Opportunity to showcase products at the 1990

Microsoft conference and the LASERTEX Exhibition Center in Springfield, Virginia.

Selection

of the Evaluation

Program candidates will

be

limited to

a select

few.

Candidates will be chosen on the merits of the application which will be developed utilizing the LASERTEX system.sssssssssssss

Published by Stan J. Caterbone and the Advanced Media Group

was developed to accomplish the insurmountable task of delivering a product that is characteristic of the needs of the market that it will serve. Unlike other products that are introduced to the marketplace, LASERTEX will offer potential qualified prospects the opportunity to utilize the complete LASERTEX system in exchange for their feedback and evaluation. This feedback and evaluation will play a major role in the final development, before LASERTEX is introduced to the optical publishing marketplace.

This evaluation program will provide extraordinary benefits for both American Helix and for the participants. By conducting market research that is both effective and useful to the consumers, American Helix is able to save itself and most importantly its prospects precious time in the development and delivery of its long awaited LASERTEX ELECTRONIC PUBLISHING SOFTWARE.

Qualifications will be limited to a select few that will serve to represent a meaningful sampling of the marketplace, including, private business, industry, government, education, media, and special projects (exhibit technologies). This will give American Helix the needed communications and feedback to as many working environments as possible. A representative number of individuals will also be asked to serve on the LASERTEX Development Council. This Council will have direct input into the final stage of development with regards to product functionality and capabilities.

Published by Stan J. Caterbone and the Advanced Media Group

LASERTEX EVALUATION PROGRAM QUALIFICATIONS

PAST EXPERIENCE: Organizations must have completed at least ???? CD-ROM applications prior to being admitted into the LASERTEX Evaluation Program. Other media type applications will be considered in lieu of CD-ROM. Organizations must prove a longterm commitment to optical publishing and CD-ROM. Selections will be based on the applicants ability to demonstrate prior success from previous applications with regards to quality, functionality and capabilities.

PROJECT DIRECTOR: Organizations must have available at least one and preferably two experienced personnel to attend the 5-10 day training workshop. Organizations must commit a project director that will oversee and administer the CD-ROM project that will be performed for the LASERTEX Evaluation Program. The project director will act as the liaison between American Helix and the selected organization.

PENDING PROJECT: Qualified organizations must have a pending CD-ROM project that is ready to be processed and will be completed with finished discs by MICROSOFT '90 (late February or early March). All applications must be available to be part of the LASERTEX APPLICATIONS DEMONSTRATION DISC ----- to be displayed at MICROSOFT '90.

MINIMUM FUNCTIONALITY STANDARDS: American Helix will determine minimum functionality standards that projects must display in order to qualify for the LASERTEX Evaluation Program. The functionality of the projects must be of such standards as to test the performance of some or all LASERTEX capabilities. Projects can qualify with simple data retrieval projects if they utilize creativity and excellence with regards to the user interfaces of the applications.

Published by Stan J. Caterbone and the Advanced Media Group

PROGRAM PROCEDURES

Applicants will submit completed applications to American Helix Technology Corporation no later than November 1, 1989. American Helix review applications on or before November 25th. Applicants will be notified of approval status of applications.

Upon acceptance, American Helix will schedule and confirm the PROJECT STETEGY MEETING. The purpose of this meeting is to explore the and coordinate the specific project that will be developed using the LASERTEX ELECTRONIC PUBLISHING SYSTEM. This meeting will define system configurations, specifications, design, and project development schedules. The following outline will be followed:

SYSTEM HARDWARE SPECIFICATIONS: All system hardware specifications needed to perform the Adhering capabilities and hardware requirements needed by the end users for the retrieval software will be outlined. This will include any additional requirements for special user interfaces including audio, full motion video, graphics, etc.

PROJECT DESIGN SPECIFICATIONS: The project design specifications will be outlined according to the specific application and functionality of the project being developed. This will include the user interfaces to be utilized along with specific functionality specifications. The project storyboard will also be outlined.

DEMONSTRATION DISC: Requirements and specifications will be outlined to deliver a functional demonstration disc of the application under development. The appropriate time schedule and delivery process will be outlined.

INFORMATION ASSET REQUIREMENTS: The information assets will be specified along with specifications for all data conversion requirements. This will include all information assets being utilized for the completions of the respective project. Procedures to obtain and capture any needed information assets must be outlined before project design procedures can be implemented.

