SALES AGENCY, DEVELOPMENT AND LICENSE AGREEMENT
between
COHERENT, INC.
and
PALOMAR MEDICAL TECHNOLOGIES, INC.
COHERENT ADDRESS: 0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx Xxxxx, XX 00000 U.S.A.
PALOMAR ADDRESS: 00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 X.X.X.
EFFECTIVE DATE: November 17, 1997
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
TABLE OF CONTENTS
ITEM PAGE NUMBER
AGREEMENT......................................................................1
DEFINITIONS....................................................................1
APPOINTMENT OF SALES AGENT.....................................................4
RESPONSIBILITIES OF COHERENT...................................................6
RESPONSIBILITIES OF PALOMAR....................................................6
COMMISSIONS;TERMS OF PURCHASE OF PRODUCTS BY COHERENT..........................9
COMPLIANCE WITH GOVERNMENT REGULATIONS........................................11
WARRANTY......................................................................11
SERVICE.......................................................................12
LIMITED LIABILITY TO COHERENT AND OTHERS......................................12
PROPERTY RIGHTS...............................................................13
TRADEMARKS AND TRADE NAMES....................................................13
PATENTS AND TRADE SECRETS.....................................................14
INFRINGEMENT..................................................................15
INDEMNIFICATION...............................................................16
DEVELOPMENT PROJECTS..........................................................17
MANUFACTURING RIGHTS..........................................................18
PATENT LICENSE GRANT..........................................................19
INTELLECTUAL PROPERTY NOTICES.................................................21
TERM AND TERMINATION..........................................................21
GENERAL PROVISIONS............................................................22
EXHIBITS
A Palomar Patents
B Wire Instructions
C Form of Warrant
D Terms and Conditions of Purchase
E Product Warranty
F Confidentiality Agreement
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AGREEMENT
THIS AGREEMENT is made and entered into as of November 17, 1997 by and
between Palomar Medical Technologies, Inc., a Delaware corporation having a
place of business at 00 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000
(hereinafter "Palomar") and Coherent, Inc., a Delaware corporation having a
principal place of business at 0000 Xxxxxxx Xxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx
00000 ("Coherent").
WHEREAS, Palomar is a diverse technology company that promotes the
development and sale of various high-technology products, including a medical
hair laser removal device known as the EpiLaser;
WHEREAS, Coherent is an established company in laser technology with an
established worldwide network for distribution, sales and service of laser
technology and related products;
WHEREAS, Coherent and Palomar perceive mutual advantage to Palomar
providing Coherent with EpiLaser and successor versions of the EpiLaser for
distribution, sales and service through Coherent's worldwide network;
WHEREAS, Coherent desires to collaborate with Palomar in the development of
lasers for hair removal applications, and distribute such products pursuant to
the terms of this Agreement;
NOW THEREFORE, in consideration of the premises and of the faithful
performance of the covenants herein contained, the parties hereto agree as
follows:
1. DEFINITIONS
Terms not otherwise defined herein shall have the meanings set forth below:
1.1 "Affiliate" shall mean any corporation or other legal entity other than
Coherent in whatever country organized, controlling, controlled by or under
common control with Coherent. The term "control" means possession, direct or
indirect, of the powers to direct or cause the direction of the management and
policies of an entity, whether through the ownership of voting securities, by
contract or otherwise.
1.2 "Xxxxxxxx Patent" shall mean U.S. Patent No. 5,595,698, including any
division, continuation or any foreign patent application or letters patent or
equivalent thereof issuing thereon or reissue, reexamination or extensions
thereof.
1.3 "Clinical Trial Agreement" shall mean the agreement entered into
between Massachusetts General Hospital, Dr. R. Rox Xxxxxxxx and Palomar on
August 18, 1995 relating to the use of lasers for the removal of hair.
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1.4 "Development Projects" shall mean the development work done by Palomar
pursuant to Section 15 of this Agreement.
1.5 "Distributed Products" shall mean Palomar's current EpiLaser laser
system ("Epi1"), its next generation EpiLaser in development ("Epi2"), the
StarLight diode laser in development, any upgrades thereto, and any future
Products added to this list by mutual agreement of the parties or pursuant to
Section 16.2 hereof.
1.6 "Effective Date" shall mean November 17, 1997.
1.7 "GAAP" shall mean generally accepted accounting principles.
1.8 "Gross Margin" shall mean the difference between the purchase price and
the cost of goods, calculated in accordance with GAAP.
1.9 "Invention" shall mean any new and useful process, manufacture, or
composition of matter in the field of laser hair removal conceived or first
reduced to practice during the conduct of Development Projects. The term does
not include any invention made solely by one or more Coherent employees.
1.10 "Licensed Field" shall mean hair reduction and/or hair removal.
1.11 "Licensed Product" shall mean any article, device or composition, the
manufacture, use or sale of which, absent the licenses granted herein, would
infringe a Valid Claim of any of the Palomar Patents.
1.12 "License Term" shall be the period of time during which this Agreement
is in effect.
1.13 "Net Revenues" shall mean the price at which Coherent invoices the
sale or lease of the Licensed Products to its customers, less any reasonable
charges for shipping, import duties, brokerage and use or sales taxes. It is
further understood and agreed that in respect of inter-company sales between
Coherent and any Affiliate, Net Revenues be calculated off the price at which
the Affiliate invoices the sale or lease of the Licensed Products to its
customer. If the competitive product has more than one application, "Net
Revenues" shall be only that portion allocated to the hair removal product based
upon the average sales price of a stand-alone Distributed Product.
1.14 "Palomar Developments" shall mean any invention, improvement,
modification, enhancement, creation, design, method, documentation, know-how or
other development or information of any kind made or acquired by Palomar during
the life of this Agreement that would infringe one or more of the Palomar's
Patents if made, used or sold by an unlicensed person or entity.
1.15 "Palomar Patents" shall mean any rights owned by Palomar in (i) the
patents and patent applications listed on the attached Exhibit A, including,
without limitation, the Xxxxxxxx Patent, (ii) patents issued from the
applications listed in Exhibit A or from any division or continuation of those
applications, (iii) claims of continuation-in-part applications, and of any
resulting patents, that claim an invention claimed or specifically described in
the applications listed on Exhibit A, and (iv) any reissues of or patents
issuing upon reexamination of any patents described in preceding clauses (i),
(ii), or (iii).
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1.16 "Palomar Technology" shall include the Palomar Patents and Palomar
Developments.
1.17 "Patent Right" shall mean any United States or foreign patent
application, or the equivalent of such applications, including any division,
continuation, or continuation-in-part, thereof, or any Letters Patent or the
equivalent thereof issuing thereon or reissue or extension thereof, containing
one or more claims to an Invention.
1.18 "Products" shall mean laser products for cosmetic applications,
including the Distributed Products.
1.19 "Territory" shall mean all countries of the world, except Canada.
1.20 "Valid Claim" shall mean any claim of any Palomar Patent that has not
been finally rejected or declared invalid, in the jurisdiction in question, by a
patent office or court of competent jurisdiction in any unappealable decision.
2. APPOINTMENT OF SALES AGENT
2.1 Subject to the terms and conditions set forth in this Agreement,
Palomar hereby appoints Coherent as its exclusive sales agent for the
Distributed Products in the Territory; provided, however, that Palomar retains
the right to sell Distributed Products in the Territory to existing
representatives and distributors until the effective date their termination by
Palomar. Upon the signing of this Agreement, Palomar agrees to use its
commercially reasonable best efforts to terminate all representatives and
distributors for its Distributed Products consistent with its contractual
obligations and governing legal authority. As these relationships are
terminated, they shall automatically be added to the definition of Territory.
For so long as this Agreement is in effect, Palomar shall not appoint any other
sales agent or distributor with responsibility for the sale of Distributed
Products in the Territory, or otherwise license other parties to manufacture the
Distributed Products; provided, however, that this limitation shall not apply to
third parties that contract with Palomar to manufacture the Distributed Products
or parts thereof for sale hereunder.
