EXHIBIT 10.3
PURCHASE AGREEMENT
This Agreement is dated this 30th day of December, 2000 (the "effective
date") by and between American Technology Corporation ("ATC"), a Delaware
corporation, having a principal place of business located at 00000 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxx, XX 00000 and ASI Technology Corporation, a Nevada
Corporation ("ASI"), having a principal place of business located at 000
Xxxxxxxx Xxxxxxx Xx. Xxxxx 000, Xxxxxxxxx, Xxxxxx 00000.
RECITALS
WHEREAS, ATC has developed and patented certain Sound Reduction
technology. As a result of ATC's inventions it was awarded U.S. Patent No.
5,966,452 for Sound Reduction Method and System for Jet Engines issued on
October 12, 1999 (the "Patent"). ATC has filed corresponding patent applications
in Brazil, Canada, China, EPO, Japan and the Russian Federation.
WHEREAS, this Sound Reduction technology is believed to have commercial
viability in commercial, industrial, and military applications but will require
further development, additional capital and research.
WHEREAS, ATC desires to pursue other business ventures and desires to
sell and otherwise assign all of its right, title, interest and benefit in and
to its Sound Reduction patent, related technology, and all other intellectual
property rights related thereto, as defined in paragraph 1a) hereof, to ASI
according to the terms and conditions set forth below in order to allow further
development of this technology to be completed.
WHEREAS, ASI is a company looking for new technology to purchase and
exploit and ASI desires to purchase ATC's Sound Reduction issued patent and
related technology according to the terms and conditions below.
TERMS
Now, therefore, in consideration of the mutual promises described below
and other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereby agree to be legally bound as follows:
1. Definitions. For purposes of this Agreement, the following definitions apply:
a) "Technology" shall be defined as all right, title, interest, and
benefit of ATC and all powers and privileges of ATC (including to make, have
made, use, or sell under patent law; to copy, adapt, distribute, display, and
perform under copyright law; and to use and disclose under trade secret law) in
and to all proprietary rights ("Proprietary Rights") embodied in or related to
the Sound Reduction Method and System for Jet Engines technology, defined as
follows:
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1) One United States and foreign patents and patent
applications, including, without limitation, the issued patents and patent
applications listed on Exhibit A hereto, patent license rights and patentable
inventions, any continuation or continuation-in-part of, division of, or
substitution for any such applications, any United States patent issued thereon,
any reissue or reexamination application filed on any such United States patent,
any reissue patent or reexamined patent issuing thereon, and any extension of
any such United States patent or reissue patent and any and all applications for
patent in any country foreign to the United States on any invention disclosed in
any of said patents or patent applications described above and any patents
granted thereon;
2) All trade secrets, know-how, confidential or proprietary
information, including, without limitation, the confidential and proprietary
information identified in Exhibit B hereto, shop rights, technical data,
technology licenses, concepts, drawings, schematics, prototypes, improvements,
enhancements, upgrades, materials, works of authorship, derivative, and
derivative works, mask works, engineering files, system documentation, flow
charts, computer software code and design specifications acquired or developed
by ATC or any of its affiliates that are embodied or incorporated in, derived
from or in any way related to the Proprietary Rights or in connection with the
development of the programming, inventions, processes, and apparati entailed by
the Proprietary Rights;
3) All market research and information, contact lists,
marketing materials, business plans, notes, documents and records pertaining in
any way to any of the Proprietary Rights and any existing or future products
incorporating any of the Proprietary Rights or any item described in any of the
foregoing paragraphs and any agreements with any other parties to contribute to
the further development of any of the Proprietary Rights; and
4) All other intellectual property rights and legal
protections in every and all countries and jurisdictions owned or claimed by ATC
or any of its affiliates and embodied in or are in any way related to any of the
Proprietary Rights.
b) "Closing" shall refer to the time and place at which this Agreement
and all related assignments will be executed by the parties.
