Confidential Treatment Requested
Exhibit 10.7
3-A-4
KNOW - HOW AND TRADEMARK
LICENSE AGREEMENT
THIS KNOW-HOW AND TRADEMARK
LICENSE AGREEMENT is
entered into effective as of this 13 th day of
September, 2002 (the “Effective Date”), between
OMP , INC., a Delaware, U.S.A. corporation having its
principal place of business at 310 Golden Shore, Long Beach,
California 90802 (“OMP”), and ROHTO PHARMACEUTICAL
CO, LTD., a Japanese company having its principal place of
business at 1-8-1, Tatsumi-nishi, Ikuno-ku, Osaka 544-8666, Japan
(“Rohto”).
WHEREAS, OMP has rights in cosmetic products, formulas,
processing techniques and other know-how and trade secrets relating
to the manufacture, processing, storage and distribution of skin
care products sold under various OMP trademarks;
WHEREAS, OMP is the owner of the Obagi and Protocols
trademarks and certain other trademarks used in connection with the
sale of skin care products; and
WHEREAS, OMP desires to license to Rohto, and Rohto
desires to obtain, the rights to use such know-how and trademarks
to manufacture such product for distribution and sale solely in the
Japanese mass market channel, all on the terms and conditions set
forth below.
NOW, THEREFORE,
in consideration of mutual promises
contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the
following terms shall have the following meanings:
1.1
“Affiliate” means a corporation, partnership, trust or other
entity that directly, or indirectly through one or more
intermediates, controls, is controlled by or is under common
control with a party to this Agreement. For such purposes,
“control,” “controlled by” and “under
common control with” shall mean the possession of the power
to direct or cause the direction of the management and policies of
an entity, whether through the ownership of voting stock or
partnership interest, by contract or otherwise. In the case of a
corporation, the direct or indirect ownership of more than fifty
percent (50%) of its outstanding voting shares or the ability
otherwise to elect a majority of the board of directors or other
managing authority of the entity shall in any event be deemed to
confer control, it being understood that the direct or indirect
ownership of a lesser percentage of such shares shall not
necessarily preclude the existence of control.
THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTION.
Confidential Treatment Requested
1.2
“Facility”
means Rohto’s manufacturing
facility located within Japan, or such other facilities Rohto
determines to use at any time with prior notification to OMP in
writing.
1.3
“Know-How”
means the concept for the Licensed
Products, confidential formulae, active ingredient, delivery
systems, and clinical efficacy and safety test data, processing
techniques, product positioning and other know how, trade-secrets
and the improvement of them, Product and marketing information
including any product similar to the Product (including but not
limited to Protocols in Europe) outside of the Territory which is
owned or controlled by OMP while this Agreement is in
effect.
1.4
“Licensed
Products” means
those certain premium-priced skin care products listed on Exhibit A
that conform to the Specifications, and such other products as the
parties may hereafter mutually agree in writing.
1.5
“Specifications”
means those specifications for
formulae and processing techniques for Licensed Products set forth
on Exhibit A, as may be revised and amended from time to time by
OMP.
1.6
“Territory” means the country of Japan. The parties may
expand the Territory by mutual written agreement.
1.7
“OMP
Trademarks” means
those trademarks and tradenames set forth on Exhibit B hereto, and
such other trademarks developed by OMP and supplied to Rohto as the
parties may hereafter mutually agree in writing. The parties agree
that OMP Trademarks shall include any trademarks or tradenames
including the name “Obagi,” “Protocols” or
“Skin Health Restoration,” even if such trademarks or
tradenames are developed collaboratively between the parties during
the term of this Agreement.
1.8
“Joint
Trademarks” means
those trademarks set forth on Exhibit B hereto, and such other
trademarks jointly developed and/or obtained by Rohto and OMP as a
result of collaboration between the two parties, other than those
trademarks and tradenames described in Section 1.7.
1.9
“Rohto
Trademarks” means
those trademarks developed primarily by Rohto in relation to the
marketing and promotion of the Products in the Territory. The OMP,
Joint and Rohto Trademarks are referred to collectively in this
Agreement as the “Trademarks.”
1.10
“Net
Sales” means the
value of Products sold by Rohto calculated on the price invoiced by
Rohto to its purchaser less:
(a)
Transportation charges or allowances
if any, included in such amount:
THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTION.
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Confidential Treatment Requested
(b)
Trade, quantity or cash discounts,
and broker’s or agent’s commissions if any, allowed or
paid;
(c)
Credits or allowance, including but
not limited to rebate, discount, and refund, if any, given or made
on account of rejection or return of Products previously delivered:
and
(d)
Any tax, excise or other
governmental charge included in such amount, on the production,
sale, transportation, use or delivery of the Products.
