Exhibit 10.7
SETTLEMENT AGREEMENT
THIS AGREEMENT is made effective this 30th day of July, 1996, by and
between American Dental Technologies (hereinafter, "ADT"), a Delaware
corporation, having offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and Sunrise Technologies International, Inc.
(hereinafter, "SUNRISE"), a Delaware corporation, having offices at ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
WITNESSETH:
WHEREAS, ADT and SUNRISE are presently engaged in the following
litigation:
(a) Appellate Action No. A072262, entitled "Sunrise
Technologies International, Inc., Plaintiff/Cross-Defendant and Respondent v.
American Dental Technologies, Inc., f/k/a American Dental Laser, Inc.,
Defendant/Cross-Claimant and Appellant," now pending in the Court of Appeal of
the State of California, First Appellate District, Division Four, as appealed
from the lower court Civil Action No. H-172132-2, entitled, "Sunrise
Technologies International, Inc. et al. v. American Dental Technologies," which
was litigated in the Superior Court for the County of Alameda - Southern
Division (collectively hereinafter, "State Court Action"); and
(b) Civil Action No. C94-1512 (EFL), entitled "Sunrise
Technologies International, Inc. and Danville Manufacturing v. American Dental
Technologies, Inc.," now pending in the United States District Court for the
Northern District of California, Civil Action No. C94-1513 (EFL), entitled,
"Sunrise Technologies International, Inc. and Danville Manufacturing v. American
Dental Technologies, Inc.," now pending in the United States District Court for
the Northern District of California; and Civil Action No. C95-2048-EFL, entitled
"American Dental Technologies, Inc. v. Sunrise Technologies International, Inc.
et al." (collectively hereinafter, "Federal Court Actions");
WHEREAS, a judgment was entered against ADT in the lower court
proceedings of the State Court Action in the sum of $940,178.00, plus taxable
costs and interest, ADT having posted a cash deposit with the state court
pending an appeal in the State Court Action in the sum of $1,410,267.00;
WHEREAS, ADT and SUNRISE desire to settle and terminate the foregoing
litigation and as part of such settlement SUNRISE desires to obtain certain
patent licenses from ADT;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, ADT and SUNRISE agree as follows:
State Court Action
1. SUNRISE shall relinquish and forgive the judgment in the State Court
Action in its full amount of $940,178.00, plus costs, interest and attorney
fees. SUNRISE shall release ADT, its officers, agents, affiliates, and attorneys
from any and all claims and counterclaims arising prior
to the effective date of this Agreement which were made or which could have been
made arising out of the subject matter of the State Court Action, including all
such claims for damages, costs, interest and attorney fees. SUNRISE will execute
all documents necessary to dismiss the State Court Action with prejudice and to
release the full amount of the cash deposit (plus interest) posted on appeal by
ADT immediately upon execution of this Agreement, each party to bear its own
costs and attorney fees. SUNRISE represents and warrants that it has made no
assignment or hypothecation of any judgment or claims, including but not limited
to claims for attorney fees, arising out of the State Court Action to any
creditor, attorney or other third party and agrees to indemnify and hold ADT
harmless from any such third party claim. As used in this Agreement,
"affiliates" shall mean any corporation of which fifty percent (51%) or more of
the voting stock is owned or controlled by a party to this Agreement.
2. ADT shall release SUNRISE, its officers, agents, affiliates and
attorneys from any and all claims and counterclaims arising prior to the
effective date of this Agreement which were made or which could have been made
arising out of the subject matter of the State Court Action, including all such
claims for damages, costs, interest and attorney fees. ADT will execute all
documents necessary to dismiss the State Court Action with prejudice immediately
upon execution of this Agreement, each party to bear its own costs and attorney
fees. ADT represents and warrants that it has made no assignment or
hypothecation of any claims, including but not limited to claims for attorney
fees, arising out of the State Court Action to any creditor, attorney or other
third party and agrees to indemnify and hold SUNRISE harmless from any such
third party claim.