2.2 In order to remain the exclusive sales agent, Coherent shall be
required to achieve a customer order level of a minimum of 75 Distributed
Products per quarter during the term of the Agreement, except that the minimums
shall be 30 units per quarter until such time as Palomar notifies Coherent in
writing that it can deliver at least 30 units per quarter of either the Epi2 or
Starlight diode laser system. The minimums shall then increase to 50 units for
the next quarter before increasing to 75 per quarter. Orders that are already in
house at the time the Agreement is signed, and orders that are received from
Palomar's distributors and representatives until their rights are terminated,
shall not count towards these minimums. In the event that Coherent fails to
achieve such minimum customer order level during any quarter during the term of
this Agreement, until such time as Palomar notifies Coherent in writing that it
can deliver at least 30 units per quarter of either the Epi2 or Starlight diode
laser system, Coherent may, in its sole discretion, pay Palomar the sum of
$25,000 per unit short of the minimums within ten (10) days of the end of any
such quarter, and maintain exclusivity. Any such payments after such time as
Palomar notifies Coherent in writing that it can deliver at least 30 units per
quarter of either the Epi2 or Starlight diode laser system, will be negotiated
by the parties in good faith at a later date, but in no event shall such
payments be less than $25,000. If Coherent fails to achieve such minimum
customer order level during any quarter during the term of this Agreement and
elects not to make this payment within the ten day period after the end of such
quarter, this Agreement may become non-exclusive, at Palomar's sole discretion,
which shall be exercised within sixty (60) days of the end of any quarterly
period that Coherent fails to achieve such minimum customer order level.
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2.3 The relationship of Palomar and Coherent established by this Agreement
is that of independent contractors, and nothing contained herein shall be
construed to (i) give either party the power to direct and control the
day-to-day activities of the other, (ii) constitute the parties as partners,
joint venturers, co-owners or otherwise as participants in a joint or common
undertaking, or (iii) allow one party to create or assume any obligation on
behalf of the other for any purpose whatsoever. Under no circumstances,
including without limitation for purposes of this Section 2.3, will Coherent be
deemed to be an employee or agent of Palomar. Each party shall be solely
responsible for, and shall indemnify, defend and hold the other party free and
harmless from, any and all claims, damages, liabilities, fees, losses, claims,
allegations, or lawsuits, threatened or pending, (including attorneys' fees)
arising from or relating to the acts of their employees or its agents.
2.4 Coherent may appoint an independent representative or distributor to
handle its responsibilities under this Agreement in any particular Territory, in
which case Coherent's obligations hereunder shall be satisfied if such
representative or distributor is in compliance with such obligations.
3. RESPONSIBILITIES OF COHERENT
3.1 LUMP SUM PAYMENT. Upon execution of this Agreement, Coherent shall pay
Palomar a lump sum of Three Million Five Hundred Thousand Dollars ($3,500,000)
by wire transfer in accordance with the instructions attached hereto as Exhibit
B.
3.2 PROMOTION OF PRODUCTS. During the term of the Agreement, Coherent shall
use its reasonable best efforts to fully and actively promote the purchase and
use of the Distributed Products in the Territory and to supply Palomar with
regular reports regarding these activities. Without limiting the foregoing,
Coherent shall have the following responsibilities throughout the Territory:
3.2.1 Maintain active contacts with all potential and actual customers
and users of the Distributed Products.
3.2.2 Coherent shall pay sales commissions to its sales
representatives for the sale of Distributed Products which, calculated as a
percentage of the sales price, shall be at least as favorable as that paid
for sales of its own comparable products it may sell from time to time
during the term of this Agreement.
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3.2.3 Obtain customer orders for the Distributed Products and provide
assistance to customers in fulfilling them.
3.2.4 Use its reasonable best efforts to promote the Distributed
Products by training its sales and service forces, and organizing,
implementing and funding physician training courses and preceptorship
programs.
3.2.5 Undertake publicity in journals for the Distributed Products and
exhibit the Products at suitable trade fairs.
3.2.6 Achieve a sufficient level of understanding of the Distributed
Products to enable Coherent to provide technical support to the customer
and effectively sell and service the Distributed Products.
3.2.7 Provide technical liaison between Palomar and the customer.
3.2.8 On or before the 15th of each month during the term of this
Agreement commencing January 1, 1998, Coherent will provide Palomar with
six-month rolling forecasts of predicted sales by Distributed Product
("Forecast"). It is understood that these Forecasts are good-faith
estimates only, and Coherent shall not be obligated to purchase any
Distributed Products set forth in the Forecast. However, if during the term
of this Agreement Coherent fails to sell to its customers, or purchase for
its own account, at least fifty percent (50%) of the number of Distributed
Products set forth in the first three months of the Forecasts for the
months of January, April, July and October, it shall pay Palomar a deposit
equal to * times the number of Distributed Products set forth in the
first three-months of such Forecast minus the number actually sold during
that period. This deposit shall be either returned to Coherent or used as a
credit against future remittances to Palomar, at Coherent's option, at such
time as Coherent thereafter sells or purchases at least the number of
Distributed Products set forth in the three months of any such Forecast
after any such deposit. Any amounts on deposit on termination of this
Agreement shall be promptly returned to Coherent, without the right of set
off.
3.2.9 Coherent will perform the necessary research, including, without
limitation, legal research, to determine what limitations exist, if any,
for selling the Distributed Products in the Territory.
3.2.10 Keep Palomar fully informed of all governmental, commercial,
and industrial activities, plans and regulations which do or could affect
the sale of Distributed Products in the Territory.
3.2.11 Coherent shall reimburse Palomar for Palomar's out-of-pocket
expenses for advertisements, trade show participation and marketing
materials related to the Products when such marketing activities were
requested to be undertaken by Coherent in writing. Such reimbursements
shall be paid within ten (10) days of date of invoice.
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
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3.3 SALES INFORMATION. Coherent shall maintain and provide to Palomar
during the term of the Agreement, a complete record of all sales of the
Distributed Products, showing customer name, date of sale, shipping date,
instrument model, serial number, and sales order acknowledgment and invoices for
all Distributed Products covered by this Agreement, as well as special terms of
the sale, including warranty, installation date and other appropriate
information.
3.4 MATERIALS. Coherent shall promptly provide Palomar with examples of
marketing and technical information concerning the Distributed Products, that
have been prepared to support the Distributed Products within the Territory.
Coherent shall be responsible for preparing any foreign language verions of
operating manuals for the Disbtibuted Products.
3.5 RESPONSE TO INQUIRIES. Coherent shall promptly respond to all inquiries
from Palomar concerning matters pertaining to this Agreement.
3.6 NEW DEVELOPMENTS. Coherent Medical shall inform Palomar of new Product
developments in the field of hair removal.
3.7 COMPLIANCE WITH LAWS. Coherent shall comply with all applicable laws
relating to the sale and distribution of the Distributed Products in the
Territory.
3.8 CUSTOMER COMPLAINTS. Coherent shall promptly advise Palomar in writing
of any customer complaints reported to it relating to the Products that would
require Palomar, as manufacturer of the Products, to file reports with any
governmental agency.
3.9 SALES AND USE TAX. Coherent shall be responsible for collecting and
remitting any sales and use tax for Distributed Products sold under this
Agreement.
4. RESPONSIBILITIES OF PALOMAR
4.1 WARRANT. Upon execution of this Agreement, Palomar shall provide to
Coherent a three-year warrant to purchase one million shares of the common
stock, par value $.01 per share, of Palomar, with an exercise price of $5.25 per
share in the form attached hereto as Exhibit C.
4.2 MATERIALS. Palomar shall promptly provide Coherent with marketing and
technical information concerning the Distributed Products, that have been
prepared by Palomar and its agents to support the Distributed Products within
the Territory. Palomar agrees to prepare, with Coherent's collaboration and
assistance, and thereafter deliver to Coherent, one copy of the service manual
and operator's manual for each Distributed Product, which Coherent may then
copy.
4.3 RESPONSE TO INQUIRIES. Palomar shall promptly respond to all inquiries
from Coherent concerning matters pertaining to this Agreement.
4.4 TESTING. Palomar shall test all Distributed Products before shipment to
Coherent and provide a copy to Coherent of such test results with the
Distributed Product.
4.5 DELIVERY TIME. Palomar shall use its reasonable best efforts to
minimize delivery time as much as possible and to fulfill delivery obligations
as committed in acceptances.
