[GS&S Draft of March 22, 1999]
FIRST AMENDMENT TO LICENSE AGREEMENT
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THIS AMENDMENT is entered into and made effective as of March 22,
1999, by and between ▇▇▇▇▇▇▇▇▇ COMMUNICATIONS, INC., a Nevada corporation
("▇▇▇▇▇▇▇▇▇"), and ION SYSTEMS, INC., a Missouri corporation ("ION"), to the
License Agreement, dated February 18, 1999, between ▇▇▇▇▇▇▇▇▇ and ION (the
"LICENSE AGREEMENT"). Capitalized used in this Amendment that are not otherwise
defined herein shall have the respective meanings given to such terms in the
License Agreement.
1. ENGAGEMENT FOR SERVICES.
1.1 Kanakaris engages ION, and ION accepts the engagement by
Kanakaris, to perform the following services (collectively the "SERVICES") for
▇▇▇▇▇▇▇▇▇:
(a) Prepare for the use of ▇▇▇▇▇▇▇▇▇ the Business Plan referred to
in SECTION 2.3(a) of the License Agreement.
(b) Prepare for the use of ▇▇▇▇▇▇▇▇▇ a presentation (the "ANALYST
PRESENTATION") for a conference by Kanakaris with investment analysts expected
to be held on or about ________ 1999 (the "ANALYST MEETING"), and assist
▇▇▇▇▇▇▇▇▇ in ▇▇▇▇▇▇▇▇▇' delivery of the Analyst Presentation at the Analyst
Meeting.
1.2 ION shall have the right to delegate all or any portion of the
duty to perform the Services to one or more other Persons as ION shall designate
in ION's sole discretion. If Kanakaris approves any such delegation of the duty
to perform all or any of the Services, then Kanakaris shall release any rights
or claims against ION for any failure to perform the Services to the full extent
of such delegation and shall look solely to the Person to whom the Services were
delegated by ION for the full performance of the delegated Services. In the
event of any such delegation, ION shall reasonably cooperate with Kanakaris and
the Person to whom the performance of the Services is delegated and shall
encourage and facilitate communications between Kanakaris and such Persons with
regard to the Services.
1.3 ION and any other Person to whom the performance of the Services
are delegated by ION shall perform the Services as an independent contractor to
▇▇▇▇▇▇▇▇▇. Neither ION nor any such other Person is an agent or representative
of ▇▇▇▇▇▇▇▇▇ and has no authority to act for or to bind Kanakaris or any of its
Affiliates. ▇▇▇▇▇▇▇▇▇ is not an agent or representative of ION or any such other
Person and has no authority to act for or to bind ION or any such other Person.
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1.4 ION designates ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual residing in
Pennsylvania ("▇▇▇▇▇▇"), and such other Persons as may be engaged by ▇▇▇▇▇▇ to
assist ▇▇▇▇▇▇ in the performance of the Services, to perform all of the Services
for ▇▇▇▇▇▇▇▇▇. Kanakaris approves ION's delegation of the duty to perform all of
the Services to ▇▇▇▇▇▇ and such other Persons as may be engaged by ▇▇▇▇▇▇.
2. COMPENSATION FOR SERVICES.
2.1 For purposes of this Amendment: "SERVICES OPTION SHARES" means
175,000 shares of ▇▇▇▇▇▇▇▇▇ Common Stock (the Services Option Shares are in
addition to and separate from, and are not a part of, the Option Shares under
the License Agreement); "SERVICES STOCK OPTION" means the right to purchase all
or any of the Services Option Shares as granted pursuant to this SECTION 2;
"SHARES DESIGNEE" means the Person or Persons designated by ION to receive the
Services Option Shares pursuant to Section 2.3; "WEEKLY AVERAGE STOCK PRICE"
means, for any calendar week period, the sum of either the average of the bid
and asked prices per share for the ▇▇▇▇▇▇▇▇▇ Common Stock or the closing trading
price per share for the ▇▇▇▇▇▇▇▇▇ Common Stock, whichever is applicable to the
exchange or other facility on which the ▇▇▇▇▇▇▇▇▇ Common Stock is publicly
traded, for each day during such calendar week for which such exchange or other
facility was open for trading, divided by the number of days during such
calendar week for which such exchange or other facility was open for trading;
and "UNRESTRICTED STOCK DATE" means date on which all the Services Option Shares
issued or issuable pursuant to the exercise of the Services Stock Option are
permitted to be publicly traded without any holding periods or other
restrictions under applicable federal and state laws.
2.2 As compensation for the Services (and in addition to the Stock
Option granted pursuant to SECTION 4 of the License Agreement), ▇▇▇▇▇▇▇▇▇ grants
to ION the right, exercisable in whole or in part at `the option of ION in ION's
sole discretion, at any time and from time to time, for so long as the Services
Stock Option is exercisable and all of the Services Option Shares have not been
purchased pursuant to the exercise thereof, to purchase from ▇▇▇▇▇▇▇▇▇ all or
any portion of the Services Option Shares, for an aggregate purchase price equal
to $.01 per share multiplied by the number of Services Option Shares as to which
the Services Stock Option is being exercised, on and subject to the terms and
conditions in this SECTION 2.
