Exhibit 10.3
SETTLEMENT AGREEMENT
This settlement agreement is entered into this 6th day of November, 2001
by and between EP MedSystems, Inc. ("EP Med") and EchoCath, Inc. ("EchoCath").
WHEREAS, on or about February 27, 1997, EP Med entered into various
agreements with EchoCath, including an exclusive license agreement, a purchase
agreement and a subscription agreement (collectively, the "Agreements"); and
WHEREAS, on or about October 7, 1997, EP Med filed a litigation against
EchoCath in the United States District Court for the District of New Jersey,
Docket No. 97-4926 (AJL) (the "Litigation"), asserting various allegations
against EchoCath in connection with the Agreements; and
WHEREAS, on or about December 7, 1997, EchoCath answered the complaint,
denying the allegations and asserted a counterclaim against EP Med, which
counterclaim was subsequently denied by EP Med; and
WHEREAS, the parties are desirous of resolving their disputes amicably
without the acknowledgement or admission of liability by any party;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and for other good and valuable consideration, the adequacy and
sufficiency of which all are hereby acknowledged by the parties;
IT IS agreed by and between the parties as follows:
1. Within fifteen (15) days of the execution of this Agreement,
EchoCath shall pay to EP Med the sum of thirty thousand ($30,000.00)
dollars.
2. EP Med hereby waives any rights to receive from EchoCath any
dividends due and owing to EP Med as of the date of this Agreement,
or which may
become due and owing to EP Med incident to EP Med's ownership of
Series B Cumulative Convertible Preferred Stock in EchoCath (the
"Preferred Stock").
3. EchoCath hereby waives its right to receive from EP Med minimum
royalty payments which EchoCath claims to be due and owing to
EchoCath, or which may become due and owing to EchoCath pursuant to
the license agreement between the parties dated February 27, 1997
(the "License Agreement").
4. Upon execution of this Agreement, and in accordance with the
Certificate of Designation under which said shares were issued, EP
Med shall convert all of its shares of Preferred Stock of EchoCath
which it currently owns into 300,000 shares of unrestricted EchoCath
Class A common stock, and, subsequent to conversation, shall receive
any dividends or distributions which other shareholders of EchoCath
Class A common stock may receive.
5. Upon execution of this Agreement, EchoCath shall grant EP Med
warrants to purchase, at the Exercise Price, one hundred and fifty
thousand (150,000) shares of EchoCath Class A common stock (above
and beyond the shares set forth in paragraph 4 of this Agreement).
The Exercise Price for the Warrant shall be the Fair Market Value of
a share of the Common Stock on the date of the Settlement Agreement.
The Fair Market Value of the Common Stock on the date of the
Settlement Agreement means the
2
average of the daily closing prices for the five (5) consecutive
trading days before the date of the Settlement Agreement excluding
any trades which are not bona fide arm's length transactions. The
closing price for each day shall be the mean between the closing
high bid and low asked quotations of the Common Stock in the
over-the-counter market as shown by the National Association of
Securities Dealers, Inc. Automated Quotation System, or any similar
system of automated dissemination of quotations of securities prices
then in common use, if so quoted, (ii) if not quoted as described in
clause (i), the mean between the closing high bid and low asked
quotations for the Common Stock as reported by the National
Quotations Bureau Incorporated for any similar successor
organization, or (iii) if the Common Stock is listed or admitted for
trading on any national securities exchange, the last sale price,
regular way, or the mean of the closing bid and asked prices thereof
if no such sale occurred, in each case as officially reported on the
principal securities exchange on which the Common Stock is listed.
Said warrants must be exercised within five (5) years of the date of
this Agreement, subsequent to which the warrants shall be null and
void. EP Med shall be entitled to cashless exercise of the warrants
during the term of these warrants. The warrants shall be in the form
annexed hereto as Exhibit A.
6. All agreements, except this Agreement, between EP Med and EchoCath,
including but not limited to the License Agreement and associated
purchase and distribution agreements between the parties dated
February
3
27, 1997, are hereby terminated, and no party shall have any further
claims or rights against the other relating directly or indirectly
to any such agreement.
