EXHIBIT 10.26
ROYALTY AGREEMENT
This Agreement (the "Agreement") is made as of the 1st day of October,
1997, by and among Medical Scientific, Inc., a Massachusetts corporation
having a principal place of business at 000 Xxxx Xxxxxxx Xxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000 ("MSI"), Conceptus, Inc., a Delaware corporation having a
principal place of business at 0000 Xxxxxx Xxxxxx, Xxx Xxxxxx, Xxxxxxxxxx
00000 ("Conceptus"), and Microgyn, Inc., a Massachusetts corporation and
wholly owned subsidiary of Conceptus ("Microgyn"). (Conceptus and Microgyn
are collectively referred to hereinafter as the "Company.")
WITNESSETH
WHEREAS, MSI and the Company are entering into that certain
Manufacturing Transition Agreement, dated as of October 1, 1997 (the
"Manufacturing Transition Agreement"), pursuant to which MSI is transferring
to Microgyn, and Microgyn is acquiring from MSI, certain manufacturing
know-how (as more fully described in the Manufacturing Transition Agreement,
the "Manufacturing Know-How"); and
WHEREAS, in consideration for the Manufacturing Know-How, the Company is
paying the Purchase Price (as defined in the Manufacturing Transition
Agreement), which includes the payment of royalties as provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
A. Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to such terms in the Manufacturing Transition Agreement
unless the context otherwise requires.
B. "AFFILIATE" shall mean at any time, any person or legal entity then
directly or indirectly controlled by, controlling or under common control
with the party with respect to which this term is associated, and shall
include, without limitation, any person or legal entity which owns, either of
record or beneficially, 50% or more of the voting stock of any party hereto,
or 50% or more of the voting stock of which is owned by any party hereto.
C. "REVENUE-GENERATING SHEATH" shall mean any Sheath that the Company,
its Affiliates or agents sell to end-users or to distributors or resellers
for sale to end-users, as evidenced by the creation of an invoice by the
Company; or any Sheath otherwise transferred or disposed of for value, but
not including Sheaths provided to third parties solely for demonstration
purposes or for use in clinical trials.
D. "ROYALTY" shall have the meaning assigned to it in Article II.
E. "ROYALTY PERIOD" shall mean the four-year period commencing on the
first day following the Transfer Completion Date.
F. "SHEATH" shall mean any disposable device that fits over an
operative resectoscope and converts the resectoscope from a monopolar device
into a bipolar device. The term "Sheath" includes the Products.
ARTICLE II
ROYALTIES
A. ROYALTY PAYMENTS. As part of the Purchase Price for the transfer
of the Manufacturing Know-How from MSI to the Company, the Company hereby
agrees to pay to MSI during the Royalty Period a royalty of three dollars
($3.00) per Revenue-Generating Sheath (the "Royalty"); provided, however, the
Company shall have the right to offset any unused balance of the Excess
Overhead Prepayment that is not offset against the Cash Component; provided,
further, the Company shall not be obligated to pay any Royalty, and no
Royalties shall accrue prior to the Transfer Completion Date.
B. ROYALTY REPORTS.
1. For each calendar month during the Royalty Period, the Company
shall furnish or cause to be furnished to MSI, within 20 days of the end of
each calendar month, a written report showing: (i) the number of
Revenue-Generating Sheaths sold, transferred or otherwise disposed of for
value during such month; and (ii) the Royalties which shall have accrued
hereunder in respect of such sales. The Company shall keep accurate records
in sufficient detail to enable the Royalties hereunder to be determined and
to be verified by MSI. All information provided pursuant to this paragraph
shall be considered Confidential Information for purposes of Article IV
hereof.
2. Royalties shown to have accrued by each report shall be due
and payable on the date such report is due. Payments in whole or in part may
be made in advance of such due date. All royalty payments due shall be paid
in U.S. dollars via wire transfer.
C. RIGHT TO AUDIT. MSI shall have the right, once every twelve
months, at its own expense, to have an independent public accountant,
reasonably acceptable to the Company, examine the relevant financial books
and records of account of the Company during normal business hours, upon
reasonable notice, to determine or verify the number of Revenue-Generating
Sheaths sold during the Royalty Period. If errors of five percent (5%) or
more during a 12-month period are discovered as a result of such examination,
the Company shall reimburse MSI for the reasonable expense of such
examination and pay the deficiency immediately. All information audited
pursuant to this paragraph shall be considered Confidential Information for
purposes of Article IV hereof.
