Oem Supply And Manufacturing License Agreement

EXHIBIT 10.1


OEM SUPPLY AND MANUFACTURING LICENSE AGREEMENT


THIS OEM SUPPLY AND MANUFACTURING LICENSE AGREEMENT is made and entered into this 24th day of July, 1995 ("Effective Date"), by and between GYNECARE, INC., a California corporation with principal offices at 125 Constitution Drive, Menlo Park, California 94025 ("Gynecare") and Gyrus Medical, Ltd., a United Kingdom corporation, with principal offices at St. Mellons Techbase, Fountain Lane, St. Mellons, Cardiff CF3 0LX U.K. ("Gyrus").


RECITALS


A. Gynecare wishes to purchase from Gyrus certain Products (as hereinafter defined) based on the Specifications (as hereinafter defined).


B. Gyrus desires to become Gynecare's exclusive supplier of such Products throughout the term of this Agreement.


C. Gyrus owns all right, title and interest in the Patent Rights (as hereinafter defined) and Related Technical Information (as hereinafter defined).


D. Gyrus wishes to license the Patent Rights and Related Technical Information to Gynecare, within the Field (as hereinafter defined), to make, use and sell Products on the terms and conditions set forth below and Gynecare wishes to obtain a license on such terms.


NOW, THEREFORE, in consideration of the foregoing and the mutual promises set forth herein, Gynecare and Gyrus hereby agree as follows:


ARTICLE 1
DEFINITIONS


1. DEFINITIONS. As used herein the following terms shall have the meanings set forth below.


1.1 "FIELD" means gynecological products for use in conjunction with a hysteroscope wherein the intended purpose is the removal of uterine fibroids or uterine tissue.

1.2 "LICENSED PRODUCT" means any product or component whose sale would infringe a Valid Claim in the country for which such item is sold.


1.3 "PATENT RIGHTS" means all right, title and interest in and to the patents, patent applications and invention disclosures set forth in Exhibit A attached hereto (as amended by mutual agreement of the parties) including (i) all corresponding patents, utility models, inventor certificates,


registrations or the like in any country of the world with respect to the foregoing, (ii) all continuations, continuations-in-part, divisionals, reissues, additions, reexaminations and extensions with respect to any of the foregoing; and (iii) any patents and patent applications relating to Improvements which are developed solely by Gyrus or jointly developed by Gyrus and Gynecare.


1.4 "RELATED TECHNICAL INFORMATION" means any published or unpublished research and development information, unpatented inventions, know-how, trade secrets, copyrights, and all preclinical, clinical and other technical data in the possession of Gyrus prior to the Effective Date, or during the term of this Agreement, in each case which relates to the practice of the Patent Rights.


1.5 "VALID CLAIM" shall mean a claim of an issued and unexpired patent included within the Patent Rights which has not been held unenforceable, unpatentable or invalid by a court or other governmental agency of competent jurisdiction, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.


1.6 "IMPROVEMENTS" means improvements or derivations of the subject matter covered by the Patent Rights which are developed by either Gyrus or Gynecare during the term of this Agreement which would not already be included within the Patent Rights and which are applicable to the Field.


1.7 PRODUCTS. "Products" means the products and components identified in Exhibit B attached hereto manufactured in accordance with the Specifications. Exhibit B may be amended to add or delete Products from time to time by execution of a new Exhibit B by the parties.


1.8 SPECIFICATIONS. "Specifications" shall mean any mutually agreed embodiment of the Products, including without restriction any future amendments or variations to the Specifications proposed or implemented by either party.


1.9 NET SELLING PRICE. "Net Selling Price" means, subject to Section 5.2, the gross amount actually received by Gynecare from the sale of any particular Product, less: (i) credits for returns; (ii) sales, excise or other taxes; provided, however, that (a) in no event shall Net Selling Price include any handling, insurance or transportation costs associated with a particular product and (b) in the event that any particular Product is sold by Gynecare as part of a bundle or kit, the Net Selling Price for that particular product shall be determined by multiplying the net selling price of the bundle or kit by the fraction A/A+B where A is the suggested list price for the Product sold separately (as documented by Gynecare's records) and B is the suggested list price for the remaining product in the bundle or kit sold separately (as documented by Gynecare's records). In the event that Gynecare receives any Products from Gyrus that Gynecare uses for promotion or demonstration purposes, the Net Selling Price for such Products shall be deemed to be Gynecare's list price for such Products.


1.10 EQUIPMENT PRODUCTS. "Equipment Products" means radio frequency hardware and associated reusable Products.


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1.11 DISPOSABLE PRODUCTS "Disposable Products" means packaged, sterile, single use disposable Products.


