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PATENT PURCHASE AGREEMENT
THIS PATENT PURCHASE AGREEMENT (this "Agreement") is entered into
as of this 27th day of October, 1995 (the "Effective Date"), by and between
PCT HOLDINGS, INC., a Washington corporation ("PCTH"), SEISMIC SAFETY
PRODUCTS, INC., a Washington corporation (the "Subsidiary"), and XXXXX X.
XxXXXX, of Whites Creek, TN ("McGill"), in his individual capacity.
RECITALS
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WHEREAS, McGill is the holder of two United States Letters
Patent, U.S. Patent No. 4,903,720, granted on February 27, 1990, and U.S.
Patent No. 5,119,841, granted on June 9, 1992 (collectively, the
"Patents"); and
WHEREAS, PCTH has offered to cause the Subsidiary to purchase
from McGill the Patents (including but not limited to the right to xxx for
past infringements), so as to acquire full and unencumbered title and
interest in the Patents, for an aggregate consideration of $120,000 and
otherwise based upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, McGill desires to sell the Patents (including but not
limited to the right to xxx for past infringements) to the Subsidiary,
based upon the terms and subject to the conditions hereinafter set forth;
and
WHEREAS, to induce PCTH to enter into this agreement, McGill has
agreed to enter into a noncompetition agreement and to grant other rights
to PCTH and the Subsidiary;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties
hereto covenant and agree as follows:
AGREEMENT
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1. PURCHASE AND SALE.
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1.1 Agreement to Sell and Purchase. Upon the basis of the
representations and warranties, for the consideration, and subject to the
terms and conditions set forth in this Agreement, McGill hereby agrees to
sell, transfer, assign and convey, and the Subsidiary hereby agrees to
purchase, the Patents, including but not limited to the right to xxx for
past infringements, free and clear of all liens, encumbrances and rights of
others.
1.2 Purchase Price. The total purchase price for the Patents (the
"Purchase Price") shall be $120,000, as provided in Section 1.3 hereof.
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1.3 Payment of Purchase Price. The Purchase Price shall be
payable to McGill by the Subsidiary or PCTH as follows:
(a) $5,000 to be paid by company check on the Closing Date;
and
(b) Equal installments of $5,000 each to be paid by company
check on the 15th day of each month for 24 consecutive months thereafter.
1.4 Transfer Documents. Provided that all conditions precedent
have been fulfilled or waived, McGill shall deliver to the Subsidiary, upon
payment of the $5,000 due on the Closing Date (as defined in Section 1.5),
patent assignments and such other instruments of transfer (in form and
substance satisfactory to PCTH and the Subsidiary) as may be necessary to
transfer to the Subsidiary all of the right, title and interest in and to
the Patents, free and clear of any liens, claims or encumbrances of any
kind.
1.5 Closing. The closing of the transaction contemplated in the
Agreement (the "Closing") shall take place on November 30, 1995 (the
"Closing Date"), at the offices of Stoel Rives, 3600 One Union Square,
Seattle, Washington, or at such other time and place as the parties may
agree.
2. TERMINATION.
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2.1 Right to Terminate. Notwithstanding anything to the contrary
in this Agreement, this Agreement may be terminated and the transactions
contemplated herein abandoned at any time prior to the Closing:
(a) Mutual Consent. By mutual consent of PCTH and McGill.
(b) Delay. By either PCTH or McGill, if the Closing shall
not have occurred by December 31, 1995; provided, however, that the right
to terminate this Agreement under this Section 2.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date.
(c) Breach by PCTH. By McGill, if PCTH breaches any of
PCTH's representations and warranties in any material respect or fails to
comply in any material respect with any of its agreements contained here.
(d) Breach by McGill. By PCTH, if McGill breaches any of his
representations and warranties in any material respect or fails to comply
in any material respect with any of his agreements contained herein.
2.2 Obligations to Cease. If this Agreement is terminated
pursuant to Section 2.1, all obligations of the parties to this Agreement
shall terminate and there shall be no liability of any party hereto to any
other party except (i) as set forth in Sections 6.4 and 8.6; and (ii) that
nothing herein will relieve any party from liability for any willful breach
of this Agreement.
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3. REPRESENTATIONS AND WARRANTIES OF McGILL.
