EXHIBIT 10.24
NON-EXCLUSIVE PATENT LICENSE
THIS NON-EXCLUSIVE PATENT LICENSE
(this “ Agreement ”) is made and entered into as
of the 29th day of March, 2007 (the “Effective Date
”), by and among Palomar Medical Technologies, Inc., a
Delaware corporation, with offices at 82 Cambridge Street,
Burlington, MA 01803 (“Palomar”), Alma Lasers, Inc., a
Delaware corporation, with offices at 485 Half Day Road #100,
Buffalo Grove, IL 60089, and Alma Lasers, Ltd., an Israeli company,
with offices at 7 Halamish Street, Caesarea Industrial Park,
Caesarea, Israel 38900 (Alma Lasers, Inc. and Alma Lasers, Ltd.,
collectively, “ Alma ”) (Palomar on the one
hand, and Alma together with all Alma Affiliates (as defined below)
on the other hand, each a “ Party ”, and
together, the “ Parties ”).
WITNESSETH :
WHEREAS, Palomar and MGH (as defined
below), on the one hand, and Alma Lasers, Inc., on the other hand,
are parties to a certain patent-related Lawsuit (as defined in the
Settlement Agreement (as defined below));
WHEREAS, Palomar and MGH, on the one
hand, and Alma Lasers, Inc., on the other hand, have agreed to
enter into that certain Settlement Agreement, to be executed
contemporaneously with this Agreement (the “ Settlement
Agreement ”), pursuant to which Palomar and MGH, on the
one hand, and Alma Lasers, Inc., on the other hand, will settle the
patent infringement claims in the Lawsuit among other things;
WHEREAS, Palomar has a license from
MGH under the Anderson Patents (both as defined below) relating to
the use of light to remove hair; and
WHEREAS, Alma and Alma Affiliates
desire to obtain, and Palomar is willing to grant, a non-exclusive,
royalty-bearing sublicense under the Anderson Patents to develop
and commercialize products developed by Alma and Alma Affiliates
under the terms of the Settlement Agreement and the following terms
and conditions.
NOW THEREFORE, the Parties hereby
agree as follows:
1.
Definitions . The following terms (and their correlatives),
in addition to terms defined on first use herein, shall have the
meanings set forth below:
1.1. Affiliates.
(a)
“Alma Affiliate” shall mean any person or entity
that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with Alma
(i) as of the Effective Date or (ii) after the Effective
Date provided such person or entity is not an Excluded Third Party
at the time such person or entity first meets the foregoing control
requirements (unless Palomar provides its written consent in its
sole discretion), in each case of clauses (i) and (ii), only
for so long as such person or entity satisfies the foregoing
control requirements. For clarity, any Third Party that does not
become an “Alma Affiliate” hereunder because of the
reference to “Excluded Third Party” in clause
(ii) above shall continue to be treated as a “Third
Party” for all purposes hereunder.
Non-Exclusive Patent
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(b)
“ Palomar Affiliate ” shall mean any person or
entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with Palomar (i) as of the Effective Date or
(ii) after the Effective Date, in each case of clauses
(i) and (ii), only for so long as such person or entity
satisfies the foregoing requirements.
(c)
“ Affiliates ” shall mean, with respect to any
Third Party, any person or entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or
is under common control with such Third Party, in each case only
for so long as such person or entity satisfies the foregoing
requirement.
For purposes of this
Section 1.1, “control” and, with correlative
meanings, the terms “controlled by” and “under
common control with” shall mean (i) the possession,
directly or indirectly, of the power to direct the management or
policies of an entity, whether through the ownership of voting
securities, by contract relating to voting rights or corporate
governance, or otherwise, or (ii) the ownership, directly or
indirectly, of at least fifty percent (50%) of the voting
securities or other ownership interest of an entity (or, with
respect to a limited partnership or other similar entity, its
general partner or controlling entity); provided, that if local law
restricts foreign ownership, “control” shall be deemed
established by direct or indirect ownership of the maximum
ownership percentage that may, under such local law, be owned by
foreign interests.
1.2. “ Alma Modules
” shall mean Alma Hair Modules and Alma Other Modules, each
as defined below:
(a)
“Alma Hair Module ” shall mean any energy source
module, Sold by Alma or Alma Affiliates, that is marketed as being
capable of using or uses or is incorporated into a product or
system that uses optical radiation to remove hair. For clarity and
without limitation, if in addition to using optical radiation to
remove hair, an Alma Hair Module may be used for the treatment of
skin (including treatment of vascular and pigmented lesions, acne,
fat, cellulite, wrinkles, scars and tattoos, skin tightening, and
for other dermatological applications), or other treatment or
cosmetic purpose(s), it shall in all events remain an “Alma
Hair Module” hereunder.
(b)
“ Alma Other Module ” shall mean any energy
source module, Sold by Alma or Alma Affiliates, that is marketed as
being capable of using or uses or is incorporated into a product or
system that uses optical radiation for the treatment of skin
(including treatment of vascular and pigmented lesions, acne, fat,
cellulite, wrinkles, scars and tattoos, skin tightening, and for
other dermatological applications) or other treatment or cosmetic
purposes, other than hair removal; in all events, other than an
Alma Hair Module.
1.3. “ Alma Products
” shall mean Alma Hair Products and Alma Combination
Products, each as defined below. “ Alma Other Product
” shall mean any product, system, component or accessory,
Sold by Alma or Alma Affiliates, that (i) is not an Alma
Product, and (ii) that is marketed as being capable of using
or uses or is incorporated into a product or system that uses one
or more Alma Other Modules. As of the Effective Date, there are no
“Alma Other Products” for purposes of this
Agreement.
