IN THE CIRCUIT COURT OF MONTGOMERY COUNTY
PETER R. RONY,
Plaintiff
V.
NANOTRAN, INCORPORATED
Serve: Jonathan A. Titus,
President
(or any other corporate
officer)
State Route 642
Blacksburg, Virginia 24060
TYCHON, INCORPORATED
Serve: Jonathan A. Titus,
President
(or any other corporate
officer)
State Route 642
Blacksburg, Virginia 24060
THE BLACKSBURG GROUP, INC.
Serve: Jonathan A. Titus,
President
(or any other corporate
officer)
State Route 642
Blacksburg, Virginia 24060
GROUP TECHNOLOGY, LTD.
Serve: Registered Agent Jonathan A. Titius
State Route 642
Blacksburg, Virginia 24060
DAVID G. LARSEN
844 Hutcheson Lane
Blacksburg, Virginia 24060
JONATHAN A. TITUS
611 Fairview Avenue
Blacksburg, Virginia 24060
CHRISTOPHER A. TITUS
Belmont Court
Christiansburg, Virginia 24073
or serve at: State Route 642
Blacksburg, VA 24060
and
SARA J. TITUS
Belmont Court
Christiansburg, Virginia 24073
or serve at: State Route 642
Blacksburg, VA 24060
Defendants.
For his Bill of Complaint, Plaintiff respectfully represents as follows:
I. Plaintiff is a resident of Montgomery County, Virginia. He is the co-founder of Nanotran, Incorporated and owns 25% of the outstanding stock of the corporation. He also owns 25% of the outstanding stock of Tychon , Incorporated.
2. Nanotran, Incorporated (hereinafter “Nanotran”) is a Virginia Corporation with principal offices in Montgomery County, Virginia. It was formed on August 8, 1974, by Plaintiff and individual defendants, David G. Larsen and Jonathan A. Titus, and has been engaged in the business of promoting sales of electronic books and hardware ever since.
3. Tychon, Incorporated (hereinafter “Tychon”) is a Virginia Corporation with principal offices in Montgomery County, Virginia. It was formed in November 7, 1974, for the purpose of microcomputer hardware development and manufacture for E & L Instruments, Inc.
4. Jonathon A. Titus (hereinafter “J.Titus”) is a resident of Montgomery County, Virginia. He is the president of Nanotran and Tychon, a member of each corporation’s Board of Directors and the owner of 25% of the outstanding stock of each corporation.
5. David G. Larsen (hereinafter “Larsen”) is a resident of Montgomery County, Virginia. He is a member of the Board of Directors of Nanotran and Tychon and the owner of 25% of the outstanding stock of each corporation.
6. Christopher A. Titus (hereinafter “C. Titus”) is a resident of Montgomery County, Virginia. He is the brother of J. Titus, the vice-president of Nanotran and Tychon, a member of each corporation’s board of directors and the owner of 25% of the outstanding stock of each corporation.
7. Sara J. Titus (hereinafter “S. Titus”) is a resident of Montgomery County, Virginia. She is the wife of C. Titus, the corporate secretary-treasurer of Nanotran and Tychon and a member the Board of Directors of Nanotran and Tychon.
8. In the Spring of 1974, Plaintiff and Larsen collaborated on teaching an electronics course in the chemistry department for chemical engineering Co-op students at Virginia Tech. In doing so, Larsen developed hardware that was later called “outboards” and Plaintiff wrote experiments. In the Spring of 1974, Plaintiff and Larsen contacted vendors for the purpose of marketing the hardware and books. E & L Instruments, Inc. (hereinafter “E & L”) expressed interest in manufacturing and selling products and books produced by Plaintiff and Larsen.
9. During the month of July, 1974, Plaintiff and Larsen concluded their negotiations with E & L and had a contract drawn up, but not signed, for the purpose of dealing with E &L. The party of the first part on the contract was E &L and the parties of the second part were Plaintiff and Larsen.
10. On or about August 8, 1974, J. Titus joined Plaintiff and Larsen in their venture and the three formed a corporation, Nanotran, for the purpose of dealing with E & L.
11. On or about October 2, 1974, Plaintiff, Larsen and J. Titus signed a document entitled “Employment Contract. “ The document was also signed by Larsen as a representative of Nanotran. The purported employment contract was not supported by any consideration, lacked mutuality and was otherwise invalid. A copy of the document is attached hereto as Exhibit “A”.
12. Neither Plaintiff nor Larsen have ever acted as an employee of Nanotran or Tychon.
13. On or about November 7, 1974, Nanotran entered into a five (5) year contract with E & L under which E & L was to manufacture and sell products and books created by Nanotran (eg. Plaintiff, Larsen and J. Titus).
14. On or about November 7, 1974, Tychon was formed for the purpose of developing and manufacturing microcomputer hardware, developing syllabi for microprocessor seminars, and participating in marketing efforts for E & L. In reality, since September, 1977, Tychon and Nanotran may really be considered one corporation since their shareholders, directors and officers are the same.
