SETTLEMENT AGREEMENT

 

THIS NON-EXCLUSIVE PATENT LICENSE OUTSIDE CONSUMER FIELD (this “Agreement”) is entered into this September 15, 2011 (the “Effective Date”), by and among Palomar Medical Technologies, Inc., a Delaware corporation, with offices at 15 Network Drive, Burlington, MA 01803 USA (“Palomar”), Candela Corporation, a Delaware corporation with offices at 530 Boston Post Road, Wayland, MA 01778 USA (“Candela”), and Syneron, Inc., a Delaware corporation with offices at 3 Goodyear, Unit A, Irvine, California 92618 USA (“Syneron”).  Palomar, Candela and Syneron each referred to herein as a “Party”, and together, the “Parties.”

 

 

 

WITNESSETH:

 

WHEREAS, Palomar, Candela and Syneron are parties to certain patent-related Lawsuits (as defined in the Settlement Agreement (as defined below));

 

WHEREAS, Palomar, Candela and Syneron have agreed to enter into that certain Settlement Agreement, to be executed contemporaneously with this Agreement (the “Settlement Agreement”), pursuant to which Palomar, Candela and Syneron will settle the Lawsuits 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;

 

WHEREAS, Syneron desires to obtain, and Palomar is willing to grant, a non-exclusive sublicense under the Anderson Patents to develop and commercialize Syneron Products (as defined below) under the following terms and conditions; and

 

WHEREAS, Palomar desires to obtain, and Candela is willing to grant, a non-exclusive (sub)license under the Candela Patents (as defined below) 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:

 

1.1. “Affiliate” shall mean, as to any person, any corporation, firm, partnership, entity or other person that, now or hereafter, directly or indirectly, controls, is controlled by, or is under common control with such person, where “control” means the capacity to designate, appoint or otherwise determine the board of directors or other governing authority of such person, whether by law or in fact, and whether by (i) ownership of more than fifty percent (50%) of the equity or rights or shares in profits and losses (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of such person, (ii) voting rights or management contract or agreement, (iii) any other contract or agreement that grants to any other person effective control over the affairs and activities of such person, or (iv) some combination of the foregoing.

 

1.2. “Anderson Patents” shall mean (i) the Patents set forth on Exhibit A, 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).

 

1.3. “Candela 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).

 

1.4. “Component” shall mean any handpiece, module, accessory, part, replacement part, or other component (including any lens, optical component, tip, software or other item) of any product or system.

 

1.5. “Consumer Field” shall mean the field in which products or systems (and their Components) 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.

 

1.6. “Excluded Technology” as of a point in time, shall mean any product of a Third Party (i) that Palomar is accusing of infringement under any Anderson Patent in a then-pending suit or action, provided that (1) if (A) Palomar accuses such Third Party of infringement under any Anderson Patent pursuant to a suit or action instituted after the Effective Date (and such Third Party was not accused by Palomar of such infringement pursuant to a suit or action as of the Effective Date) (a “Later Sued Third Party”), (B) Syneron or its Affiliate is at the time of such institution of such suit or action, or has been in the last six (6) months prior to such institution of such suit or action, in active negotiations with such Later Sued Third Party with respect to a potential business transaction (which can be evidenced by Syneron through reasonable documentation) and (C) the definitive documentation for such transaction is executed within six (6) months after the filing of such suit or action, then the products of such Later Sued Third Party relevant to such business transaction will not be covered by this definition and (2) if Syneron or its Affiliate incorporates any non-core Components of such Later Sued Third Party in any Syneron Products prior to such institution of such suit or action, then such non-core Components will not be deemed Excluded Technology to the extent incorporated in Syneron Products (including if Syneron and its Affiliates continue to incorporate such non-core Components in Syneron Products), or (ii) with respect to which Palomar has obtained a then-outstanding injunction preventing the making or sale of such Third Party product based on infringement of any Anderson Patent (and such Third Party’s making or selling of such product has not been licensed to do so under the applicable Anderson Patent for such product).

 

1.7. “Excluded Third Party” shall mean a Third Party making or selling Excluded Technology.

 

1.8. “Exhibit C Third Party” shall mean those companies listed on Exhibit C.

 

1.9. “MGH” shall mean The General Hospital Corporation in Boston, Massachusetts.

 

1.10. “MGH Agreement” shall mean that certain “Amended and Restated License Agreement” between Palomar and MGH effective as of December 20, 2007, as such agreement may be amended or restated after the Effective Date in a manner that is not materially inconsistent with the terms of this Agreement.

 

1.11. “Palomar Product” shall mean any product or system (and their Components), now or hereafter Sold by Palomar or its Affiliates, the manufacture, use, sale, offering for sale, or importation of which, absent the license granted by Candela in Section 2.2(a), would infringe a Candela Patent, plus improvements thereto, other than any such products, systems and Components for which Palomar or its Affiliate is serving substantially only as a distributor.

 

1.12. “Palomar Sublicensee” shall mean any Third Party to which Palomar or a Palomar Affiliate grants a permitted sublicense pursuant to Section 2.2(b) under the license grant from Candela in Section 2.2(a).

 

1.13. “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.

 

1.14. “Professional Field” shall mean the field in which products or systems (and their Components) 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 re-Sale to any person or entity for personal use).

 

1.15. “Sale” shall mean, with respect to a product, system or Component, 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 exchanged for the use of such product, system or Component.