DATA CONVERSION REQUIREMENTS: All necessary data conversion requirements needed to obtain the specified information assets must be outlined along with estimated costs associated with performing the respective data conversion requirements. Data conversion functions are not included in the EVALUATION PROGRAM. However American Helix may elect to provide data conversion services in situations that would be beneficial to the applicant.

PREMASTERING AND MASTERING REQUIREMENTS: The necessary requirements to perform premastering and mastering services must be outlined along with respective

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scheduling dates (Estimated Time of Arrival). All necessary data conversion specifications must be adhered to in order to facilitate a smooth and successful transition to the premastering and mastering functions. These services will be performed by American Helix Technology Corporation. However the costs associated will be inclusive of the royalty per disc charge.

REPLICATION, PACKAGING, FULFILLMENT: The necessary requirements of replication and packaging services must be outlined. This includes the schedule to have any and all necessary artwork and design schedules outlined. This will include the label art for the CD-ROM discs and any booklets and inlays that will be included. All packaging and fulfillment requirements must also be considered and scheduled.

ACCOUNTABILITY, RESPONSIBILITY & SCHEDULING: Because of the complexity and perfection required to produce a successful application in CD-ROM, it is of vital importance that strict scheduling and the respective responsibilities of all parties concerned be of the utmost importance. The purpose of the Evaluation program is to develope succesfull applications that will gain industry recognition and contribute to the efforts of producing standards that will allow publishers to produce the quality of product needed to facility the growth of the CD-ROM industry--but at a reasonable cost!

LASERTEX FRANCHISE TRAINING SCHEDULE: It will be mandatory that all developers attend the LASERTEX TRAINING WORKSHOP. It is recommended that at least two persons responsible for the development of the LASERTEX APPLICATION attend the training workshop. The schedule and requirements of attending persons will be outlined.

The above agenda for the PROJECT STRATEGY MEETING will lay the foundation the development of the respective project. American Helix will respond with complete documentation regarding the requirements, specifications, and schedules that were defined from PROJECT STRATEGY MEETING. This documentation, The (Your Company) LASERTEX APPLICATION SPECIFICATIONS AND OUTLINE, will serve as the Project Manual. This manual will be delivered within 15 business days after the PROJECT STRATEGY MEETING. The Applicant will have 10 days to respond in writing to any discrepancies or misinformation contained in the manual. Americanl Helix and the Applicant must reach agreement on any outstanding issues within 5 business days. Upon final approval, the manual will only be adapted by general consensus.

MICROSOFT DEMONSTRATION DISC

Selected Applications that display outstanding quality, functionality, creativity and effectiveness will be selected to appear on the MICROSOFT DISPLAY DISC. This disc will be

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showcase selected demonstrations characteristic of the Application that was developed. Sensitive and Confidential information will deleted. The Microsoft Disc will will be used to display both functionality and capabilities of LASERTEX, as well as a sampling of applications that have been developed. During the MICROSOFT '90 SHOW, Free Display Discs will be distributed.

The MICROSOFT DISPLAY DISC is designed to give both American Helix and the respective Developers/Publishers exposure to both the CD-ROM and Optical Publishing Industry, as well as the Developer's respective trade/industry. All Evaluation Program Developers that are selected will be supplied with a quantity of MICROSOFT DISPLAY DISCS for distribution.

LASERTEX DEVELOPMENT COUNCIL

The LASERTEX DEVELOPMENT COUNCEL will serve to provide American Helix with direct and focused communications during the final development and future adapting of the LASERTEX ELECTRONIC PUBLISHING SYSTEM. Selected Evaluation Program participants will be asked to serve on the Development Council.

The Development Council will advise on existing funtionality and capabilities of the LASERTEX System. Such issues as the effectiveness of certain user interfaces, data conversion utitities, and file formats are a few of the issues to be discussed. Regular meetings and or communications will be implemented during the Evalualtion Program. Recommendations will have direct impact on the final version of LASTERTEX that will be delivered to the marketplace at MICROSOFT.

