EX-10.9
58
Settlement Agreement and Limited Mutual Release
This Settlement Agreement and Mutual Release, made and effective as of
this 7th day of November, 1997, by and between Surgical Laser Technologies, Inc.
("SLT"), a Delaware corporation, having a principal place of business at 000
Xxxxxxxx Xxxxx, Xxxxxxxxxxxxxxx, Xxxxxxxxxxxx 00000; Xxxxx Xxxxxxxxx
("Daikuzono"), a Japanese citizen and resident alien of the United States of
America, having an address at 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxx
00000; and SLT-Japan Company, Ltd., a Japanese company, having an address of 6th
Floor, Chiyoda Seimei Hachioji Yokoyamacho Xxxx. 00-0, Xxxxxxxx-xxx,
Xxxxxxxx-xxx, Xxxxx 000, Xxxxx as well as a branch address at 0000 Xxxxxxxxxx
Xxxx, Xxxxxxxxxx, Xxxx 00000.
Recitals
WHEREAS, Daikuzono brought an action against SLT on five counts in the
United States District Court for the Southern District of Ohio, alleging breach
of contract, patent infringement and fraud;
WHEREAS, the two fraud counts were dismissed, and the venue of this
action was removed to the United States District Court for the Eastern District
of Pennsylvania, captioned Xxxxx Xxxxxxxxx vs. Surgical Laser Technologies,
Inc., Civil Action No. 96-833 (the "Action");
WHEREAS, one of the contracts allegedly breached is an Employment
Agreement dated March 1, 1987, between SLT and Daikuzono (the "Employment
Agreement");
WHEREAS, Daikuzono alleged that SLT owed him approximately $1,000,000
in unpaid salary due under the Employment Agreement;
WHEREAS, Daikuzono also alleged that SLT owed him royalties earned from
his assignment to SLT of U.S. Patent Nos. 4,693,244; 4,592,353; and 4,736,743;
WHEREAS, SLT denied and disputed Daikuzono's claims and advanced
counterclaims against Daikuzono that Daikuzono had breached the Employment
Agreement, which counterclaims Daikuzono disputed;
WHEREAS, SLT and Daikuzono, each having asserted their claims against
the other at a cost to themselves in time, money and effort, wish now to enter
an agreement whereby this Action will be settled for all purposes and further
cost may be avoided and by which they may clarify and harmonize their future
relations.
59
Agreement
NOW, THEREFORE, in consideration of the premises set forth above and the mutual
promises, agreements, covenants, undertakings, representations and warranties
set forth below, each of which is material to this agreement, and the
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, make the following agreement:
1. Definitions.
The following definitions shall apply for purposes of this Settlement
Agreement and Mutual Release ("Agreement"):
a. "SLT" means Surgical Laser Technologies, Inc. and its subsidiaries.
b. "SLT-Japan" means SLT-Japan Company, Ltd., a Japanese corporation, and
its subsidiaries.
c. "Contact Laser(TM) Patents" means the following three U.S. Patent Nos.:
4,693,244; 4,592,353; and 4,736,743.
d. "Person" means any individual, partnership, joint venture, association,
corporation or other entity.
e. "Court" means the United States District Court for the Eastern District
of Pennsylvania.
f. "Action" means that civil action maintained by Daikuzono against SLT in
the United States District Court for the Eastern District of
Pennsylvania, captioned Xxxxx Xxxxxxxxx versus Surgical Laser
Technologies, Inc., Civil Action No. 96-833.
g. "Net Sales" means gross sales less any discounts off the gross sales
price.
2. Payment by SLT.
a. SLT shall pay Daikuzono the balance in that certain savings account no.
861464-3618, maintained by it at CoreStates Bank for royalties, and
interest thereon, accrued in favor of Daikuzono. The balance in that
account as of October 31, 1997 is $377,738.03, comprising royalties
earned through August 31, 1997. SLT shall deposit royalties earned
during September and October 1997 into the account on or before
November 11, 1997. Interest shall accrue on the balance in the account
and be paid to Daikuzono at the time of the payment of principal.
