EXHIBIT 10.18
QUARTERLY REVENUE BASED PAYMENT AGREEMENT
This Quarterly Revenue Based Payment Agreement (this "Agreement") is
made and entered into as of February 25, 2002, by and among SmartGate Inc., a
Nevada corporation ("SmartGate") and the persons and entities set forth on
Exhibit "A" or their assigns (individually a "Recipient" and collectively, the
"Recipients").
RECITALS:
WHEREAS, pursuant to an Agreement of Merger and Plan of Reorganization
by and among SmartGate, SmartGate/RadioMetrix Acquisition Corp. and RadioMetrix
Inc. ("RadioMetrix") which was entered into as of February 25, 2002 ("Merger
Agreement") and closed on even date herewith ("Closing"), the Recipients are
entitled to a certain quarterly revenue based payment; and
WHEREAS, the parties hereto, by this Agreement, wish to memorialize and
set forth the terms, conditions and details of the quarterly revenue based
payment arrangement;
NOW, THEREFORE, in consideration of the foregoing and the covenants,
promises and representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
intending to be legally bound, agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Change of Control" shall mean that SmartGate has: entered into
a merger transaction in which SmartGate is not the survivor; or sold shares
representing sixty (60%) percent or more of the then outstanding shares in a
transaction; or sold all or substantially all (i.e. - seventy [70%] percent or
more of the fair market value) of the RadioMetrix Technology related assets; or
sold or granted a master license to the RadioMetrix Technology to a third party
in which the stockholders are different than the stockholders of SmartGate.
"RadioMetrix Technology" shall mean all applications or uses
(save and except only those covered by the Sublicense Agreement between
RadioMetrix and SmartGate, L.C. dated February 14, 1997, as amended by Amendment
dated March 2, 1999 which is incorporated by reference) based upon or covered by
the License Agreement between RadioMetrix and SDR Metro Inc. dated March 14,
1992 as amended by Amendment dated May 26, 1998 which is incorporated by
reference. The present or future validity or enforceability of the Sublicense
Agreement or the License Agreement shall not affect their use for the
definitional purpose as set forth herein.
"Revenue Based Payment" shall mean a quarterly revenue-based
payment equal to seven (7%) percent of all Revenue from the RadioMetrix
Technology.
"Revenue from the RadioMetrix Technology" shall mean all revenue
of any description, including but not limited to, revenue from product sales,
licenses, sublicenses, royalties, leases, asset sales, joint ventures or other
consideration, payments, income or revenue derived from or related to the
RadioMetrix Technology.
"Super Majority" shall mean the holders of seventy-five percent
(75%) of the Recipients' entitlement to the Revenue Based Payment or Termination
Payment, which shall
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include any of the Recipients' respective heirs, successors or assigns who
acquire all or any part of the entitlement of a Recipient.
"Termination Payment" shall mean a one-time payment in an
amount equal to the full commercial value of the Revenue Based Payments
determined pursuant to Paragraph 4 of this Agreement which, once paid in full,
has the result of terminating SmartGate's ongoing obligation to pay Revenue
Based Payments under this Agreement.
2. REVENUE BASED PAYMENT.
a. Until terminated by a Termination Payment pursuant to
this Agreement, SmartGate shall pay to the Recipients the Revenue Based Payment
as defined herein.
b. Each Revenue Based Payment shall be paid within fifteen
(15) calendar days following each fiscal quarter of SmartGate.
c. Unless otherwise agreed by SmartGate and the Super
Majority, each Revenue Based Payment shall be paid one-half (1/2) in cash and
one-half (1/2) in SmartGate common stock. The SmartGate common stock shall be
valued at seventy-five (75%) percent of the average closing market price for the
thirty (30) calendar days immediately preceding the end of the applicable
quarterly period.
d. In the event any Revenue Based Payment is not paid when
due, such unpaid Revenue Based Payment(s) shall accrue interest at the lower of
eighteen (18%) percent or the amount permissible under law per annum from the
due date until the date said Revenue Based Payment (or Revenue Based Payments)
is paid in full.
e. Annually, the Quarterly Revenue Based Payments made
shall be reviewed by SmartGate's independent public accountants, which shall
provide the manner of calculation and the amount of payment due for the year.
