WWW.EXFILE.COM -- 11763 -- PALOMAR MEDICAL TECHNOLOGIES, INC. -- EXHIBIT 10.1




	



Exhibit 10.1  




DEVELOPMENT AND
LICENSE AGREEMENT 



        THIS
DEVELOPMENT AND LICENSE AGREEMENT (this “Agreement”) is entered into
as of February 14, 2003 (the “Effective Date”), by and between The Gillette
Company, a Delaware corporation (“The Gillette Company,” and collectively with
its Affiliates, “Gillette”), and Palomar Medical Technologies, Inc., a Delaware
corporation (“Palomar Medical Technologies, Inc.,” and collectively with its
Affiliates, “Palomar”). Gillette and Palomar are sometimes referred to herein
individually as a “party” and collectively as the “parties.” 




RECITALS 



        WHEREAS,
Palomar has developed light-based systems for, among other things, the management of human
hair; 



        WHEREAS,
Gillette has specialized experience in, among other things, the development and worldwide
commercialization of consumer hair management products and systems for personal use; and 



        WHEREAS,
subject to the terms and conditions set forth below, the parties desire to enter into a
collaboration for the development and commercialization of light-based, consumer products
and systems for personal use for female hair management. 



        NOW,
THEREFORE, in consideration of the foregoing premises, the mutual promises and
covenants of the parties contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows: 




ARTICLE I
R&D Program 




        1.1 In General. 



                     (a)  
          Conduct of the R&D Activities. Each of Palomar and Gillette shall
          perform, or cause to be performed, its respective R&D Activities in
          accordance with this Agreement, including the initial R&D plan attached
          hereto as Exhibit A (the “Initial R&D Plan”). The Initial R&D
          Plan shall be revised, updated and extended as the R&D Committee may direct
          at least semi-annually, with the Initial R&D Plan and any such revisions,
          updates or extensions thereto hereinafter referred to as the “R&D
          Plan.” 



                     (b)  
          Scope of the R&D Program. The purpose of the R&D Program shall be
          to develop one or more Light-Based Hair Management Products in the Female Field,
          including the First Female Product. 



                     (c)  
          Duration of the R&D Program. The term of the R&D Program shall
          commence on April 1, 2003 (the “Commencement Date”) and, unless
          earlier terminated in accordance with Section 10.4(a), shall end on the
          latest to occur of (i) nine hundred twelve (912)












      days after the Commencement
          Date, (ii) the date on which Palomar has completed the last R&D Activity
          required to be performed by Palomar pursuant to the R&D Plan, or (iii) the
          date on which Regulatory Approval in the United States is received for the First
          Female Product (the “R&D Period”). 



                     (d)  
          R&D Leader and Key Personnel. Each party shall conduct its day-to-day
          R&D Activities under the direction and supervision of a project leader
          designated by such party (the “R&D Leader”). The R&D Leader of
          each party shall be the primary contact for the other party with respect to the
          R&D Activities. The R&D Leader and the other scientific and technical
          personnel of Palomar considered by Gillette to be key personnel for the R&D
          Activities (the “Palomar Key Personnel”), and the minimum amount of
          time that each will devote to the R&D Activities, are listed by name or job
          description on Schedule 1.1(d). (For those Key Personnel listed on Schedule
          1.1(d) by job description but not by name, at the point at which Palomar assigns
          a Person to the position, it will notify Gillette in writing of the identity of
          such Person and the position to which such Person was assigned). Palomar shall
          not substitute persons for the Palomar Key Personnel or materially reduce the
          time commitment of any Palomar Key Personnel to the R&D Activities without
          the prior written approval of Gillette, which approval with respect to the
          Palomar Key Personnel other than the R&D Leader shall not be unreasonably
          withheld. Palomar shall use commercially reasonable efforts to obtain from each
          of its Key Personnel and other persons substantially involved in conducting
          Palomar’s obligations with respect to the R&D Activities, Additional
          Activities and Commercial Assessment Period Additional Activities covenants not
          to compete with Palomar in the development or commercialization of Light-Based
          Hair Management Products in the Field during such person’s involvement in
          the R&D Activities or this Agreement and for a six (6) month period
          following the termination of such person’s involvement in such activities.
          During the Restricted Access Period, Palomar shall not be required to disclose
          to Gillette or any Gillette representative serving on the R&D Committee any
          data or information concerning any Female Product, Palomar Technology or any
          other Information and Inventions, other than that data and information with
          respect to which Gillette has a right of evaluation during such period pursuant
          to Section 1.3(a)(i), or as the parties may otherwise mutually agree. 



                     (e)  
          Subcontracting. Either party may subcontract its work obligations for the
          R&D Activities; provided, however, that except in the case of
          R&D Activities designated in the R&D Plan as activities for which
          subcontractors will be used (the “R&D Plan Subcontracted
          Activities”), Palomar shall not subcontract R&D Activities without
          Gillette’s prior written consent in any instance where a single
          subcontractor Person will be paid more than seventy-five thousand dollars
          ($75,000) or in the event that all subcontractors will be paid more than three
          hundred and seventy-five thousand dollars ($375,000) in the aggregate for all
          R&D Activities (other than R&D Plan Subcontracted Activities)
          subcontracted by Palomar hereunder. Each party shall be responsible to the other
          for the performance of any of its subcontractors under any provisions of this
          Agreement for which such party is responsible. Neither party shall disclose to
          any subcontractor nor permit any subcontractor to use the other party’s
          Technology, nor any Joint Technology, Confidential Information or Controlled
          Information without provisions safeguarding non-use and non-disclosure at least
          as restrictive as those provided in this Agreement. 





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        1.2 Palomar Rights and
Obligations During R&D Period. All of Palomar’s obligations under this
Section 1.2 are subject in part to Gillette’s payment obligations with respect
to the R&D Program as provided in Section 1.3(b)(iii): 



                     (a)  
          In General. Palomar shall (i) perform, or cause to be performed, its
          R&D Activities as required pursuant to the R&D Plan in good scientific
          manner, and in compliance in all material respects with all Applicable Law and
          good clinical, laboratory and Manufacturing practices, and (ii) allocate
          sufficient time, effort, equipment and skilled personnel to complete its R&D
          Activities. Without limiting the foregoing, Palomar’s obligations under the
          R&D Plan shall include consulting with Gillette during the R&D Period
          and informing Gillette in a timely manner of Palomar’s research and
          development with respect to Female Products. 



                     (b)  
          Reporting. Within thirty (30) days after the end of each Calendar Quarter
          in which R&D Activities are performed, Palomar shall provide to the R&D
          Committee a written progress report, which report shall describe the R&D
          Activities Palomar has performed, or cause to be performed, during such Calendar
          Quarter, evaluate the work performed in relation to the goals of the R&D
          Plan, and provide such other information as may be required by the R&D Plan
          or, subject to Section 1.3(a)(i), reasonably requested by the R&D
          Committee with respect to the R&D Activities. 



                     (c)  
          Supply of Resources and Facilities for Use in R&D Program. Subject to
          Section 1.3(b)(iii), Palomar shall supply at no additional cost to
          Gillette, any and all funding, materials, equipment, facilities and other
          resources reasonably required to carry out Palomar’s obligations under the
          R&D Plan. 



                     (d)  
          R&D and Clinical Supply of Prototypes During the R&D Period.
          Subject to Section 1.3(a)(i), as provided in the R&D Plan, Palomar
          shall supply Prototypes (i) for use by Gillette in conducting an evaluation of
          the First Female Product, Palomar Technology or the R&D Activities, and (ii)
          for use by the parties in carrying out the R&D Activities, including
          Clinical Trials, in each case in the number and within the time period provided
          in the R&D Plan. Such Prototypes when provided by Palomar to Gillette shall
          be treated as Palomar Confidential Information hereunder, and during the
          Restricted Access Period, Gillette may use the Prototypes only in accordance
          with the protocols developed by Gillette, provided that, (i) prior to using the
          Prototypes, Gillette shall provide to Palomar advance written notice of such
          protocols and any material changes thereto made by Gillette subsequent to
          providing such notice, (ii) Palomar shall have forty-eight (48) hours to provide
          to Gillette comments thereon and (iii) upon Gillette’s receipt of any such
          comments prior to the expiration of such period Gillette shall consult with
          Palomar in good faith regarding such comments prior to using the Prototypes.
          Gillette shall promptly disclose to Palomar all Information and Inventions
          arising from the use of the Prototypes in accordance with
          Section 8.1(c)(i). ALL PROTOTYPES ARE PROVIDED “AS IS”, WITHOUT
          ANY REPRESENTATION OR WARRANTY OF ANY KIND. In the event that Gillette
          reasonably requests Palomar to supply more than the number of Prototypes that
          Palomar is required to deliver to Gillette pursuant to the R&D Plan, Palomar
          shall supply such additional Prototypes and Gillette shall pay for them in
          accordance with Section 1.8 as Additional Activities hereunder. 



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                     (e)  
          Regulatory Approval. Palomar shall have the right, in consultation with
          Gillette, to develop the appropriate strategy for obtaining and maintaining the
          Regulatory Approval in the United States for the First Female Product, provided
          that all IDEs, Regulatory Documentation and other filings, applications or
          requests pursuant to or in connection with the Regulatory Approval in the United
          States for the First Female Product shall be made in the name of Palomar (all
          U.S. Regulatory Documentation developed by Palomar for the First Female Product,
          the “Palomar U.S. Regulatory Documentation”). Palomar shall use
          Commercially Reasonable Efforts consistent with the R&D Plan to obtain
          Regulatory Approval for the First Female Product in the United States within the
          applicable FDA Approval Period. Palomar shall conduct all communications with
          the U.S. Regulatory Authorities with regard to the First Female Product;
          provided, however, that subject to all Applicable Law, Palomar
          shall (i) notify Gillette as soon as reasonably practicable in advance of all
          meetings and significant communications with the U.S. Regulatory Authorities
          relating to the First Female Product, (ii) permit representatives of Gillette to
          attend such meetings, unless Gillette representatives’ presence would
          materially impede the Regulatory Approval process in the United States, and
          (iii) forward to Gillette copies of written correspondence to and from the U.S.
          Regulatory Authorities related to the First Female Product, promptly upon
          submission thereto or receipt therefrom, as applicable. Notwithstanding anything
          contained in this Section 1.2(e) to the contrary, and without limitation of
          any other right or remedy that may be available to Gillette, in the event that
          Palomar refuses or otherwise fails during any one hundred and eighty (180) day
          period during the R&D Period to use Commercially Reasonable Efforts
          consistent with the R&D Plan to obtain Regulatory Approval for the First
          Female Product in the United States, upon thirty (30) days’ prior written
          notice to Palomar and Palomar’s failure to cure such refusal or failure
          within forty-five (45) days of Palomar’s receipt of such notice, Gillette
          shall have the right to seek Regulatory Approval for the First Female Product in
          the United States in the name of Gillette, and shall have the right to reference
          and otherwise use any Palomar U.S. Regulatory Documentation in connection
          therewith, consistent with the terms of the license granted by Palomar to
          Gillette in Section 4.1(a)(ii). 




        1.3 Gillette Rights and
Obligations During R&D Period. 



                     (a)  
          Gillette’s Access Rights. 



                                     (i)  
          Gillette’s Right of Evaluation During Restricted Access Period.
          During the Restricted Access Period, Gillette shall have access to clinical and
          safety data relating to the First Female Product, but no Palomar Technology or
          other Information and Inventions owned or Controlled by Palomar. During such
          period, Palomar shall supply to Gillette pursuant to Section 1.2(d) and in
          accordance with the R&D Plan such Prototypes as Gillette may reasonably
          request for the purpose of evaluating the safety, efficacy and functionality of
          such Prototypes; provided, however, that Gillette shall not
          reverse engineer, disassemble, decompile or otherwise modify, test or analyze
          the Prototypes, any part thereof or software contained therein during such
          period. 



                                     (ii)  
          Gillette’s Right of Access After Restricted Access Period. In the
          event that Gillette does not terminate this Agreement pursuant to
          Section 10.4(a), from and after the expiration of the Restricted Access
          Period, Gillette shall have the right from time to time during the R&D
          Period upon written request to Palomar to evaluate all Regulatory



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      Documentation
          and all Information and Inventions relating to or comprising any Female
          Product(s) or the Palomar Technology, but in each case only to the extent
          Controlled by Palomar. Within five (5) business days of receipt of such request,
          Palomar shall (1) provide to Gillette copies of any and all Regulatory
          Documentation, Patents and inventions disclosure documents, and copies of any
          other documentation reasonably requested by Gillette (in the form in which such
          other documentation is maintained by Palomar), (2) grant access to Gillette
          during reasonable business hours at Palomar’s research facility for
          Gillette to review all such documentation and such Information and Inventions,
          and (3) respond to reasonable inquiries made by Gillette relating to such
          documentation and Information and Inventions, in each of clauses (1) and (2),
          that has not yet been disclosed to Gillette. 



                     (b)  
          Gillette Obligations. 



                                     (i)  
          In General. Gillette shall (A) perform, or cause to be performed, its
          R&D Activities as required pursuant to the R&D Plan in good scientific
          manner, and in compliance in all material respects with all Applicable Law and
          good clinical, laboratory and Manufacturing practices, and (B) allocate
          sufficient time, effort, equipment and skilled personnel to complete its R&D
          Activities. Without limiting the foregoing, Gillette’s obligations under
          the R&D Plan shall include consulting with Palomar during the R&D Period
          and informing Palomar in a timely manner of Gillette’s development and
          commercialization-related decisions with respect to Female Product(s). 



                                     (ii)  
          Regulatory Approval. Gillette shall have the right to obtain and maintain
          Regulatory Approval(s) for (A) the First Female Product in all countries other
          than the United States, and (B) all Female Products other than the First Female
          Product in all countries worldwide, and all IDEs, Regulatory Documentation, and
          other filings, applications or requests pursuant to or in connection with the
          such Regulatory Approvals shall be made in the name of Gillette (or its
          designee). During the Exclusivity Period, at Gillette’s written request,
          Palomar shall consult with Gillette on the process of filing for and obtaining
          Regulatory Approvals for such Female Products in such countries. Gillette shall
          pay Palomar in accordance with Section 1.8 for all Costs incurred by
          Palomar in connection with Palomar’s performance of its obligations
          pursuant to this Section 1.3(b)(ii) as Additional Activities hereunder. 



                                     (iii)  
          R&D Funding for the Initial R&D Plan. Prior to the first day of
          the applicable Calendar Quarter, Gillette shall pay to Palomar the amounts set
          forth in Section 6.1(b). Gillette’s total obligations to make payments
          to Palomar in connection with Palomar’s performance of its obligations
          under the Initial R&D Plan shall be as set forth in Section 6.1(b). In the
          event that Palomar’s costs and expenses relating to the Initial R&D
          Plan (including obtaining Regulatory Approval for the First Female Product in
          the United States) exceed the amount to be paid by Gillette to Palomar with
          respect to such activities, then Palomar shall bear such excess costs and
          expenses unless otherwise agreed in writing by the parties or except as
          otherwise provided pursuant to Section 1.6(b). 



                                     (iv)  
          Reporting. Within thirty (30) days after the end of each Calendar Quarter
          in which R&D Activities are performed, Gillette shall provide to the R&D
          Committee a written progress report, which report shall describe the R&D
          Activities Gillette has performed, or caused to be performed, during such
          Calendar Quarter, evaluate the work  




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performed in relation to
the goals of the R&D Plan, and provide such other information as may be
required by the R&D Plan or reasonably requested by the R&D Committee
with respect to the R&D Activities. 



                                     (v)  
          Gillette Costs. Gillette shall be solely responsible for all costs and
          expenses (including all its Costs) that it incurs in connection with the R&D
          Activities. 




        1.4 R&D Committee. 



                     (a)  
          Formation and Authority of R&D Committee. Palomar and Gillette shall
          establish a research oversight and management committee (the “R&D
          Committee”), which shall oversee the R&D Activities performed by the
          parties and approve any changes in the R&D Plan. 



                     (b)  
          Composition of R&D Committee. The R&D Committee shall be
          comprised of two (2) representatives of each of Gillette and Palomar. Each party
          shall designate one (1) of its representatives to be such party’s
          “R&D Committee Leader.” Each party shall notify the other of its
          initial representatives and R&D Committee Leader within ten (10) business
          days after the execution of this Agreement. From time to time, each party may
          substitute its representatives or R&D Committee Leader on three (3)
          days’ prior written notice to the other party. 