 

1.16. “Syneron Product” shall mean any products or systems (and their Components), now or hereafter Sold by Syneron or its Affiliates (other than Excluded Third Parties), the manufacture, use, sale, offering for sale, or importation of which, absent the sublicense granted by Palomar in Section 2.1(a), would infringe an Anderson Patent, plus improvements thereto, other than (a) any such products, systems and Components for which Syneron or its Affiliate is serving substantially only as a distributor, and (b) Excluded Technology.  Notwithstanding the foregoing, improvements to Syneron Products expressly excludes the incorporation of any Excluded Technology.

 

1.17. “Syneron Sublicensee” shall mean any Third Party to which Syneron grants a permitted sublicense pursuant to Section 2.1(b) under the sublicense grant from Palomar in Section 2.1(a)

 

1.18.  “Syneron Subsidiaries” shall mean any corporation, firm, partnership, entity or other person that, now or hereafter, directly or indirectly, is controlled by Syneron Medical Limited, where “control” means the capacity to designate, appoint or otherwise determine the board of directors or other governing authority of such person, whether by law or in fact, and whether by (i) ownership of more than fifty percent (50%) of the equity or rights or shares in profits and losses (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of such person, (ii) voting rights or management contract or agreement, (iii) any other contract or agreement that grants to any other person effective control over the affairs and activities of such person, or (iv) some combination of the foregoing.

 

1.19. “Third Party” shall mean any person or entity, other than Palomar, Candela or Syneron, or their respective Affiliates.

 

2. License Grants.

 

2.1. By Palomar.

 

(a) Syneron Products.  Palomar hereby grants to Syneron and its Affiliates a worldwide, perpetual, irrevocable, fully paid up (subject to Section 3.1), royalty-free, non-exclusive sublicense, under the Anderson Patents, to make, use, sell, offer for sale, export and import Syneron Products, in each case only for hair removal and only outside of the Consumer Field.  It is understood and agreed that the foregoing sublicense grant does not include any right to have made, have used, have sold, have offered for sale or have imported Syneron Products or otherwise to subcontract any Third Party to make, use, sell, offer for sale or import Syneron Products, except as set forth in Section 2.1(b).

 

(b) Limited Sublicensing Rights.  Syneron and its 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(a), nor shall any purported sublicenses under such sublicense grants made by Syneron, its Affiliates or any of their respective sublicensees prior to the Effective Date be valid or enforceable, except Syneron and its Affiliates may grant sublicenses only as may be necessary for (i) the Sale of Syneron Products by Third Parties acting as distributors (for clarity, excluding any re-Sale of a product by Syneron or its Affiliate to a Third Party from which it purchased such product or such Third Party’s Affiliate, except if the product is a non-core Component that is integrated into finished goods), (ii) the manufacture of Syneron Products by Third Parties for Sale only to Syneron or its Affiliates or such Third Party distributors (for clarity, excluding any manufacturing activities based on any design primarily owned by a Third Party), or (iii) the development and commercialization of Syneron Products in a collaboration between Syneron (or its Affiliate) and a Third Party in which Syneron (or its Affiliate) has substantial development and/or commercialization obligations; provided that, for each of clauses (i), (ii) and (iii), any such Third Parties are not Excluded Third Parties at the time such sublicense is granted.  Syneron Sublicensees shall not have the right to grant any sublicenses under any such sublicense grant by Syneron.  Apart from the foregoing limited right to grant further sublicenses, Syneron shall not have any right to Transfer (as defined in Section 2.3(b)) such sublicense grant except pursuant to Section 9.3.  No purchaser of any Syneron 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(a), notwithstanding the patent exhaustion/first sale doctrine; provided, however, the sublicense grant set forth in Section 2.1(a) includes immunity for infringement (whether direct, contributory, inducement of infringement or otherwise) of the Anderson Patents by Syneron and its Affiliates’ respective suppliers, manufacturers, assemblers, contractors, service providers, distributors, resellers, sales representatives, customers and end users, and all persons acting by, through, under or in concert with Syneron or its Affiliates, but only to the extent they are acting in their capacities as such, and only with respect to Syneron Products exploited within the scope of the sublicense grant set forth in Section 2.1(a).

 

(c) License Field Limitation.  Notwithstanding anything contained herein to the contrary, the sublicense grant provided for in Section 2.1(a) does not include a license under the Anderson Patents within the Consumer Field.  The rights of Syneron and its Affiliates with respect to the Consumer Field are addressed in that certain Consumer License Term Sheet (“Consumer Field Agreement”).

 

(d) Worldwide License.  Subject to the terms of the sublicense grant set forth in Section 2.1(a) and without limiting the limited scope thereof, a particular unit of Syneron Product shall be licensed under all those claims of Anderson Patents throughout the world that would be practiced by the making, having made, using, selling, offering for sale, exporting, or importing of such unit of Syneron Product, regardless of where such action occurs or the country where such Anderson Patents have issued, and such practice shall be deemed to exhaust all such geographic (but not field-based) claims with respect to such unit of Syneron Product.  To the extent that, notwithstanding the foregoing, any such claim is not exhausted under the applicable law of any country because such action did not occur in such country, the distributors, resellers, customers and end users of Syneron or any of its Affiliates that acquire such unit of Syneron Product in such country shall be deemed to be licensed under such claim to make, use, offer for sale, sell, export, and import such unit of Syneron Product outside the Consumer Field.

 

(e) [Intentionally left blank.]

 

(f) 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.

