NON-EXCLUSIVE PATENT LICENSE
THIS
NON-EXCLUSIVE PATENT LICENSE (this “ Agreement
”) is entered into this 18th day of October, 2006
(the “ Execution Date ”), and shall be
treated as in full force and effect as of July 1, 2006 (the “
Effective Date”), by and between Palomar Medical
Technologies, Inc., a Delaware corporation, with offices at 82
Cambridge Street, Burlington, MA 01803 (“ Palomar
”), and Laserscope, a California corporation with offices at
3070 Orchard Drive, San Jose, CA 95134-2011 (“
Laserscope ”) (Palomar on the one hand, and Laserscope
together with all Laserscope Affiliates (as defined below) on the
other hand, each a “ Party ”, and together,
the “ Parties ”).
WITNESSETH:
WHEREAS,
Palomar has a license from MGH under the Anderson Patents (both as
defined below) relating to the use of light to remove
hair;
WHEREAS,
Palomar and Laserscope are parties to that certain Patent License
Agreement, dated October 15, 1999, as amended (the “
Original Agreement ”);
WHEREAS,
Palomar and Laserscope desire to terminate the Original Agreement,
subject to the survival provisions set forth in Section 10.1,
and execute and enter into this Agreement in lieu thereof;
and
WHEREAS,
Laserscope and Laserscope 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 Laserscope and Laserscope Affiliates under 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:
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(a) “ 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 Execution Date or (ii) after the Execution Date, in
each case of clauses (i) and (ii), only for so long as
such person or entity satisfies the foregoing
requirements.
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(b) “
Laserscope 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
Laserscope (i) as of the Execution Date or (ii) after the
Execution 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, (1)
Exhibit A lists Laserscope Affiliates as of the
Execution Date, and (2) any Third Party that does not become a
“Laserscope 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.
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(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.
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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.
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1.2. “ Anderson
Patents ” shall mean (i) the Patents set forth on
Exhibit B , 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). “ Other Anderson Patents ”
shall mean the following subset of Anderson Patents: U.S. Patent
No. 5,824,023 and 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, U.S. Patent
No. 5,824,023 or the application that issued as such U.S.
Patent.
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1.3. “ 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.
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1.4. “ Excluded
Third Party ” shall mean any Third Party and its
Affiliates against which:
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(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
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(b) Palomar or any of
Palomar Affiliates has an outstanding injunction pertaining to
infringement of the Anderson Patents;
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in each case of
(a) and (b), other than any Third Party for which Laserscope can
reasonably demonstrate by written evidence that Laserscope and such
Third Party had conducted substantial negotiations in good faith
concerning an otherwise prohibited transaction ( e.g. , an
Assignment pursuant to Section 10.3(a) or any Acquisition
covered by Section 2.2(e) (including any that would cause such
Third Party to become a “Laserscope Affiliate”
hereunder as defined in Section 1.1(b) save for
the “Excluded Third Party” restriction therein),
or a sublicense pursuant to Section 2.2(a)), in each case
before the date that any such suit or action was first filed or any
injunction entered.
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1.5. “
Gillette ” shall mean The Gillette Company, and its
successors and permitted assigns of the Gillette
Agreement.
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1.6. “ Gillette
Agreement ” shall mean that certain “Development
and License Agreement” between Palomar and The Gillette
Company dated as of February 14, 2003, as such agreement is amended
as of the Execution 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 Gillette Agreement,
excluding exhibits thereto and redactions of other commercially
sensitive information, as amended as of the Execution Date is
attached hereto at Appendix A .
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1.7. “
Laserscope Modules ” shall mean Laserscope Hair
Modules and Laserscope Other Modules, each as defined
below:
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(a) “
Laserscope Hair Module ” shall mean any energy source
module, Sold by Laserscope or Laserscope 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, a Laserscope 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 a “Laserscope Hair Module”
hereunder. By way of example and without limitation, the energy
source modules in the following products in the form they are Sold
by Laserscope as of the Execution Date are “Laserscope Hair
Modules” for purposes of this Agreement: the YAG module in
the Gemini Laser System, the YAG module in the Lyra-i Laser System
and the IPL source in the Solis System.