                     (c)  
          Procedural Rules of R&D Committee. The R&D Committee shall meet
          at least once each Calendar Quarter, or as otherwise agreed to by the parties,
          with the location of such meetings alternating between Palomar and Gillette
          facilities. In the event that either party hosts a R&D Committee meeting at
          a site outside of Eastern Massachusetts, the hosting party shall reimburse the
          other party for all reasonable out-of-pocket travel expenses incurred by the
          other party in having its members of the R&D Committee attend such meeting.
          The R&D Committee Leaders shall send notices and agendas for all regular
          R&D Committee meetings to all R&D Committee members. Each party shall
          use commercially reasonable efforts to cause its representatives to attend the
          meetings of the R&D Committee. A representative of Gillette shall be
          designated at all times to act as the chair of the R&D Committee (the
          “R&D Committee Chair”). The R&D Committee shall adopt such
          standing rules as shall be necessary for its work. A quorum of the R&D
          Committee shall exist whenever there is present at a meeting at least one (1)
          representative appointed by each party. Members of the R&D Committee may
          attend a meeting either in person or by telephone, video conference or similar
          means in which each participant can hear what is said by the other participants.
          Representation by proxy shall not be allowed. In addition, each party may, at
          its discretion, invite non-voting employees, and with the consent of the other
          party, consultants or vendors, to attend the meetings of the R&D Committee.
          Subject to Section 1.4(d), the R&D Committee shall take all action by
          (i) consensus of the R&D Committee Leader of both Gillette and Palomar,
          or if the R&D Committee Leader for either party is not present at the
          meeting, the other representative of such party present at a meeting at which a
          quorum exists, or (ii) by written resolution approved by all of the members
          of the R&D Committee. 



                     (d)  
          Resolution of Disputes Arising Among the R&D Committee. Issues coming
          before the R&D Committee that require action, approval or resolution and for
          which the



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 R&D Committee is
unable to reach consensus as provided in Section 1.4(c) on a mutually acceptable
action, approval or resolution, shall be resolved by the R&D Committee
Chair, provided, however, that at the written request of the
Palomar R&D Committee Leader, prior to final resolution of any dispute by
the R&D Committee Chair, a meeting shall be held between the Chief Executive
Officer of Palomar and the Vice President of Research and Development of The
Gillette Company, who shall attempt in good faith to negotiate a resolution
(subject to Board of Directors or equivalent approval, where applicable). In the
event of any such escalation of a dispute, Gillette shall retain the final right
of decision, except that in case of any disputed matter, the resolution of which
by Gillette would result in (i) a significant delay in the timetable for the
development or Regulatory Approval of the First Female Product, or (ii) an
increase in the costs relating to the development or Regulatory Approval of the
First Female Product, such change shall require the mutual written consent of
both parties unless, with respect to clause (ii) only (and not
clause (i)), Gillette agrees to bear one hundred percent (100%) of such
additional costs. This Section 1.4(d) shall not apply to the procedure
established by the parties pursuant to Section 8.2(a). 



                     (e)  
          Minutes of R&D Committee Meetings. The party hosting any meeting
          shall appoint one person (who need not be a member of the R&D Committee) to
          attend the meeting and record the minutes of the meeting. Such minutes shall be
          circulated to the parties promptly following the meeting for review, comment and
          distribution. Such minutes shall be deemed approved by both of the parties
          unless a party objects to the accuracy of such minutes by providing written
          notice to the other party within ten (10) days of receipt of such minutes.
          Any modifications to the R&D Plan approved at a R&D Committee meeting
          shall be considered approved and shall constitute an amendment thereto upon
          R&D Committee ratification of the meeting minutes related thereto. 



                     (f)  
          Limitations on Authority of R&D Committee. Each party to this
          Agreement shall retain the rights, powers, and discretion granted to it under
          this Agreement, and no such rights, powers, or discretion shall be delegated to
          or vested in the R&D Committee unless such delegation or vesting of rights
          is expressly provided for in this Agreement or the parties expressly so agree in
          writing. Except in the case of amendments to the R&D Plan made pursuant to
          Section 1.4(e), the R&D Committee shall not have the power to amend or
          modify this Agreement, which may only be amended or modified as provided in
          Section 14.7. 



        1.5 R&D Records.
Palomar and Gillette each shall maintain, or cause to be maintained, records of its
respective R&D Activities in sufficient detail and in good scientific manner
appropriate for patent and regulatory purposes, which shall be complete and accurate and
shall fully and properly reflect all work done and results achieved in the performance of
its respective R&D Activities, and which shall be retained by such party for at least
five (5) years after the termination of this Agreement, or for such longer period as may
be required by Applicable Law or for the pendency of any application for Patent. Each
party shall have the right, during normal business hours and upon reasonable notice, to
inspect and copy any such records; provided, however, that Palomar shall not
have any obligation to make such records available to Gillette during the Restricted
Access Period, to the extent that such records (a) contain information other than
information as to which Gillette has a right of evaluation during 




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such period pursuant to
Section 1.3(a)(i), or (b) concern Joint Inventions and related Joint Technology with
respect to which Palomar has no disclosure obligation pursuant to Section 8.1(c)(i). 




        1.6 Gillette’s
First Decision Point. 



                     (a)  
          The First Decision Point. On or before the First Decision Point, Gillette
          shall determine in its sole discretion whether it desires to continue
          participating in the development and commercialization of the Female Product(s).
          In the event that Gillette determines on or before the First Decision Point not
          to continue participating in such development and commercialization, Gillette
          shall terminate this Agreement pursuant to Section 10.4(d). In the event
          that Gillette fails to terminate this Agreement pursuant to
          Section 10.4(d), Gillette shall be deemed to have elected to continue
          participating in such development and commercialization and Gillette shall make
          the First Development Completion Payment to Palomar pursuant to
          Section 6.1(d)(i) on or before the First Development Completion Payment
          Date. 



                     (b)  
          Assumption that Pre-Market Approval Not Required. The Initial R&D
          Plan has been prepared and the initial R&D Payments have been determined on
          the assumption that the First Female Product will be a 510(k) Product and not a
          PMA Product. In the event that the First Female Product is determined by the FDA
          to be a PMA Product, Gillette may elect to terminate this Agreement in
          accordance with Section 10.4(b), or elect to continue participating in such
          development and commercialization for such product. In the event that Gillette
          elects to continue participating in such development and commercialization, the
          parties shall cooperate in good faith to agree upon a revised R&D Plan and
          additional R&D Payments required to implement and carry out such revised
          plan, provided that, subject to Gillette’s right to credit certain amounts
          pursuant to the proviso in this sentence, Gillette shall be solely responsible
          for any incremental Costs of Palomar and Gillette, and shall pay Palomar
          additional R&D Payments in an amount equal to Palomar’s incremental
          Costs, which result from or relate to classification of such product as a PMA
          Product; provided, however, that fifty percent (50%) of the total
          amount of such incremental Costs, not to exceed in the aggregate two million
          five hundred thousand dollars ($2,500,000), are creditable by Gillette against
          the First Development Completion Payment only (and no other payments owed by
          Gillette to Palomar hereunder), if any, owed by Gillette to Palomar. Following
          the adoption by the parties of such revised R&D Plan, the parties shall
          cooperate in good faith to implement and carry out the R&D Activities set
          out in such R&D Plan. 



        1.7 Additional Light-Based
Hair Management Product(s). After the Restricted Access Period and
during the Exclusivity Period, Palomar shall promptly notify Gillette in writing
of each Light-Based Hair Management Product other than the First Female Product,
which (a) has an application in the Female Field, (b) is reasonably expected to
be commercially successful, and (c) is Controlled by Palomar (each
an “Additional Light-Based Hair Management Product”). Palomar
shall provide to Gillette with respect to each Additional Light-Based Hair
Management Product a report (the “Additional Product Report”)
providing material data and information Controlled by Palomar, in whole or in
part, concerning (i) such product’s safety and efficacy, (ii) its
commercial potential, and (iii) the intellectual property rights Controlled by
Palomar, in whole or in part, claiming or covering such product, and



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contractual obligations of Palomar and any
known patent-related or other restriction that Palomar reasonably believes would limit or
otherwise affect the parties’ rights to fully Exploit such product. In the event that
Gillette desires to develop and commercialize such Additional Light-Based Hair Management
Product in the Female Field jointly with Palomar, the parties shall negotiate in good
faith to agree upon an R&D plan (with respect to each additional product, a
“Supplemental R&D Plan”) and R&D payments (with respect to each
additional product, “Supplemental R&D Payments”) for such product. Upon the
parties entering into a mutually acceptable written agreement adopting the Supplemental
R&D Plan and the Supplemental R&D Payments with respect to such Additional
Light-Based Hair Management Product, references herein to the “R&D Plan” and
“R&D Payments” shall automatically be deemed to include references to the
“Supplemental R&D Plan,” and “Supplemental R&D Payments,”
respectively. Any such Additional Light-Based Hair Management Product, and the
parties’ rights and obligations with respect thereto, shall be subject to the terms
and conditions of this Agreement, including ARTICLE VI, except to the extent that any term
or condition (A) applies expressly or by clear implication only to the First Female
Product developed pursuant to this Agreement, or (B) is supplemented, modified or replaced
by the Supplemental R&D Plan or Supplemental R&D Payments, or is otherwise amended
by the parties pursuant to Section 14.7. All information contained in the Additional
Product Report shall be treated as Palomar Confidential Information hereunder. This
Section 1.7 shall terminate in its entirety when the Exclusivity Period ends or is
terminated. For the avoidance of doubt, Gillette’s election not to develop or
commercialize jointly with Palomar any Additional Light-Based Hair Management Product
shall not in any way diminish or otherwise affect the licenses or other rights that are
granted by Palomar to Gillette in this Agreement. 




        1.8 Palomar Costs. 



                     (a)  
          Additional Activities. 



                                     (i)  
          Gillette may request that Palomar perform or have performed activities or
          services during the term of this Agreement, provided Gillette pay Palomar’s
          reasonable Costs arising therefrom in accordance with this Section 1.8(a),
          pursuant to various provisions of this Agreement (such activities and services
          in each case, “Additional Activities”). Additional Activities include,
          without limitation, any activities or services to be performed by Palomar that
          are subsequently added to the Initial R&D Plan. This Section 1.8
          specifies the procedure whereby Gillette shall pay Palomar’s Costs for the
          performance of Additional Activities: 



                                             (1)  
          With respect to all incremental out-of-pocket costs and expenses to be incurred
          by Palomar in the performance of Additional Activities, including all costs for
          materials, Palomar shall have the right to invoice Gillette for fifty percent
          (50%) of such out-of-pocket costs and expenses upon Palomar issuing a purchase
          order to a Third Party giving rise to them, and Gillette shall pay Palomar such
          amounts within forty-five (45) days of receiving such invoice from Palomar with
          no right of set-off. For all Palomar’s incremental Costs incurred in
          performing Additional Activities, other than those out-of-pocket costs and
          expenses already paid by Gillette in accordance with the immediately preceding
          sentence, Palomar shall invoice Gillette on a monthly basis for all Costs
          already incurred by Palomar, and Gillette shall pay Palomar in full within
          forty-five (45) days of receiving such invoice from 



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     Palomar with no right of set-off or credit. Palomar shall provide to Gillette
with any such invoice a detailed summary of any and all Costs incurred by
Palomar during the period covered by such invoice, which summary shall be
accompanied by documentation of any such Costs. For the avoidance of doubt,
incremental out-of-pocket costs and other Costs incurred by Palomar in
connection with Additional Activities shall include only those costs which are
in addition to amounts that Palomar was to incur prior to Gillette’s
request that it perform such Additional Activities, and any amount allocable to
R&D Activities that the R&D Committee cancels, reduces or for which
Additional Activities are substituted, shall be applied to offset or credit
costs incurred by Palomar in connection with Additional Activities. 



                                             (2)  
          At Gillette’s request and prior to the performance of any Additional
          Activities, Palomar shall provide Gillette with a reasonably detailed good faith
          estimate of Palomar’s Costs for the performance of Additional Activities
          after receiving from Gillette a reasonably detailed description of such
          Additional Activities (the “Estimate”). At Gillette’s
          request, the parties shall meet and discuss the Estimate. In the event that
          Palomar reasonably anticipates that Palomar’s Costs for the performance of
          Additional Activities will be greater than the applicable Estimate (an
          “Overrun”), then Palomar shall, prior to performing the portion of
          Additional Activities which will result in the Overrun, notify Gillette and
          provide Gillette with a reasonably detailed accounting of the difference between
          Palomar’s revised estimate of its Costs and the original applicable
          Estimate. At Gillette’s option, (A) some or all of the remaining Additional
          Activities shall be postponed or canceled, or (B) Palomar shall continue to
          perform such Additional Activities and the parties shall negotiate in good faith
          to provide for an increase in the Estimate to cover any such difference, which
          increase shall be due and payable as provided in Section 1.8(a)(i)(1);
          provided, however, that in the event that Gillette elects to have
          Palomar proceed with such Additional Activities, Gillette shall not be required
          to pay to Palomar any Costs that exceed the Estimate for the relevant activities
          by more than twenty percent (20%) without Gillette’s prior written consent
          (the “Authorized Overruns”). 



                     (b)  
          Books. Palomar shall maintain materially complete and accurate books,
          records and accounts that, in reasonable detail, fairly reflect any Costs to be
          paid by Gillette pursuant to this Section 1.8 in conformity with GAAP. Such
          books, records and accounts shall be Palomar Confidential Information. Palomar
          shall retain such books, records and accounts until the later of
          (1) three (3) years after the end of the period to which such books,
          records and accounts pertain, or (2) the expiration of the applicable tax
          statute of limitations (or any extensions thereof), or for such longer period as
          may be required by Applicable Law. Gillette shall have the right, during normal
          business hours and upon reasonable notice, to inspect and copy any such books,
          records and accounts for purposes of conducting an audit of them. 




ARTICLE II 
Commercialization 




        2.1 Gillette’s
Commercialization Rights and Obligations. 



                     (a)  
          Gillette’s Commercialization Rights and Obligations. From and after
          the expiration of the R&D Period for the First Female Product, until such
          time as Gillette elects to opt-out of the commercialization of such product
          pursuant to Section 2.3, Gillette shall have the following rights and
          responsibilities: 



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                                     (i)  
          Commercialization of Female Products. Subject to Palomar’s
          obligations as set forth in Section 2.2, during the Exclusivity Period,
          Gillette shall have the sole right to commercialize, Manufacture or have
          Manufactured, distribute and sell the Female Product(s). The parties acknowledge
          and agree that all commercialization decisions, including decisions relating to
          which, if any, of the Palomar Technology, Joint Technology or Gillette
          Technology shall be incorporated in, or used to Manufacture, Female Products,
          and Gillette’s Exploitation and pricing of the Female Products, shall be
          within the sole discretion of Gillette. Subject to Section 3.1, Gillette
          reserves the right to determine the Product Specifications for Female Product(s)
          that Gillette commercializes. Palomar acknowledges that Gillette is in the
          business of researching, developing, Manufacturing, marketing and selling
          consumer products and nothing in this Agreement shall be construed as imposing
          on Gillette the duty to Exploit or otherwise commercialize any Female Product
          for which payments are due hereunder to the exclusion of, or in preference to,
          any other Gillette product. 



                                     (ii)  
          Manufacturing. Subject to Section 3.1, Gillette shall have the right
          to Manufacture (or to have Manufactured by a Third Party) a supply of each
          Female Product for use in CUTs and all commercial supply of each Female Product
          for sale to consumers for use in the Consumer Field. In accordance with the
          terms of Section 1.3(b)(ii), Palomar shall cooperate with Gillette in good
          faith and assist Gillette in obtaining any and all Regulatory Approvals required
          for Gillette or such Third Party to Manufacture each Female Product. 



                                     (iii)  
          Trademarks. 



                                             (1)  
          Gillette shall have the sole right to determine the Trademarks to be used with
          respect to the development and commercialization of the Female Products on a
          worldwide basis, and shall own all right, title and interest in and to such
          Trademarks. 



                                             (2)  
          In the event that Palomar requests that Gillette display on the Female
          Product(s) (including labels, packaging or inserts therefore) a Trademark or
          marketing logo provided by Palomar (the “Palomar Marks”), Gillette
          shall consider such request but shall have no obligation to use Palomar Marks.
          In the event that Gillette elects, in its sole discretion, to display one of
          more Palomar Marks on the Female Product, (A) the parties shall consult on the
          manner and location of such display, provided that such display shall not be
          more prominent than the trademark and marketing logo of Gillette but in any
          event shall have a commercially reasonable size and location, (B) Gillette shall
          permit Palomar to review all material regulatory filings which relate to all
          proposed labels, packaging, package inserts, and promotional materials required
          under this Agreement to include the Palomar Marks, if permitted by Applicable
          Law, prior to the filing of any such materials with any Regulatory Authority,
          and (C) subject to the terms and conditions of this Agreement, the parties shall
          enter into a commercially reasonable agreement granting to Gillette a
          non-exclusive license to use such Palomar Marks solely in connection with the
          Exploitation of Female Products. 



                                             (3)  
          During and after the term of this Agreement, and except with respect to any
          Palomar Marks licensed to Gillette as provided in Section 2.1(a)(iii)(2),
          Palomar shall not use any Trademark used by Gillette at any time to identify or
          distinguish any



-11- 









     Female Product, or any Trademark that is confusingly similar to, misleading or
deceptive with respect to, or that dilutes any Trademark used by Gillette at any
time to identify or distinguish any Female Product. 



