EXHIBIT 2.2
ROYALTY AGREEMENT
This Royalty Agreement ("Agreement") entered into as of this 1st day of
May, 1997 is by and between ASAHI/AMERICA, INC., a Massachusetts corporation
(the "Owner"), and THE ROSAEN COMPANY , a Michigan corporation. ("TRC").
WHEREAS, Owner, TRC, Universal Flow Monitors, Inc. ("UFM") and certain
other parties have entered into a Purchase and Sale Agreement ("P&S Agreement")
dated as of the date hereof pursuant to which the TRC and UFM sold to Owner and
Owner has purchased from TRC and UFM certain assets; and
WHEREAS, as a material inducement to TRC to Transfer its rights in the
UVP Products (as defined below), TRC requires Owner to grant to TRC a royalty
interest in one of the product lines under development which was sold to Owner
pursuant to the P&S Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. THE PRODUCTS.
1.1 Pursuant to the P&S Agreement, TRC and UFM have sold, transferred
and otherwise conveyed to Owner all of their right, title and interest in and to
certain products known as the Ultrasonic Vortex Products which products have
been under development by TRC and which are the subject of a United States
Patent Application Serial No. 08/662,037 which was filed on June 12, 1996 and a
United States Continuation-In-Part Application Serial No. 08/784,712 (the "UVP
Products" or "UVP", as more fully defined on Exhibit A attached hereto and made
a part hereof).
2. THE ROYALTY.
2.1 Owner shall pay to TRC a royalty (the "Royalty" or "Royalties") of
five percent (5%) on the Net Sales Amounts (as defined herein) collected by
Owner on all UVP Products sold by Owner during the Term (as defined herein). TRC
acknowledges that UVP Products may be sold in conjunction with other products or
systems manufactured and/or distributed by Owner, and TRC's
right to a Royalty shall solely be in respect of sales of the UVP Products.
2.2 For purposes hereof, "Net Sales Amounts" shall mean gross revenue
less returns, discounts, including cash discounts, rebates and freight.
2.3 In the event that the UVP is developed and sold by Owner, Royalties
shall be payable to TRC on a calendar quarter basis, within thirty (30) days
following the close of each calendar quarter for all sales of UVP completed in
the just-ended calendar quarter. Owner shall deliver copies of all sales orders
to TRC with each Royalty payment.
2.4 Owner shall have a right of offset against any Royalties that
become payable to TRC for any amounts owed to Owner pursuant to the terms of the
P&S Agreement. In addition, in the event a third party brings a claim against
Owner alleging that the UVP Technology (as defined below) infringes proprietary
rights of such party, all Royalties shall be placed in escrow pending
determination of such claim. Any remaining escrowed amounts shall be released
(a) if the third party action is successful, to Owner, to the extent Owner is
entitled to indemnification under the P&S Agreement as a result of the outcome
of such action, with the remainder, if any, to TRC, or (b) if the third party
action is not successful, to TRC.
3. DUTIES OF OWNER.
3.1 As of the time of this Agreement, the UVP is in development. Owner
intends to use its reasonable efforts to complete development of the UVP.
Notwithstanding Owner's obligation to pay Royalties, Owner shall not be required
to complete development nor to market or make sales of the UVP if Owner, in its
sole discretion, determines that the completion, marketing and/or distribution
of the UVP is not economically or financially feasible, and, in the event Owner
makes such determination and no sales of the UVP are made, Owner shall neither
be in breach of this Agreement nor be required to pay any Royalties to TRC
hereunder.
3.2 During the Term of this Agreement, Owner shall not sell, license
or otherwise transfer any right to manufacture and market the UVP Products to
third parties unless Owner obtains the written consent of TRC, which shall not
be unreasonably withheld or delayed. The foregoing notwithstanding, (a) Owner
shall not
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be precluded from subcontracting manufacturing rights to third parties or from
granting distribution rights to third parties provided, however, that Owner
shall remain responsible for paying Royalties on the Net Sales made by such
parties, and (b) Owner shall not be required to obtain TRC's consent in the
event that Owner sells all or substantially all of its assets or merges with a
third party, where such acquiror or merged entity, as the case may be, agrees to
pay the Royalties to the TRC in accordance with the terms of this Agreement and
to otherwise comply with the terms hereof.
