AGREEMENT REGARDING LICENSE MATTERS
THIS AGREEMENT REGARDING LICENSE MATTERS (the "Agreement") is made and
entered into as of this 22nd day of January, 1996 by and among INTERoACT
SYSTEMS, INCORPORATED, a North Carolina corporation (the "Company"), NETWORK
LICENSING, INC., a North Carolina corporation and wholly owned subsidiary of the
Company ("Network"), and XXXXXXX X. XXXXX, an individual ("Xxxxx").
W I T N E S S E T H:
WHEREAS, Xxxxx is a party to an Assignment of License Agreement dated
as of June 15, 1993 (the "Assignment of License Agreement") by and among
Network, Xxxxx, Xxxxxx Xxxxxx, an individual ("Singer"), and Xxxxxx X. Xxxxxx,
an individual ("Xxxxxx"), pursuant to which Xxxxx irrevocably assigned to
Network the license granted to him under the license agreement referred to
therein between Xxxxx and Singer and Xxxxxx with respect to certain patents and
improvements thereon (the "License Agreement") as modified by an addendum
thereto also described therein (the "Addendum") in exchange for certain royalty
payments and other rights described therein; and
WHEREAS, the rights to manufacture and sell Inventions (as defined in
the License Agreement) as they apply to retail network systems pursuant to the
Assignment of License Agreement have been sublicensed to the Company from
Network pursuant to a Sublicense dated as of June 16, 1993 (the "Sublicense");
and
WHEREAS, pursuant to the Assignment of License Agreement and the
Sublicense, Xxxxx has been receiving royalty payments in the amount of $10,000
per month; and
WHEREAS, Xxxxx and the Company are in disagreement as to whether under
the Assignment of License Agreement Xxxxx may be entitled to an increase in such
royalty payments in the future based on a percentage of gross revenues; and
WHEREAS, Xxxxx is a director of the Company and the Vice Chairman of
the Board of Directors of the Company and has a significant interest in the
ability of the Company to succeed, achieve its business goals and become
profitable, not only because of his positions on the Board of Directors and as a
licensor entitled to receive payments only if the patent rights licensed to the
Company are used by the Company, but also because Xxxxx has a significant equity
interest in the Company through his direct and beneficial ownership of the
outstanding shares of Clearing Systems, Inc., a Delaware corporation which owns
816,902 shares of common stock of the Company ("CSI"); and
WHEREAS, the Company is presently in the process of raising equity
capital in a private offering approved by its Board of Directors on October 13,
1995 (the "Offering"), which capital is necessary to allow the Company to
continue its operations, and the Company is having difficulty obtaining firm
commitments or funds from certain investors who are concerned about the
constraints on the Company's present and future cash flows, profitability and
market value caused by the royalty and other payments due Xxxxx and certain
other individuals and entities and caused by the possibility of litigation with
respect to Xxxxx' royalty payments; and
WHEREAS, Xxxxx has agreed to amend the Assignment of License Agreement
with respect
to future royalty payments and certain other provisions and to enter into the
other covenants and agreements set forth herein in exchange for the Company's
agreement to enter into an Ancillary Agreement of Merger and the Plan and
Agreement of Merger (collectively, the "Merger Agreement") with CSI pursuant to
which, subject to the terms and conditions therein, CSI would merge with and
into the Company and the shareholders of CSI would receive shares of common
stock of the Company; and
WHEREAS, Xxxxx' covenants and agreements set forth herein are expected
to enable the Company to conclude successfully the Offering and continue its
operations and will therefore enhance the value of Xxxxx' equity ownership in
the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Xxxxx hereby agrees that, effective upon the closing of the Offering
and notwithstanding any provision of the Assignment of License Agreement to the
contrary, including but not limited to Sections 8 through 10 thereof, or of any
provision of any other agreement by which any of the parties hereto may be
bound, the only royalty Network shall be required to pay Xxxxx under the
Assignment of License Agreement shall be $10,000 per month and such obligation
to make royalty payments and all other obligations of Network or the Company to
Xxxxx under the Assignment of License Agreement shall cease immediately upon the
common stock of the Company obtaining a value of $32 per share (the "Liquidity
Event", as defined below), as adjusted for stock dividends, splits, combinations
or recapitalizations after the date hereof. Specifically, Xxxxx and Network
agree that, effective upon the closing of the Offering, as between them Section
10 of the Assignment of License Agreement shall be amended in its entirety to
read as follows:
10. The payment to Xxxxx hereunder will continue at the rate
of Ten Thousand Dollars ($10,000) per month until the Liquidity Event
(as defined below). Thereafter, Xxxxx shall be entitled until no
further compensation under this Agreement, the license of rights to
Network under this Agreement shall have become irrevocable and Xxxxx
shall have no further rights, and Network shall have no further
obligations to Xxxxx, under this Agreement. For purposes of this
Agreement, "Liquidity Event" shall be the first to occur of the
following events: (a) the common stock of Network or its parent shall
be traded in a public securities market at an average price in excess
of $32 per share for a period of not less than 30 consecutive days, (b)
an acquisition, consolidation or merger of Network or its parent by or
with or into any other corporation, corporations or other entity if the
value of the aggregate consideration to the shareholders of Network or
its parent, as appropriate, shall exceed $32 per share, or (c) the
sale, transfer or other disposition of all or substantially all of the
stock or assets of Network or its parent to an entity, other than a
corporation, partnership or other entity controlled by the Network or
its parent, if the aggregate consideration ultimately distributed to
the shareholders of Network or its parent, as appropriate, as a result
of such transaction shall exceed $32 per share. For purposes of this
Agreement, the value or price of $32 per share shall be appropriately
adjusted for stock dividends, splits, combinations or recapitalizations
after the date hereof.