c) "Gross Revenues from Sale of Products" shall include all revenues
actually received by ASI from the sale of any products by ASI wherein the
Technology is all or a material portion of the product (as customarily agreed to
in such agreements), but excluding shipping charges, quantity, trade or cash
discounts, taxes on the production or sale the legal incidence of which is on
the purchaser of the product, credits for returns and commissions to third
parties. "Gross Revenues from Sale of Products" shall not include any payments
or fees from any development contract with a governmental authority or
commercial entity or person paid either to ASI or any third party licensee,
except for amounts actually received in payment of products delivered pursuant
to such a development agreement. In the event that ASI sells a product which
includes equipment in addition to the Technology, Gross Revenues from Sale of
Products shall not include the portion of the amount received by ASI which is
attributable to such additional equipment.
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d) If ASI licenses or sublicenses all or a material portion (as
customarily agreed to in such agreements) of the Technology to any third party,
"Gross Revenues from License of Technology" shall be calculated as all revenues
actually received by ASI from such license or sublicense.
e) "Gross Revenues from Sale of Technology" shall include all amounts
actually received by ASI from the subsequent sale or assignment of all or a
portion of the Technology to a third party, but excluding sales taxes the legal
incidence of which is on the purchaser and brokers or finders fees and
commissions.
2. Assignment; Technology Purchase Price. ATC hereby agrees to sell, assign and
transfer, and at the Closing shall sell, assign and transfer, to ASI in
perpetuity (or for the longest period of time otherwise permitted by law) all of
ATC's right, title, interest and benefit in and to the Technology and
Proprietary Rights. As full payment for such sale, assignment and transfer, ASI
agrees to pay ATC an amount equal to two hundred thousand dollars ($200,000)
(the "Technology Purchase Price") which the parties agree equals or exceeds the
fair market value of the Technology and Proprietary Rights determined on the
basis of arms-length negotiations. The Technology Purchase Price shall be
payable as follows:
a) ASI agrees to pay the sum of one hundred thousand dollars ($100,000)
to ATC at the Closing of this Agreement.
b) ASI agrees to pay to ATC the sum of ten thousand dollars ($10,000)
per month for 10 consecutive months. The first payment shall be due on the 1st
day of the month following the Closing. If there is less than 20 days between
the Closing and the first payment due date, the first payment may be delayed by
one month. These payments shall not bear interest. Any payment made within 10
days of the due date shall be deemed timely made.
3. Royalty Payments.
a) Royalty Based on Gross Revenues from Sale of Products In addition to
the Technology Purchase Price described in paragraph 2, ASI agrees to pay to ATC
a royalty as specified below. The calendar year during which ASI makes the first
sale of any product incorporating the Technology and/or Proprietary Rights shall
be called the "first year". No royalties shall be due under this section 3 a)
after the expiration of the Patent.
i) For all sales made during the first year the royalty shall be 6% of the Gross
Revenues from Sale of Products.
ii) For all sales made during the second year the royalty shall be 5% of the
Gross Revenues from Sale of Products.
iii) For all sales made during any year after the second year the royalty shall
be 4% of the Gross Revenues from Sale of Products.
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b) Royalty Based on Gross Revenues from License of Technology. In
addition to the Technology Purchase Price described in paragraph 2 and the
Royalty Based on Gross Revenues from Sale of Products, ASI agrees to pay to ATC
a royalty equal to fifteen percent (15%) of all Gross Revenues from License of
Technology as defined in paragraph 1 (d) for the life of the patent.
c) Royalty Based on Gross Revenues from Sale of Technology. In addition
to the Technology Purchase Price described in paragraph 2 and the Royalty Based
on Gross Revenues from Sale of Products and the Royalty based on Gross Revenues
from License of Technology described in paragraph 3(a & b), in the event that
ASI sells or assigns the Technology to any third party during the life of the
Patent, ASI agrees to pay to ATC ten percent (10%) of the total purchase price
actually received by ASI. If the purchase price is paid in installments, ATC
shall be entitled to receive ten percent (10%) of each installment payment
within fifteen (15) days after the end of the calendar quarter during which such
installment payment is actually received ASI (regardless of whether such
installment payment is received after the life of the Patent).
d) The parties agree that the assignments assigning the various
Technology will not be recorded with the United States Patent and Trademark
Office until the entire $200,000 Technology Purchase Price has been made to ATC.