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(a)
“ Alma Combination Product ” shall mean any
product, system, component or accessory, Sold by Alma or Alma
Affiliates, (i) that as of the date of its Sale, is marketed
as being capable of using both at least one Alma Other Module and
at least one Alma Hair Module, and (ii) the manufacture, use,
sale, offering for sale, or importation of which with an Alma Hair
Module, absent the sublicense granted by Palomar herein, would
infringe a Valid Claim of the Anderson Patents. For clarity and
without limitation, Exhibit A lists Alma Combination
Products in existence up to the Effective Date and sets forth
examples of when an Alma Other Product or an Alma Hair Product
shall become an “Alma Combination Product” hereunder
(and an example of a marketing technique which does not change an
Alma Hair Product into an “Alma Combination Product”
hereunder).
(b)
“ Alma Hair Product ” shall mean any product,
system, component or accessory, Sold by Alma or Alma Affiliates,
(i) that contains an Alma Hair Module, (ii) the
manufacture, use, sale, offering for sale, or importation of which,
absent the sublicense granted by Palomar herein, would infringe a
Valid Claim of the Anderson Patents, and (iii) that as of its
date of Sale, is not marketed for use in combination with an Alma
Other Module. For clarity and without limitation,
Exhibit B provides additional clarifications and lists
items that are Alma Hair Products in existence up to the Effective
Date.
1.4. “Alma Sublicensee
” shall mean any Third Party to which Alma or an Alma
Affiliate grants a permitted sublicense pursuant to
Section 2.2 under the sublicense grant from Palomar in
Section 2.1.
1.5. “ Anderson Patents
” shall mean (i) the Patents set forth on
Exhibit C , and (ii) all other Patents that claim the
right of priority to, or enjoy the benefit of an earlier filing
date of, in whole or in part, directly or indirectly, one or more
of the Patents identified in the immediately preceding clause
(i).
1.6. “ Consumer Field
” shall mean the field in which products or systems are
intended for or marketed to consumers for personal use. For the
avoidance of doubt, the “Consumer Field” shall exclude
products or systems in the Professional Field.
1.7. “ Excluded Third
Party ” shall mean any Third Party and its Affiliates
against which:
(a) any
suit or action involving any Anderson Patent has been instituted
between Palomar or any Palomar Affiliates and such Third Party or
any of its Affiliates; or
(b) Palomar
or any of Palomar Affiliates has an outstanding injunction
pertaining to infringement of the Anderson Patents;
provided, however, that an Excluded Third Party to which Palomar
grants a non-exclusive sublicense under the Anderson Patents within
the Professional Field, which sublicense agreement has materially
the same terms as this Agreement, shall no longer be deemed an
“Excluded Third Party” hereunder effective upon the
effective date of such sublicense grant; provided, further, that in
the event of an Acquisition (as defined in Section 2.2(e)),
such sublicense granted to such Third Party and the terms of such
sublicense agreement (and not this Agreement) shall apply to such
Third Party’s product(s) and technology, and improvements and
derivatives thereto.
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1.8. “ Gillette ”
shall mean The Gillette Company, and its successors and permitted
assigns of the Gillette Agreement.
1.9. “ Gillette
Agreement ” shall mean that certain “Amended and
Restated Development and License Agreement” between Palomar
and The Gillette Company entered into as of February 14, 2007
and effective as of February 14, 2003, as such agreement is
amended as of the Effective Date, including the Amendment to the
“Amended and Restated Development and License
Agreement” between Palomar and The Gillette Company entered
into as of February 14, 2007 and effective as of
February 14, 2003, and as such agreement may be amended or
restated thereafter in a manner that is not materially inconsistent
with the terms of this Agreement. A copy of the Gillette Agreement,
excluding exhibits thereto and redactions of other commercially
sensitive information, as amended as of the Effective Date is
attached hereto at Appendix A.
1.10. “ Licensed
Products ” shall mean Alma Products (including those Alma
Hair Modules that alone amount to an “Alma Product”
hereunder), provided in each case that such Alma Product is Sold,
marketed, promoted and branded primarily as a product of Alma or
one or more of Alma Affiliates. For clarity, Licensed Products may
include future energy source modules, products, systems, components
or accessories Sold by Alma or Alma Affiliates after the Effective
Date, as long as such energy source module, product, system,
component and accessory satisfies in full the definitional
requirements for a “Licensed Product” (and its
subsidiary definitions) hereunder.
1.11. “ MGH ”
shall mean The General Hospital Corporation in Boston,
Massachusetts.
1.12. “ MGH Agreement
” shall mean that certain “License Agreement”
between Palomar and MGH dated as of August 18, 1995, as such
agreement is amended as of the Effective Date and as such agreement
may be amended or restated thereafter in a manner that is not
materially inconsistent with the terms of this Agreement. A copy of
the MGH Agreement, as redacted, as amended as of the Effective Date
is attached hereto at Appendix B.
1.13. “ Net Sales
” shall mean, subject to the remainder of this
Section 1.13, all amounts invoiced by Alma and Alma
Affiliates, for the Sale to Third Parties of Licensed Products
(collectively, the “Actual Amounts” ), less:
(i) allowances and adjustments actually credited to customers
for damaged and returned product (which allowances and adjustments
may be taken only on a product-by-product basis, that is an
allowance or adjustment on one product, for example, Sonata System,
shall not be taken against Sales of another type of product, for
example, a Soprano System or Harmony System);
(ii) promotional, trade, quantity, cash and prompt payment
discounts separately identified on the invoice and actually allowed
and taken; and (iii) Third Party charges of the following
kinds collected by the seller from the buyer and separately
identified on the invoice: transportation charges, insurance
charges for transportation, sales taxes, excise taxes and customs
duties, and governmental charges levied on or measured by the sale;
provided that: (1) no deductions shall be made from Actual
Amounts for any royalties owed or paid to any person or entity; and
(2) Net Sales shall include upgrades or additions to, or
partial replacements for, Licensed Products, where upgrades include
but are not limited to swapping a new Licensed Product for a
buyer’s existing product.