D. PAYMENT DELAY. In case of any delay in payment by the Company to
MSI not occasioned by an event described in Section H of Article VII hereof,
a late payment charge of one and one-half percent (1.5%) per month, assessed
from the due date of said payment, shall be due and payable by the Company
without any special notice. Any payments made by the Company subsequent to
the determination that a late payment charge applies, shall first be applied
to the late payment charge and then to the outstanding royalty payable.
ARTICLE III
INDEMNIFICATION
The Company will indemnify and hold MSI harmless from and against any
and all suits, actions, losses, obligations, deficiencies, liabilities,
claims, damages, cost and expenses (including court costs and reasonable
attorneys' fees) which arise out of, are caused by, relate to, or result or
occur from or in connection with the Company's acts or omissions in
connection with its activities under this Agreement. If any claim by a third
party is made against MSI and MSI intends to seek indemnification with
respect thereto as set forth in this Article III, MSI will promptly give
written notice to the Company of such claim. The failure of MSI to give
prompt notice shall not relieve the Company of its obligations hereunder,
unless such
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failure materially prejudices the defense of the claim for which
indemnification is sought. The Company will have ten days after such notice
is given to elect, by written notice given to MSI, to undertake, conduct and
control, through counsel of its own choosing and at the Company's sole risk
and expense, the good faith settlement or defense of such claim, and MSI will
cooperate with the Company in connection therewith; provided MSI will be
entitled to participate in such settlement or defense through counsel chosen
by MSI, and the fees and expense of such counsel will be borne by MSI; and,
provided further, that the Company shall not make any settlement involving
the payment of money by MSI without first making available the funds needed
to pay the settlement and will not make any settlement involving any
injunction or similar restriction against MSI without the consent of MSI,
which consent shall not be unreasonably withheld. If the Company does not
make a timely election to undertake the good faith defense or settlement of
the claim as aforesaid, or if the Company fails to proceed with the good
faith defense or settlement of the matter after making such election, in
either such event, MSI will have the right to contest, settle or compromise
the claim at its exclusive discretion, at the risk and expense of the Company
to the full extent set forth above, as the case may be. The provisions of
this Article III shall survive termination of the Agreement.
ARTICLE IV
CONFIDENTIALITY
For purposes of this Agreement, "Confidential Information" shall mean
any information of a confidential and/or proprietary nature as to which
either party has acquired or, during the term of this Agreement, acquires,
any interest, including, but not limited to, all discoveries, inventions,
improvements and ideas related to any process, formula, machine, device,
manufacture, composition of matter, plan or design, whether patentable or
not, or relating to the conduct of its business which, prior to the date
hereof or during the term of this Agreement, was or is disclosed to the other
party. In order for any information to be deemed Confidential Information, it
must be in written form and appropriately marked confidential at the time of
disclosure to the other party, or alternatively, if the information is
disclosed orally, it must be confirmed as confidential in writing by the
disclosing party within ten days of such disclosure. Notwithstanding the
foregoing, the term "Confidential Information" shall not include any
information which: (i) has been published or otherwise becomes a matter of
public knowledge by any means other than the receiving party's default in the
observance or performance of any term or provision of this Article on its
part to be observed and performed; (ii) was known to the receiving party at
the time of such disclosure or as evidenced by its business records
maintained in the ordinary course; (iii) is at any time disclosed to the
receiving party by any person or entity not a party hereto who it believes,
after reasonable inquiry, has the right to do disclose same; or (iv) is
independently developed by the receiving party.
For a period of five years from the date of this Agreement, each party
will maintain the other party's Confidential Information in confidence and
will not disclose the same to any person or entity not a party hereto or use
the same for the benefit of any such third party. The receiving party will
keep and maintain complete and accurate written records of the Confidential
Information of the other party, will xxxx such Confidential Information with
such legends as the disclosing party may reasonably direct, and will promptly
deliver same to the disclosing party upon the expiration or termination
hereof or at such other times as the disclosing party may request.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF MSI.