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4.6 TERRITORIAL INQUIRIES. Palomar shall submit to Coherent any inquiry
(other than inquiries from or related to House Accounts (as hereinafter defined)
regarding the purchase or potential purchase of Distributed Products)
originating from the Territory rather than answering the inquiry directly.
4.7 QUOTATIONS TO EXPORTERS. Palomar shall refrain from giving quotations
to exporters for Distributed Products to be shipped to the Territory (other than
those relating to House Accounts).
4.8 NEW DEVELOPMENTS. Palomar shall inform Coherent of new Product
developments in the field of hair removal.
4.9 TRAINING. At Coherent's request, Palomar will provide the training
necessary for Coherent to in turn train its sales and service forces and its
clinical educators in the operation and service of the Distributed Products.
Coherent shall reimburse Palomar for its reasonable out-of-pocket expenses for
such training. Cost for transport and living expenses for Coherent's personnel
to attend such seminars will also be borne by Coherent. Coherent shall pay for
any training sessions in excess of two per new Product or upgrade at Palomar's
standard rates.
4.10 CTI CENTERS. In connection with its CTI business, Palomar agrees to
include Coherent's cosmetic laser systems on its list of preferred equipment and
use its commercially reasonable best efforts to place these laser systems in the
CTI center if Coherent has the technology needed.
4.11 UPGRADE OBLIGATIONS. Palomar agrees to upgrade all Epi1 products sold
prior to the Effective Date by providing the following upgrade (including any
replacement parts deemed necessary to complete the upgrade) the Epi1 to Coherent
at no cost:
- Flexible fiber-optic delivery system
- Higher energy output for enhanced effectiveness
- 50 J/cm(2) with a 7 mm spot (+/- 10%)
- 25 J/cm(2) with a 10 mm spot (+/- 10%)
- Streamlined handpiece with improved ergonomics
If the upgrade can be done in the field, Coherent shall provide up to one day's
labor at no cost to Palomar to install the upgrade on a next call basis. If
installing the upgrade takes longer than one day, Palomar shall pay Coherent its
standard and customary rates to complete the upgrade. Palomar shall train
Coherent service personnel in installing the upgrade at no cost to Coherent
other than its out-of-pocket travel expenses. Coherent shall have the exclusive
right to contact customers to schedule the service calls and to explain the
upgrade policy. Palomar agrees to use its commercially reasonable best efforts
to manufacture parts for at least ten (10) upgrades per month until all Epi1
units are upgraded, and to incorporate the upgrades into the Epi1 by April 1,
1998.
4.13 FDA REPORTING OF CUSTOMER COMPLAINTS. Palomar agrees to file any
required reports with the FDA relating to customer complaints forwarded to
Palomar by Coherent where Palomar is the manufacturer of the Distributed Product
in question.
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5. COMMISSIONS; TERMS OF PURCHASE OF PRODUCTS BY COHERENT
5.1 Except as set forth in Sections 5.2 and 5.3 below, Palomar shall pay
Coherent a commission of $* for each Distributed Product sold by Palomar to
Coherent's customers, subject to adjustment as set forth below:
5.1.1 For Distributed Products sold after April 1, 1998, Coherent's
commission shall be increased by *% of any excess over a $* sales price and
reduced by *% of any shortfall under $*.
5.1.2 For Epi1 products sold between the Effective Date and March 30,
1998 with the upgrades described in Section 4.12 above, Coherent's
commission shall be increased by *% of any excess over a $* sales price and
reduced by *% of any shortfall under $*.
5.1.3 For Epi1 products sold between the Effective Date and March 30,
1998 without the upgrades described in Section 4.12 above, Coherent's
commission shall be increased by *% of any excess over a $* sales price and
reduced by *% of any shortfall under $*.
5.1.4 Notwithstanding the foregoing, Palomar agrees to sell
Distributed Products to Coherent's independent international sales
representatives for $* for the non-upgraded version and $* for the upgraded
version, in both cases Coherent's commission shall be $* (which shall
include the cost of service). Coherent's commission shall be increased by
*% of any excess over a $* sales price for the non-upgraded version and $*
for the upgraded version, except that Coherent shall be entitled to its
full $* commission on sales to independent international sales
representatives pursuant to quotes at lower prices given by Palomar prior
to the Effective Date. Except as set forth above, without the written
approval of Palomar, no non-upgraded Epi1 shall be sold under this Section
for less than $*, and no upgraded Epi1 shall be sold under this Section for
less than $*.
5.1.5 Except as set forth in Section 5.1.4 above, in no event shall
the Epi1 be sold for less than $*.
5.1.6 Subject to the limitations set forth in this Section 5.1,
Coherent shall have the right to set the sales price to the end-customer,
and will inform Palomar of the end-customer price and the corresponding
payment to Palomar at the time the order is placed with Palomar.
5.1.7 For Distributed Products with a list price to the end-customer
below $*, the parties shall negotiate a fair and reasonable commission
based upon the same principles they used to establish the $* commission
herein.
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
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5.2 For orders that have been received by Palomar and not shipped by the
Effective Date, Coherent shall receive a $* commission, less Palomar's sales and
distribution expenses and commissions (not to exceed $*) on each such order.
5.3 For sales by Palomar to House Accounts within the Territory during the
term of this Agreement, Coherent shall be entitled to receive $5,000 per
Distributed Product. House Accounts shall be defined as revenue sharing sites
that are (i) existing as of the date of this Agreement; and/or (ii) chains that
have at least ten sites (at different geographic locations), including, but not
limited to, Columbia/HCA, where, unless the chain requires otherwise, the laser
system is used under the direction of only one doctor (who can designate a
substitute when he or she is out of the office). Palomar covenants that it will
not require, encourage, advocate or suggest that CTI centers permit doctors from
the surrounding community to use the laser system for their patients. If this
happens at any previously designated House Account, notwithstanding Palomar's
efforts, any such site shall be disqualified as a House Account and Coherent
shall be entitled to receive an additional $15,000 per site. Palomar shall also
be permitted to place Distributed Products into accounts that don't fall within
the definition of House Accounts, provided that Palomar provides marketing
services for such account, does not transfer ownership of the laser, and shares
in the revenues generated from its use. For these sales, Coherent shall be
entitled to receive $20,000 per unit. In no event shall Palomar be permitted to
place Distributed Products into more than 300 of the sites referenced in this
paragraph during the first three years of this Agreement. The parties shall
negotiate additions to this number as part of the annual evergreening renewal
process, which shall not be less than 50 additional sites in year four (4), if
this Agreement is extended.
5.4 PURCHASE OF DEMO UNITS. From time to time during the term of this
Agreement, Coherent may require demonstration units to bring to trade shows, as
well as demonstration units for its sales and service force. Accordingly, during
the term of this Agreement, Coherent shall be entitled to purchase up to 25
Distributed Products for demonstration purposes. The purchase of these
demonstration units shall count towards the minimum purchase requirements set
forth in Section 2.2. The purchase price for the demonstration units ("Purchase
Price") shall be $* per unit, payable within ten (10) days of date of invoice by
check or wire transfer, at Coherent's election. If Coherent resells a
demonstration unit within six months of its purchase, it shall pay Palomar any
additional amounts as would be required to be paid pursuant to Section 5.1.
5.5 TERMS AND CONDITIONS. All purchases of Distributed Products by Coherent
from Palomar during the term of this Agreement shall be subject to Coherent's
standard terms and conditions, a copy of which are attached as Exhibit C to this
Agreement. In the event of any inconsistencies between the terms and conditions
contained in Exhibit C and the terms and conditions contained in this Agreement,
this Agreement shall govern.
5.6 SHIPPING. All prices are F.O.B. Palomar's plant. In the absence of
specific instructions, Palomar will select the carrier and ship freight prepaid
and added to the price of the Distributed Product. Coherent shall insure all
shipments to Coherent's customers. Palomar will not be deemed to assume any
liability in connection with any shipment because of the selection of a carrier
or the failure of Coherent to obtain insurance. Title and risk of loss or damage
to each of the Distributed Products will pass to Coherent or its customer when
delivery is made to the possession of the carrier.