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(b) “
Laserscope Other Module ” shall mean any energy source
module, Sold by Laserscope or Laserscope 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 a Laserscope Hair Module. By way of example and without
limitation, the energy source modules in the following products in
the form they are Sold by Laserscope as of the Execution Date are
“Laserscope Other Modules” for purposes of this
Agreement: the 532nm laser module of the Gemini Laser System, the
532nm laser module of the Aura-i Laser System, and the Erbium:YAG
laser module in the Venus-i Laser System.
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1.8. “
Laserscope Products ” shall mean Laserscope Hair
Products and Laserscope Combination Products, each as defined
below. “ Laserscope Other Product ” shall mean
any product, system, component or accessory, Sold by Laserscope or
Laserscope Affiliates, that (i) is not a Laserscope Product,
and (ii) is marketed as being capable of using or uses or is
incorporated into a product or system that uses one or more
Laserscope Other Modules. As of the Execution Date, the following
products in the form they are Sold by Laserscope as of the
Execution Date are “Laserscope Other Products” for
purposes of this Agreement: the Aura-i Laser System and Venus-i
Laser System.
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(a) “
Laserscope Combination Product ” shall mean any
product, system, component or accessory, Sold by Laserscope or
Laserscope Affiliates, (i) that as of the date of its Sale, is
marketed as being capable of using both at least one Laserscope
Other Module and at least one Laserscope Hair Module, and
(ii) the manufacture, use, sale, offering for sale, or
importation of which when sold with a Laserscope Hair Module,
absent the sublicense granted by Palomar herein, would infringe a
Valid Claim of the Anderson Patents. For clarity and without
limitation, Exhibit C lists Laserscope Combination
Products in existence as of the Execution Date, examples of when a
Laserscope Other Product or a Laserscope Hair Product shall become
a “Laserscope Combination Product” hereunder, and an
example of a marketing technique which does not change a Laserscope
Hair Product into a “Laserscope Combination Product”
hereunder.
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(b) “
Laserscope Hair Product ” shall mean any product,
system, component or accessory, Sold by Laserscope or Laserscope
Affiliates, (i) that contains a Laserscope 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 a Laserscope Other Module. For clarity and without
limitation, Exhibit D provides additional
clarifications and lists items that are Laserscope Hair Products in
existence as of the Execution Date.
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1.9. “
Laserscope Sublicensee ” shall mean any Third Party to
which Laserscope or a Laserscope Affiliate grants a permitted
sublicense pursuant to Section 2.2 under the sublicense grant from
Palomar in Section 2.1.
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1.10. “
Licensed Products ” shall mean Laserscope Products
(including those Laserscope Hair Modules that alone amount to a
“Laserscope Product” hereunder). For clarity, Licensed
Products may include future energy source modules, products,
systems, components or accessories Sold by Laserscope or Laserscope
Affiliates after the Execution 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.
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1.11. “ MGH
” shall mean The General Hospital Corporation in Boston,
Massachusetts.
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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 Execution 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 Execution Date is attached hereto at Appendix B
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1.13. “ Net
Sales ” shall mean all amounts invoiced by Laserscope and
Laserscope 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, a Lyra-i Laser System, shall not be taken
against Sales of another type of product, for example, a Gemini
Laser 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 Laserscope Combination Products which do not include a
Laserscope Hair Module for which no royalties are due Palomar
hereunder for their Sale. However, as provided in Section 4.4,
subsequent Sales of Laserscope Hair Modules for use with such
Laserscope 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 Laserscope Product in connection with the Sale of a second
Laserscope Product shall be treated as follows: (i) the Net
Sales attributed to the Sale of such second Laserscope Product
(a) shall not include any deduction or other reduction for the
trade-in given by Laserscope for such first Laserscope Product,
unless Laserscope paid royalties to Palomar hereunder upon the Sale
of such first Laserscope Product ( e.g. , there shall be no
such deduction or other reduction when such first Laserscope
Product is a Laserscope Other Product), and (b) shall be
calculated as set forth in this definition, and such Sale of such
second Laserscope 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 Laserscope Product
shall be calculated as set forth in this definition, and such
re-Sale of such first Laserscope 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 Laserscope a Lyra-i Laser System for $60,000, then under
Section 4.4, Laserscope is obligated to pay Palomar a royalty of
$4,500 on such Sale of the Lyra-i Laser System (7.5% of $60,000).