MSI hereby represents and warrants to the Company the following:
1. MSI is a corporation organized, validly existing and in
corporate good standing under the laws of Massachusetts, has all requisite
corporate power and authority to own and operate its property and carry on
its business and is not required to qualify to do business in any other
jurisdiction.
2. The execution and delivery of this Agreement has been duly and
validly authorized by all necessary corporate action on the part of MSI, and
(assuming valid execution by the Company) this Agreement is a valid and
binding obligation of MSI enforceable against it.
3. As of the date of this Agreement, MSI is not a party to any
lawsuit, nor is there any outstanding claim against MSI, alleging that use of
the Manufacturing Know-How infringes the proprietary rights of any third
party.
B. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to MSI the following:
1. Conceptus is a corporation organized, validly existing and in
corporate good standing under the laws of Delaware, has all requisite
corporate power and authority to own and operate its property and carry on
its business and is not required to qualify to do business in any other
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, results of operations or financial condition
of Conceptus. Microgyn is a corporation organized, validly existing and in
corporate good standing under the laws of Massachusetts, has all requisite
corporate power and authority to own and operate its property and carry on
its business and is not required to qualify to do business in any other
jurisdiction.
2. The execution and delivery of this Agreement has been duly and
validly authorized by all necessary corporate action on the part of each of
Conceptus and Microgyn, and (assuming valid execution by MSI) this Agreement
is a valid and binding obligation of each of Conceptus and Microgyn
enforceable against each of them.
3. As of the date of this Agreement, neither Conceptus nor
Microgyn is a party to any lawsuit, nor is there any outstanding claim
against Conceptus or Microgyn, respectively, alleging that use of the
Manufacturing Know-How infringes the proprietary rights of any third party.
4. As of the date of this Agreement, neither Conceptus nor
Microgyn is a party to any agreement or understanding, oral or written, which
would, in any manner, be inconsistent with the rights granted herein to MSI
and neither Conceptus nor Microgyn shall enter into any agreement or
understanding, oral or written, during the term of this Agreement, nor during
the term of this Agreement, directly or indirectly, engage in any activity
which would, in any manner, be inconsistent with the rights herein granted to
MSI.
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ARTICLE VI
TERM AND TERMINATION
A. TERM. This Agreement shall be effective as of the Transfer
Completion Date and shall continue until the end of the month following the
due date of the last payment to be made by the Company to MSI hereunder
unless sooner terminated in accordance with the provisions of this Agreement.
B. Termination. This Agreement may be terminated only upon the
express written consent of all of the parties hereto. Upon the expiration or
termination of this Agreement, all rights and obligations of the parties
hereunder shall cease except that the provisions of Articles I, III, IV, VI
and VII shall survive, and any obligations of the Company to pay Royalties or
other amounts to MSI which have accrued as of the date of termination or
expiration shall not be affected.
ARTICLE VII
MISCELLANEOUS
A. NO ASSIGNMENT. The Company shall have no right to assign any of
its rights or obligations under this Agreement, other than to its successor
by merger, consolidation or sale of assets, without the prior written consent
of MSI, which consent shall not be unreasonably withheld.
B. SEVERABILITY. Any provision of this Agreement which is found to be
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Each provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law. If any provision contained in this Agreement
shall be held to be excessively broad as to scope, activity or subject so as
to be unenforceable at law, such provision shall be construed by limiting and
reducing it so as to be enforceable to the extent compatible with the
applicable law as then in effect.
C. NOTICE. All notices or other communications required or permitted
to be given under this Agreement shall be in writing and will be deemed
effective and given when delivered in person, sent by delivery service or by
certified or registered mail, postage and certification prepaid, or sent by
telecopier or facsimile with confirmation to the following addresses:
If to MSI: Medical Scientific, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Fax: 000.000.0000
Attn: President
With a copy to: Warner & Xxxxxxxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: 000.000.0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
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If to Microgyn: Microgyn, Inc.
0000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Fax: 000.000.0000
Attn: President
If to Conceptus: Conceptus, Inc.
0000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Fax: 000.000.0000
Attn: President
With a copy to: Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Fax: 000.000.0000
Attn: Xxxxxxx X. Xxxx, Esq.
D. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered will be
an original, but all of which together will constitute one and the same
instrument. In pleading or proving this Agreement, it will not be necessary
to produce or account for more than one such counterpart.
