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a shareholders’ agreement. The shareholders’ agreement
delineated the shareholders’ rights and restricted the transfer
of company stock.
On October 10, 1970, the partnership and MPC executed an
assignment agreement, which assigned the rights to the expansible
fastener (i.e., for which a patent application was pending) from
the partnership to MPC. In consideration of the transfer of
patent rights, MPC was obligated to make payments to the
partnership of 4 percent of the gross proceeds from the sale of
expansible fasteners.
On October 10, 1970, the partnership dissolved. Thereafter,
Mr. McSherry owned 38 percent, and Mr. Garfield owned 36 percent
of MPC shares. Pursuant to the dissolution agreement, all shares
of MPC owned by the partnership were distributed to Mr. McSherry
and Mr. Garfield. The dissolution agreement further provided
that Mr. McSherry and Mr. Garfield would each receive 50 percent
of MPC’s payments due to the partnership. In addition, the
assignment agreement provided that, upon dissolution of the
partnership, payments relating to the expansible fastener were to
be made directly to Mr. McSherry and Mr. Garfield.
On March 28, 1972, the U.S. Patent Office granted the patent
for the expansible fastener, and, thereafter, Mr. McSherry and
Mr. Garfield began to collect royalty payments from the sales of
the device. From 1978 through 1985, petitioner and Mr. McSherry
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Last modified: May 25, 2011