Attached files
| file | filename |
|---|---|
| 10-Q - FORM 10Q 091231 - LML PAYMENT SYSTEMS INC | form10q.htm |
| EX-31.1 - EXHIBIT 31_1 - LML PAYMENT SYSTEMS INC | exh31_1.htm |
| EX-32.1 - EXHIBIT 32_1 - LML PAYMENT SYSTEMS INC | exh32_1.htm |
| EX-31.2 - EXHIBIT 31_2 - LML PAYMENT SYSTEMS INC | exh31_2.htm |
CONFIDENTIAL
TREATMENT
Exhibit
10.1
SETTLEMENT AND LICENSE
AGREEMENT
This Settlement and License Agreement
(the “Agreement”) is entered into by LML Patent Corp., (“LML”) and The Royal
Bank of Scotland plc. (“RBS”). LML and RBS are individually referred
to as “Party” and collectively as the “Parties.” This Agreement is
effective as of the 29th day
of December, 2009 (“Effective Date”).
RECITALS
WHEREAS, LML owns rights in
certain U.S. Patents related to making, using, offering for sale and selling
Electronic Check Conversion systems and services;
WHEREAS, LML began an action
against RBS and other defendants in the United States District Court for the
Eastern District of Texas, Marshall Division, 2-08-CV-448-DF (“Litigation I”)
and 2-09-CV-180-TJW (“Litigation II”) (collectively, the “Lawsuits”), alleging
infringement of LML’s U.S. Patent No. RE40,220; and
WHEREAS, the Parties have
reached a settlement of their dispute, and RBS desires to license LML’s
patents;
NOW, THEREFORE, in
consideration of the covenants contained in this Agreement and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. DEFINITIONS.
The following definitions apply to this
Agreement:
(a) “ACH”
is the acronym for the “Automated Clearing House” Network and means the
electronic payment network regulated by the National Automated Clearing House
Association (“NACHA”).
(b) “ACH
File” means the electronic transaction that results from ECC and includes NACHA
standard entry class codes ARC, WEB, POP, TEL, and BOC.
(c)
“Affiliate” means any person or entity that directly or indirectly owns or
controls, is owned or controlled by, or is under common ownership or control
with, such Party, where “control” means ownership of fifty percent (50%) or more
of the capital stock or other ownership interest of the person or entity
carrying the right to vote for or appoint directors or their equivalent (if not
a corporation).
(d) “Court”
means the United States District Court for the Eastern District of Texas,
Marshall Division.
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(e) “Customer”
means any person or entity that purchases or receives Licensed Products and
Services directly from Licensee. Specifically excluded from this
definition are (1) Defendants, (2) banks, banking institutions and payment
processing companies, and (3) any person or entity that purchases or receives
Licensed Products and Services directly from Licensee on behalf of a bank,
banking institution, or payment processing company.
(f) “Defendant”
means any defendant named in the Lawsuits and any Affiliate of such
defendant.
(g) “ECC”
is the acronym for “Electronic Check Conversion” and means the process or system
by which a paper check is converted to an electronic transaction.
(h) “Licensed
Products and Services” means products or services of RBS that create, process,
or transmit ACH Files that RBS originates, receives from Third Party Converters
and/or receives or generates on behalf of Customers, and that practice one or
more claims of the LML Patents.
(i) “Licensee”
means RBS and its Affiliates as of the Effective Date.
(j) “LML
Patents” means (i) U.S. Patent No. RE40,220, (ii) any issued patent and any
pending patent application anywhere in the world that LML currently owns or
controls (or has the right to own or control) as of the Effective Date of this
Agreement; (iii) any patent or application to which any of the foregoing patents
and/or patent applications claims priority, and (iv) any continuations,
continuations in part, reissues, reexamination certificates, and/or divisional
applications of the foregoing patents and/or patent applications described
above.