3.3 Owner will keep accurate and complete books and records of its
sales of the UVP Products. The TRC and its accountants shall have the right to
review at TRC's expense, at any time and from time to time, but not more often
than once each calendar quarter, such relevant books and records of Owner as may
be reasonably required for TRC to determine the amount and the basis of
calculation of the Royalties theretofore due and payable, or paid; provided,
however, that TRC shall provide to Owner at least ten (10) business days' notice
of its intent to review said books and records and such review shall be
performed during the regular business hours of Owner and at a time which does
not unreasonably disrupt the business operations of Owner. Moreover, TRC's right
to review such books and records shall only be with respect to those books and
records (or portions thereof) which deal directly with the sale of the UVP
Products and the Royalties payable on such sales.
4. TERM; TERMINATION.
4.1 The "Term" of this Agreement shall commence upon the date of this
Agreement and continue for a period of ten (10) years.
4.2 This Agreement shall earlier terminate in the event that any of
TRC, UFM or Lars or Erik Rosaen violates Section 9.1.3 of the P&S Agreement.
5. INFRINGEMENT; ACTIONS INVOLVING THIRD PARTIES.
5.1 TRC and Owner agree to inform the other promptly in writing of any
unauthorized use that becomes known to it and/or if it has any reason to believe
that there may be an unauthorized use by any third party of any of the
technology subsumed in the pending patent applications transferred to Owner
relative to the UVP Products (the "UVP Technology").
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5.2 In the event that a patent is granted in respect of the UVP
Technology, in the case of any infringement or alleged infringement by a third
party of the UVP Technology, Owner shall, after consultation with TRC, but in
Owner's ultimate discretion, have the right, but shall not be obligated, to:
5.2.1 settle the infringement dispute with the third
party as it relates to the UVP Technology;
5.2.2 prosecute the infringement dispute (and thereafter
to settle same); or
5.2.3 not prosecute the infringement dispute.
5.2.4 In case Owner brings an infringement action, TRC
agrees to become a party to such settlement and/or a party plaintiff
in such infringement action. Owner shall control the prosecution of
such infringement action and shall have complete authority to abandon
or settle such action at any time, but shall consult from time to time
with TRC regarding same.
5.3 If Owner elects to bring an action against a third party or
parties as provided in Section 5.2.2, Owner shall request that TRC either waive
the right to receive any amount as a result of such claim by settlement or
otherwise or pay 5% of the costs of maintaining such claim. TRC shall notify
Owner of its decision within 10 days of such request in the event TRC elects not
to waive. If TRC does not so waive its rights, TRC shall reimburse Owner for its
proportionate share of costs on a quarterly basis within 10 days of presentation
to TRC of supporting evidence of costs and expenses. Owner may set off Royalty
amounts otherwise payable to TRC in reimbursement for such costs. In the event
that TRC elects to waive its rights as aforesaid, but Owner elects to include
TRC as a plaintiff pursuant to Section 5.2.4, then Owner shall indemnify and
hold TRC harmless from its expenses and losses due to third party cross claims,
except to the extent that such claim arises from an action or omission by TRC
which is a breach of a representation or warranty of TRC under the P&S
Agreement.
5.4 In the event that the infringement action is successful or settled
in Owner's favor and results in a payment to Owner:
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5.4.1 which exceeds the fees and expenses incurred by
Owner in bringing the action, and TRC has elected not to waive its
right to receive such amounts, then, after reimbursement of the costs
and expenses incurred by Owner and TRC on a pro rata basis, TRC and
Owner shall share in such award five percent (5%) to TRC and
ninety-five percent (95%) to Owner; or
5.4.2 and TRC has elected to waive its right to such
payment, then, one hundred percent (100%) of the award will be paid to
Owner.