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
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5.7 ORDER AND ACCEPTANCE. All orders for Distributed Products submitted by
Coherent shall be initiated by written purchase orders sent to Palomar and
requesting a delivery date during the term of this Agreement; provided, however,
that an order may initially be placed orally or electronically if a
conformational written purchase order is received by Palomar within a reasonable
time after said oral or electronic order but in any case before shipment. No
order shall be binding upon Palomar until accepted by Palomar in writing, and
Palomar shall have no liability to Coherent with respect to purchase orders that
are not accepted. Once Palomar has accepted an order, it may not be cancelled by
Coherent. Palomar shall notify Coherent of the acceptance or rejection of an
order and of the assigned delivery date for accepted orders within ten (10)
working days of receipt of the order. Palomar shall use its reasonable best
efforts to deliver Distributed Products at the times specified either in its
quotation or in its written acceptance of Coherent's purchase orders. Preprinted
language in a purchase order is of no effect to modify this Agreement.
5.8 PAYMENTS TO PALOMAR. Coherent shall invoice its customers for the sale
of the Distributed Products on Palomar's behalf and act as collection agent for
the accounts receivable. When collected, Coherent shall remit the purchase price
to Palomar within five (5) business days, less its commission as set forth
herein. Customer deposits shall be forwarded to Palomar within five (5) business
days of receipt. Coherent makes no representations or guarantees relating to the
collection of accounts receivables hereunder. The parties agree that the credit
risk is with the manufacturer of the Distributed Product. Coherent shall apply
its customary and standard policies and procedures for evaluating customers'
credit worthiness before such customers are permitted to purchase Distributed
Products under this Agreement. Any variances shall be approved in advance by
Palomar in writing, at its discretion. The parties acknowledge that neither of
them is under any obligation to pay the other for any sales of Distributed
Products where the customer fails to pay for the Distributed Product.
5.9 LATE CHARGES. If Coherent fails to pay the price or any other payment
due to Palomar promptly and when due, Palomar may recover, in addition to the
price or payment, interest thereon at a rate equal to the lesser of 1-1/2% per
month and the maximum rate of interest allowable under applicable law.
6. COMPLIANCE WITH GOVERNMENT REGULATIONS
6.1 Coherent shall not sell any Products to, or for the use of, any
ultimate purchaser with which Palomar could not deal under the laws or
regulations of the United States, including, without limitation, the regulations
of the United States Food and Drug Administration. Coherent shall comply with
all other laws and regulations of the United States and any other cognizant
jurisdiction relating to the marketing and sale of the Products.
6.2 Palomar and Coherent shall comply with all other laws and regulations
of the United States and any other cognizant jurisdiction relating to the
manufacturing and labeling of the Distributed Products.
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6.3 During the term of this Agreement, Palomar shall use its commercially
reasonable best efforts to maintain in full force and effect all governmental
approvals necessary for the sale and manufacture of the Distributed Products in
the Territory, except for Japan, including, without limitation, the United
States and Europe (CE Xxxx). The parties shall meet within the next 90 days to
determine whether to apply for the necessary licenses to sell any of the
Distributed Products in Japan. Within that 90 day period, Coherent may notify
Palomar that it will undertake to obtain such licenses, in which case, all costs
thereof shall be borne by Coherent, the licenses shall be in both Coherent's and
Palomar's name. If Coherent has obtained such licenses, upon termination of this
Agreement Palomar may either (i) reimburse Coherent for its out of pocket
expenses incurred in procuring these licenses, in which case Coherent shall
assign its interest in the licenses to Palomar or (ii) elect not to reimburse
Coherent, in which case Palomar shall not sell Distributed Products in Japan
pursuant to such licenses. Nothing contained herein shall restrict Palomar's
ability to obtain its own licenses in Japan.
6.4 During the term of this Agreement, if Coherent determines to sell
Distributed Products in a country within the Territory where regulatory approval
is required but not obtained, Coherent shall use its commercially reasonable
best efforts to obtain, at its sole cost and expense, any such governmental
approvals necessary for the sale of Distributed Products in such country.
7. WARRANTY
For so long as Palomar manufactures the Distributed Product, Palomar warrants
such Distributed Product to the end-user under the terms of Palomar's standard
warranty set forth in Exhibit E, as it may be modified or superceded from time
to time by Palomar. All service work for Distributed Products under warranty
shall be performed by Coherent in accordance with Section 8.
8. SERVICE
8.1 Coherent shall maintain the services of a sufficient number of
certified service engineers, and shall use its best efforts to adequately
service and maintain (both in and out of warranty) all Distributed Products in
the Territory. Coherent shall purchase parts inventory and any specialized tools
necessary for the proper and prompt service of the Distributed Products sold by
Coherent. Palomar agrees to use its commercially reasonable best efforts to ship
parts to Coherent as soon as possible after receipt of order. In regards to
specialized tools, Palomar agrees to sell them to Coherent for its costs plus
25% for tools it manufactures, and at its cost for tools it buys from third
parties, plus shipping and standard handling charges. Coherent shall provide
Palomar with service reports as to the work performed in each instance. During
the term of this Agreement, all warranty and service work on the Products shall
be performed by Coherent personnel. In addition, following the expiration of
this Agreement, Coherent shall continue to perform all warranty and service work
on Distributed Products sold by Coherent pursuant to this Agreement.
8.1.1 For Distributed Products sold by Palomar prior to the date of
this Agreement and still under warranty, Palomar shall supply the parts at
no charge, and Coherent the labor. Palomar shall pay Coherent its standard
and customary service labor rates and out-of-pocket expenses within 30 days
of date of invoice.
8.1.2 For Distributed Products manufactured by Palomar and sold by
Coherent that are under warranty, Palomar shall supply the parts at no
charge, and Coherent the labor. Coherent shall be permitted to deduct
$4,000 for each such Epi1 manufactured and sold in the United States during
the term of this Agreement,
-11-
from the payments due Palomar under Section 5 and, if applicable, Section
16.2 hereof. Palomar shall pay Coherent $* for each Epi1 it manufactures
and places in a CTI under Section 5.3 within 30 days of such placement.
Coherent shall be responsible for providing the labor for warranty service
for these Distributed Products. When the Epi2 and StarLight laser products
are manufactured and sold, the parties shall negotiate an appropriate sum
to be paid for domestic warranty service to be provided by Coherent. If
Coherent manufactures a Product, then Coherent shall bear the entire cost
of parts and service, including warranty service, for such Product.
8.1.3 For Distributed Products not under warranty, Palomar shall be
the exclusive supplier of critical parts (e.g. parts that are not otherwise
generally available) which Coherent shall purchase from Palomar at its cost
plus 25%.
9. LIMITED LIABILITY TO COHERENT AND OTHERS
IN NO EVENT SHALL PALOMAR BE LIABLE TO COHERENT OR ANY OTHER ENTITY FOR ANY
SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF
CONTRACT, NEGLIGENCE OR OTHERWISE, AND WHETHER OR NOT PALOMAR HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGE. THE ESSENTIAL PURPOSE OF THIS PROVISION IS TO
LIMIT THE POTENTIAL LIABILITY OF PALOMAR ARISING OUT OF THIS AGREEMENT. NOTHING
IN THIS CLAUSE SHALL LIMIT PALOMAR'S OBLIGATION TO INDEMNIFY COHERENT AS SET
FORTH IN SECTION 14.
10. PROPERTY RIGHTS
10.1 PROPERTY RIGHTS. Coherent agrees that Palomar owns all right, title,
and interest in the product lines that include the Products now or hereafter
subject to this Agreement and in all of Palomar's patents, trademarks, trade
names, inventions, copyrights, know-how, and trade secrets relating to the
design, manufacture, operation or service of the Products. The use by Coherent
of any of these property rights is authorized only for the purposes herein set
forth, and upon termination of this Agreement for any reason such authorization
shall cease. Coherent shall not challenge Palomar's attempt to register any
name, xxxx or logo in use as of the effective date of the Agreement or any name,
xxxx, or logo substantially similar thereto, except as expressly set forth
herein.
10.2 SALE CONVEYS NO RIGHT TO MANUFACTURE OR COPY. The Products are offered
for sale and are sold by Palomar subject in every case to the condition that
such sale does not convey any license, expressly or by implication, to
manufacture, duplicate or otherwise copy or reproduce, either in whole or in
part, any of the Products, except as expressly set forth herein.