          

            (g) Excluded Third Parties.  The Parties intend that no Excluded Third Party, or any of their Excluded Technology, is to be granted any rights under the Anderson Patents sublicensed by Palomar under Section 2.1(a).  Thus, the Parties have agreed to preclude any assignment of this Agreement by Syneron to any Excluded Third Party under Section 9.3(a) and any Excluded Third Party that becomes a direct or indirect subsidiary or parent of Syneron will not be deemed an “Affiliate” of Syneron hereunder.  Further, Syneron and its Affiliates hereby agree that to the extent that any of them acquires any rights or interest in or to any Excluded Technology from any person or entity while such person or entity is an “Excluded Third Party” hereunder, whether by assignment under Section 9.3(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(a) (or any sublicense thereunder granted pursuant to Section 2.1(b)) shall not apply to such Excluded Technology during the period in which such Excluded Third Party is an “Excluded Third Party” hereunder, and Palomar and its sublicensees shall retain any and all rights to enforce the Anderson Patents against Syneron, its Affiliates, such Excluded Third Party or any other Third Party with respect to the Excluded Technology.  Additionally, the Parties have agreed that upon any assignment of this Agreement by Syneron to any Exhibit C Third Party under Section 9.3(a), or if Syneron is otherwise acquired by any Exhibit C Third Party, the definition of Syneron Products shall be automatically limited to exclude the products or systems (other than non-core Components), and improvements thereof, Sold by such Exhibit C Third Party (and its Affiliates) as of immediately prior to such assignment.  Candela shall not have any right to assign this Agreement separately from Syneron.

 

2.2. By Candela.

 

(a) Palomar Products.  Candela hereby grants to Palomar and its Affiliates a worldwide, perpetual, irrevocable, fully paid up, royalty-free, non-exclusive license, under the Candela Patents, to make, use, sell, offer for sale, export and import Palomar Products outside of the Consumer Field.  It is understood and agreed that the foregoing sublicense grant does not include any right to have made, have used, have sold, have offered for sale or have imported Palomar Products or otherwise to subcontract any Third Party to make, use, sell, offer for sale or import Palomar Products, except as set forth in Section 2.2(b).

 

(b) Limited Sublicensing Rights.  Palomar and its Affiliates shall not have any right to grant to any Third Parties any sublicense under the (sub)license grant set forth in Section 2.2(a), nor shall any purported sublicenses under such sublicense grants made by Palomar or any of its Affiliates or sublicensees prior to the Effective Date be valid or enforceable, except Palomar and its Affiliates may grant sublicenses only as may be necessary for (i) the Sale of Palomar Products by Third Parties acting as distributors (for clarity, excluding  any re-Sale of a product by Palomar or its Affiliate to a Third Party from which it purchased such product or such Third Party’s Affiliate, except if the product is a non-core Component that is integrated into finished goods), (ii) the manufacture of Palomar Products by Third Parties for Sale only to Palomar or its Affiliates or such Third Party distributors (for clarity, excluding any manufacturing activities based on any design primarily owned by a Third Party), or (iii) the development and commercialization of Palomar Products in a collaboration between Palomar or its Affiliate and a Third Party in which Palomar or its Affiliate has substantial development and/or commercialization obligations.  Palomar Sublicensees shall not have the right to grant sublicenses under such sublicense grants by Palomar.  Apart from the foregoing limited right to grant sublicenses, Palomar shall not have any right to Transfer such license grant except pursuant to Section 9.3(a).  No purchaser of any Palomar Product shall, by operation of this Agreement, receive any license, sublicense or other rights in, to or under the Candela Patents that exceeds the scope and terms of the license grant set forth in Section 2.2(a), notwithstanding the patent exhaustion/first sale doctrine; provided, however, the license grant set forth in Section 2.2(a) includes immunity for infringement (whether direct, contributory, inducement of infringement or otherwise) of the Candela Patents by Palomar and its Affiliates’ respective suppliers, manufacturers, assemblers, contractors, service providers, distributors, resellers, sales representatives, customers and end users, and all persons acting by, through, under or in concert with Palomar or its Affiliates, but only to the extent they are acting in their capacities as such, and only with respect to Palomar Products exploited within the scope of the license grant set forth in Section 2.2(a).

 

2.3. Related Licensing Provisions.

 

(a) Prosecution.  As between the Parties, each Party shall have the sole right (but not the obligation) in its sole discretion (subject to, for Palomar, the MGH Agreement) to prosecute, maintain, enforce and defend any Patents (sub)licensed by such Party to the other Party hereunder, and such other Party shall have no rights with respect to any such activities.

 

(b) Other Transactions.  (i) 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 any and all of the Anderson Patents or the MGH Agreement and (ii) Candela may Transfer to a Third Party any and all of the Candela Patents, in each case provided that any such transaction is made subject to (and each Party shall make each such transaction subject to) all rights and sublicense(s) of the other Party arising from this Agreement and shall not impose any additional obligations on such other Party.

 

(c) Licensing Fees.  Except as otherwise expressly provided herein, any amounts or other consideration owed to any Third Party by either Party as (sub)licensor on account of the grant of the (sub)licenses contained in this Section 2 shall be the sole responsibility of the Party granting the (sub)license.

 

2.4. MGH Agreement.  Syneron hereby acknowledges that a copy of the MGH Agreement (subject to redaction of commercially sensitive information) has been made publicly available by Palomar in connection with Palomar’s filing on Form 8-k, dated March 20, 2008, with the United States Securities and Exchange Commission.  Without limiting Article 4, in the event that the MGH Agreement is terminated for any reason, Palomar shall have no liability of any kind whatsoever as a result of such termination.