                                     (iv)  
          Costs and Expenses of Commercialization Activities. Except as otherwise
          expressly provided herein, Gillette shall be solely responsible for all costs
          and expenses in connection with commercialization activities. For the avoidance
          of doubt, Gillette shall not have any obligation to reimburse Palomar for any
          costs or expenses incurred by Palomar prior to the Effective Date in connection
          with Palomar Technology, Palomar Male Technology or Female Product Technology,
          unless otherwise expressly provided herein. 



                     (b)  
          Gillette’s Diligence Obligations. Palomar’s sole remedies for
          any failure by Gillette to commercialize Female Product(s) are as follows. 



                                     (i)  
          In the event that Gillette fails to Launch a Female Product comprising an
          apparatus for delivering laser light to radiate areas of the skin in one or more
          Major Markets within forty-eight (48) months following the Launch Decision,
          Palomar shall have the right within thirty (30) days after the end of such
          48-month period to terminate this Agreement pursuant to Section 10.5;
          provided, however, that Palomar shall not have the right to
          terminate this Agreement pursuant to Section 10.5 in the event that, prior
          to the end of such 48-month period, Gillette pays to Palomar ten million dollars
          (US $10,000,000) on account of such failure to Launch. 



                                     (ii)  
          In the event that Gillette fails to Launch a Female Product comprising an
          apparatus for delivering laser light to radiate areas of the skin in one or more
          Major Markets within sixty (60) months following the Launch Decision, Palomar
          shall have the right within thirty (30) days after the end of such 60-month
          period to terminate this Agreement pursuant to Section 10.5;
          provided, however, that Palomar shall not have the right to terminate
          this Agreement pursuant to Section 10.5 in the event that, prior to the end
          of such 60-month period, Gillette pays to Palomar ten million dollars (US
          $10,000,000) on account of such failure to Launch (the payment obligations of
          Gillette pursuant to the provisos contained in Section 2.1(b)(i) and this
          Section 2.1(b)(ii), collectively the “Failure to Launch Payments”). 



                                     (iii)  
          In the event that Gillette fails to Launch a Female Product comprising an
          apparatus for delivering laser light to radiate areas of the skin in one or more
          Major Markets within seventy-two (72) months following the Launch Decision,
          Palomar shall have the right to terminate this Agreement pursuant to
          Section 10.5. 



For the avoidance of doubt,
(A) the rights and remedies of Palomar specified in Sections 2.1(b)(i),
2.1(b)(ii) and 2.1(b)(iii) are cumulative of one another, (B) the Failure to Launch
Payments are in addition to and not in lieu of the Annual Exclusivity Collaboration
Payments set forth in Section 6.1(g), (iii) no portion of any Failure to Launch
Payments shall offset, reduce or be credited against any other payment obligations of
either party hereunder, including any payment obligations under ARTICLE VI or ARTICLE
VIII. Except with respect to any obligations of Gillette pursuant to Section 1.3(b),
Gillette shall be deemed to satisfy its diligence obligations hereunder, whether
contractually or at common law, with respect to the Exploitation of Female Product(s) and
Non-Light Based Products through the payment by



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Gillette to Palomar of the Annual Exclusivity Collaboration Payments and the
Launch Payments on the terms and conditions provided for herein. 




        2.2 Palomar’s
Post-R&D Period. 



                     (a)  
          During the Commercial Assessment Period. Palomar acknowledges and agrees
          that the First Development Completion Payment, if any, made by Gillette to
          Palomar at the First Development Completion Payment Date pursuant to
          Section 6.1(d)(i) is intended, among other things as set forth in
          Section 6.1(d)(iii), to compensate Palomar for Palomar’s performance,
          upon request by Gillette, of reasonable services during the Commercial
          Assessment Period. From and after completion of the R&D Program with respect
          to the first Female Product, until the completion of the Commercial Assessment
          Period, Palomar shall, at no additional cost or expense to Gillette, perform
          activities related to the commercialization of Female Products as Gillette may
          reasonably request (the “Commercial Assessment Period Additional
          Activities”); provided, however, that the performance by
          Palomar of such activities shall not exceed three (3) FTEs during the Commercial
          Assessment Period; provided further, that Gillette shall reimburse
          Palomar for any out-of-pocket costs and expenses reasonably incurred by Palomar
          to perform such activities (including any travel expenses). Palomar shall have
          the right, with Gillette’s prior written consent, not to be unreasonably
          withheld, to subcontract Commercial Assessment Period Additional Activities,
          provided that (1) with respect to those Commercial Assessment Period
          Additional Activities that are of the type that Palomar subcontracted in
          connection with the R&D Plan, (a) those Commercial Assessment Period
          Additional Activities performed by the subcontractor(s) shall not be counted
          against the FTEs provided for in the previous sentence, and (b) the costs
          of such subcontracting shall be treated as out-of-pocket costs and expenses of
          Palomar subject to reimbursement provided for in the previous sentence, and
          (2) with respect to those Commercial Assessment Period Additional
          Activities that are of the type that Palomar performed (without subcontracting)
          under the R&D Plan, (x) those Commercial Assessment Period Additional
          Activities performed by the subcontractor(s) shall be counted against the FTEs
          provided for in the previous sentence, and (y) the costs of such
          subcontracting shall not be treated as out-of-pocket costs and expenses of
          Palomar subject to reimbursement provided for in the previous sentence (except
          to the extent that costs and expenses reasonably incurred by the subcontractor
          would qualify as out-of-pocket costs and expenses of Palomar if such costs and
          expenses were incurred by Palomar in the first instance). Any activities
          performed in excess of those FTEs shall be paid for by Gillette in accordance
          with Section 1.8 as Additional Activities hereunder. 



                     (b)  
          Following the Commercial Assessment Period. From and after completion of
          the Commercial Assessment Period with respect to the First Female Product until
          the end of the Exclusivity Period, Palomar shall cooperate with any and all
          reasonable requests for consultation or assistance from Gillette with respect to
          the development and commercialization of the Female Product Technology,
          including by making its employees, consultants and other scientific staff
          available upon reasonable notice during normal business hours at their
          respective places of employment to consult with Gillette on issues arising
          during such development and commercialization. In addition, during the
          Exclusivity Period, in the event that Gillette reasonably concludes following
          the completion of the Commercial Assessment Period with respect to the First
          Female Product that design modifications are necessary or appropriate to
          maximize such product’s commercial potential, Palomar shall, at



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          Gillette’s election, cooperate with Gillette in good faith to adopt a work
          plan for the additional development work, and perform additional activities to
          implement such modifications as the parties may mutually agree. For all
          activities and services performed by Palomar under this Section 2.2(b),
          Gillette shall pay Palomar in accordance with Section 1.8 as Additional
          Activities hereunder. 



        2.3 Second Decision Point.
In the event that, pursuant to Section 1.6(a), Gillette fails to terminate this
Agreement in accordance with Section 10.4(d) on or before the First Decision Point,
Gillette shall have the right to opt-out of the commercialization process for the First
Female Product on or before the Second Decision Point. In the event that Gillette
determines on or before the Second Decision Point to opt-out of the commercialization
process, Gillette shall terminate this Agreement pursuant to Section 10.4(d). In the
event that Gillette fails to terminate this Agreement pursuant to Section 10.4(d) on
or before Second Decision Point, Gillette shall be deemed to have elected to continue
commercializing Female Product(s) (such election, the “Launch Decision”), and
Gillette shall make the Second Development Completion Payment to Palomar in the amount set
forth in Section 6.1(d)(i) on or before the Second Development Completion Payment
Date. 




ARTICLE III
CUT Supply 




        3.1 CUT Supply. 



                     (a)  
          In General. The parties shall confer in good faith to determine which
          party, if either, shall supply the Female Product for use by Gillette in CUTs
          (the “CUT Female Product”), provided that Gillette shall have the
          right to make a final determination with respect thereto. In the event that
          Gillette desires an Estimate of the Manufacturing Costs that would be incurred
          by Palomar in connection with the Manufacture of CUT Female Products, Gillette
          shall provide to Palomar the Product Specifications on or before the later of
          (i) eight hundred and forty-two (842) days after the Effective Date, in the
          event that as of such date the R&D Period has not been extended past the
          nine hundredth twelfth (912th) day after the Effective Date, or (ii) sixty (60)
          days prior to the end of the projected end of the R&D Period, in the event
          that as of such date the R&D Period has been extended past the nine
          hundredth twelfth (912th) day after the Effective Date. Palomar shall provide to
          Gillette, not later than thirty (30) days after the receipt of such Product
          Specifications, a good faith Estimate as to all Costs that would be incurred by
          Palomar in connection with the Manufacture of CUT Female Products. In the event
          that Gillette elects to have Palomar supply the CUT Female Product for use by
          Gillette in CUTs, Gillette shall so notify Palomar in writing not later than ten
          (10) days after the last day of the R&D Period (such notice,
          the “Ten-Day Notice”). In the event that Gillette does not so
          notify Palomar on or before the last day of such ten-day period that Palomar
          will supply the CUT Female Product for use by Gillette in CUTs, then Gillette
          shall be deemed to have determined that Gillette shall supply the CUT Female
          Product. 



                     (b)  
          Product Specifications. With the Ten-Day Notice, Gillette shall provide
          to Palomar complete Product Specifications for the CUT Female Product
          (the “CUT Product Specifications”), which CUT Product
          Specifications (i) shall contain commercially reasonable tolerances, where
          appropriate, (ii) shall comply with the applicable U.S. Regulatory



-14- 









               Approval, (iii) in the case of Female Products other than the First Female
          Product, shall specify a Female Product that is the same as or substantially
          similar to the First Female Product, and (iv) may be modified or changed by
          Gillette only in accordance with Section 3.4. 



                     (c)  
          Supply of CUT Female Products. Palomar shall use commercially reasonable
          efforts to supply to Gillette within one hundred and twenty (120) days (the last
          day of such period, the “Delivery Date”) of receiving the Ten-Day
          Notice and the CUT Product Specifications, and Gillette shall purchase from
          Palomar, three hundred (300) units of the CUT Female Product, which CUT Female
          Product shall conform to the CUT Product Specifications; provided,
          however, that in the event that Palomar Manufactures Prototypes in
          connection with the R&D Activities, that conform to and comply with the
          requirements set forth in this ARTICLE III with respect to CUT Female Products,
          such Prototypes shall be delivered by Palomar to Gillette as “CUT Female
          Products” and there shall be a corresponding reduction in the number of
          units of the CUT Female Product that Gillette shall purchase pursuant to this
          Section 3.1 (such number of units of the CUT Female Product that Gillette shall
          purchase pursuant to this Section 3.1, the “Total CUT Supply”). The
          parties may mutually agree to have Palomar supply additional units of the CUT
          Female Product, or other Female Product(s) for use by Gillette in CUTs that do
          not conform with the CUT Product Specifications, provided that any such
          agreement or supply by Palomar shall not act to delay in any way the Commercial
          Assessment Period Termination Date. 



                     (d)  
          Effects of Delays in Supply of CUT Female Product. In the event that
          Palomar determines that, for whatever reason, it will not deliver to Gillette
          the Total CUT Supply by the Delivery Date, Palomar shall promptly notify
          Gillette thereof in writing and inform Gillette of the new delivery date (which
          date shall be the earliest possible date on which Palomar can deliver the
          units). Upon receipt of such notice, and to the extent Gillette determines that
          the delay in delivery is likely to impact adversely the CUT schedule, Gillette
          shall act promptly to adjust the CUT schedule in light of such delay. 



                                     (i)  
          A delay in the supply by Palomar to Gillette of the Total CUT Supply, which
          delay is attributable to Gillette, shall reduce the 240-day period provided for
          in clause (b) of the definition of Commercial Assessment Period by an amount of
          time equal to the period of delay attributable to Gillette. For example, and
          without limitation, delays attributable to Gillette shall include the following:
          (i) if Gillette fails to provide the CUT Product Specifications with the
          Ten-Day Notice as specified in Section 3.1(a), or otherwise provides CUT
          Product Specifications that do not comply with the requirements of
          Section 3.1, then the 240-day period shall be reduced on a day-by-day basis
          for each day that the CUT Product Specifications are late or are not in
          compliance, or (ii) if Gillette fails to pay Palomar the Advanced CUT
          Female Product Costs in a timely manner as specified in Section 3.2, then
          the 240-day period shall be reduced on a day-by-day basis for each day that the
          full amount of such payment is late. 



                                     (ii)  
          A delay in the supply by Palomar to Gillette of the Total CUT Supply, which
          delay is attributable to Palomar, shall increase the 240-day period provided in
          clause (b) of the definition of Commercial Assessment Period by up to sixty (60)
          days (or such larger number of days as the parties mutually agree) in the event
          that Gillette reasonably determines that such delay(s) will result in a delay in
          the CUT schedule. 




-15- 








        3.2 Price. The parties
hereby agree that the price (the “Manufacturing Fee”) of each unit of CUT Female
Product supplied by Palomar pursuant to this ARTICLE III shall be equal to Palomar’s
Costs to Manufacture such unit of CUT Female Product calculated in accordance with Section
1.8 and Schedule A-2 (the “Manufacturing Cost”). With respect to all
out-of-pocket costs and expenses to be incurred by Palomar in supplying units of CUT
Female Product under this ARTICLE III, including all costs and expenses for components to
be incorporated into those units (collectively, the “Advanced CUT Female Product
Costs”), Palomar shall have the right to invoice Gillette for fifty-percent (50%) of
the Advanced CUT Female Product Costs upon Palomar issuing a purchase order to a Third
Party giving rise to them, and Gillette shall pay Palomar such amounts within forty-five
(45) days of receiving such invoice from Palomar. With respect to all Manufacturing Costs
other than Advanced CUT Female Product Costs, upon shipping units of CUT Female Product to
Gillette, Palomar shall invoice Gillette for such units of CUT Female Product, and
Gillette shall make a payment to Palomar within forty-five (45) days after receipt by
Gillette of such invoice. Gillette shall have the right, during normal business hours and
upon reasonable notice, to review and audit Palomar’s books and records to confirm
the Manufacturing Costs. 



        3.3 Female Product(s)
Requirements. Upon Gillette’s request, Palomar shall promptly provide to Gillette
in writing, with respect to the CUT Female Product supplied to Gillette by Palomar under
this ARTICLE III, such warranties as Gillette may reasonably request to confirm that,
during the Commercial Assessment Period, the CUT Female Products conform to the CUT
Products Specifications and are in compliance with the applicable U.S. Regulatory Approval
(which warranties shall not apply to any intellectual property rights). In the event of
any breach of such warranties, Gillette’s sole and exclusive remedy shall be, at
Palomar’s sole discretion, for Palomar to replace the defective CUT Female Product
unit or repair such unit. The foregoing notwithstanding, Palomar shall not be responsible
for damage to any CUT Female Product resulting from misuse, negligence or accident or
resulting from repairs, alterations or installation made or authorized by any Person other
than Palomar. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 3.3, THE CUT FEMALE
PRODUCT IS PROVIDED “AS IS”, WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY KIND. 



        3.4 Amendment of CUT
Product Specifications and Manufacturing Process. Gillette reserves the right to
amend, modify or supplement the CUT Product Specifications for the CUT Female Product for
the purpose of complying with Good Manufacturing Practices or the applicable Regulatory
Approvals or for any other reasonable business purpose, provided that any such amendment,
modification or supplement shall not act to delay in any way the Commercial Assessment
Period Termination Date, and further provided that any such amendment, modification or
supplement shall not increase the cost to manufacture the CUT Female Product unless the
Manufacturing Fee is correspondingly increased. Palomar may not amend, modify or
supplement the CUT Product Specifications for the CUT Female Product in any respect
without the prior written consent of Gillette. 



        3.5 Records; Notification
of Inspections; Communications. Palomar shall maintain all records necessary to comply
with all Applicable Law relating to the Manufacture of the CUT Female Product. Gillette
shall have the right, during normal business hours and upon reasonable prior notice to
Palomar, to inspect any Palomar (or subcontractor) facility at which a CUT Female Product
is Manufactured, the equipment and materials used in Manufacturing such 



-16- 









product, and the records relating to the Manufacture of such product. Palomar
shall promptly notify Gillette in writing of any proposed or unannounced visit
or inspection by any Regulatory Authority of any Palomar (or subcontractor)
facility at which a CUT Female Product is Manufactured. Subject to all
Applicable Law, Gillette shall have a right to be present to participate in any
such announced visit or inspection, unless the Gillette representative’s
presence would impede the visit or inspection, and to receive copies of all
written communications with any Regulatory Authority with respect thereto.




        3.6 Controlling Terms and
Conditions. The parties agree that the terms and conditions of this Agreement,
including this ARTICLE III, shall control the supply of CUT Female Product hereunder, and
that the terms and conditions of any purchase order or form of acceptance exchanged by the
parties with respect to the supply of CUT Female Product by Palomar to Gillette, shall not
apply thereto. 