(k) “Third
Party Converter” means any person or entity that creates or processes ACH Files
on behalf of RBS and transmits those ACH Files to RBS for the purpose of further
transmission to the ACH Network (as part of an ACH pass-through transaction)
using the Licensed Products and Services. Specifically excluded from
this definition are (1) Defendants, (2) banks and banking institutions, and (3)
any person or entity that creates or processes ACH Files on behalf of any bank
or banking institution other than RBS, and that transmits those ACH Files to RBS
for the purpose of further transmission to the ACH Network (as part of an ACH
pass-through transaction) using the Licensed Products and Services.
2. SETTLEMENT
OF THE LITIGATION.
2.1 Stipulated
Dismissal. The Parties agree to direct their counsel to file
with the Court a joint motion for dismissal with prejudice of the Parties’
respective claims for relief in Litigation I within five (5) days after the
receipt of payment specified in Section 3.1.
2.2 No Award of Fees or
Costs. The Parties agree that they shall bear their own costs
and attorneys' fees relating to Litigation I.
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2.3 No Attempt to
Invalidate. Licensee agrees that, in the absence of a subpoena
or court order requiring its participation or support, it shall not take any
action, participate in or support any suit, claim, action, litigation,
administrative proceeding, or proceeding of any nature brought by or against LML
that concerns or challenges the validity or enforceability of the LML Patents,
unless such suit, claim, action, litigation or proceeding to enforce one or more
of the LML Patents is brought by LML or its successors, assigns, Affiliates, or
licensees against Licensee, or places Licensee in a reasonable apprehension of
being sued on one or more of the LML Patents.
3. PAYMENT
AND TERMINATION
3.1 Payment by
Licensee. Licensee agrees to pay to LML the sum of one million
one hundred fifty thousand U.S. dollars ($1,150,000.00) within ten (10) business
days following the Effective Date. The amount will be delivered to
LML’s counsel, McKool Smith P.C., via wire transfer to the following
account:
Bank:
Inwood National Bank
Address:
7621 Inwood Road, Dallas, TX 75209
Acct#
[******]
ABA#
[******]
Account
Name: McKool Smith IOLTA Trust Account
3.2 Termination Due to Non-Payment by
Licensee. If Licensee fails to make the payment specified in
Section 3.1 above in the time specified, that failure will constitute a material
breach of this Agreement. LML may then, after five business (5) days
following written notice of such breach to Licensee, at its option, either
terminate the Agreement or it may petition the Court for specific enforcement of
Licensee’s payment obligations. Licensee hereby consents to the
jurisdiction of the Court for enforcement of the payment obligations in Section
3.1, and agrees that specific enforcement of the payment obligations of this
Agreement is an available remedy.
3.3 Tax Liability. Each Party
shall bear its own tax liability hereunder.
3.4 Additional
Payments. The payment of the amount set forth in Section 3.1
shall be the total compensation to LML and any other LML Affiliates by Licensee
for all releases, licenses, covenants and all other rights granted in this
Agreement, and no additional payment shall be due or made to LML or any other
person by Licensee with respect to the releases, licenses, covenants and all
other rights granted in this Agreement.
3.5 Payment Transaction Forms. LML
agrees that, as a condition to receiving payment as set forth herein, it shall
complete RBS’ standard W-9 form and ACH transmittal form.
***This
confidential portion has been omitted and filed separately with the Securities
and Exchange Commission
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4. RELEASES
AND COVENANT NOT TO SUE
4.1 LML’s
Release. Except for the obligations of Licensee under this
Agreement and conditioned upon LML’s receipt of payment from Licensee as
specified under this Agreement, LML forever releases Licensee from any claims or
causes of action for patent infringement, whether known or unknown, that as of
the Effective Date, LML asserted or could have asserted.
4.2. Licensee’s Release. Except for
the obligations of LML under this Agreement, Licensee forever releases LML and
its Affiliates from any claims or causes of action for patent infringement,
whether known or unknown, that as of the Effective Date, Licensee asserted or
could have asserted.
4.3 Covenant-Not-To-Sue. The
Parties and their Affiliates covenant not to file suit against each other for
infringement of any patents they own that are currently issued or that may
hereafter issue on applications currently owned, or patents that they
subsequently acquire that are not otherwise licensed under this
Agreement. This covenant-not-to-sue will expire seven (7) years
following the Effective Date of this Agreement.
