SECOND AMENDMENT TO LICENSE AGREEMENT
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THIS SECOND AMENDMENT TO LICENSE AGREEMENT (this "Second Amendment") is
entered into and made effective as of May 4, 2000, by and between XXXXXXXXX
COMMUNICATIONS, INC., a Nevada corporation ("Xxxxxxxxx"), and ION SYSTEMS, INC.,
a Missouri corporation ("ION").
R E C I T A L S
A. Effective as of February 18, 1999, Xxxxxxxxx and ION entered into a
License Agreement (the "LICENSE AGREEMENT"), and effective as of Xxxxx 00, 0000,
Xxxxxxxxx and ION entered into a First Amendment to License Agreement (the
"FIRST AMENDMENT"; the License Agreement and the First Amendment are together
the "EXISTING AGREEMENTS"). Capitalized terms used in this Second Amendment that
are not otherwise defined herein shall have the respective meanings given to
such terms in the Existing Agreements.
B. The License Agreement contained the grant of a Stock Option, and the
First Amendment contained the grant of a Services Stock Option (the Stock Option
and the Services Option are collectively the "EXISTING OPTIONS"), to purchase a
total of 275,000 shares of the common stock, $.001 par value per share, of
Xxxxxxxxx ("COMMON STOCK"), upon the terms set forth in those agreements.
X. Xxxxxxxxx and ION desire to modify the Existing Agreements in the
manner set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. PAYMENT. Concurrently with the execution and delivery of this
Agreement by both parties, Xxxxxxxxx shall pay $45,000.00 to ION by wire
transfer to an account designated by ION.
2. EXISTING OPTION EXERCISE NOTICES. The parties acknowledge that ION
has previously undertaken to give notice pursuant to the Existing Agreements to
exercise the Existing Options. ION hereby rescinds any such notices, with the
same effect as if ION had not undertaken to give such notices or undertaken to
exercise the Existing Options. Immediately upon the execution and delivery of
this Agreement by both parties, Xxxxxxxxx shall return to ION (by overnight
delivery) the check for $1,312.50 delivered by ION to Kanakaris in connection
with ION's undertaking to give notice to exercise the Services Stock Option.
3. EXISTING OPTION CONDITIONS SATISFIED. The parties acknowledge that
all the conditions set forth in paragraphs (a) through (c) of Section 2.4 of the
First Amendment have been fully satisfied, and all of the Existing Options are
now fully exercisable. Section 2.4(d) of the First Amendment is hereby revised
so that the term of the Services Stock Option is extended and shall expire and
shall no longer be exercisable to the extent it is not exercised on or before
May 1, 2003. Xxxxxxxxx represents and warrants to ION that except to the extent,
if any, that the implementation of one or more of the Proposals (as defined
below) may constitute a Sale Event: (i) Xxxxxxxxx is in compliance with the
covenants in Section 4.4 of the License Agreement and Section 2.6 of the First
Amendment; and (ii) no Sale Event has occurred and Xxxxxxxxx is not currently a
party to any agreement under which a Sale Event is contemplated. ION waives its
rights under Section 4.5 of the License Agreement and Section 2.6(d) of the
First Amendment in respect of Proposal Nos. 3, 4 and 5 (the "Proposals") as
described in the Definitive Proxy Statement dated May 1, 2000 for the Special
Meeting of Stockholders of Kanakaris to be held on May 24, 2000, but ION's
rights thereunder shall not be waived and shall continue in full force and
effect as to any other event or occurrence that may constitute a Sale Event.
4. ADDITIONAL OPTION. Kanakaris hereby grants to ION the right under
the Xxxxxxxxx 2000 Stock Option Plan (the "Additional Option"), exercisable in
whole or in part in ION's sole discretion, at any time and from time to time
from the date hereof through and including May 1, 2003, to purchase from
Kanakaris up to 87,500 shares of Common Stock (the "Additional Option Shares")
at an exercise price of $1.295 per share, on the terms and subject to the
conditions described in this Second Amendment. The Additional Option and the
Additional Option Shares are subject to and entitled to the benefit of the terms
and conditions contained in Sections 2.5 and 2.6 of the First Amendment that are
applicable to the Services Stock Option and the Services Option Shares.