1.11
“Channel”
means the sales and distribution
channels in which Rohto is currently engaged: specifically Drug
Stores and Variety Stores, including their mail-order and Internet
sales activities. It also may include by mutual agreement,
dispensaries attached to doctor’s offices for the sale of
over-the-counter drugs. To be considered in the Territory, mail
order and internet sales must be made to “ship to” and
billing addresses in the Territory.
1.12
“Drug
Stores” are defined
as stores specifically licensed to sell the over-the-counter drug
as a significant portion of their revenue.
1.13
“Variety
Stores” are defined
as stores that are not licensed to sell prescription medicines or
over-the-counter drugs but are otherwise similar to drug stores in
term of the type of products they carry and consumer demographics
that they target for appeal. Variety Stores sell many kinds of
goods including cosmetics, accessories and other small household or
personal items. Examples of Variety Stores include Loft and Sony
Plaza. Variety stores do not include or encompass upscale
“department” stores such as those operated by
Matsuzakaya Co., The Daimaru, Inc., Isetan Co. or Hankyu Department
Stores Inc.
ARTICLE 2
LICENSE GRANT AND EFFECTIVE DATE
2.1
License to
Know-How . Subject to the terms and conditions of this
Agreement, OMP hereby grants to Rohto the exclusive,
royalty-bearing license to use the Know-How to manufacture Licensed
Products at the Facility and to market, sell and distribute such
Licensed Products in the Channel in the Territory. OMP shall not
itself use, nor grant to any other person the right to use, the
Know-How in the Channel in the Territory to manufacture, marketing,
sale and distribution of Licensed Products or similar products
within the Channel of the Territory. OMP shall not knowingly sell
Licensed Products to persons (other than Rohto) in the Channel in
the Territory, nor shall OMP authorize any other licensee of the
Know-How to sell Licensed Products in the Channel in the
Territory.
THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTION.
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2.2
License to
Trademarks . Subject to the terms and conditions of this
Agreement, OMP hereby grants to Rohto the license to use the OMP
Trademarks and Joint Trademarks solely to market, advertise, sell
and promote Licensed Products in the Channel in the Territory. OMP
will not license and has not licensed any other party to apply such
Trademarks to Licensed Products or similar product within the
Channel of the Territory during the term of this Agreement, and
will not itself export, or knowingly support a third party
exporting, Licensed Products bearing such Trademarks into the
Channel in the Territory. OMP retains the right to license third
parties during the term of this Agreement to use within the
Territory any of OMP Trademarks or Joint Trademarks so long as they
are not marketed or sold within the Channel. OMP assumes no
responsibility and shall have no liability regarding exports by
third parties into the Territory of products, including Licensed
Products bearing the OMP Trademarks or Joint Trademarks.
2.3
No Right of
Sublicense . Rohto may not sublicense or otherwise transfer
to any third party any of Rohto’s rights to use the Know-How
or Trademarks, without the prior written consent of OMP. Such
consent shall not be unreasonably withheld.
2.4
Limited License
. This license is limited to Licensed Products
which meet or exceed the Specifications, and Rohto shall not use
the Know-How or OMP Trademarks or Joint Trademarks for any other
purpose. No other license, express or implied, is granted with
respect to the Know-How or OMP Trademarks or Joint Trademarks. OMP
reserves all rights not expressly granted hereunder.
ARTICLE 3
DISCLOSURE OF KNOW-HOW AND TECHNICAL ASSISTANCE
3.1
Disclosure of
Know-How . Within sixty (60) days after the Effective Date,
OMP shall provide Rohto with any requested materials, including
quality assurance materials, documents and other tangible
information, that embody the Know-How. Rohto agrees not to copy
such materials, without the prior written consent of OMP, except as
may be reasonably necessary to exercise its rights under this
Agreement. During the term of this Agreement, OMP shall continue to
disclose such Know-How as may be reasonably necessary for the
manufacture of the Licensed Products.
3.2
Technical
Assistance . If
Rohto requests, during the one (1) year period following the
Effective Date, OMP shall provide to Rohto the reasonable services
of appropriate personnel to assist in the transfer of the Know-How
to Rohto, to demonstrate the methods or processes of manufacturing
and packaging the Licensed Products and to assist Rohto in
establishing manufacturing processes for the Licensed Products.
Such technical assistance shall be provided at such times and in
such locations as the parties may mutually
THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTION.
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agree. After such one (1) year period, OMP may
provide to Rohto additional technical assistance upon such terms as
the parties may mutually agree.
3.3
Marketing
Assistance . OMP
will provide reasonable assistance in terms of OMP employee time
and attention to assist in the promotion of the Products in Japan.