Federal Court Actions
3. ADT shall release SUNRISE, its officers, agents, affiliates and
attorneys from any and all claims and counterclaims arising prior to the
effective date of this Agreement which were made or which could have been made
arising out of the subject matter of the Federal Court Actions, including all
such claims for damages, costs, interest and attorney fees. ADT further releases
SUNRISE with respect to SUNRISE's past Senior model and current MicroPrep
Associate and Director models, as described and identified in the depositions of
▇▇▇▇ Fernwood and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the Federal Court Actions, from any and all
claims of infringement under patents issuing on any pending or presently
contemplated patent applications owned or controlled by ADT which relate to air
abrasive equipment or apparatus, other than such patents or applications
covering air abrasive dental systems or methods of treatment as otherwise
provided herein. ADT will execute all documents necessary to dismiss SUNRISE
from the Federal Court Actions with prejudice immediately upon execution of this
Agreement, each party to bear its own costs and attorney fees. In no event,
however, shall this paragraph 3 be interpreted to constitute a release of any
liability or damages, directly or indirectly, arising out of ADT's claims
against Danville Manufacturing or a dismissal of any of the claims in the
Federal Court Actions against Danville Manufacturing. Notwithstanding, upon
execution of this Agreement, ADT will offer to dismiss without prejudice all
pending litigation by ADT against Danville Manufacturing in return for a
dismissal without prejudice by Danville Manufacturing of all pending litigation
by Danville Manufacturing against ADT, each party to bear its own costs and
attorneys fees. ADT represents and warrants that it has made no assignment or
hypothecation of any claims, including but not limited to claims for attorney
fees, arising out of the Federal Court Actions to any creditor,
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attorney or other third party and agrees to indemnify and hold SUNRISE harmless
from any such third party claim.
4. SUNRISE shall release ADT, its officers, agents, affiliates and
attorneys from any and all claims and counterclaims arising prior to the
effective date of this Agreement which were made or which could have been made
arising out of the subject matter of the Federal Court Actions, including all
such claims for declaratory judgment, damages, costs, interest and attorney
fees. SUNRISE will execute all documents necessary to dismiss its claims in the
Federal Court Actions against ADT with prejudice immediately upon execution of
this Agreement, each party to bear its own costs and attorneys fees. SUNRISE
represents and warrants that it has made no assignment or hypothecation of any
claims, including but not limited to claims for attorney fees, arising out of
the State Court Action to any creditor, attorney or third party and agrees to
indemnify and hold ADT harmless from any such third party claim.
5. The dismissals submitted to the Court pursuant to paragraphs 3 and 4
of this Agreement shall include (i) a stipulation by SUNRISE that the patents
asserted in Civil Action No. C95-2048 (EFL), to wit, U.S. Patent No. 5,330,354,
U.S. Patent No. 5,350,299 and U.S. Patent No. 5,525,058 and the patent asserted
in Civil Action No. C94-1513 (ELF), to wit, U.S. Patent No. 5,275,561, are
acknowledged by SUNRISE to be valid; (ii) an order commensurate in scope with
the stipulation of section (i) of this paragraph 5; (iii) a stipulation by ADT
that the patents asserted in Civil Action No. C94-1512 (EFL), to wit, U.S.
Patent No. 4,893,440, U.S. Patent No. 4,733,503, U.S. Patent No. 4,708,534 and
U.S. Patent No. 4,635,897, and any non-dental air abrasive patents or patent
applications presently owned by ADT are not infringed by SUNRISE's past Senior
model and current MicroPrep Associate and Director models as described and
identified in the depositions of ▇▇▇▇ Fernwood and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the Federal
Court Actions; and (iv) an order commensurate in scope with the stipulation of
section (iii) of this paragraph 5.