ARTICLE IV 
License Grants 




        4.1 Grants to Gillette. 



                     (a)  
          License Grants in the Female Field. In partial consideration of the
          royalties payable to Palomar by Gillette hereunder, and subject in the case of
          Sections 4.1(a)(i) and 4.1(a)(ii) to ARTICLE X, and in all cases to all other
          terms and conditions of this Agreement, Palomar hereby grants to Gillette: 



                                     (i)  
          a worldwide, exclusive (including with regard to Palomar), royalty-bearing
          license (with the right to sublicense only as permitted in Section 4.1(b)),
          under Palomar’s rights, titles, and interests in and to the Palomar
          Technology and the Joint Technology to Exploit Female Products; 



                                     (ii)  
          a worldwide, exclusive (including with regard to Palomar), royalty-bearing
          license and right of reference (with the right to sublicense only as permitted
          in Section 4.1(b)), under Palomar’s rights, titles and interests in and to
          the Palomar U.S. Regulatory Documentation, to Exploit Female Products; 



                                     (iii)  
          a worldwide, perpetual, irrevocable, exclusive (including with regard to
          Palomar) license, with the right to grant sublicenses (through multiple tiers of
          sublicensing), under all of Palomar’s rights, titles, and interests in and
          to the Joint Technology (including the MGH Joint Patents), to Exploit
          Non-Light-Based Products; and 



                                     (iv)  
          a worldwide, perpetual, irrevocable, non-exclusive license, with the right to
          grant sublicenses (through multiple tiers of sublicensing), under all of
          Palomar’s rights, titles, and interests in and to any MGH Joint Technology
          with respect to which Gillette does not receive an ownership interest pursuant
          to Section 8.1(c)(ii)(2), to Exploit processes, products and systems outside the
          Field (except (1) to the extent that Palomar has granted to Gillette in Section
          4.1(a)(iii) exclusive rights to Exploit such processes, products and systems (in
          which case Gillette’s rights shall be as provided in such Section) or (2)
          for Exploitation of Light-Based Products). 




-17- 









The exclusive nature of the license
grants contained in this Section 4.1(a) shall not prevent Palomar or any of its
licensees or sublicensees from conducting any activity, or exercising or granting any
licenses or other rights, as otherwise permitted under this Agreement, with respect to the
Palomar Technology, Joint Technology or Palomar U.S. Regulatory Documentation that has as
its goal or intent (i) Exploitation of a product or a system outside the Female Field
and not Exploitation of a product or system inside the Female Field, notwithstanding the
possibility that such activity, exercise or grant may have applications inside the Female
Field, or (ii) Exploitation of a product or system (other than a Non-Light Based
Product) and not Exploitation of a Non-Light Based Product, notwithstanding the
possibility that such activity, exercise or grant may have applications as a
Non-Light-Based Product. This paragraph shall remain in full effect as long as any of the
license grants contained in this Section 4.1(a) are in effect. 



                     (b)  
          Sublicenses. Gillette shall not have the right to grant to any Third
          Parties any sublicenses under the license grants set forth in
          Section 4.1(a)(i) and 4.1(a)(ii), except as may be necessary for
          (i) the Manufacture of Female Products on behalf of Gillette or any of its
          permitted sublicensees, (ii) Third Party distributors to sell or otherwise
          distribute Female Products as provided hereunder, (iii) the importation, sale,
          offering for sale, transport, distribution, promotion and marketing of Female
          Products in markets other than any Major Market, or (iv) for the limited purpose
          of subcontracting as provided for by Section 1.1(e). In the event of the
          termination of the license grants set forth in Section 4.1(a)(i) or
          4.1(a)(ii) for any reason, Palomar shall have the right to (A) terminate such
          sublicense agreement(s) or (B) assume them from Gillette, provided that such
          assumption by Palomar is consistent with the terms and conditions of such
          sublicense agreement(s). Gillette shall be responsible to Palomar for the
          performance of any of Gillette’s permitted sublicensees under any
          provisions of this Agreement for which Gillette is responsible. Gillette shall
          not permit any sublicensees to use or disclose any Palomar Technology or Palomar
          U.S. Regulatory Documentation (in each case, to the extent such technology or
          documentation constitutes Palomar Confidential Information or Gillette
          Controlled Information) without provisions safeguarding non-disclosure and
          non-use at least as strict as those provided in this Agreement. Apart from the
          foregoing limited rights to sublicense, Gillette shall not have any right or
          authority to sublicense, assign or otherwise transfer the license grants set
          forth in Section 4.1(a)(i) or 4.1(a)(ii) without Palomar’s prior
          written consent in its sole discretion, provided that Gillette may transfer
          those license grants in connection with the permitted assignment of this
          Agreement in full pursuant to Section 14.2. 



                     (c)  
          No Other Right. Gillette shall have no right, express or implied, to the
          Palomar Technology, Palomar Male Technology, Palomar U.S. Regulatory
          Documentation, or Palomar’s right, title, and interest in and to the Joint
          Technology in or outside the Field except as expressly provided in
          Section 4.1(a) or as otherwise expressly provided in this Agreement.
          Gillette shall not at any time use or practice, or grant licenses or other
          rights under, Palomar Technology, Palomar Male Technology, Palomar U.S.
          Regulatory Documentation, Palomar Confidential Information or Palomar’s
          right, title, and interest in and to the Joint Technology, except as expressly
          permitted by this Agreement. All rights in and to Palomar Technology, Palomar
          Male Technology, Palomar U.S. Regulatory Documentation, or Palomar’s right,
          title, and interest in and to the Joint Technology, which are not expressly
          provided to Gillette in this Agreement, shall be retained by Palomar. 



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        4.2 Grants to Palomar. 



                     (a)  
          Palomar Technology and Joint Technology for Female Product Development.
          Subject to Section 14.2 and ARTICLE X, Gillette hereby grants to Palomar during
          the Exclusivity Period a worldwide, non-exclusive, royalty-free license, with
          the right to sublicense only in accordance with Section 4.2(e), under
          Gillette’s right, title and interest in and to the Palomar Technology and
          the Joint Technology (i) to conduct the R&D Activities, Additional
          Activities and Commercial Assessment Period Additional Activities, (ii) to
          research and develop Additional Light-Based Hair Management Products for use in
          the Female Field for the sole purpose of presenting to Gillette such product
          opportunities pursuant to Section 1.7, and (iii) to use the Manufacturing
          Process for the Female Product(s) to make and have made the Female Product(s)
          for Gillette, in each case only to the extent necessary for Palomar to fulfill
          its obligations to Gillette under this Agreement. For the avoidance of doubt,
          nothing in this Section 4.2(a) grants to Palomar the right to offer to sell,
          sell, have sold, import or export any product or system. 



                     (b)  
          Gillette Technology for Female Product Development. Subject to Section
          14.2 and ARTICLE X, Gillette hereby grants to Palomar during the Exclusivity
          Period a worldwide, non-exclusive, royalty-free license, with the right to
          sublicense only in accordance with Section 4.2(e), under Gillette’s right,
          title and interest in and to the Gillette Technology, (i) to conduct the R&D
          Activities, Additional Activities and Commercial Assessment Period Additional
          Activities, (ii) to research and develop Additional Light-Based Hair Management
          Products in the Female Field for the sole purpose of presenting to Gillette such
          product opportunities pursuant to Section 1.7, and (iii) to use the
          Manufacturing Process for the Female Product(s) to make and have made the Female
          Product(s) for Gillette, in each case only to the extent necessary for Palomar
          to fulfill its obligations to Gillette under this Agreement. For the avoidance
          of doubt, nothing in this Section 4.2(b) grants to Palomar a license or other
          rights under the Gillette Technology to offer to sell, sell, have sold, import
          or export any Female Product, or any other product or system. 



                     (c)  
          Gillette Technology for Male Product Development. Subject to Section 14.2
          and ARTICLE X, Gillette hereby grants to Palomar a worldwide, non-exclusive,
          royalty-free license, with the right to sublicense only in accordance with
          Section 4.2(e), under Gillette’s right, title and interest in and to the
          Gillette Technology, (i) to research and develop one or more Light-Based Hair
          Management Products for use in the Male Field, and (ii) to use the Manufacturing
          Process for a Light-Based Hair Management Product in the Male Field to make and
          have made such product, in each case (A) for the sole purpose of presenting
          product opportunities to Gillette pursuant to Section 5.1, and (B) only during
          the period commencing on the first day of the R&D Period and ending on the
          last day of the Option Exercise Period (unless Gillette agrees in writing to
          extend such period). For the avoidance of doubt, nothing in this Section 4.2(c)
          grants to Palomar a license or other rights under the Gillette Technology to
          offer to sell, sell, have sold, import or export any Light-Based Hair Management
          Product in the Male Field, or any other product or system. 



                     (d)  
          Joint Technology for Light-Based Products. Gillette hereby grants to
          Palomar a worldwide, perpetual, irrevocable, exclusive (including with regard to
          Gillette), royalty-free license, with the right to grant sublicenses (through
          multiple tiers of sublicensing), 




-19- 









      under all of Gillette’s rights, titles,
          and interests in and to the Joint Technology to Exploit Light-Based Products
          intended or marketed for use outside the Field. Gillette shall not practice or
          use, or grant licenses or other rights under, Joint Technology for the purpose
          of Exploiting Light-Based Products outside the Field. The exclusive nature of
          the license grant contained in this Section 4.2(d) shall not prevent
          Gillette or any of its (sub)licensees from conducting any activity, or
          exercising or granting any licenses or other rights, as otherwise permitted
          under this Agreement, with respect to the Joint Technology that has as its goal
          or intent Exploitation of a product or a system, other than a Light-Based
          Product intended or marketed for use outside the Field, and not as its goal or
          intent Exploitation of a Light-Based Product intended or marketed for use
          outside the Field, notwithstanding the possibility that such activity, exercise
          or grant may have an application as a Light-Based Product outside the Field. 



                     (e)  
          Sublicenses. 



                                     (i)  
          Palomar shall have the right to grant to one or more Third Parties a sublicense
          under the license granted by Gillette to Palomar in Section 4.2(a) or
          4.2(b) only (i) to the extent consistent with the provisions governing
          subcontracting as provided for by Section 1.1(e), or (ii) for the limited
          purpose of Manufacturing the Prototypes or the CUT Female Product for Gillette
          pursuant to this Agreement. 



                                     (ii)  
          Palomar shall have the right to grant to one or more non-commercial Third
          Parties (e.g., academic institutions, hospitals or governmental entities)
          a sublicense under the license granted by Gillette to Palomar in
          Section 4.1(c). Palomar shall use commercially reasonable efforts to
          include in each agreement in which Palomar grants to a Third Party such a
          (sub)license, terms and conditions that protect and preserve the intellectual
          property interests of Palomar and Gillette with respect to the technology
          (sub)licensed by Palomar thereunder. 



                                     (iii)  
          In the event of the termination of the license grants set forth in
          Section 4.2(a), 4.2(b) or 4.2(c) for any reason, each such sublicense shall
          be deemed to terminate. Palomar shall be responsible to Gillette for the
          performance of any of Palomar’s permitted sublicensees under any provisions
          of this Agreement for which Palomar is responsible. Palomar shall not permit any
          sublicensees to use or disclose any Gillette Technology (to the extent such
          technology constitutes Gillette Confidential Information or Palomar Controlled
          Information) without provisions safeguarding non-disclosure and non-use at least
          as strict as those provided in this Agreement. Apart from the foregoing limited
          rights to sublicense, Palomar shall not have any right or authority to
          sublicense, assign or otherwise transfer the license grants set forth in
          Section 4.2(a), 4.2(b) or 4.2(c) without Gillette’s prior written
          consent in its sole discretion, provided that Palomar may transfer those license
          grants in connection with the permitted assignment of this Agreement in full
          pursuant to Section 14.2. 



                     (f)  
          No Other Right. Palomar shall have no right, express or implied, to the
          Gillette Technology (including the Gillette Licensed Patents) or Gillette’s
          right, title, and interest in and to the Joint Technology in or outside the
          Field except as expressly provided in Section 4.2(a), 4.2(b), 4.2(c) or
          4.2(d) or as otherwise expressly provided in this Agreement. Palomar shall not
          at any time use or practice, or grant licenses or other rights under the
          Gillette Technology, Gillette Confidential Information, or Gillette’s
          right, title and interest in and to the  



-20- 









     Joint Technology, except as expressly permitted by this Agreement. All rights in
and to Gillette Technology or Gillette’s right, title, and interest in and
to the Joint Technology, which are not expressly provided to Palomar in this
Agreement, shall be retained by Gillette. 




ARTICLE V 
Other Covenants of the
Parties 




        5.1 Option for the Male
Field. 



                     (a)  
          Grant of Male Option. Subject to ARTICLE X, Palomar hereby grants to
          Gillette an option (the “Male Option”) for a worldwide, exclusive
          (including with regard to Palomar), royalty-bearing license, under
          Palomar’s rights, titles, and interests in and to the Palomar Male
          Technology, Joint Technology and Palomar U.S. Regulatory Documentation to
          Exploit Light-Based Hair Management Products for use in the Male Field
          (collectively, “Male Products”). 



                     (b)  
          Exercise of Male Option. Palomar may elect to provide Gillette one
          opportunity (the “Male Product Opportunity”) to exercise the Male
          Option with respect to Male Products by Palomar’s providing to Gillette
          written notice thereof (the “Opportunity Notice”), which opportunity
          shall be with respect to the Male Product that, at the time such opportunity is
          offered to Gillette, is the most commercially promising Male Product that is in
          Palomar’s Control and that Palomar has, directly or indirectly, conceived
          or developed. Subject to Section 14.2(d), Palomar shall not be obligated to
          provide to Gillette the Male Product Opportunity at any time. Gillette may
          exercise its Male Option with respect to Male Products, pursuant to the
          following terms and conditions: 



                                     (i)  
          Prior to offering to Gillette the Male Product Opportunity, Palomar shall
          conduct with respect to one (1) Male Product comprising an apparatus for
          delivering light to radiate areas of the skin (the “Subject Male
          Product”) sufficient preclinical, clinical and other testing to demonstrate
          that the product meets the Safety and Efficacy Standards. 



                                     (ii)  
          Prior to or simultaneous with Palomar’s providing to Gillette the
          Opportunity Notice, Palomar shall provide to Gillette in writing (A) material
          preclinical, clinical and other testing data, and any other material information
          in Palomar’s Control, with respect to the Subject Male Product, which data
          and information shall contain sufficient scientific evidence to demonstrate that
          the Subject Male Product satisfies the Safety and Efficacy Standards, and (B)
          material information concerning the intellectual property rights Controlled by
          Palomar claiming or covering such product, and contractual obligations of
          Palomar and any known patent-related restrictions that Palomar reasonably
          believes would limit or otherwise affect the parties’ rights to fully
          Exploit the Subject Male Product (collectively, the “Evaluation
          Materials”). The Evaluation Materials shall be treated as Palomar
          Confidential Information hereunder. 



                                     (iii)  
          The Opportunity Notice provided by Palomar to Gillette shall be in writing and
          shall contain a legend that contains the words “Opportunity Notice”
          and shall state that such notice is being provided to Gillette pursuant to this
          Section 5.1(b)(iii). The



-21- 









     effective date of the Opportunity Notice shall be the date on which such notice
is received by Gillette, provided that, if as of such date either (A) Gillette
has not received from Palomar all Evaluation Materials, or (B) the second (2nd)
anniversary of the Effective Date has not yet occurred, then the effective date
of the Opportunity Notice shall be deemed to be the first date on which (x)
Gillette has received from Palomar such materials, and (y) such second
anniversary has occurred (the “Opportunity Notice Effective Date”).




                                     (iv)  
          Gillette shall have sixty (60) days after the Opportunity Notice Effective Date
          (the “Option Exercise Period”) within which to exercise the Male
          Option by providing to Palomar written notice thereof (an “Option Exercise
          Notice”). 



                                     (v)  
          In the event that Gillette elects not to, or otherwise fails to exercise the
          Male Option within the Option Exercise Period, then the Male Option shall
          terminate in its entirety and Palomar shall not have any further obligation
          under this Section 5.1. Upon the termination of the Male Option,
          (i) Palomar shall be free to exercise rights under the Palomar Male
          Technology or Palomar’s rights, title and interest in and to the Joint
          Technology to Exploit, or to grant to a Third Party rights under the Palomar
          Male Technology or such Joint Technology to Exploit, Male Products in the Male
          Field, (ii) the covenant granted by Palomar to Gillette in
          Section 5.2(b) shall terminate, and (iii) Gillette shall return to
          Palomar or destroy, at Palomar’s option, all Evaluation Materials and any
          materials embodying Evaluation Materials (except that one copy of such materials
          may be retained by Gillette in the offices of its outside counsel). 