This assistance will include the cooperation of Dr. Obagi (or his
successor) in his capacity as the Chief Medical Officer of
OMP.
ARTICLE 4
OWNERSHIP, IMPROVEMENTS AND INFRINGEMENT
4.1
Ownership
. Rohto acknowledges that OMP owns all right,
title and interest in and to the Know-How and the OMP Trademarks
and Joint Trademarks, and that Rohto will not acquire any ownership
right or interest in the Know-How or the OMP Trademarks or Joint
Trademarks by virtue of the disclosure of Know-How or license of
such Trademarks to Rohto hereunder.
4.2
Improvements and New
Products . If
Rohto discovers or devises any improvement to the Licensed
Products, or in any process or method of manufacturing the Licensed
Products, it shall disclose to OMP within thirty (30) days of
filing for any protection by Rohto of its intellectual property
related to such discovery, including but not limited to a patent
application, the nature and means of making use of the improvement
(or if Rohto declines to file for protection for such intellectual
property, at least thirty (30) days prior to implementing use of
such intellectual property in the Licensed Products). Rohto shall
not incorporate into the Licensed Products any improvements except
with the prior written consent of OMP. Upon written approval from
Rohto, not to be unreasonably withheld, OMP will also be granted a
license to use Rohto’s improvements with OMP’s products
outside of the Territory. Such grant-back license shall be
non-exclusive and with no sub-license right; provided, however,
that OMP shall have the right to sublicense to its distributors and
contract manufacturers. Such license shall be royalty-free for any
minor or incremental improvements to the Licensed Products, such as
upgrades to the quality of ingredient(s), introduction of a new
ingredient that improves the product effectiveness or changes to a
process or method of manufacturing the Licensed Products that
result in manufacturing cost reductions of 20% or less. The parties
shall negotiate separate terms in good faith for royalty on any
other significant improvements to the Licensed Products other than
the minor or incremental improvements as described in this
Section.
THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTION.
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4.3
Third Party
Infringement .
(a) Rohto shall notify OMP in
writing of any infringement, misappropriation or imitation of the
Trademarks, Know-How or the Licensed Products by any third party,
promptly after any of the foregoing comes to Rohto’s
attention. OMP shall have the right, but not the obligation, to
commence or prosecute any claims or suits in its own name or in the
name of Rohto or join Rohto as a party thereto to address such
infringement, misappropriation or imitation related to any OMP
Trademarks or Joint Trademarks. If OMP brings an action to
discontinue such infringement, misappropriation or imitation, such
action shall be solely at OMP’s cost, with Rohto providing
such reasonable cooperation as OMP may request in writing. If OMP
declines to bring an action, Rohto may do so at Rohto’s sole
cost. Rohto shall not institute any suit or take any action on
account of any such infringement, misappropriation or imitation
without the prior written consent of OMP.
(b) Rohto shall have the right, but
not the obligation, to commence or prosecute any claims or suits in
its own name or in the name of OMP or join OMP as a party thereto
to address such infringement, misappropriation or imitation related
to any Rohto Trademarks. If Rohto brings an action to discontinue
such infringement, misappropriation or imitation, such action shall
be solely at Rohto’s cost, with OMP providing such reasonable
cooperation as Rohto may request in writing. If Rohto declines to
bring an action, OMP may do so at OMP’s sole cost. OMP shall
not institute any suit or take any action on account of any such
infringement, misappropriation or imitation without the prior
written consent of Rohto. Rohto shall also notify OMP of any claims
that Rohto’s use of any of the trademarks used with the
Products conflicts with the asserted rights of others.
4.4
Cooperation
. For the purpose of maintaining the value of the
Licensed Products in the Territory, the parties agree to cooperate
in good faith for the purpose of securing and preserving
OMP’s rights in and to the Know-How and OMP Trademarks and
Joint Trademarks, and Rohto’s rights in the improvements
described in Section 4.2 and Rohto Trademarks.
4.5
Officer
Activities . OMP
shall use commercially reasonable efforts to assure that to the
extent permitted by applicable law, OMP’s directors,
officers, and employees, including Dr. Zein Obagi, will
neither promote, market, distribute, and sell nor solicit any third
party to promote, market, distribute, and sell any products similar
to or competing with the Licensed Products in the Channel in the
Territory.
THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTION.
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4.6
Power and Authority to
Act .
OMP represents and warrants that OMP
is legal and beneficial owner of all right and interest in and to
(or has sufficient licenses to) Know-How and OMP Trademarks and
Joint Trademarks and has full power and authority to grant licenses
and perform its obligations under this Agreement.