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LASERTEX EVALUATION PROGRAM FINANCIAL CONSIDERATIONS

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EXXON OPTICAL PUBLISHING STRATEGIC PLAN

EXXON OBJECTIVES: To research, develop, and implement optical publishing technology for the purpose of disemenating and distributing multimedia information to the internal organization of EXXON. This technology will optimize the efficiency of utilizing current information by the following:

1. Archival:

long as 100 years without any means of modification.

This thechnology will preserve the current data and

information for as

2. Multimedia:

graphics; images; audio; and full motion video to be compiled and delivered on one medium.

Optical publishing or CD-ROM in particular will enable data; text;

3. Storage: One CD-ROM has the ability to store up to 650 megabytes of any or all of

the above information types on one CD-ROM disc.

4. Interactive Capabilities:

interfaces to provide users with the ability to port infomation to printers; modems; and files, and to allow the users to interact with the respective data and information; such as incorporating notes of the respective CD-ROM files.

CD-ROM has the ability to use various divice and system

5. Updating Systems: Seamless magnetic updates are available to update the CD-ROM

with magnetic medium without the need of manufacturing the CD-ROM until mass updates are required.

6. Distribution: CD-ROM technology allows massive amounts of data and information

in varying formats to be distributed on an optical disc replacing volumes of paper and other magnetic mediums that will drastically reduce the costs of distribution and provide a more efficient and effective methods of using the respective information.

7. Search and Retrieval: CD-ROM technology allows users to utilize various search and

retrieval methods to allow immediate acces to specific information that is requested. Hyperlinks to accompanying information or related charts, graphs, images, or audio tracks is available to give users instantaneous access to all or any information related giving users the ability to concentrate on specific issues without cuasing time and efforts in locating pieces of information on other sources or mediums.

8. Foriegn Language Capabilities: CD-ROM technology will allow the use of foreign

language systems to incorporatae several translations of data on one optical disc, making the information accessible to worldwide engineers and personell without reproducing optical discs for several markets.

9. Environmental Issues: CD-ROM will have an inherent positive impact on current

environmental issues, specifically waste and recycling. CD-ROM will drastically reduce

the amount of paper that is currently being used and distributed throughout EXXON. This have considerable merits to general public and hopefully be used to better an organizations public image.

The EXXON Research and Development Corporation is in the ultimate situation to take full advantage of CD-ROM technology and its multimedia capabilities. Because of the nature of information; which includes primary emphaisis on images with regards to vast numbers of sattelite photographs and accompanying graphs and charts, CD-ROM offers the capabilties of streamlining the distribution of this information, and will ultimately provide the medium by

Published by Stan J. Caterbone and the Advanced Media Group

which the time and cost of distributing this infomation will be dramatically reduced over time. Above and beyond this objective is to enable EXXON to use this medium to increase the efficiency and effectiveness of the exploration and development information and data, used by all personel at one time or another, and will ultimately contribute to the bottom line of EXXON USA.

STRATEGIC PLAN - In developing the strategic plan (Two to Three Year) to implement optical publishing at EXXON Exploration and Development the following objectives will outline and define the direction of our efforts:

1. Introduction and Demostration: A series of Beta Test Projects will be developed for

the purpose of introducting and demonstrating the technology of optical publishing. The Beta projects will contain real data, provided by Exxon. American Helix will perform the development and production of the CD-ROM. The primary objective of the Beta Projects will be to enlighten the powers to be of the many benefits and capabilities of CD-ROM for example;

efficiency in managing, distributing and utilizing current data and information; economic advantages of distributing such information; and optimizing any or all decision making processes concerning such information; increased accessability to all world markets of such information, especially foreign markets.

2. Implementation and Test Market Analysis: After approval of the Beta Project or

Projects, Implementation of the project to the internal and field personel of Exxon in an effort test the effectiveness and the compatibility of using CD-ROM technology to replace or compliment conventional methods of information retrieval. After the test marketing proves successful and any or necessary changes are implemented after evaluation of the feedback from the field, CD-ROM will be introduced to the selected internal and field personel.

3. In-House Optical Publishing: After several projects have been succesfully

completed, Exxon will begin to migrate more of the production processes in-house and will perform them with internal staff. The degree to which Exxon performs in-house optical publishing will depend upon staffing capabilities and economics.

4. Training & Education: American Helix will provide any or all necessary training and

education to Exxon staffing in order to implement and support optical publishing. This may include on site workshops and training seminars.