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For clarity and without limitation,
this definition of Net Sales includes Alma Combination Products
which do not include an Alma Hair Module for which no royalties are
due Palomar hereunder for their Sale. However, as provided in
Section 4.4, subsequent Sales of Alma Hair Modules for use
with such Alma Combination Products shall affect royalties owed to
Palomar. Thus, it shall be necessary to determine and keep records
of the Net Sales attributable to all such Licensed Products. As a
consequence, inclusion of a Licensed Product in this definition of
Net Sales, by itself, shall not indicate that royalties are
necessarily due Palomar hereunder on the Sale of such Licensed
Product.
The following paragraphs provide
additional non-limiting examples for calculating Net Sales
hereunder:
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Trade-in of a first Alma Product (such as a Sonata System) in
connection with the Sale of a second Alma Product (such as a
Soprano System) shall be treated as follows: (i) the Net Sales
attributed to the Sale of such second Alma Product (a) shall
not include any deduction or other reduction for the trade-in given
by Alma for such first Alma Product, unless Alma paid royalties to
Palomar hereunder upon the Sale of such first Alma Product (
e.g. , there shall be no such deduction or other reduction
when such first Alma Product is an Alma Other Product), and
(b) shall be calculated as set forth in this definition, and
such Sale of such second Alma Product shall be subject to the
royalty obligations set forth in Section 4.4, and
(ii) the Net Sales attributable to any re-Sale of such first
Alma Product shall be calculated as set forth in this definition,
and such re-Sale of such first Alma Product shall be subject to the
royalty obligations set forth in Section 4.4. For example,
without limiting the generality of the foregoing, if a customer
purchases from Alma a Sonata System for $60,000 before
January 1, 2008, then under Section 4.4, Alma is
obligated to pay Palomar a royalty of $5,100 on such Sale of the
Sonata System (8.5% of $60,000). If that customer then purchases
from Alma a Soprano System for $120,000 and is provided a credit of
$20,000 in connection with a trade-in of such Sonata System that
such customer previously purchased before January 1, 2008
(thus paying Alma $100,000), then under Section 4.4, Alma is
obligated to pay Palomar a royalty of $8,500 on such Sale of the
Soprano System (8.5% of $100,000) and no amount shall be due
hereunder for the $20,000 credit provided for the Sonata System. If
Alma then re-Sells the traded-in Sonata System for $40,000 before
January 1, 2008, then under Section 4.4, Alma is
obligated to pay Palomar a royalty of $3,400 on such re-Sale of the
traded-in Sonata System (8.5% of $40,000). |
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Installation charges, whether or not separately invoiced or
identified on an invoice, shall not be deducted from the Actual
Amounts. |
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Charges for the standard warranty for a Licensed Product,
whether or not separately invoiced or identified on an invoice,
shall not be deducted from the Actual Amounts. However, charges
separately identified on an invoice for an extended warranty (after
deducting appropriate charges for the standard warranty) may be
deducted from Actual Amounts. |
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Charges for standard or basic training (often referred to as
inservice training or initial training) or any training by Alma or
Alma Affiliates (collectively referred to as “ Standard
Training ”) for a Licensed Product, whether or not
separately invoiced or identified on an invoice, shall not be
deducted from the Actual Amounts. However, charges separately
identified on an invoice for additional training by a Third Party
(after deducting appropriate charges for the Standard Training, if
such Third Party is to provide the Standard Training) may be
deducted from Actual Amounts. |
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Excluding physically separate light-based systems which are
covered in the following paragraph on Bundled Packages, charges for
other products, accessories, parts or items listed on an invoice
along with a Licensed Product, with no separate and distinct price
set forth for those other products, accessories, parts or items on
the invoice in question, shall not be deducted from Actual
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If Alma or any Alma Affiliate Sells
one or more Licensed Product(s), in combination with other,
physically separate light-based systems that are not Licensed
Products at a single price (a “ Bundled Package
”), then the Net Sales attributable to such Licensed
Product(s), for the purpose of determining Net Sales attributable
hereunder, shall be calculated by multiplying the Net Sales of such
Bundled Package by the fraction A/(A+B), where A is the average Net
Sales price of Licensed Product(s) in the relevant country during
the applicable calendar quarter as Sold separately in bona
fide arms-length transactions by the selling party (
i.e. , Alma or an Alma Affiliate, who shall be deemed to be
a “ Selling Party ”), and B is the total average
Net Sales price of all other light-based system(s) in the Bundled
Package that are not Licensed Product(s) in the relevant country
during the applicable calendar quarter, as Sold separately in
bona fide arms-length transactions by such Selling Party.
If, in any given country and applicable calendar quarter, the
Licensed Product(s) and other light-based system(s) included in a
Bundled Package are not all Sold separately in bona fide
arms-length transactions in such country by the same Selling Party,
Net Sales of a Licensed Product(s) included within the Bundled
Package shall be calculated using the formula above, using the
average Net Sales price in the United States for the applicable
calendar quarter of the Licensed Product(s) and the other
light-based system(s), again in bona fide arms-length
transactions by a single Selling Party. If no average Net Sales
prices of the Licensed Product(s) and the other such light-based
system(s) is available for the United States for the applicable
calendar quarter from bona fide arms-length transactions by
a single Selling Party, the Net Sales of the Licensed Product(s)
shall be the aggregate Net Sales of such assemblage of Products
without deduction of any kind.