 

2.5. No Other Rights.  Each Party acknowledges and agrees that, as between the Parties, Candela owns or has all right, title and interest in and to the Candela Patents, and Palomar and MGH have all right, title and interest in and to the Anderson Patents, other than in each case with respect to non-exclusive (sub)license grants already made by the Parties in the applicable license field hereunder, and that (i) in the case of Candela, Palomar shall acquire no right, title or interest in or to the Candela Patents, by implication, estoppel or otherwise, other than the (sub)license grant to Palomar set forth in Section 2.2(a) or as otherwise expressly provided herein, and (ii) in the case of Palomar, Syneron shall acquire no right, title or interest in or to the Anderson Patents, by implication, estoppel or otherwise, other than the sublicense grant to Syneron set forth in Section 2.1(a) or as otherwise expressly provided herein.

 

3. Compensation.

 

3.1. Upfront Fee.  Syneron shall pay to Palomar within two (2) business days of the Effective Date a non-refundable amount equal to Thirty One Million U.S. Dollars (US$31,000,000).  The payment required by this Section 3.1 shall be made by wire transfer to Palomar to the bank account specified below, without deduction for any taxes or other charges.

 

**

3.2. Taxes and Other Charges.  In addition to any other amounts due hereunder, Syneron and its Affiliates shall pay all foreign, federal, state, municipal and other governmental excise, sales, use, property, customs, import, value added, gross receipts and other taxes, fees, levies and duties of any nature now in force or enacted in the future that are assessed upon or with respect to the manufacture, use, offer for sale, sale or importation of the Syneron Products, or otherwise arising in connection with this Agreement or any transactions contemplated hereby, but excluding United States taxes based on Palomar’s net income.  If Syneron is required by law to make any deduction or withhold from any sum payable to Palomar by Syneron hereunder, then Syneron shall be entitled to make such deduction or withhold such sum and remit such deduction or sum to the relevant taxing authority.  In the event that Syneron makes such a deduction or withholds such a sum, Syneron shall promptly furnish Palomar with official tax certificates as evidence of tax payments on Palomar's behalf, in order to support Palomar's claim for any United States income tax credit with respect to any such taxes so withheld and paid to a government by Syneron on Palomar’s behalf.

 

4. Representations and Warranties with License; Disclaimer; No Consequentials.

 

4.1. General.  Each Party represents and warrants to the other Party as of the Effective Date that:

 

(a) it is a corporation duly organized, validly existing and in good standing under the laws of the state or other jurisdiction of its organization, and has full corporate power and authority to enter into this Agreement;

 

(b) this Agreement has been duly executed and delivered by it and is a binding obligation of it, enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally, and to general equitable principles; and

 

(c) it is not subject to a petition for relief under any bankruptcy legislation, it has not made an assignment for the benefit of creditors, it is not subject to the appointment of a receiver for all or a substantial part of its assets, and it is not contemplating taking or becoming subject to any of the foregoing.

 

** This material was omitted pursuant to a request for confidential treatment and was separately filed with the SEC on September 21, 2011.

 

 

 

4.2. By Palomar.  Palomar hereby represents and warrants and covenants to Syneron that (a) Palomar has the full power to enter into this Agreement and to perform its obligations hereunder; (b) except as otherwise set forth in the MGH Agreement, Palomar is the exclusive licensee of the entire right, title and interest in and to the Anderson Patents; (c) Palomar has the sole right and authority to enter into this Agreement and grant the rights, licenses, and immunities granted hereunder, without the need for any licenses, releases, consents, approvals or immunities not yet granted or obtained; and (d) Palomar has not previously granted and shall not grant any rights in the Anderson Patents that would cause Syneron or Syneron’s Affiliates not to have the sublicense granted in Section 2.1(a).  

 

4.3. By Syneron and Candela.  Syneron and Candela hereby represent and warrant and covenant to Palomar that (a) Syneron and Candela have the full power to enter into this Agreement and to perform their obligations hereunder; (b) Candela is the owner or exclusive licensee of the entire right, title and interest in and to the Candela Patents; (c) Syneron and Candela have the sole right and authority to enter into this Agreement and grant the rights, licenses, and immunities granted hereunder, without the need for any licenses, releases, consents, approvals or immunities not yet granted or obtained; and (d) Candela has not previously granted and shall not grant any rights in the Candela Patents that would cause Palomar or Palomar’s Affiliates not to have the sublicense granted in Section 2.2(a).

 

4.4. Disclaimer.  EXCEPT AS EXPRESSLY PROVIDED HEREIN OR IN THE SETTLEMENT AGREEMENT OR THE CONSUMER FIELD AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, OR ARISING BY CUSTOM OR TRADE USAGE, WITH RESPECT TO THE SYNERON PRODUCTS, PALOMAR PRODUCTS, ANDERSON PATENTS, CANDELA PATENTS OR ANY OTHER ITEMS OR RIGHTS PROVIDED HEREUNDER, OR OTHERWISE IN CONNECTION WITH THIS AGREEMENT.  WITHOUT LIMITING THE FOREGOING, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES AND REPRESENTATIONS, WHETHER EXPRESS OR IMPLIED, (i) THAT ANY PRODUCT OR SYSTEM, OR ITS DEVELOPMENT, MANUFACTURE, MARKETING, SALE, IMPORTATION, DISPOSITION OR USE, OR ANY OTHER ACTIVITIES CONTEMPLATED BY THIS AGREEMENT, SHALL BE FREE FROM INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER RIGHTS OF ANY THIRD PARTY, (ii) AS TO THE QUALITY OR PERFORMANCE OF ANY SUCH ITEMS, OR (iii) OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NONINFRINGEMENT.