Royalties earned in November 1997 and in months thereafter shall not be
deposited into the account set forth in this Section 2(a), but shall be
paid in accordance with Section 5 below. Payment under this Section
2(a) shall be made by cashier's check, payable to "Xxxxx Xxxxxxxxx and
White, Getgey & Xxxxx Co., L.P.A., his attorneys." Payment shall be
made within five (5) business days of the date that the Court enters an
order of dismissal of the Action, in accordance with Section 11 hereof.
60
b. The amount of the payment made pursuant to this Section 2 shall
hereafter be a matter of confidence between the parties, and
neither the fact nor the amount of the payment shall be disclosed
by a party hereto or by counsel to a party hereto to any Person
without the written consent of the other party to this Agreement,
which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, either party may make such disclosures as may be
required by or appropriate under applicable laws, including
without limitation federal or state securities laws, without the
necessity of prior written consent of the other party.
3. Withholding Taxes.
a. The payment described in Section 2(a) shall be made without
withholding of U.S. income taxes based upon Daikuzono's status as
a resident alien. Daikuzono has also provided SLT a copy of the
July 25, 1997 letter from his legal counsel in Japan, Xxxxxxx
Xxxxxxxxx, verifying Daikuzono's current entitlement to the
royalties and shall have submitted by the time of payment set
forth in Section 2(a) other tax documentation supporting the
position that income taxes need not be withheld.
b. Daikuzono shall promptly notify SLT of any change in his tax
status in the United States. If SLT deems it appropriate under
applicable tax rules and regulations, Daikuzono shall submit
documentation necessary and sufficient to evidence the change in
status and to comply with the applicable rules and regulations.
c. Daikuzono shall indemnify, defend and hold SLT harmless for any
withholding taxes, interest and penalties that the Internal
Revenue Service, the Japanese Ministry of Finance or any other
governmental agency may assess against SLT based upon royalty
payments which SLT has made to Daikuzono prior to the date hereof,
or which are made under Section 2(a) pursuant to Daikuzono's
instructions and in prima facie compliance with the applicable tax
laws.
4. The Contact Laser(TM) Patents.
a. SLT shall pay Daikuzono a royalty of three percent (3%) on its net
sales of those products which SLT presently offers for sale and
which are identified in Appendix A hereto, being covered by a
claim of at least one of the Contact Laser(TM) Patents and not
comprising staple items of commerce. SLT has not been obliged
heretofore, nor shall it be obliged hereafter, to pay Daikuzono
royalty on any other products which it presently offers for sale,
including without limitation its laser systems, fiber delivery
systems and any options and accessories thereto, except as set
forth in Section 4(c) below.
b. In the event that SLT sells a product which it presently does not
offer for sale, which is covered by a claim of at least one of the
Contact Laser(TM) Patents and which does not comprise a staple
item of commerce, then SLT shall pay Daikuzono a royalty of three
percent (3%) on its net sales of the new product.
c. Where SLT sells, for a single aggregate price, a product bearing
royalty under Section 4(a) or 4(b) and a product not bearing such
royalty (including, without limitation, such products as laser
systems, fiber delivery systems and any options and accessories),
the price shall be allocated between the covered and non-covered
products in proportion to their several list prices,
61
but where such discrete listprices do not exist, then the
allocation shall be in proportion to their direct costs to SLT.
d. SLT's obligation to pay royalties to Daikuzono under Section 4(a)
and 4(b) shall absolutely cease for products, otherwise covered
under a claim of a Contact Laser(TM) Patent, which are sold on or
after April 9, 2005.
e. Royalties under this Section 4 shall apply to net sales of
products by SLT made on or after November 1, 1997. Payment for
royalties for prior periods shall be liquidated by means of the
payment described in Section 2(a).
f. In the event that a Japanese counterpart to U.S. Patent Nos.