Xxxxxxxxx represents and warrants to ION that the grant of the Additional
Option, and the issuance and delivery of the Additional Option Shares upon any
exercise of the Additional Option, are on the date hereof and will be on the
date of any such issuance and delivery in compliance with all applicable
requirements of the Securities Act, the Exchange Act and any applicable state
securities laws.
5. REGISTRATION RIGHTS AND TRADING RESTRICTIONS. Sections 2.7 and 2.8
of the First Amendment and Sections 4.6 and 4.7 of the License Agreement are
hereby deleted in their entirety and replaced with the following:
(a) For all purposes under the Existing Agreements and this Second
Amendment, the term "SHARES DESIGNEE" shall include only the following persons:
Xxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxx, Xxxxx Xxxxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxx
Xxxxxxx, Xxxxxx Xxxx, and Xxxxx Xxxxxxxxx.
(b) Xxxxxxxxx shall (at the expense of Xxxxxxxxx) take all such actions
(including registration under the Securities Act, if such is required, and
filing reports under the Exchange Act, if such is required) as may be necessary
under applicable federal and state securities laws to enable and permit ION and
any Shares Designee to whom Xxxxxxxxx has issued Option Shares, Services Option
Shares or Additional Option Shares (collectively "ISSUED OPTION SHARES") to sell
up to an aggregate of 231,250 of their Issued Option Shares in the public
markets or on the exchange or other facility on which the Xxxxxxxxx Common Stock
is then publicly traded, without any holding periods under applicable federal
and state securities laws, by not later than May 1, 2001; PROVIDED, that (i)
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Xxxxxxxxx shall, if and to the extent permitted under any contract binding on
Xxxxxxxxx or to which Xxxxxxxxx has agreed prior to the date of this Second
Amendment to become bound, include the remaining 131,250 Issued Option Shares in
such registration statement; and (ii) Xxxxxxxxx shall only be required to
satisfy the state securities law requirements of Missouri, Illinois and
Pennsylvania. Until Xxxxxxxxx satisfies such requirements (and, with respect to
any Issued Option Shares exempted from such requirements, after satisfying such
requirements), any Issued Option Shares may be subject to restrictions on their
transferability unless the registration requirements of the Securities Act or
the requirements of the Commission's Rule 144 thereunder are satisfied.
(c) ION and all Shares Designees to whom Xxxxxxxxx has issued the
Issued Option Shares shall not, as a group, in the aggregate sell or transfer
more than 45,000 shares of the Issued Option Shares in any period of one
calendar month; PROVIDED, that this limitation shall expire and no longer be in
effect after May 1, 2002. Xxxxxxxxx may issue to its transfer agent stop
transfer instructions, and may require recipients of the Issued Option Shares to
execute reasonable lock-up agreements, to ensure compliance with this
restriction.
6. SECURITIES COMPLIANCE. The parties intend that the Existing Options,
the Additional Option and the Issued Option Shares (collectively the
"Securities"), have been, are being or will be issued in one or more private
transactions intended to be exempt from the registration requirements of the
Securities Act. Accordingly, ION hereby represents and warrants to Xxxxxxxxx as
follows:
(a) ION is acquiring the Securities for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Securities or any part thereof or interest therein, without prejudice, however,
to ION's right, subject to the provisions of this Second Amendment, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration.
(b) ION, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
(c) ION is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(d) ION is not purchasing the Securities as a result of or subsequent
to any advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(e) ION understands and acknowledges that (i) the Securities are being
offered and sold to it without registration under the Securities Act in a
private placement that is exempt from the registration provisions of the
Securities Act, and (ii) the availability of such exemption depends in part on,
and Xxxxxxxxx will rely upon the accuracy and truthfulness of, the foregoing
representations, and ION hereby consents to such reliance.
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(f) ION understands that as a condition to the issuance of the Issued
Option Shares, Xxxxxxxxx may require ION and any Share Designee who are to
receive such shares of Common Stock to execute an investment representation
letter containing the representations in the foregoing paragraphs (a) through
(e).