For clarity, (i) subject to
clause (iii) below, transfer of a Licensed Product within Alma
or between Alma and Alma Affiliates for subsequent Sale to a Third
Party shall not be considered a Sale until a Sale is made to a
Third Party and the Net Sales shall be based on the Sale to the
Third Party of such Licensed Product by Alma or Alma Affiliates,
(ii) a Licensed Product shall be considered “Sold”
upon the earlier of shipment of or receipt of payment for such
Licensed Product or Alma or any Alma Affiliate recognizing revenue
with respect to such sale of Licensed Product in accordance with
U.S. generally accepted accounting principles, consistently
applied, and all royalty obligations on Net Sales of such Licensed
Product shall accrue upon the time of Sale regardless of the time
of collection by the selling entity, (iii) sales of Licensed
Products by
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Alma
Sublicensees (including sales by distributors and subdistributors)
shall not give rise to Net Sales hereunder because those products
shall have already been Sold by Alma or Alma Affiliates to such
Alma Sublicensees, with the Net Sales arising from such Sale
already accounted for under this definition; provided, however,
that a Sale or transfer of Licensed Products by Alma or Alma
Affiliates to Alma Sublicensees that purchase such Licensed
Products for the resale or distribution of such Licensed Products
in the United States shall not be considered a Sale hereunder until
a Sale is made by such Alma Sublicensee or a Third Party
distributor in the United States and the Net Sales shall be based
on such Sale of such Licensed Product by such Alma Sublicensee or
Third Party distributor in the United States, (iv) “amounts
invoiced” as used above shall include the value of any
monetary or other consideration to be received by Alma or any Alma
Affiliates from a Sale of any Licensed Product, (v) Net Sales
shall be deemed to be equal to, for any Licensed Product
(a) Sold to any Third Party for less than the seller is then
charging in bona fide arms-length transactions for
comparable products or (b) donated, transferred or given away
free of charge, in each case of clauses (a) and (b), the
average Net Sales price of such Licensed Product in bona
fide arms-length transactions by such seller, (vi) all
Sales to any distributors shall include the fair market value of
all cash and other consideration received from such distributor,
and (vii) all of the amounts specified in this definition
shall be determined from the books and records of Alma and Alma
Affiliates maintained in accordance with U.S. generally accepted
accounting principles, consistently applied.
1.14. “ Patents ”
shall mean (i) any patents and patent applications and any
patents issuing therefrom worldwide, (ii) any substitutions,
divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations,
extensions, supplementary protection certificates, term extensions
(under patent or other law), certificates of invention and the
like, of any such patents or patent applications, and
(iii) any foreign or international equivalents of any of the
foregoing.
1.15. “ Professional
Field ” shall mean the field in which products or systems
are intended or marketed for sale to doctors, health care
providers, beauty care professionals or other commercial service
providers for use on or with patients or customers (and not for
resale to any person or entity for personal use).
1.16. “ Sale ”
shall mean, with respect to a Licensed Product, the sale,
distribution, lease, use (including training, preceptorships,
marketing and promotional uses), cost-per-shot arrangements and any
other arrangement in which monetary or other consideration is to be
received by Alma or one or more Alma Affiliates for the use of such
Licensed Product. For clarity, the donation, transferring or giving
away free of charge of any Licensed Product hereunder shall
constitute a Sale.
1.17. “ Third Party
” shall mean any person or entity, other than Palomar, Alma
or any Palomar Affiliates or Alma Affiliates.
1.18. “ Valid Claim
” shall mean either (i) a claim of an issued and
unexpired Patent which has not been revoked or held permanently
unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not
been admitted to be invalid or unenforceable through opposition,
reissue, re-examination or disclaimer or otherwise, or
(ii) a
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claim of
a pending application for a Patent which claim was filed in good
faith and has not been abandoned or finally disallowed without the
possibility of appeal or refiling of said application.
2.
License Grants .
2.1. Sublicense Grant by
Palomar . Subject to the terms and conditions of this
Agreement, Palomar hereby grants to Alma and Alma Affiliates a
worldwide, royalty-bearing, non-exclusive sublicense, under the
Anderson Patents, to make, use, sell, offer for sale and import
Licensed Products (provided that those Alma Hair Modules that alone
amount to an “Alma Product” hereunder are used
exclusively with other Alma Products or Alma Other Products and no
other products or systems of Alma, Alma Affiliates or any Third
Parties), in each case only for hair removal and only outside of
the Consumer Field. It is understood and agreed that (i) the
foregoing sublicense grant shall cover only those Licensed
Products Sold for which royalties are paid to Palomar hereunder as
provided in Section 4 (including with respect to Sales of
Licensed Products occurring before the Effective Date for which
Alma pays royalties hereunder as specified in Section 4.2),
(ii) the foregoing sublicense grant automatically extends,
without any further action by Alma or any Alma Affiliates, to each
person and entity that is an “Alma Affiliate” as of the
Effective Date or becomes an “Alma Affiliate”
thereafter, but only for so long as such person or entity remains
an “Alma Affiliate” hereunder, and (iii) Palomar
shall be in direct privity under this Agreement with any Alma
Affiliate as a result of such sublicense grant.
2.2. Related Licensing
Provisions.