4,693,244; 4,592,353; or 4,736,743 should issue, then Daikuzono
shall have a non-exclusive and royalty-free license in Japan to
make, use and sell products covered by, and otherwise practice the
technology described in, the counterpart Japanese patent.
g. SLT acknowledges that it has no contractual or property rights by
which to preclude SLT-Japan from selling products which are
covered, without more, by the claims of the Contact Laser(TM)
Patents in the following countries: Cambodia, Indonesia, Laos,
Malaysia, North Korea, People's Republic of China, the
Philippines, Taiwan, Thailand, Singapore, South Korea and Vietnam.
h. SLT further acknowledges that apart from the counterpart Japanese
patents described 4(f), there are no foreign counterpart patents
to the Contact Laser(TM) Patents other than a counterpart to U.S.
Patent No. 4,736,743 in Great Britain, Germany, Austria and
Switzerland.
5. Royalty Payment.
a. For sales on or after November 1, 1997, of products bearing
royalty in favor of Daikuzono under Section 4 of this Agreement,
SLT shall pay royalties earned in a given month by the end of the
following month. Thus, by way of example, royalties earned in
November 1997 shall be payable by December 31, 1997. A grace
period of 5 days shall be allowed SLT after month end in which to
complete payment.
b. Payment shall be by wire transfer to the trust account of White,
Getgey & Xxxxx Co., L.P.A., pursuant to transfer instructions
given from time to time by White, Getgey & Xxxxx Co., L.P.A., such
instructions to become effective on thirty (30) days' prior
written notice to SLT.
c. Accompanying each payment made under Section 5(b) shall be a brief
statement by SLT setting forth the calculation supporting the
payment.
6. Other Undertakings.
a. In order to lessen potential confusion over the discrete
identities and roles of SLT and SLT-Japan, SLT shall not establish
and conduct direct operations in Japan in its own name, and
SLT-Japan shall not establish and conduct direct operations in the
United States of America in its own name. SLT shall be permitted
to establish and conduct operations in Japan, and SLT-Japan
shall be permitted to establish and conduct operations in the USA,
in the name of a
62
subsidiary, affiliate or independent third-party, provided that
any such entity does not have or use such terms as "Surgical
Laser" or "SLT" in its formal company name or the informal company
name used in trade, or in the trademarks or service marks used in
the respective countries.
b. Notwithstanding the foregoing of Section 6(a), it is understood
and agreed that the parties hereto or the entities through which
such operations may be established and conducted in Japan (in the
case of SLT) and the USA (in the case of SLT-Japan) shall not be
precluded from clarifying to inquiring customers or other members
of the marketplace the entities' respective affiliations with SLT
and/or SLT-Japan, nor shall SLT and SLT-Japan be precluded from
ascribing on their products, or in the related product labeling
and trade literature, the provenance of such products to
themselves, whether such ascription is required under the laws of
the several jurisdictions, as by way of example 21 Code of Federal
Regulations Part 808 et seq., or whether such ascription is
appropriate under the rules governing registration of products
under international standards for medical devices, as by way of
example, EN ISO 9000 et seq., EN 46000 et seq. and the EC Medical
Device Directive (93/42).
c. From the date of this Agreement and until the third anniversary
thereof, SLT shall not import into Japan, nor cause to be imported
into Japan, any of the following SLT(R) Contact Laser(TM) Systems,
whether new, refurbished or remodeled: (i) the CLMD Contact Laser
System, a 35-watt laser system supplied to SLT in part by NEC
Electronics, Inc.; and (ii) the CL60 Contact Laser System, a
60-watt laser system supplied to SLT in part by NEC Electronics,
Inc.
d. Nothing in this Section 6 grants, directly or indirectly, any
rights in the intellectual property rights of a party to this
Agreement to another party hereto. No rights in the intellectual
property rights of a party to this Agreement are granted to
another party hereto except as specifically set forth elsewhere in
this Agreement.
7. Audit.
a. Daikuzono shall have the right to designate auditors to audit
those books and records of SLT that relate to the calculation of
royalties described under Sections 4 and 5 hereof. The audit shall
be as to entire discrete fiscal years of SLT for sales of products
made on or after November 1, 1997, excepting the period November
1, 1997 to December 28, 1997, which shall be treated as a partial,
but auditable fiscal year.
b. A discrete fiscal year shall be so audited no more than once, and
must be audited within three (3) years from its fiscal year-end.