If that customer then purchases from Laserscope a Gemini Laser
System, which has one Hair Module and one Other Module, for
$120,000 and is provided a credit of $20,000 in connection with a
trade-in of such Lyra-i Laser System that such customer previously
purchased (thus paying Laserscope $100,000 in cash), then under
Section 4.4, Laserscope is obligated to pay Palomar a royalty of
$3,750 on such Sale of the Gemini Laser System (7.5% of 50% of
$100,000) and no amount shall be due hereunder for the $20,000
credit provided for the Lyra-i Laser System. If Laserscope then
re-Sells the traded-in Lyra-i Laser System for $40,000, then under
Section 4.4, Laserscope is obligated to pay Palomar a royalty of
$3,000 on such re-Sale of the traded-in Lyra-i Laser System (7.5%
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 Laserscope or Laserscope
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
Amounts.
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If
Laserscope or any Laserscope 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. , Laserscope or a
Laserscope 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) transfer of a Licensed Product within Laserscope
or between Laserscope and Laserscope 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 Laserscope or
Laserscope Affiliates, (ii) a Licensed Product shall be
considered “Sold” upon the earlier of shipment of or
receipt of payment for such Licensed Product or Laserscope or any
Laserscope 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 Laserscope
Sublicensees (including sales by distributors and subdistributors)
shall not give rise to Net Sales hereunder because those products
shall have already been Sold by Laserscope or Laserscope Affiliates
to such Laserscope Sublicensees, with the Net Sales arising from
such Sale already accounted for under this definition,
(iv) “amounts invoiced” as used above shall
include the value of any monetary or other consideration to be
received by Laserscope or any Laserscope Affiliates from a Sale of
any Licensed Product, (v) Net Sales shall be deemed to be
equal to, for any Licensed Product Sold to any Third Party for less
than the seller is then charging in bona fide arms-length
transactions for comparable products, 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 Laserscope and
Laserscope Affiliates maintained in accordance with U.S. generally
accepted accounting principles, consistently applied.
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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.
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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).
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1.16. “
Sale ” shall mean, with respect to a Licensed Product,
the sale, distribution, lease, use (including training,
preceptorships, marketing and promotional uses for which Laserscope
or one or more Laserscope Affiliates is to receive monetary or
other consideration), cost-per-shot arrangements and any other
arrangement in which monetary or other consideration is to be
received by Laserscope or one or more Laserscope Affiliates for the
use of such Licensed Product.
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1.17. “ Third
Party ” shall mean any person or entity, other than
Palomar, Laserscope or any Palomar Affiliates or Laserscope
Affiliates.
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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
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.
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2.1. Sublicense Grant
by Palomar . Subject to the terms and conditions of this
Agreement, Palomar hereby grants to Laserscope and Laserscope
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 Laserscope Hair
Modules that alone amount to a “Laserscope Product”
hereunder are used exclusively with other Laserscope Products or
Laserscope Other Products and no other products or systems of
Laserscope, Laserscope Affiliates or any Third Parties), in each
case only during the Term, 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 during the Term for which royalties are paid to
Palomar hereunder as provided in Section 4, (ii) the
foregoing sublicense grant automatically extends, without any
further action by Laserscope or any Laserscope Affiliates, to each
person and entity that is a “Laserscope Affiliate”
as of the Execution Date or becomes a “Laserscope
Affiliate” thereafter, but only for so long as such person or
entity remains a “Laserscope Affiliate” hereunder,
and (iii) Palomar shall be in direct privity under this
Agreement with any Laserscope Affiliate as a result of such
sublicense grant.
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2.2. Related
Licensing Provisions .
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(a) Limited
Sublicensing Rights . Laserscope and Laserscope 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, except Laserscope, and only those Laserscope
Affiliates that are wholly-owned by Laserscope (directly or
indirectly, and taking into account any local law restrictions as
noted in Section 1.1) and no other Laserscope Affiliates, may grant
sublicenses only as may be necessary for (i) Third Parties to
distribute Licensed Products Sold by Laserscope or Laserscope
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 Laserscope or Laserscope
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).