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McGill represents and warrants to PCTH and the Subsidiary that:
3.1 Due Authorization. McGill has full power and authority to
execute and deliver this Agreement and to perform and to carry out his
obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by McGill and is binding upon and enforceable
against him in accordance with its terms, except as such enforcement may be
limited by equitable principles or by applicable bankruptcy, insolvency,
reorganization or other laws affecting creditor's rights generally. The
execution and delivery of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by
McGill, and the performance of his obligations thereunder, will not (a)
violate any federal, state, county, or local law, rule, or regulation or
any applicable decree or judgment of any court or governmental authority or
(b) violate or conflict with, or permit the cancellation of, or constitute
a default under, any agreement to which McGill is a party or by which he or
his property is bound.
3.2 Title to Patents. McGill has good and marketable full and
unencumbered legal and equitable title to U.S. Patent No. 4,903,720 and
U.S. Patent No. 5,119,841, including without limitation the exclusive right
to bring actions for infringement thereof, free and clear of all security
interests, liens, encumbrances, claims, or rights of any kind. McGill has
not licensed to others, or agreed to license, any of the Patents, or
entered into any contracts with respect thereto.
3.3 No Infringement. There has been no assertion or claim that
any manufacture, use or sale of any product by any third party infringes
any of the claims of the Patents, and McGill does not believe and has no
reason to believe that any manufacture, use or sale of any product by any
third party infringes any of the claims of the Patents. There is no claim,
dispute, action, proceeding or lawsuit asserting infringement of the rights
of any third party by the products and methodologies claimed in the
Patents, no threat of such action, and no basis exists for any such action.
3.4 Validity of Patents. All materials and information of which
disclosure to the United States Patent and Trademark Office is required
pursuant to United States Patent Law and Regulations during the prosecution
of the Patents have been submitted thereto. There has been no
misrepresentation and, to the best knowledge and belief of McGill, there is
no information or prior art reference that would render the Patents invalid
or raise any material questions regarding their validity.
3.5 Consents and Approvals. No consent, approval or authorization
of, or filing or registration with, any court, regulatory authority,
governmental body, or any other third party is required for the
consummation of the transaction of this Agreement.
3.6 Brokers. McGill has not entered into any arrangement with any
broker, finder or investment banker and will not incur a fee or any
liability for any brokerage or investment banking fee, commission, or
finder's fee in connection with the transactions contemplated by this
Agreement.
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3.7 Reliance. McGill recognizes and agrees that, notwithstanding
any investigation by PCTH, PCTH is relying upon the representations and
warranties made by McGill in this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF PCTH.
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PCTH and the Subsidiary represent and warrant to McGill as
follows:
4.1 Due Organization. PCTH is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Washington and has full corporate power and authority to enter into and
perform this Agreement. The Subsidiary is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Washington and has full corporate power and authority to enter into and
perform this Agreement.
4.2 Due Authorization. PCTH and the Subsidiary each have full
corporate power and authority to execute and deliver this Agreement and to
perform and carry out their obligations under this Agreement. The execution
and delivery of this Agreement and performance of PCTH's obligations and
the obligations of the Subsidiary contemplated hereby have been duly and
validly authorized by all necessary corporate action of PCTH and the
Subsidiary. This Agreement has been duly and validly executed and delivered
by PCTH and the Subsidiary and constitutes the valid and binding obligation
of PCTH and the Subsidiary, enforceable in accordance with its terms,
except as such enforcement may be limited by equitable principles or by
applicable bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally. The execution and delivery of this Agreement
(as well as all instruments, agreements, certificates or other documents
contemplated hereby) by PCTH and the Subsidiary and their performance of
their obligations thereunder, will not (a) violate any federal, state,
county, or local law, rule, or regulation or any decree or judgment of any
court or governmental authority applicable to PCTH or the Subsidiary or
their property or (b) violate or conflict with, or permit the cancellation
of, or constitute a default under, any agreement to which PCTH or the
Subsidiary is a party or by which they or their property is bound.
5. INDEMNIFICATION.
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5.1 Indemnification. McGill agrees to indemnify and hold harmless
PCTH and the Subsidiary, and any of the affiliates, officers, directors,
employees, successors, assigns or agents of PCTH and the Subsidiary, from
and against any losses, damages, liabilities, costs and expenses, including
without limitation, any attorney's fees, technical expert fees and any
other expenditures for defense, and damages and settlement disbursements
that may be incurred as a result of any claim, dispute, proceeding or
lawsuit out of or related to any breach of, misrepresentation or inaccuracy
in, or intentional or reckless omission from, any representation or
warranty made by McGill in the Agreement or related agreements or
documents.