Daikuzono shall give SLT at least sixty (60) days' prior written
notice of a desired audit, whereupon SLT and Daikuzono shall
establish a time and date for the audit. If SLT so desires, the
audit shall be conducted at the place where it regularly maintains
its books and records. While the audit may cover more than one
discrete fiscal year, no more than one such audit shall be allowed
per calendar year.
c. Notwithstanding Section 7(b), an audit commissioned by Daikuzono
for a discrete fiscal year shall not be conducted before SLT's
independent accountants shall have completed their audit or review
of the books and records of SLT for that fiscal year or before SLT
shall have issued its Form 10-K for the applicable fiscal year to
the Securities and Exchange Commission. Based upon the independent
accountants' review of SLT's calculation and payment of royalties
under
63
Section 4 hereof, SLT may correct any discrepancy ascertained by
its accountants in such calculation or payment without interest,
penalty, fee or further liability to Daikuzono, provided that SLT
shall have originally calculated such royalties in good faith.
d. In the event that Daikuzono's auditors contend that a discrepancy
exists between the royalties as calculated by them and the
royalties as calculated, reviewed and possibly corrected by SLT
and its independent accountants, then Daikuzono's auditors shall
promptly set forth to SLT in detail the basis for their
contention, including without limitation the basis on which they
regard that products which SLT sold but on which it did not
calculate and pay royalties should be treated as products coming
within a claim of a Contact Laser(TM) Patent and otherwise bearing
royalty (thus excluding, for example, fiber delivery systems).
e. The parties shall confer in good faith on the discrepancy and
attempt to reach agreement on the same. If the parties cannot
reach agreement, then Daikuzono may give notice of default to SLT,
which SLT shall have thirty (30) days to cure. If such alleged
default is not so cured, then Daikuzono and SLT will submit the
issue to non-binding mediation through the auspices of an
independent mediation organization. One mediator will be selected.
Daikuzono and SLT will share equally the costs assessed by the
mediation organization. Daikuzono and SLT will pay their
respective attorneys' fees.
f. Daikuzono shall bear the cost of any audit commissioned by him
except in certain circumstances where such an audit determines
that a discrepancy greater than five percent (5%) (a "material
discrepancy") exists between the royalties calculated by
Daikuzono's auditors and the royalties calculated, reviewed and
possibly corrected by SLT and its independent accountants. The
cost of the first such audit that determines a material
discrepancy shall be borne by Daikuzono; the cost, up to but not
exceeding $2,000, of a subsequent audit that determines a material
discrepancy in a discrete fiscal year shall be borne by SLT.
g. In the event that SLT should fail to pay royalties in a timely
manner to Daikuzono, then SLT shall also be obliged to pay
Daikuzono simple interest at the annual rate of the prime rate of
interest, plus two percent (2%), reported by the Wall Street
Journal on the date such royalties first become due and payable to
the date they are paid.
h. Daikuzono and his auditors and other advisors shall treat
information from SLT concerning its calculation and payment of
royalties as confidential and material, non-public information,
unless such information is already in the public domain.
8. Default; Notice of Default; Right to Cure; Rights Upon Failure to
Cure.
a. In the event SLT fails to make any payment when due, under Section
5(a), it shall be in default.
b. As a condition precedent to the right of Daikuzono or SLT-Japan to
bring any legal action, based upon the occurrence of a default,
Daikuzono or SLT-Japan must first provide to SLT written notice of
default. Such notice shall specify the period for which the
default exists, the grounds for declaring such a default and
demanding that the default be cured. Such notice shall be sent in
accordance with Section 12(a). SLT shall then have thirty (30)
days from the date of the notice to cure the default.
64
c. In the event SLT fails to cure the default, after notice has been
given, Daikuzono or SLT-Japan shall have the right to bring an
action against SLT and seek any remedy available at law.