ARTICLE 2
GRANT OF MANUFACTURING RIGHTS


2.1 MANUFACTURING LICENSE. Subject to the limitations set forth herein, Gyrus hereby grants to Gynecare an exclusive, worldwide, royalty-free license under the Patent Rights and Related Technical Information to make, have made, use and sell Licensed Products, to practice any process, method or procedure, and to otherwise exploit the Patent Rights and Related Technical Information, in each case solely within the Field.


2.2 DISCLOSURE OF TECHNOLOGY. Promptly after the Effective Date, and throughout the term of this Agreement, Gyrus shall provide Gynecare, as reasonably requested by Gynecare, with (i) copies of all patent applications within the Patent Rights set forth in Exhibit A attached hereto, all correspondence and written materials related thereto, and all Related Technical Information; and (ii) all physical embodiments of the Patent Rights and Related Technical Information, including without limitation copies of all notebooks, drawings, diagrams, computer files, manuscripts, patent prosecution documents and other materials created or obtained in the course of developing the Patent Rights and/or Related Technical Information or related to their conception, experimentation, design, fabrication, or use. Subject to Section 7 below, Gynecare may use and disclose such information and embodiments as it deems appropriate. Gyrus' obligations under this Section 2.2 shall in all cases be limited to disclosure of materials that have reference to the Field.


2.3 IMPROVEMENTS.


(a) Gyrus shall, throughout the term of this Agreement, keep Gynecare apprised of any Improvements (as defined in Section 1.6 above) that it has developed or is in the process of developing. Gyrus further agrees to promptly file, and to diligently prosecute, patent applications with respect to any Improvements that might reasonably constitute patentable inventions.


(b) Gynecare shall, at its sole option, have the right to make any Improvements developed by Gyrus part of the license granted to Gynecare pursuant to Section 2.1 above. In the event Gynecare decides to make such Improvements part of the license, Gyrus shall promptly deliver to Gynecare all materials reasonably necessary for Gynecare to exercise its license with respect to such Improvements.


(c) If any Improvements are made during the term hereof through the joint efforts of the parties, ownership of those Improvements will vest jointly in the parties. The parties agree to cooperate in efforts to obtain appropriate patent protection for any such Improvements and shall equally share the costs and expenses therefrom. Each of Gyrus and Gynecare agrees that, without the prior written consent of the other, it shall not sublicense any such jointly- owned Improvements or otherwise exploit such jointly-owned improvements other than for the benefit of Gyrus or Gynecare.


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ARTICLE 3
OWNERSHIP


3.1 PATENTS AND TECHNOLOGY. Gyrus owns all right, title, and interest in the Patent Rights and Related Technical Information. Gynecare shall have no rights in the Patent Rights and Related Technical Information except as expressly provided in this Agreement.


3.2 IMPROVEMENTS. Subject to Sections 1.3 and 3.1 above, each party shall own all right, title, and interest in any Improvements it creates during the term of this Agreement, including all patent, copyright, trade secret, and other intellectual property rights therein.


ARTICLE 4
MANUFACTURE AND SALE OF PRODUCTS


4.1 OBLIGATION. Subject to the terms and conditions of this Agreement, Gyrus shall manufacture Products and shall sell such Products to Gynecare.


4.2 EXCLUSIVE SALE TO GYNECARE. Throughout the term of this Agreement Gyrus agrees not to manufacture for, or sell to, anyone other than Gynecare, any products for application in the Field, without the prior written consent of Gynecare.


4.3 GYRUS MANUFACTURING PREFERENCE. Gynecare agrees that, throughout the term of this Agreement, it shall not manufacture Products or purchase Products from anyone other than Gyrus. Notwithstanding the foregoing, in the event of termination of this Agreement by Gynecare pursuant to Section 11.3 below, Gynecare shall be permitted to manufacture any Licensed Products in any amount which it deems appropriate.


4.4 PURCHASE ORDERS. Gynecare shall order Products from Gyrus by issuing written purchase orders to Gyrus. Orders may be submitted by telecopier with a confirming hard-copy order within ten (10) days. Such purchase orders shall specifically identify the Products, the quantity of Products, ship-to locations, any special shipment instructions, and the date of delivery to Gynecare. All such purchase orders shall be submitted at least ninety (90) days prior to the requested delivery date. Unless Gyrus objects to the date of delivery in a purchase order within three (3) business days of the receipt of such purchase order, the Products shall be delivered to Gynecare on or before such date. If Gyrus so notifies Gynecare of its objection, the parties shall mutually agree on an alternative delivery date. Gyrus shall use its best efforts to deliver products to Gynecare on the date specified in the purchase order. Gyrus shall send Gynecare a formal written acknowledgment of each Gynecare purchase order within five (5) business days after receipt thereof. All purchase orders placed by Gynecare shall be subject to the terms and conditions of this Agreement, and no provisions in any acknowledgment or any other of Gyrus's documents related to the purchase orders shall in any way modify or add to such terms and conditions.