5.5 In the event Owner does not undertake action to prevent an
infringement of the UVP Technology within three (3) months of actual knowledge
of same, TRC shall have the right, but shall not be obligated, to prosecute at
its own expense any such infringement and, in furtherance of such right, TRC may
join Owner as a party plaintiff in any such suit without expense to Owner, and
in such event, TRC shall indemnify and hold Owner harmless from all expenses and
or losses incurred by it, including as a result of any cross claims made against
Owner by any other party to such action.
5.6 In the event that TRC shall undertake the enforcement of the UVP
Technology rights as provided under Section 5.5 hereof, Owner shall continue to
pay one hundred percent (100%) of all Royalties due to TRC, except to the extent
necessary to reimburse itself for expenses and or losses incurred as a result of
the action. Any recovery of damages by TRC for any such action shall be
distributed one hundred percent (100%) to TRC. TRC shall be entitled to settle
any such litigation by agreement, consent, judgment, voluntary dismissal, or
otherwise, with the prior written consent of Owner, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, Owner shall not be
required to consent to the terms of any settlement which diminishes the value of
the UVP Technology to Owner.
5.7 Subject to the other terms of this Agreement, in any infringement
suit or action instituted by either party against third parties to enforce the
UVP Technology rights pursuant to this Agreement, the other party hereto shall,
at the request of the party initiating such action, cooperate in all respects
and, to the extent possible, have its officers, directors and employees testify
when requested and make available relevant records, papers and information
relating to such action.
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6. OPPORTUNITIES/CONFLICTS OF INTEREST/NON-EXCLUSIVITY OF THE PARTIES. Except as
required by this Agreement, (i) no party to this Agreement shall have any rights
in or to the other business activities of the other parties, nor to the income
or profits derived therefrom, (ii) Owner shall not be prohibited from
manufacturing and/or marketing products which compete with the UVP, (iii)
neither Owner nor Beneficiaries shall be obligated to offer any investment or
other business opportunities to the other party, and (iv) no party shall have
any duty, fiduciary or otherwise, to afford the other parties any opportunity to
participate in such activities.
7. WARRANTY AND REPRESENTATION. Each party warrants and represents to the other
that it has full right, power and authority to enter into this Agreement and to
perform all its obligations hereunder and that the execution, delivery and
performance of this Agreement will not violate the provisions of any other
agreement to which it is a party.
8. ARBITRATION.
8.1 Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in Boston,
Massachusetts, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association and the provisions in this Article 14, and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
8.2 With regard to the interpretation of this Agreement on matters of
dispute between Owner and TRC, the parties agree to have all questions related
thereto, including the award of compensatory or punitive damages, or both,
submitted to and resolved by binding arbitration by a panel of three (3)
arbitrators.
9. NOTICES. All notices to a party shall be addressed to such party at the
address set forth below or to such other place as may be designated by written
notice to the other party. Notice shall be sufficient when delivered by hand;
when sent by telecopy with the original thereof posted first-class mail, postage
prepaid, within two (2) business days thereafter; when posted certified mail,
postage prepaid, return receipt requested; or when delivered by a reputable
private courier, requesting evidence of receipt as part of its service. Any such
notice
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shall be addressed to the party at its telecopy number or its address described
below, and shall be effective when first received. Unless otherwise notified in
writing, each party shall direct all sums payable to the other party at its
address for notice purposes. For purposes hereof, the addresses of the parties
shall be as follows:
If to Owner: Asahi/America, Inc.
35 Green Street
Malden, Massachusetts 02148
Attn: President
With copies to: Burton Winnick, Esq.
Marianne Gilleran, Esq.
Gadsby & Hannah LLP
225 Franklin Street
Boston, Massachusetts 02110
Telecopy: (617) 345-7050
If to TRC: The Rosaen Company
1755 East Nine Mile Road
P.O. Box 249
Hazel Park, Michigan 48030
Attn: Lars O. Rosaen, President
With a copy to: Steven E. Grob, Esq.
Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243
Telecopy: (313) 568-6989
or to such other address as may be designated in writing by any party from time
to time in accordance herewith, and shall be deemed delivered upon the earliest
to occur of delivery by hand, when so telecopied, when so placed in the mails or
when delivered to such delivery service as aforesaid.
