**Exhibit 99.2**

 

FIRST AMENDMENTtoAMENDED AND RESTATED LICENSE AGREEMENTforDYNAMIC SKIN COOLING METHOD AND APPARATUSU.C. Case No. 93-364

 

THIS is a FIRST AMENDMENT to the AMENDED AND RESTATED LICENSEAGREEMENT (the Agreement) by and between The Regents of the University ofCalifornia (The Regents), a California corporation, having its statewideadministrative offices at 1111 Franklin Street, Oakland, California 94607 andCandela Corporation (Licensee), a Delaware corporation, having a principal placeof business at 530 Boston Post Road, Wayland, MA 01778-1886.

 

RECITALS

 

WHEREAS, certain inventions, characterized as“Method and Apparatus for the Dynamic Cooling of Biological Tissue Treated viaThermal Mediated Surgery” (Invention), were made at the University ofCalifornia, Irvine, by Drs. J. Stuart Nelson, Thomas E. Milner, andLars O. Svaasand, and are claimed in Regents’ Patent Rights;

 

WHEREAS, the Invention was made under fundingprovided in part by the U.S. Department of Health and Human Services (DHHS);

 

WHEREAS, the parties previously entered intoan agreement titled “Exclusive License Agreement between The Regents of theUniversity of California and Candela Laser Corporation for Dynamic Skin CoolingMethod and Apparatus,” effective as of December 19, 1994 and Amended as ofSeptember 30, 1998 granting certain rights to the Invention to Licensee;

 

WHEREAS, disputes arose between the partiesconcerning their rights and obligations under the prior license agreement,resulting in a lawsuit in the District of Massachusetts and an arbitration;

 

WHEREAS,Licensee and The Regents resolved the lawsuit and arbitration between them byentering into the Agreement effective August 11, 2000;

 

WHEREAS,further disputes arose between the parties concerning their rights andobligations under the Agreement, resulting in an arbitration (“the SecondArbitration”), in which a Final Award was made on May 6, 2005;

 

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WHEREAS,Licensee and The Regents find that laser systems utilizing the DCD provide oneof the safest laser treatment for the public and believe that the public needsare well served by Licensee’s marketing and promoting laser systems utilizingthe DCD as Licensee’s primary cooling technology; and

 

WHEREAS,Licensee has requested relief from the royalties set forth in the Agreement andconfirmed in the Second Arbitration and The Regents is willing to accommodateLicensee’s request in return for the consideration set forth herein,

 

NOW,THEREFORE, the parties agree as follows:

 

1.             EffectiveJuly 3, 2005 Section 1.8 of the Agreement is deleted in its entiretyand replaced with the following:

 

**“1.8****        “Net Invoice Price” means (a) thegross invoice price charged by and the value of any other consideration owed toLicensee for a Patent Product or Patent Method, or (b) in those instanceswhere the Patent Product or Patent Method is combined in any manner with anyother product or service, the gross invoice price charged by and the value ofany other consideration owed to Licensee for the combined product or service,less the following items, but only to the extent that they are identifiedseparately on a bill or invoice:**

 

#### **i**.                                         allowancesactually granted to customers for rejections, returns, or prompt payment andvolume discounts;

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#### **ii**.                                     freight,transport backing, and insurance charges associated with transportation;

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#### **iii.**                                 taxes,including Deductible Value-Added Tax, tariffs or import/export duties based onSales when included in the gross invoice price, but excluding value-added taxesother than Deductible Value Added Tax or taxes assessed on income derived fromSales; “Deductible Value-Added Tax” means only the portion of the value-addedtax that is actually incurred and is not reimbursable, refundable, orcreditable under the tax authority of any country;

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#### **iv.**                                    rebates or discountspaid or credited pursuant to applicable law; and

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#### **v.**                                        any extendedwarranties (any warranty providing coverage beyond the industry standard of aone-year warranty) offered by Licensee to its customers, so long as customershave the option of purchasing Patent Products from Licensee without an extendedwarranty.”

#### ** **

2.             EffectiveJuly 3, 2005, Section 1.9 of the Agreement is added:

 

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**“1.9****                        “Net Sales”means:**

 

(1.9a)      exceptin the instances described in Subparagraphs 1.9b, 1.9c, and 1.9d of thisParagraph, the Net Invoice Price;

 

(1.9b)      forany Relationship-Influenced Sale of a Patent Product or Patent Method, NetSales shall be based on the Net Invoice Price at which theRelationship-Influenced Sale Purchaser resells such Patent Product or PatentMethod;

 

