SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT is
entered into as of the latest of the dated signatures below (“Effective Date”)
by and among Technology
Research Corporation (“TRC”), and Shanghai ELE Manufacturing
Corporation (“ELE”).
IN CONSIDERATION OF THE MUTUAL
COVENANTS AND PROMISES CONTAINED HEREIN, THE SUFFICIENCY OF WHICH THE PARTIES
IRREVOCABLY ACKNOWLEDGE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE
1
DEFINITIONS
The following terms shall have the
meaning set forth below when used in this Agreement:
1.1 “’337
Patent” means U.S. Patent No. 6,292,337 entitled “Electrical System
with Arc Protection”, including all foreign counterparts, divisional,
continuation, reissued, reexamined, continuation in-part patents and any patents
or pending applications claiming priority from them or any of their parent
applications.
1.2 “Chinese
Patents” means Chinese Patent Nos. ZL200420096315.2, ZL200520118736.5 and
ZL200520118737.X, including all foreign counterparts, divisional, continuation,
reissued, reexamined, continuation in-part patents and any patents or pending
applications claiming priority from them or any of their parent
applications.
1.3 “Sold”
means ELE has shipped its products and invoiced its customer for such
products.
1.4 “Agreement”
means this Settlement Agreement.
1.5 “Party”
or “Parties” means any party to this Agreement.
1.6 “Stipulation
of Dismissal With Prejudice” means the Stipulation of Dismissal with Prejudice
document attached as Appendix A.
ARTICLE
2
BACKGROUND
2.1 TRC
is the owner of the entire right, title and interest in and to the ’337
Patent. ELE is the owner of the entire right, title and interest in
and to the Chinese Patents.
2.2 ELE
filed suit against TRC in the U.S. District Court for the Central District of
California, No. 2:07-cv-1102-RGK-VBK. The suit was transferred to the
U.S. District Court for the Middle District of Florida, No. 8:07-cv-1007-JDW-MSS
(“the Action”). In the Action, ELE sought declaratory judgment of
non-infringement of the ’337 patent and invalidity of the ’337
patent. TRC asserted affirmative defenses and counterclaims,
alleging, among other things, that ELE infringes the ’337 Patent and that the
’337 patent is valid and enforceable.
2.3 The
parties to this Agreement now desire to settle the Action, and to settle and
resolve all issues which they may have against each other arising out of or in
connection with the ’337 patent and the Chinese Patents.
ARTICLE
3
PAYMENTS AND
ROYALTIES
3.1 ELE
shall pay TRC [request for
confidential treatment] in full settlement regarding all products made,
used, sold, imported or offered for sale by ELE prior to July 1, 2008 (“Past
Products”). This amount is to be offset by the [request for confidential treatment]
owed to ELE by TRC pursuant to Section 3.2 of this
agreement. The remaining [request for confidential treatment]
shall be payable within thirty days of the dismissal of the
Action.
3.2 TRC
shall pay ELE [request for
confidential treatment] in full settlement regarding all products made,
used, sold, imported or offered for sale by TRC prior to July 1, 2008 and in
partial consideration for the license granted to it by ELE pursuant to Section
4.3 of this Agreement. This amount shall be credited as an offset to
the amount owed to TRC pursuant to Section 3.1 of this agreement and shall be
credited upon execution of the Agreement.
3.3 For
so long as the ’337 Patent is valid and enforceable, the royalty for the license
granted to ELE under this Agreement on any of ELE’s Leakage Current Detector
Interrupter Products other than Past Products (“ELE LCDI Products”) Sold is
[request for confidential
treatment] on ELE LCDI Products having a voltage rating of 125 volts or
less, and is [request for
confidential treatment] on all other ELE LCDI Products.
3.4 Royalty
payments will be paid quarterly, will be due for the previous quarter on the
15th
of the month following the end of that quarter, and will be accompanied by a
statement of the number of ELE LCDI Products (by voltage rating when
appropriate) Sold during that quarter.
3.5 ELE
guarantees a minimum royalty payment of [request for confidential
treatment] for Fiscal year 2009 (7/08-6/09) and [request for confidential
treatment] for Fiscal year 2010 (7/09-6/10), payable at [request for confidential
treatment] per quarter. If in any quarter, the amount of
actual royalties paid exceeds [request for confidential
treatment], the amount in excess of [request for confidential treatment]
will be carried over and credited toward the next quarters’ minimum
royalty payment within the same Fiscal year.