5. GRANT OF LICENSE. LML hereby
grants to Licensee a fully paid-up, irrevocable, non-exclusive,
non-sublicensable, non-transferable license under the LML Patents to make, use,
sell, offer for sale, import, and export the Licensed Products and
Services. In addition, this grant of license applies to: (i)
Customers, but only to the extent that such Customers purchase or receive
Licensed Products and Services directly from the Licensee, and (ii) Third Party
Converters, but only to the extent that such Third Party Converters create or
process ACH Files directly for the Licensee and transmit those ACH Files to the
Licensee for the purpose of further transmission to the ACH Network (as part of
an ACH pass-through transaction) using the Licensed Products and
Services. For the avoidance of doubt, this grant of license does not
apply to (i) any ACH Files purchased or received by a Customer from any person
or entity other than Licensee, or (ii) any ACH Files created or processed by a
Third Party Converter for any person or entity other than
Licensee. Except as expressly provided herein, nothing in the
Agreement is intended to grant any rights or license, express or implied, to
Licensee or exhaust any patent rights of LML with respect to the LML
Patents.
6. CHANGE
IN CONTROL/ACQUISITIONS
6.1 Acquisitions by
Licensee. In the event Licensee acquires an entity after the
Effective Date of this Agreement, such entity will not gain the benefit of the
license grant, covenant-not-to-sue, or releases in the Agreement. LML
agrees to negotiate in good faith with the acquired entity to license, under the
LML Patents, any ACH Files created, processed, or transmitted by the acquired
entity based on a presumptive royalty rate of $[***] U.S. dollars per ARC
SEC-coded ECC transaction and $[***] U.S. dollars per POP, BOC, WEB, or TEL
SEC-coded ECC transaction.
***This
confidential portion has been omitted and filed separately with the Securities
and Exchange Commission
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6.2 Mergers Between Licensee and Another
Entity.
(i) In
the event Licensee merges with another entity that is not otherwise licensed
under the LML Patents and the number of ACH Files created, processed, or
transmitted by the merged entity each month after the date of the merger does
not exceed [***]% of Licensee’s average monthly transaction volumes for Licensed
Products and Services (based on the 12 months preceding the date of the merger
(hereinafter, “Conditional Merger Volume Limit”), then the license grant,
covenant not to sue, and releases in this Agreement will continue to apply but
only with respect to: (a) the Licensed Products and Services that existed prior
to the date of the merger, and (b) the ACH Files created, processed or
transmitted by the merged entity each month after the date of the merger up to
the Conditional Merger Volume Limit.
(ii) In
the event Licensee merges with another entity that is not otherwise licensed
under the LML Patents and the number of ACH Files created, processed, or
transmitted by the merged entity in any given month after the date of the merger
exceeds the Conditional Merger Volume Limit (as defined above), then the
provisions of Section 6.2(i) shall immediately terminate, and the license grant,
covenant not to sue, and releases in this Agreement will continue to apply but
only with respect to: (a) the Licensed Products and Services that existed prior
to the date of the merger, and (b) the ACH Files created, processed or
transmitted by the merged entity each month after the date of the merger up to
[***]% of the Licensee’s average monthly transaction volumes for Licensed
Products and Services (based on the 12 months preceding the date of the merger)
(hereinafter, “Adjusted Merger Volume Limit”). LML agrees to
negotiate in good faith with the merged entity to license, under the LML
Patents, any ACH Files created, processed, or transmitted by the merged entity
in excess of the Adjusted Merger Volume Limit based on a presumptive royalty
rate of $[***] U.S. dollars per ARC SEC-coded ECC transaction and $[***] U.S.
dollars per POP, BOC, WEB, or TEL SEC-coded ECC transaction.
6.3 Acquisitions of
Licensee.