**(1.9c)      inthose instances where a Patent Product or Patent Method is not Sold, but isotherwise exploited, the Net Sales for such Patent Product or Patent Methodshall be the Net Invoice Price of products or services of the same or similarkind and quality, Sold in similar quantities, currently being offered for Saleby Licensee.  Where such products orservices are not currently being offered for Sale by Licensee, the Net Salesfor a Patent Product or Patent Method otherwise exploited, for the purpose ofcomputing royalties, shall be the average Net Invoice Price at which productsor services of the same or similar kind and quality, Sold in similarquantities, are then currently being offered for Sale by othermanufacturers.  Where such products orservices are not currently Sold or offered for Sale by Licensee or others, thenthe Net Sales shall be Licensee’s cost of manufacture of Patent Product or thecost of conducting the Patent Method, determined according to GenerallyAccepted Accounting Principles (“GAAP”), plus one hundred percent (100%); or**

 

**(1.9d)      fora Reacquisition Sale Or Exploitation, Net Sales shall mean the Net InvoicePrice upon the Reacquisition Sale Or Exploitation of a Patent Product or PatentMethod.”**

 

3.                                       EffectiveJuly 3, 2005, Section 1.10 of the Agreement is added:

 

“1.10       “Relationship-Influenced Sale” means aSale of a Patent Product or Patent Method, or any exploitation of the PatentProduct, between Licensee and (i) an Affiliate; (ii) a Joint Venture;or (iii) a Related Party.”

 

4.                                       EffectiveJuly 3, 2005, Section 1.11 of the Agreement is added:

 

“1.11       “Relationship-InfluencedSale Purchaser” means the purchaser of Patent Product or Patent Method in aRelationship-Influenced Sale.”

 

5.                                       EffectiveJuly 3, 2005, Section 1.12 of the Agreement is added:

 

“1.12       “ReacquisitionSale Or Exploitation” means those instances where Licensee acquires a PatentProduct or Patent Method and then subsequently Sells or otherwise exploits suchPatent Product or Patent Method.”

 

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6.             EffectiveJuly 3, 2005, Section 1.13 of the Agreement is added:

 

“1.13       “Sale”means the act of selling, leasing or otherwise transferring, providing, orfurnishing for use for any consideration. Correspondingly, “Sell” means to make or cause to be made a Sale, and “Sold”means to have made or caused to be made a Sale.”

 

7.             EffectiveJuly 3, 2005, Section 1.14 of the Agreement is added:

 

“1.14       “Related Party” means a corporation,firm, or other entity with which, or individual with whom, Licensee (or any ofits respective stockholders, subsidiaries or Affiliates) have an agreement,understanding, or arrangement (for example, but not by way of limitation, anoption to purchase stock or other equity interest, or an arrangement involvinga division of revenue, profits, discounts, rebates, or allowances) unrelated tothe Sale or exploitation of the Patent Products or Patent Method without whichsuch other agreement, understanding, or arrangement, the amounts, if any,charged by Licensee to such entity or individual for the Patent Product orPatent Method would be higher than the Net Invoice Price actually received, orif such agreement, understanding, or arrangement results in Licensee extendingto such entity or individual lower prices for such Patent Product or PatentMethod than those charged to others without such agreement, understanding, orarrangement buying similar products or services in similar quantities.”

 

8.             Section 3.1of the Agreement is deleted in its entirety and replaced with the following:

 

“3.1         EffectiveJuly 3, 2005, as further consideration for all the rights and licensesgranted to Licensee, Licensee will pay to The Regents an earned royalty at therate of three percent (3%) based on the Net Sales of each laser system Sold ifthe laser system contains any operative element of a DCD or otherwise enables aDCD (“Earned Royalty”).  In the case ofSales to resellers (*e.g.*distributors or original equipment manufacturers) that are notRelationship-Influenced Sales, the three percent (3%) Earned Royalty in thisparagraph shall be based on Licensee’s Net Sales on the Sale to its reseller.”

 

9.             Section 3.2is deleted in its entirety and replaced by the following:

 

“3.2         Inconsideration for the reductions herein in Licensee’s royalty obligations,Licensee will pay The Regents for the life of this agreement an annual licensemaintenance fee of three hundred thousand dollars ($300,000), which shall bepaid in a lump sum of three million dollars ($3,000,000) within ten (10) daysof signing of this First Amendment by both parties.  This payment is non-refundable and is notcreditable against royalties or any other obligations Licensee may have to TheRegents.”

 

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10.                                 EffectiveJuly 3, 2005, Section 3.6 is deleted in its entirety and replacedwith the following:

 

“3.6         Licenseeshall pay a minimum annual royalty of one million dollars ($1,000,000) for thecalendar years 2006 through 2010. Thereafter, and for the life of this agreement, Licensee shall pay aminimum annual royalty of the lesser of five-hundred thousand dollars($500,000) or thirty percent (30%) of the previous year’s Earned Royalties, butin no case shall the minimum annual royalty for any year be less thantwo-hundred fifty thousand dollars ($250,000). This minimum annual royalty shall be paid to The Regents by February 28of each year and shall be credited against the earned royalty due and owing forthe calendar year in which the minimum payment was made.”