                     (c)  
          Negotiation of Definitive Agreement With Respect to Subject Male Product.
          In the event that Gillette exercises the Male Option in accordance with
          Section 5.1(b)(iv), the parties shall negotiate in good faith for a period
          of ninety (90) days from the date of the Option Exercise Notice the terms and
          conditions to be included in a definitive agreement governing the grant by
          Palomar to Gillette of a license for the Male Field (the “Male
          Collaboration Agreement”). The Male Collaboration Agreement shall (1)
          reflect a deal structure substantially similar to the one in this Agreement, (2)
          contain financial terms that are commercially reasonable taking into
          consideration the stage of development and market potential for the Subject Male
          Product, which terms are similar in structure to those contained in ARTICLE V,
          including the potential for an up-front payment by Gillette to Palomar, (3)
          contain grants by Palomar to Gillette of licenses for the Male Product with
          respect to the Male Field that are the same in scope as the licenses granted to
          Gillette in Section 4.1(a) for Female Products, and (4) contain grants by
          each party of covenants that are the same in scope as the covenants granted to
          the other party in ARTICLE IV and this ARTICLE V with respect to the Female
          Field. In the event that the parties are unable within such ninety (90) day
          period to negotiate and enter into the Male Collaboration Agreement, either
          party may initiate the dispute resolution process set forth in
          Section 13.2. From and after the effective date of a Male Collaboration
          Agreement, each party’s rights with respect to Male Products shall be as
          set forth in that agreement. 



        5.2 Palomar Covenants
Relating to Exploitation of Technology and Products.          



                     (a)  
          During the Exclusivity Period, Palomar covenants to Gillette that, except as
          provided in Sections 4.2(a) and 4.2(b), Palomar shall not, (i) except in
          connection with 



-22- 









     R&D Activities, Additional Activities or Commercial Assessment Period
Additional Activities, (1) conduct any activity for the benefit of, or sponsored
by any Third Party, that has as its goal or intent discovering, identifying,
Exploiting or otherwise commercializing Light-Based Hair Management Products in
the Female Field, (2) otherwise exercise rights under the Palomar Technology or
Joint Technology with a goal or intent to Manufacture, sell, have sold, import,
export or otherwise commercialize any Light-Based Hair Management Products in
the Female Field, or any Female Accessory Product or (ii) grant any license or
other rights to any Person to utilize any intellectual property Controlled by
Palomar (including any Palomar Technology or Joint Technology) with the goal or
the intent of discovering, identifying, Exploiting or otherwise commercializing
(1) Light-Based Hair Management Products in the Female Field, or (2) any Female
Accessory Product. Subject to the terms and conditions of this Agreement,
including Sections 5.3 and 5.4, the restrictions contained in this
Section 5.2(a) shall not prevent Palomar from conducting any activity, or
exercising or granting any rights or licenses, that has as its goal or intent
Exploitation of a product or system (other than a Female Accessory Product)
outside of the Female Field and not Exploitation of a product or system in the
Female Field, notwithstanding the possibility that any such product or system
may have applications in the Female Field. 



                     (b)  
          Prior to and during the Option Exercise Period with respect to the Male Option
          set forth in Section 5.1, Palomar covenants to Gillette that Palomar shall
          not utilize, or grant any license or other rights to any Person to utilize, any
          intellectual property Controlled by Palomar (including any Palomar Male
          Technology or Joint Technology) with the goal or intent of Exploiting
          Light-Based Hair Management Products in the Male Field, except in accordance
          with this Section 5.2(b). Prior to and during the Option Exercise Period,
          Palomar shall have the right to utilize any intellectual property Controlled by
          Palomar (including any Palomar Male Technology or Joint Technology) to research
          and develop Light-Based Hair Management Products in the Male Field for the sole
          purpose of developing a Male Opportunity to present to Gillette, and Palomar may
          enter into agreements with one or more non-commercial Third Parties
          (e.g., academic institutions, hospitals or governmental entities) as may
          be necessary or desirable to advance such efforts and such purpose, provided
          that such agreements shall not grant any commercialization rights (or options
          for such rights) to such Third Parties in the Male Field. Subject to the terms
          and conditions of this Agreement, including this Section 5.2(b) and
          Sections 5.3 and 5.4, the restrictions contained in this Section 5.2(b)
          shall not prevent Palomar from conducting any activity, or exercising or
          granting any rights or licenses, that has as its goal or intent Exploitation of
          a product or system (other than a Female Accessory Product) outside of the Male
          Field and not Exploitation of a product or system in the Male Field,
          notwithstanding the possibility that any such product or system may have
          applications in the Male Field. 



                     (c)  
          Palomar covenants to Gillette that, in the event that at any time during the
          Exclusivity Period, Palomar enters into an agreement with a Third Party whereby
          the Third Party grants to Palomar a license with respect to any intellectual
          property that would, if such intellectual property were owned by Palomar,
          constitute Palomar Technology under this Agreement, Palomar shall use
          commercially reasonable efforts to obtain from such Third Party the right to
          grant to Gillette a sublicense under such license on terms and conditions that
          are no less favorable to Gillette than those terms and conditions in this
          Agreement that apply to Gillette’s Exploitation of Female Products, which
          sublicense shall be subject, without limitation, to the last two full sentences
          of Section 6.1(i). 




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        5.3 Covenants Relating to
Exploitation. Palomar acknowledges and agrees that the exclusivity granted by Palomar
to Gillette under the Palomar Technology, Palomar Male Technology and Palomar’s
right, title and interest in and to the Joint Technology to Exploit Female Products (and
in the event that the parties enter into the Male Collaboration Agreement, Male Products),
is of critical importance to Gillette, and that without such exclusivity, Gillette would
not have entered into this Agreement. Gillette acknowledges and agrees that Palomar’s
ability to retain or grant to Third Parties exclusivity with respect to Palomar Technology
and Palomar Male Technology outside the Exclusive Field and with respect to Joint
Technology to Exploit Light-Based Products outside the Field is of critical importance to
Palomar, and without the ability to retain or grant to Third Parties such exclusivity,
Palomar would not have entered into this Agreement. In order to ensure that Gillette
receives the benefit of such exclusivity in the Exclusive Field, and that Palomar retains
the benefits of such exclusivity outside the Exclusive Field, the parties agree as
follows: 



                     (a)  
          Palomar covenants to Gillette that: 



                                     (i)  
          Palomar will include in each Third Party agreement in which Palomar grants to
          the Third Party a license or other rights under any Palomar Technology, Palomar
          Male Technology or Joint Technology to sell, have sold, offer for sale or
          otherwise commercialize one or more Light-Based Products in the Consumer Field
          or Professional Field (each such Third Party a “Palomar Licensee,” and
          each such agreement, a “Palomar License Agreement”), terms and
          conditions that prohibit the Palomar Licensee, at any time during the
          Exclusivity Period, from Exploiting any such Technology, by: 



                                             (1)  
          developing any Light-Based Product intended by Palomar (or such Third Party) for
          use (in whole or in part) in the Exclusive Field; 



                                             (2)  
          marketing any Light-Based Product in the Exclusive Field; or 



                                             (3)  
          developing or commercializing in or outside the Field any Female Accessory
          Product during its period of commercialization by Gillette or any Gillette
          Licensee, provided that any apparatus, component, accessory, disposable or
          Consumable as to which Palomar or any Palomar Licensee has expended material
          financial and other resources on its development or commercialization as a
          Light-Based Accessory Product before such Female Accessory Product is first
          commercialized by Gillette or any Gillette Licensee, shall not be subject to the
          restriction contained in this Section 5.3(a)(i)(3). 



                                     (ii)  
          Palomar will include in each Palomar License Agreement, terms and conditions
          that, during the Exclusivity Period: 



                                             (1)  
          require the Palomar Licensee to label Light-Based Products commercialized in the
          Consumer Field or Professional Field pursuant to such license with the following
          phrase (or similar words which fairly convey such products are for use only in
          the licensed field): “intended only for use in the “x”
          field,” where “x” shall mean the field of use for which the Third
          Party holds such license and shall in any event exclude the Exclusive Field; 



-24- 









                                             (2)  
          prohibit the Palomar Licensee, in the development and commercialization of
          Light-Based Products in the Consumer Field or Professional Field, from
          intentionally (A) designing, modifying or otherwise improving any Light-Based
          Product(s) with the goal or intent of improving its efficacy or performance in
          the Exclusive Field; or (B) optimizing, inducing, supporting or encouraging the
          use of any Light-Based Products in the Exclusive Field; 



                                             (3)  
          grant to Gillette Third Party beneficiary rights to enforce any provision of
          such agreement that corresponds to the covenants of Palomar contained in this
          Section 5.3(a); and 



                                             (4)  
          grant to Gillette the rights required pursuant to Section 5.4(b). 



                                     (iii)  
          In the event that Palomar develops or commercializes any Light-Based Products
          directly as opposed to granting a (sub)license(s) or other right(s) to a Third
          Party(ies) as contemplated in Sections 5.3(a)(i) and 5.3(a)(ii), Palomar shall
          comply with the terms of Sections 5.3(a)(i) and 5.3(a)(ii) to the same extent as
          if Palomar were standing in the shoes of any Third Party referred to in such
          Sections (e.g., by doing that which a Third Party would be required to do
          and by refraining from doing that which a Third Party would be prohibited from
          doing), provided that Sections 5.3(a)(i) and 5.3(a)(ii) shall, prior to the Male
          Option Termination Date, not apply to Palomar’s activities related to the
          Exploitation of Light-Based Products in the Male Field, so long as Palomar
          complies with Section 5.2(b). 



                                     (iv)  
          The covenants of Palomar contained in Sections 5.3(a)(i)(1), 5.3(a)(i)(2)
          and 5.3(a)(ii)(2), which apply directly to Palomar and will apply to Palomar
          Licensees, shall not prevent Palomar or any Palomar Licensee from conducting any
          activity, or exercising or granting any licenses or other rights, as otherwise
          permitted under this Agreement, with respect to the Palomar Technology, Palomar
          Male Technology, Joint Technology or otherwise, that has as its goal or intent
          Exploitation of a product or system outside the Exclusive Field and not
          Exploitation of a product or system in the Exclusive Field, notwithstanding the
          possibility that such activity, exercise or grant may have applications in the
          Exclusive Field. 



                     (b)  
          Gillette covenants to Palomar that: 



                                     (i)  
          Gillette will include in each Third Party agreement in which Gillette grants to
          a Third Party a license or other rights under any Palomar Technology, Palomar
          Male Technology or Joint Technology to sell, have sold, offer for sale or
          otherwise commercialize one or more Female Products (each such Third Party a
          “Gillette Licensee,” and each such agreement, a “Gillette License
          Agreement”), terms and conditions that prohibit the Gillette Licensee from
          Exploiting any such technology, by: 



                                             (1)  
          With respect to the Joint Technology, developing any Light-Based Product
          intended by Gillette (or any Gillette Licensee) for use (in whole or in part)
          outside the Field, and with respect to the Palomar Technology, developing any
          Light-Based



-25- 









     Product intended by Gillette (or such Third Parties) for use (in whole or in
part) outside the Female Field; 



                                             (2)  
          marketing any Light-Based Product outside the Exclusive Field; 



                                             (3)  
          developing or commercializing in or outside the Field any Light-Based Accessory
          Product during its period of commercialization by Palomar or any Palomar
          Licensee, provided that any apparatus, component, accessory, disposable or
          Consumable as to which Gillette or any Gillette Licensee has expended material
          financial and other resources on its development or commercialization as a
          Female Accessory Product before such Light-Based Accessory Product is first
          commercialized by Palomar or any Palomar Licensee, shall not be subject to the
          restriction contained in this Section 5.3(b)(i)(3). 



                                     (ii)  
          Gillette will include in each Gillette License Agreement, terms and conditions
          that: 



                                             (1)  
          require the Gillette Licensee to label Female Products with the following phrase
          (or similar words which fairly convey such products are for use only in the
          Female Field): “intended only for use in the management or removal of
          female hair”; 



                                             (2)  
          prohibit such Gillette Licensee, in the development and commercialization of
          Female Products, from intentionally (A) designing, modifying or otherwise
          improving any Female Product(s) with the goal or intent of improving its
          efficacy or performance outside the Female Field, or (B) optimizing, inducing,
          supporting, or encouraging the use of Female Products outside the Female Field. 



                                     (iii)  
          grant to Palomar Third Party beneficiary rights to enforce any provision of such
          agreement that corresponds to the covenants of Gillette contained in this
          Section 5.3(b), provided that such agreement grants to Gillette a reciprocal
          right in accordance with Section 5.3(a)(ii)(3). 



                                     (iv)  
          grant to Palomar Licensees the rights required pursuant to Section 5.4(a). 



                     (c)  
          In the event that Gillette develops or commercializes any Female Product
          directly as opposed to granting a (sub)license(s) or other right(s) to a Third
          Party(ies) as contemplated in Section 5.3(b)(i) and 5.3(b)(ii), Gillette shall
          comply with the terms of Sections 5.3(b)(i) and 5.3(b)(ii) to the same extent as
          if Gillette were standing in the shoes of any Gillette Licensee referred to in
          such Sections (e.g., by doing that which a Gillette Licensee would be
          required to do and by refraining from doing that which a Gillette Licensee would
          be prohibited from doing), provided that nothing contained in this Section
          5.3(c) shall limit the scope of the license granted by Palomar to Gillette in
          Section 4.1. 



                     (d)  
          The covenants of Gillette contained in Sections 5.3(b)(i)(1), 5.3(b)(i)(2)
          and 5.3(b)(ii)(2) shall not prevent Gillette or any Gillette Licensee from
          conducting any activity, or exercising or granting any licenses or other rights,
          as otherwise permitted under this Agreement, with respect to the Palomar
          Technology, Joint Technology or otherwise, that has



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     as its goal or intent Exploitation of a product or system with respect to the
Joint Technology, inside the Field, and with respect to all other such
technology, inside the Exclusive Field, notwithstanding the possibility that
such activity, exercise or grant may have applications outside the Field and
Exclusive Field, respectively. 




        5.4 Economic Adjustments
for Off-Label Sales 



                     (a)  
          Gillette Covenants. 



                                     (i)  
          In order to preserve for each of the Palomar Licensees the economic benefits of
          the exclusivity granted by Palomar to such Palomar Licensee under the Palomar
          Technology, Palomar Male Technology or Joint Technology to Exploit Light-Based
          Products in the Consumer Field or the Professional Field, as the case may be,
          Gillette agrees to make payments to such Palomar Licensee in the manner set
          forth in subparagraph (ii) below, to compensate such Palomar Licensee for
          certain lost profits, if any, resulting from net off-label purchases of Female
          Products by end-users in the exclusive field of such Palomar Licensee. 



                                     (ii)  
          In the event that any Palomar Licensee shall suffer Lost Profits (calculated in
          the manner set forth in subparagraph (iii) below) in excess of Five Million
          Dollars (US $5,000,000) in any calendar year, then such Palomar Licensee may
          submit a written notice to Gillette (a “Lost Profits Notice”)
          specifying its aggregate Lost Profits for such calendar year and enclosing
          copies of (A) the Independent Study (as defined below) supporting such
          calculation and (B) the relevant Palomar License Agreement. Within one hundred
          and eighty (180) days after receipt thereof, Gillette shall (1) remit payment to
          such Palomar Licensee, to such bank account designated in the Lost Profits
          Notice, in an amount equal to the difference between such Lost Profits and Five
          Million Dollars ($5,000,000) or (2) provide to such Palomar Licensee a detailed
          written critique of such calculation, propose a revised calculation of such
          Palomar Licensee’s Lost Profits based on a new Independent Study, and
          enclose a copy of such Independent Study. In the event that Gillette shall
          propose a revised calculation, Gillette and such Palomar Licensee shall meet
          within thirty (30) days thereafter to attempt in good faith to negotiate an
          agreed level of Lost Profits, or otherwise settle the dispute. In the event that
          the parties shall fail to reach agreement at such meeting, either party may
          bring a lawsuit in any court of competent jurisdiction to resolve such dispute. 



                                     (iii)  
          The Lost Profits of a Palomar Licensee for a calendar year shall be determined
          as follows. Such Palomar Licensee shall retain, at its expense, a
          nationally-recognized economic consulting firm to determine, for such year, on
          the basis of accepted accounting, market research, sampling and survey
          methodology, (A) the sales of Female Products for such year that displaced sales
          of Light-Based Products by or on behalf of Palomar’s Licensee in the
          exclusive field of such Palomar Licensee, as specified in the relevant Palomar
          License Agreement, and (B) the sales of Light-Based Products for such year by
          such Palomar Licensee or its sublicensees or agents that displaced sales of
          Female Products by or on behalf of Gillette; (C) the average net profit of such
          Palomar Licensee for each unit of Light-Based Product sold (on a
          country-by-country basis, as relevant); (D) the loss of sales resulting from net
          off-label sales, calculated on the basis of (A) and (B); and (E) the lost
          profits attributable to such net off-label sales, calculated on the basis of (C)
          and (D) (the “Lost Profits”). Such



-27- 









     determinations shall be summarized and documented in a report prepared by such
nationally-recognized economic consulting firm (the “Independent
Study”). 



                                     (iv)  
          Notwithstanding any other provision of this Section 5.4, Gillette shall have no
          obligation to make any payment to any Palomar Licensee hereunder (A) if such
          Palomar Licensee has materially breached any provision of the relevant Palomar
          License Agreement corresponding to any negative covenant set forth in Section
          5.3(a) hereof or (B) if the Lost Profits claimed by such Palomar Licensee relate
          to a period after the termination or expiration of the period of license
          exclusivity provided for in the relevant Palomar License Agreement. 