7. RELEASE OF CLAIMS.
(a) ION hereby irrevocably and unconditionally releases, acquits and
forever discharges Kanakaris, as well as all agents, officers, directors,
shareholders, employees, representatives, insurance carriers, predecessors,
successors, assigns, attorneys, divisions, parents, subsidiaries and affiliates
of Kanakaris and all persons acting by, through, under or in concert with
Kanakaris or any of the foregoing persons or entities (collectively the
"Kanakaris Releasees"), from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and expenses
(including reasonable attorneys' fees and costs actually incurred) of any nature
whatsoever, known or unknown, suspected or unsuspected, arising out of alleged
violations of or otherwise relating to Section 4 of the License Agreement and
the Stock Option granted therein, or Section 2 the First Amendment and the
Services Stock Option granted therein, which ION now has, or claims to have, or
which ION at any time heretofore had, or claimed to have, from the beginning of
time up to and including the date of this Second Amendment, against any of the
Kanakaris Releasees (collectively "Claims"); PROVIDED, that notwithstanding
anything to the contrary contained herein, the term "Claims" shall not include,
and ION is not releasing or waiving the right to enforce its rights under or
with respect to, any of the following: (i) this Second Amendment; (ii) the
License Agreement other than Section 4 thereof, and the First Amendment other
than Section 2 thereof; and (iii) Section 4 of the License Agreement (as
modified herein), and Section 2 of the First Amendment (as modified herein),
from and after the date of this Second Amendment.
(b) It is understood and agreed that the foregoing release is a full,
complete and final general release of any and all Claims described herein, and
that ION and Xxxxxxxxx agree that such release shall apply to all unknown,
unanticipated, unsuspected and undisclosed claims, demands, liabilities, actions
or causes of action, in law, equity or otherwise, as well as those which are now
known, anticipated, suspected or disclosed.
(c) It is understood and agreed that the foregoing release of Claims is
a compromise settlement of disputes between the parties hereto and shall not be
construed to be an admission of any liability or obligation whatsoever by any
Kanakaris Releasee to ION or to any other person whomsoever.
(d) ION represents that it has not filed with any court, governmental
agency or arbitration service any complaint, charge or lawsuit against any of
the Kanakaris Releasees involving any Claims released herein, and ION
irrevocably covenants and agrees that it shall forever refrain from initiating,
filing, instituting, maintaining or proceeding upon, or encouraging, advising or
voluntarily assisting any other person or entity to institute, maintain or
proceed upon any Claim of any nature whatsoever released in this Section 7.
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(e) ION represents that it fully understands its right to discuss all
aspects of the foregoing release with its attorneys, that it has availed itself
of this right or has had sufficient opportunity to do so, that the foregoing
release was reached after negotiations, that it has carefully reviewed and fully
understood all of the provisions of the foregoing release, and that it is
voluntarily entering into the foregoing release.
(g) ION hereby acknowledges and agrees that the provisions of Section
1542 of the Civil Code of the State of California, and any law or legal
principle of similar effect in any jurisdiction, with respect to the foregoing
release are expressly waived by ION, and that Section 1542 of the Civil Code of
the State of California reads as follows:
"ss. 1542. A General Release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
The parties do not intend that this paragraph should be construed as altering
the effect of Section 11.8 of the License Agreement.
(h) ION represents and warrants that it has not directly or indirectly,
by operation of law or otherwise, transferred or assigned or attempted to
transfer or assign any of the Claims released hereunder.
8. MISCELLANEOUS.
(a) This Second Amendment and the License Agreement and First Amendment
contain the entire agreement between the parties hereto and constitute the
complete, final and exclusive embodiment of their agreement with respect to the
subject matter hereof. The terms of this Second Amendment are contractual and
not a mere recital. To the extent there are any conflicts between this Second
Amendment and the License Agreement or First Amendment, this Second Amendment
shall control.