5.2 Indemnification Procedures.
(a) Claim Notice. In the event that an indemnified person
reasonably determines that it is entitled to indemnification pursuant to
Section 5.1, the
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indemnified person shall provide written notice to McGill, specifying in
reasonable detail the nature and estimated amount of the claim.
(b) Third-Party Claims. If the claim specified in the claim
notice relates to a third-party claim, McGill shall have 15 days after his
receipt of the claim notice to notify the indemnified person whether McGill
agrees that the claim is subject to indemnification pursuant to this
Section 5 and whether McGill elects to defend such third-party claim at his
own expense. If the claim relates to a third-party claim that McGill elects
to defend, the indemnified person shall reasonably cooperate with such
defense. The indemnified person shall, however, be entitled to participate
in the defense or settlement of such a third-party claim through its own
counsel and at its own expense and shall be entitled to approve or
disapprove any proposed settlement that would impose a duty or obligation
on the indemnified person. If McGill does not timely elect to defend a
third-party claim, or if McGill fails to conduct such defense with
reasonable diligence, the indemnified party may conduct the defense of, or
settle, such claim at the risk and expense of McGill.
(c) Claims Other Than Third-Party Claims. If the claim does
not relate to a third-party claim, McGill shall have 30 days after receipt
of the claim notice to notify the indemnified party in writing whether
McGill accepts liability for all or any part of the claim and the method
and timing of any proposed payment. If McGill does not so notify the
indemnified party, McGill shall be deemed to have accepted liability for
all damages described in the claim notice.
5.3 Set-Off During First Twenty-Nine Months. Notwithstanding
anything to the contrary in Section 5.2, in the event that PCTH or the
Subsidiary reasonably determines at any time prior to completion of
payments for the twenty-nine months following Closing that PCTH or the
Subsidiary is entitled to indemnification pursuant to Section 5.1, PCTH
shall be entitled to pay the amount of any such claim to an escrow agent as
payment to McGill would otherwise become due, instead of to McGill as part
of the remaining payments due McGill. In the event that PCTH pays any such
disputed amount to an escrow agent and the parties are not able to mutually
resolve the dispute within 10 business days after the last payment due, the
parties shall submit the dispute to arbitration. Arbitration under this
section shall be conducted in accordance with the commercial arbitration
rules of the American Arbitration Association, in King County, Washington,
by one attorney arbitrator selected by mutual agreement, or by three
arbitrators if the parties are unable to agree on a single arbitrator
within 20 days of the first demand for arbitration. All arbitrators are to
be selected from a panel provided by the American Arbitration Association.
The arbitrators shall have the authority to permit discovery, to the extent
deemed appropriate by the arbitrators, upon request of a party. The
arbitrators shall have no power or authority to add to or detract from the
agreements of the parties. The cost of the arbitration shall be borne
equally pending the arbitrator's award. The arbitrators shall have no
authority to award punitive or consequential damages. The resulting
arbitration award may be enforced by all lawful remedies, including without
limitation injunctive or other equitable relief obtained in any applicable
court located in King County, Washington.
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6. OTHER AGREEMENTS.
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6.1 Noncompetition Covenant. McGill agrees that, for five years
following the Closing Date, he will not directly or indirectly engage in or
perform any services to, or provide individuals to perform such services
to, whether on an employment, a consulting or an advisory basis, or own,
manage, operate, control, be employed by, participate in or be connected in
any manner with the ownership, management, operation or control of any
business or undertaking that directly or indirectly competes with the
business of PCTH or the Subsidiary or any affiliate thereof in an area of
technology that is related to earthquake gas and electricity shutoff and
actuator apparatus that are activated by seismic activity, this area of
technology specifically excluding, without limitation, technology related
to leak-detecting shutoff systems, earthquake alarms and P wave alarms.