                                     (v)  
          Gillette hereby consents to Palomar’s granting to each Palomar Licensee in
          the relevant Palomar License Agreement third party beneficiary rights to enforce
          directly against Gillette any provision of this Section 5.4(a), provided that
          such Palomar License Agreement includes a provision corresponding to that
          described in Section 5.4(b). 



                     (b)  
          Palomar Covenants. Palomar agrees to include in each Palomar License
          Agreement covenants that bind the relevant Palomar Licensee in the same manner
          and to the same extent that Gillette is bound by Section 5.4(a), mutatis
          mutandis (such that Gillette is accorded thereunder the rights of a Palomar
          Licensee under Section 5.4(a) hereof). Further, Palomar agrees to include in
          each Palomar License Agreement a grant to Gillette of third party beneficiary
          rights to enforce any such provision of such agreement. 



        5.5 Duration and Scope of
Section 5.3. Insomuch as certain of the provisions of Section 5.3 are intended to
apply to Gillette and any Gillette Licensee, and Palomar and any Palomar Licensee, this
Section 5.5 sets forth the general principles for the duration and scope of Section 5.3: 



                     (a)  
          For as long as Gillette or a Palomar Licensee has an exclusive (sub)license
          under a license granted to it by Palomar under the Palomar Technology or Joint
          Technology (as the case may be) sufficient in scope to Exploit, in the case of
          Gillette, Female Products, and in the case of the Palomar Licensee, Light-Based
          Products outside the Field, then the Person receiving such license shall enjoy
          the benefits of the restrictions contained in Section 5.3(a) or 5.3(b),
          respectively, (i.e., as long as the licenses grants in Section 4.1(a)(i)
          and 4.1(a)(ii) remain exclusive to Gillette, Gillette shall enjoy the benefit of
          the restrictions contained in Section 5.3(a)). At such time as Gillette or the
          Palomar Licensee, as the case may be, no longer has any such exclusive license,
          then Gillette or the Palomar Licensee shall no longer enjoy the benefits of such
          restrictions. 



                     (b)  
          For as long as Gillette or a Palomar Licensee is granted a (sub)license by
          Palomar, whether exclusive or non-exclusive in scope, under the Palomar
          Technology or Joint Technology sufficient in scope to Exploit, in the case of
          Gillette, Female Products, and in the case of the Palomar Licensee, Light-Based
          Products outside the Field, then Gillette or the Palomar Licensee, respectively,
          shall be subject to the restrictions contained in Section 5.3(a) or 5.3(b), as
          applicable (i.e., so long as the license grants in Section 4.1(a)(i) and
          4.1(a)(ii) remain in force, Gillette shall be subject to the restrictions
          contained in Section 5.3(b)). 



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                     (c)  
          For the avoidance of doubt, (i) if Gillette or any such Palomar Licensee only
          has non-exclusive rights under Palomar Technology or Joint Technology, Gillette
          or such Palomar Licensee, respectively, shall not enjoy the benefit of the
          restrictions contained in Sections 5.3(a) or 5.3(b), but shall be subject to the
          restrictions contained in Sections 5.3(a) or 5.3(b), as applicable, (ii) the
          ownership interest that Gillette retains in Joint Technology, as distinguished
          from the license interest from Palomar under Section 4.1, shall not by itself
          render Gillette subject to the restrictions contained in Section 5.3(b), and
          (iii) for this Agreement, ARTICLE X sets forth if and when Section 5.3 will
          terminate, and this Section 5.5 is not intended to vary ARTICLE X or any other
          provision of this Agreement in any way, with the understanding that ARTICLE X is
          intended to reflect the principles set forth in this Section 5.5. 



        5.6 Restrictions
Reasonable. The parties acknowledge and agree that all restrictions contained in this
ARTICLE V are reasonable, valid and necessary for the adequate protection of (a) in the
case of Gillette, Gillette’s Female Product(s) business, and the Male Option granted
by Palomar to Gillette until the Male Option Termination Date, and (b) in the case of
Palomar, Palomar’s Light-Based Product business, and that neither party would have
entered into this Agreement without the protection afforded to it by the other party
pursuant to this ARTICLE V. 




ARTICLE VI 
Payments 



        6.1 Payments to Palomar for Female Products.  Subject to the terms and conditions
set forth in this Agreement, Gillette shall make the following payments to
Palomar:



                     (a)  
          R&D Advance Payment. Gillette shall pay to Palomar five hundred
          thousand dollars (US $500,000) within ten (10) business days of the Effective
          Date (the “R&D Advance Payment”), which amount shall be fully
          creditable against the final payment that Gillette shall be required to make to
          Palomar pursuant to Section 6.1(b) in connection with the R&D Program.
          Except as expressly provided in the immediately preceding sentence, such payment
          shall otherwise be non-creditable and non-refundable and there shall be no right
          of set-off with respect thereto. 



                     (b)  
          R&D Payments. For the first ten (10) full Calendar Quarters
          after the Effective Date, Gillette shall pay to Palomar for each such Calendar
          Quarter seven hundred thousand dollars (US $700,000) to support the R&D
          Activities (each such payment, an “R&D Payment” and
          collectively the “R&D Payments”) in accordance with
          Section 1.3(b)(iii). For the avoidance of doubt, Gillette shall be required
          to pay to Palomar seven million dollars (US $7,000,000) in the aggregate, and no
          more than seven million five hundred thousand dollars (US $7,000,000) in the
          aggregate, unless otherwise expressly provided herein, in Section 14.2(d), or as
          the parties may otherwise agree, in connection with the R&D Program (which
          amount shall be inclusive of the five hundred thousand dollar (US $500,000)
          payment made by Gillette to Palomar pursuant to Section 6.1(a) and credited
          against payments made in connection with the R&D Program as provided in that
          Section). In the event that this Agreement is terminated by Gillette pursuant to
          Section 10.4(a) before the final R&D payment becomes due, Gillette’s
          shall be obligated to make R&D Payments to Palomar in the amount of four
          million five hundred thousand dollars ($4,500,000) in the aggregate (against
          which amount the five hundred thousand



-29- 









     dollar ($500,000) payment made by Gillette to Palomar pursuant to Section 6.1(a)
shall be credited). In the event that this Agreement is terminated by Gillette
pursuant to Section 10.4(b) before the final R&D payment becomes due,
Gillette shall be obligated to make R&D Payments to Palomar with respect to
the two (2) Calendar Quarters after the Calendar Quarter in which Gillette
provides to Palomar written notice of such termination (against which amounts
the five hundred thousand dollar ($500,000) payment made by Gillette to Palomar
pursuant to Section 6.1(a) shall be credited). In the event that this Agreement
is terminated by Gillette pursuant to Section 10.4(d) or by Palomar pursuant to
Section 10.3 before the final R&D Payment becomes due, Gillette shall be
obligated to pay Palomar all remaining R&D Payments (against which remaining
amount the five hundred thousand dollar ($500,000) payment made by Gillette to
Palomar pursuant to Section 6.1(a) shall be credited). In the event that this
Agreement is terminated by Gillette pursuant to Section 10.3 for Palomar’s
uncured material breach before the final R&D Payment becomes due, Gillette
shall have no further obligation from and after the date on which Gillette
provides to Palomar written notice of such termination to pay Palomar any
additional R&D Payments. In the event that Gillette is obligated to pay
Palomar one or more R&D Payments after the termination of this Agreement as
provided above, all such R&D Payments shall become due and payable within
thirty (30) days of when any such termination becomes effective. All
R&D Payments shall be non-creditable and non-refundable and there shall be
no right of set-off with respect thereto. 



                     (c)  
          Manufacturing Payments. In the event that Gillette elects to have Palomar
          Manufacture the CUT Female Product, Gillette shall pay to Palomar Manufacturing
          Fees with respect to such CUT Female Product, calculated in accordance with
          Section 3.2. All Manufacturing Fees shall be non-creditable and
          non-refundable and there shall be no right of set-off with respect thereto,
          except in the event that an audit provided for in Section 3.2 confirms that
          Gillette overpaid Palomar. 



                     (d)  
          Development Completion Payment(s). 



                                     (i)  
          Development Completion Payments. In the event that Gillette fails to
          terminate this Agreement in accordance with Section 10.4(d) on or before
          the First Decision Date or Second Decision Date, as applicable, Gillette shall
          pay to Palomar the applicable Development Completion Payment(s) on or before the
          First Development Completion Payment Date or the Second Development Completion
          Payment Date, as the case may be: 







	Development Event		Development Completion  Payment
	 	 	 
	First Development Completion	 	$2,500,000 (“First Development Completion Payment”)
	 Payment Date	 	 
	 	 	 
	Second Development Completion	 	$10,000,000 (“Second Development Completion Payment,” and
	 Payment Date 	 	together with the First Development Completion Payment,
	 	 	“Development Completion Payments”)








	


                                     (ii)  
          Development Completion Payments Not Creditable or Refundable; Payable Only
          Once. Except as provided in Section 1.6(b) and 14.2, Development Completion
          Payments made by Gillette at the First Development Completion Payment Date and
          the Second Development Completion Payment Date shall not be refundable or
          creditable against TTPs or royalty payments or any other payments owed by
          Gillette to Palomar hereunder and there shall be no right of set-off with
          respect thereto. Each Development Completion Payment



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     shall be payable only once
          irrespective of the number of Female Products that are developed or
          commercialized by the parties pursuant to this Agreement. 



                                     (iii)  
          Understanding. The parties understand and agree that the Development
          Completion Payments are made for partial reimbursement of costs expended by
          Palomar for its development of Palomar Technology prior to the Effective Date,
          as further described in Section 6.1(e)(i). 



                     (e)  
          TTPs to Be Made by Gillette to Palomar for Female Products. 



                                     (i)  
          Introduction. The parties understand and agree that Palomar shall
          disclose to Gillette a substantial amount of Palomar Technology developed before
          the Effective Date. The parties further understand and agree that Palomar has
          expended significant effort and capital to develop such Palomar Technology and
          without it, the parties would not be able to commercialize Female Products in
          the time-frame or manner contemplated by this Agreement. Gillette shall pay
          Palomar the TTPs set forth in this Section 6.1(e), the Development
          Completion Payments set forth in Section 6.1(d), the Annual Exclusivity
          Collaboration Payments set forth in Section 6.1(g), the Failure to Launch
          Payments set forth in Section 2.1(b), and the lump-sum payments set forth
          in Section 6.2(a) as partial reimbursement for Palomar’s development
          and disclosure of such Palomar independently-developed technology. By means of
          the TTPs, the parties mutually agree that they have shared equitably the risk
          involved in determining the value of such Palomar Technology and the risk
          involved in developing and commercializing Female Products (including the risk
          involved in creating a new market sector). 



                                     (ii)  
          TTPs. On a Female Product-by-Female Product basis, Gillette shall pay to
          Palomar on account of sales or distributions of each such product by Gillette or
          any of its agents or (sub)licensees, TTPs in the amount of four percent (4%) of
          worldwide Net Sales of each Female Product(s); provided, however,
          in the case of each Female Product Lotion, Gillette’s obligation to pay to
          Palomar TTPs with respect to such Female Product Lotion shall be two percent
          (2%). Notwithstanding the foregoing, except as otherwise expressly provided in
          Section 6.1(g), 6.1(h) or ARTICLE VIII, all such TTPs shall be
          non-creditable and non-refundable and there shall be no right of set-off with
          respect thereto, except in the event that an audit confirms that Gillette had
          overpaid Palomar as provided in Section 6.8, whereupon any over-payment
          shall be addressed as provided in that Section. 



                                     (iii)  
          TTP Period. Gillette’s obligation to pay to Palomar TTPs pursuant to
          Section 6.1(e)(ii) shall commence on the date of First Commercial Sale of a
          Female Product and shall continue on a Female Product-by-Female Product basis
          for as long as such Female Product is sold or distributed by or on behalf of
          Gillette or any of its agents or (sub)licensees. 




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         (f) Royalties
for Female Products.  



                                     (i)  
          Royalties. On a Female Product-by-Female Product and country-by-country
          basis, Gillette shall pay to Palomar on account of sales or distributions of
          each such product by Gillette or any of its agents or (sub)licensees, royalties
          in the amount of two percent (2%) of Net Sales of each Female Product where the
          Manufacture, sale, offer for sale, use or import of such Female Product would
          (in the absence of the license(s) or other ownership interests provided pursuant
          to this Agreement (including any of Gillette’s ownership or other interests
          in the Joint Patents)) infringe a Valid Claim of a Palomar Patent or Joint
          Patent; provided, however, in the case of each Female Product
          Lotion, Gillette’s obligation to pay to Palomar royalties with respect to
          such Female Product Lotion shall be one percent (1%). Notwithstanding the
          foregoing, that in the event that such Manufacture, sale, offer for sale, use or
          import of such Female Product(s) would infringe an MGH Valid Claim(s) but no
          other Valid Claim, Gillette’s obligation pursuant to this Section 6.1(f)
          shall be reduced to one percent (1%) of such Net Sales and shall apply only if
          and to the extent that Palomar has a corresponding payment obligation to MGH
          under an MGH Agreement. Except as otherwise expressly provided in
          Section 6.1(g), 6.1(h) or ARTICLE VIII, all royalty payments under this
          Section 6.1(f)(i) shall be non-creditable and non-refundable and there
          shall be no right of set-off with respect thereto, except in the event that an
          audit confirms that Gillette had overpaid Palomar as provided in
          Section 6.8, whereupon any over-payment shall be addressed as provided in
          that Section. 



                                     (ii)  
          Royalty Period. Gillette’s obligation to pay to Palomar royalties
          pursuant to Section 6.1(f)(i) shall commence on the date of First
          Commercial Sale of a Female Product and terminate on a Female Product-by-Female
          Product and country-by-country basis on the date of the last to expire of any
          Valid Claim of a Palomar Patent or Joint Patent in such country covering the
          Manufacture, sale, offer for sale, importation or use of such product. 



                     (g)  
          Annual Exclusivity Collaboration Payments. As further reimbursement to
          Palomar for its development and disclosure of Palomar Technology as described in
          Section 6.1(e)(i) and in partial consideration of the exclusivity granted
          by Palomar to Gillette pursuant to ARTICLE IV and ARTICLE V, Gillette shall pay
          Palomar the Annual Exclusivity Collaboration Payments (as defined below) set
          forth in this Section 6.1(g). Subject to ARTICLE X, within thirty (30) days
          after the first anniversary of the Second Development Completion Payment Date
          (such anniversary, the “Exclusivity Payment Date”), and thereafter
          within thirty (30) days after each anniversary of the Exclusivity Payment Date,
          Gillette shall pay to Palomar ten million dollars (US $10,000,000) (each, an
          “Annual Exclusivity Collaboration Payment”). For the twelve-month
          period commencing on the second anniversary of the Exclusivity Payment Date and
          any future such anniversary of the Exclusivity Payment Date, as the case may be,
          and ending twelve months thereafter (each twelve month period, an “Annual
          Exclusivity Collaboration Period”), the Annual Exclusivity Collaboration
          Payment paid during the first thirty (30) days of the corresponding Annual
          Exclusivity Collaboration Period shall be (A) fully creditable against any and
          all TTPs or royalties owed by Gillette to Palomar for Net Sales during the
          corresponding Annual Exclusivity Collaboration Period, and (B) payable only once
          irrespective of the number of Female Products that are developed or
          commercialized by the parties pursuant to this Agreement; provided,
          however, that in the event that Gillette elects pursuant to
          Section 10.2 to terminate the Exclusivity Period, from and after such
          termination date



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     no Annual Exclusivity Collaboration Payments shall be payable by Gillette to
Palomar. For avoidance of doubt, any credits, offsets or other reductions
available under this Agreement for Gillette to credit against TTPs and royalties
owed by Gillette to Palomar (taking into account Section 6.6(b)) shall not
be used to reduce any Annual Exclusivity Collaboration Payments. 



                     (h)  
          TTP and Royalty Reductions. Subject to Section 6.6(b), on a Female
          Product-by-Female Product and country-by-country basis, with respect to each
          Female Product sold by Gillette or any of its agents or (sub)licensees to one or
          more Third Parties in a particular country, during any given Calendar Quarter,
          if the sum of TTPs and royalty payments owed by Gillette to Palomar and by
          Gillette to one or more Third Parties in connection with sales of such product
          in such country exceeds ten percent (10%) of the Net Sales of such product in
          such country (prior to application of this Section), then thirty-three percent
          (33%) of the difference of (1) the sum of (A) the applicable royalty rate
          and the TTP rate payable to Palomar (as provided in Sections 6.1(e)(ii) and
          6.1(f)(i)) (the sum of such rates, the “Female Product Payment Rate”)
          and (B) the rates of royalties and TTPs payable to such Third Parties, minus
          (2) ten percent (10%), shall be reduced from the Female Product Payment
          Rate payable to Palomar for such Calendar Quarter (which reduction shall be
          applied pro rata to each of the royalty rate and the TTP rate); provided,
          however, that in any Annual Exclusivity Collaboration Period, in no event
          shall this Section 6.1(h) reduce the amount of any Annual Exclusivity
          Collaboration Payment. Notwithstanding anything contained in this Agreement to
          the contrary, (i) amounts paid by Gillette to Palomar pursuant to Section
          6.1(i) shall be excluded from the royalty reduction provisions contained in this
          Section 6.1(h), and (ii) except as otherwise expressly provided in
          Section 8.5, amounts paid by the parties pursuant to that Section shall be
          excluded from the royalty reduction provisions contained in this Section 6.1(h). 