3.6 The
payments required to be made pursuant to section 3.1 of this Agreement shall be
made in United States dollars by wire transfer of immediately available funds as
follows:
Technology
Research Corporation
0000
000xx Xxxxxx
Xxxxx
Xxxxxxxxxx,
XX 00000-0000
Bank
Name: Wachovia
Bank
City/State: Winston-Salem,
NC
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|
Account
No.:
|
[request for confidential
treatment]
|
|
|
ABA
No.:
|
[request for confidential
treatment]
|
|
|
Swift
Code:
|
[request for confidential
treatment]
|
|
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Account
Name:
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3.7 ELE
agrees to keep records showing the sales or other disposition of ELE LCDI
Products sold or otherwise disposed of under the license herein granted in
sufficient detail to enable the royalties payable by ELE to be
determined. Upon notice from TRC as described herein, which may be
given no more than once every twelve (12) months, ELE shall provide access to
those Auditors (defined below) whom TRC may request in writing as needing access
to the ELE’s statements, for the purpose of performing an audit of ELE’s
compliance with the terms and conditions set forth in the Agreement. ELE shall
provide such Auditors with reasonable assistance as they may require, at TRC’s
sole cost and expense. If any audit by an Auditor results in ELE being
notified that it is not in compliance with provisions under this Agreement, ELE
shall take actions to comply with the recommendations contained in such
notification. All audits will be paid for exclusively by TRC, shall
require reasonable advanced written notice to ELE (but in no event less than
thirty (30) business days), and will be conducted in a manner so as not to
disrupt ELE’s business. All information accessed by Auditors as part of an
audit shall be deemed the Confidential Information of ELE and treated in
accordance with the provisions contained in Section(s) 3, 5 and 6 of the
Stipulated Protective Order filed in connection with the Action on or about
August 27, 2007 and approved by the Court on or about August 29, 2007. In
the event an audit concludes that ELE’s payments are not in full compliance with
this Agreement, then TRC's sole remedy shall be to require ELE to pay such
additional amounts as necessary to bring ELE into compliance, including accrued
interest at the rate of 1.5% per month or the maximum lesser rate allowed by
applicable law. For purposes of this Section 3.7, "Auditor" shall
mean those independent third party individuals unaffiliated with TRC and engaged
at TRC's sole cost and expense to audit ELE's compliance with the terms and
conditions set forth in this Agreement, and who: (a) are reasonably acceptable
to ELE as indicated by ELE in writing; and (b) have signed confidentiality
agreements with terms at least as strict as those contained herein and in the
above-referenced Stipulated Protective Order.
ARTICLE
4
LICENSE
AGREEMENT
4.1 Conditioned
upon ELE complying with the payment obligations specified in section 3.1 of this
Settlement Agreement, TRC hereby grants to ELE, its subsidiaries, and its
existing contract manufacturers, a perpetual, worldwide, non-transferable
(except as set forth in Section 10.1), non-exclusive license, limited to the
room air conditioner (RAC) market, to make, have made, use, offer-to-sell, sell,
export, and import, or otherwise dispose of products and services, the making,
having made, use, offering to sell, selling, exporting or importing of which
would in the absence of this license infringe any valid and enforceable claim of
the ’337 Patent. This license shall apply to ELE’s customers,
manufacturers, partners, distributors, re-sellers, vendors, and their respective
end users, but only with respect to products and services made
by, provided by, or purchased from ELE. This license shall
not be interpreted or construed as granting ELE any right to sub-license any
third party or Non-Subsidiary rights to use any invention claimed in the ’337
Patent, except as such invention is or was embodied in materials, equipment, or
products provided directly by ELE. “Non-subsidiary” shall mean any
corporation of which ELE does not own or control more than 50% of the U.S. or
foreign corporation, company or other legal entity. Further, this
license shall not be interpreted or construed to include any products or
services of any third party that acquires ELE or any of ELE’s subsidiaries or
affiliates, where such products or services (i) were in existence at the time of
the acquisition or (ii) are new products or services developed by said third
party subsequent to said acquisition.
4.2 The
term of the license granted to ELE shall be for the life of the ’337
Patent.