5. Support and Research & Develelopment: The optical publishing projects will

continue to be supported through information updates, and through the implementation of new capabilities and features that would support any existing CD-ROM technologies currently in use at EXXON. Research and development of new and improving technologies with specific regards for improved capabilities of image display technology, foriegn language capabilities, data compression techniques, and others.

LOGISTICS PLAN - The following will outline a plan of action to pursue the preceding strategic plan. This logistics plan will include prelimanary time and cost estimates:

1. Exploration Beta Test - Time estimate 4 to 6 weeks. Cost estimate of $8,000 to $12,000. A protype beta test project containing real data submitted by Exxon will be developed as follows:

A. Exxon will submit data from an existing Exploration & Survey to American

Helix. This infomation is expected to be delivered in 2 to 3 weeks.

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B. American Helix will evaluate the data and determine if data conversion or

data preparation procedures need to be performed. American Helix and Exxon will design and develop the CD-ROM user interfaces and the functions and capabilities for the proposed Beta Test Project. American Helix will confirm the prior cost estimates ($8,000 to $12,000) to produce the CD-ROM. Time estimate is 1 to 2 weeks depending upon the need to prepare data.

C. American Helix will perform the production of the CD- ROM including

replication, printing, and packaging. Time estimate is 2 to 4 weeks depending upon preference of the turnaround price schedules.

2. Annual Conference Beta Test (Optional) - To take advantage of above CD-ROM production and in preparation to implement a multimedia CD-ROM for the 1991 Anual Conference, a Beta Test could be developed and includud on the same CD-ROM as above, with information gathered after the conference in April. The CD-ROM could then be presented and demonstrated with the same infomation that was presented in the conference, thus giving decision makers a legitimate frame of reference, and would enable the Beta Test to be presented while decision makers could make clear reference of how the CD-ROM could have helped divulge and process the information presented in the recent conference.

A. During the Annual conference, Exxon would tape record the entire audio

information of the meeting.

B. Exxon would provide any existing photographs of persons presenting reports during

meeting.

C. Exxon would provide actual reports, in electronic files from the presenters of the meeting.

D. American Helix would produce CD-ROM as above.

Given our current discussions, further planning would be fruitless and distracting. The preceding logistics plan will be constantly updated and modified to represent current decisions and situations regarding EXXON's optical publishing efforts.

PERIPHEAL BUSINESS ACTIVITIES

IMPLEMENTATION & LOGISTICS PLAN

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January 25, 1991

Barry J. Glick Donnelley Geosystems 53 West James Street Lancaster, PA 17604

Dear Barry:

As per our previous conversation, Allon Lefever, Chairman of the Board, of American Helix, and Vice President of High Industries, will be awaiting a call from a Donnelly representative regarding our discussions.

In order to facilitate a fair and equitable discussion pertaining to American Helix, please advise your personnel that High Industries are open to any and all discussions regarding the business at hand. Also, it would be in the best interest of all parties, if your personnel refrained from disclosing any and all information that I may have disclosed during our discussions. High Industries should be given the opportunity to represent and disclose such information.

I, of course will be available to discuss my knowledge of the CD- ROM business, and or the American Helix operations at large.

Allon Lefever can be contacted at 293-4444.

I would like to continue our discussions, and would ask to visit

with you next week, schedule permitting, to take a look at your specific operations, systems, and technologies, as we discussed.

I can be reached at the numbers below, or my lab at 392-6533.

I look forward to continuing or discussions.

Regards,

Stan J. Caterbone, Director

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AMERICAN HELIX/ADVANCED MEDIA GROUP, LTD., AND SHEFFIELD STRATEGIC ALLIANCE

I)MISSION STATEMENT

>To collectively develop and produce , from end to end, multimedia interactive optical applications.

>To consider the following technologies in the production of said applications: Digital Video Interactive (DVI); Compact Disc Interactive (CDI); Compact Disc Read Only Memory (CD-ROM), Laser Disc; Video Disc; and other related optical publishing technologies.

>To develop and produce multimedia applications for the following markets: commercial; education; training; entertainment; and exhibit.

>To commit to providing a superior product, with special regards for quality, content, and price.

>To build and grow a successful and profitable business through the collective efforts, energies, and resources of both American helix/Advanced Media Group, LTD., and Sheffield.