(a)
Limited Sublicensing Rights . Alma and Alma Affiliates shall
not have any right to grant to any Third Parties any further
sublicenses under the sublicense grant set forth in Section 2.1,
nor shall any purported sublicenses under such sublicense grants
made by Alma or any Alma Affiliates or any of their sublicensees
prior to the Effective Date be valid or enforceable, except Alma,
and only those Alma Affiliates that are wholly-owned by Alma
(directly or indirectly, and taking into account any local law
restrictions as noted in Section 1.1) and no other Alma
Affiliates, may grant sublicenses only as may be necessary for
(i) Third Parties to distribute Licensed Products Sold by Alma
or Alma Affiliates and for which royalties are payable to Palomar
on Net Sales hereunder, or (ii) the manufacture of Licensed
Products by Third Parties for sale only to Alma or Alma Affiliates
and for which royalties are payable to Palomar on later Net Sales
hereunder of such Licensed Products by Alma or Alma Affiliates,
provided that, for each of clauses (i) and (ii), any such
Third Parties are not Excluded Third Parties, and further provided
that any such sublicense grants shall apply only to activities
occurring on or after the actual date such sublicense grant is
first memorialized in writing (and not before). Alma Sublicensees
shall not have the right to grant any sublicenses under any such
sublicense grant by Alma or Alma Affiliates. Alma shall be
responsible to Palomar for the performance of any Alma Affiliates
and Alma Sublicensees under any provisions of this Agreement for
which Alma or any Alma Affiliate is responsible, even if such
person or entity is also responsible to Palomar. No purchaser of
any Licensed Product shall, by operation of this Agreement, receive
any license, sublicense or other rights in, to or under the
Anderson Patents that exceeds the scope and terms of the sublicense
grant set forth in Section 2.1, notwithstanding the patent
exhaustion/first sale doctrine. Apart from the foregoing limited
right to grant further sublicenses, Alma and Alma Affiliates shall
not have any right to
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make an
Assignment or otherwise Transfer such sublicense grant except
pursuant to Section 9.3.
(b)
License Field Limitation . Notwithstanding anything
contained herein to the contrary, (i) Alma and Alma Affiliates
shall not exercise, (ii) Alma shall not allow any Alma
Affiliates or Alma Sublicensees to exercise, and (iii) with
respect to any distributor, sublicense or other agreements entered
into by Alma or any Alma Affiliates, or purchase orders issued or
accepted by Alma or any Alma Affiliates, in each case after the
Effective Date, Alma shall expressly prohibit in writing all Alma
Affiliates and Alma Sublicensees from exercising, the sublicense
grant provided for in Section 2.1 within the Consumer Field.
With respect to not allowing certain activities by Alma
Sublicensees as set forth in clause (ii) of the 1 st sentence of
this Section 2.2(b), the Parties understand and agree that,
without limiting Alma and an Alma Affiliate’s obligations
under such clause, once Alma or any Alma Affiliate learns of any
violation of their obligations not to allow any Alma Sublicensee to
conduct those prohibited activities, Alma and Alma Affiliates shall
promptly use commercially reasonable efforts to end all such
prohibited activities by such Alma Sublicensee within a
commercially reasonable time period, and if unable to end all such
prohibited activities by such efforts, shall in all events within
six (6) months of first learning of any such prohibited
activities by such Alma Sublicensee: (x) terminate the sublicense
to such Alma Sublicensee; and (y) stop Selling (directly or
indirectly through other Alma Sublicensees or otherwise) Licensed
Products to such Alma Sublicensee. If Palomar notifies Alma in
writing of any Alma Sublicensee conducting any such prohibited
activities, Alma shall thereafter confirm in writing to Palomar
that Alma has complied with the immediately preceding sentence for
such Alma Sublicensee.
(c)
Patent Marking . Alma and Alma Affiliates shall mark all
Licensed Products Sold after the Effective Date in accordance with
the patent laws, if any, of the jurisdictions in which such
Licensed Products are manufactured, used or Sold. Without
limitation, Alma and Alma Affiliates shall mark all Licensed
Products Sold in the United States after the Effective Date with
the applicable U.S. patent numbers of the applicable Anderson
Patents.
(d)
Palomar’s Right to Grant Other Sublicenses . Subject
to the terms of this Agreement, Palomar retains the right to grant
sublicenses and other rights in and to the Anderson Patents as
Palomar may deem appropriate in its sole discretion.
(e)
Excluded Third Parties . The Parties intend that no Excluded
Third Party, or any of their products or other technology, is to be
granted any rights under the Anderson Patents sublicensed by
Palomar under Section 2.1, either through the direct
sublicense from Palomar to Alma and Alma Affiliates under
Section 2.1 or as an Alma Sublicensee. Thus, the Parties have
agreed to preclude any Excluded Third Party from becoming an
“Alma Affiliate” hereunder as provided in
Section 1.1(a), and further have agreed to preclude any
Assignment of this Agreement by Alma or any Alma Affiliate to or
otherwise involving any Excluded Third Party under
Section 9.3. Further, Alma and Alma Affiliates hereby agree
that to the extent that any of them acquires any rights or interest
in or to any product(s) or other technology from any person or
entity while or after such person or entity is an “Excluded
Third Party” hereunder, whether by Assignment under
Section 9.3, asset purchase or sale, bankruptcy, conveyance,
lease, distribution arrangement, manufacturing arrangement
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(including any foundry arrangement), license, sublicense, option,
other transfer or any other transaction of any type (any such
transaction, an “ Acquisition ”), the sublicense
grant set forth in Section 2.1 (or any sublicense thereunder
granted pursuant to Section 2.2) shall not apply to such
product(s) or technology or any improvements or derivatives thereto
(even if such person or entity at some time after the applicable
Acquisition is no longer an “Excluded Third Party”
hereunder, whether pursuant to the provisos set forth in
Section 1.7 or otherwise), and Palomar and its sublicensees
shall retain any and all rights to enforce the Anderson Patents
against Alma, Alma Affiliates, such Excluded Third Party or any
other Third Party with respect to the same.