4.3 Conditioned
upon TRC complying with the payment obligations specified in section 3.2 of this
Settlement Agreement, ELE hereby grants to TRC, its subsidiaries, and its
existing contract manufacturers, a perpetual, worldwide, non-transferable
(except as set forth in Section 10.1), non-exclusive license, limited to the
room air conditioner (RAC) market, to make, have made, use, offer-to-sell, sell,
export, and import, or otherwise dispose of products and services, the making,
having made, use, offering to sell, selling, exporting or importing of which
would in the absence of this license infringe any valid and enforceable claim of
the Chinese patents. This license shall apply to TRC’s customers,
manufacturers, partners, distributors, re-sellers, vendors, and their respective
end users, but only with respect to products and services made by, made for,
provided by, or purchased from TRC. This license shall not be
interpreted or construed as granting TRC any right to sub-license any third
party or Non-Subsidiary rights to use any invention claimed in the Chinese
patents, except as such invention is or was embodied in materials, equipment, or
products provided directly or indirectly by TRC. “Non-subsidiary”
shall mean any corporation of which TRC does not own or control more than 50% of
the U.S. or foreign corporation, company or other legal
entity. Further, this license shall not be interpreted or construed
to include any products or services of any third party that acquires TRC or any
of TRC’s subsidiaries or affiliates, where such products or services (i) were in
existence at the time of the acquisition or (ii) are new products or services
developed by said third party subsequent to said acquisition.
4.4 The
term of the license granted to TRC shall be for the life of the last to expire
Chinese Patents.
4.5 Other
than this license and the release of Article 6, no license, right, or immunity
is granted by TRC or by ELE to each other or any third party, either expressly
or by implication, or by estoppel, or otherwise, to any patents, inventions, or
other property right.
ARTICLE
5
DISMISSAL OF THE
ACTION
5.1 Within
five business days after the complete execution and delivery of this Agreement,
TRC and ELE shall cause their respective counsel to endorse and file the
Stipulation of Dismissal With Prejudice attached as Appendix A to cause all of
their claims and counterclaims in the Action with respect to each other to be
dismissed with prejudice. The Stipulation may be amended to the
extent necessary to comply with court rules.
ARTICLE
6
MUTUAL
RELEASES
6.1 TRC
hereby releases and forever discharges ELE, and all of its respective directors,
officers, stockholders, members, affiliate companies, subsidiaries, acquired
companies, acquirers, parent companies, employees, attorneys, and agents
(collectively, “ELE Entities”), and their permitted successors and assigns, from
any and all claims, demands, obligations, losses, causes of action, damages,
penalties, costs, expenses, attorney fees, liabilities, compensation, and
indemnities of any nature, whether based on contract, tort, statute or other
legal or equitable theory of recovery, whether known or unknown, which as of the
Effective Date of this Agreement TRC, and its respective affiliate and parent
companies, had or claims to have had against ELE, including but not limited to
any arising out of or in connection with claims that were made or that could
have been made in any form with respect to the ’337 or Chinese patents or other
patents, and except for any breach of this Agreement. This release
shall apply to ELE’s customers, manufacturers, partners, distributors,
re-sellers, vendors, and their respective end users, but only with respect to
products and services made by, provided by, purchased from, or licensed from ELE
Entities.
6.2 ELE
hereby releases and forever discharges TRC, and all of its respective directors,
officers, stockholders, members, affiliate companies, subsidiaries, acquired
companies, acquirers, parent companies, employees, attorneys, and agents
(collectively, “TRC Entities”), and their permitted successors and assigns, from
any and all claims, demands, obligations, losses, causes of action, damages,
penalties, costs, expenses, attorney fees, liabilities, compensation, and
indemnities of any nature, whether based on contract, tort, statute or other
legal or equitable theory of recovery, whether known or unknown, which as of the
Effective Date of this Agreement ELE, and its respective affiliate and parent
companies, had or claims to have had against TRC, including but not limited to
any arising out of or in connection with claims that were made or that could
have been made in any form with respect to the ’337 or Chinese patents or other
patents, and except for any breach of this Agreement. This release
shall apply to TRC's customers, manufacturers, partners, distributors,
re-sellers, vendors, and their respective end-users, but only with respect to
products and services made by, provided by, purchased from, or licensed from TRC
Entities.
6.3 As
long as this Agreement relating to the ‘337 Patent and Chinese Patents remains
in effect, TRC covenants that it will not enforce any other patent against the
ELE Entities on any ELE LCDI Products having the same design as ELE LCDI
Products sold within the United States prior to June 30, 2008.