The Recipients shall have the right to independently audit said calculation. If
any payment is underpaid by greater than ten percent (10%) of the amount that
should have been paid, SmartGate shall immediately pay the unpaid amount with
interest on such unpaid amount at the lower of eighteen percent (18%) or the
amount permissible under law per annum from the date the unpaid amount should
have been paid until it is paid in full.
f. The Revenue Based Payment shall be made to the
Recipients (or their respective heirs, successors or assigns) in the following
amounts:
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NAME % OF THE REVENUE BASED
PAYMENT BEING PAID
----------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxx 42.535953
----------------------------------------------------------------------------
Xxxxxxxxx Xxxxxxxx Xxxxxx Irrevocable Trust 21.267976
Under Agreement Dated the 29th day of July
1998
----------------------------------------------------------------------------
Xxxxxxx Xxxxxxx Xxxxxx Irrevocable Trust 21.267976
Under Agreement Dated the 29th day of
July 1998
----------------------------------------------------------------------------
Xxxxxx X. Xxxx 10.066844
----------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 4.861251
----------------------------------------------------------------------------
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g. Any assignment by a Recipient of part or all of their interest
in the Revenue Based Payment shall be effective upon delivery of said assignment
in written form acceptable to SmartGate.
3. TERM AND TERMINATION PAYMENT.
a. This Agreement and SmartGate's obligation to make
Revenue Based Payments shall continue until terminated by mutual agreement of
the parties or until terminated pursuant to Paragraphs 3(b) and 3(c) hereof.
b. SmartGate may terminate its obligation to make future
Revenue Based Payments by making a one-time payment to the Recipients (or their
respective heirs, successors or assigns in interest) of the Termination Payment
as determined pursuant Paragraph 4.
c. Should SmartGate enter into a transaction involving a
Change of Control of SmartGate, SmartGate shall, prior to the closing of such
transaction, notify the Recipients in writing of the anticipated Change of
Control transaction. The Super Majority of the Recipients shall, within twenty
(20) calendar days after the receipt of such notice, elect, in the exercise of
their sole discretion, to: (i) require SmartGate to terminate its obligation
pursuant to Paragraph 3(b) by making the Termination Payment thereby terminating
SmartGate's ongoing obligation under this Agreement to make Revenue Based
Payments. In the event of such election, the Termination Payment shall be made
in full before the closing of the Change of Control transaction, unless
otherwise agreed in writing by the Super Majority of the Recipients; or (ii)
require that this Agreement and SmartGate's ongoing obligation to make Revenue
Based Payments shall continue as an express obligation of the surviving entity
or the entity which gains control over SmartGate or its assets.
d. The Termination Payment shall be paid to the Recipients
(or their respective heirs, successors or assigns) in the same percentage
amounts as the Revenue Based Payments are paid.
e. Unless otherwise agreed by SmartGate and the Super
Majority, the Termination Payment shall be paid one-half (1/2) in cash and
one-half (1/2) in SmartGate common stock. The SmartGate common stock shall be
valued at seventy-five (75%) percent of the average closing market price for the
thirty (30) calendar days immediately preceding the date of the Termination
Payment.
4. DETERMINATION OF THE AMOUNT OF THE TERMINATION PAYMENT.
a. The amount of the Termination Payment shall be
determined by appraisal.
b. Unless otherwise agreed in writing by SmartGate and the
Super Majority of the Recipients, the appraisal shall reflect the full
commercial value of the entitlement to receive Revenue Based Payments for the
duration of this Agreement. The determination of full commercial value shall not
be adjusted for current or past relationships between the parties, past Revenue
Based Payments, other consideration paid under the Merger Agreement or equity
interests of the Recipients in SmartGate. The appraisal shall take into
consideration the future prospects of the RadioMetrix Technology, the present as
well as future product applications and the potential of future revenue assuming
reasonable financial support for product development, product introduction,
marketing and sales support. Further, the appraisal shall take into
consideration the potential of future Revenue Based Payments over the full term
of the entitlement (including, but not limited to, potential product sales,
license, royalty, joint venture
4
and other revenue) from products or technology applications which are then
commercialized and future or potential applications.