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
-12-
11. TRADEMARKS AND TRADE NAMES
11.1 USE. During the term of this Agreement, Coherent shall have the right
to indicate to the public that it is an authorized sales agent for the
Distributed Products. Palomar hereby grants Coherent permission to us any
trademarks, trade names, service marks and logos owned or claimed by Palomar and
used in connection with the Distributed Products ("Palomar Trademarks") solely
in conjunction with the performance by Coherent of its rights and obligations
under this Agreement. To the extent that Coherent is permitted under this
Agreement to use, sell, promote and/or distribute Products, this permission
shall apply and pass through to Coherent's distributors who distribute Products
(i.e., without any modification to the Product, product packaging,
documentation, or other materials) ("Distributor"). Coherent shall provide
notice of these trademark license terms of this Agreement to, and enforce such
terms with and against, Coherent's Distributors. Palomar is a third party
beneficiary of any agreement between Coherent and Coherent's Distributors
arising from or relating to the use by Coherent or Distributor of Palomar
Trademarks, and any such agreement will so provide in express terms. Palomar
shall be entitled to enforce the terms of this Trademark License directly
against any Distributor in the event Coherent fails to do so. At Palomar's sole
cost and expense, Coherent agrees to assist in the registration of the Palomar
Trademarks in the Territory in the name of Palomar, in renewal and maintenance
of such registration and in such recording of Coherent as a registered user as
Palomar may reasonably request. Effective upon the termination of this
Agreement, Coherent shall cease to use all trademarks, marks, and trade names of
Palomar.
11.2 MANUFACTURING BY COHERENT. To the extent Coherent is permitted to make
Products under this Agreement, Coherent agrees to insure that the Palomar
Trademarks are only associated with goods of equal or higher value than the
Products produced by Palomar. Palomar retains the right to inspect goods
manufactured by Coherent for quality to ensure this provision is observed.
11.3 LIMITATIONS ON USAGE. Coherent shall use the Palomar Trademarks only
as approved by Palomar (which approval shall not be unreasonably withheld) and
in conformity with any guidelines or policies as provided by Palomar to Coherent
from time to time. Coherent agrees not to modify, alter or remove any Palomar
Trademark.
11.4 USE OF THE PARTY'S NAME. The parties agree that all Licensed Products
sold under this Agreement and all related materials, including, without
limitation, brochures and advertising materials, shall be labeled with both
Coherent and Palomar's names, each equally prominently displayed. Coherent
expressly disclaims any rights to the goodwill and intellectual property
resident in such Distributed Products, except as expressly set forth herein.
11.5 TRADEMARKS OF SUPPLIERS TO PALOMAR. Palomar may incorporate into or
bundle with the Distributed Products branded products of Palomar's suppliers,
and Palomar may enter into agreements requiring Palomar to use or display the
marks or brand identifiers of suppliers in a manner specified in such agreement;
provided, however, that the foregoing shall not apply to competitors of Coherent
without Coherent's prior written approval. Upon Coherent's receipt of notice of
such agreements from Palomar and thereafter, Coherent agrees to comply with the
applicable terms and conditions of any agreement between Palomar and its
suppliers relating to the use of the trademarks, trade names, service marks
and/or logo(s) of such suppliers.
-13-
12. PATENTS AND TRADE SECRETS
12.1 Any Invention conceived or reduced to practice solely by Palomar
employees or anyone working with Palomar other than Coherent in the performance
of any Development Project, shall be owned by Palomar. Palomar shall promptly
advise Coherent in writing of each Invention disclosed to Palomar. In the event
of joint inventorship between Coherent and Palomar employees, the Invention will
be deemed to be jointly owned. Patent applications for Inventions owned jointly
by Palomar and Coherent shall be filed as mutually agreed upon by the parties,
except that any such agreement must be reached on terms reasonably calculated to
obtain such patents.
12.2 All patent costs pertaining to any Palomar Patent Rights, including
preparation, filing, prosecution, issuance and maintenance costs, shall be borne
by Palomar, except for Patent Rights owned jointly by the parties, which shall
be shared equally, and which shall be reimbursed as incurred.
13. INFRINGEMENT
13.1 Palomar will protect the Palomar Patent Rights from infringement and
prosecute infringers when, in its sole judgement, such action may be reasonably
necessary, proper and justified.
13.2 If Coherent shall have supplied Palomar with written evidence
demonstrating to Palomar's reasonable satisfaction prima facie infringement of a
claim of a Palomar Patent Right by a third party, Coherent may by notice request
Palomar to take steps to protect such Patent Right. Palomar shall notify
Coherent within sixty (60) days of the receipt of such notice whether Palomar
intends to prosecute the alleged infringement. If Palomar notifies Coherent that
it intends to so prosecute, Palomar shall, within three (3) months of its notice
to Coherent either (i) cause infringement to terminate or (ii) initiate legal
proceedings against the infringer. In the event that Palomar notifies Coherent
that Palomar does not intend to prosecute said infringement, Coherent may, upon
notice to Palomar, initiate legal proceedings against the infringer at
Coherent's expense and in Palomar's name if so required by law. No settlement,
consent judgment or other voluntary final disposition of the suit which
invalidates or restricts the claims of such Patent Rights will be entered into
without the consent of Palomar, which consent shall not be unreasonably
withheld, and shall not be withheld unless Palomar assumes responsibility for
future expenses in litigation. Coherent shall indemnify Palomar against any
order for payment that may be made against Palomar as a result of any
settlement, consent judgment or other voluntary final disposition of the suit
entered into without Palomar's consent.
-14-
13.3 In the event that one party shall initiate or carry on legal
proceedings to enforce any Patent Right against any alleged infringer, the other
party shall fully cooperate with and supply all assistance reasonably requested
by the party initiating or carrying on such proceedings. The party which
institutes any suit to protect or enforce a Patent Right shall have sole control
of that suit and shall bear the reasonable expenses (excluding legal fees)
incurred by said other party in providing such assistance and cooperation as is
requested pursuant to this paragraph. The party initiating or carrying on such
legal proceedings shall keep the other party informed of the progress of such
proceedings and said other party shall be entitled to counsel in such
proceedings but at its own expense. Any award paid by third parties as the
result of such proceedings (whether by way of settlement or otherwise) shall
first be applied to reimbursement of the unreimbursed legal fees and expenses
incurred by either party, including reimbursement to Palomar, and then the
remainder shall be divided between the parties as follows:
13.3.1 (i) If the amount is based on lost profits, Coherent shall
receive an amount equal to the damages the court determines
Coherent has suffered as a result of the infringement less the
amount of any royalties and other payments that would have been
due Palomar on sales of products lost by Coherent as a result of
the infringement had Coherent made such sales; and
(ii) Palomar shall receive an amount equal to the royalties and
other payments it would have received if such sales had been made
by Coherent, or
13.3.2 As to awards other than those based on lost profits, sixty (60)
percent to the party initiating such proceedings and forty (40)
percent to the other party, provided that in the event that
Palomar has paid for further litigation subsequent to Palomar's
refusal to agree to a settlement, consent judgement or voluntary
final disposition of a suit pursuant to paragraph 13.2, such
awards shall be divided equally between the parties.
13.4 For the purposes of the proceedings referred to in this Section 13,
Palomar and Coherent shall permit the use of their names and shall execute such
documents and carry out such other acts as may be necessary. The party
initiating or carrying on such legal proceedings shall keep the other party
informed of the progress of such proceedings and said other party shall be
entitled to counsel in such proceedings but at tits own expense, said expenses
to be off-set against any damages received by the party bringing suit in
accordance with the foregoing paragraph 13.3
14. INDEMNIFICATION
14.1 DESIGN DEFECT. The party that develops a Product shall indemnify,
defend and hold harmless the other party and its officers, employees and agents
and their respective successors, heirs and assigns (the "Design Defect
Indemnitees"), against any liability, damage, loss or expense (including
reasonable attorney's fees and expenses of litigation) incurred by or imposed
upon the Design Defect Indemnitees or any one of them in connection with any
claims, suits, actions, demands or judgment arising out of any theory of design
defect (including, but not limited to, actions in the form of tort, warranty or
strict liability) concerning such Product.