10. MISCELLANEOUS.
10.1 Anything in this Agreement to the contrary notwithstanding, the
provisions of this Agreement shall survive termination hereof for such period as
shall give full effect thereto.
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10.2 Any waiver, modification or amendment of any provision of this
Agreement shall be effective only if in writing and signed by each of the
parties hereto.
10.3 This Agreement shall in all respects be construed, enforced, and
given effect according to the laws of the Commonwealth of Massachusetts without
regard to conflict of laws principles which would require the application of the
laws of another jurisdiction.
10.4 No waiver or modification of any right or obligation arising under
this Agreement shall be construed as a waiver or modification of any other right
or obligation. No waiver of any breach of this Agreement shall constitute a
waiver of any subsequent breach of the same or any other term or condition
hereof.
10.5 Neither party shall be responsible for any resulting loss if the
fulfillment of any of the terms or provisions of this Agreement is delayed or
prevented by riots, wars, acts of enemies, national emergency, strikes, floods,
fires, acts of God, or by any other cause not within the control of the party
whose performance is interfered with or which, by the exercise of reasonable
diligence, such party is unable to prevent, whether of the class of causes
enumerated above or not.
10.6 TRC and Owner are independent. Nothing herein contained shall be
construed to place TRC and Owner in the relationship of principal and agent,
master and servant, partners or joint venturers.
10.7 If any provision of this Agreement shall be found to be invalid or
unenforceable, then such provision or provisions shall not invalidate or in any
way affect the enforceability of the remainder of this Agreement and such
provision or provisions shall be curtailed and limited to the extent necessary
to bring the Agreement within any legal requirement.
10.8 The headings of the sections and other subdivisions of this
Agreement are for convenient reference only. They shall not be used in any way
to govern, limit, modify, construe this Agreement or any part or provision
thereof nor otherwise be given any legal effect.
10.9 This Agreement may be executed in counterparts. Each counterpart,
including a signature page executed by each of
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the parties hereto, shall be an original counterpart of this Agreement, but all
of such counterparts together shall constitute one instrument.
10.10 Each party agrees to provide any additional documents reasonably
requested by the other party in order to carry out the purpose of this
Agreement.
10.11 This Agreement, together with the P&S Agreement, contains the
full and complete undertaking and agreement between Owner and TRC with respect
to the within subject matter, and supersedes all other agreements between Owner
and TRC, whether written or oral, and may not be modified or amended except by
written instrument executed by both Owner and TRC.
10.12 Owner shall give TRC notice of any exercise of its right of offset as set
forth herein reasonably promptly upon the exercise of such right.
IN WITNESS WHEREOF, the parties hereto have set their hands to this
Agreement as a sealed instrument and have delivered this Agreement as of the day
and year first above written.
ASAHI/AMERICA, INC.
By: /s/ Leslie B. Lewis
THE ROSAEN COMPANY
By: /s/ Lars O. Rosaen
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. _____________, 1997
Then personally appeared the above-named, Leslie B. Lewis, who being
duly sworn states that he is the President of and
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acknowledged the foregoing instrument to the free act and deed of Asahi/America,
Inc. this ____ day of _____________, 1997.
_____________________________
Notary Public
My Commission Expires:
SEAL
STATE OF MICHIGAN
Oakland County, ss. May 1, 1997
Then personally appeared the above-named, Lars O. Rosaen, who being
duly sworn states that he is the President of and acknowledged the foregoing
instrument to the free act and deed of The Rosaen Company this 1st day of May,
1997.
/s/ Allan P. Sheridan
Notary Public
My Commission Expires: 3/27/99
SEAL
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Exhibit A
Ultrasonic Vortex Meter
A plastic vortex shedding flow meter that senses the vortices by use of sending
and receiving sound waves through fluid. Optionally it has remote signal
processing and a clamp-on housing wherein the active electronic and sonic
section of the meter body can be removed from the vortex shedding mechanical
portion for purposes of repair or maintenance.