STRATEGIC PLAN

>Combine the video post production technologies of Sheffield with the optical publishing technologies of the American Helix/Advanced Media Group, LTD

>Evaluate and define the capabilities of the respective organizations by exchanging visits to each other's facilities.

>Define the capabilities of the strategic alliance and define the requirements and specifications for a beta project.

>Secure an agreement to produce the previously mentioned beta project.

RESPONSIBILITIES

> American Helix/Advanced Media Group, LTD.,

- Project Manager: Provide over all project management duties and responsibilities.

- Optical Publishing Technologies:

Provide expertise, resources, and energies of all related

optical publishing and information technologies, including: data

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preparation and conversion; software systems; hardware systems; manufacturing; and database management.

- Audio Technologies:

Provide audio expertise, resources and energies to engineering, recording, and manufacturing.

- Marketing:

Provide marketing duties and responsibilities required to build the respective business.

>Sheffield

- Video Technologies:

Provide expertise, resources, and energies for all related video technologies.

- Post Production:

Provide all post production services including: editing, recording, and engineering.

- Production:

Provide services and or supervision of any video production required for the development of the multimedia application.

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CONFIDENTIAL DISCLOSURE AGREEMENT

This agreement dated this

day of

Stan Caterbone, Wayne Landis, and Steve Swan,

, is between

as individuals for the specific purposes of disclosure, confidentiality and intent to pursue the

opportunity of the development of a CD-ROM containing a collection of "BRIDGE" games.

The above named individuals do hereby agree to the following terms of agreement as

pertaining to the confidentiality of this venture:

1. At no time shall any of the above named individuals be referenced on any formal

documentation of any kind without the prior consent of that individual, or individuals.

2. At no such time shall any of the above named individuals disclose or reference any

of the above named individuals without the consent of that individual or individuals.

3. The purpose of this agreement is to formalize the intent of the above named

individuals to pursue the business opportunities of placing "BRIDGE" on CD-ROM and until this

agreement is amended or void, this is the only business venture contained herein.

The

following terms of conditions are to be adhered to while pursuing this venture:

1. The above named individuals do not have any rights to enter into any binding

contracts or agreements as pertaining to this venture until a formal, and legal business

contract and or agreement has been executed.

2. The above named individuals do hereby agree to participate in this venture with the

intent to formalize any such contracts or agreements that are necessary to formally

engage in the same said venture.

3. The above named individuals do hereby agree to collectively pursue the above

mentioned business opportunities and do not have the right to distribute and or disclose

any and all information that has been obtained during the term of this agreement

without prior consent of all individuals named herein.

4. The above individuals do hereby forfeit the opportunity to pursue the above

mentioned venture as an individual or as any individual associated with any other

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association, partnership, organization, or any business entity,

consent of all of the above named individuals.

without prior written

5. The above named individuals to hereby agree to respect the terms of confidentiality,

disclosure and secrecy with respect to the existing associations and relationships of the

above named individuals.

6. The above mentioned individuals do hereby agree to perform best efforts

negotiations with regards to any formal business agreement or contract that may be

executed in order to engage in the above mentioned business. All individuals do hereby

agree to pursue the above mentioned business opportunity in an honest, equitable and

professional manner.

7. This agreement is intended to only commit the best efforts of the above name

individuals, and does not refer to any financial or like considerations.

This agreement is in effect for 180 days from the execution date above, if no formal

business contract or agreement has been executed at such time, a renewal agreement must be

executed and this contract must then be amended.

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THIS PROPOSAL PREPARED FOR

BELLSOUTH ADVERTISING AND PUBLISHING

Mr. Hillrie M. Quin

Operations Manager - Strategic Systems Planning

BellSouth Enterprises, Inc.

May 1, 1989

by

GENESYS DATA TECHNOLOGIES, INC.

Lynn O. Lee - Johnny Sparks

Post Office Box 1057

Pelham, Alabama 35124

(205)987-9093

Published by Stan J. Caterbone and the Advanced Media Group

(DATE)

Mr. Hillrie M. Quin, Jr. Operations Manager Strategic Systems Planning BELLSOUTH ENTERPRISES, INC 7E04 Campanile 1155 Peachtree Street, N.E. Atlanta, Georgia 30367-6000

Dear Hillrie:

It was a pleasure to have you and your associates visit our Hunt Valley, Maryland Headquarters last week for a GeneSys Network demonstration and Company overview. As we promised during your visit, we are submitting this revised proposal for BellSouth Advertising and Publishing for an Optical Filing and Retrieval Network, for Yellow Pages Sales, and production documents. Also enclosed is a written response to each of the items on your Imaging Checklist dated April 17, 1989.