6.2 Right of First Refusal. For five years following the Closing
Date, PCTH and the Subsidiary shall have the right of first refusal to
purchase any technology, product, prototype or concept which McGill
develops, or helps develop, related to the subject matter of the Patents
("Subsequent Technology"), which right may be exercised on an exclusive
basis within three months after PCTH or the Subsidiary receives written
notice from McGill of the existence of the Subsequent Technology. The terms
of any such exercise shall be agreed upon by PCTH or the Subsidiary and
McGill. Prior to and during the three-month exclusive period, McGill will
not entertain offers from any third party for the Subsequent Technology.
PCTH and the Subsidiary shall have the further right, after expiration of
any such three-month exclusive period, to match any other offer made for
the Subsequent Technology, within one month of receiving notice of such
offer, by giving written notice of its intention to match such offer.
McGill agrees to notify PCTH and the Subsidiary promptly upon determining
that any Subsequent Technology is available and to notify PCTH and the
Subsidiary promptly in the event that any offer for Subsequent Technology
is received from a third party. If no terms are agreed upon by PCTH or the
Subsidiary and McGill, or no matching offer is made by PCTH or the
Subsidiary within the applicable time periods, McGill will be free to
manufacture, market, sell, distribute, license or otherwise dispose of the
Subsequent Technology at his discretion and notwithstanding any other
provisions of this Agreement. In the event that a person other than McGill
has rights to Subsequent Technology because such person is a co-inventor or
co-developer thereof, McGill will use his best efforts to provide to PCTH
and the Subsidiary the rights described in this Section with respect to
such person's interest.
6.3 Further Assurances. McGill agrees that, from time to time and
after execution of this Agreement, he will, upon the request of PCTH or the
Subsidiary and without further consideration, take all steps reasonably
necessary to place the Subsidiary in possession of full record and actual
title to the Patents and full operating control of all rights to make, use
and sell the products embodying the Patents, and full operating control of
all rights to make, use and sell the products embodying the patents, and he
will do or have done, execute or have executed, and deliver or have
delivered, all further acts, assignments, powers of attorney, and
acknowledgements or assurances as reasonably required to assign to and vest
in the Subsidiary all his right, title, and interest in the Patents.
6.4 Confidentiality. The terms and conditions of this Agreement
and all information and materials, including all financial statements and
business information, know-how, techniques and other proprietary materials
and intellectual property used in the
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conduct of the respective businesses of the parties hereto as now conducted
or as proposed to be conducted, that have been divulged or provided during
the negotiation of this Agreement are the confidential information of the
party owning such information and materials (the "Confidential Information").
Unless the owner of the relevant Confidential Information consents in writing
to the contrary, no Confidential Information shall be divulged, except on a
need to know basis to directors, officers or key employees involved in the
transactions contemplated hereby and such third party consultants as need the
Confidential Information for tax, accounting, or similar purposes or as
required by applicable law; provided that this obligation will not apply to
PCTH or the Subsidiary after the Closing Date.
6.5 Disclosure. Any press release or public disclosure regarding
the execution of this Agreement or the terms hereof will be made at the
sole discretion of PCTH or the Subsidiary.
6.6 Maintenance After Closing. PCTH and the Subsidiary shall be
responsible for all costs, services and fees involved with prosecution,
allowance, registration and maintenance of the Patents and Related
Intellectual Property that arise after Closing.
6.7 Performance of Subsidiary Obligations. Subject to the
consummation of the Closing, PCTH agrees to carry out the obligations of
the Subsidiary in the event that the Subsidiary fails to carry out any of
its obligations to Sellers under this Agreement, including any obligations
pursuant to Sections 1.2 or 1.3, above.
7. CONDITIONS PRECEDENT TO CLOSING.
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7.1 Conditions to the Obligations of PCTH and the Subsidiary. The
obligations of PCTH and the Subsidiary to close the transaction
contemplated in this Agreement are subject to the fulfillment, at or prior
to Closing (unless waived in writing by PCTH):
(a) Representations and Warranties. The representations and
warranties of McGill contained herein shall be true and correct in all
material respects as of Closing as if made at Closing;
(b) Closing Documents. McGill shall have executed and
delivered to PCTH and the Subsidiary all documents required to be delivered
by McGill pursuant to this Agreement, in form reasonably satisfactory to
PCTH and its counsel.