6.4 As
long as this Agreement relating to the ‘337 Patent and Chinese Patents remains
in effect, ELE covenants that it will not enforce any other patent against the
TRC Entities on any TRC LCDI Products having the same design as TRC LCDI
Products sold within the United States prior to June 30, 2008.
6.5 The
mutual releases granted above are not to be construed as releasing the parties
from any obligations arising and unfulfilled under this agreement.
ARTICLE
7
FEES AND
COSTS
7.1 The
Parties shall pay all of their own fees and expenses, including court costs,
legal fees and expert fees, incurred in the prosecution or defense of the
Action, and in the preparation of this Agreement.
ARTICLE
8
REPRESENTATIONS AND
WARRANTIES
8.1 Each
Party represents and warrants that it has the right to enter into this
Agreement.
8.2 The
Parties' representatives, by their signatures below, represent and warrant that
they are duly authorized to execute and deliver this Agreement on behalf of the
respective Party.
8.3 TRC
hereby represents, covenants, and warrants that it will not assert against ELE
Entities or their permitted successors and assigns, or any of ELE’s customers,
manufacturers, partners, distributors, re-sellers, vendors, or any other
permitted user of ELE LCDI Products (whether such permission is granted directly
by ELE or another licensee of ELE) (collectively together with ELE Entities,
“ELE Users”) any claim of infringement based upon the ’337 Patent arising out of
or in connection with the use, sale, or distribution of the ELE LCDI
Products.
8.4 ELE
hereby represents, covenants, and warrants that it will not assert against TRC
Entities or their permitted successors and assigns, or any of TRC’s customers,
manufacturers, partners, distributors, re-sellers, vendors, or any other
permitted user of TRC LCDI Products (whether such permission is granted directly
by TRC or another licensee of TRC) (collectively together with TRC Entities,
“TRC Users”) any claim of infringement based upon the Chinese patents arising
out of or in connection with the use, sale, or distribution of the TRC LCDI
Products.
8.5 For
as long as ELE continues to be a competitor in the LCDI market, TRC will not
license the ’337 Patent to any third party manufacturer in China (other than to
a contract manufacturer for TRC), except to the extent that such a license is
necessary to resolve litigation. In the event that a license of the
‘337 Patent is necessary to resolve litigation, the license will be at royalty
rates no lower than those paid by ELE pursuant to Section 3.3 and 3.5 of this
Agreement unless agreed to in writing by ELE, as part of a settlement
agreement, or by order of a court of competent jurisdiction (a “Lower Rate
Mandate”). In the event of a Lower Rate Mandate, at ELE’s sole
discretion, Section 3.3 and 3.5 of this Agreement may be deemed amended to
permit ELE to pay at the rate established by the Lower Rate Mandate effective on
the same date the Lower Rate Mandate becomes effective.
ARTICLE
9
CONFIDENTIALITY
9.1 The
Parties shall keep the terms of this Agreement confidential and shall not now or
hereafter divulge these terms to any third party except:
9.1.1 with the
prior written consent of the other Party; or
9.1.2 to
any governmental body having jurisdiction to call for such terms;
or
9.1.3 as
otherwise may be required by law or legal process, including to legal and
financial advisors in their capacity of advising a Party in such matters;
or
9.1.4 during the
course of litigation so long as the disclosure of such terms and conditions are
restricted in the same manner as is the confidential information of other
litigating parties and so long as (a) the restrictions are embodied in a
court-entered Protective Order and (b) the disclosing Party informs the other
Party in writing at least ten (10) days in advance of the disclosure;
or
9.1.5 in
confidence to legal counsel, accountants, banks, financing sources and their
advisors solely in connection with complying with financial transactions or
legal reporting requirements; or
9.1.6 any
disclosure required by any applicable securities regulations, including any
disclosure required by TRC in public SEC filings, but only to the extent that
the disclosing party, determines in its sole discretion, that
such disclosure is required by applicable securities laws
and regulations.
9.3 Notwithstanding
the above, the Parties are free to disclose to any customer or other member of
the public at any time the terms of this Agreement and the settlement of the
Action to the extent provided, or in the form provided, in Appendix B to this
Agreement.