2.3 ION shall have the right in its sole discretion to designate that
all or any part of the Services Option Shares being purchased pursuant to any
exercise of the Services Stock Option shall be issued to ▇▇▇▇▇▇ and any other
Persons as may be engaged by ▇▇▇▇▇▇ to assist ▇▇▇▇▇▇ in the performance of the
Services, instead of being issued to ION. Such designation shall be accomplished
by so notifying ▇▇▇▇▇▇▇▇▇ in writing at the time the Services Stock Option is
being exercised by ION, which designation shall state the Shares Designee to
whom the Services Option Shares shall be issued and the number of Services
Option Shares to be issued to such Shares Designee. Unless so designated by ION,
all Services Option Shares shall be issued to ION upon exercise of the Services
Stock Option. ION and each Shares Designee shall be solely responsible for all
income tax consequences (if any) to them resulting from the grant of the
Services Stock Option, the exercise of the Services Stock Option, and any sale
of the Services Option Shares.
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2.4 The right to exercise any portion of the Services Stock Option is
subject to the following terms and conditions (in addition to the other terms
and conditions in this Section 2):
(a) The Services Stock Option as to 43,750 shares of the Services
Option Shares shall not be exercisable until the Weekly Average Stock Price has
exceeded $2.00 per share for two consecutive calendar week periods. (The
remaining 87,500 shares of the Services Option Shares that are not subject to
the restriction in this SECTION 2.4(a) or the restriction in SECTION 2.4(b)
shall be exercisable as provided herein without regard to the public trading
price of the ▇▇▇▇▇▇▇▇▇ Common Stock in any period of time.)
(b) The Services Stock Option as to 43,750 shares of the Services
Option Shares shall not be exercisable until the Weekly Average Stock Price has
exceeded $2.50 per share for three consecutive calendar week periods.
(c) ION may not exercise any portion of the Services Stock Option
prior to the earlier to occur of (i) the Unrestricted Stock Date, or (ii)
September 30, 1999.
(d) The Services Stock Option shall expire and shall no longer be
exercisable to the extent it is not exercised on or before March 31, 2001.
2.5 Subject to SECTION 2.4, the Services Stock Option, if, when and to
the extent exercised by ION, shall be exercised by ION delivering notice of the
exercise thereof to ▇▇▇▇▇▇▇▇▇ (the "SERVICES STOCK OPTION EXERCISE NOTICE")
along with any related designation of a Shares Designee pursuant to SECTION 2.3.
To be valid and effective, the Services Stock Option Exercise Notice must be
accompanied by payment of the full amount of the aggregate purchase price for
the Services Option Shares being purchased. Upon giving the Services Stock
Option Exercise Notice, ION or the related Shares Designee shall be deemed for
all purposes to be the owner of the Services Option Shares being purchased from
and after the date of the Services Stock Option Exercise Notice. Upon receipt of
a valid Services Stock Option Exercise Notice, ▇▇▇▇▇▇▇▇▇ shall promptly issue a
stock certificate to represent the Services Option Shares being purchased, duly
registered in the name of ION or the related Shares Designee on the books and
records of ▇▇▇▇▇▇▇▇▇ regarding its capital stock and duly executed on behalf of
▇▇▇▇▇▇▇▇▇, and deliver such stock certificate to ION or the related Shares
Designee; PROVIDED, that at the request of ION or the related Shares Designee,
Kanakaris shall deliver the Services Option Shares being purchased to a
brokerage account designated by ION or the related Shares Designee, as the case
may be. Delivery to ION or the related Shares Designee of the Services Option
Shares being purchased in the manner contemplated herein shall constitute a
representation and warranty by ▇▇▇▇▇▇▇▇▇ to ION or the related Shares Designee
that such Services Option Shares are validly authorized and issued, fully paid
and non-assessable. Prior to the exercise of the Services Stock Option, ION
shall not have any rights as a shareholder of Kanakaris or with respect to any
of the Services Option Shares issuable upon the exercise of the Services Stock
Option, except such rights as are expressly provided herein.
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2.6 For so long as any portion of the Services Stock Option remains
exercisable, the following covenants shall be in effect:
(a) ▇▇▇▇▇▇▇▇▇ shall reserve a sufficient number of shares of
authorized but unissued shares of ▇▇▇▇▇▇▇▇▇ Common Stock for issuance pursuant
to the Services Stock Option.
(b) ▇▇▇▇▇▇▇▇▇ shall provide to ION copies of all reports, notices
and other documents provided to the shareholders of Kanakaris.