                     (i)  
          Third Party Royalties. In the event that Gillette’s Exploitation of
          Female Products triggers any payment obligations to any Third Party pursuant to
          an agreement originally entered into by Palomar and such Third Party prior to or
          on the Effective Date, including to MGH pursuant to the MGH Agreements, Palomar
          shall be solely responsible for such payments. In the event that Gillette’s
          Exploitation of Female Products triggers any payment obligations to any Third
          Party pursuant to an agreement originally entered into by Palomar and such Third
          Party after the Effective Date, Palomar shall so inform Gillette in writing and
          provide to Gillette a copy of such Third Party agreement. Gillette shall be
          required to pay to Palomar any such payment obligations attributable to
          Gillette’s exercise of any rights or license (or sublicense) under such
          Third Party agreement that accrue after Gillette’s receipt of such
          agreement; provided, however, that in the event that Gillette
          elects not to exercise any rights or a license (or sublicense) under such Third
          Party agreement, Gillette shall so inform Palomar in writing and from and after
          such date Gillette shall have no rights or license (or sublicense) and shall
          have no obligations to make such payments to Palomar for such payment
          obligations that accrue after such date unless and until the parties otherwise
          mutually agree in writing. 




        6.2 Payments to Palomar
for Gillette Joint Independent Products and Other Independent Products. 



                     (a)  
          Lump-Sum Payments for Gillette Joint Independent Products and Other
          Independent Products. In partial consideration of the exclusivity granted by
          Palomar to 



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      Gillette pursuant to ARTICLE IV and ARTICLE V, Gillette hereby agrees
          to make the following payments to Palomar: 



                                     (i)  
          Launch During Exclusivity Period. Subject to Sections 6.2(a)(iii) and
          6.2(a)(iv), in the event that, during the Exclusivity Period, Gillette Launches
          a Gillette Joint Independent Product or an Other Independent Product in the
          Field, within thirty (30) days of such Launch, Gillette shall pay to Palomar on
          account of the Launch of such product, five million dollars (US $5,000,000). In
          the event that, subsequent to such Launch, Gillette terminates the Exclusivity
          Period pursuant to Section 10.2, within thirty (30) days of the end of the
          Exclusivity Period, Gillette shall pay to Palomar on account of the Launch of
          such product, an additional five million dollars (US $5,000,000). Such payments
          shall be non-creditable and non-refundable and there shall be no right of
          set-off with respect thereto. 



                                     (ii)  
          Launch After Termination of Exclusivity Period. Subject to Sections
          6.2(a)(iii) and 6.2(a)(iv), in the event that, after the termination, if any, of
          the Exclusivity Period, Gillette Launches a Gillette Joint Independent Product
          or an Other Independent Product in the Field, within thirty (30) days of such
          Launch, Gillette shall pay to Palomar on account of the Launch of such product,
          ten million dollars (US $10,000,000). Such payment shall be non-creditable and
          non-refundable and there shall be no right of set-off with respect thereto. 



                                     (iii)  
          Lump-Sum Payments Contingent on Regulatory Approval in the United States for
          first Female Product. Notwithstanding anything contained in Sections
          6.2(a)(i) and 6.2(a)(ii), in the event that, as of the date of Gillette’s
          Launch of a Gillette Joint Independent Product or Other Independent Product in
          the Field, Palomar has not obtained Regulatory Approval in the United States for
          the First Female Product, Gillette’s obligation to make a lump-sum payment
          to Palomar pursuant to Section 6.2(a)(i) or 6.2(a)(ii), as applicable, shall be
          deferred until thirty (30) days after such Regulatory Approval is obtained. In
          the event that Palomar fails to obtain Regulatory Approval in the United States
          for the First Female Product, Gillette shall have no obligation to make any
          payment(s) to Palomar pursuant to Sections 6.2(a)(i) and 6.2(a)(ii). 



                                     (iv)  
          Lump-Sum Payment(s) Payable Only Once. Once Gillette has made a
          payment(s) to Palomar pursuant to Section 6.2(a)(i) or 6.2(a)(ii) on account of
          the first Gillette Joint Independent Product or Other Independent Product
          Launched by Gillette in the Field, Gillette shall have no further obligation to
          make payments to Palomar pursuant to Section 6.2(a)(i) or 6.2(a)(ii) on account
          of any subsequent or other Gillette Joint Independent Product or Other
          Independent Product Launched by Gillette in the Field. 



                     (b)  
          TTPs for Gillette Joint Independent Products and Other Independent
          Products. 



                                     (i)  
          Gillette Joint Independent Products. Gillette shall pay to Palomar on
          account of sales or distributions of each Gillette Joint Independent Product in
          the Field by Gillette or any of its agents or (sub)licensees, on a Gillette
          Joint Independent Product-by-Gillette Joint Independent Product basis, TTPs in
          the amount of four percent (4%) of worldwide Net Sales of such product;
          provided, however, that in the case of each Independent



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     Product Lotion, Gillette’s obligation to pay to Palomar TTPs with respect
to such Independent Product Lotion shall be two percent (2%). Gillette’s
obligation to pay to Palomar TTPs pursuant to this Section 6.2(b)(i) shall
commence on the date of First Commercial Sale of the Gillette Joint Independent
Product and shall continue, on a Gillette Joint Independent Product-by-Gillette
Joint Independent Product basis, for (A) in the case of a Gillette Joint
Independent Product Launched by Gillette during the Exclusivity Period, as long
as such Gillette Joint Independent Product is sold by or on behalf of Gillette
or any of its agents or (sub)licensees, and (B) in the case of a Gillette Joint
Independent Product Launched within ten (10) years after the termination of the
Exclusivity Period, twenty (20) years after the Launch of the first Gillette
Joint Independent Product in the Field that is Launched during the ten (10)
years after the termination of the Exclusivity Period. 



                                     (ii)  
          Other Independent Products. Gillette shall pay to Palomar on account of
          sales or distributions of each Other Independent Product in the Field by
          Gillette or any of its agents or (sub)licensees, on an Other Independent
          Product-by-Other Independent Product basis, TTPs in the amount of (A) one
          percent (1%) of worldwide Net Sales of such product, with respect to sales
          occurring during the Exclusivity Period, and (B) two percent (2%) of worldwide
          Net Sales with respect to such product, with respect to sales occurring after
          the Exclusivity Period has terminated. Gillette’s obligation to pay to
          Palomar TTPs pursuant to this Section 6.2(b)(ii) shall commence on the date
          of First Commercial Sale of each Other Independent Product and shall terminate
          on the tenth (10th) anniversary of the First Commercial Sale of the first Other
          Independent Product Launched by Gillette in the Field. 



                     (c)  
          Royalties for Gillette Joint Independent Products. Gillette shall pay to
          Palomar on account of sales or distributions of each Gillette Joint Independent
          Product(s) in the Field by Gillette or any of its agents or (sub)licensees, on a
          Gillette Joint Independent Product-by-Gillette Joint Independent Product and
          country-by-country basis, royalties in the amount of two percent (2%) of Net
          Sales of such product; provided, however, that in the case of each
          Independent Product Lotion, Gillette’s obligation to pay to Palomar
          royalties with respect to such Independent Product Lotion shall be one percent
          (1%). Notwithstanding the foregoing, in the event that such Manufacture, sale,
          offer for sale, use or import of such Gillette Joint Independent Product(s)
          would infringe an MGH Valid Claim(s) but no other Valid Claim, Gillette’s
          obligation pursuant to this Section 6.2(c) shall be reduced to one percent (1%)
          of such Net Sales and shall apply only if and to the extent that Palomar has a
          corresponding payment obligation to MGH under an MGH Agreement. Gillette’s
          obligation to pay to Palomar royalties pursuant to this Section 6.2(c)
          shall commence on the date of First Commercial Sale of the Gillette Joint
          Independent Product and terminate on a country-by-country basis on the date of
          the last to expire of any Valid Claim of a Joint Patent covering such product. 



                     (d)  
          Royalties for Non-Light Based Products. In the event, and only to the
          extent, that the Manufacture, sale, offer for sale, use or import of a Non-Light
          Based Product outside the Field by or on behalf of Gillette or any of its
          sublicensees pursuant to the license granted to Gillette in Section 4.1(a)(iii)
          would (in the absence of such license) infringe a Valid Claim of an MGH Patent
          or an MGH Joint Patent, Gillette shall pay to Palomar on account of sales or
          distributions of each such Non-Light Based Product, on a Non-Light Based
          Product,-by-Non-Light Based Product basis, royalties in the amount of one
          percent (1%) of Net Sales of such product; provided, however, that
          Gillette’s obligation pursuant to this Section 6.2(d) shall apply



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     only if and to the extent that Palomar has a corresponding payment obligation to
MGH under an MGH Agreement. Gillette’s obligation to pay to Palomar
royalties pursuant to this Section 6.2(d) shall commence on the date of
First Commercial Sale of the Non-Light Based Product and terminate on a
country-by-country basis on the date of the last to expire of any Valid Claim of
a MGH Patent or MGH Joint Patent covering such product. Except as otherwise
expressly provided in ARTICLE VIII, all royalty payments under this
Section 6.2(d) shall be non-creditable and non-refundable and there shall
be no right of set-off with respect thereto, except in the event that an audit
confirms that Gillette had overpaid Palomar as provided in Section 6.8,
whereupon any over-payment shall be addressed as provided in that Section.




                     (e)  
          Royalties for Products or Systems Exploited Pursuant to the License Grant by
          Palomar to Gillette in Section 4.1(a)(iv). In the event, and only to the
          extent, that the Manufacture, sale, offer for sale, use or import of a product
          or system outside the Field by or on behalf of Gillette or any of its
          sublicensees pursuant to the license granted to Gillette in Section 4.1(a)(iv)
          would (in the absence of such license) infringe a Valid Claim of a Joint Patent
          with respect to which Gillette does on have an ownership interest, Gillette
          shall pay to Palomar on account of sales or distributions of each such products
          or systems, on a product-by-product or system-by-system basis (as applicable),
          royalties in the amount of one percent (1%) of Net Sales of such product;
          provided, however, that Gillette’s obligation pursuant to this
          Section 6.2(e) shall apply only if and to the extent that Palomar has a
          corresponding payment obligation to MGH under an MGH Agreement. Gillette’s
          obligation to pay to Palomar royalties pursuant to this Section 6.2(e)
          shall commence on the date of First Commercial Sale of such product or system in
          such country and terminate on a country-by-country basis on the date of the last
          to expire of any Valid Claim of any such Joint Patent covering such product or
          system. Except as otherwise expressly provided in ARTICLE VIII, all royalty
          payments under this Section 6.2(e) shall be non-creditable and
          non-refundable and there shall be no right of set-off with respect thereto,
          except in the event that an audit confirms that Gillette had overpaid Palomar as
          provided in Section 6.8, whereupon any over-payment shall be addressed as
          provided in that Section. 




        6.3 Payments to Gillette. 



                     (a)  
          Products Claimed by Gillette Licensed Patents. Subject to the terms,
          conditions and limitations of this Agreement, including Section 6.3(b), in the
          event that Palomar Exploits, or grants to a Third Party a sublicense to Exploit,
          any product or service covered by a Gillette Licensed Patent, and provided that
          Gillette has granted to Palomar a license under the Gillette Licensed Patents
          that is being exercised by such Exploitation, Palomar shall pay to Gillette on a
          product-by-product and country-by-country basis, royalties in the amount of one
          percent (1%) of Net Sales of such product or service in such country, which Net
          Sales shall be calculated as provided in the definition of “Net
          Sales,” substituting therein “Palomar” for “Gillette”
          wherever such term appears. The royalty obligations under this
          Section 6.3(a) shall terminate, on a country-by-country basis, with respect
          to each product for which a royalty is payable upon the expiration date in such
          country of the last to expire of any Valid Claim of a Gillette Licensed Patent
          covering such product or service. 



                     (b)  
          Third Party Royalties. In the event that Palomar’s Exploitation of
          any product or service under the rights granted by Gillette to Palomar under the
          Gillette Licensed Patents triggers any payment obligations by Gillette to any
          Third Party, Gillette shall so inform



-36- 









      Palomar in writing and provide to Palomar
          a copy of such Third Party agreement. Palomar shall be required to pay to
          Gillette any such payment obligations attributable to Palomar’s exercise of
          any rights or license (or sublicense) under such Third Party agreement that
          accrue after Palomar’s receipt of such agreement; provided,
          however, that in the event that Palomar elects not to exercise any rights
          or a license (or sublicense) under such Third Party agreement, Palomar shall so
          inform Gillette in writing and from and after such date Palomar shall have no
          such rights or license (or sublicense) and shall have no obligation to make such
          payments to Gillette for such payment obligations that accrue after such date
          unless and until the parties otherwise mutually agree in writing. 



        6.4 TTP and Royalty
Reductions for Independent Products. Subject to Section 6.6(b), on an Independent
Product-by-Independent Product and country-by-country basis, with respect to each
Independent Product sold by Gillette or any of its agents, distributors or (sub)licensees
to one or more Third Parties in a particular country, during any given Calendar Quarter,
if the sum of TTPs and royalty payments owed by Gillette to Palomar and by Gillette to one
or more Third Parties in connection with sales of such Independent Product in such
country, exceeds ten percent (10%) of the Net Sales of such product in such country (prior
to application of this Section), then thirty-three percent (33%) of the difference of
(1) the sum of (A) the applicable TTP rate and royalty rate payable to Palomar (as
provided in this ARTICLE VI) (the sum of such rates, the “Independent Product
Payment Rate”) and (B) the rates of TTPs and royalties payable to such Third Parties,
minus (2) ten percent (10%), shall be reduced from the Independent Product Payment
Rate payable to Palomar for such Calendar Quarter (which reduction shall be applied pro
rata to each of the TTP rate and the royalty rate). Notwithstanding anything contained in
this Agreement to the contrary, amounts paid by Gillette to Palomar pursuant to Section
6.1(i) shall be excluded from the royalty reduction provisions contained in this Section
6.4. 



        6.5 Royalty Reductions for
Gillette Licensed Patents. On product/service-by-product/service and
country-by-country basis, with respect to each product/service sold by or distributed by
Palomar or any of its agents, distributors or (sub)licensees to one or more Third Parties
in a particular country for which Palomar is obligated to pay Gillette a royalty pursuant
to Section 6.3, during any given Calendar Quarter, if the sum of royalty payments
owed by Palomar to Gillette and by Palomar to one or more Third Parties, as the case may
be, in each case in connection with sales of such product/service in such country, exceeds
ten percent (10%) of the Net Sales of such product/service in such country (prior to
application of this Section), then thirty-three percent (33%) of the difference of
(1) the sum of (A) the applicable royalty rate payable to Gillette (as provided in
this ARTICLE VI) (the sum of such rates, the “Product/Service Payment
Rate”) and (B) the rates of TTPs and royalties payable to such Third Parties, minus
(2) ten percent (10%), shall be reduced from the Product/Service Payment Rate payable
to Gillette for such Calendar Quarter; provided, however, that in no event shall
the Product/Service Payment Rate be reduced more than thirty-three percent (33%) in any
Calendar Quarter. For purposes of this Section, for sales by Palomar or any of its of its
agents or (sub)licensees, Net Sales shall be calculated as provided in the definition of
“Net Sales,” substituting therein “Palomar” for “Gillette”
wherever such term appears. Notwithstanding anything contained in this Agreement to the
contrary, amounts paid by Palomar to Gillette pursuant to Section 6.3(b) shall be excluded
from the royalty reduction provisions contained in this Section 6.5. 



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        6.6 TTP and Royalty
Payments. 



                     (a)  
          In General. Running royalties and TTPs payable pursuant to
          Sections 6.1(e)(ii), 6.1(f)(i), 6.2(b)(i), 6.2(b)(ii), 6.2(c) and 6.3 shall
          be payable on a Calendar Quarterly basis, within sixty (60) days after the
          end of each Calendar Quarter, based upon the Net Sales during such Calendar
          Quarter, commencing with the Calendar Quarter in which the First Commercial Sale
          of a Product is made. Royalties shall be calculated in accordance with GAAP and
          with the terms of this ARTICLE VI. 