(f)
Prosecution . As between the Parties, Palomar shall have the
sole right, but not the obligation, in its sole discretion (subject
to the MGH Agreement) to prosecute, maintain, enforce and defend
the Anderson Patents, and Alma and Alma Affiliates shall have no
rights with respect to any such activities.
(g)
Other Transactions . Palomar may assign, convey, sell,
lease, encumber, license, sublicense or otherwise transfer to or
grant any right in or to (collectively, “ Transfer
”) a Third Party or Palomar Affiliate any and all of the
Anderson Patents or the MGH Agreement, provided that any such
transaction is made subject to the sublicense grant to Alma and
Alma Affiliates set forth in Section 2.1 and shall not impose
any additional obligations on Alma or Alma Affiliates.
(h)
Licensing Fees . Except as otherwise expressly provided
herein, any amounts or other consideration owed by Palomar to any
Third Party or Palomar Affiliate on account of the sublicense grant
to Alma and Alma Affiliates set forth in Section 2.1 shall be
the sole responsibility of Palomar.
2.3. MGH Agreement . Palomar
represents and warrants to Alma that the MGH Agreement, as redacted
and attached hereto as Appendix B , is true and
complete and in effect as of the Effective Date. In the event that
the MGH Agreement is terminated for any reason before the
expiration of all of the Valid Claims of the Anderson Patents, Alma
and Alma Affiliates shall no longer have any further patent royalty
obligations to Palomar under this Agreement from the date of such
termination (other than for patent royalty obligations accrued
hereunder before such date). Notwithstanding anything contained
herein to the contrary, Palomar shall have no liability of any kind
whatsoever as a result of any such termination.
2.4. No Other Rights . Alma
acknowledges and agrees that, as between the Parties, Palomar and
MGH have all right, title and interest in and to the Anderson
Patents, and that Alma and Alma Affiliates shall acquire no right,
title or interest in or to the Anderson Patents, by implication,
estoppel or otherwise, other than the sublicense grant to Alma and
Alma Affiliates set forth in Section 2.1 or as otherwise
expressly provided herein.
3.
Other Obligations of Alma .
3.1. Definitions for this
Section 3 .
(a)
“ Exploit ” shall mean to make, have made,
import, use, sell, or offer for sale, including to research,
develop, register, modify, enhance, improve, Manufacture,
have
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Manufactured, formulate, have used, export, transport, distribute,
promote, market or have sold or otherwise dispose of.
(b)
“ Exploitation ” shall mean the making, having
made, importation, use, sale, offering for sale or disposition of a
product or process, including the research, development,
registration, modification, enhancement, improvement, Manufacture,
formulation, optimization, import, export, transport, distribution,
promotion or marketing of a product or process.
(c)
“ Manufacture ” shall mean, with respect to a
product or system, the manufacturing, processing, formulating,
packaging, labeling, holding and quality control testing of such
product or compound.
3.2. Covenants.
(a) For
as long as the sublicense grant by Palomar to Alma and Alma
Affiliates set forth in Section 2.1 is in effect (the “
Sublicense Term ”), Alma and Alma Affiliates shall not
Exploit or otherwise practice the sublicenses to the Anderson
Patents granted to Alma and Alma Affiliates by Palomar under
Section 2.1 by:
(i) developing
any Licensed Products intended by Alma or any Alma Affiliates for
use (in whole or in part) in the Consumer Field;
(ii) marketing
any Licensed Products in the Consumer Field; or
(iii) developing
or commercializing in or outside the Consumer Field any Female
Accessory Product during its period of commercialization by
Gillette or any Gillette licensee, provided that any apparatus,
component, accessory, disposable or Consumable as to which Alma or
any Alma Affiliate has expended material financial and other
resources on its development or commercialization as a Light-Based
Accessory Product before such Female Accessory Product is first
commercialized by Gillette or any Gillette licensee shall not be
subject to the restriction contained in this
Section 3.2(a)(iii). All capitalized terms used in this
Section 3.2(a)(iii), but not defined herein, shall have the
meanings ascribed to them in the Gillette Agreement.
(b) During
the Sublicense Term, Alma and Alma Affiliates shall label Licensed
Products commercialized outside the Consumer Field pursuant to the
sublicense to the Anderson Patents granted to Alma and Alma
Affiliates by Palomar under Section 2.1 with the following
phrase (or similar words which fairly convey such products are for
use only outside the Consumer Field): “not intended for
consumer self-use.”
(c) During
the Sublicense Term, Alma and Alma Affiliates shall not, in the
development and commercialization of Licensed Products outside the
Consumer Field pursuant to the sublicense to the Anderson Patents
granted to Alma and Alma Affiliates by Palomar under
Section 2.1, intentionally (1) design, modify or
otherwise improve any such Licensed Product(s) with the goal or
intent of improving its efficacy or performance in the Consumer
Field, or (2) optimize, induce, support or encourage the use
of any such Licensed Products in the Consumer Field.
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(d) The
covenants of Alma and Alma Affiliates contained in
Sections 3.2(a)(i), 3.2(a)(ii) and 3.2(c) shall not prevent
Alma or any Alma Affiliates from conducting any activity, or
exercising or granting any licenses or other rights, with respect
to the practice of the Anderson Patents, that has as its goal or
intent Exploitation of a product or system outside the Consumer
Field and not Exploitation of a product or system in the Consumer
Field, notwithstanding the possibility that such activity, exercise
or grant may have applications in the Consumer Field.
(e) All
Consumer Field Users (as defined in Section 3.3(a)), other
than Palomar, are hereby granted third-party beneficiary rights to
enforce the provisions of this Section 3.2 provided that
Palomar has granted such Consumer Field Users such rights in
writing.