(c) In the event of any restructuring of the capital stock or
capitalization of ▇▇▇▇▇▇▇▇▇, including any stock split or stock dividend, the
terms of the Services Stock Option (including the number of shares of ▇▇▇▇▇▇▇▇▇
Common Stock subject to the Services Stock Option and the price per share for
the shares to be purchased thereunder) shall be modified so as to preserve the
rights of ION under the Services Stock Option and the intentions of the parties
hereunder; PROVIDED, that ION shall not be protected from any dilution of ION's
interests under the Services Stock Option as a result of the issuance of
additional shares of the authorized shares of ▇▇▇▇▇▇▇▇▇ Common Stock subsequent
to the date of this Amendment, and ION shall not have any preemptive rights with
respect to the issuance of any capital stock of any class by Kanakaris.
(d) ▇▇▇▇▇▇▇▇▇ shall give ION notice not less than forty-five days
prior to the consummation of any Sale Event. Any portion of the Services Stock
Option as to which ION does not deliver to ▇▇▇▇▇▇▇▇▇ a Services Stock Option
Exercise Notice within thirty days after receipt of such notice from Kanakaris
shall be canceled; PROVIDED, that if the Sale Event as to which notice was given
is not consummated within ninety days after the notice, then any canceled
portion of the Services Stock Option shall be reinstated and ION shall have the
right to rescind the exercise thereof and to have the exercised Services Stock
Option reinstated.
2.7 ▇▇▇▇▇▇▇▇▇ shall (at the expense of ▇▇▇▇▇▇▇▇▇) 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 laws to enable and permit ION and any Shares
Designee to whom ▇▇▇▇▇▇▇▇▇ has issued Services Option Shares to sell their
Services Option Shares in the public markets or on the exchange or other
facility on which the ▇▇▇▇▇▇▇▇▇ Common Stock is then publicly traded, without
any holding periods or other restrictions under applicable federal and state
laws, by not later than March 31, 2000. Until ▇▇▇▇▇▇▇▇▇ satisfies such
requirements, any Services Option Shares issued by ▇▇▇▇▇▇▇▇▇ 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.
2.8 ION and all Shares Designees to whom ▇▇▇▇▇▇▇▇▇ has issued Services
Option Shares shall not, as a group, in the aggregate sell more than 30,000
shares of the Services Option Shares they own in any period of one calendar
month; PROVIDED, that this limitation shall expire and no longer be in effect on
March 31, 2001.
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2.9 ▇▇▇▇▇▇▇▇▇ represents and warrants to ION and each Shares Designee
that the grant of the Services Stock Option, and the issuance and delivery of
the Services Option Shares upon any exercise of the Services Stock 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.
3. ANALYST PRESENTATION.
3.1 Notwithstanding the Services to be provided with respect to the
Analyst Presentation and the Analyst Meeting, Kanakaris shall have the sole
right and responsibility to review and approve the Analyst Presentation prior to
the Analyst Meeting, and Kanakaris shall have the sole control over the Analyst
Meeting and the information to be provided or presented by or on behalf of
Kanakaris at the Analyst Meeting. Upon the approval by Kanakaris of the Analyst
Presentation, the Analyst Presentation shall be deemed to have been prepared by
Kanakaris (and not by ION or any other Person) for all purposes. In the
preparation of the Analyst Presentation, and in connection with the Analyst
Meeting, Kanakaris (and not ION or any other Person) shall be solely responsible
for determining that the Analyst Presentation and the Analyst Meeting comply
with the Securities Act, the Exchange ACT, and any applicable state securities
laws.
3.2 Kanakaris indemnifies and shall hold harmless ION, any other Person
to whom duties are delegated by ION, and their respective Affiliates
(collectively the "SERVICE PERSONS"), from and against any and all claims,
actions, suits or proceedings, any losses, damages or liabilities incurred in
connection therewith, and any fees, costs or expenses (including reasonable
attorneys' fees) incurred in connection therewith, based on, caused by or
arising as a result of or in connection with the Analyst Presentation or the
Analyst Meeting (including any violations or alleged violations of the
Securities Act, the Exchange Act, or any applicable state securities laws),
except such as are based solely on the gross negligence or intentional
misconduct by the Service Person claiming indemnification hereunder.
4. LICENSE AGREEMENT.
4.1 The provisions of SECTIONS 1 AND 11 of the License Agreement are
incorporated by reference and made a part of this Amendment with the same effect
as if fully set forth herein, and as if references therein to the Agreement were
references to this Amendment.
4.2 ▇▇▇▇▇▇▇▇▇ and ION hereby make and restate all the representations
and warranties made and stated by ▇▇▇▇▇▇▇▇▇ 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 Amendment, and with the same effect as if
all references therein to the Agreement were references to the License Agreement
as amended by this Amendment.
4.3 The License Agreement, as amended by this Amendment, shall remain
in full force and effect in accordance with the terms of the License Agreement
as amended by this Amendment.
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Hereafter, all references to the License Agreement shall be interpreted as
references to the License Agreement as amended by this Amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their respective duly authorized officers as of the
date first indicated above.
▇▇▇▇▇▇▇▇▇ COMMUNICATIONS, INC.
By /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
ION SYSTEMS, INC.
By /S/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇, President
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