4.7
Third Party Intellectual
Property . OMP
represents and warrants that, to the best of its knowledge, OMP has
no knowledge of any infringement or of any pending or threatened
claim relating in any manner to Know-How and OMP Trademarks; and to
the best of OMP’s knowledge, the Know-How is valid and
enforceable and that its use as contemplated under this Agreement
would not infringe any third party’s intellectual
property.
4.8
Trademark
Reputation . OMP
agrees to use commercially reasonable efforts to maintain good-will
and good reputation of OMP Trademarks and Joint Trademarks. Both
parties further covenant not to use door-to-door sales, or multi
level distribution channel as their distribution channel in the
Territory.
ARTICLE 5
PRODUCT QUALITY AND MANUFACTURING PRACTICES
5.1
Quality of Licensed
Products . Rohto acknowledges that, if the Licensed
Products fail to conform to the Specifications, or otherwise are
not consistent with OMP’s image and reputation for overall
high quality products, then the substantial goodwill which OMP has
built up and now possesses in connection with the Know-How and OMP
Trademarks and Joint Trademarks will be impaired. Accordingly,
Rohto hereby agrees that:
(a) The Licensed Products (including
all packaging, labeling and advertising) shall conform to the
Specifications therefor, and be of high standards and of such
quality, style and appearance as shall (in the judgment of OMP) be
reasonably adequate and suited to their exploitation to the best
advantage and to the protection of the Know-How, OMP Trademarks,
Joint Trademarks and goodwill pertaining thereto;
(b) The Licensed Products shall be
manufactured, processed, labeled, marketed, sold and distributed in
accordance with all applicable laws, rules and regulations, and
shall not be adulterated, contaminated or misbranded within the
meanings of any applicable law or regulation; and
(c) The policies for the marketing,
distribution and sale of the Licensed Products by Rohto shall be of
high standards and to the best advantage of the Know-How and
Trademarks and that the same shall in no manner reflect adversely
upon the good name of OMP, or upon any of its products, the
Know-How or the Trademarks.
THE SYMBOL [***] IS USED TO INDICATE THAT A
PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTION.
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Notwithstanding the foregoing, in no
event may OMP require Rohto to manufacture any Licensed Product to
Specifications that do not comply with applicable laws.
5.2
Manufacturing
Practices . Without limiting the generality of any
obligations of Rohto hereunder, Rohto agrees to meet or exceed all
its manufacturing practices and standards (as of the Effective
Date) with respect to all manufacturing activities for the Product.
Rohto shall provide OMP with written notice of any material changes
in such manufacturing practices. During the term of this Agreement,
Rohto agrees that OMP or its agent (reasonably acceptable to Rohto)
will be permitted to inspect the Facility annually to assure
compliance with such manufacturing practices; and, OMP shall
provide Rohto with a copy of the results of such inspection. If
such inspection discloses deficiencies in the Facility, OMP may
request, and Rohto shall implement, corrective actions, at
Rohto’s expense and on a timetable mutually acceptable to the
parties. In addition, in such event, OMP shall have the right to
conduct reasonably frequent inspections of the Facility. OMP shall
have the right to terminate this Agreement if Rohto fails to
implement commercially reasonable corrective actions. OMP shall
also be permitted, at its own expense, to place a representative at
the Facility to monitor Rohto’s performance hereunder for the
initial production of each new Licensed Product.
ARTICLE 6
MARKETING AND SALES
6.1
Submission for
Approval . Rohto shall submit a representative sample of
its proposed advertising and promotional materials (including,
without limitation, packaging, package inserts, labels, tags,
advertising copy, advertising layouts, radio and television
presentations, publicity and promotional materials, catalogues and
other sales or trade literature, all of which shall hereinafter be
collectively referred to as the “Materials”) pertaining
to the Licensed Products to OMP for written approval before prior
to the launch of each new Licensed Product. OMP reserves the right
to disapprove of any proposed copy and in such case, shall provide
appropriate changes or comments to Rohto. OMP will notify Rohto of
the approval status within ten (10) business days after receipt of
such materials. Failure to notify Rohto of such status within ten
(10) business days following the request for approval shall
constitute approval. Thereafter, Rohto will have no obligation to
seek approval for minor changes including but not limited to
introducing a new size/SKU of an existing product or formula, and
adding or deleting a non-active ingredient by 2% or less or
changing a non-active ingredient by 2% or less. Rohto will,
however, submit more significant changes to OMP for its prior
written approval. Examples of significant changes include a new
product launch, a line extension (introducing a unique new product
not a new size/SKU of an existing product or formula), a change in
logo dimensions/proportions, a significant change in formulations
(adding/deleting an active ingredient), or