 

4.5. No Consequential Damages.  OTHER THAN FOR THE INDEMNIFICATION OBLIGATIONS OF SYNERON, ON ONE HAND, AND PALOMAR, ON THE OTHER HAND, CONTAINED IN SECTION 6, IN NO EVENT SHALL ANY PARTY BE LIABLE UNDER THIS AGREEMENT FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS OR LOSS OF USE), WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR ANY CAUSE OF ACTION RELATING TO THE SYNERON PRODUCTS, PALOMAR PRODUCTS, CANDELA PATENTS, ANDERSON PATENTS OR ANY OTHER ITEMS OR RIGHTS PROVIDED HEREUNDER, OR OTHERWISE IN CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT SUCH PARTY KNOWS OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGE.

 

5. Disputes.

 

5.1. Disputes.  The Parties recognize that disputes as to certain matters may from time to time arise that relate to any Party’s rights or obligations hereunder.  It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedited manner by mutual cooperation.  To accomplish this objective, the Parties agree to adhere to the following procedures if and when a dispute arises under this Agreement: by a written notice sent by a Party, any such disputes shall be first referred to executive officers designated by each affected Party (the date of such notice, the “Dispute Notice Date”).  If such executive officers are unable to resolve such a dispute within thirty (30) days of the Dispute Notice Date, the matter shall be presented to the chief executive officers of such Parties, or their respective designees (which designees must be senior executives), for resolution through good faith discussions.  In the event that the chief executive officers or their designees cannot resolve the dispute within thirty (30) days of being requested by a Party to resolve a dispute, any such Parties may take such other lawful action as such Party deems appropriate in its sole discretion, including pursuing litigation against the others.  The effectiveness of, and any time periods contained in, this Section 5.1 shall run concurrently with any other provisions and time periods described in this Agreement, including any provisions or time periods relating to breach or termination of this Agreement.

 

5.2. Equitable Relief.  Notwithstanding the foregoing dispute resolution procedure and notwithstanding the exclusive jurisdiction described in Section 9.6, in the event of an actual or threatened breach hereunder, the aggrieved Party may seek equitable relief (including restraining orders, specific performance or other temporary or permanent injunctive relief) without submitting to such dispute resolution procedure and in any court having jurisdiction if there is a reasonable likelihood of the occurrence of irreparable harm during the period of the dispute resolution procedure.

 

5.3. [Intentionally left blank.]

 

5.4. Challenges. Patent Challenges (as defined in Section 7.4), and any disagreement between the Parties regarding the subject matter thereof, shall not be subject to this Section 5 or otherwise be deemed disputes for purposes of this Section 5.

 

6. Indemnification.

 

6.1. Indemnification by Syneron.  Syneron shall indemnify, defend and hold Palomar and its directors, officers, employees and agents (“Palomar Indemnitees”) harmless from and against any and all claims, demands, actions, losses, liabilities, damages and expenses (including reasonable costs and expenses of attorneys, professionals and accountants) (collectively, “Losses”) incurred by any Palomar Indemnitee that arise out of Third Party claims, demands, actions (“Third Party Claims”) in connection with the development or manufacture of any Syneron Products or the marketing, distribution, Sale, disposition or use by anyone (including Syneron, Syneron Sublicensees and any of their agents, resellers and customers) of any such Syneron Products or provision by anyone of any related services.  The foregoing shall include, without limitation, indemnification by Syneron against all Losses that arise out of Third Party Claims in connection with (i) any representation, warranty or agreement that is made by Syneron (or any Syneron Sublicenees or agents or resellers of the foregoing) to or with any reseller, customer or other Third Party with respect to any Syneron Product or related service or that otherwise arises out of any such transaction, or (ii) any claim by such Third Party that any such Syneron Product or part thereof is defective (whether in design, materials, workmanship or otherwise) or that otherwise relates to any attribute, condition or failure of any such Syneron Product, including any claim of product liability (whether brought in tort, warranty, strict liability or other form of action) or negligence.  Palomar may monitor at its own expense in the defense of any such Losses.  Syneron, in the defense of any such Losses, shall not, except with the approval of Palomar, consent to entry of any judgment or enter into any settlement which (1) would result in injunctive or other relief being imposed against Palomar, or (2) does not include as a term thereof the giving by the claimant to Palomar an unconditional release from all liability in respect to such Losses.

 

6.2. Indemnification by Palomar.  Palomar shall indemnify, defend and hold Syneron and its directors, officers, employees and agents (“Syneron Indemnitees”) harmless from and against any and all Losses incurred by any Syneron Indemnitee that arise out of Third Party Claims in connection with the development or manufacture of any Palomar Products or the marketing, distribution, Sale, disposition or use by anyone (including Palomar, Palomar Sublicensees and any of their agents, resellers and customers) of any such Palomar Products or provision by anyone of any related services.  The foregoing shall include, without limitation, indemnification by Palomar against all Losses that arise out of Third Party Claims in connection with (i) any representation, warranty or agreement that is made by Palomar (or any Palomar Sublicensees or agents or resellers of the foregoing) to or with any reseller, customer or other Third Party with respect to any Palomar Product or related service or that otherwise arises out of any such transaction, or (ii) any claim by such Third Party that any such Palomar Product or part thereof is defective (whether in design, materials, workmanship or otherwise) or that otherwise relates to any attribute, condition or failure of any such Palomar Product, including any claim of product liability (whether brought in tort, warranty, strict liability or other form of action) or negligence.  Syneron may monitor at its own expense in the defense of any such Losses.  Palomar, in the defense of any such Losses, shall not, except with the approval of Syneron, consent to entry of any judgment or enter into any settlement which (1) would result in injunctive or other relief being imposed against Syneron, or (2) does not include as a term thereof the giving by the claimant to Syneron an unconditional release from all liability in respect to such Losses.