7.2 Conditions Precedent to the Obligations of McGill. The
obligations of McGill to close the transaction contemplated in this
Agreement are subject to the fulfillment, at or prior to Closing, of the
following conditions (unless waived in writing by McGill):
(a) Representation and Warranties. The representations and
warranties of PCTH and the Subsidiary contained herein shall be true and
correct in all material respects as of Closing as if made at Closing; and
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(b) Purchase Price. PCTH shall have delivered the first
$5,000 payment of the Purchase Price.
7.3 Condition Precedent to the Obligations of All Parties. The
obligations of all parties to close the transaction contemplated in this
Agreement are subject to the Closing, prior to or simultaneously with the
Closing, of the purchase by PCTH or the Subsidiary of (i) substantially all
of the assets of Seismic Safety Products, Inc., a Florida corporation, and
(ii) certain intellectual property owned by McGill and Xxxxxxx X.
Xxxxxxxxx.
8. MISCELLANEOUS.
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8.1 Waiver or Modification of Agreement. No modification or
waiver of any provision of this Agreement, nor any consent to any departure
by either party herefrom, shall in any event be effective unless the same
shall be in writing and signed by the party against which enforcement of
such modification or waiver is sought, and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
8.2 Amendment of Agreement. This Agreement may be amended with
respect to any provision contained herein by a written instrument duly
executed on behalf of each party hereto.
8.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered, or three days after deposited in the United States mail,
first-class, postage prepaid, or by facsimile addressed to the respective
parties hereto as follows:
If to PCTH or the Subsidiary:
---------------------------
PCT Holdings, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
c/o Cashmere Manufacturing, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Stoel Rives
00xx Xxxxx, Xxx Xxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to McGill:
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c/o Xxxxx XxXxxx
000 Xxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. XxXxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxxxxxx
Wenderoth, Lind & Ponack
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as to any party hereto as such party shall
designate by like notice to the other parties hereto.
8.4 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making
proof of this Agreement, it shall never be necessary to produce or account
for more than one such counterpart.
8.5 Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement
shall survive the Closing.
8.6 Expenses. Each of the parties hereto will bear all costs,
charges and expenses incurred by such party in connection with this
Agreement and the consummation of the transactions contemplated herein.
8.7 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of PCTH, the Subsidiary and McGill, and their
representatives, successors, and permitted assigns, in accordance with the
terms hereof. PCTH and the Subsidiary agree that any sale, transfer,
assignment or conveyance of the Patents to another
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party shall be made expressly subject to the terms, conditions and provisions
of this Agreement.
8.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements,
representations, warranties, statements, promises, information,
arrangements and understandings, whether oral or written, express or
implied, with respect to the subject matter hereof.
8.9 Governing Law. This Agreement and its validity, construction,
enforcement, and interpretation shall be governed by the substantive laws
of the State of Washington.
8.10 Attorneys' Fees. If suit, action or appeal is filed by any
party to enforce the provisions of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and expenses.
8.11 Invalid Provisions. If any provision of this Agreement is
deemed or held to be illegal, invalid or unenforceable, this Agreement
shall be considered divisible and inoperative as to such provision to the
extent it is deemed to be illegal, invalid or unenforceable, and in all
other respects this Agreement shall remain in full force and effect;
provided, however, that if any provision of this Agreement is deemed or
held to be illegal, invalid or unenforceable there shall be added hereto
automatically a provision as similar as possible to such illegal, invalid
or unenforceable provision and be legal, valid and enforceable. Further,
should any provision contained in this Agreement ever be reformed or
rewritten by any judicial body of competent jurisdiction, such provision as
so reformed or rewritten shall be binding upon all parties hereto.
8.12 Remedies Cumulative. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which
any party may be lawfully entitled.
8.13 Waiver. No failure or delay on the part of any party in
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a
waiver of such right, power, or privilege, nor shall any single or partial
exercise of any such right, power, or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
8.14 Headings. The descriptive section headings are for
convenience of reference only and shall not control or affect the meaning
or construction of any provision of this Agreement.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement
to be duly executed as of the date and year first above written.
PCT HOLDINGS, INC., a Washington
corporation
By /s/ XXXXXX X. XXXXXX
---------------------------------
Title President
SEISMIC SAFETY PRODUCTS, INC., a
Washington corporation
By /s/ XXXX XXXX
---------------------------------
Title President
/s/ XXXXX X. XxXXXX
-----------------------------------
XXXXX X. XxXXXX
