Exhibit 10.1
 
SETTLEMENT AND LICENSE AGREEMENT
 
This Settlement and License Agreement (“Agreement”) is made and entered into as
of November 5, 2012 (“Effective Date”) by and between Alexsam, Inc., a Texas
corporation (“Alexsam”), NetSpend Holdings, Inc., a Delaware corporation
(“Holdings”), and NetSpend Corporation, a Delaware corporation (“NetSpend”).
 
WHEREAS, Alexsam is the owner of U.S. Patent No. 6,000,608, issued on December
14, 1999 and entitled “Multifunction Card System” (“the ‘608 Patent”), and U.S.
Patent No. 6,189,787, issued on February 20, 2001 and entitled “Multifunction
Card System” (“the ‘787 Patent”);
 
WHEREAS, Alexsam and NetSpend entered into a license agreement dated March 17,
2004 (the “2004 License Agreement”), wherein Alexsam granted certain rights
under the ‘608 Patent and the ‘787 Patent to NetSpend pursuant to the terms and
conditions set forth therein;
 
WHEREAS, there is now pending in the District Court of Travis County, Texas,
419th Judicial District, a civil action entitled Alexsam, Inc. v. NetSpend
Corporation., Cause No. D-1-GN-07-003659 (“the Lawsuit”); and
 
WHEREAS, Alexsam alleged in the Lawsuit claims of breach and fraud related to
the 2004 License Agreement, and NetSpend alleged certain affirmative defenses
and counterclaims to Alexsam’s allegations;
 
WHEREAS, the Parties’ dispute in the Lawsuit was tried to verdict in the Travis
County District Court in April, 2012, resulting in an $18 million jury verdict
in Alexsam’s favor, and the Court subsequently ruled in favor of Alexsam as to
NetSpend’s alleged affirmative defense under the “Most-Favored Nations” clause
of the 2004 License Agreement;
 
WHEREAS, the Parties desire to avoid further litigation risks and expense, and
to fully compromise, settle and release any and all claims and counterclaims
which were or could have been asserted in the Lawsuit or that arise from or are
otherwise related to the Licensed Patents or the 2004 License Agreement, on the
terms and conditions set forth below, and have therefore agreed, with no Party
admitting liability to any other Party, to dismiss the Lawsuit with prejudice.
 
 
 

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NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein, Alexsam, Holdings and NetSpend agree as follows:
 
1. Definitions. As used in this Agreement, the following terms and phrases shall
have the following meanings:
 
1.1           “Company” means NetSpend Corporation or any Affiliate thereof.
 
1.2           “Affiliate” means, with respect to any Person, any other Person
that directly or indirectly Controls, is Controlled by, or is under common
Control with such Person.
 
1.3           “Alexsam” means Alexsam, Inc., and any corporation, firm,
partnership, proprietorship, or other form of business organization in which
Alexsam has at least a fifty percent (50%) ownership interest either directly or
indirectly through one or more entities related to Alexsam, or (b) the power to
direct or cause the direction, either directly or indirectly, of the management
and policies of such entity, whether through ownership of voting securities, by
contract or otherwise.
 
1.4           “Control” means the possession, direct or indirect, of the power
to vote fifty-one percent (51%) or more of the securities that have ordinary
voting power for the election of directors of any entity, or to direct or cause
the direction of the management and policies of such entity, whether through
ownership of voting securities or by contract or otherwise.
 
1.5           “Parties” means NetSpend, Holdings and Alexsam collectively;
“Party” means any of them individually.
 
1.6           “Person” means an individual, corporation, partnership, limited
liability company, limited liability partnership, syndicate, trust, association,
organization or other entity, or any governmental authority.
 
1.7           “Licensed Patents” means the ‘608 Patent and ‘787 Patent, and any
reissues, reexaminations, extensions, substitutions, continuations, divisions,
and continuation-in-parts thereof, all patents and patent applications claiming
priority from, or from which priority is claimed, all foreign counterpart
patents and applications or equivalents to any of the foregoing worldwide, and
any future patents, applications or equivalents covering any inventions
underlying the Licensed Patents, if a license to same would be required by the
Company  to exercise its rights and enjoy the benefits granted under the
licenses granted in this Agreement.
 