 

7. Term and Termination.

 

7.1. Term.  This Agreement shall become effective as of the Effective Date, and shall remain in full force and effect until the expiration of the last-to-expire Anderson Patent or Candela Patent (the “Term”), unless earlier terminated upon the mutual written agreement of the Parties.

 

7.2. Effect of Expiration or Termination.  Expiration or termination of this Agreement shall not affect any rights or obligations of the Parties, including the payment of amounts due, which have accrued up to the date of such expiration or termination.  Upon expiration or termination of this Agreement, the provisions of Sections 1, 2, 3, 4, 5, 6, 7.2, 7.3, 7.4 and 9 shall survive and shall continue in full force and effect in accordance with their terms.

 

7.3. Consequences of Breach.

 

(a) Breach and Exclusive Remedies.  If Palomar on the one hand or Syneron on the other breaches this Agreement and such breach remains uncured for more than forty-five (45) days after the receipt by the breaching Party of notice specifying the breach and requiring its remedy, provided, prior to such notice being delivered, the Parties had fully complied with Section 5 (except as may otherwise be provided in Section 5.2); then on each such occasion, the non-breaching Party shall have the right:

 

(I)           to seek monetary damages for such breach, whether or not cured, and/or

 

(II)           to seek equitable relief (including restraining orders, specific performance or other injunctive relief) to prevent such uncured breach from continuing or such breach from occurring again in the future.

 

The prevailing Party in such an action for monetary damages or equitable relief shall be entitled to recover reasonable attorneys’ fees and expenses from the other Party.  The Parties acknowledge and agree that the remedies provided for in this Section 7.3 are the sole and exclusive remedies for any breach of this Agreement, and no breach of this Agreement shall constitute grounds for termination of this Agreement or any of the rights or obligations set forth herein.

 

7.4. Patent Challenges.

 

(a) Syneron and Syneron Subsidiaries shall not directly or indirectly (i) bring, pursue, maintain, assert or raise, (ii) cause or support any Syneron Sublicensee to bring, pursue, maintain, assert or raise or (iii) cause or support  any Third Party to bring, pursue, maintain, assert or raise, in each case any claim, counterclaim, defense or other contention or assertion in any court or other governmental forum of competent jurisdiction (including any patent office) seeking a judgment or other decision that any claims of the Anderson Patents are invalid or unenforceable or not patentable (any such claim or other assertion, a “Patent Challenge”).  For clarity, compelled testimony (including oral, documentary or other testimony in response to any Third Party subpoena) shall not amount to a “Patent Challenge” hereunder, provided that (a) Syneron provides Palomar with advance written notice of such testimony as early as practicable, and (b) such testimony is limited to the scope required by law to the extent possible.

 

(b) Syneron acknowledges and agrees that the provisions of this Section 7.4 are reasonable, valid and necessary for the adequate protection of Palomar’s interest in and to the Anderson Patents, and that Palomar would not have granted to Syneron and its Affiliates the non-exclusive sublicense under the Anderson Patents provided for in Section 2 or otherwise entered into the Settlement Agreement without all of the provisions of this Section 7.4.  Palomar shall have the right, at any time in its sole discretion, to strike this Section 7.4 in part or in full from this Agreement, and Palomar shall have no liability of any kind whatsoever as a result of the presence or absence of this Section 7.4.  This Section 7.4 shall not be understood or applied to alter any standing or jurisdictional requirements that may apply to any Patent Challenge.

 

8. Future Syneron Acquisitions

 

8.1 Currently Licensed Third Parties.  If, after the Effective Date, Syneron or one of its Affiliates either directly or indirectly acquires an entity other than an Excluded Third Party, and such entity is, immediately prior to the date of the acquisition, licensed under one or more of the Anderson Patents outside the Consumer Field through an existing agreement pursuant to which royalties are paid based on then-existing product sales, then, upon the closing of such acquisition such entity shall become licensed under this Agreement, except that such entity (or Syneron or its Affiliate, as applicable) shall continue to owe such royalties on the products previously Sold by such entity and/or its Affiliates (and improvements thereto) at the rates and pursuant to the terms set forth in such existing agreement; provided, however, if such entity is not the beneficiary of a most favored licensee provision with respect to such royalties, such entity will be subject to the most favored licensee provision contained in Section 4.6 of the Non-Exclusive Patent License, dated November 6, 2006, between Palomar and Cynosure, Inc., as set forth in the copy of such agreement filed by Palomar on Form 8-K (the “MFN Provision”).