Patent License
6. ADT hereby grants to SUNRISE a nonexclusive license under U.S.
Patent No. 5,275,561, U.S. Patent No. 5,330,354, U.S. Patent No. 5,350,299 and
U.S. Patent No. 5,525,058, and any foreign counterparts, reexaminations,
reissues, continuations or continuations-in-part based on the disclosures of the
patents of this paragraph 6, for the life of such patents, to make, use, lease
and sell SUNRISE's current MicroPrep Associate and Director models as described
and identified in the depositions of ▇▇▇▇ Fernwood and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the
Federal Court Actions, and future models to the extent such future models do not
infringe any non-dental patents or patent applications (for example, on helical
powder feed mechanisms) of ADT, throughout the world, but excluding those
territories (Japan, China, including ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, India, Pakistan, Australia, New Zealand, Singapore, Thailand, Malaysia
and Indonesia) presently covered by agreements between ADT and Denics Co., Ltd.,
a/k/a Dental Innovative Corporation, a Japanese corporation. The license granted
in this paragraph 6 is non-transferable by assignment, sublicense or other means
of transfer except as provided in paragraphs 7 and 8 of this Agreement,
provided, further, that the period in which SUNRISE is licensed under this
Agreement, SUNRISE shall have the right to have the products of this paragraph 6
manufactured by a third party solely for SUNRISE. The license granted in
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this paragraph 6 is subject to the payments provided in paragraph 9 of this
Agreement. ADT represents and warrants that other than the patents licensed in
this paragraph 6, ADT does not presently own or hold licensable rights in any
other patents or patent applications covering the products of this paragraph 6.
7. The license granted in paragraph 6 of this Agreement is
non-transferable for a period of eighteen (18) months from the effective date of
this Agreement and SUNRISE shall make no such transfer or promise to transfer
within such eighteen (18) month period, except as provided in paragraph 8 of
this Agreement. After the expiration of such eighteen (18) month period, SUNRISE
shall have the right to transfer the license of paragraph 6 of this Agreement
upon the following terms and conditions: the transferee shall assume all
obligations of SUNRISE under this Agreement, including the obligation to make
the payments required by paragraph 9 of this Agreement; provided, however, that
no such transfer of the license after such eighteen (18) month period has
expired, but before the expiration of twenty-four (24) months after the
effective date of this Agreement, shall be made conditioned on the subsequent
sale or transfer of all of SUNRISE's dental air abrasive products business.
8. SUNRISE may at any time transfer the license of paragraph 6 of this
Agreement if such transfer is made with the transfer of all of SUNRISE's dental
air abrasive products business (for the purposes of this Agreement, the phrase
"transfer of all of SUNRISE's dental air abrasive products business" shall mean
any such transfer by asset sale or exchange or by stock transfer or exchange,
and shall further include any merger by or into, or consolidation with,
SUNRISE); provided, however, that, if such transfer occurs within two (2) years
of the effective date of this Agreement, then SUNRISE shall pay to ADT, in cash,
a transfer fee equal to ten percent (10%) of the gross consideration for the
transfer of the license and the dental air abrasive products business received
by SUNRISE, regardless of the form of the consideration (provided that, in the
event of a merger, such gross consideration shall be based on the fair market
value of the shares thereupon issued by SUNRISE or thereupon issued to SUNRISE
and/or its shareholders) and the transferee or surviving entity shall assume all
obligations of SUNRISE under this Agreement, including the obligation to make
the payments required by paragraph 9 of this Agreement. In the event such
transfer of all of SUNRISE's dental air abrasive products business shall occur
more than two (2) years after the effective date of this Agreement, then
SUNRISE's only obligation upon transfer shall be to require such transferee or
continuing entity to assume all obligations of SUNRISE under this Agreement,
including the obligation to make the payments required by paragraph 9 of this
Agreement.
Payments
9. Beginning on January 1, 1997, SUNRISE, or its permitted successor or
assignee, shall pay to ADT the sum of seven percent (7%) on the net sales price
(defined as gross sales price less freight, duties and taxes) on all air
abrasive products manufactured, sold or leased by SUNRISE, or its permitted
successor or assignee, which are manufactured (by or on behalf of SUNRISE), sold
or leased in a county in which ADT, presently or in the future, owns or controls
patents or patent applications on any dental air abrasive products or methods of
treatment, until the expiration of all such patents/patent applications. In the
event that SUNRISE, or its permitted successor or assignee, manufactures or has
manufactured on its behalf, and sells or leases (i.e.,
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manufactures and sells or manufactures and leases), air abrasive products wholly
within a country where ADT holds no such patents or patent applications or where
all such patents have expired, then no such payments shall be required. The
payments required under this paragraph 9 of this Agreement shall accrue when the
subject products are delivered, invoiced or paid for, whichever occurs first.