Laserscope Sublicensees shall not have the right to grant any
sublicenses under any such sublicense grant by Laserscope or
Laserscope Affiliates. Laserscope shall be responsible to Palomar
for the performance of any Laserscope Affiliates and Laserscope
Sublicensees under any provisions of this Agreement for which
Laserscope or any Laserscope 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, Laserscope and Laserscope
Affiliates shall not have any right to make an Assignment or
otherwise Transfer such sublicense grant except pursuant to
Section 10.3(a).
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(b) License Field
Limitation . Notwithstanding anything contained herein to the
contrary, (i) Laserscope and Laserscope Affiliates shall not
exercise, (ii) Laserscope shall not allow any Laserscope
Affiliates or Laserscope Sublicensees to exercise, and
(iii) with respect to any distributor, sublicense or other
agreements entered into by Laserscope or any Laserscope Affiliates,
or purchase orders issued or accepted by Laserscope or any
Laserscope Affiliates, in each case after the Effective Date,
Laserscope shall expressly prohibit in writing all Laserscope
Affiliates and Laserscope Sublicensees from exercising, the
sublicense grant provided for in Section 2.1 within the
Consumer Field. With respect to not allowing certain activities by
Laserscope 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 Laserscope and a
Laserscope Affiliate’s obligations under such clause, once
Laserscope or any Laserscope Affiliate learns of any violation of
their obligations not to allow any Laserscope Sublicensee to
conduct those prohibited activities, Laserscope and Laserscope
Affiliates shall promptly use commercially reasonable efforts to
end all such prohibited activities by such Laserscope 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 Laserscope Sublicensee: (x) terminate the
sublicense to such Laserscope Sublicensee; and (y) stop Selling
(directly or indirectly through other Laserscope Sublicensees or
otherwise) Licensed Products to such Laserscope Sublicensee. If
Palomar notifies Laserscope in writing of any Laserscope
Sublicensee conducting any such prohibited activities, Laserscope
shall thereafter confirm in writing to Palomar that Laserscope has
complied with the immediately preceding sentence for such
Laserscope Sublicensee.
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(c) Patent
Marking . Laserscope and Laserscope Affiliates shall mark all
Licensed Products Sold after the Execution Date in accordance with
the patent laws, if any, of the jurisdictions in which such
Licensed Products are manufactured, used or Sold. Without
limitation, Laserscope and Laserscope Affiliates shall mark all
Licensed Products Sold in the United States after the Execution
Date with the applicable U.S. patent numbers of the applicable
Anderson Patents. Compliance with this provision shall not be
construed as an admission of patent infringement.
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(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.
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(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 Laserscope and Laserscope Affiliates under Section 2.1 or
as a Laserscope Sublicensee. Thus, the Parties have agreed to
preclude any Excluded Third Party from becoming
a “Laserscope Affiliate” hereunder as provided in
Section 1.1(b), and further have agreed to preclude any
Assignment of this Agreement by Laserscope or any Laserscope
Affiliate to or otherwise involving any Excluded Third Party under
Section 10.3(a). Further, Laserscope and Laserscope 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 such person or entity is
an “Excluded Third Party” hereunder, whether by
Assignment under Section 10.3(a), asset purchase or sale,
bankruptcy, conveyance, lease, distribution arrangement,
manufacturing arrangement (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(a)) 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), and
Palomar and its sublicensees shall retain any and all rights to
enforce the Anderson Patents against Laserscope, Laserscope
Affiliates, such Excluded Third Party or any other Third Party with
respect to the same.
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(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 Laserscope and Laserscope Affiliates shall have no
rights with respect to any such activities.
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(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 Laserscope and Laserscope
Affiliates set forth in Section 2.1 and shall not impose any
additional obligations on Laserscope or Laserscope
Affiliates.
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(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
Laserscope and Laserscope Affiliates set forth in Section 2.1 shall
be the sole responsibility of Palomar.
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2.3. MGH
Agreement . Palomar represents and warrants to Laserscope that
the MGH Agreement, as redacted and attached hereto as
Appendix B , is true and complete and in effect as of
the Execution 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, Laserscope and Laserscope
Affiliates shall no longer have any further royalty obligations to
Palomar under this Agreement from the date of such termination
(other than for 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 such termination.