c. The appraisal shall be performed by an appraisor
mutually acceptable to SmartGate and the Super Majority. In the event SmartGate
and the Super Majority cannot agree upon who the appraisor shall be, then
SmartGate shall select an appraisor and the Super Majority shall select an
appraisor, and those two appraisors shall select a third appraisor and that
third appraisor shall be the appraisor to determine the amount of the
Termination Payment based upon the criteria set forth in Paragraph 4(b) above.
5. RECIPIENTS REMEDIES. SmartGate's obligation to make the Revenue
Based Payments constitutes a material element of this Agreement. SmartGate
acknowledges that, in the absence of a breach by RadioMetrix, SmartGate shall
not fail or refuse to make any Revenue Based Payments when due or otherwise
challenge its obligation to make the Revenue Based Payments. Such failure,
refusal or challenge by SmartGate would be wholly inconsistent with the
intentions of the parties entering into this Agreement and could be grounds for
bad faith. Any failure by SmartGate to timely make the Revenue Based Payments
when due or any challenge to the legality or enforceability of the provisions
of this Agreement shall be deemed to be a material breach of this Agreement
entitling the Recipients to seek damages and specific performance under the
arbitration provision of this Agreement.
6. ACKNOWLEDGMENT OF PRESENT AND FUTURE CONFLICTS OF INTEREST.
a. SmartGate has been fully advised of the conflicts
of interest of the Recipients and Xxxxxx & Xxxxx, P.A. (collectively, the
"Conflicted Parties"). SmartGate has had full access to all books, records and
other documents of RadioMetrix and to ask questions of RadioMetrix' officers
and directors. SmartGate appointed an Independent Committee of its Board of
Directors (the "Independent Committee of Directors"), and has vested said
Independent Committee of Directors with full and complete authority to
negotiate, perform due diligence and, in its sole discretion, to enter into and
close this Agreement and the Merger Agreement. The conflicts of interest of the
Conflicted Parties were expressly waived by the Independent Committee of
Directors. Further, the Independent Committee of Directors hereby waives: (i)
any defense to the future enforceability or validity of this Agreement arising
out of or relating to the conflicts of interest of the Conflicted Parties; and
(ii) any claim or cause of action which may be brought by SmartGate against the
Conflicted Parties based upon or related to the conflicts of interest.
b. Following the Effective Time of the Merger Agreement,
SmartGate shall conduct its business, including all aspects relating to the
commercialization, development, product introduction, product marketing and the
establishment of product and licensing pricing of the RadioMetrix Technology in
a fashion deemed by the Board of Directors to be in the best interest of
SmartGate and its stockholders without regard to the interests of the Recipients
or with regard to the Merger Consideration and Additional Merger Consideration
issued under the Merger Agreement. The Recipients hereby acknowledge the
absolute discretion of SmartGate and its Independent Committee of Directors to
make any and all decisions regarding the manner in which the RadioMetrix
Technology shall be commercialized and hereby waive any right to object thereto.
In the event that the Board of Directors identifies any matter before the Board
or SmartGate which involves a conflict of interest between SmartGate and the
Recipients, the decision or matters relating to or affected by said conflict of
interest shall be exclusively and
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solely resolved by an Independent Committee of Directors appointed by the Board
of Directors. Such Independent Committee of Directors shall have full access to
independent legal counsel and independent advisors, including financial
advisors. In all such matters, including matters relating to the creation of an
Independent Committee of Directors or the determination of whether a conflict of
interest may be involved, Recipients who are directors or officers of SmartGate
shall abstain. Any determination as to whether a conflict of interest exists
shall be determined by the Independent Members of the Board of Directors with
all interested or conflicted Directors abstaining.
7. ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be exclusively settled by
binding arbitration before the American Arbitration Association situated in
Tampa, Florida before a panel of three (3) arbitrators. All aspects of the
arbitration shall be governed by the rules then in effect of the American
Arbitration Association. Arbitration shall be the sole and exclusive manner for
resolving all disputes hereunder. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Each party
shall pay its respective share of the fees, costs and expenses billed by the
American Arbitration Association and the arbitrators, and the prevailing party
shall recover from the non-prevailing party all of the prevailing party's costs,
expenses and fees it incurred in connection with the arbitration, including
reasonable attorneys' fees.
8. ASSIGNMENT.
a. SmartGate shall not assign this Agreement without first
obtaining the written permission of the Super Majority.
b. Any one or all of the Recipients may assign this
Agreement without the permission of SmartGate.
9. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) If to SmartGate:
To: Independent Committee of Directors
SmartGate Inc.
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Independent Committee Member,
Xxxxxx X. Xxxx
Fax: (000) 000-0000
Copy to:
Xxxxxxx & Xxxxxxx, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
(b) If to Recipients:
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To: The addresses set forth on Exhibit "A".
10. RULES OF CONSTRUCTION. The provisions of Section 8 of the
Indemnity Agreement to which this Agreement is attached as Exhibit "A" are
incorporated herein by this reference and made an integral part hereof.
11. MISCELLANEOUS. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida. This Agreement may be
executed by the parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be an original but all counterparts shall together
constitute one and the same instrument. Facsimile signatures to this Agreement
are permitted and shall be deemed the same as the original signature of the
signing party for all purposes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by themselves or their duly authorized respective officers or representatives,
all as of the date first above written.
SmartGate Inc. Recipients
a Nevada Corporation
/s/ XXXXXXX X. XXXXXXX
/s/ XXXXXX X. XXXX -------------------------------
--------------------------- Xxxxxxx X. Xxxxxxx
By: Xxxxxx X. Xxxx
Its: Chief Financial Officer
Xxxxxxx Xxxxxxx Xxxxxx Irrevocable
Trust u/a/d July 29, 1998
/s/ XXXXXXX X. XXXXX, TRUSTEE
------------------------------------
Xxxxxxx X. Xxxxx, Trustee
Xxxxxxxxx Xxxxxxxx Xxxxxx
Irrevocable Trust u/a/d/ July 29, 1998
/s/ XXXXXXX X. XXXXX, TRUSTEE
------------------------------------
Xxxxxxx X. Xxxxx, Trustee
/s/ XXXXXX X. XXXX
------------------------------------
Xxxxxx X. Xxxx
/s/ XXXXXXX X. XXXXX
------------------------------------
Xxxxxxx X. Xxxxx
Exhibit "A"
Recipients
Xxxxxxx X. Xxxxxxx
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxxx Xxxxxxx Xxxxxx Irrevocable
Trust u/a/d July 29, 1998
c/o Xxxxxxx X. Xxxxx, Trustee
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxxxxx Xxxxxxxx Xxxxxx Irrevocable
Trust u/a/d July 29, 1998
c/o Xxxxxxx X. Xxxxx, Trustee
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxx
0000 Xxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxxx X. Xxxxx
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
AMENDMENT TO QUARTERLY REVENUE BASED PAYMENT AGREEMENT
This Amendment to Quarterly Revenue Based Payment Agreement (the
"Amendment") is entered into as of April 24, 2003 by and among Invisa, Inc.
f/k/a SmartGate Inc., a Nevada corporation ("SmartGate n/k/a Invisa"), and the
persons and entities set forth on Exhibit "A" or their assigns (individually, a
"Recipient" and collectively, the "Recipients").
R E C I T A L S:
WHEREAS, pursuant to an Agreement of Merger and Plan of Reorganization
by and among SmartGate n/k/a Invisa, SmartGate/RadioMetrix Acquisition Corp., a
Nevada corporation, and Radio Metrix Inc., a merged and now dissolved Florida
corporation dated as of February 25, 2002 ("Merger Agreement"), the Recipients
are entitled to certain Revenue Based Payments, the structure, terms and
conditions of which are set forth in the Quarterly Revenue Based Payment
Agreement ("Agreement"); and
WHEREAS, the parties wish to modify the Agreement to provide that each
Revenue Based Payment (and the Termination Payment) be paid all in cash (as
opposed to 1/2 in cash and 1/2 in stock), unless otherwise mutually agreed to by
SmartGate n/k/a Invisa and the Super Majority of the Recipients; and
WHEREAS, the parties desire to modify the Revenue Based Payment
structure and the Termination Payment structure pursuant to the terms set forth
hereinbelow.