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2. Xxxxx and Network hereby agree that, effective upon the closing of
the Offering and notwithstanding any provision therein to the contrary or of any
provision of any other agreement by which any of the parties hereto may be
bound, as between them Section 4 of the Assignment of License Agreement is
hereby terminated and rescinded in its entirety. In consideration thereof,
Network and the Company agree that in the event Network or the Company abandons
the patents or other rights subject to the Assignment of License, subject to the
rights of Xxxxxx and Singer under the License Agreement or the Assignment of
License, as either of such agreements are heretofore or hereafter amended or
modified, Xxxxx shall have the right to purchase for $10.00 the rights currently
assigned to Network under the Assignment of License.
3. Xxxxx agrees that upon the Liquidity Event (as defined in Section 1
hereof) the Security Agreement entered into between Network and Xxxxx as of June
15, 1993 and the security interest granted therein will be terminated in full.
4. Xxxxx agrees that in the event the Company or Network obtains a
direct assignment of the patents and other rights subject to the License
Agreement, then the Assignment of License Agreement and all rights of Xxxxx
therein shall terminate, but such termination shall not relieve Network of its
obligation to pay Xxxxx the royalties until the Liquidity Event as set forth in
Section 10 of the Assignment of License Agreement, as hereby amended.
5. Upon, and only upon, the request of the Company, Xxxxx shall use his
best efforts to assist the Company in resolving expeditiously any and all issues
with Singer and Xxxxxx with respect to the patent rights subject to the License
Agreement and Assignment of License Agreement and with Xxxx X. Xxxx and Xxxxxx
X. Xxxxxxxx with respect to agreements either of them may have with the Company,
and in entering into such agreements with such persons or any of them as the
Company shall deem advisable and in the best interest of the Company.
6. The Company agrees to negotiate in good faith with Xxxxx with
respect to granting to Xxxxx licensing opportunities that would be outside the
scope of the Company's present or future business pursuits and that would not be
competitive with the Company's present or future business plans. Any such
agreement or license is subject to approval of the Board of Directors of the
Company.
7. Each of the parties hereto agrees to execute such amendments to the
Assignment of License Agreement, the License Agreement and such other agreements
as may be necessary or appropriate, in the opinion of the Company, to effectuate
the intent of the foregoing agreements.
8. For and in consideration of the benefits to Xxxxx set forth herein
and in the recitals hereto, Xxxxx, for himself and his executors,
administrators, personal representatives, successors and assigns, hereby finally
and forever releases and discharges the Company, Network, Vanguard Cellular
Systems, Inc., a North Carolina corporation and significant shareholder of the
Company, and each of their affiliates, agents, directors, employees, officers,
shareholders, successors, assigns and attorneys (the "Indemnified Parties") of
and from any, every and all manner of actions, causes of actions, debts,
obligations, suits, promises, judgments, claims and demands whatsoever in law or
in equity that he has or may have except with regard to breach of this Agreement
and the Assignment of License Agreement as modified herein, and Xxxxx, for
himself and his executors, administrators, personal representatives, successors
and assigns further covenants and agrees not to
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xxx or bring any actions against any of the Indemnified Parties with respect
thereto.
9. Each of the parties hereto agrees that the terms of this Agreement
shall remain confidential and shall not be disclosed to persons other than
representatives of the Company, Network and their affiliates, members of Xxxxx'
personal family and the attorneys representing the parties, except that the
terms of this Agreement may be disclosed as required by law. Xxxxx also agrees
that he will continue to hold in confidence all knowledge or information of a
confidential nature he has or may obtain with respect to the Company, Network or
their affiliates.
10. Xxxxx acknowledges that he has carefully read this Agreement, that
he knows and understands the contents hereof, that he has had ample opportunity
to review the terms hereof, that he is under no pressure to execute this
Agreement, that he has consulted or had the opportunity to consult with a lawyer
regarding this Agreement, and that he executes this Agreement of his own free
act and deed.
11. This Agreement shall be binding upon and shall inure to the benefit
of each of the parties hereto and their respective successors and assigns;
provided, however, that Xxxxx may not assign his obligations hereunder. This
Agreement contains the entire agreement among the parties hereto with respect to
the subject matter hereof and supersedes any and all previous agreements or
understandings among them, whether oral or written. The parties agree that there
are no other terms or conditions of this Agreement, except as expressly set
forth herein. Further, the parties agree that this Agreement shall not be
altered or modified or in any way changed except in writing signed by the
parties.
12. This Agreement shall be governed by and construed in accordance
with the laws of the State of North Carolina, without regard to principles of
conflicts of laws.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall be
deemed to be one and the same instrument.
14. Notwithstanding any other provision of the License Agreement and/or
any other agreements between the parties and or between Company, Murphy, Singer,
and/or Network, the Company's obligation to pay Xxxxx the sum of $10,000 per
month until the Liquidity Event shall be unconditional and remain binding
regardless of the status of any patent and or Xxxxx' license thereto. The
Company and Network acknowledge that the foregoing obligation to pay Xxxxx IS
THE ESSENCE of Xxxxx' agreement to modify the existing Assignment of License
Agreement dated 15th day of June, 1993.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed by its duly authorized officer as of the
day and year first written above.
/s/ XXXXXXX X. XXXXX (SEAL)
Xxxxxxx X. Xxxxx
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INTERoACT SYSTEMS, INCORPORATED
By: /s/ XXXXXXX X. XXXXXXX
President
NETWORK SYSTEMS, INC.
BY: /s/ XXXXXXX X. XXXXXXX
President
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