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(a) Laserscope
acknowledges and agrees that Laserscope and Laserscope Affiliates
have no right, title or interest in or to the Anderson Patents and
that nothing in this Agreement shall be construed as conferring by
implication, estoppel or otherwise any license, right, title,
interest or other right under the Anderson Patents or any other
Patent or other intellectual property rights of Palomar, any
Palomar Affiliates or MGH, other than the sublicense grant to
Laserscope and Laserscope Affiliates set forth in Section
2.1.
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(b) Palomar acknowledges
and agrees that nothing in this Agreement shall be construed as
conferring by implication, estoppel or otherwise any license,
right, title, interest or other right under any Patent or other
intellectual property rights of Laserscope or any Laserscope
Affiliate.
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3.
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Other Obligations of
Laserscope .
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3.1. Definitions for
this Section 3 .
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(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 Manufactured,
formulate, have used, export, transport, distribute, promote,
market or have sold or otherwise dispose of.
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(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.
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(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.
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(a) For as long as the
sublicense grant by Palomar to Laserscope and Laserscope Affiliates
set forth in Section 2.1 is in effect (the “
Sublicense Term ”), Laserscope and Laserscope
Affiliates shall not Exploit or otherwise practice the sublicenses
to the Anderson Patents granted to Laserscope and Laserscope
Affiliates by Palomar under Section 2.1 by:
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(i) developing any
Licensed Products intended by Laserscope or any Laserscope
Affiliates for use (in whole or in part) in the Consumer
Field;
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(ii) marketing any
Licensed Products in the Consumer Field; or
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(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
Laserscope or any Laserscope 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.
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(b) During the
Sublicense Term, Laserscope and Laserscope Affiliates shall label
Licensed Products commercialized outside the Consumer Field
pursuant to the sublicense to the Anderson Patents granted to
Laserscope and Laserscope 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.”
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(c) During the
Sublicense Term, Laserscope and Laserscope 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 Laserscope and Laserscope 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
Laserscope and Laserscope Affiliates contained in
Sections 3.2(a)(i), 3.2(a)(ii) and 3.2(c) shall not
prevent Laserscope or any Laserscope 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.
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(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.
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3.3. Economic
Adjustments for Off-Label Sales .
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(a) Laserscope and
Laserscope 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 Laserscope and Laserscope
Affiliates by Palomar under Section 2.1, for use in the
Consumer Field.
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(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 Laserscope or any
Laserscope 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, Laserscope
or the Laserscope 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
Laserscope or such Laserscope Affiliate, as applicable, shall
propose a revised calculation, Laserscope or such Laserscope
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 Laserscope or such Laserscope 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.
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(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 sales by Laserscope, Laserscope Affiliates, Laserscope
Sublicensees and Laserscope’s agents for such year of
Licensed Products, commercialized pursuant to the sublicense under
the Anderson Patents granted to Laserscope and Laserscope
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 Laserscope or Laserscope
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 ”).
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(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.
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(a) The provisions of
this Section 3 shall apply to Laserscope Sublicensees to the
same extent as Laserscope and Laserscope 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 Laserscope or Laserscope Affiliates under
this Section 3 that have accrued as of the end of the
Sublicense Term.
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(b) Palomar represents
and warrants to Laserscope as of the Execution Date that the
Gillette Agreement, excluding exhibits and redactions of other
commercially sensitive information, and attached hereto as of the
Execution Date as Appendix A , is true and complete and
in effect as of the Execution Date.
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4.1. Flow-Chart .
Attached hereto as Exhibit E 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.