ARTICLE
10
GENERAL
PROVISIONS
10.1 Assignment. This
Agreement and any rights, licenses or privileges under this Agreement including,
but not limited to, the license and release or any rights under them, shall be
freely assignable to (i) any parent, or subsidiary of a Party or (ii) an
acquiror of a Party or of any portion of a Party’s business to which this
Agreement applies (whether by way of an asset or stock
transaction). TRC and ELE represent that they are not currently
engaged in any active negotiations in connection with their acquisition by
any third party.
10.2 Waiver. The
waiver by any Party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or any subsequent breach of the
same or a different kind.
10.3 Amendments. Any
changes to this Agreement must be in writing specifically stating an intention
to modify this Agreement signed by the Party or Parties to be
bound.
10.4
Survival of
Representations, Covenant and Warranties. The representations,
covenants and warranties contained in this Agreement shall survive the execution
and delivery of this Agreement.
10.5 Relationship of
Parties. Nothing in this Agreement shall create or be deemed
to create any relationship of agency, partnership, or joint venture between TRC,
on the one hand, and ELE, on the other.
10.6 No Third Party
Beneficiaries. Except with respect to the ELE and TRC Users,
this Agreement is made and entered into for the sole protection and benefit of
the Parties, and no other person or entity shall be a direct or indirect
beneficiary of or shall have any direct or indirect cause of action or claim in
connection with this Agreement.
10.7 Notices. Any
notice or other communication required or permitted under this Agreement shall
be given in writing and shall be conclusively deemed to have been duly given on
the date delivered if delivered personally, or five (5) days after deposit in
the United States mail, by registered or certified mail, postage prepaid,
addressed as follows:
10.7.1 Notices
to TRC shall be addressed to:
Xxxxxxx
X. Xxxxxxxx, Esq.
Xxxxx
& Xxxxxxxxx LLP
Xxxxxxxxxx
Xxxxxx, Xxxxx 0000
Xxxxxxxxxx,
X.X. 00000-0000
10.7.2 Notices
to ELE shall be addressed to:
Xxxx X.
Xxxx, Esq.
Xxxxxxx
XxXxxxxxx LLP
The Water
Garden
1620 26th
Street, Xxxxxx Xxxxx, Xxxxx Xxxxx
Xxxxx
Xxxxxx, XX 00000-0000
10.8 Headings. All
headings in this Agreement are used for convenience only and shall not affect
the interpretation of this Agreement.
10.9 Applicable Law; Choice of
Forum; Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of Delaware, without regard to its
conflict of laws provisions. It is further agreed that all disputes
and matters whatsoever arising under, in connection with or incident to this
Agreement shall be litigated, if at all, in and before a United States District
Court, to the exclusion of the Courts of any state, locality or
country. The Parties irrevocably consent to personal jurisdiction in
such District Courts for such purposes.
10.10 No Strict
Construction. Each Party and counsel for each Party have
reviewed this Agreement, and, accordingly, the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
10.11
Entire
Agreement. This Agreement contains the entire understanding
among TRC, on the one hand, and ELE, on the other, superseding all prior or
contemporaneous communications, negotiations, discussions, agreements, and
understandings among the Parties with respect to the subject matter of this
Agreement.
10.12 Counterparts. This
Agreement may be executed in any number of counterparts, including those
transmitted to and among the Parties via facsimile, with the same effect as if
the signatures on each counterpart were upon a single instrument. All
counterparts, taken together, shall constitute this Agreement.
10.13 Partial
Invalidity. If any of the provisions herein shall be invalid,
illegal or unenforceable in any respect, this Agreement shall be construed
without the term or provision so that this Agreement will remain binding on the
Parties.
10.14 Non-Disparagement. Each
Party will instruct its executive officers and board members not to disparage
any other Party with respect to the matters at issue in the
Action. This clause is not intended to, and does not prevent, either
party from making general statements of the superiority of its
products.
______________________________________________
CERTAIN
INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. OMITTED TEXT IS
INDICATED BY “[request for confidential treatment]”.
_______________________________________________
IN WITNESS WHEREOF, intending to be
legally bound, the Parties have caused this Agreement to be executed by their
duly authorized representatives as of the dates set forth below.
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On
this _____ day of July, 2008
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__________________________________________
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Xxxx
Xxxxx
Chief
Executive Officer
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|
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Shanghai
ELE Manufacturing Corporation
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On
this _____ day of July, 2008
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__________________________________________
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Xxxx
Xxxxxx
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President
and Chief Executive Officer
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Technology
Research Corporation
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