(i) In
the event of an acquisition of Licensee by an entity that is not otherwise
licensed under the LML Patents and in which Licensee continues to exist as a
legal entity and the number of ACH Files created, processed, or transmitted by
the acquiring entity each month after the date of the acquisition does not
exceed [***]% of Licensee’s average monthly transaction volumes for Licensed
Products and Services (based on the 12 months preceding the date of the
acquisition (hereinafter, “Conditional Acquisition Volume Limit”), then the
license grant, covenant not to sue, and releases in this Agreement will continue
to apply but only with respect to: (a) the Licensed Products and Services that
existed prior to the date of the acquisition, and (b) the ACH Files created,
processed or transmitted by the acquiring entity each month after the date of
the acquisition up to the Conditional Acquisition Volume Limit.
***This
confidential portion has been omitted and filed separately with the Securities
and Exchange Commission
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(ii) In
the event of an acquisition of Licensee by an entity that is not otherwise
licensed under the LML Patents and in which Licensee continues to exist as a
legal entity and the number of ACH Files created, processed, or transmitted by
the acquiring entity each month after the date of the acquisition exceeds the
Conditional Acquisition Volume Limit (as defined above), then the provisions of
Section 6.3(i) shall immediately terminate, and the license grant, covenant not
to sue, and releases in this Agreement will continue to apply but only with
respect to: (a) the Licensed Products and Services that existed prior to the
date of the acquisition, and (b) the ACH Files created, processed or transmitted
by the acquiring entity each month after the date of the acquisition up to
[***]% of the Licensee’s average monthly transaction volumes for Licensed
Products and Services (based on the 12 months preceding the date of the
acquisition) (hereinafter, “Adjusted Acquisition Volume Limit”). LML
agrees to negotiate in good faith with the acquiring entity to license, under
the LML Patents, any ACH Files created, processed, or transmitted by the
acquiring entity in excess of the Adjusted Acquisition Volume Limit based on a
presumptive royalty rate of $[***] U.S. dollars per ARC SEC-coded ECC
transaction and $[***] U.S. dollars per POP, BOC, WEB, or TEL SEC-coded ECC
transaction.
6.4 Purchase of Assets of
Licensee.
(i) In
the event of a sale of the assets of Licensee that includes the business line
that provides the Licensed Products and Services to an entity that is not
otherwise licensed under the LML Patents and in which the number of ACH Files
created, processed, or transmitted by the purchasing entity each month after the
date of the purchase does not exceed [***]% of Licensee’s average monthly
transaction volumes for Licensed Products and Services (based on the 12 months
preceding the date of the purchase (hereinafter, “Conditional Purchase Volume
Limit”), then the license grant, covenant not to sue, and releases in this
Agreement will continue to apply but only with respect to: (a) the Licensed
Products and Services that existed prior to the date of the purchase, and (b)
the ACH Files created, processed or transmitted by the purchasing entity each
month after the date of the purchase up to the Conditional Purchase Volume
Limit.
(ii) In
the event of a sale of the assets of Licensee that includes the business line
that provides the Licensed Products and Services to an entity that is not
otherwise licensed under the LML Patents and in which the number of ACH Files
created, processed, or transmitted by the purchasing entity each month after the
date of the purchase exceeds the Conditional Purchase Volume Limit (as defined
above), then the provisions of Section 6.4(i) shall immediately terminate, and
the license grant, covenant not to sue, and releases in this Agreement will
continue to apply but only with respect to: (a) the Licensed Products and
Services that existed prior to the date of the purchase, and (b) the ACH Files
created, processed or transmitted by the purchasing entity each month after the
date of the purchase up to [***]% of the Licensee’s average monthly transaction
volumes for Licensed Products and Services (based on the 12 months preceding the
date of the purchase) (hereinafter, “Adjusted Purchase Volume
Limit”).
***This
confidential portion has been omitted and filed separately with the Securities
and Exchange Commission
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LML
agrees to negotiate in good faith with the purchasing entity to license, under
the LML Patents, any ACH Files created, processed, or transmitted by the
purchasing entity in excess of the Adjusted Purchase Volume Limit based on a
presumptive royalty rate of $[***] U.S. dollars per ARC SEC-coded ECC
transaction and $[***] U.S. dollars per POP, BOC, WEB, or TEL SEC-coded ECC
transaction.