 
 

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1.8             “Licensed Product” means any product with respect to which
Company serves as (i) a processor for the accounts and/or sub-accounts
associated with such product, (ii) a program manager or (iii) an issuer, or any
system or method associated with or related to such a product, where the
product, system or method, either alone, or in conjunction with other components
or activities, infringes or may infringe any claim of the Licensed Patents.
 
2.           License.
 
2.1           In exchange for and upon receipt of the payment required by
Section 5.1 below, Alexsam grants to the Company a non-exclusive, irrevocable,
non­transferable (except as set forth in Section 13 below), perpetual, fully
paid-up, worldwide right and license, without the right to grant sub-licenses
(subject to the provisions of Section 2.2 below), under the Licensed Patents to
make, use, import, issue, distribute, offer to sell, design, operate, market,
process, sell or otherwise practice the Licensed Product, alone or in
combination with others, including without limitation to process card
activations, recharges, signature debit, PIN debit and ATM withdrawal
transactions for Licensed Product.
 
2.2           The license granted in Section 2.1 above shall extend to the
Company’s distributors, retailers, agents, issuing banks, marketers, branding
partners, aggregators, accountholders, card associations, authorization
networks, and other Persons through whom, or as agent, member service provider,
third party processor or independent sales organization for whom, the Company
offers, distributes, activates, loads, reloads or otherwise provides a Licensed
Product, including any such Person who may contract with the Company to offer
such Licensed Product under, in whole or in part, such Person’s own name or
marks (collectively, “Third Parties”), but only to the extent that such Third
Parties’ activities pertain to a Licensed Product.
 
2.3           Except as otherwise authorized herein, nothing in this Agreement
shall extend any rights under the Licensed Patents to any other Person,
including distributors, retailers, issuing banks, card associations and
authorization networks.  It is not the intention of the Parties to license or
extend any other rights under the Licensed Patents to any third party for any
activity not related to a Licensed Product.  It is further agreed that nothing
contained in this Agreement exhausts any of Alexsam’s rights under the Licensed
Patents against any non-licensed entities, and that no aspect of this Agreement
may be relied upon to support any argument of any such patent exhaustion, or any
claim of sublicense.
 
 
 

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3.           Covenant Not to Sue.  In exchange for and upon receipt of the
payment to be paid as required by Section 5.1 below, Alexsam covenants and
agrees neither to sue the Company, nor its attorneys, employees, agents,
officers, directors or shareholders, nor any Third Parties within the scope of
Section 2.2 above (but only to the extent that such Third Party’s activities are
related to a Licensed Product) for infringement of the Licensed Patents or any
other intellectual property right related to the Licensed Patents for the
Company’s or the Third Party’s licensed activities under Sections 2.1 or 2.2
above.
 
4.           Termination of 2004 License Agreement.  Upon receipt of the payment
to be paid as required by Section 5.1 below, the 2004 License Agreement, and all
past, present and future rights and obligations of the Parties thereunder, shall
automatically terminate and be superseded by this Agreement.
 
5.           Settlement Payment.
 
5.1           In consideration of the license, covenants, releases, and other
agreements contained herein, NetSpend agrees to pay Alexsam within five (5)
business days of the Effective Date, a lump sum payment in the amount of Twenty
Four Million and No/100ths Dollars ($24,000,000.00).
 
5.2           The payment due under Section 5.1 shall be made in U.S. dollars by
wire transfer and in immediately available funds to:
 
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
ABA Routing #
For the Benefit of: Fitch Even Tabin & Flannery Client Fund Account
Account #

5.3           The payment due under Section 5.1 shall be made without
deductions, and each Party shall be responsible for its own taxes, assessments,
or other charges (if any) associated with payment or receipt of payment under
this Agreement.
 