9. Voidance of Prior Agreements; Affirmation of Assignment.
a. This Settlement Agreement and Mutual Release voids, nullifies,
replaces and supersedes, for all purposes, all prior agreements,
undertakings and understandings by, between or among SLT,
Daikuzono and SLT-Japan. Such prior agreements, undertakings and
understandings include without limitation: (i) that certain
agreement dated March 21, 1984 between Daikuzono and SLT; (ii)
that certain agreement dated June 25, 1984 between Daikuzono and
Surgical Laser Technologies Ohio, Inc. (a former subsidiary of
SLT); (iii) that certain agreement dated on or about February 5,
1985 between Daikuzono and SLT; (iv) that certain agreement dated
March 1, 1987 between Daikuzono and SLT (the "Employment
Agreement"); and (v) that alleged agreement between Daikuzono and
SLT which Daikuzono has averred had been formed on or about July
7, 1990.
b. Notwithstanding Section 9(a), Daikuzono's prior assignments to SLT
of the Contact Laser(TM) Patents, and of any other patents and
patent applications assigned by Daikuzono to SLT, is hereby
affirmed, confirmed and ratified.
c. The parties represent and warrant to each other that there are no
agreements or understandings in force, or claims outstanding,
between SLT and SLT-Japan, except as set forth in this Agreement.
10. Mutual Limited Release.
SLT, Daikuzono and SLT-Japan mutually release each other from any and
all claims they may have against each other as of the date of this
Agreement, as follows:
a. SLT, for itself, its affiliates, successors and assigns, does
hereby forever and completely release, remise, acquit and
discharge Daikuzono, SLT-Japan and specifically SLT-Japan's US
affiliate Innovative Healthcare Devices, Inc., for and against any
and all claims, liabilities, demands, obligations, rights,
damages, costs, expenses and causes of action of any nature, kind
or character (whether tort, contract or statutory), known or
unknown, suspected or unsuspected, fixed or contingent, which are
based on, relate to, arise from or are in any way connected with
any oral or written statement, act, omission, warranty,
covenant, agreement or course of conduct, occurring on or before
the date hereof, but not as to such as occur after the date
hereof.
b. Daikuzono and SLT-Japan, for themselves, their affiliates,
successors and assigns, do hereby forever and completely release,
remise, acquit and discharge SLT and its officers, directors,
shareholders, and employees, joint ventures and affiliates from
and against any and all claims, liabilities, demands, obligations,
rights, damages, costs, expenses and causes of action of any
nature, kind or character (whether tort, contract or statutory),
known or unknown, suspected or unsuspected, fixed or contingent,
which are based on, relate to, arise from or are in any way
connected with any oral or written statement, act, omission,
warranty, covenant, agreement or course of conduct, occurring on
or before the date hereof, but not as to such as occur after the
date hereof.
65
c. It is the intent of the parties hereto that the mutual
consideration received pursuant to this Agreement satisfies and
finally resolves all controversies that exist between them, and
the parties agree that such controversies are hereby satisfied and
resolved as between themselves.
d. None of the parties is presently aware that any product of another
party infringes any issued patent owned by that party. Therefore,
each party represents to the other parties that it does not
presently intend to bring a patent infringement action against
another party hereto, based on that other party's current
products.
11. Dismissal of Action.
Daikuzono and SLT shall promptly stipulate to the dismissal of the
Action with prejudice, with each party to bear its own costs and
attorneys' fees.
12. Miscellaneous.
a. Notices given to the parties hereunder shall be by certified or
registered mail, return receipt requested, or by an overnight
courier service which obtains evidence of receipt from the
addressee. Notice shall be sent to the addresses set forth above,
in the case of SLT to the attention of its President. Any notice to
a party hereunder shall be accompanied by notice also to its
outside counsel, as follows:
Counsel for Daikuzono and SLT-Japan:
------------------------------------
White, Getgey & Xxxxx Co., L.P.A.
1700 Fourth and Vine Tower
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Counsel for SLT:
----------------
Duane, Morris & Heckscher, LLP
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, Xx. 00000
Attention: Gene X. X. Xxxxxxx, Esq.
A notice shall be deemed given on the date set forth on the return
receipt as received by the recipient. A party or its counsel may
change its address hereunder, if notice is given of the same in
conformance with these provisions.
b. If part of this Agreement should be found to be void or
unenforceable, then the portion so found shall be excepted from
the Agreement, and the balance of the Agreement shall be construed
in such manner as to give as much effect as possible to the
parties' intentions.
c. Each party acknowledges that it has had the benefit of counsel of
the party's own selection. Each party agrees that this Agreement
has been jointly drafted and that neither party has been the sole
or prime draftsman of the Agreement.