7. EP Med and its affiliates, as defined in the License Agreement, are
hereby granted by EchoCath a paid-up worldwide non-exclusive,
non-assignable and non-transferable (except as set forth below as to
the amendment to Section 13.8 of the License Agreement) license on
the use of EchoMark(R), EchoEye(R)and ColorMark(R)patents and
technology, in the Field of Use of the Terminated License. "Field of
Use" shall include the application of the EchoMark(R), EchoEye(R)and
ColorMark(R)patents and technology as it applies to any and all
systems and products which are designed and/or manufactured for
electrophysiology applications, to include but not limited to
mapping, ablation and internal cardioversion. The Field of Use
specifically excludes permanent implantable pulse generators. EP Med
shall pay to EchoCath, from the date of this Agreement, a royalty
equal to two percent (2%) of Net Sales of any product made, used or
sold coming within the scope of the Field of Use, as defined in this
Agreement. For purposes of this Agreement, "Net Sales" shall have
the same meaning as set forth in paragraph 1.11 of the License
Agreement, which paragraph is hereby incorporated by reference as if
more fully set forth herein. EP Med shall not have to pay to
EchoCath any minimum royalty on the sale of EchoMark(R),
EchoEye(R)and ColorMark(R)products, but only such earned royalties
as are set forth in this Agreement. ED Med shall keep full and
4
accurate records showing the quantity and nature of
EchoMark(R)products sold by it, in accordance with paragraph 4.1 of
the License Agreement, and shall pay said royalties in accordance
with paragraph 4.2 of the License Agreement, both paragraphs 4.1 and
4.2 being hereby incorporated by reference as if more fully set
forth herein. EchoCath covenants that it will pay all patent
maintenance fees as they become due with respect to the EchoMark(R),
EchoEye(R)and ColorMark(R)patents. To the extent EchoCath should
fail to pay such patent maintenance fees as they become due,
EchoCath will notify EP Med, and EP Med is authorized by EchoCath to
pay such patent maintenance fees and any surcharges thereon. If
EchoCath does not reimburse EP Med, EP Med will be entitled to
reduce its obligation to pay such 2% royalty by the amount of such
patent maintenance fees and any surcharges. In addition, Section 7.2
(relating to improvements), article 9 (relating to infringement),
article 10 (relating to representations, warranties and
indemnification), article 11 (relating to limitation of liability),
article 12 (relating to term and termination) and article 13
(miscellaneous provisions) of the License Agreement are all hereby
incorporated by reference as if more fully set forth herein. Section
13.8 of the License Agreement is hereby amended only to add that EP
Med shall also be entitled to assign its rights and obligations
under this Agreement, without the consent of the other party, in the
event of a sale to a non-affiliate of a product line or a product
thereof which incorporates (or could incorporate) or otherwise uses
the
5
EchoMark(R), EchoEye(R)and ColorMark(R)patents and technology in the
Field of Use, provide such non-affiliate assumes the obligation to
pay such 2% royalty hereunder with respect thereto. Except as herein
amended, Section 13.8 of the License Agreement is hereby
incorporated by reference in its totality as if more fully set forth
herein.
8. The Litigation shall be dismissed with prejudice, with each side to
bear its own costs and legal fees. The parties shall execute a
stipulation of dismissal in the form annexed hereto as Exhibit B,
and shall file said stipulation with the court.
9. Except as otherwise set forth in this Agreement, EP Med, its
directors, officers, parents, affiliates, successors and assigns,
hereby release EchoCath and EchoCath's directors, officers,
shareholders, employees, agents, attorneys, insurers, parents,
affiliates, successors and assigns, from any and all claims, demands
and causes of actions, which EP Med has or ever had against EchoCath
and/or EchoCath's directors, officers, shareholders, employees,
agents, attorneys, insurers, parents, affiliates, successors and
assigns, including but not limited to claims alleged or which could
have been alleged in the Litigation.
10. Except as otherwise set forth in this Agreement, EchoCath, its
directors, officers, parents, affiliates, successors and assigns,
hereby release EP Med and EP Med's directors, officers,
shareholders, employees, agents, attorneys, insurers, parents,
affiliates, successors and assigns, from any
6
and all claims, demands and causes of actions, which EchoCath has or
ever had against EP Med and/or EP Med's directors, officers,
shareholders, employees, agents, attorneys, insurers, parents,
affiliates, successors and assigns, including but not limited to
claims alleged or which could have been alleged in the Litigation.
11. The parties agree that any dispute between them, including but not
limited to claims as to the construction and/or interpretation of
this Agreement, shall be resolved at an arbitration to be held in
Somerset, New Jersey before a neutral arbitrator to be selected in
accordance with the rules of the American Arbitration Associates
governing Commercial Disputes. The parties agree that the decision
of the arbitrator shall be final and binding upon the parties
without the need for a judicial order and/or judgment.
12. The parties represent to each other that they have the power and
authority to enter into this agreement, and that each signator to
this Agreement is duly authorized to enter into this Agreement and
to bind the party on whose behalf the signator is signing.
13. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New Jersey, irrespective of New Jersey's
conflict of laws provisions.
14. This Agreement shall be considered as the product of negotiation
between the parties and having been drafted by both of the parties.
7
15. The parties to this Agreement acknowledge and represent that each of
them has been represented by competent counsel of its choice during
the negotiation and execution of this Agreement, and that each of
the parties has had an adequate opportunity to review and understand
all of the provisions of this Agreement.
16. This Agreement is the full and complete agreement between the
parties and all other agreements, whether oral or written, are
hereby superseded, except as expressly set forth herein. This
Agreement may be modified only by a subsequent writing signed by all
parties to this Agreement.
Attested to EP MEDSYSTEMS, INC.
/s/Xxxxxx Xxxxxxx By:/s/ Xxxxx X. Xxxxxxx
------------------ ----------------------------
XXXXX XXXXXXX, PRESIDENT
Attested to ECHOCATH, INC.
/s/ X.X. Xxxxxxxxx By:/s/ Xxxxx XxXxxxxxxxx
------------------ ----------------------------
XXXXX XXXXXXXXXXX, PRESIDENT
8