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4.5 FORECASTS. Beginning four (4) months prior to initial Product release, Gynecare will provide to Gyrus, on the first day of each month, a rolling six (6) month forecast of Gynecare's anticipated requirements for Products. The forecast for any given month (a "Shipment Month") shall become binding upon Gynecare, following final permitted adjustments, three (3) months prior to the start of that Shipment Month at which time Gynecare shall be required to submit binding purchase orders pursuant to Section 4.4 above for the number of units forecast for such Shipment Month. Prior to that time, monthly forecasts may be adjusted by Gynecare without penalty as follows:


Fourth month prior to Shipment 10% adjustment from
Month previous forecast for that
Shipment Month


Fifth month prior to Shipment 50% adjustment from
Month previous forecast of that
Shipment Month


Sixth or later months prior No restrictions
to Shipment Month


If Gyrus at any time believes it will not be able to satisfy Gynecare's requirements for the Products, Gyrus shall promptly notify Gynecare, specifying the reasons for the delay and its expected duration. In addition to the foregoing, both Gyrus and Gynecare agree to negotiate, in good faith, a minimum quantity Product forecast four (4) months prior to the third year after initial Product release.


4.6 PURCHASE ORDER CHANGES. Gynecare and Gyrus may by mutual agreement make changes to the quantity and delivery date for any purchase order up to thirty (30) days before the delivery date; provided that (i) any changes in quantity are no less than those provided for under Section 4.5 above and (ii) the delivery date may not be advanced to less than thirty (30) days from the date of the change without Gyrus's permission and (iii) the implementation of Purchase Order Changes shall relieve Gyrus of any supply obligations may otherwise result in termination under Section 11.


4.7 SHIPMENT. Products shall be shipped by Gyrus in suitable packing containers F.O.B. Gyrus' manufacturing facility.


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ARTICLE 5
PRICE, PAYMENT AND DEPOSIT TERMS; MANUFACTURING FEE


5.1 TRANSFER PRICE FORMULA. Gyrus shall sell the Products to Gynecare at purchase prices equal to [*] of Gynecare's average Net Selling Price for the Products in accordance with the following: (i) the purchase price computation for any particular Product shall be made at the time of the delivery of such Product by Gyrus to Gynecare; (ii) the average Net Selling Price applied with respect to the sale of a Product during any particular calendar quarter other than the first calendar quarter in which such Product is sold shall be equal to the average of the Net Selling Prices received by Gynecare for such Products during the previous calendar quarter; (iii) the purchase price used for a Product during the first calendar quarter during which such Product is sold shall be Gynecare's published list price for such Product; and (iv) with the exception of delivery to the United Kingdom, the purchase price determined according to the above calculation shall be inclusive of all applicable taxes (including without limitation any applicable sales, use or value-added taxes) and Gynecare shall not under any circumstances be separately invoiced for any such taxes. Within twenty (20) days following the end of each calendar quarter, Gynecare will send Gyrus written notice setting forth the average Net Selling Price received by Gynecare for the Products during such quarter. Notwithstanding anything in this section 5.1 to the contrary, the price at which Gynecare shall purchase the Disposable Products from Gyrus shall not be less than [*]; provided, however, that Gyrus agrees to negotiate in good faith with Gynecare to reduce such minimum price following the second anniversary of the date of delivery of first commercial Product to Gynecare if the volume of Product purchases by Gynecare from Gyrus exceeds twice the Minimum Purchase Requirements as set forth on Exhibit C.


5.2 GYNECARE PAYMENT. In consideration of the licenses and rights granted to Gynecare herein, Gynecare agrees to pay Gyrus a non-refundable purchase deposit in the amount of [*] (the "Deposit"), payable in installments as follows: (i) [*] on the Effective Date; (ii) [*] upon successful completion of animal laboratory tests; (iii) [*] upon the earlier to occur of (A) completion of Gynecare's intellectual property due diligence or (B) 60 days following the Effective Date; (iv) [*] upon completion of first human use trial of safety and effectiveness [*]; and (v) [*] upon preproduction first article Product approval [*]. Notwithstanding the foregoing, Gynecare shall have no right of recovery of payments past or due and shall have no obligation to pay Gyrus any of the installments described above in the event that this Agreement has been terminated for any reason, prior to the time that such installment has become due (unless such installment has already become due and has not yet been paid by Gynecare). The Deposit shall be applied as follows, until fully amortized, against the purchase price which would otherwise be charged by Gyrus to Gynecare for Product purchases: (i) for each purchase of a Disposable Product by Gynecare from Gyrus, [*] of the Net Selling Price of such Disposable Product shall be credited against and subtracted from the Deposit; and (ii) for each purchase of an Equipment Product by Gynecare from Gyrus, [*] of the Net Selling Price of such Equipment Product shall be credited against and subtracted from the Deposit.