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(a) Lump Sum
Payment . In consideration of the release granted in Section
7.2, Laserscope shall pay to Palomar (i) an initial payment of
One Million Seventy-Nine Thousand Five Hundred United States
Dollars (US$1,079,500), which initial payment shall be made by
Laserscope to Palomar within five (5) days of the Execution
Date, and (ii) a second payment of One Million Seventy-Nine
Thousand Five Hundred United States Dollars (US$1,079,500) (such
initial and second payments, collectively, the “Lump Sum
Payments”), which second payment shall be made by Laserscope
to Palomar upon the earlier of (a) without limiting
Section 10.3(a), the closing of a sale or transfer to a Third
Party of all or substantially all of the assets comprising
Laserscope’s aesthetic business, whether by sale, merger,
spin-off or otherwise, or (b) January 15, 2007. The Lump Sum
Payments shall be made by wire transfer and without deduction for
any taxes or other charges, as provided in Section 4.11. The
Parties acknowledge that (A) the Lump Sum Payments reflect
Laserscope’s good faith estimate of (1) the aggregate
amount of unpaid royalties that would be due pursuant to Section
4.4 for Sales of Licensed Products, excluding the Original Licensed
Product (as defined below), by Laserscope and Laserscope Affiliates
accruing before the Effective Date if such Section were applied to
such Sales prior to the Effective Date, plus (2) the
aggregate amount of unpaid royalty payments due from Laserscope for
Original Net Sales (as defined below) of the Original Licensed
Product accruing prior to the Effective Date under the Original
Agreement, in each case excluding interest, and (B) for the
avoidance of doubt, subject to payment of each of the Lump Sum
Payments, Laserscope shall not be liable for any interest due on
such unpaid royalties described in clause (A), in accordance
with the release granted by Palomar in Section 7.2(a).
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(b) No Right to
Audit . Sales of Licensed Products and such Original Net Sales
of the Original Licensed Product that give rise to the Lump Sum
Payments in Section 4.2(a) and applicable interest shall not
be auditable by Palomar.
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(c) Definitions .
For purposes of this Agreement, (i) “ Original Licensed
Product ” shall mean the “Licensed Product”
and (ii) “ Original Net Sales ” shall mean
“Net Sales”, in each case as such terms are defined in
the Original Agreement.
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4.3. No Payments for
Certain Laserscope Products . The Parties acknowledge and agree
that no royalties are due hereunder for the Sale of
(1) Laserscope Other Products, except as provided in
Section 4.4(c) to the extent that a Laserscope Other Product
becomes a Laserscope Combination Product hereunder, or
(2) Laserscope Other Modules, except as provided in
Section 4.4(c) upon their Sale as part of or for use with a
Laserscope Combination Product. No provision contained herein,
including in this Section 4.3 or Section 4.4 or the
definitions in Section 1, shall limit Palomar’s ability
to institute any suit or action and seek any remedy against
Laserscope or any Laserscope Affiliate in the event the
manufacture, use, sale, offering for sale, or importation of any
Laserscope Other Product or Laserscope Other Module infringes any
Valid Claim of the Anderson Patents, even if the same is used in
combination with a Licensed Product for which a license is granted
and royalties are paid hereunder.
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4.4. Royalties
Payable by Laserscope for Net Sales .
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(a) Laserscope Hair
Products and Laserscope Modules Added Thereto .
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(i) Laserscope shall pay
to Palomar royalties on Net Sales of each Laserscope Hair Product,
in all countries where the manufacture, use, sale, offer for sale
or importation of such Laserscope Hair Product infringes a Valid
Claim of the Anderson Patents, equal to seven and one half
percent (7.5%) of such Net Sales.
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(ii) In the event that a
Laserscope Hair Module is Sold for use with a previously Sold
Laserscope Hair Product, Laserscope shall pay to Palomar royalties
of seven and one half percent (7.5%) on Net Sales attributable
to such Laserscope Hair Module in all countries where the
manufacture, use, sale, offer for sale or importation of such
Laserscope Hair Module infringes a Valid Claim of the Anderson
Patents.
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(iii) In the event that
a Laserscope Other Module is Sold for use with a previously Sold
Laserscope Hair Product, (1) no royalties already paid or owed
to Palomar for the previous Sale of such Laserscope Hair Product
hereunder shall be creditable or refundable and there shall be no
right of set-off with respect thereto, and (2) no royalties
shall be owed Palomar hereunder on the Net Sales attributable to
such Laserscope Other Module.
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(b) Laserscope Other
Products, and Laserscope Modules Added Thereto .
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(i) No royalties shall
be owed Palomar hereunder by Laserscope on the Sale of Laserscope
Other Products.