 
 

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6.           Patent Marking. The Company agrees to mark all Licensed Products or
associated packaging with an appropriate marking of the Licensed Patents in
accordance with 35 U.S.C. §287, including, without limitation, use of the phrase
“Licensed Under U.S. Patent Nos. 6,000,608 and 6,189,787” or the like. The
Company shall have one year from the Effective Date to begin producing Licensed
Products or associated packaging conforming to the requirements of this Section
6 and shall be under no obligation to replace unmarked Licensed Products or
associated packaging in existence as of one year after the Effective Date. If
Alexsam believes the Company is, at any time during the Term of this Agreement,
in breach of the requirements of this Section 6, Alexsam shall give written
notice to the Company of such claimed breach no less than sixty (60) days in
advance of filing any claim, suit or action regarding same, and in any such
claim, suit or action Alexsam’s sole and exclusive remedy shall be to (i)
require the Company to comply with this Section 6 with respect to any Licensed
Product or associated packaging that is produced after the conclusion of such
claim, suit or action and (ii) to recover its attorneys fees to the full extent
permitted under Texas Civil Practices & Remedies Code section 38.001 and/or
38.002, and no party shall be entitled to cancel or terminate or refuse to
perform other duties established by this Agreement because of such a breach.
 
7.           Term and Termination.  This Agreement shall remain in full force
and effect for the life of the Licensed Patents.
 
8.           Warranties, Representations and Indemnification.
 
8.1           Alexsam warrants and represents that: it owns all right, title and
interest in and to the Licensed Patents and the 2004 License Agreement; it has
complete authority to enter into, execute, deliver and perform this Agreement
and to grant the rights granted herein; its execution of this Agreement has been
duly authorized by all necessary corporate action.
 
8.2           NetSpend and Holdings warrant and represent that: they have
complete authority to enter into, execute, deliver and perform this Agreement;
and the execution of this Agreement has been duly authorized by all necessary
corporate action.  NetSpend and Holdings further warrant and represent that they
have thoroughly investigated their financial condition, and based upon said
investigation hereby represent that the Company is solvent and has been
generally paying its debts as due and in the ordinary course of business; and
that by making said lump sum payment the Company will not become insolvent and
will be able to continue generally paying its debts as due and in the ordinary
course of business.
 
 
 

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8.3           The Parties specifically represent that they own all the claims
that they are releasing under this Agreement, have authority to release said
claims and have not, in any way, transferred those claims to any other Person.
 
8.4           Indemnification
 
a.           Alexsam hereby agrees to defend and hold harmless the Company, its
officers, directors, employees, agents and attorneys (each a “NetSpend
Indemnitee”), from and against all suits, claims, or other actions, and will
indemnify the NetSpend Indemnitees, from any damages and expenses, including
reasonable attorneys fees, arising out of any claim brought by a third party
based, in whole or in part, upon any action or alleged breach by Alexsam of its
representations or warranties set forth in Section 8.1.
 
b.           NetSpend and Holdings hereby agree to defend and hold harmless
Alexsam, its officers, directors, employees, agents and attorneys (each an
“Alexsam Indemnitee”), from and against all suits, claims, or other actions, and
will indemnify the Alexsam Indemnitees, from any damages and expenses, including
reasonable attorneys fees, arising out of any breach by the Company of its
representations or warranties set forth in Section 8.2.
 
c.           The foregoing indemnification obligations by each Party shall be
subject to the following: (i) The indemnified party promptly notifies the other
party in writing of the claim; provided that the failure to so notify the
indemnifying party shall not relieve the indemnifying party of any liability it
may have to the indemnified party hereunder except to the extent the
indemnifying party has been materially prejudiced thereby; (ii) the indemnifying
party has sole control of the defense and all related settlement negotiations
with respect to the claim, provided, however, that the indemnified party has the
right, but not the obligation, to participate at its expense in the defense of
any such claim of action through counsel of its own choosing; and (iii) the
indemnified party cooperates fully to the extent necessary, and executes all
documents necessary, for the defense of such claim.
 
 
 

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9.           Covenant Not to Contest. Unless NetSpend is named as a party in any
proceeding brought under the Licensed Patents, NetSpend shall not file, join as
a party in, or directly or indirectly assist any third party in challenging or
attacking the validity, enforceability, or infringement of either of the
Licensed Patents.  However, Alexsam acknowledges and agrees that NetSpend may
fully comply with any and all legal obligations related to a subpoena requesting
documents or information related to any such challenge or attack.
 