3.3. Economic Adjustments for
Off-Label Sales .
(a) Alma
and Alma Affiliates each agrees to make payments to
(i) Gillette, (ii) any other Third Party to which Palomar
has granted an exclusive sublicense under the Anderson Patents in a
field that in whole or in part falls within the Consumer Field, and
(iii) Palomar (collectively, “ Consumer Field
Users ”), as appropriate, in the manner set forth below,
to compensate any of them for certain lost profits, if any,
resulting from net off-label purchases during the Sublicense Term
of Licensed Products commercialized pursuant to the sublicense to
the Anderson Patents granted to Alma and Alma Affiliates by Palomar
under Section 2.1, for use in the Consumer Field.
(b) In
the event that a Consumer Field User shall suffer Lost Profits
(calculated in the manner set forth in Section 3.3(c)) in
excess of Five Million Dollars (U.S. $5,000,000) in any calendar
year, then such Consumer Field User may submit a written notice to
Alma or any Alma Affiliate (a “ Lost Profits Notice
”) specifying its aggregate Lost Profits for such calendar
year and enclosing copies of (A) the Independent Study (as
defined below) supporting such calculation and (B) this
Agreement. Within one hundred and eighty (180) days after
receipt thereof, Alma or the Alma Affiliate, as applicable, shall
(1) remit payment to such Consumer Field User, to such bank
account designated in the Lost Profits Notice, in an amount equal
to the difference between such Lost Profits and Five Million
Dollars (U.S. $5,000,000) or (2) provide to such Consumer
Field User a detailed written critique of such calculation, propose
a revised calculation of such Consumer Field User’s Lost
Profits based on a new Independent Study, and enclose a copy of
such Independent Study. In the event that Alma or such Alma
Affiliate, as applicable, shall propose a revised calculation, Alma
or such Alma Affiliate, as applicable, and such Consumer Field User
shall meet within thirty (30) days thereafter to attempt in
good faith to negotiate an agreed level of Lost Profits, or
otherwise settle the dispute. In the event that Alma or such Alma
Affiliate, as applicable, and such Consumer Field User shall fail
to reach agreement at such meeting, either of them may bring a
lawsuit in any court of competent jurisdiction to resolve such
dispute.
(c) The
Lost Profits of such Consumer Field User for a calendar year during
the Sublicense Term shall be determined as follows. Such Consumer
Field User shall retain, at its expense, a nationally-recognized
economic consulting firm to determine, for such year, on the basis
of accepted accounting, market research, sampling and survey
methodology, (A) the
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sales by
Alma, Alma Affiliates, Alma Sublicensees and Alma’s agents
for such year of Licensed Products, commercialized pursuant to the
sublicense under the Anderson Patents granted to Alma and Alma
Affiliates by Palomar under Section 2.1, that displaced sales
by or on behalf of such Consumer Field User of products, intended
for use in the Consumer Field, that use optical radiation for
therapeutic or cosmetic effect, and (B) the sales of such
products for such year by such Consumer Field User and its
affiliates, sublicensees and agents that displaced sales of such
Licensed Products by or on behalf of Alma or Alma Affiliates,
(C) the average net profit of such Consumer Field User for
each unit of product sold (on a country-by-country basis, as
relevant), (D) the loss of sales resulting from net off-label
sales, calculated on the basis of (A) and (B), and
(E) the lost profits attributable to such net off-label sales,
calculated on the basis of (C) and (D) (the “ Lost
Profits ”). Such determinations shall be summarized and
documented in a report prepared by such nationally-recognized
economic consulting firm (the “ Independent Study
”).
(d) All
Consumer Field Users, other than Palomar, are hereby granted
third-party beneficiary rights with respect to the provisions of
this Section 3.3 provided that Palomar has granted such
Consumer Field Users such rights in writing.
3.4. Other Provisions .
(a) The
provisions of this Section 3 shall apply to Alma Sublicensees
to the same extent as Alma and Alma Affiliates. The provisions of
this Section 3 shall be in effect for only as long as the
Sublicense Term, and further shall be in effect with respect to any
particular Consumer Field User for only as long as such Consumer
Field User has an exclusive sublicense under the Anderson Patents
in a field that in whole or in part falls within the Consumer
Field, provided that the end of the Sublicense Term shall not
affect any obligations of Alma or Alma Affiliates under this
Section 3 that have accrued as of the end of the Sublicense
Term.
(b) Palomar
represents and warrants to Alma as of the Effective Date that the
Gillette Agreement, excluding exhibits and redactions of other
commercially sensitive information, and attached hereto as of the
Effective Date as Appendix A , is true and complete and
in effect as of the Effective Date.
4.
Compensation .
4.1. Flow-Chart . Attached
hereto as Exhibit D are flow-charts showing how to
determine royalty payments for the Sale of Licensed Products in
accordance with the provisions of this Section 4. The Parties
intend for those flow-charts and the provisions of this
Section 4 to be read and construed as one document in order to
understand the royalty obligations hereunder.
4.2. Patent Royalties Arising from
Past Sales.
