EXHIBIT 10.5
AMENDMENT TO SETTLEMENT AGREEMENT
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THIS AMENDMENT TO SETTLEMENT AGREEMENT ("the Amendment"), dated this 22nd
day of August, 2000, and deemed effective August 22, 2000, by, between, and
among LML PAYMENT SYSTEMS, INC. ("LML"), CHEQUEMARK HOLDINGS, INC. ("CHI"),
CHEQUEMARK PATENT, INC. ("CPI"), CHEQUEMARK, INC. ("Chequemark"), XXXXXX X.
HILLS ("Mr. Hills"), and CHEQUEMARK TECHNOLOGIES CORPORATION n/k/a XXXX
TECHNOLOGIES, INC. ("CTC").
WITNESSETH:
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WHEREAS, on or about March 11, 1998, pursuant to a "Patent Purchase
Agreement", CPI purchased U.S. Patent No. 5,484,988 ("the '988 Patent") relating
to the "Checkwriting Point-of-Sale System," ("the Checkwriting System") a
related patent application and related technology ("the Patent Estate") from Mr.
Hills and Xxxxx X. Xxxxxxx ("Xx. Xxxxxxx"), ultimately in exchange for shares of
LML stock and future earn-out shares of LML stock; and
WHEREAS, on or about March 11, 1998, pursuant to an "Asset Purchase
Agreement", Chequemark purchased the assets, including software, executable code
and source code relating to the Checkwriting System, of CTC ultimately in
exchange for shares of LML stock, and future earn-out shares of LML stock; and
WHEREAS, on or about March 11, 1998, Mr. Hills entered into an "Employment
Agreement" with Chequemark in which he agreed to remain employed by Chequemark
for a period of one (1) year; and
WHEREAS, to secure his one (1) year employment obligation, Mr. Hills
pledged the shares of LML stock he received pursuant to the Patent Purchase
Agreement and his portion of the shares of LML stock received by CTC under the
Asset Purchase Agreement; and
WHEREAS, the LML Share Certificates representing the shares then pledged by
Mr. Hills were held in escrow by the law firm of Xxxxxxxx & Shohl in Columbus,
Ohio,("the Escrowed Shares"); and
WHEREAS, LML disputes Mr. Hills' and CTC's ownership of the Escrowed Shares
and maintains that Mr. Hills committed a "Unilateral Resignation" and that,
therefore, the LML Share Certificates belong to LML; and
WHEREAS, Mr. Hills, and CTC claim ownership of the Escrowed Shares, and
deny that Mr. Hills effected a "Unilateral Resignation"; and
WHEREAS, on or about March 10, 1999, LML and CPI commenced an action in the
United States District Court for the Middle District of Florida styled LML
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Payment Systems Inc., Chequemark Patent, Inc. and Chequemark Holdings, Inc., v.
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Xxxxxx X. Hills, Case No. 99-217 Civ-J-20A (the "Federal Court Action"), to
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require Mr. Hills to execute an assignment of patent application Ser. No.
08/775,400, and
WHEREAS, on or about July 17, 2000, the parties entered into a Settlement
Agreement in an effort to dispose of all claims and causes of action existing
between them, and
WHEREAS, as part of the Settlement Agreement, Mr. Hills was required to
obtain a written release as well as other property from Global Technologies,
LLC, Airtime Technologies, Inc., and Xxxx X. Xxxx, and
WHEREAS, Mr. Hills was not able to obtain the release and other property
from Global Technologies LLC, Airtime Technologies, Inc. and Xxxx X. Xxxx, as
required by the Settlement Agreement, and
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WHEREAS, the parties still desire to go forward with a settlement on the
following amended terms,
NOW, THEREFORE, in consideration of the mutual promises and agreements of
each signatory set forth in this Amendment and other good and sufficient
consideration, the sufficiency of which is acknowledged by the parties hereto,
it is agreed by, between, and among LML, CPI, CHI, Chequemark, Mr. Hills, and
CTC that:
1. EXECUTION OF AFFIDAVIT BY MR. HILLS - Mr. Hills shall execute and
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deliver into escrow an affidavit in the form attached as Exhibit A to the
Amendment stating: (i) Mr. Hills had no authority to execute the assignment of
U. S. Patent No. 5,484,988 ("the '988 Patent") from CPI to himself or any other
assignment of the '988 Patent (ii) that, since March 11, 1998, Mr. Hills has
had no ownership interest or any other interest in the '988 Patent, and (iii)
that he informed Global Technologies, LLC, Global Transaction Systems LLC
(collectively, "Global"), Airtime Technologies, Inc. ("Airtime"), and Xxxx X.