10.           Releases.
 
10.1           In consideration for the covenants, terms and conditions
contained in this Agreement, Alexsam hereby releases the Company, its officers,
directors, employees, shareholders and agents, from any and all claims and/or
counterclaims, including but not limited to any claims and/or counterclaims
relating to breach of contract, fraud or patent infringement, known or unknown,
which were or could have been brought against the Company in the Lawsuit or
under the Licensed Patents or pursuant to the 2004 License Agreement based upon
activities occurring before the Effective Date.  Alexsam releases all Third
Parties from any and all claims and/or counterclaims, known or unknown, which
were or could have been brought against such Third Parties in the Lawsuit or
under the Licensed Patents or pursuant to the 2004 License Agreement based upon
activities occurring before the Effective Date, but only to the extent that the
activities of such Third Parties relate to the Licensed Products. The releases
of this Section 10.1 are conditioned on the Company making the required payment
to Alexsam pursuant to Section 5.1 above.
 
10.2           In consideration for the covenants, terms and conditions
contained in this Agreement, the Company hereby releases Alexsam, its officers,
directors, employees, shareholders and agents, from any and all claims and/or
counterclaims, including but not limited to any claims and/or counterclaims
relating to breach of contract, fraud or patent infringement, known or unknown,
which were or could have been brought against Alexsam in the Lawsuit or relating
to the Licensed Patents or the 2004 License Agreement based upon activities
occurring before the Effective Date, but it is acknowledged by Alexsam that this
release does not in any way restrict the Company’s  right to fully and
completely defend itself if Alexsam were to ever bring another lawsuit against
the Company in the future for infringement of the Licensed Patents.
 
 
 

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11.           Dismissal of Lawsuit. Promptly upon receipt of the lump sum
payment pursuant to Section 5.1 above, Alexsam and NetSpend will dismiss all
claims against each other with prejudice to refiling same through the filing and
entry of a Joint Motion to Dismiss and Agreed Order of Dismissal in the form
attached hereto as Exhibit “A”.
 
12.           Confidentiality. The Parties will not reveal to any third party
the specific terms of this Agreement, except as follows: (i) with the prior
consent of the other Party; (ii) by court order; (iii) under compulsion of
subpoena provided that the other Party is given notice of the subpoena and the
opportunity to resist disclosure or to impose confidentiality thereon; (iv)
under a protective order entered by a court; (v) to a Party’s financial
advisors, legal advisors or insurers; (vi) by Holdings, as necessary to satisfy
its SEC reporting obligations; (vii) as otherwise required by law; and (vii) by
Alexsam as necessary to satisfy obligations to any other  licensee, or to any
potential licensee or entity desirous of acquiring the Licensed Patents so long
as reasonable measures are taken to assure the confidential treatment of the
disclosed information.  Nothing herein shall prevent a Party from disclosing
information regarding this Agreement that becomes part of the public domain by
virtue of clause (vi) of this Section.
 
13.           Assignment.  Neither Party may assign, transfer or otherwise
dispose of its rights and obligations under this Agreement, in whole or in part,
without the prior written consent of the other Party, provided, however,  that a
Party may assign or transfer all of its rights and obligations under this
Agreement without the other Party’s consent in connection with any merger of
which such assigning or transferring Party is not the surviving entity or any
sale or transfer of all or substantially all of such assigning or transferring
Party’s stock or assets.  In the event of such assignment or transfer by
NetSpend and/or Holdings, their rights hereunder shall continue only for that
portion of any future owner’s or merger partner’s business directly attributable
to the business operations acquired from NetSpend and/or Holdings, recognizing
(i) that the future business owner’s or merger partner’s existing operations
prior to the acquisition or merger may require a separate license and (ii)
the  operations and business directly attributable to the business operations
acquired from NetSpend and/or Holdings may continue to evolve and expand
following any such assignment or transfer and such evolved or expanded business
operations will still be entitled to the Company’s rights hereunder.
 
 
 

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14.           Entire Agreement. This Agreement constitutes the entire Agreement
of the Parties and, upon the payment of the amount required by Section 5.1
above, supersedes all previous negotiations, agreements, understandings or
commitments and shall not be released, discharged, changed or modified, except
by instruments in writing signed by duly authorized officers or representatives
of the Parties.
 