(a)
Payment . Alma shall pay to Palomar within seven
(7) days of the Effective Date Alma’s good faith
estimate (which estimate for Sales of the Harmony System and Aria
System to third party distributors outside the United States
accruing before the Effective Date shall be made in accordance with
the assumptions set forth in Section 4.2(d)) of the aggregate
amount of royalties due pursuant to Section 4.4 for Sales of
Licensed Products
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(except
that the royalty rate applicable to Net Sales of such Licensed
Products shall be nine and one half percent (9.5%) of such Net
Sales) by Alma and Alma Affiliates accruing before the Effective
Date, plus interest at the Applicable Rate (as defined in
Section 4.2(b)). For clarity, such Sales shall include Sales
of Licensed Products by predecessors in interest to Alma and Alma
Affiliates, including MSQ, Ltd., Orion Lasers, Ltd. and Orion
Lasers, Inc. The payment required by this Section 4.2 shall be
made by wire transfer, without deduction for any taxes or other
charges, as provided in Section 4.11. The payment required by this
Section 4.2 is exclusive of any amounts payable by Alma to
Palomar pursuant to the Settlement Agreement, including pursuant to
Section 3(a) of the Settlement Agreement, or the that certain Trade
Dress Settlement Agreement, to be executed contemporaneously with
this Agreement, by and between Palomar and Alma (the “ TDS
Agreement ”).
(b)
Interest . The payment set forth in Section 4.2(a) will
include interest at the Applicable Rate calculated on a compound
basis with a calendar quarterly compounding period from the date in
the middle of the calendar quarter in which the Sale was made until
the Effective Date. “Applicable Rate” shall mean a
rate, starting from the first Sale of a Licensed Product until the
payment date, published in The Wall Street Journal ,
Eastern United States Edition (“ WSJ ”)
as the prime lending rate.
(c)
Audit . Such Sales of Licensed Products that give rise to
the payment in Section 4.2(a) and applicable interest in
Section 4.2(b) shall be auditable for a period of seven
(7) years from the date of each such Sale as contemplated by
Sections 4.9 and 4.10, and Alma shall be responsible for any
under-payment of the amount owed Palomar under this
Section 4.2 notwithstanding the terms of this Agreement, the
Settlement Agreement or the TDS Agreement (including any release
contained in the Settlement Agreement or TDS Agreement). The
Parties acknowledge and agree that Alma shall be required to pay
any initial under-payment under this Section 4.2 (the “
Initial Under-Payment ”) in full, plus interest at a
rate equal to the rate of interest specified in Section 4.11
(calculated on a compound basis with a monthly compounding period
from the date in the middle of the calendar quarter in which the
Sale was made until the date payment is made, or if any portion of
the Initial Under-Payment cannot reasonably be related to any such
Sale so as to determine the start date for such interest
calculation, then from January 1, 2006 for such portion), and
not the Applicable Rate, and failure by Alma to pay the Initial
Under-Payment, plus such interest, in full within forty-five
(45) days following notice thereof shall constitute a material
breach of this Agreement by Alma. For clarity, only one rate of
interest shall apply to any Sale of Licensed Product, or any
portion of Net Sales, not initially reported by Alma that gives
rise to or results in the Initial Under-Payment, which rate of
interest shall be equal to the rate of interest specified in
Section 4.11 as determined above and not the Applicable
Rate.
(d)
Estimate Assumptions . With respect to Alma’s good
faith estimate of the royalties due pursuant to Section 4.4
for Sales of the Harmony System and Aria System by Alma and Alma
Affiliates to third party distributors outside the United States
accruing before the Effective Date only, the Parties acknowledge
and agree that where accurate records are not available as to which
Alma Hair Modules and Alma Other Modules were sold for use with
particular base units/consoles by such distributors to end users
the following assumptions are acceptable for purposes of
determining such estimate:
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(i) As
of the Effective Date, the Alma Hair Modules and Alma Other Modules
Sold for use with the Aria System base unit/console will also
operate on the Harmony System base unit/console. Alma hereby
represents that to the best of its knowledge the foregoing
assumption is true.
(ii) For
purposes of Sections 4.2(d)(iii) and 4.2(d)(iv), any Alma
Other Modules that can only operate on the Harmony System base
unit/console shall only be included with and applied toward Sales
of the Harmony System base unit/console.
(iii) Since
only one type of Alma Hair Module is Sold for use with the Harmony
System and Aria System base units/consoles as of the Effective
Date, where the number of Alma Hair Modules Sold to a distributor
is less than or equal to the number of Harmony System and Aria
System base units/consoles Sold to such distributor as of the
Effective Date, it shall be assumed that no more than one Alma Hair
Module was sold for use with any such particular base unit/console
by the distributor to an end user (with priority given to the
Harmony System base units/consoles). For example, if 9 Alma Hair
Modules, 5 Harmony System base units/consoles and 5 Aria System
base units/consoles are Sold to a distributor in the aggregate
before the Effective Date, then (A) 1 Alma Hair Module would
be deemed to have been Sold for use with each of the 5 Harmony
System base units/consoles, and (B) 1 Alma Hair Module would
be deemed to have been Sold for use with each of 4 of the Aria
System base units/consoles. If the number of Alma Hair Modules Sold
to a distributor is greater than the number of such base
units/consoles Sold to such distributor as of the Effective Date,
the number of Alma Hair Modules Sold to such distributor shall be
spread evenly over the number of such base units/consoles Sold to
such distributor (with priority given to the Harmony System base
units/consoles). For example, if 12 Alma Hair Modules, 5 Harmony
System base units/consoles and 5 Aria System base units/consoles
are Sold to a distributor in the aggregate before the Effective
Date, then (C) 1 Alma Hair Module would be deemed to have been
Sold for use with each of the 5 Harmony System base units/consoles,
(D) 1 additional Alma Hair Module would be deemed to have been
Sold for use with each of 2 of the 5 Harmony System base
units/consoles, and (E) 1 Alma Hair Module would be deemed to
have been Sold for use with each of the 5 Aria System base
units/consoles.
(iv)
For purposes of determining the number of Alma Other Modules sold
for use with a Harmony System base unit/console or Aria System base
unit/console Sold to a particular distributor, (i) the total
number of Alma Other Modules Sold to a distributor that can be
operated on both the Harmony System and Aria System base u
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