To facilitate the recording of the assignments under these conditions, the
parties agree that the original assignments will remain in escrow with the law
firm of Xxxxxx, North & Western, attention Xxxxxx North. Once Xxxxxx, North &
Western has been notified that the $200,000 Technology Purchase Price has been
paid in full to ATC, they will promptly take the steps necessary to record the
assignments with confirmation to the parties.
e) Royalties accruing to ATC under this agreement shall be computed
quarterly, with the quarter-annual periods ending on the last day of the months
of March, June, September and December. Within thirty (30) days after the end of
each such period, ASI shall provide to ATC a written report, in a form and
format mutually agreed upon by the parties, and with, at least, the content set
forth below, and shall pay to ATC all royalties accruing during such period.
1) All reports shall be in sufficient detail to allow
confirmation of the accuracy of the royalty payment made and shall show in
detail for the quarter-annual period to which the report pertains.
2) Each of the parties shall hold in confidence all
information reported with respect to royalty payments, and shall not disclose
such information to others without written permission of the other party, except
as reasonably required internally for management purposes and as reasonably
necessary to comply with applicable laws and government regulations.
3) ASI shall keep true and complete books and records
pertaining to its conduct under this Agreement. Such books and records shall be
in sufficient detail to enable royalties payable to ATC to be accurately
determined. All applicable books and records shall be kept in accordance with
generally accepted accounting principles.
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4) ASI shall make such books and records available, upon
written request, at reasonable times during regular business hours for
inspection and copying by ATC, or ATC's designated representative, but not more
than twice each calendar year, and supply ATC with the details and supporting
data necessary to verify the reports and payments required by this Agreement.
Employees, agents and contractors of ASI charged with maintaining and assuring
the accuracy of such books and records shall likewise be made available to ATC
as reasonably required in connection with such verification. ASI shall maintain
such books and records for at least five (5) years after the end of the calendar
year to which they pertain.
5) If an error of more than two and one-half percent (2.5%) is
discovered in the total royalties due or paid during any one (1) year period,
then the reasonable costs to ATC of the inspection discovering the error, and
subsequent reasonable costs of remedying the error, shall be borne by ASI, and
subsequently such inspections shall be allowed more often but not more than four
(4) times each calendar year.
4. Default.
a) Once ASI has paid the Technology Purchase Price in full as provided
in paragraph 2, ATC agrees that it will have no claim against ASI for the return
of the Technology or the Proprietary Rights or in voiding or rescinding this
Agreement and the related assignments.
b) In the event that ASI fails to pay the Royalty as required herein,
ATC agrees that its only remedy is to seek monetary damages from ASI for unpaid
Royalties.
5. Representations, Warranties and Covenants.
a) ATC hereby represents and warrants to, and covenants with, ASI as
follows:
1) No consents (other than necessary filings in patent offices
wherein Proprietary Rights have been registered or applications therefore have
been filed) of any other parties are necessary or appropriate under any
agreements concerning any of the Technology or the Proprietary Rights in order
for the transfer and assignment of any of the Technology and Proprietary Rights
under this Agreement to be legally effective.
2) Upon the Close of this Agreement, ATC shall have good and
marketable title to the Technology and the Proprietary Rights, free and clear of
any and all liens, mortgages, encumbrances, pledges, security interests, or
charges of any nature whatsoever (collectively, "Liens") and upon final payment
of the $ 100,000 installment payment as provided above, ASI shall receive good
and marketable title to the Technology and the Proprietary Rights, free and
clear of any and all Liens.