 

8.2 Unlicensed Third Parties.  If, after the Effective Date, Syneron or one of its Affiliates either directly or indirectly acquires an entity other than an Excluded Third Party, and such entity is, immediately prior to the date of the acquisition, not licensed under one or more of the Anderson Patents outside of the Consumer Field but sells products that would infringe the Anderson Patents in the absence of such a license, then, upon the closing of such acquisition and such entity thereby becoming licensed under this Agreement, such entity shall pay on a quarterly basis a royalty equal to seven and one-half percent (7.5%) with respect to aggregate prospective Net Sales (as defined in Palomar’s then standard Professional Field License Agreement as of the Effective Date) of the products previously Sold by such entity and/or its Affiliates (and improvements thereto) outside the Consumer Field; provided, however, that such entity will be subject to the MFN Provision.

 

8.3 Syneron Acquisitions. Notwithstanding any agreement entered into by Palomar to the contrary, if any Syneron Subsidiary (other than an Excluded Third Party) either directly or indirectly acquires an entity licensed by Palomar under one or more of the Anderson Patents, then Palomar shall automatically be deemed to give consent to such acquisition and waive any provision in any such license that would otherwise prevent or deter the consummation of the acquisition or terminate, narrow, or render null or void, or prevent the assignment or transfer to such Syneron Subsidiary of such license

 

9. General.

 

9.1. Entire Agreement; Counterparts.  The Settlement Agreement and filings and agreements contemplated thereby, the Consumer License Agreement (including all exhibits and attachments thereto) and this Agreement (including all exhibits and attachments hereto) constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes and replaces all previous agreements, practices or courses of dealings between the Parties, whether written or oral, relating to the subject matter hereof.  This Agreement may be executed in counterparts with the same force and effect as if each of the signatories had executed the same instrument.

 

9.2. No Agency or Joint Venture Relationship.  Nothing contained herein shall be deemed to create any association, partnership, joint venture or relationship of principal, agent, master or servant between the Parties hereto, or to provide any Party with the right, power or authority to incur any obligation or make any representations, warranties or guarantees on behalf of any other Party.

 

9.3. Assignment.

 

(a) Each Party shall not assign this Agreement, in whole or in part, or otherwise Transfer any of its rights or interests, nor delegate any of its obligations, hereunder, in any case whether voluntarily, involuntarily, by operation of law or otherwise, provided that a Party may assign this Agreement as a whole to the assigning Party’s surviving or resulting entity in a Change of Control.  Any attempt to assign, Transfer or delegate all or any portion of this Agreement in violation of this Section 9.3(a) shall be null and void.  “Change of Control” of a Party shall mean: (i) a bona fide merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Party and a Third Party pursuant to which the stockholders of the Party immediately preceding such transaction hold less than a majority of the equity interests in the surviving or resulting entity of such transaction; (ii) any Third Party “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes a “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under such Act) (other than the applicable Party), directly or indirectly, of securities of such Party representing fifty percent (50%) or more of the combined voting power of such Party’s then outstanding securities; or (iii) a sale or other disposition by a Party of assets or earning power aggregating a majority of the assets or earning power of the Party or of those assets relating primarily to the subject matter of this Agreement.

 

(b) This Agreement shall be binding upon, and inure to the benefit of, the legal representatives, successors and permitted assigns of the Parties.  For clarity and without limiting the generality of this Section 9.3(a), any permitted assignee of a Party pursuant to Section 9.3 shall be bound by all of the Party’s obligations hereunder.  Except for Third Party indemnitees, there shall be no third-party beneficiaries, either express or implied, to this Agreement.

 

9.4. Severability.  Except as otherwise expressly provided herein, if any term, covenant or condition of this Agreement or the application thereof to any Party or circumstance shall, to any extent, be held to be invalid or unenforceable (including the terms of Section 7.4) by a court of competent jurisdiction, then (i) the remainder of this Agreement, or the application of such term, covenant or condition to Parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law, and (ii) the Parties hereto covenant and agree to renegotiate any such invalid or unenforceable term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the Parties that the basic purposes of this Agreement are to be effectuated.

 

9.5. Waivers; Amendments; Supplements.  Except as expressly provided herein, no waiver by any Party of a breach of any covenant or condition of this Agreement by any other Party shall be construed to be a waiver of any succeeding breach of the same or any other covenant or condition.  Except as otherwise expressly provided herein, this Agreement or any Exhibit hereunder may not be changed or amended except by a writing expressly referring to this Agreement signed by both Parties.

 

9.6. Jurisdiction.  The Parties hereby irrevocably consent to the exclusive jurisdiction, venue and forum of the United States District Court for the District of Delaware or the appropriate state court in Delaware for any action or proceeding arising out of or relating to this Agreement or any agreement or document delivered in connection herewith or therewith, and agree that all claims in respect of such action or proceeding may be heard and determined in such state or federal court.  Each of the Parties consents to the jurisdiction of such court or courts and agrees that the service upon it of a summons and complaint by ordinary mail shall be sufficient for such court or courts to exercise personal jurisdiction over the Parties.  The Parties waive any objection to any action or proceeding in the United States District Court for the District of Delaware on the basis of forum non-convenes, lack of personal jurisdiction or otherwise.  Notwithstanding the foregoing, if any action or proceeding may not be brought in any such court because all such courts lack subject matter jurisdiction, the Parties may bring such action or proceeding in a court of appropriate jurisdiction.

 

9.7. Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Delaware, without regard to its principles of conflicts of laws; provided that any dispute relating to the scope, validity, enforceability, infringement, patentability or misuse of any Patent shall be governed by, and construed and enforced in accordance with, the substantive laws of the jurisdiction in which such Patent originates.