-15-
14.2 MANUFACTURING DEFECT. The party that manufactures a Product shall
indemnify, defend and hold harmless the other party and its officers, employees
and agents and their respective successors, heirs and assigns (the
"Manufacturing Defect Indemnitees"), against any liability, damage, loss or
expense (including reasonable attorney's fees and expenses of litigation)
incurred by or imposed upon the Manufacturing Defect Indemnitees or any one of
them in connection with any claims, suits, actions, demands or judgment arising
out of any theory of manufacturing defect (including, but not limited to,
actions in the form of tort, warranty or strict liability) concerning such
Product.
14.3 BREACH OF WARRANTY. The party that sells a Product to the end user
under this Agreement shall indemnify, defend and hold harmless the other party
and its officers, employees and agents and their respective successors, heirs
and assigns (the "Breach of Warranty Indemnitees"), against any liability,
damage, loss or expense (including reasonable attorney's fees and expenses of
litigation) incurred by or imposed upon the Breach of Warranty Indemnitees or
any one of them in connection with any claims, suits, actions, demands or
judgment arising out of any theory of breach of warrant (including, but not
limited to, actions in the form of tort, warranty or strict liability)
concerning such Product.
14.4 LIMITATION. The indemnifications above shall not apply to any
liability, damage, loss or expense to the extent that it is directly
attributable to (i) the negligent activities, reckless misconduct or intentional
misconduct of the Indemnitees; or (ii) a claim that the manufacture, use or sale
of a Product infringes upon a patent or other intellectual property owned by a
third party.
14.5 ATTORNEYS. The indemnifying party agrees, at its own expense, to
provide attorneys reasonably acceptable to the indemnified party to defend
against any actions brought or filed against any party indemnified hereunder
with respect to the subject of indemnity contained herein, whether or not such
actions are rightfully brought.
14.6 PATENT, COPYRIGHT AND TRADEMARK INDEMNIFICATION. Subject to Section
14.7 below, Coherent agrees that Palomar has the right to defend, or at its
option to settle, and Palomar agrees, at its own expense, to defend or at its
option to settle, any claim, suit or proceeding brought against Coherent or its
customer on the issue of infringement of any patent, copyright or trademark by
the Products sold hereunder or the use thereof, subject to the limitations
hereinafter set forth. Palomar shall have sole control of any such action or
settlement negotiations, and Palomar agrees to pay, subject to the limitations
hereinafter set forth, any final judgment entered against Coherent or its
customer on such issue in any such suit or proceeding defended by Palomar. If
Palomar receives any damage award and/or attorneys' fees in any such claim, suit
or proceeding, it shall not be obligated to share any portion thereof with
Coherent. Palomar's obligation under this Section to indemnify, defend and hold
harmless Coherent shall not apply in the case of any Products or Palomar
Trademarks (i) manufactured to Coherent's design or modified by Coherent without
Palomar's permission (except in the situation where the modification did not
cause the Products to infringe the patent, copyright, trademark at issue); (ii)
used in combination with other technology or products not supplied by Palomar
(except in the situation where the combination did not cause the Products to
infringe the patent, copyright, trademark at issue); or (iii) not used pursuant
to Palomar's existing instructions. Coherent agrees that Palomar at its sole
option shall be relieved of the foregoing obligations unless Coherent or its
customer notifies Palomar promptly in writing of such claim, suit or proceeding
and gives Palomar authority to proceed as contemplated herein, and, at Palomar's
expense, gives Palomar proper and full information and assistance to settle
and/or defend any such claim, suit or proceeding for infringement of any patent,
copyright or trademark, or it is adjudicatively determined that the Products, or
any part thereof, infringe any patent, copyright or trademark, or it the sale or
-16-
use of the Products, or any part thereof, is, as a result, enjoined, then
Palomar may, at its option and expense: (i) procure for Coherent and its
customers the right under such patent, copyright or trademark to sell or use, as
appropriate, the Products or such part thereof; or (ii) replace the Products
with suitable non-infringing Products; (iii) suitably modify the Products; or
(iv) if the use of the Products, or part thereof, is prevented by injunction
during the first three years of this Agreement, remove the Products, or part
thereof, and pay Coherent an amount equal to $3.0 million multiplied by a
fraction, the numerator of which is thirty-six (36) minus the number of months
expired from the Effective Date as of the date of the injunction, and the
denominator is thirty-six (36). Palomar shall not be liable for any costs or
expenses incurred by Coherent without its prior written authorization.
14.7 ENTIRE LIABILITY. The foregoing provisions of this Section 14 state
the entire liability and obligations of Palomar and the exclusive remedy of
Coherent and its customers, with respect to any alleged infringement of patents,
copyrights, trademarks or other intellectual property rights by the Products or
any part thereof.
15. DEVELOPMENT PROJECTS
15.1 During the term of this Agreement, Coherent and Palomar shall
collaborate on the definition of Products to be developed hereunder. Palomar
agrees to use its reasonable best efforts to develop Products, and to share the
results of such development work with Coherent during the term of this
Agreement.
15.2 Palomar agrees to spend at least the following amounts (based on GAAP)
for the development of Products during the next three full years ending December
31:
Year 1: $5,000,000
Year 2: 10% of Palomar's gross revenues (after
deducting commissions paid to Coherent) in
Year 1 from Products developed by Palomar
and/or Coherent, and sold by Coherent.
Year 3: 10% of Palomar's gross revenues (after
deducting commissions paid to Coherent) in
Year 2 from Products developed by Palomar
and/or Coherent, and sold by Coherent.
15.3 The parties shall keep each other reasonably informed on the status of
their development efforts related to hair removal products. At least once per
quarter, each party shall prepare a written report and send it to the other
party summarizing the development work done relating to the Products during the
preceding quarter. In addition, Palomar's chief financial officer shall prepare
and deliver to Coherent a certificate on or before January 31 of each year,
certifying to the level of development expenditures by Palomar for the Products
for the preceding 12 months ending December 31.
15.4 Palomar shall use its reasonable best efforts to maintain in full
force and effect its Clinical Trial Agreement with Massachusetts General
Hospital during the term of this Agreement, and not to modify or amend the
Clinical Trial Agreement without Coherent's consent, which will not be
unreasonably withheld.
-17-
16. MANUFACTURING RIGHTS
16.1 From time to time during the term of this Agreement, as Palomar
develops a prototype Product, it shall notify Coherent in writing and Coherent
shall have 30 days thereafter to notify Palomar in writing whether or not it is
interested in having an exclusive right to sell such Product. For purposes of
this provision, the term prototype Product shall be defined as a Product
delivered to a clinical investigator and tested on no less than three patients.
16.2 If Coherent notifies Palomar that it wishes to distribute the
prototype Product, such Product shall automatically be included in the
definition of "Distributed Products" and Palomar and Coherent shall meet to
discuss who shall manufacture the Product. Palomar may choose to (i) manufacture
the Product, in which case it shall pay Coherent a sales commission of *% of the
selling price (other terms, such as purchase minimums and prices shall be
negotiated at that time) or (ii) offer Coherent the right to manufacture the
Product, in which case, if Coherent decides to manufacture, Coherent shall pay
Palomar *% of the Gross Margin for such Product. For purposes of calculating the
Gross Margin, the fully burdened cost of sales (exclusive of royalties under the
Xxxxxxxx Patent) shall be determined at the time of Palomar's election, and
shall not be revised thereafter. If the parties are unable to agree on terms for
manufacturing or selling future Products developed hereunder, Palomar may
appoint another company to distribute such Products on terms no more favorable
than those offered to Coherent under this Section 16.2, or sell any non-hair
removal Products directly. Palomar shall be prohibited from directly selling
hair removal products to physicians during the term of this Agreement.