- ---------- * Confidential treatment requested. Confidential portion filed separately with the Commission.


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5.3 PAYMENT TERMS. Upon shipment of Products to Gynecare, Gyrus shall submit an invoice to Gynecare. Such invoice shall reflect the purchase price for the Products computed pursuant to Section 5.1 above as well as that portion of the Deposit, if any, to be applied against such purchase price pursuant to Section 5.2 above. Unless otherwise agreed by the parties in writing, Gynecare shall pay each invoice in cleared funds and in such good time for Gyrus to be credited with such payments in its nominated U.K. clearing bank account no later than thirty (30) days from the date thereof. All invoices shall be presented, and payment accepted, in terms of U.S. dollars; provided such invoices shall be adjusted in accordance with a change of greater than ten percent (10%) in the exchange rates between the U.S. dollar and British pounds sterling as published in the Financial Times as of the date of shipment of applicable products compared to the rate in effect at the time of calculating the initial transfer prices for the Products.


5.4 TAXES. As set forth in Section 5.1 above, the prices for the Products include any and all taxes. All applicable sales, use, value-added or other taxes shall be paid directly by Gyrus.


5.5 RESOLUTION OF DISAGREEMENTS OVER TRANSFER PRICE.


(a) In the event Gynecare and Gyrus disagree over the transfer price determined pursuant to Section 5.1 above, Gyrus shall have the right to retain an independent public accounting firm to review the books and records of Gynecare (including the work papers of Gynecare's own independent auditing firm) to determine the appropriate transfer price. If such independent public accounting firm determines that Gyrus' transfer price calculation is higher than the transfer price calculated by Gynecare's own auditing firm with respect to any particular Products, the two accounting firms will then confer to resolve their differences. If the two firms are unable to resolve their differences and agree upon a transfer price, the two firms together shall pick a third accounting firm whose decision as to the transfer price of the Products shall be binding for purposes of this Agreement.


5.6 CHANGE IN SPECIFICATIONS FOR PRODUCTS.


(a) GYRUS CHANGES. Gyrus shall not change the Specifications set forth in Exhibit A for Products or make any manufacturing changes that might affect the Products without the prior written consent of Gynecare.


(b) GYNECARE PROPOSED CHANGES. In the event Gynecare desires a change to the Specifications set forth in Exhibit A for Products, Gynecare shall submit such requested change in writing to Gyrus. Gyrus will advise Gynecare in writing within thirty (30) days of receipt of the change request whether, in Gyrus' opinion, the change is technically and economically feasible. Gyrus agrees that it will in good faith consider making the requested change in the Specifications, but is under no obligation to do so.


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ARTICLE 6
PATENT PROSECUTION AND ENFORCEMENT


6.1 PATENT PROSECUTION. Gyrus shall be obligated to direct all patent filings, prosecution and maintenance relating to the Patent Rights in [*]; provided, however, that Gyrus and Gynecare agree, throughout the term of this Agreement, to cooperate in (i) selection of patent counsel; (ii) formulation of a general intellectual property strategy; (iii) foreign filings; and (iv) determination of the content of each new application, divisional, continuation or continuation-in-part. Each further agrees to assist the other in any formalities relating to the foregoing and each shall use its best efforts to ensure that the other receives copies of all relevant correspondence.


Gyrus shall assume all costs and expenses associated with the filing, prosecution and maintenance of the Patent Rights in the following countries: [*]. Gynecare shall have the right to obligate Gyrus at Gynecare's expense, to file, prosecute and maintain the Patent Rights in the countries not listed above; provided, however, that in the event Gyrus does not file, prosecute and maintain such Patent Rights, (i) Gynecare may, at its own expense, pursue such Patent Rights as it deems appropriate and, (ii) Gyrus agrees to fully cooperate with Gynecare, including the execution of any documents required, in this regard.


6.2 ENFORCEMENT OF PATENT RIGHTS. In the event that any of the Patent Rights are infringed by a third party within the Field, Gyrus shall have the right, but not the obligation, to institute, prosecute and control any action or proceeding with respect to such infringement, by counsel of its choice, including any declaratory judgment action arising from such infringement. Gyrus shall be entitled to any and all proceeds recovered from third parties as a result of the enforcement of the Patent Rights as set forth above. Notwithstanding the foregoing, in the event that Gyrus declines in any instance to enforce the Patent Rights within the Field, Gynecare shall have the right, but not the obligation, to enforce the Patent Rights within the Field in the manner set forth above and shall be entitled to retain any and all proceeds recovered from third parties as a result thereof. In addition, upon termination of this Agreement by Gynecare pursuant to Section 11.3 below, Gynecare shall have the exclusive right to enforce the Patent Rights within the Field as set forth above and shall have the exclusive right to any and all proceeds recovered from third parties as a result of the enf ...