Xxxx ("Xx. Xxxx") that LML or one or more of its subsidiaries claimed ownership
of the '988 Patent. No funds or stock shall be disbursed from escrow if Mr.
Hills does not deliver into escrow the affidavit in the form attached as Exhibit
A to this Amendment simultaneously with Mr. Hills' delivery into escrow of this
Amendment with his signature hereon.
2. DISCLOSURE OF SUBLICENSEES - Mr. Hills shall disclose, under oath, the
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name and business address of every person or business entity of which he is
aware to which Global, Airtime, Xx. Xxxx or any related party, may have granted
or conveyed a license, marketing rights or any other right to use or promote all
or any portion of the '988 Patent or the Checkwriting System. All persons and
entities to whom Global, Airtime or Xx. Xxxx (or any related person or entity)
may
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have granted or conveyed a license, marketing rights, or any other right to use,
market or promote all or any portion of the '988 Patent or the Checkwriting
System shall be referred to collectively as "sublicensees" and individually as a
"sublicensee".
3. AGREEMENTS WITH GLOBAL, AIRTIME AND XX. XXXX - Mr. Hills shall deliver
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into escrow any agreements, if any, between himself and Global, Airtime, Xx.
Xxxx or any related party, regarding the purported assignment of the '988 Patent
or any royalties owed to Mr. Hills from the license, assignment or use of the
'988 Patent or the license or use of the Checkwriting System or software or
source code utilized as part of the Checkwriting System.
4. MODIFIED AGREED FINAL JUDGMENT AND PERMANENT INJUNCTION - Within five
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(5) business days after the execution of this Amendment, the signatories to this
Amendment shall file in the Federal Court Action a Stipulation And Joint Motion
For Entry Of Agreed Final Judgment And Permanent Injunction (with attached
Agreed Final Judgment And Permanent Injunction) in the form attached as Exhibit
B to this Amendment. The signatories to this Amendment shall not appeal in any
way the Agreed Final Judgment And Permanent Injunction. If any signatory must
engage in legal action defending, enforcing or otherwise arising out of this
Amendment and/or the Agreed Final Judgment And Permanent Injunction, the
prevailing party or parties shall be entitled to its, his, or their attorneys'
fees, costs of investigation, and court costs (including all deposition costs)
for such action. The Amended Agreed Final Judgment shall supercede the final
judgment attached as Exhibit C to the Settlement Agreement.
5. COOPERATION - Mr. Hills shall cooperate with reasonable requests for
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information from LML, CPI, CHI or Chequemark in connection with (i) any
investigations conducted by LML, CPI, CHI or Chequemark and (ii) any legal
proceedings involving LML, CPI, CHI or Chequemark
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and Global, Airtime, Xx. Xxxx or one or more of their respective subsidiaries,
affiliates, relatives or sublicensees. Mr. Hills agrees to submit to LML in
written form all relevant facts of which he is aware regarding the use, sale,
transfer, marketing and promotion of the '988 Patent or the Checkwriting System
by Global, Airtime, Xx. Xxxx or any of their respective sublicensees. This
writing shall be submitted by Mr. Hills into escrow at the same time that he
submits this Amendment with his signature hereon into escrow, but under no
circumstances shall the release and disbursement to Mr. Hills of the funds and
stock currently held in escrow be delayed, hindered, canceled or prohibited
based on the content or sufficiency of said writing.
6. RETURN OF PORTION OF AMOUNT FROM ESCROW - Paragraph 7 of the
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Settlement Agreement is amended to the extent that $350,000 (plus interest) of
the $2,500,000 (plus interest) held in escrow shall be delivered to LML within
one (1) business day of the effective date of this Amendment for the purpose of
pursuing or defending other legal claims regarding ownership, license or
infringement of the patent or intellectual property incorporated within the
Checkwriting System against persons other than Mr. Hills who claim rights
directly or indirectly from Mr. Hills. On August 21, 2005, provided that there
is no ongoing litigation, LML shall provide in writing to Mr. Hills at his last
known address a reasonable, non-privileged accounting of the litigation expenses
incurred as a result of such claims and shall refund to Mr. Hills that portion
of the $350,000.00 that remains unused as of August 21, 2005, for the
aforementioned litigation expenses. If litigation is ongoing as of August 21,
2005, LML shall provide the accounting and refund contemplated by this paragraph
within sixty (60) days of the termination of the litigation. The remaining
balance ($2,150,000) (plus interest) shall be delivered to Mr. Hills within one
(1) business day of the effective date of this Amendment.