E. CAPTIONS. The captions of sections or subsections of this
Agreement are for reference only and will not affect the interpretation or
construction of this Agreement.
F. WAIVERS. No waiver of any breach or default hereunder will be
valid unless in a writing signed by the waiving party. No failure or other
delay by either party in exercising any right, power, or privilege hereunder
will be or operate as a waiver thereof, nor will any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege.
G. FURTHER ASSURANCES; COOPERATION. From time to time on and after
the date hereof, MSI and the Company will promptly execute and deliver all
such further instruments and other documents, and will promptly take all such
further actions, as the other may reasonably request in order to effect or
confirm the transactions hereby contemplated and to carry out the purposes of
this Agreement. In addition, each of MSI and the Company will cooperate with
the other in all reasonable respects relating to the transactions and
relationship between the parties contemplated hereby.
H. FORCE MAJEURE. Any delay in the performance of any of the duties
or obligations of any party hereto shall not be considered a breach of this
Agreement and the time required for performance shall be extended for a
period equal to the period of such delay; provided, that such delay has been
caused by or is the result of any act of God, acts of a public enemy,
insurrections, riots, embargoes, labor disputes (including strikes, lockouts,
job actions, or boycotts), fires, explosions, earthquakes, floods, shortages
of material or energy or other unforeseeable causes beyond the control and
without the fault or negligence of the party so affected. The party so
affected shall give prompt notice to the other party of such cause, and shall
take whatever reasonable steps are necessary to relieve the effect of such
cause as rapidly as possible.
I. ENTIRE AGREEMENT. This Agreement and the Manufacturing Transition
Agreement, together with the exhibits hereto and thereto, contain the entire
understanding and agreement among the parties, and supersedes any prior
understandings or agreements among them, with respect to the subject matter
hereof.
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J. GOVERNING LAW. This Agreement will to the maximum lawful extent be
governed by and interpreted and construed in accordance with the internal
laws of the Commonwealth of Massachusetts, as applied to contracts made, and
entirely to be performed, within Massachusetts, and without reference to
principles of conflicts or choice of law.
K. RELATIONSHIP OF PARTIES. The relationship of the Company and MSI
will be one of independent contracting parties, and not that of partners,
joint venturers, principal-and-agent, or otherwise. Neither the Company nor
MSI will have or purport to have any right, power, or authority to bind the
other.
L. ARBITRATION. The parties agree to work together in good faith to
resolve any disputes arising under or in connection with this Agreement and
the transactions and relationship between the parties contemplated hereby,
and to explore resolution of the dispute through methods of alternative
dispute resolution. If the parties are unable to resolve a dispute, it shall
be finally settled by a panel of three arbitrators, each having at least five
years of experience as an arbitrator and otherwise mutually acceptable to the
parties, in an arbitration administered by American Arbitration Association
in accordance with the internal laws of the Commonwealth of Massachusetts
(except that any dispute relating to the construction or effect of any patent
shall be resolved under the applicable laws of the United States or such
other jurisdiction as granted such patent). Any demand for arbitration
hereunder must be made before the running of the legal statute of limitations
applicable to the claim at issue. Any such arbitration shall take place in
Boston, Massachusetts, unless otherwise agreed by the parties, and shall be
subject to the then applicable Federal Rules of Civil Procedure. Each of the
Company and MSI will be responsible for one-half of the fees and expenses of
the panel of arbitrators, and all of such party's own costs and expenses, in
connection with any such arbitration. Judgment upon any award rendered by the
panel of arbitrators, if such award is in accordance with applicable law and
the terms of this Agreement, may be entered in any court of competent
jurisdiction. The decision of the panel of arbitrators shall be in writing
and shall set forth in reasonable detail the basis for such decision.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written.
MICROGYN, INC.
By: /s/ Xxxxxxx Xxxxx
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
CONCEPTUS, INC.
By: /s/ Xxxxxxx Xxxxxxxx
Name: Xxxxxxx Xxxxxxxx
Title: President and Chief Executive Officer
MEDICAL SCIENTIFIC, INC.
By: /s/ Xxxx X. Xxxxxxxx
Name: Xxxx X. Xxxxxxxx
Title: President
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