16.3 In the event Palomar is unable or unwilling to manufacture any of the
Distributed Products for any reason, including Palomar's bankruptcy, Coherent
shall have the right to manufacture them, on the same terms as set forth in
Section 16.2. If Coherent acquires a license under this Section 16, it shall pay
a royalty to Palomar in the amount of *% of the Gross Margin (as hereinafter
defined) less out of pocket expenses incurred by Coherent to transfer
manufacturing and lost profits on sales to customers who cancel their order due
to the delay. Coherent shall not include any such reimbursed capitalized out of
pocket expenses or lost profits in such Gross Margin. For purposes of this
paragraph, "unable to manufacture" shall be defined as when the backlog for hair
removal products exceeds three months for a period of at least three months, so
long as the orders were within 10% of Coherent's Forecast during the
corresponding period, and provided that such backlog is not attributable to
failure by third parties to perform, including, without limitation, failure to
supply necessary parts.
16.4 If during the term of this Agreement, Coherent manufactures, sells or
otherwise distributes hair removal products that are competitive to any
Distributed Product, it shall pay Palomar a royalty of *% of the Net Revenues of
any such hair removal product sold during the first year of any such sales and
*% for such product sold in each successive year during the term of this
Agreement. These percentages shall be reduced by one-half in the event Palomar
defaults in its obligations to spend money to develop new cosmetic laser
products as set forth in Section 15. Coherent's royalty obligations under this
Section 16 shall survive the termination of this Agreement if it is terminated
by Palomar for cause, for a period of time equal to the remaining term of this
Agreement if it weren't terminated by Palomar and not otherwise extended by the
parties.
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
-18-
16.5 Palomar shall cooperate with Coherent in good faith for the purpose of
allowing Coherent to exercise its rights hereunder, including, without
limitation, providing Coherent with copies of all technical data, manufacturing
know-how, drawings and supplier information necessary to manufacture the
Products, all of which shall be subject to the Confidentiality Agreement
attached hereto as Exhibit F.
17. PATENT LICENSE GRANT.
17.1 On the terms and subject to the conditions set forth herein, Palomar
hereby grants to Coherent a non-exclusive, royalty-bearing sublicense (without
the right to sublicense others) under the Palomar Patents to make, have made,
use and sell Distributed Products and competitive Coherent products for which
royalties are paid to Palomar under Section 16.4 ("Coherent Products") in the
Territory during the License Term. For Distributed Products manufactured by
Palomar and sold by Coherent, Palomar shall be solely responsible for paying all
royalty obligations to MGH relating to the Xxxxxxxx Patent that may arise as a
result of the manufacture, use or sale of Distributed Products during the
License Term. Licensed Products manufactured by Coherent shall bear a royalty of
* of Net Revenues. During the term of this Agreement, such royalty obligations
shall be fulfilled by payment to Palomar of the amounts set forth in Section 16.
17.2 All rights not expressly granted are reserved to Palomar. Nothing
herein shall be construed as granting Coherent, by implication, estoppel or
otherwise, including the first sale doctrine, any license or other right under
any patent or other intellectual property right of Palomar, except for the
licenses expressly granted in Section 17.
17.3 Upon termination of this Agreement, Palomar agrees to grant Coherent
any licenses required for Distributed Products distributed by Coherent pursuant
to this Agreement to any other patents it licenses or owns, on commercially
reasonable terms to be negotiated. The parties shall negotiate in good faith,
but no license shall be granted if the parties are unable to reach agreement on
reasonable terms.
17.4 In addition to the license granted under Section 17.1 above, from and
after the termination date of this Agreement, Palomar hereby grants Coherent a
non-exclusive, worldwide, royalty-bearing license in the License Field to make,
have made, use and sell Licensed Products that infringe the Xxxxxxxx Patent. The
sublicense shall include the right to grant to the purchasers of Licensed
Products from Coherent and its Affiliates, the right to use such Licensed
Products in a method coming within the scope of the Xxxxxxxx Patent. Coherent
shall have no right to grant further sublicenses to the Xxxxxxxx Patent, except
that it shall be permitted to transfer its rights in connection with the sale of
its hair removal product line.
17.4.1 After termination of this Agreement, and in no event less than
three years, Coherent shall pay Palomar running royalties of
*% of Net Revenues so long as the Licensed Product, its
manufacture, use or sale is covered by a Valid Claim of the
Xxxxxxxx Patent, until such time as Palomar licenses three
companies with sales of aesthetic laser products in excess of $20
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
-19-
million per year at rates in excess of *%, at which time the
running royalty rate shall be adjusted to the average of such
higher prices. However, if Palomar licenses the Xxxxxxxx Patent
at a rate less than the amount Coherent is then paying, Coherent
shall be entitled to such lower rate for sales occurring after
such lower rate is effective. The sublicense to the Xxxxxxxx
Patent granted in this Section 17.4, and Coherent's royalty
obligations in connection therewith, shall survive termination of
the Agreement.
17.4.2 Royalties due shall be calculated as of the last day of each
month with respect to transactions made during that month and
within 30 days thereafter Coherent shall remit to Palomar full
payment of royalties due, accompanied by a detailed report of the
calculation thereof, Whenever conversion from any foreign
currency shall be required, such conversion shall be at the rate
of exchange thereafter published in the Wall Street Journal for
the business day closest to the end of the applicable Accounting
Period.
17.4.3 With each payment, Coherent shall deliver to Palomar a full and
accurate accounting to include at least the following information
to the extent necessary to determine royalties:
(a) Quantity of each Licensed Product sold or leased (by
country) by Coherent and its Affiliates;
(b) Total billing for each Licensed Product (by country);
(c) Quantities of each Licensed Product used by Coherent and its
Affiliates;
(d) Revenues from Services paid to Coherent and its Affiliates;
and
(e) Total royalties payable to Palomar.
17.4.4 Unless otherwise terminated as provided for in this Section 17,
the license to the Xxxxxxxx Patent granted hereunder will
continue until the expiration of the Xxxxxxxx Patent. Palomar has
the right to terminate this sublicense upon fifteen (15) days
prior written notice to Coherent in the event of any material
breach of the obligation to make royalty payments hereunder,
unless such breach is cured prior to the expiration of such
fifteen (15) day period. Upon termination of the sublicense
granted hereunder, Coherent shall pay Palomar all royalties due
or accrued on the Net Revenues up to and including the date of
termination. In the event of any termination, Coherent shall also
have the right to fill all existing orders for Licensed Products,
provided the royalties set forth herein are paid on such orders.
*Indicates that material has been omitted pursuant to a request for confidential
treatment, and separately filed with the SEC.
-20-
17.5 Upon termination of this Agreement, Coherent agrees to xxxxx Xxxxxxx
any licenses under any patents it licenses or owns to make, use, offer for sale
or sell any Licensed Products, on commercially reasonable terms to be
negotiated. The parties shall negotiate in good faith, but no license shall be
granted if the parties are unable to reach agreement on reasonable terms.
18. INTELLECTUAL PROPERTY NOTICES.
Coherent shall reproduce on all copies of any documentation or Confidential
Information, all copyright, trademark, confidentiality and other notices on the
original. Coherent shall reproduce Palomar's patent notices on Distributed
Products. Coherent shall place on all brochures, flyers, advertisements, all
other promotional, instructional or merchandising materials collateral to
Products sold by Coherent a notice stating that the Products are "Manufactured
and sold under patent license from Palomar Medical Technologies, Lexington, MA."
20. TERM AND TERMINATION
19.1 TERM. This Agreement shall commence on the date hereof and continue
for an initial period of three years, unless terminated earlier under the
provisions of this Section 19. At the end of each year, this Agreement shall
automatically be renewed for an additional one year period, unless either party
provides the other with written notice of its intention not to renew the
Agreement at least thirty (30) days prior to the renewal date.
19.2 TERMINATION FOR CAUSE. If either party defaults in the performance of
any provision of this Agreement, or violates the covenant of good faith and fair
dealing implied by law, then the non-defaulting party may give written notice to
the defaulting party that if the default is not cured within thirty (30) days
the Agreement will be terminated. If the non-defaulting party gives such notice
and the default is not cured during the thirty-day period, or reasonable action
isn't taken to cure any default that can not be cured during the thirty-day
period, then the Agreement shall automatically terminate at the end of that
period.
19.3 TERMINATION FOR INSOLVENCY. This Agreement shall terminate, at the
election of the other party, (i) upon the institution by or against either party
of insolvency, receivership or bankruptcy proceedings or any other proceedings
for the settlement of debts, (ii) upon either party making an assignment for the
benefit of creditors, or (iii) upon either party dissolution or ceasing to do
business.