 

9.8. Certain Expenses.  Except as otherwise expressly provided herein, each of the Parties hereto shall bear its own costs and expenses arising out of the negotiation, execution and performance of this Agreement.

 

9.9. Cumulative Remedies.  Except as otherwise expressly provided herein, no remedy granted to any Party herein shall be exclusive of any other remedy, and each remedy shall be cumulative with every other remedy herein or now or hereafter existing at law, in equity or otherwise.

 

9.10. Further Actions.  Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

9.11. Parties Advised by Counsel.  This Agreement has been negotiated between unrelated Parties who are sophisticated and knowledgeable in the matters contained in this Agreement and who have acted in their own self interest.  In addition, each Party has had the opportunity to seek advice of legal counsel.  This Agreement shall not be interpreted or construed against any Party to this Agreement because that Party or any attorney or representative for that Party drafted or participated in the drafting of this Agreement.

 

9.12. Notices.  All notices, demands, requests, approvals, consents or other communications to be given or delivered under this Agreement shall be in writing and shall be deemed to have been given: (i) when delivered in person or by courier or confirmed facsimile; (ii) upon confirmation of receipt when sent by certified mail, return receipt requested; or (iii) upon receipt when sent by reputable private international courier with established tracking capability (such as DHL, FedEx, or UPS), postage pre-paid, and addressed as set forth as the case may be, to the noticed Party at the address set forth below, or such other address as a Party may specify by written notice to the other.

 

Notices shall be sent to Palomar at:

 

Palomar Medical Technologies

15 Network Drive

Burlington, MA 01803

Attention: CEO

Facsimile: (781) 993-2377

 

with a required copy to:

 

and a further required copy to:

 

Goodwin Procter LLP

Exchange Place

53 State Street

Boston, MA 02109

Attention: Kingsley L. Taft, Esq.

Facsimile: (617) 523-1231

 

and to Syneron at:

 

Syneron Inc.

3 Goodyear, Unit A

Irvine, California 92618

Attention: Louis Scafuri

Facsimile: (949) 716-8287

 

and to Candela at:

 

Candela Corporation

530 Boston Post Road

Wayland, MA 01778

Attention: Louis Scafuri

Facsimile: (508) 358-5602

 

and a further required copy to:

 

One Azrieli Center

Round Building

Tel Aviv 67021

Israel

Attention: Gene Kleinhendler, Esq.

Facisimile: 972-3 ###-###-####

and a further required copy to:

 

Morrison & Foerster LLP

555 West Fifth Street

Suite 3500

Los Angeles, CA 90013-1024

Attention: Anthony Press, Esq.

Facisimile: (213) 892-5454

 

9.13. Captions, Section Headings.  As used in this Agreement, “including” means “including but not limited to”, and “herein”, “hereof” and “hereunder” refer to this Agreement as a whole.  The Section headings used herein are for reference and convenience only, and shall not enter into the interpretation of this Agreement.  Unless otherwise expressly provided herein, any reference to a number of “days” hereunder shall refer to calendar days.  References to Sections include subsections, which are part of the related Section (e.g., a section numbered “Section 2.1(b)” would be part of “Section 2”, and references to “Section 2” would also refer to material contained in the section described as “Section 2.1(b)”).

 

9.14. No Admissions.  This Agreement is entered into in order to compromise and settle disputed claims, without any concession or admission with respect to the scope, validity or invalidity, or enforceability or nonenforceability of the Anderson Patents or the Candela Patents by any Party, and without any acquiescence on the part of any Party as to the merit of any claim, defense, affirmative defense, counterclaim, liabilities or damages related to the Patents or the pending patent related Lawsuits (as defined in the Settlement Agreement).  Neither this Agreement nor any part thereof shall be, or be used as, an admission of scope, infringement, or liability by any Party or any Third Party, at any time for any purpose.

 

 

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IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound hereby, have each caused its duly authorized representative to execute and deliver this Agreement under seal as of the Effective Date.

 

 

 

Palomar Medical Technologies, Inc.

 

By:      /s/ Joseph P. Caruso      

Name: Joseph P. Caruso

Title: CEO

 

 

 

Syneron, Inc.

 

By:      /s/ Louis P. Scafuri      

Name: Louis P. Scafuri

Title: CEO

 

 

 

Candela Corporation

 

By:       /s/ Louis P. Scafuri          

Name: Louis P. Scafuri

Title: CEO

 

 

 

 

U.S. Patent Nos. 5,595,568 (Ex Parte Reexam Certificate 7161st), 5,735,844 (Ex Parte Reexam Certificate 7214th)

European Patent Nos. EP 0 806 913 B1 & EP 1 230 900 B1

           (all validated in France, Germany, Great Britain, Italy, and Spain)

Chinese Patent No. ZL96191751.2

Japanese Patent Nos. 3,819,025; 4,117,846; 4,159,595

Canadian Patent No. 2,210,720

Hong Kong Patent No. 1048754

Canada: Appl. No. 2,550,682*

Europe:  Appl. No. EP040077257 (Div of EP Appl. No. 02 07 6295.1)

Japan: Appl. No. 2008-49548 (Div of JP 3,819,025)*

*Has been or is intended to be abandoned.

 

**

 

 

 

 

 

 

 

** This material was omitted pursuant to a request for confidential treatment and was separately filed with the SEC on September 21, 2011.

** This material was omitted pursuant to a request for confidential treatment and was separately filed with the SEC on September 21, 2011.