NOW, THEREFORE, in consideration of the mutual promises made herein,
and for other good and valuable consideration, receipt of which is hereby
acknowledged by each party, the parties, intending to be legally bound, hereby
agree that the Agreement is amended as follows:
1. The provisions of subparagraph c. of Paragraph 2. are hereby deleted
in their entirety, and replaced with the following:
"Unless otherwise mutually agreed by SmartGate n/k/a Invisa and the
Super Majority, each Revenue Based Payment shall be paid in cash. In
the event SmartGate n/k/a Invisa and the Super Majority mutually agree
that a portion of the Revenue Based Payments shall be paid in SmartGate
n/k/a Invisa common stock, then in such event, the SmartGate n/k/a
Invisa common stock shall be valued at seventy-five (75%) percent of
the average closing market price for the thirty (30) calendar days
immediately preceding the end of the applicable quarterly period."
2. The provisions of subparagraph e. of Paragraph 3. are hereby deleted
in their entirety, and replaced with the following:
"Unless otherwise mutually agreed between SmartGate n/k/a Invisa and
the Super Majority, the Termination Payment shall be paid entirely in
cash. In the event SmartGate n/k/a Invisa and the Super Majority
mutually agree that a portion of the Termination Payment shall be paid
in SmartGate n/k/a Invisa common stock, then in such event, the
SmartGate n/k/a Invisa common stock shall be valued at seventy-five
(75%) percent of the average closing market price for the thirty (30)
calendar days immediately preceding the date of the Termination
Payment."
3. Except as set forth hereinabove, the Agreement remains unchanged,
and in full force and effect, and in the case of any conflict between the
provisions of this Amendment and the Agreement, the provisions hereof shall
prevail.
4. This Amendment was prepared by Xxxxxxx Xxxxx, as general counsel to
Invisa. Xx. Xxxxx is a former shareholder of RadioMetrix with approximately 4.8%
ownership. Xx. Xxxxx is also a shareholder and employee of Invisa. Xx. Xxxxx has
advised all parties to this Amendment to consult with and rely upon independent
legal counsel. By execution hereof, all parties expressly waive Xx. Xxxxx'x
conflict of interest.
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed
by themselves or their duly authorized respective officers or representatives,
all as of the date first above written.
Invisa, Inc. f/k/a SmartGate Inc. Recipients
a Nevada Corporation
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
/s/ Xxxxxx X. Xxxx Xxxxxxx X. Xxxxxxx
---------------------------------
By: Xxxxxx X. Xxxx
Its: Chief Financial Officer
Xxxxxxx Xxxxxxx Xxxxxx Irrevocable
Trust u/a/d July 29, 1998
/s/ Xxxxxxx X. Xxxxx, as Trustee
-------------------------------------
Xxxxxxx X. Xxxxx, Trustee
Xxxxxxxxx Xxxxxxxx Xxxxxx
Irrevocable Trust u/a/d July 29, 1998
/s/ Xxxxxxx X. Xxxxx, as Trustee
-------------------------------------
Xxxxxxx X. Xxxxx, Trustee
/s/ Xxxxxx X. Xxxx
-------------------------------------
Xxxxxx X. Xxxx
/s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
EXHIBIT "A"
RECIPIENTS
Xxxxxxx X. Xxxxxxx
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxxx Xxxxxxx Xxxxxx Irrevocable
Trust u/a/d July 29, 1998
c/o Xxxxxxx X. Xxxxx, Trustee
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxxxxx Xxxxxxxx Xxxxxx Irrevocable
Trust u/a/d July 29, 1998
c/o Xxxxxxx X. Xxxxx, Trustee
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxx
0000 Xxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxxx X. Xxxxx
000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