(b) This Second Amendment shall bind the heirs, personal
representatives, successors and permitted assigns of each party, and inure to
the benefit of each party and Xxxxxxxxx Releasee, their or its agents,
directors, officers, employees, servants, successors and permitted assigns.
(c) This Second Amendment shall survive the issuance and delivery of
the consideration being exchanged herein and the termination of arrangements
contained herein.
(d) Section 11 of the License Agreement is incorporated by reference
and made a part of this Second Amendment with the same effect as if fully set
forth herein, and as if references therein to the Agreement were references to
this Second Amendment; PROVIDED, that the address for giving notices to
Xxxxxxxxx is corrected to 0000 Xxxxxx Xxxxxxxxx, Xxxxx X0, Xxxxx Xxxx,
Xxxxxxxxxx 00000, Telephone: (000) 000-0000, Facsimile: (000) 000-0000.
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(e) Xxxxxxxxx and ION hereby make and restate all the representations
and warranties made and stated by Xxxxxxxxx and ION in Section 6 and Section 7,
respectively, of the License Agreement, with the same effect as if they were
made and stated on the date of this Second Amendment, and with the same effect
as if all references therein to the Agreement were references to the License
Agreement as amended by the First Amendment and this Second Amendment; PROVIDED,
that the provisions of Sections 6 and 7 referred to below are modified to read
as indicated below.
(i) Section 6.2 is modified to read as follows: The authorized
capital stock of Xxxxxxxxx consists of 100,000,000 shares of common stock, $.001
par value per share, and 5,000,000 shares of preferred stock, $.01 par value per
share. Of the 5,000,000 shares of preferred stock, 1,000,000 have been
designated as Class A Convertible Preferred Stock and the remaining 4,000,000
shares are undesignated. As of April 7, 2000, there were outstanding 31,090,775
shares of common stock, 1,000,000 shares of preferred stock and options to
purchase approximately 6,031,250 shares of common stock. As of the date of this
Second Amendment, Xxxxxxxxx also has outstanding warrants to purchase
approximately 33,334 shares of common stock and warrants, debentures and escrow
obligations as described in prospectus supplements for Registration File Nos.
333-84909 and 333-31748 as publicly available through XXXXX.
(ii) Section 6.7 is modified to read as follows: No consent,
authorization, order, license, certificate or permit of or from, notice to, or
declaration or filing with, any governmental authority, court or other tribunal,
or any third party, is required for Kanakaris to execute, deliver and perform
this Agreement, except such as may be required under federal or state securities
laws as contemplated herein.
(iii) Section 6.8 is modified to read as follows: Xxxxxxxxx
has timely filed all statements and reports required to be filed by Kanakaris
under the Securities Act and the Exchange Act (the "Public Filings") since
Xxxxxxxxx filed a registration statement on Form SB-2/A on November 19, 1999;
true, correct and complete copies of all such Public Filings filed by Xxxxxxxxx
since November 19, 1999 are publicly available through XXXXX. As of their
respective dates or, in the case of registration statements, their effective
dates (or if amended or superseded by a filing prior to the date of this Second
Amendment, then on the date of such filing), none of the Public Filings
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(iv) Section 7.1 is modified to read as follows: ION has been
duly incorporated and organized and is validly existing and in good standing as
a corporation under the laws of the State of Missouri, is not required to be
qualified to transact business as a foreign corporation under the laws of any
other jurisdiction, and has the full right, power and authority to enter into,
execute, deliver and perform this Agreement.
(f) The License Agreement, as amended by the First Amendment and this
Second Amendment, shall remain in full force and effect in accordance with the
terms of the License Agreement as amended by the First Amendment and this Second
Amendment.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their duly authorized representatives as of the date
first above written.
XXXXXXXXX COMMUNICATIONS, INC.
By: /S/ Xxxx Xxxxxxxxx
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Xxxx X. Xxxxxxxxx, President
ION SYSTEMS, INC.
By: /S/ Xxxx Xxxxxx
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Xxxx Xxxxxx, Co-Chairman and CEO
By: /S/ Xxx Xxxxxx
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Xxx Xxxxxx, Co-Chairman
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