We would like to take this opportunity to summarize just a few of GeneSys Data Technologies, Inc.'s company and product strengths, as well as our unequalled ability to support you in your immediate and long term imaging requirements.

o

GeneSys Data Technologies. Inc. is a multi-million dollar imaging company with many successful customer installation of stand-alone systems and/or networks in the Continental Untied States and Europe.

o

GeneSys provides our customers with local hardware maintenance support through an experienced and nationally recognized office systems and maintenance organization.

o

GeneSys offers what we believe to be unique functionality in our product. We will be integrating the ability to store ASCII data in a screen format exactly like you currently see in your forms - in the same file folder and on the same optical disk as images of other documents you currently retain in those folders (September 1989). You will be able to retrieve a folder on our system and view these documents as part of the same file.

o

One of our greatest strengths is our support. GeneSys supports initial installation and training, and also provides upgrades and on-going training of your personnel. We also provide comprehensive, in depth training for your System Administrator who will then be fully competent to provide on-site internal training and support. Additionally, GeneSys has two local

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representatives who are qualified to and will assist in day to day support. We have earned the reputation with our customers of staying with them until they become comfortable and competent - and then being only a phone call away.

o

GeneSys software support and updates are free for the first year. After that time the maintenance fee includes upgrades and new releases of software at no additional charge. In todays software market this is a rare occurrence and one that will allow your imaging system to evolve and keep abreast of the most advanced technology long after installation.

o

Prior to delivery of a customer network, GeneSys has all software and equipment installed in a staging (burn-in) area of their Baltimore offices. In this area, the equipment is installed, software is loaded and the system remains operational for an appropriate period of time. Electronic boards have a much higher failure rate immediately after installation. This staging (burn-in) procedure assures our customers that their system will be fully operational in the shortest possible period of time during site installation. We eliminate problems before your system ever arrives at your offices.

o

Your system from GeneSys comes equipped with a modem so that via the telephone, immediate diagnosis of a problem may be achieved and assistance provided.

o

GeneSys is able to provide our customers with not only one but a variety of scanners, workstations, printers, networks, optical subsystems (jukeboxes) and sizes and types of optical disks - all via industry standard interfaces. Our customers can select their system's components from us based on your specific needs. As your needs grow you will have a wide variety of options to meet those changing needs. If you require components we do not currently support, we will interface them where possible.

o

GeneSys has optical subsystems (jukeboxes) and networked systems installed in customer locations. These sites are available for customer visits.

o

All items contained in this proposal, with the exception of those clearly marked "Future and Confidential", are functional and demonstrable today.

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PROPRIETARY NOTICE

NOTICE OF DISCLAIMER

This proposal may contain confidential information of GeneSys Data Technologies, Inc. which is provided for the sole purpose of permitting BellSouth Enterprises, Inc. and BellSouth Advertising and Publishing to evaluate this proposal. This document should not be reproduced or otherwise disclosed to any person outside of the group directly responsible for evaluation of its contents without written approval of GeneSys Data Technologies, Inc., except that there is no obligation to maintain the confidentiality of information known to the recipient prior to receipt of such information or which becomes publicly known through no fault of recipient or is received without obligation of confidentiality from a third part owning no obligation of confidentiality.

All prices and conditions in this proposal are valid for a period of ninety (90) days. Any changes which may affect this proposal shall be communicated in writing.

This proposal has been prepared in accordance with accepted techniques for system design and GeneSys Data Technologies' understanding of your requirements based upon the information provided to us. All information provided reflects our best estimates based on your information. However, operating environment, including among other aspects, speeds, configuration, personnel and costs may vary from those indicated in the proposal due to variations in volume environment, personnel, software, programs and other factors and thus GeneSys Data Technologies, Inc. cannot warrant the accuracy of such estimates.