3) To the best of ATC's knowledge, ATC is the sole owner of
the entire right, title and interest in and to the Technology and the
Proprietary Rights. The Technology and the Proprietary Rights are free of all
licenses, sublicenses, royalty or similar payment obligations,
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liens, mortgages, encumbrances, pledges, or security interests, of any nature
whatsoever and are not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge. ATC has the right and authority to enter into this
Agreement and to grant the rights granted herein. No facts have come to ATC's
attention that would form a basis for the belief that the Technology or the
Proprietary Rights or any rights thereunder owned by ATC are unenforceable or
invalid and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the best of ATC's knowledge, is
threatened against ATC that challenges the legality, validity, enforceability,
use, or ownership of such items. ATC has not agreed to indemnify any person for
or against any interference, infringement, misappropriation, or other conflict
with respect to such items. All material information affecting the patentability
of the claims of the Technology, the Proprietary Rights and patent rights
thereunder known to ATC has been disclosed to the United States Patent and
Trademark Office and any other governing entity as relate to such rights. There
have been no transfers, sales, assignments, licenses or other conveyance of any
rights, title or interest in or to such items and none are pending or
contemplated except as otherwise provided herein. The Technology and Proprietary
Rights represent all of the patents, patent applications, rights or inventions
created or owned by ATC that relate to the Sound Reduction technology. To the
best of ATC's knowledge, the Technology and the Proprietary Rights and the
processes represented by them will perform the functions as set forth in the
patents and patent applications listed in Exhibit A hereto and disclosed by ATC
to ASI, and ATC does not have knowledge of any matter that would prevent such
performance. To the best of ATC's knowledge, ATC has not, by any of its acts or
acts of its agents, put any of those rights into jeopardy.
4) There are no obligations for further work, development,
reporting or delivery of any items or work product to any government entity.
5) Although ASI intends to expend funds to develop the
Technology and the Proprietary Rights, ATC acknowledges and agrees that there is
no obligation to do so should ASI decide, in its sole and absolute discretion,
that it is not in its business interest. Additionally, ATC acknowledges and
agrees that the Technology and the Proprietary Rights are not presently fully
developed or commercially viable. Accordingly, ATC acknowledges that there is no
assurance of any future Royalties.
6) ATC acknowledges that ASI shall be free to develop,
abandon, transfer, sell, license or otherwise deal with the Technology without
consent or claim by ATC other than as otherwise provided in this Agreement.
b) ASI acknowledges and agrees that it is buying the Technology and the
Proprietary Rights as is with no assurance of future revenues relating from the
Technology or the Proprietary Rights.
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6. Indemnification.
a) ATC shall indemnify, defend, and hold harmless ASI against and in
respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, and reasonable attorneys' fees, that ASI shall incur or suffer, that
arise, result from, or relate to any (i) claim that the Technology or the
Proprietary Rights as sold, transferred and assigned by ATC (as distinguished
from technologies or inventions originating with ASI after the Closing )
infringes or misappropriates the intellectual property rights of any third party
or (ii) any breach of, or failure by ATC to perform, any of their
representations, warranties, covenants, or agreements in this Agreement or in
any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by ATC under this Agreement. Notwithstanding the foregoing, the
indemnification obligations of ATC with respect to matters described in clause
(i) above shall be limited in dollar amount to the amount of the Technology
Purchase Price and any Royalties paid or accrued by ASI to ATC.
b) ASI shall promptly notify ATC of the existence of any claim, demand,
or other matter to which ATC's indemnification obligations would apply, and
shall give it a reasonable opportunity to defend the same at its own expense and
with counsel of its own selection; provided that ASI shall at all times also
have the right to fully participate in the defense at its own expense. If ATC
shall, within a reasonable time after this notice, fail to defend, ASI shall
have the right, but not the obligation, to undertake the defense of, and to
compromise or settle (exercising reasonable business judgment), the claim or
other matter on behalf, for the account, and at the risk, of ATC. If the claim
is one that cannot by its nature be defended solely by ATC (including, without
limitation, any federal or state tax proceeding), then ASI shall make available
all information and assistance that ATC may reasonably request.