15.           Unknown Facts.  The Parties acknowledge and agree that additional
facts may later be learned that are relevant to this Agreement and still they
hereby specifically desire, intend and agree to release all claims, as set forth
herein.  The Parties have had a full and complete opportunity to engage legal
counsel to advise them regarding this Agreement and the execution of this
Agreement. The Parties agree, represent, and warrant that they have, in fact,
consulted with legal counsel regarding the effect, nature, tenor, advisability,
and legal consequences of signing this Agreement and are relying upon their own
judgment to enter into this Agreement.
 
16.           Notices.  All notices to be given hereunder shall be in writing
and sent by certified mail, return receipt requested to the addresses specified
below:
 
Any notice to Alexsam shall be addressed to:
 
Alexsam, Inc.
10916 Grand Journey Avenue
Raleigh, North Carolina 27614
Attention: Robert E. Dorf

With copy to:
 
Timothy P. Maloney
Fitch, Even, Tabin & Flannery, LLP
120 S. LaSalle Street, Suite 1600
Chicago, IL 60603

Any notice to the Company shall be addressed to:
 
NetSpend Corporation
701 Brazos Street, Suite 1300
Austin, Texas 78701
Attention: President

 
 

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With a copy to:
 
Tommy Jacks
FISH & RICHARDSON P.C.
111 Congress Avenue, Suite 810
Austin, TX 78701

17.           Severability.  In the event that any provision of this Agreement,
or the application of such provision, his found to be contrary to law, the
remaining provisions shall remain in full force and effect.
 
18.           Disclaimer of Warranties. TO THE FULLEST EXTENT PERMISSIBLE UNDER
APPLICABLE LAW AND EXCEPT AS OTHERWISE SET FORTH IN SECTION 8, ALEXSAM DISCLAIMS
ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THOSE RELATED
TO THE USE OR SUITABILITY OF ANY PRODUCT OR METHOD AND IMPLIED WARRANTIES OF
NONINFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
 
19.           Governing Law and Dispute Resolution.  THIS AGREEMENT WILL BE
GOVERNED BY THE LAWS OF THE UNITED STATES AND THE STATE OF TEXAS, WITHOUT REGARD
TO CONFLICTS OF LAWS.  THE PARTIES HEREBY AGREE AND CONSENT TO THE EXCLUSIVE
JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS LOCATED IN TRAVIS COUNTY,
TEXAS FOR RESOLUTION OF ANY CLAIMS OR DISPUTES ARISING UNDER OR RELATED TO THIS
AGREEMENT.
 
20.           Signatures. This Agreement may be signed in counterparts and will
become binding and effective upon the exchange of facsimile or E-mailed PDF
copies of the required signatures. The parties will thereafter exchange formal
signed originals of this Agreement for their permanent records.
 
21.           Costs and Fees. The parties shall each bear their own respective
costs and attorneys’ fees in connection with the Lawsuit and this Agreement.
 
IN WITNESS WHEREOF, the parties hereby acknowledge their agreement and consent
to the terms and conditions set forth above through their respective signatures
as contained below.
 
 
 

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I HAVE READ THE ABOVE AND FOREGOING DOCUMENT AND AGREE TO ITS TERMS.
 
 

AGREED BY ALEXSAM, INC.   AGREED BY NETSPEND HOLDINGS, INC. By:
/s/ Robert E. Dorf
  By:
/s/ Chuck Harris
                    Printed Name:
Robert E. Dorf
  Printed Name:
Chuck Harris
Title:
Chief Executive Officer
  Title:
President
                    Date:
11/5/2012
  Date:
5 Nov 12
                         
AGREED BY NETSPEND CORPORATION
      By:
/s/ Chuck Harris
      Printed Name:
Chuck Harris
      Title:
President
      Date:
5 Nov 12

 
The following Schedules and Exhibits have been omitted from this Exhibit:

Exhibit A – Joint Motion to Dismiss and Final Order of Dismissal
 
The registrant will furnish supplementally a copy of any omitted Schedule or
Exhibit to the Securities and Exchange Commission upon the request of the
Commission.