 

11.                                 EffectiveJuly 3, 2005, Section 5.4 is deleted in its entirety and replacedwith the following:

 

“5.4         After thefirst commercial Sale of a Patent Product, Licensee will provide to The Regentsquarterly royalty reports on or before February 28, May 31, August 31and November 30 of each year.  Eachsuch royalty report will cover Licensee’s most recently completed calendarquarter (October through December, January through March, April throughJune, and July through September) and will show for the calendar quarter:

(5.4a) the number of Patent Products Sold by Licensee;

(5.4b) the gross sales of all laser systems Sold;

(5.4c) the Net Sales of all of all laser systems Sold;

(5.4d) the invoice date and invoice number of each PatentProduct Sold;

(5.4e) the list price and Net Invoice Price of each PatentProduct Sold by Licensee;

(5.4f) the laser system type and serial number of each PatentProduct Sold;

(5.4g) a reconciliation of reported royalty revenues andpublicly reported revenues;

(5.4h) documentation of Net Sales of DCDs Sold separatelyfrom any laser system;

(5.4i) the royalties, in U.S. dollars, payable hereunder withrespect to all Sales of Patent Products; and

(5.4j) the exchange rates used, if any.”

 

12.                                                         Effective July 3, 2005, Section 11.1 is deleted inits entirety and replaced with the following:

 

“11.1       Upontermination of this Agreement, Licensee shall have the privilege of disposingof all previously made or partially made Patent Products, but no more, within aperiod of one hundred and twenty (120) days, provided, however, that the Saleof such Patent Products shall be subject to the terms of this Agreementincluding, but not limited to the payment of royalties on the Net Sales ofPatent Products at the rates and at the times provided herein and the renderingof reports in connection therewith.”

 

13.                                                         Effective July 3, 2005, Section 18.1 is deleted inits entirety and replaced with the following:

 

“18.1       Any noticeor payment required to be given to either party shall be deemed to have beenproperly given and to be effective (a) on the date of delivery ifdelivered in person or (b) five (5) days after mailing if mailed byfirst-class certified mail, postage paid, to the respective addresses givenbelow, or to such other address as it shall designate by written notice givento the other party.

 

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| In the case of Licensee:    |   | Candela Corporation                          |
|-----------------------------|--------|----------------------------------------------|
|                        |   | 530 Boston Post Road                         |
|                        |   | Wayland, MA 01778-1886                       |
|                        |   | Attention: Mr. Gerard E. Puorro         |
|                        |   |                                         |
| With a copy to:             |   | Joseph A. Capraro, Jr.                  |
|                        |   | Proskauer Rose LLP                           |
|                        |   | One International Place                      |
|                        |   | Boston, MA 02110-2600                        |
|                        |   |                                         |
| In the case of The Regents: |   | THE REGENTS OF THE UNIVERSITY  OF CALIFORNIA |
|                        |   | Office of the President                      |
|                        |   | Office of Technology Transfer                |
|                        |   | 1111 Franklin Street, 5th Floor              |
|                        |   | Oakland, California 94607-5200               |
|                        |   | Telephone: (510) 587-6000                    |
|                        |   | Facsimile: (510) 587-6090                    |
|                        |   | Attention:                                   | Executive Director, |
|                        |   |                                         | Research Administration and |
|                        |   |                                         | Technology Transfer |
|                        |   | Referring to: U.C. Case No. 93-364      |
|                        |   |                                         |
| With a copy to:             |   | Office of Technology Alliances               |
|                        |   | 380 University Tower                         |
|                        |   | 4199 Campus Drive                            |
|                        |   | Irvine, California 92697-7700                |
|                        |   | Telephone: (949) 824-7297                    |
|                        |   | Facsimile: (949) 824-2899                    |
|                        |   | Attention:                                   | David G. Schetter |
|                        |   |                                         | Assistant Vice Chancellor |

 

14.         Effective July 3,2005, Section 27.6 is deleted in its entirety.

 

15.         No amendment to ormodification of this First Amendment to Agreement will be valid or binding uponthe parties unless made in writing and signed on behalf of each party.

 

16.         This First Amendment toAgreement embodies the entire understanding of the parties relating to thesubject matter hereof, and supersedes all previous communications,representations, or understandings, whether oral or written, between theparties relating to the subject matter hereof.

 

IN WITNESS WHEREOF, both The Regents andLicensee have executed this First Amendment to Agreement, in duplicateoriginals, by their respective officers hereunto duly authorized, on the dayand year hereinafter written.

 
| CANDELA CORPORATION: | THE REGENTS OF THE UNIVERSITY  OF CALIFORNIA: |
|----------------------|-----------------------------------------------|
|                 |                                          |
| By:                  |                                          |   | By: |   |   |
|                 |                                          |   |   |   |   |
| Name:                |                                          |   | Name: |   |   |
|                 |                                          |   |   |   |
| Title:               |                                          |   | Title: |   |   |
|                 |                                          |   |   |   |   |
| Date:                |                                          |   | Date: |   |   |
|                      |                                               |  |  |  |  |  |  |  |  |  |

 

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