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(ii) In the event that a
Laserscope Hair Module is Sold for use with a previously Sold
Laserscope Other Product, (1) no royalties shall be owed
hereunder for the previous Sale of the Laserscope Other Product,
and (2) Laserscope shall pay to Palomar royalties of seven and
one half percent (7.5%) on Net Sales attributable to such
Laserscope Hair Module in all countries where the manufacture, use,
sale, offer for sale or importation of such Laserscope Hair Module
infringes a Valid Claim of the Anderson Patents.
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(iii) In the event that
a Laserscope Other Module is Sold for use with a previously Sold
Laserscope Other Product, no royalties shall be owed Palomar
hereunder on the Net Sales attributable to such Laserscope Other
Module.
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(c) Royalties Payable
by Laserscope on Laserscope Combination Products .
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(i) Amount .
Laserscope shall pay to Palomar a seven and one half percent (7.5%)
royalty on the percentage set forth in the table below of the
Aggregate Net Sales (as defined below) attributable to the Sale of
each Laserscope Combination Product, in all countries where the
manufacture, use, sale, offer for sale or importation of such
Laserscope Combination Product infringes a Valid Claim of the
Anderson Patents:
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Type of Laserscope Combination
Products
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Number of Laserscope Hair
Modules
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Number of Laserscope Other
Modules
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Percentage of Aggregate Net Sales
To Use to Calculate Royalty Amount Owed
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None
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One or
more
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Zero percent
(0%), i.e., no royalty due
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One or
more
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None
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One hundred
percent (100%)
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Only
one
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One or
more
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Fifty percent
(50%)
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More than
one
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One or
more
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Seventy percent
(70%)
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(ii) Calculation of
Royalties . For purposes of calculating royalties on the Sale
of Laserscope Combination Products, and Laserscope Modules for
them, the “ Aggregate Net Sales ” shall be used,
wherein such term shall mean all of the Net Sales attributable to
all the components of a particular Laserscope Combination Product,
i.e. , the Laserscope Combination Product and all associated
Laserscope Modules, whether one or more than one Sales were
involved. Accordingly, upon each Sale of a Laserscope Combination
Product, or a Laserscope Module associated therewith, the royalties
due Palomar shall be calculated or recalculated, as the case may
be, as follows:
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(1) On the first Sale of
a Laserscope Combination Product, the royalty shall be calculated
as provided in the table above on the Net Sales attributable to
such Laserscope Combination Product (including any Laserscope
Modules Sold therewith), which shall be the Aggregate Net Sales for
such purposes;
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(2) For a Laserscope
Combination Product previously Sold, upon the Sale of a Laserscope
Module to be used with such Laserscope Combination Product, the Net
Sales from clause (1) above and the Net Sales attributable to
such Laserscope Module shall be summed to give the Aggregate Net
Sales, and the royalty shall be calculated as provided in the table
above, with the understanding that the percentage of Aggregate Net
Sales to be used to calculate the royalty owed may change if the
type of Laserscope Combination Product were to change as a result
of the Sale of such Laserscope Module, and either (A) a credit
shall be taken by Laserscope if and only to the extent that
Laserscope has already paid royalties on such Laserscope
Combination Product (and no other Laserscope Product) in excess of
the new royalty calculated, or (B) an additional amount shall
be paid by Laserscope to Palomar for any increase in the royalties
owed; and
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(3) The process in
clause (2) above shall be repeated for each Sale of a
Laserscope Module to be used with such Laserscope Combination
Product.
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Exhibit F
sets forth examples of calculating
royalties owed for the Sale of Laserscope Combination
Products.
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(iii) Counting
Laserscope Modules . With respect to the foregoing table in
Section 4.4(c)(i), for purposes of determining the number of
Laserscope Modules associated with a particular Laserscope
Combination Product:
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(1) Each separate
Laserscope Module shall count as either a Laserscope Hair Module or
a Laserscope Other Module, even if such module may be used for
multiple treatment purposes ( e.g. , a Laserscope Other
Module that was marketed for treatment of both wrinkles and acne
would count as one Laserscope Other Module for the tally);
and
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(2) Each Laserscope
Module may only be associated with a single Laserscope Combination
Product, even if such Laserscope Module is used with more than one
Laserscope Combination Product, and each Laserscope Module shall be
associated with that Laserscope Combination Product that gives to
t
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