66
d. This Agreement shall be construed in accordance with the laws of
Pennsylvania, and any litigation pursuant to this Agreement shall
be brought and maintained in the United States District Court for
the Eastern District of Pennsylvania.
e. No party shall be deemed to be the agent or partner of another.
The parties to this Agreement are independent of each other.
f. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the parties hereto. A party may
assign its rights and obligations under this Agreement without the
consent of the other parties so long as the assignment
incorporates all of the rights and obligations of this Agreement.
g. Neither the execution nor the delivery of this Agreement, nor the
performance of the terms hereof, by any party hereto shall be
considered an admission by it of any present or past wrongdoing or
liability, and any and all such alleged admissions or liabilities
are hereby expressly denied by the parties hereto.
h. Consistent with Section 11, each party shall bear its own legal
costs in this matter.
i. The terms of the Settlement Agreement and Mutual Release shall not
be modified except in a writing signed by each party. A party's
forbearance from action or from pursuit of a remedy for a
grievance hereunder shall not be considered a waiver against a
future grievance.
j. This Agreement represents the entire agreement of the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties, hereby have affixed their hands as of
the date first above written.
Surgical Laser Technologies, Inc. SLT-Japan Company, LtInc.
By: /s/ W. Xxxxx Xxxxxxxxx By: /s/ Xxxxx Xxxxxxxxx
----------------------- -------------------------
Its: President and CEO Its:________________________
67
Appendix A
Listing of SLT's Products under Sec. 4(a)
-----------------------------------------
SLT(R) Contact Laser(TM) Probes and Scalpels and Contact Fibers
----------------------------------------------------------------
HP 1.0 ILT12 MCX 1.5 MD 2.5
MD 3.5 MD 6 MRP 10 MRP 15
MRP 1.5 MRP 3 MRP 5 MRP 7
MRTP 1.5 MRTP 3 MRTP 5 MT 1.5
MT 3.5 MTR 1.5 MTR 3.5 MTRG 1.5
MTRG 2.5 MTRG 3.5 MTRL 10 MTRL 6
MTRL 3 MTRL 7 MTRL 8 RMD 2.5
RMTR 1.5 SMD 2.5 SMD 3.5 SMRP 10
SMRP 15 SMRP 1.5 SMRP 3 SMRP 5
SMRP 7 SMRTP 1.5 SMRTP 3 SMRTP 5
SMT 1.5 SMT 3.5 SMTR 1.5 SMTR 3.5
SMTRG 1.5 SMTRG 3.5 VMAX 4 ER 2
ER 4 ER 6 ER 8 ER 10
ER 10 ER 12 ERP 2 ERP 4
ERP 6 ERP 8 ERP 10 XXX 00
XX 0 XX 0 XX 0 XX 8
GR 10 GR 12 GRP 2 GRP 4
GRP 6 GRP 8 GRP 10 GRP 12
DF 2 CFE 0.8 CFRH 5 CFRH 8
CFRH 9 CFRH 11 OS 2 OS 3
Heraeus LaserBlade(TM) Scalpels and Contact Fibers
--------------------------------------------------
CLB 2 CLB 4 CLB 6 CLB 8
CLB 10 CLB 12 CLBX 0.2 CLBX 0.4
CLBX 0.6 CLBX 0.8 CLBX 1.0 CLBX 1.2
FLB 2 FLB 4 FLB 6 FLB 8
FLB 10 FLB 12 FLBX 0.2 FLBX 0.4
FLBX 0.6 FLBX 0.8 FLBX 1.0 FLBX 1.2
XX-00 XX-00 XX-00 XX-00
XX-00 LTV-01 TS 1.5
HSI conical contact fibers with parts numbers 0040-xxxx:
5160 5161 5401 5190
5191 5170 5171 5210
5211 5180 0000 0000
Contact Laser and LaserBlade are trademarks of SLT and Heraeus LaserSonics,
resp.
68
