[COHERENT LETTERHEAD]
February 1, 1999
Xx. Xxxxx X. Xxxxxxx
Chief Executive Officer
Palomar Medical Technologies, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Dear Xxx:
This letter is to confirm the agreement between Coherent, Inc.
("Coherent") and Palomar Medical Technologies, Inc. ("Palomar") relating, to the
Sales Agency, Development and License Agreement dated November 17, 1998 ("Sales
Agency Agreement") pending the Closing of the Agreement and Plan of
Reorganization dated as of December 7, 1998 ("Agreement and Plan of
Reorganization") as follows:
1. Effective from January 20, 1999 until the first to occur of (i) the
satisfaction of all of Coherent's closing conditions set forth in Section 6.2
(except for Section 6.2(i)) (the "Closing Conditions") of the Agreement and Plan
or Reorganization or (ii) termination of the Agreement and Plan of
Reorganization, Coherent hereby consents to the appointment of other sales
agents and/or distributors for Xxxxxxx'x xxxx laser based hair removal products.
As consideration for Coherent waiving- its exclusive rights to market and sell
these products in accordance with the terms of the Sales Agency Agreement,
Palomar agrees to pay Coherent S2,739.73 per day between January 20, 1999 and
the first to occur of satisfaction of all Closing- Conditions or termination of
the Agreement and Plan of Reorganization. This amount shall be paid at Closing
by a deduction in the Merger Consideration, or if the Closing, does not occur,
within 15 days of termination of the Agreement and Plan of Reorganization. If
the Closing does not occur, all such marketing and sales rights shall
exclusively revert back to Coherent unless Coherent agrees with Palomar in
writing to extend this arrangement. In addition, Palomar may also at any time
immediately terminate its obligation to pay Coherent $2,739.73 by notifying
Coherent in writing that exclusive rights to distribute Xxxxxxx'x xxxx laser
based hair removal products are reverting back to Coherent. During the remaining
term of the Sales Agency Agreement, Coherent shall be entitled to its full
commission for any sales of Xxxxxxx'x xxxx laser based hair removal products
occurring after the date of reversion of such exclusive rights to Coherent.
2. Coherent agrees to purchase at least $125,000 of spare parts
relating to the LightSheer at Star's cost. As consideration for such pricing,
Coherent agrees to provide Star with a line of credit up to $750,000. Coherent
shall have the right to purchase up to $250,000 of LightSheer spare parts at
Star's cost. In the event Coherent purchases more
than $125,000 of such spare parts, the line of credit shall be increased by
$2,000 for every $ 1,000 of purchases in excess of S 125,000. In no event shall
the line of credit exceed $1 million. Any loans under this paragraph shall be
'interest free. Amounts drawn on this line of credit shall be used for Star's
working- capital purposes only. The principal amount shall be due and payable
upon the earlier of the Closing- (in which case Star can decide whether to repay
such amount or have it included as a liability on the Closing Balance Sheet) or
15 days following termination of the Agreement and Plan of Reorganization. Loans
shall be evidenced by a promissory note in substantially the form attached
hereto as Exhibit A.
3. Palomar agrees that the LightSheer EP and LightSheer SP shall be
considered Distributed Products under the Sales Agency Agreement and that
Coherent shall have the exclusive right to market and sell such products
according to the Sales Agency Agreement. In regards to the LightSheer EP and SP
products, we agree as follows:
a.The Light Sheer EP will have the following pricing and
commission structure:
Price Coherent Palomar
End-User $125,000 $47,000 $78,000
Distributor $100,000 S22,000 $78,000
b. The LightSheer SP pricing, and commission will be:
Price Coherent Palomar
End-User $105,000 S35,000 $70,000
Distributor $90,000 S20,000 $70,000
c. Coherent shall not sell these products at prices less than
those quoted above without Palomar's prior approval. In the event that Coherent
sells these products for prices in excess of those quoted above, Coherent's
commission shall be increased by 60% of such excess amount. Notwithstanding the
immediately preceding sentence, Coherent's commission on sales to distributors
of the LightSheer SP shall be $20,000 until the purchase price exceeds $97,000,
at which point it shall be increased by 60% of any excess over $97,000.
d. Coherent agrees not to announce these products prior to
February 1, 1999.
e. in addition to the 95 units already committed for shipment
in January, February and March, 1999, Coherent will buy five demos at $72,000
each.
Terms that are not otherwise defined herein shall have the meaning
assigned to them in the Sales Agency Agreement or the Agreement and Plan of
Reorganization, as applicable.
If this letter accurately sets forth your understanding of our
agreement, please countersign this letter and return a copy to me at your
earliest convenience.
Sincerely,
/s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
Executive Vice President & CFO
AGREED AND ACCEPTED
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Xxxxx X. Xxxxxxx
Chief Executive Officer
Date: January 1999
EXHIBIT A
PROMISSORY NOTE
Santa Clara, California
January ___, 1999
FOR VALUE RECEIVED, the undersigned, Star Medical Technologies, Inc., a
California corporation ("Star"), promises to pay to Coherent, Inc., a Delaware
corporation ("Coherent"), or order, the principal sum of S . No interest shall
accrue on the outstanding principal balance. The principal amount shall be due
and payable on or before the earlier of (1) the closing, of the Agreement and
Plan of Reorganization between Coherent, PMTI and others dated December 7, 1998
(either by payment directly to Coherent or having- the principal amount included
as a liability on the Closing Balance Sheet) or (ii) 15 days following
termination of such Agreement and Plan of Reorganization.
Should the principal not be paid in a timely manner, interest shall
accrue on the outstanding principal and interest balance at the lesser of 1 V2%
per month or the highest rate permitted by law.
Star shall reimburse Coherent for all costs and expenses incurred by it
and shall pay the reasonable fees and disbursements of counsel to Coherent in
connection with the enforcement of Coherent's rights hereunder.
No amendment, modification or waiver of any provision of this Note nor
consent to any departure by Star therefrom shall be effective unless the same
shall be in writing- and signed by Coherent and then such waiver or consent
shall be effective only 'in the specific instance and for the specific purpose
for which given.
Star hereby waives any requirement of notice of dishonor, notice of
protest and protest.
This Note shall be deemed to be a contract made under the laws of the
State of California and shall be construed in accordance with the laws of said
State. This Note shall be binding upon Star and its successors and assigns and
the terms hereof shall inure to the benefit of Coherent and its successors and
assigns, including subsequent holders hereof. The holding, of any provision of
this Note to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provisions and the other provisions of this Note
shall remain in fall force and effect.
STAR MEDICAL TEC@LNOLOGIES, INC.
By
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