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GENESYS DATA TECHNOLOGIES

OPTICAL INFORMATION SYSTEMS

The introduction of Optical Information Systems represents a quantum leap forward in the areas of data and document storage and handling. GeneSys Data Technologies has assumed an international position of leadership with its comprehensive product line of image and data management systems.

Optical imaging technology allows easy access to documents typically stored in filing drawers. Before now these documents could not be stored in machine-readable format. Not only can corporate America re-claim some badly-needed and expensive office space, but productivity and customer service issues can now be effectively addressed. Customers are more satisfied when requested documents can be quickly and accurately retrieved.

GeneSys had gone one step further in improving the efficiency of data storage. At one time the storage capacity and efficiency of

a mainframe was mind-boggling, today the reality is that storing

information in this environment is very expensive. Now formatted data can be kept a keystroke away for a mere fraction of the cost.

GeneSys Optical Imaging System -

The GeneSys Optical Imaging System heralds the beginning of a new age in information management. Designed to replace manual paper filing systems and microform, the Optical Imaging System provides

a convenient workstation capable of storing thousands of documents

on a single disk and millions of documents in an optical subsystem. There is no longer a need for bulky file cabinets or cumbersome microform systems to store the documents that are vital to business operations.

The Stand-Alone System -

The GeneSys stand-alone system is a personal computer based product designed to scan, index and store original paper documents in one easy step. At the heart of the system is the GeneSys database software which allows documents to be stored and retrieved randomly from an optical disk.

Documents are captured in the system by the document scanner and then instantaneously displayed on a full page, high resolution monitor. Documents are then indexed according to selected fields and written to the optical disk.

Documents are retrieved from the system through the database software. The software allows a document to be retrieved by one or several of the selected index fields. Once retrieved the document(s) can be displayed, printed, faxed or updated. The database software allows the user to append additional documents to a file as well as "notes" to specific images.

The Image Network -

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The GeneSys Image Network can provide multiple users with rapid access to a centralized shared document database. As with the stand-alone system, data/images are scanned in, displayed, and indexed at the workstation. The advantages of the networking environment are realized in the economies of scale, increased system performance, and greater connectivity for the end user.

Depending on the user's needs, multiple workstations can be configured for scanning, retrieving, or both. Data security and decreased costs are two of the major advantages of this system. Users can select which stations will be able to scan and update the database, and create workstations for retrieval only purposes. This allows strict control over changes and access to documents and files, as well as minimizing hardware expenditures.

By delegating communication tasks to high-end network cards, and processing tasks to various network servers, the GeneSys Image Network achieves superior performance levels to those of the stand- alone system. Utilizing the ExcelanTM card and proprietary software, the network achieves the best possible response time in the transfer of multiple documents from large databases in a local area environment.

The GeneSys Image Network is based on the Ethernet or Token Ring standard network protocol, and can run in parallel with any other network or as a stand-alone network. This configuration provides operating systems compatibility with existing systems. The addition of gateways or remote modem communications provides a link to an existing mainframe, mini, or other distributed networks. Additionally, the system allows for input via tape from other computers. This will yield greater connectivity and data sharing between the GeneSys Image Network and the user's current processing stems.

The GeneSys Image Network, like the stand-alone Optical Imaging Systems, provides a powerful cost-effective solution to records management problems and opportunities.

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STANDARD PRODUCT DESCRIPTION

The GeneSys Imaging Network is a local area network (LAN) based system utilizing microcomputers as workstations, designed to emphasize flexibility, throughput and connectivity.

Through a unique architecture which minimizes the systems dependence on particular hardware or applications, the GeneSys Imaging Network allows a complete document storage system to not only coexist but be integrated together into one hardware and software platform. This flexible architecture also ensures a migration path for the future, as new equipment becomes available and as new applications become apparent.

Image networks typically have throughput problems compared to traditional LANs because of the size of the storage space required for an image (typically from 10,000 to 250,000 bytes. GeneSys engineers have overcome these problems through hardware integration and aggressive software design.

We have chosen fast and smart networking cards to delegate processing and communication tasks, allowing workstations and servers high performance. The network servers and workstations utilize Intel's 80386 microprocessors, large fast fixed disks and lots of memory. All of these decisions were made to improve overall performance required by the unique demands of an imaging network.

The network has been designed to operate differently than traditional LANs. Ins