All payments shall be made in U.S. dollars. In no event shall a payment by
SUNRISE under this paragraph 9 be required for products that are both made and
sold prior to January 1, 1997.
10. SUNRISE, and any permitted successor or assignee, shall (i) make
the payments required in paragraph 9 of this Agreement on February 15th, May
15th, June 15th and November 15th for the preceding accounting quarter, with the
first payment to be made on May 15, 1997. SUNRISE shall keep accurate books and
records reflecting transactions made under this Agreement and shall make reports
at the time of such payments fully supporting the calculation of payments made,
including the number of units sold or leased and the sales price used to
determine payments. ADT shall have the right to inspect such books and records
through an independent certified accountant, not to exceed one such audit per
year.
Termination
11. ADT may terminate the license granted by paragraph 6 of this
Agreement only in the event of a material breach of this Agreement by SUNRISE,
and then only if, upon receiving notice of such breach SUNRISE fails to cure
such breach within thirty (30) days of such notice; such right of termination
shall not be in lieu of other remedies such as specific performance.
Patent Marking
12. SUNRISE shall apply statutory notice to its MicroPrep air abrasive
units sold in the United States substantially as follows: "This unit and its use
is protected by one or more of the following U.S. Patents: 5,275,561, 5,330,354,
5,350,299 and 5,525,058."
Notice
13. All notices required to be given under this Agreement shall be
given in writing and shall be sent by regular mail, postage prepaid, certified
mail or by recognized overnight express mail service to the parties at the
addresses below.
If to ADT, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and Chief Executive Officer
American Dental Technologies, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to SUNRISE, to:
▇▇▇▇▇ ▇. Light
President and Chief Executive Officer
Sunrise Technologies International
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Tel.:
Fax:
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ Godward ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Five ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
14. A notice sent pursuant to paragraph 13 of this Agreement shall be
deemed given on the date it is mailed, unless the intended recipient can
establish that such notice was not timely received.
Jurisdiction
15. The Court in the Federal Court Actions shall retain jurisdiction of
the parties and this Agreement for purposes of resolving any dispute which may
arise hereunder.
Governing Law
16. This Agreement is made in the County of Oakland, State of Michigan,
and shall be governed by the laws of the State of Michigan without regard to its
conflict of laws principles.
Warranties
17. Both parties represent that their undersigned representatives have
the full power and authority to enter into this Agreement. ADT represents and
warrants that it has the right and power to grant the license of paragraph 6 of
this Agreement, but makes no other warranties whatsoever regarding the patents
so licensed.
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Relationship of Parties
18. This Agreement is not intended by the parties to, and shall not,
constitute or create a joint venture, partnership or other business organization
and neither party shall be nor shall act as an agent of the other party. Neither
party shall use the other party's name in any marketing efforts.
Severabilitv
19. The invalidity of any provision of this Agreement shall not affect
the validity of any other provision of this Agreement.
Complete Agreement
20. This Agreement constitutes the entire agreement of the parties
regarding this subject matter and supercedes any and all prior or
contemporaneous oral or written agreements, understandings, negotiations or
discussions among the parties regarding this subject matter. Any amendments or
other modifications to this Agreement must be made in writing and must be duly
executed by an authorized representative or agent of each party.
Counterparts
21. This Agreement may be executed in multiple counterparts, each of
which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
Permitted Successors and Assigns
22. This Agreement, and all provisions herein, shall bind the parties
and their permitted successors and permitted assigns.
The parties have executed this Agreement as effective the date first
written above by their duly authorized agents.
AMERICAN DENTAL SUNRISE TECHNOLOGIES
TECHNOLOGIES, INC. INTERNATIONAL, INC.
------------------------------------ ---------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: ▇▇▇▇▇ ▇. Light
President and Chief Executive President and Chief Executive
Officer Officer
Date: __________________________ Date:________________________________
