Exhibit 10.2
Confidential Materials omitted and filed
separately with the
Securities and Exchange
Commission. Asterisks denote omissions.
March 9, 2006
Edwards Lifesciences LLC
One Edwards Way
Irvine, California 92614
Attention: General Counsel
Gentlemen:
As you know, Edwards Lifesciences
LLC (“Edwards”), PLC Systems Inc. (“PLC
Parent”) and PLC Medical Systems, Inc.
(“PLC”) are parties to a certain Contribution,
Development and Manufacturing Agreement (the “CDM
Agreement”) dated as of February 24, 2004, and a certain
Distribution Agreement (the “Distribution Agreement”),
also dated as of February 24, 2004, pursuant to which, among
other things, PLC has agreed to develop and manufacture certain
“Surgical Products”, as defined in the CDM Agreement,
and Edwards has agreed to distribute and sell such products so
developed and manufactured by PLC.
Edwards, PLC and PLC Parent have
agreed that it is in their respective best interests for all rights
and obligations of PLC in the development and manufacture of
Disposable Products as granted under the CDM Agreement and the
Distribution Agreement to be transferred back to Edwards, as set
forth herein. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the CDM Agreement and the
Distribution Agreement.
Accordingly, we have agreed as
follows:
1. The CDM
Agreement, including the license described in Section 2.3
(except as necessary to enable PLC to fulfill its obligations to
Edwards following the date hereof), and the Distribution Agreement
are hereby terminated, and each of the parties thereto hereby
expressly agrees that neither party shall have any liability or
continuing obligation to the other on account of such agreements,
except such continuing obligations as are expressly set forth in
the following sections of such agreements, which sections shall
survive the termination of such agreements: (i) CDM
Agreement—Articles III, VII and X, Sections 2.3 (to the
extent necessary to enable PLC to fulfill its obligations to
Edwards following the date hereof), 5.5, 5.6, 5.7, 8.1, 8.2, 9.3
and 9.4, and (ii) Distribution Agreement—Articles IX, X
and XI, and Sections 4.2, 4.3, 4.5 and 8.3(a).
2. In
consideration of the foregoing, Edwards agrees to make the
following nonrefundable payments to PLC:
a.
Initial Payment. Within three (3) business days of the date
hereof, $1,500,000 in cash;
b. Disposable
Royalty Payments.
(i)
Calculated monthly and paid in cash within 30 days after the end of
the subject month, an amount equal to [**] of all Net Sales of
Disposable Products on or prior to the second anniversary of the
date of this letter agreement.
(ii) Calculated
monthly and paid in cash within 30 days after the end of the
subject month, an amount equal to [**] of all Net Sales of
Disposable Products following the second anniversary of the date of
this letter agreement.
(iii) Within thirty (30)
days following the end of each calendar quarter, Edwards will
provide PLC with a statement that summarizes the Net Sales for the
royalty payments for such quarter.
(iv) Notwithstanding the
foregoing, the aggregate amount paid pursuant to clauses
(b)(i) and (b)(ii) above shall not exceed
$1,700,000.
3. “Net
Sales” shall mean the actual invoiced sales recorded as
revenues by Edwards or its Affiliates under its accounting policies
(as approved by Edwards’ auditors), from the sale, rent,
lease of or otherwise making available to third parties, not
affiliated with Edwards, Disposable Products, net of any royalty
paid to any third party (other than PLC), and less the following,
as applicable: refunds, discounts, credits allowed to
purchasers for return of Disposable Products or as reimbursement
for damaged Disposable Products, freight, insurance, and other
shipping charges, sales and use taxes, customs duties, and any
other governmental tax or charge (except income taxes) imposed on
or at the time of the pro
