SETTLEMENT AGREEMENT INCLUDING
CROSS-LICENSING AGREEMENT
This Settlement
Agreement Including Cross-Licensing Agreement (“
Settlement Agreement ”) is between Flow International
Corporation, a Washington corporation (“ Flow ”)
and OMAX Corporation, a Washington corporation (“ OMAX
”) and is to be effective as of March 12, 2009.
A.
OMAX and Flow , respectively, are the owners of the
certain patents identified below in Recital C all of which were
asserted in litigation between the two companies.
B. The
parties have agreed to settle the litigation between them as set
forth below. In addition, the parties have agreed to cross license
the Licensed Patents , as defined below, to each other on
the following terms and conditions.
C.
Flow patents as used herein shall refer to:
United States
Patent No. 6,766,216 (Method and System for Automated Software
Control of Waterjet Orientation Parameters) and United States
Patent No. 6,996,452 (Method and System for Automated Software
Control of Waterjet Orientation Parameters)
together with any and all continuations, continuations-in-part or
divisionals thereof, or other applications or patents which claim
priority from the ‘216 and/or ‘452 patents including
any and all foreign counterpart patents.
D.
OMAX patents as used herein shall refer to:
United States
Patent No. 5,508,596 (Motion Control With Precomputation);
United States Patent No. 5,892,345 (Motion Control For Quality
In Jet Cutting) together with any and all continuations,
continuations-in-part or divisionals thereof, or other applications
or patents which claim priority from the ‘596 and/or
‘345 patents including any and all foreign counterpart
patents.
AGREEMENT AND CROSS
LICENSE
1. Upon
execution of this Settlement Agreement , and upon the
payment of the $8,000,000 required by Section 2, the escrow
with Foster Pepper PLLC of $15,000,000 required by
Section 2.1, and execution and escrow with Foster Pepper PLLC
of the documents required by Sections 2.1 and 2.4 of this
Settlement Agreement, the parties will dismiss with prejudice the
litigation between them relating to the Flow patents and the
OMAX patents that is currently pending in the United States
District Court for the Western District of Washington, case no. CV
04-2334, releasing all claims encompassed by the
litigation.
2. In
settlement of all outstanding claims or potential claims for
damages (whether or not asserted) up to the date of this Settlement
Agreement in the pending litigation, Flow agrees to pay
OMAX the
non-refundable
sum of $8,000,000 in cash upon execution of this Settlement
Agreement , and, contingent on the parties not having merged
pursuant to the Second Amended and Restated Agreement And Plan Of
Merger among Flow, OMAX and others dated March ___, 2009, then on
August 16, 2009, Flow shall pay to OMAX the
additional settlement amount of $21,000,000 as follows:
2.1 $15,00,000 in
cash payable on or before August 16, 2009 and a promissory
note in the principal amount of $6,000,000.
2.2 The promissory
note will bear interest at 2%, compounded annually, payable at
maturity. The note will mature on August 16, 2013, and be
subordinated only to Flow’s senior bank debt.
2.3 Any shortfall
in any payment required by this Agreement shall be subject to
interest of 15% per annum, compounded annually, commencing on date
of failure to pay.
2.4 Flow
hereby consents to Judgment By Confession Without Suit pursuant to
RCW 4.60 et seq and shall execute statements in writing
pursuant to RCW 4.60.060 for each of the payments herein
contemporaneously with the execution of this Settlement Agreement,
plus attorneys’ fees and interest, which Judgments By
Confession can be filed with a Court of competent jurisdiction
immediately upon failure of payment. Such Judgments By Confession
shall be a Judgment of $6,494,593 (representing $6,000,000 at two
(2) percent interest compounded annually for four years),
which can be filed immediately after failure of the payment due on
August 16, 2014, of the $6,000,000 promissory note and shall
cease to be valid upon merger of the parties or satisfactory
payment of such $6,000,000 promissory note. Flow shall be
entitled to set aside any such Judgment By Confession upon a
showing that it has, in fact, paid the amount or amounts due in
accordance with the terms of the underlying documents.