6.5 Termination of Payments Due Pursuant
to Section 6. With respect to any good faith negotiations
undertaken pursuant to Sections 6.1 - 6.4 above, LML agrees that no royalty will
be due under the LML Patents for any ACH Files created, processed, or
transmitted by the Licensee or by any acquired entity, merged entity, acquiring
entity, or purchasing entity (as described above) after the expiration date of
the last to expire of the LML Patents.
7. CONFIDENTIALITY. The
Parties may disclose the existence of this Agreement. Neither Party
may disclose the specific terms and conditions of this Agreement to any entity
except that each Party may disclose the terms and conditions of this Agreement:
(i) to third parties with a need for access pursuant to the order or requirement
of a court, administrative or regulatory agency, or other governmental body,
provided that the Party required to make such a disclosure gives as much notice
as is reasonably possible to the other Party to contest such order or
requirement; (ii) on a confidential basis to its legal, accounting or financial
advisors solely for the purposes of providing such advice and solely to the
extent that they have a need for access; (iii) if that Party forms a good faith
belief that disclosure is required under applicable securities regulations or
listing agency requirements; (iv) in its financial statements as it is required
to do under applicable generally accepted accounting principles while acting in
reliance on its auditors; (v) to parties in the Lawsuits as part of disclosure
obligations under the Court's Protective Order, (vi) upon the express written
consent of the other Party; or (vii) on a confidential basis to investors and
potential investors and acquirers, but subject to any such investor or potential
investor or acquirer having first executed an appropriate non-disclosure
agreement requiring such investor or potential investor or acquirer to maintain
this Agreement and the terms and conditions of this Agreement in
confidence.
8. REPRESENTATIONS
AND WARRANTIES
8.1 Licensee Representations and
Warranties. Licensee represents and warrants to LML that (a) it has all
requisite legal right, power and authority to execute, deliver and perform this
Agreement; and (b) it has the right to enter into this settlement and grant the
releases, covenants not to sue and all other rights provided for under this
Agreement without any payment to any other person or third Party.
***This
confidential portion has been omitted and filed separately with the Securities
and Exchange Commission
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8.2 Licensor Representations and
Warranties. As a condition precedent to Licensee entering into this
Agreement, LML represents and warrants to Licensee that as of the Effective Date
(a) it has all requisite legal right, power and authority to execute, deliver
and perform this Agreement; (b) it has the right to enter into this Agreement
and grant the licenses and covenants not to sue and all other rights provided
for under this Agreement without any payment to any other person or third party;
(c) it owns the LML Patents, and that no other person or third party owns any
right to recover any amounts in connection with the LML Patents; (d) it has not
granted and shall not grant any licenses or other rights, under the LML Patents
or otherwise, that would conflict with or prevent the licenses and rights
granted to Licensee hereunder; and (e) there are no liens, conveyances,
mortgages, assignments, encumbrances, or other agreements that would prevent or
impair the full and complete exercise of the terms and conditions of this
Agreement.
9. GENERAL
PROVISIONS
9.1 Assignment. This
Agreement may not be assigned by either Party without the prior written consent
of the other Party in its sole discretion. This Agreement shall inure
to the benefit of, and shall bind, the respective heirs, executors,
administrators, other legal representatives, successors and permitted assigns of
the Parties hereto.
9.2 Entire
Agreement. This Agreement and the License Agreement constitute
the entire agreement between the Parties hereto with respect to the subject
matter hereof and thereof and cancels and supersedes any prior understandings
and agreements between the Parties hereto with respect thereto. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, express, implied or statutory, between the Parties other than as
expressly set forth in this Agreement.
9.3 Notices. All
notices, requests, approvals, consents and other communications required or
permitted under this Agreement will be in writing and addressed as
follows:
If to
LML:
Mr.
Patrick H. Gaines
President
LML
Patent Corp.
Suite
1680
1140 West
Pender St.
Vancouver,
BC V6E 4GI
If to
Licensee:
RBS
Citizens, N.A.