19.4 FULFILLMENT OF ORDERS UPON TERMINATION. Upon termination of this
Agreement for other than Coherent's breach, Palomar shall continue to fulfill
all orders accepted by Palomar prior to the date of termination, and Coherent's
payment obligations to Palomar hereunder for such orders shall continue.
19.5 RETURN OF MATERIALS. All trademarks, trade names, patents, copyrights,
designs, drawings, formulas or other data, photographs, samples, literature, and
sales aids of every kind provided by Palomar shall remain the property of
Palomar. Within thirty (30) days after the termination of this Agreement,
Coherent shall prepare all such items in its possession for shipment, as Palomar
may direct, at Palomar's expense.
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19.6 LIMITATION ON LIABILITY. In the event of termination by either party
in accordance with any of the provisions of this Agreement, neither party shall
be liable to the other, because of such termination, for compensation,
reimbursement or damages on account of the loss of prospective profits or
anticipated sales or on account of expenditures, inventory, investments, leases
or commitments in connection with the business or goodwill of Palomar or
Coherent. Termination shall not, however, relieve either party of obligations
incurred prior to the termination.
19.7 SURVIVAL OF CERTAIN TERMS. The provisions of Sections 1, 2.3, 3.2.11,
3.3, 3.8, 3.9, 4.12, 5.5, 5.8, 5.9, 7, 8, 9, 10, 11, 12, 13, 14, 16.4, 17.2,
17.3, 17.4, 17.5, 18, 19, and 20 shall survive the termination of this Agreement
for any reason. All other rights and obligations of the parties shall cease upon
termination of this Agreement. It is the intent of the parties that the licenses
of intellectual propoerty as contemplated by Section 16 and Section 17 by
Palomar shall be considered licenses of intellectual property as contemplated by
Section 325(n) of the Bankruptcy Code (11 U.S.C. section 356(n)).
20. GENERAL PROVISIONS
20.1 CONFIDENTIALITY. The parties agree to enter into a Confidentiality
Agreement in substantially the form attached hereto as Exhibit F.
20.2 DISPUTE RESOLUTION. For any and all claims, disputes, or controversies
arising under, out of, or in connection with this Agreement, (other than those
relating to patent rights, which shall be brought in the United States District
Court for the District of Massachusetts), which the parties shall be unable to
resolve within sixty (60) days, the party raising such dispute shall promptly
advise the other party of such claim, dispute, or controversy in a writing which
describes in reasonable detail the nature of such dispute. By not later than
five (5) business days after the recipient has received such notice of dispute,
each party shall have selected for itself a representative who shall have the
authority to bind such party and shall additionally have advised the other party
in writing of the name and title of such representative. By not later than ten
(10) business days after the date of such notice of dispute, such
representatives shall agree upon a third party which is in the business of
providing Alternative Dispute Resolution (ADR) services (hereinafter, "ADR
Provider") and shall schedule a date with such ADR Provider to engage in ADR.
Thereafter, the representatives of the parties shall engage in good faith in an
ADR process under the auspices of the selected ADR Provider, and each party
shall pay fifty percent (50%) of the ADR expenses. If within the aforesaid
thirty (30) business days after the date of the notice of dispute the
representatives of the parties have not been able to agree upon an ADR Provider
and schedule a date to engage in ADR, or if they have not been able to resolve
the dispute within thirty (30) business days after the termination of ADR, the
parties shall have the rights to pursue any other remedies legally available to
resolve such dispute in either the courts of the Commonwealth of Massachusetts
or in the United States District Court for the District of Massachusetts, to
whose jurisdiction for such purposes the parties hereby irrevocably consent. Any
written evidence originally in a language other than English shall be submitted
in English translation accompanied by the original or true copy thereof.
20.3 INSURANCE. Each party will obtain comprehensive general liability
insurance in amounts reasonable to ensure the performance of their obligations
hereunder, and Coherent will
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cause Palomar to be named as an additional insured. Each party
shall provide the other with written evidence of such insurance upon request.
Each party shall maintain such comprehensive general liability insurance beyond
the expiration or termination of this Agreement during (i) the period that any
product, process or service, relating to, or developed pursuant to, this
Agreement is being commercially distributed or sold (other than for the purpose
of obtaining regulatory approvals) and (ii) a reasonable period after the period
referred to above which in no event shall be less than five (5) years.
20.4 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter herein and merges
all prior discussions between them. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing signed by the party to be charged.
20.5 NOTICES. Any notice required or permitted by this Agreement shall be
in writing and shall be sent by prepaid express courier, addressed to the other
party at the address shown at the beginning of this Agreement or at such other
address for which such party gives notice hereunder. Such notice shall be deemed
to have been given three (3) days after deposit with such courier service.
20.6 FORCE MAJEURE. Nonperformance of either party shall be excused to the
extent that performance is rendered impossible by strike, fire, flood,
governmental acts or orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the control and not caused by the
negligence of the non-performing party.
20.7 NONASSIGNABILITY AND BINDING EFFECT. A mutually agreed consideration
for the parties' entering into this Agreement is the reputation, business
standing, and goodwill already honored and enjoyed by them, and accordingly, the
parties agree that, except as otherwise provided herein, their rights and
obligations under this Agreement may not be transferred or assigned directly or
indirectly without the prior written consent of the other party, except that
either party shall be permitted to assign its rights and obligations under the
Agreement, without the other's consent, in connection with the sale of the
company, or substantially all of its assets relating to its cosmetic laser
business. Subject to the foregoing sentence, this Agreement shall be binding
upon and inure to the benefit of the parties hereto, their successors and
assigns.
20.8 SEVERABILITY. If any provision of this Agreement or any part thereof
shall be found to be invalid, illegal or otherwise unenforceable by a court of
competent jurisdiction, such provision shall to such extent be deemed null and
void and severed from this Agreement, and the remainder of the Agreement shall
remain in full force and effect.
20.9 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, and the relations of the parties shall be
determined in accordance with, the substantive laws of the Commonwealth of
Massachusetts without regard to its principles of conflicts of laws.
20.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
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20.11 AUDIT RIGHTS. Each party shall keep accurate records and books of
account sufficient to permit verification of the other party's obligations under
this Agreement. The parties shall have the right, at their own expense, and
under reasonable conditions of time and place, to have an independent auditor,
reasonably acceptable to the other party, audit from time to time all records of
the other party relating to any of such party's obligations under this
Agreement. In the event any such audit discloses any breach of this Agreement by
such party or its employees or agents, the audited party shall, in addition to
such other rights and remedies as may be available to the auditing party as the
result of such breach, pay the full cost of such audit to the auditing party.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the day and year first above written.
COHERENT, INC. PALOMAR MEDICAL TECHNOLOGIES, INC.
By:/s/ Xxxxxxx Xxxxxxxxx By:/s/ Xxxxx X. Xxxxxxx
---------------------- ---------------------
Title: Chief Executive Officer Title: Chief Executive Officer
Date: November 17, 1997 Date: November 17, 1997
2
EXHIBIT A
PALOMAR PATENTS
Issued Patents:
Patent Number Title Issue Date
------------------- -------------- ----------
5,595,568
Patent Applications:
Serial Number Title Filing Date
---------------------- ------------ ---------------
US 08/314,082 METHOD OF HAIR REMOVAL 9/28/94
PCT/US95/12275 METHOD OF HAIR REMOVAL 9/25/95
US PERMANENT HAIR REMOVAL 2/1/95
USING OPTICAL PULSES
EXHIBIT B
WIRE INSTRUCTIONS
Bank: Citibank
ABA Routing No.: 000000000
Account Name: Xxxx Xxxxxx Xxxxxxxx, Inc.
Account Number: 40611172
For Further Credit to: Palomar Medical Technologies, Inc.
Account No.: 593-109782
EXHIBIT C
FORM OF WARRANT
EXHIBIT D
TERMS AND CONDITIONS OF PURCHASE
EXHIBIT E
PRODUCT WARRANTY
EXHIBIT F
CONFIDENTIALITY AGREEMENT