3. In
settlement of all outstanding or potential claims (whether or not
asserted) for injunctive relief in the pending litigation, and to
avoid future disputes over the Licensed Patents , the
parties agree to the Cross License set forth below. The
parties acknowledge and agree that the licenses granted by each
party are of equal value.
4.1 Licensed
Patents as used herein shall refer to the Flow patents
and the OMAX patents collectively.
4.2
Affiliate shall mean any legal entity (such as a
corporation, partnership, or limited liability company) that is
controlled by either party to this transaction. For the purposes of
this definition, the term “control” means
(i) beneficial ownership of at least fifty percent (50%) of
the voting securities of a corporation or other business
organization with voting securities or (ii) a fifty percent
(50%) or greater interest in the net assets or profits of a
partnership or other business organization without voting
securities.
4.3 Future
Patent Dispute means a dispute that arises in the future
between the parties relating to any patent or patents owned by
either party other than the Licensed Patents .
4.4 Cross
License refers to Paragraphs 3 through 11 of the Settlement
Agreement .
5.1 OMAX
grants to Flow and its Affiliates a worldwide,
irrevocable, non-assignable, non-exclusive, paid-up license to
practice each and every claim of the OMAX patents . Such
license includes the right to make, have made, use, sell, or import
products that are covered by any claim of the OMAX patents ,
and to authorize the use or resale by others of products made by or
for Flow and/or its Affiliates that are covered by
any claim of the OMAX patents .
5.2 Flow
grants to OMAX and its Affiliates a worldwide,
irrevocable, non-assignable, non-exclusive, paid-up license to
practice each and every claim of the Flow patents . Such
license includes the right to make, have made, use, sell, or import
products that are covered by any claim of the Flow patents ,
and to authorize the use or resale by others of products made by or
for OMAX and/or its Affiliates that are covered by
any claim of the Flow patents .
Each party will
mark, and will cause each Affiliate to mark, all products
with the number of each Licensed Patent that applies to such
product, if and to the extent necessary to comply with all
statutory marking requirements.
7.1 Flow
may terminate its license to OMAX by giving OMAX
written notice of such termination if any of the following take
place: (i) OMAX makes a general assignment for the benefit
of its creditors; (ii) the filing by or against OMAX of
a petition to have OMAX adjudged bankrupt or of a petition
for reorganization or arrangement of OMAX under any law
relating to bankruptcy or insolvency unless, in the case of a
filing against OMAX , the same is dismissed within sixty
(60) days; (iii) the appointment of a trustee or receiver to
take possession of all or substantially all of the assets of
OMAX , where possession is not restored to OMAX
within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of all or substantially all of the assets of
OMAX , where such seizure is not discharged within thirty
(30) days.
7.2 OMAX
may terminate its license to Flow by giving Flow
written notice of such termination if any of the following take
place: (i) Flow makes a general assignment for the benefit
of its creditors; (ii) the filing by or against Flow of
a petition to have Flow adjudged bankrupt or of a petition
for reorganization or arrangement of Flow under any law
relating to bankruptcy or insolvency unless, in the case of a
filing against Flow , the same is dismissed within sixty
(60) days; (iii) the appointment of a trustee or receiver to
take possession of all or substantially all of the assets of
Flow , where possession is not restored to Flow
within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of all or substantially all of the assets of
Flow , where such seizure is not discharged within thirty
(30) days.
8
. Arbitration of Disputes under this Cross License
and /or of Future Patent Dispute s
The parties agree
that any dispute arising from this Cross License (but not
obligations to pay amounts due under the Settlement
Agreement , which obligations to pay may be enforced in a court
of law of competent jurisdiction) or any Future Patent
Dispute between the parties with respect to any
patent
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