15. Plaintiff worked hard from the beginning, creating and establishing, enlarging, and developing the business of Nanotran/Tychon by (a) writing the preliminary manuscript on digital electronics that was the key to E & L’s decision to market the products and books of Plaintiff and Larsen; (b) writing the letters and proposals and participating in the negotiations leading to E &L’s decision to market the products and books of Plaintiff and Larsen; (c) developing the concept of “the bugbook” approach to digital electronics and microcomputer education; (d) writing six books, one instructor’s manual, and one-fourth of a seventh book in a period of no more than three years; (3) co-developing all of the early trademarks used to identify the books and products of Nanotran; (f) writing all of the early microcomputer interfacing and data communications magazine columns that brought recognition to the Plaintiff, Larsen, J. Titus, and Tychon; (g) participating in seminars and hands-on short courses to test the educational merits of “the Bugbook” approach; (h) suggesting that Bugbook III be revised and marketed by Howard W. Sams & Co., Inc., an established publisher of electronics books; (i) single-handedly making the extensive revisions to Bugbook Ill and correcting the galley proofs that led to the publication of the very successful “The 8080A Bugbook” and ultimately to the interest by Howard W. Sams & Co., Inc. to publish all of the books written by the Plaintiff and similar books marketed through Nanotran and E & L; (j) revising Bugbooks I and II for publication by Howard W. Sams & Co. , Inc. ; (k) initiating the contract between SGS-ATES Componenti Electronici SpA, a large Italian semiconductor manufacturing company, and Nanotran for the adaptation of two books written substantially by the Plaintiff; (I) identifying co-authors and participating in the writing of two successful books for SGS-ATES; (m) participating in correspondence and negotiations with other companies for the marketing of products and books of Nanotran/ Tychon; (n) participating in the identification of “outside authors,” such as Howard Berlin and NCR Corporation, and in subsequent negotiations that permitted the books of such authors to be published through Nanotran/Tychon; and (0) other related activities.
16. In writing the “Bugbooks” Plaintiff allowed one or more of the individual defendants to share in the recognition for writing the books by appearing as co-author, to share in the ownership of the copyrights and to share the royalties resulting from the sale of the books. This was done with the assurance, representation and promise of J. Titus, Larsen and later C. Titus that Plaintiff would share in the recognition, ownership rights, and royalties resulting from the sale of their products and books. The result of Plaintiff’s writing and development of the “bug” concept and trademarks created a great demand for similar books and led to the development of numerous other “bug” trademarks and other trade names and marks, such as “Blacksburg Continuing Education Series” and “The Blacksburg Group”. Such names and marks designated Nanotran/Tychon, Plaintiff, J. Titus, Larsen and C. Titus as authors or editors of such books and established the companies and the individuals worldwide as educational innovators in the fields of digital electronics, microcomputers, interfacing and programming.
17. In late 1978, and early 1979, Plaintiff learned that individual Defendants were not sharing all or substantially all of the royalties resulting from the sale of their MMD-I microcomputer products or sharing other income they were receiving. Also, Nanotran, under the control of the individual Defendants, was falling behind in the distribution of royalties from E & L which had been timely distributed for a period of two years. Plaintiff requested an accounting of such money and an explanation of what Nanotran and Tychon were doing.
18. After Defendants refused to provide Plaintiff with an accounting or explanation, Plaintiff’s attorney on March 12, 1979, advised Defendants that Plaintiff wished to reach an amicable withdrawal from the corporations.
19. Thereupon, without negotiating an amicable withdrawal of Plaintiff, the individual Defendants called a special meeting of the stockholders’ of Nanotran and the stockholders of Tychon and removed Plaintiff from the Board of Directors of each corporation and have not given him any say in the management of the businesses.
20. Both before and after Plaintiff notified Defendants of his desire to amicably withdraw from the corporations, Defendants have illegally, oppressively and fraudulently acted in connection with their control of Nanotran and Tychon and have misapplied and wasted corporate assets with the intent of taking from Plaintiff his just and lawful share thereof. Thus far, Plaintiff has learned of the following acts by the individual Defendants:
(a) In January 1979, in violation of their fiduciary duty as directors, they excessively raised the salaries of J. Titus and C. Titus by 46% and 32% respectively without even recording the increase in the minutes of any Board of Directors meetings;
(b) The increase of the salaries of J. Titus and C. Titus was done at a time when the corporations were having severe cash flow problems and was otherwise unjustified;
(c) They have unilaterally eliminated Plaintiff’s name from The Blacksburg Group;
(d) In violation of their fiduciary duty as directors, they have allowed J. Titus and C. Titus to write books while employed by Tychon/Nanotran but have not named Tychon/Nanotran as the copyright owner of such books and have not turned over the royalties from the sales of such books to Nanotran or Tychon;
(e) In violation of their fiduciary duty as directors, they have moved the principal offices of the corporations to a large residence owned by them individually and have stated that they intend to have the corporations lease the residence from their partnership for $650.00 per month. Defendants’ residence and the proposed rent are excessive for the needs of Nanotran/Tychon’s offices;
(f) In violation of their fiduciary duty as directors and officers of Nanotran/Tychon, they have not paid Plaintiff royalties due from E & L Instruments since December, 1978, and have instead used the money to pay themselves excessive salaries;
(g) On February 21, 1979, they formed a new corporation called Group Technology, Inc., which Plaintiff believes and therefore alleges they are using as another means of diverting corporate assets;
(h) As still another means of diverting the assets of the corporation to themselves, and excluding Plaintiff from his share of such assets and in violation of their fiduciary duty as directors, they hired Defendant Larsen as a consultant on September 24, 1979, and during the same directors meeting voted to divide royalties from three books amongst themselves.