7. MODIFICATION OF GENERAL RELEASE - The General Release, dated July
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15, 2000, executed by LML, CPI, CHI and Chequemark in favor of Mr. Hills
and CTC is modified to exclude claims by LML, CPI, CHI and Chequemark for
indemnification in the event that
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Global, Airtime, Xx. Xxxx or one or more of their sublicensees brings an action
(including the assertion of one or more counterclaims) against LML or one or
more of its subsidiaries and obtains a monetary award against LML or one or more
of its subsidiaries. This indemnification provision does not apply to legal fees
incurred by LML or one or more of its subsidiaries in pursuit of claims brought
by LML or one or more of its subsidiaries against Global, Airtime, Xx. Xxxx or
one or more of their sublicensees or in defense of any claims brought by Global,
Airtime, Xx. Xxxx or any of their respective sublicensees. In the event of a
money and/or stock settlement whereby LML or one or more of its subsidiaries
agrees to pay money and/or give LML stock, LML shall give reasonable notice in
writing of all terms of the offer. Within five (5) business days of the date all
of the terms of the offer are communicated by LML to Mr. Hills in writing (to
his last known address), Mr. Hills shall communicate in writing to LML whether
he accepts and agrees with the offer. If within said time Mr. Hills communicates
in writing to LML that he agrees with and accepts the offer, then Mr. Hills
shall forward to LML a cashier's check and/or LML stock, as the case may be, in
the amount equal to the settlement amount. If within said time Mr. Hills
communicates in writing to LML that he does not accept and agree with one or
more of the terms of the offer, LML nonetheless may enter into the settlement
but in that event will have no right whatsoever to indemnification thereof from
Mr. Hills of any part of the settlement amount. If Mr. Hills does not provide a
written response to LML within five (5) business days of the date all of the
terms of the offer are communicated by LML to Mr. Hills in writing (to his last
known address), then Mr. Hills shall be deemed to have accepted and agreed with
the terms of the offer. In the event Mr. Hills accepts and agrees in writing
with the offer or fails to respond as described in the immediately preceding
sentence, then Mr. Hills shall indemnify LML and/or one or more of its
subsidiaries in full for the entire settlement amount. In the event LML
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or one or more of its subsidiaries agrees to or is ordered to participate in
mediation with Global, Airtime, Xx. Xxxx or one or more of their sublicensees,
then Mr. Hills shall be given not less than ten (10) business days notice in
writing (to his last known address) of the time, date and location of the
mediation. During the mediation, Mr. Hills shall be entitled to attend the
mediation, with or without counsel, and shall be entitled to participate fully
in said mediation. The terms of this Paragraph shall apply to any settlement
reached during said mediation, except that in the event Mr. Hills fails to
attend said mediation after receiving the written notice of mediation required
by this Paragraph, Mr. Hills shall indemnify LML and/or one or more of its
subsidiaries in full for the entire settlement amount reached in mediation
notwithstanding a lack of acceptance and agreement by Mr. Hills.
8. RELEASE FROM CERTAIN OBLIGATIONS OF PARAGRAPH 9 OF SETTLEMENT
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AGREEMENT - Provided that Mr. Hills has delivered into escrow the executed
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Affidavit referenced in Paragraph 1, the writing setting forth the relevant
facts pursuant to Paragraph 5 and this Amendment executed by Mr. Hills, Mr.
Hills hereby is relieved of the obligations. Mr. Hills is hereby relieved of
the obligations of acquiring a release from Global (attached as Exhibit E to the
Settlement Agreement) and of acquiring copies of any software, equipment or
other property from Global, Airtime, Xx. Xxxx or any of their respective
sublicensees. Exhibit I to the Settlement Agreement shall be returned by the
Escrow Agent to Mr. Hills.
9. EXTENT OF AMENDMENT - Except as provided in this Amendment, all terms
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of the Settlement Agreement shall remain in full force and effect.
10. COUNTERPARTS - This Amendment may be executed in six (6) counterparts,
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each of which shall be deemed an original but all of which together shall
constitute one and the same
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Amendment. This Amendment shall be executed and delivered into escrow with
Xxxxxxxx Xxxxx by August 21, 2000. The effective date of this Agreement is
August 21, 2000. Time is of the essence.
Witnessed By: LML PAYMENT SYSTEMS, INC.
______________________ By: _____________________________
Its Authorized Officer
______________________
CHEQUEMARK PATENT, INC.
______________________ By: _____________________________
Its President
______________________
CHEQUEMARK HOLDINGS, INC.
______________________ By: _____________________________
Its President
______________________
CHEQUEMARK, INC.
______________________ By: _____________________________
Its President
______________________
XXXX TECHNOLOGIES, INC.
______________________ By: _____________________________
Its President
______________________
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______________________ __________________________________
Xxxxxx X. Hills
______________________
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