One
Citizens Plaza
Providence,
Rhode Island 02903
Mail Code
RDC 360
Attention:
Hollie Lussier
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TREATMENT
and will
be deemed sufficiently given if delivered by hand or sent by certified mail
(return receipt requested), courier, or facsimile (provided that the receiver
acknowledges receipt of the facsimile) addressed to the other Party at the
address set forth above or to such other person or address as the Parties may
from time to time designate in writing delivered pursuant to this notice
provision. Any such notices, requests, demands or other communications will be
deemed to be delivered when received by the Party to whom they were
addressed.
9.4 Governing Law. This
Agreement is governed by and will be construed in accordance with the laws of
the State of New York and the federal laws of the United States as applicable
therein, without regard to the laws of those jurisdictions governing conflicts
of laws.
9.5 Arbitration. All
claims, disputes, or other differences between the Parties relating to or
arising under this Agreement shall be exclusively resolved by binding
arbitration pursuant to the Federal Arbitration Act and the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”), with
arbitration to occur at a location to be determined by the three (3)
arbitrators. The arbitration shall be before three (3)
arbitrators. Each Party shall be entitled to select one (1)
arbitrator, each of whom shall be an attorney with subject matter expertise in
patent law and technology related to methods of electronically transferring
funds, and the selected arbitrators shall together choose the third arbitrator,
who shall also have the same required subject matter expertise. The
arbitration proceedings and the documents, materials and testimony provided
thereunder shall be kept confidential and the Parties and the arbitrators shall
be required to execute a confidentiality agreement as necessary to protect the
confidentiality of such documents, materials and testimony. Each
Party shall bear its own attorneys’ fees and costs in connection with the
arbitration, including the costs of the AAA and the arbitrators, which shall be
equally divided. The majority award of the arbitrators shall be final
and binding on the Parties, and their successors and assigns. Each
Party and its successors and assigns agrees to abide by any such award rendered
in the arbitration, hereby consents to the jurisdiction of the Court for
enforcement of any such award, and agrees that specific enforcement of any
payment obligations pursuant to such an award is an available
remedy.
9.6 Expenses. Except as
otherwise specifically provided in this Agreement, the Parties agree that they
shall bear their own costs and attorneys’ fees incurred in connection with the
negotiation and drafting of this Agreement and the transactions contemplated
herein.
9.7 Headings. The section and
sub-section headings contained in this Agreement are for convenience of
reference only and shall not serve to limit, expand or interpret the sections or
sub-sections to which they apply, and shall not be deemed to be a part of this
Agreement.
9.8 Interpretation; Construction.
The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if jointly drafted
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring either Party by virtue of the authorship of any provision of this
Agreement.
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9.9 Relationship of the
Parties. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between LML and
Licensee, and neither Party shall have any right to obligate or bind the other
Party in any manner whatsoever, and nothing herein contained shall give or is
intended to give any rights of any kind to any third persons, except as
expressly provided herein.
9.10 Enforceability. The
Parties acknowledge and agree that this Agreement is enforceable according to
its terms.
9.11 Severability. In
the event that any term or provision of this Agreement is deemed invalid,
unenforceable or void by a final, non-appealable judgment of a court of
competent jurisdiction, the remainder of the Agreement shall be interpreted to
the extent possible to effect the overall intention of the Parties as of the
Effective Date of this Agreement.
9.12 Waiver of Section 1542 of the
California Civil Code. The Parties to this Agreement hereby
expressly waive the provisions of Section 1542 of the California Civil Code,
which states as follows: “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.”
9.13 Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be considered
one and the same document.
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IN WITNESS
WHEREOF, the Parties have caused this Agreement to be executed by their duly
authorized officers as of the Effective Date.
LML
PATENT CORPORATION
By: /s/ Patrick H.
Gaines
Print
Name: Patrick H. Gaines
Title: President
Dated: December
29, 2009
THE
ROYAL BANK OF SCOTLAND PLC.
By: /s/ Denise M.
Menelly
Print
Name: Denise M. Menelly
Title: Executive
Vice-President, COO Americas
Dated: December
29, 2009
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