7. Miscellaneous Terms.
a) ATC shall execute and deliver, from time to time after the date
hereof upon the request of ASI, such further conveyance instruments, and take
such further actions, as may be necessary or desirable to evidence more fully
the conveyance of interest in and to all the Technology and Proprietary Rights
to ASI, on the part of the ASI, to the fullest extent possible. ATC therefore
agrees to:
1) Execute, acknowledge, and deliver any affidavits or
documents of assignment and conveyance regarding the Technology or the
Proprietary Rights;
2) Provide testimony in connection with any proceeding
affecting the right, title, interest, or benefit of ASI to the Technology or the
Proprietary Rights; and
3) Perform any other acts deemed necessary to carry out the
intent of this Agreement.
b) In furtherance of, but subject to the terms and conditions of, this
Agreement, ATC hereby acknowledges that, from and after the Closing and payment
in full of the Technology
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Purchase Price, ASI will have acquired all of ATC's right, title, and standing
to:
1) Receive all rights and benefits pertaining to the
Technology and the Proprietary Rights as the sole owner thereof;
2) Institute and prosecute all suits and proceedings and take
all actions that ASI, in its sole discretion, may deem necessary or proper to
collect, assert, or enforce any claim, right or title of any kind in and to any
and all of the Technology and Proprietary Rights;
3) Defend and compromise any and all such actions, suits, or
proceedings relating to such transferred and assigned rights, title, interest,
and benefits, and do all other such acts and things in relation thereto as the
ASI, in its sole discretion, deems advisable; and
4) To sell, assign, transfer, modify, further develop and
license such rights and receive royalties and other payment for such rights.
c) The parties agree that ATC shall pay all costs and fees (legal and
otherwise) necessary to maintain or prosecute the patents identified in Exhibit
A through Closing. After Closing, the parties agree that ASI will pay all such
costs and fees thereafter.
d) ATC agrees that ASI may continue retain the services of the law firm
of Xxxxxx, North & Western, including specifically Xxxxxx North, to act as ASI's
patent counsel subsequent to the Closing of this Agreement and as such ATC
hereby waives any potential conflict of interest that may exist now or in the
future.
e) ATC agrees to assist ASI during a Transition Period of up to one
year from the date of the Closing. ATC agrees to make ATC employees reasonably
available to ASI during the one year Transition Period following Closing at a
consulting rate equal to 140% of the gross hourly rate paid by ATC to that
particular employee unless another rate is agreed to by the parties. ASI agrees
that it will request any work under this paragraph in writing. ATC agrees to
provide an accounting to ASI weekly of the amount of work performed by ATC
employees and the amount of consulting fees, if any, that may be due.
f) ATC acknowledges that ASI may intend to file additional patent
applications related to the Technology as defined herein. Xx. Xxxxxx X. Xxxxxx
is currently a consultant to ASI on other matters and ATC acknowledges that he
may continue in this capacity. ATC further acknowledges that ASI may require or
request the assistance of Xx. Xxxxxx in the filing of additional patents or
exploiting the Technology and that certain patentable concepts related to the
Technology may have been invented prior to the date of this Agreement but shall
be the property of ASI. ATC agrees that ASI and Xx. Xxxxxx are free to arrange a
consulting agreement between ASI and Xx. Xxxxxx which shall be separate and
apart from this agreement and shall have no bearing upon or relationship to this
agreement.
g) ATC and ASI agree that each party shall be responsible for their own
legal and other fees and costs relating to the preparation of this Agreement.
Each party represents and warrants it has been represented by legal counsel and
that there is no finder or broker involved in this
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transaction.
h) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall supersede all previous
communications, representations, understandings and agreements, whether oral or
written. This Agreement may not be changed or modified except by a written
agreement signed by both parties. This Agreement shall be governed by and
construed in accordance with the laws of the State of California. Any action or
suit related to this Agreement shall be brought exclusively in the state or
federal courts in California. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and other applications thereof shall
not in any way be affected or impaired thereby, and such invalidity shall be
construed and limited as narrowly as practicable.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Purchaser: Seller:
ASI Technology Corporation American Technology Corporation
By: /s/ XXXXX X. XXXXX By: /s/ XXXXX XXXXXX
Name: Xxxxx X. Xxxxx Name: Xxxxx Xxxxxx
Title: President Title: President
Date: Dec 30, 2000 Date: Dec 30, 2000
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