(i) On October 15, 1979, they formed a second new corporation to compete with Nanotran/Tychon, they named the second corporation of The Blacksburg Group, Inc. a valuable trade name used by Nanotran/Tychon to identify Plaintiff, J. Titus, Larsen and C. Titus.
(j) In violation of their fiduciary duty as directors of Nanotran/Tychon they recommended approval of an offer they had made to themselves to purchase some of the assets of Nanotran and some of the assets of Tychon for a sum wholly inadequate and grossly disproportionate to the value of the assets. Plaintiff believes and therefore alleges that Defendants recommended approval of these offers for the purpose of appropriating to themselves the valuable assets of each corporation. Plaintiff believes and therefore alleges that Defendants’ new corporation, The Blacksburg Group, Inc. , will be in a business identical to that of Nanotran/Tychon and that Defendants intend to appropriate the tangible property and goodwill of Nanotran/ Tychon for their own personal gain and their own private and selfish purposes to the detriment of Plaintiff.
(k) In violation of their fiduciary duty as directors of Nanotran/Tychon, and as another means of divesting the assets of Nanotran to themselves, they voted to pay their new corporation (The Blacksburg Group, Inc.) a fee of $16,500.00 for the first year, purportedly to administer the assets they did not strip from the corporation in the first place.
(I) In violation of their fiduciary duty as directors of Nanotran, they voted in favor of severing a consulting agreement between Nanotran and Tychon (a non-existent agreement) and paying Tychon $12,400.00 as a severance payment. Plaintiff believes and therefore alleges that the $12,400.00 had already been paid to Tychon before the directors meeting and was being used to pay Defendants excessive salaries.
(m) Plaintiff believes and therefore alleges that Defendants have withheld and concealed from Nanotran/ Tychon and its minority shareholder (Plaintiff) business opportunities which were available to Nanotran/Tychon, and which came to the attention of the individual Defendants in their activities on behalf of Nanotran/Tychon and have diverted such opportunities to themselves and their new corporation.
21. That at the date of institution of this suit, the entire board of directors, all the officers, and all the stockholders, except Plaintiff, personally benefited from and participated in the above-described activities; therefore, any demand upon the board of directors that they take appropriate action to uphold the rights of Nanotran/Tychon and the rights of Plaintiff, would be futile, and thus no such demand has even been made on any of them.
WHEREFORE, Plaintiff, being without an adequate remedy at law, prays as follows:
I. That a custodian be appointed pursuant to §13.1-94 of the Code of Virginia (1950), as amended, to continue the business of Nanotran and Tychon until a final hearing on this matter;
2. That the proposed sale of some of Nanotran assets to Defendants’ new corporation, The Blacksburg Group, Inc., be temporarily and permanently enjoined;
3. That the proposed sale of some of Tychon assets to Defendants’ new corporation, The Blacksburg Group, Inc. , be temporarily and permanently enjoined;
4. That individual Defendants be directed to account for all sums of money, profits, gains and assets which they have individually, or through Group Technology, Inc. and The Blacksburg Group, Inc. have made as a result of diversion of corporate opportunities;
5. That Defendants be directed to account for excessive salaries, directors fees, lease payments, and any other sums or assets paid to them or diverted to them;
6. That individual Defendants be temporarily and permanently enjoined from using the name “The Blacksburg Group” without including Plaintiff as a member of the group;
7. That J. Titus and C. Titus be directed to account for all royalties received on books written while they were employed by Nanotran/Tychon;
8. That J. Titus, Larsen and C. Titus be required to make an accounting of all royalties received by them and be ordered to pay Plaintiff his proportionate share of such royalties in accordance with the agreement of the parties.
9. That, The Blacksburg Group, Inc. and Group Technology, Inc. , be temporarily and permanently enjoined from competing with Nanotran or using corporate opportunities diverted to them by the individual Defendants;
10. That Defendants be enjoined from using Nanotran/ Tychon funds to defend this suit;
11. That Plaintiff have such other and further relief as may be just and proper, including reasonable attorneys fees and accountant fees and his costs incurred in pursuing this suit.
PETER R. RONY
By Cordell M. Parvin
ROCOVICH, DECHOW, PARVIN & WILSON, P.C.
Suite 900, First National Exchange Bank Building
P.0. Box 13606
Roanoke, Virginia 24034