                     (b)  
          Offsets, Credits and Reductions. Notwithstanding any right of Gillette
          (i) pursuant to Article VIII to offset or credit certain amounts against
          royalties or TTPs owed by Gillette to Palomar in this Agreement, or (ii)
          pursuant to Section 6.1(h) or 6.4 to otherwise reduce the amount of royalties or
          TTPs payable by Gillette to Palomar, the aggregate credits, offsets and other
          reductions that Gillette shall be permitted to apply in any given Calendar
          Quarter with respect to a particular product shall not exceed, in the case of
          royalties, if any, royalties in the amount of one percent (1%) of Net Sales
          during such Calendar Quarter with respect to such product, and in the case of
          TTPs, if any, TTPs in the amount of one percent (1%) of Net Sales during such
          Calendar Quarter with respect to such product. Credits, offsets and reductions
          not exhausted in any Calendar Quarter may be carried into future Calendar
          Quarters, subject to the foregoing sentence. 



                     (c)  
          Covenants. The parties have agreed to the TTPs set forth in
          Sections 6.1(e) and 6.2(b) and the royalties set forth in Sections 6.1(f)
          and 6.2(c). Gillette hereby stipulates to the fairness and reasonableness of
          such TTPs and royalties and covenants not to allege or assert, or cause any
          Third Party to allege or assert, that the TTP or royalty obligations are
          unenforceable or illegal in any way. To the extent permitted by Applicable Law,
          Gillette further covenants to include in any agreement with a Third Party in
          which it grants to such Third Party a sublicense under any license granted to it
          by Palomar hereunder a term that prohibits such Third Party from alleging or
          asserting to any court or other appropriate governmental entity that the
          payments owed to Gillette by such Third Party on account of payments owed by
          Gillette to Palomar under this Agreement are unenforceable or illegal in any
          way. In the event that Gillette asserts or alleges, or causes any Third Party to
          assert or allege, to any court or other appropriate governmental entity that
          such TTPs or royalties are not legal or otherwise enforceable, this assertion or
          allegation will constitute a material breach by Gillette hereunder and Palomar
          shall have the right to terminate this Agreement immediately in accordance with
          Section 10.3 because of the material breach by Gillette without any
          opportunity to cure. 



        6.7 TTP and Royalty
Statements. Each TTP and royalty payment hereunder shall be accompanied by a statement
showing (a) the number of units of each product sold by the payor party on a
country-by-country basis during the applicable Calendar Quarter, (b) the amount of
royalties and TTPs, if any, due on such Net Sales, (c) withholding taxes, if any
required by Applicable Law to be deducted, (d) the date of the First Commercial Sale
for all Products in any country that occurred during the reporting period, (e) any
calculation concerning a reduction in TTPs or royalties pursuant to Section 6.1(h),
6.4 or 6.5, as applicable, and (f) the exchange rates used in determining the amount
of United States dollars. In addition, each TTP and royalty and other payment hereunder
shall be accompanied by a statement showing (i) any credits, offsets or other
reductions (if any) taken against such payment, (ii) a reasonably detailed



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statement of the source of such credits, offsets or other reductions;
(iii) the provision(s) of this Agreement expressly authorizing such
credits, offsets or other reductions, (iv) the extent to which such
credits, offsets or other reductions were capped pursuant to Section 6.6(b)
or any provision of ARTICLE VIII; and (v) the amount and nature any
credits, offsets and other reductions that are carried into future Calendar
Quarters as a result of being capped pursuant to such Section or ARTICLE.





        6.8 Records Retention;
Audit. 



                     (a)  
          Record Retention. Until the third (3rd) anniversary of December 31 of the
          Calendar Year in which a product for which a party owed to the other party TTP
          or royalty payments is sold or distributed, the paying party shall keep (and
          shall ensure that its agents and (sub)licensees shall keep) records of such
          sales in sufficient detail to confirm the accuracy of the TTP or royalty
          calculations hereunder. With respect to any credits, offsets or other reductions
          (if any) taken against any TTP or royalty or other payment, until the third
          (3rd) anniversary of December 31 of the Calendar Year in which any such credit,
          offset or other reduction is taken, the paying party shall keep (and shall
          ensure that its agents and (sub)licensees shall keep) records of such credits,
          offsets or other reductions in sufficient detail to confirm the accuracy of them
          hereunder. 



                     (b)  
          Audit. Upon the written request of the receiving party and not more than
          once in each Calendar Year, the paying party shall permit an independent
          certified public accounting firm of nationally recognized standing selected by
          the receiving party, and reasonably acceptable to the paying party, at the
          receiving party’s expense, to have access during normal business hours, and
          upon reasonable prior written notice, to such of the records of the paying party
          as may be reasonably necessary to verify the accuracy of the TTP or royalty
          reports hereunder for any Calendar Year ending not more than twenty-four (24)
          months prior to the date of such request. The accounting firm shall disclose to
          the paying party and the receiving party whether the royalty or reports are
          correct or incorrect and the specific details concerning any discrepancies. No
          other information shall be provided to the receiving party. 



                     (c)  
          Payment of Additional TTPs or Royalties. If such accounting firm
          concludes that additional TTPs or royalties were owed during such period, or
          excess credits, offsets or other reductions were taken, the paying party shall
          pay the additional TTPs or royalties, as applicable, with interest calculated as
          provided in Section 6.10 from the date originally due, within thirty (30)
          days after the date on which such accounting firm’s written report is
          delivered to the paying party. If, and only if, the amount of the underpayment
          is greater than two percent (2%) of the total amount owed, then the paying party
          shall reimburse the receiving party for all costs related to such audit. 



                     (d)  
          Confidentiality. The receiving party shall treat all information subject
          to review under this Section 6.8 in accordance with the confidentiality
          provisions of ARTICLE IX and shall cause its accounting firm to enter into a
          reasonably acceptable confidentiality agreement with the paying party obligating
          such firm to retain all such financial information in confidence pursuant to
          such confidentiality agreement. 




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        6.9 Mode
of Payment. All payments to Palomar or Gillette under this Agreement shall be made by
deposit of United States Dollars in the requisite amount to such bank account as the
receiving party may from time to time designate by notice to the paying party. Payments
shall be free and clear of any taxes (other than withholding and other taxes imposed on
the receiving party, which shall be for the account of such party), fees or charges, to
the extent applicable. With respect to sales outside the United States, payments shall be
calculated based on currency exchange rates for the Calendar Quarter with respect to which
sales remittance is made for TTPs or royalties. For each month and each currency, such
exchange rate shall equal the arithmetic average of the daily exchange rates (obtained as
described below) during the Calendar Quarter; each daily exchange rate shall be obtained
from The Wall Street Journal, Eastern United States Edition, or, if not so available, as
otherwise agreed by the parties. Unless otherwise designated by Palomar in writing, all
payments to Palomar under this Agreement shall be made by wire transfer to the following
bank account: 







	  	Banknorth 
	  	370 Main Street 
	  	Worcester, MA 01608 
	  	ABA No.: 211370545 
	  	Account No.: 8241022982 
	  	Account Name: Palomar Medical Technologies, Inc. 






	


        6.10 Interest on Late
Payments. Each party shall pay interest to the other party on the aggregate amount of
any payments that are not paid on or before the date such payments are due under this
Agreement at a rate per annum equal to the lesser of (a) the prime rate, as published
in The Wall Street Journal, Eastern United States Edition, plus one and one-half
percent (1.5%), on the last business day preceding the date of payment, or (b) the
highest rate permitted by applicable law, calculated on the number of days such payment is
delinquent. 



        6.11 Withholding. The
parties shall use all reasonable and legal efforts to reduce tax withholding on payments
due the other party hereunder. Notwithstanding such efforts, if a party reasonably
concludes that tax withholdings under the laws of any country are required with respect to
payments to the other party, such party shall withhold the required amount and pay it to
the appropriate governmental entity. Such party shall cooperate with the other party in
the event the other party claims exemption from such withholding or seeks deductions under
any double taxation or other similar treaty or agreement from time to time in force, such
cooperation to include, without limitation, such party promptly providing the other party
with original receipts or other evidence reasonably desirable and sufficient to allow the
other party to document such withholdings. 



        6.12 Blocked Payments.
In the event that, by reason of Applicable Law or regulation in any country, it becomes
impossible or illegal for one party to transfer payments to the other party, such payments
shall be deposited in local currency in the relevant country to the credit of the other
party in a recognized banking institution designated by the other party or, if none is
designated by the other party within a period of thirty (30) days after its receipt
of written notice from such party, in a recognized banking institution selected by such
party and identified in a subsequent written notice given to the other party. 



-40- 










ARTICLE VII 
Reports 



        7.1 Complaints. Each
party shall maintain a record of any and all complaints it receives with respect to the
Female Product(s) as required by Applicable Law. Each party shall notify the other party
in reasonable detail of any complaint received by it relating to any Female Product within
thirty (30) days after receiving the complaint, and in any event in sufficient time to
allow such other party to comply with any and all regulatory and other requirements
imposed upon it in any jurisdiction in which the Female Product(s) is being marketed. 



        7.2 Adverse Event
Reporting. Each party shall provide the other party with all information necessary or
desirable for such other party to comply with all Applicable Law with respect to the
Female Product(s). In the event that the Female Product(s) is a PMA Product, the parties
shall (a) develop appropriate adverse experience reporting procedures; (b) provide any
material information on the Female Product(s) from pre-clinical or clinical laboratory
studies, as well as serious or unexpected adverse experience reports from Clinical Trials
of the Female Product(s); and (c) report and provide such information in such a manner and
time so as to enable the parties to comply with all Applicable Law in countries for which
Regulatory Approval is or will be sought. 




        7.3 Product Recall. 



                     (a)  
          Notification and Recall. In the event that any Regulatory Authority
          issues or requests a recall or takes similar action in connection with a Female
          Product, or in the event either party determines that an event, incident or
          circumstance has occurred that may result in the need for a recall or market
          withdrawal, the party notified of or desiring such recall or similar action
          shall, within twenty-four (24) hours, advise the other party thereof by
          telephone or facsimile. Following notification of a recall, within seventy-two
          (72) hours, Gillette shall decide whether to conduct a recall (except in the
          case of a government-mandated recall) and the manner in which any such recall
          shall be conducted. 



                     (b)  
          Recall Expenses. Gillette shall bear the expenses of any recall of a
          Female Product; provided, however, that Palomar shall bear the
          direct expense to Gillette of a recall to the extent that such recall resulted
          from Palomar’s gross negligence or willful misconduct. (For the avoidance
          of doubt, nothing contained in this Section 7.3(b) shall in any way alter or
          diminish any indemnification obligation of Palomar pursuant to ARTICLE XI.) Such
          expenses of recall shall include expenses for notification, destruction or
          return of the recalled Female Product and any refund to consumers of amounts
          paid for the recalled Female Product. In the event that Palomar bears any such
          expenses of a recall, notwithstanding the last sentence of Section 7.3(a),
          Gillette shall consult with Palomar in good faith on the manner in which any
          such recall shall be conducted. The rights and remedies of Gillette under this
          Section shall be cumulative and in addition to any other rights or remedies that
          may be available to Gillette under this Agreement or at law. 




-41- 









ARTICLE VIII

Intellectual Property Rights 




        8.1 Intellectual
Property Ownership. 



                     (a)  
          Ownership of Gillette Patents and Gillette Know-How. Subject to the
          license grants to Palomar in this Agreement, as between the parties, Gillette
          shall own and retain all right, title and interest in and to any and all
          Gillette Patents, Gillette Know-How and Gillette Regulatory Documentation. 



                     (b)  
          Ownership of Palomar Patents, Palomar Know-How and Palomar U.S. Regulatory
          Documentation. Subject to the license grants to Gillette in this Agreement,
          as between the parties, Palomar shall own and retain all right, title and
          interest in and to all Palomar Patents, Palomar Know-How and Palomar U.S.
          Regulatory Documentation. 



                     (c)  
          Ownership and Exploitation of Joint Inventions and Joint Technology. 



                                     (i)  
          Palomar shall own all right, title and interest in and to all (A) Joint
          Inventions first conceived or reduced to practice during the Restricted Access
          Period, and (B) all Joint Technology with respect thereto. At the end of
          the Restricted Access Period, provided that Gillette does not terminate this
          Agreement pursuant to Section 10.4(a), Palomar shall assign, and hereby
          does assign, to Gillette, without payment of additional consideration, an equal,
          undivided interest in all such Joint Inventions and Joint Technology conceived
          or reduced to practice on or before the last day of the Restricted Access
          Period. If Gillette terminates this Agreement pursuant to Section 10.4(a),
          then there shall be no assignment by Palomar to Gillette of any such interest
          and any such Joint Inventions or Joint Technology shall be deemed “Palomar
          Patents” or “Palomar Know-How,” as the case may be, and shall no
          longer be treated as “Joint Inventions” or “Joint
          Technology” hereunder. If Gillette does not terminate this Agreement
          pursuant to Section 10.4(a), Gillette, on the one hand, and Palomar, on the
          other hand, shall each own an equal, undivided interest in (1) Joint Inventions
          first conceived or reduced to practice after the Restricted Access Period, and
          (2) all Joint Technology with respect thereto. Each party agrees to disclose to
          the other party promptly in writing any and all Joint Inventions and Joint
          Technology that are conceived or reduced to practice by or on behalf of such
          party, provided that Palomar shall not disclose to Gillette during the
          Restricted Access Period any Joint Invention or Joint Technology, and provided
          further that Palomar shall have no obligation to disclose to Gillette any Joint
          Invention or Joint Technology at any time in the event Gillette terminates this
          Agreement pursuant to Section 10.4(a). In addition, the party with an
          obligation to make such disclosures agrees, as necessary to evidence joint
          ownership of any and all such Joint Inventions and Joint Technology, to assign
          (and hereby assigns) to the other party or to cause its employees and agents to
          assign to the other party, without payment of additional consideration, an
          equal, undivided interest in such Joint Inventions or Joint Technology, as the
          case may be. 



                                     (ii)  
          Notwithstanding Section  8.1(c)(i), there may be instances in which Joint
          Inventions and related Joint Technology arise from work performed by a party in
          collaboration with a non-profit entity that is not obligated to assign such
          Joint Inventions and Joint Technology to such party, rights to which shall be
          treated as follows for purposes of this Agreement: 




-41- 








                                             (1)  
          In the event that either party proposes to subcontract any R&D Activities,
          Additional Activities or Commercial Assessment Period Additional Activities to
          any non-profit entity that would retain an ownership interest in any Joint
          Inventions and related Joint Technology conceived or reduced to practice in
          connection with the performance of such activities, the subcontracting party
          shall notify the R&D Committee and the R&D Committee shall determine
          whether to permit such subcontract on the terms with the non-profit entity
          proposed by the subcontracting party, whereupon the parties shall mutually agree
          in good faith how to treat any such Joint Inventions and related Joint
          Technology under this Agreement. 



                                             (2)  
          As of the date first written above, the parties understand and agree that the
          Initial R&D Plan provides that certain R&D Activities will be performed
          by MGH pursuant to the MGH Agreements, and MGH will retain an ownership interest
          in the Joint Inventions and related Joint Technology arising from such
          activities to the extent that an individual affiliated with MGH is an inventor
          of such Joint Inventions, all as provided in the MGH Agreements. In addition,
          Palomar may subcontract to MGH additional activities to be performed by Palomar
          hereunder. With respect to those Joint Inventions in which MGH retains an
          ownership interest (the “MGH Joint Inventions) and the related Joint
          Know-How, Joint Patents and Joint Technology (the “MGH Joint
          Know-How,” “MGH Joint Patents,” and “MGH Joint
          Technology,” respectively), Palomar shall assign to Gillette as provided in
          Section 8.1(c)(ii) an equal and undivided share of Palomar’s partial
          interest in the MGH Joint Inventions and MGH Joint Technology, to the extent
          that Palomar owns a partial interest therein and is not a mere licensee with
          respect thereto. All references to Joint Inventions, Joint Technology, Joint
          Patents and Joint Know-How hereunder, to the extent they apply to MGH Joint
          Inventions, MGH Joint Technology, MGH Joint Patents and MGH Joint Know-How,
          shall be subject to the terms and conditions of the MGH Agreements, and all
          rights and obligations of the parties with respect to the foregoing shall be
          subject to such agreements. 



                                     (iii)  
          Subject to all of the terms and conditions of this Agreement, each party may
          Exploit Joint Inventions and Joint Technology without an accounting or
          obligation to, or consent required from, the other party. Except in connection
          with a Third Party Collaboration, neither party may (sub)license any Joint
          Technology for use outside the Field without the other party’s prior
          written consent, which shall not be unreasonably withheld; provided that
          (A) Gillette’s consent shall not be required for Palomar to (sub)license
          Joint Technology (whether or not in connection with a Third Party Collaboration)
          for Exploitation by one or more Third Party(ies) of Light-Based Products outside
          the Field, and (B) Palomar’s consent shall not be required for Gillette to
          (sub)license Joint Technology (whether or not in connection with a Third Party
          Collaboration) for the Exploitation by one or more Third Parties of
          Non-Light-Based Products. 




        8.2 Various Patent
Matters. 



                     (a)  
          Inventorship Procedure. During the R&D Period, the R&D Committee
          shall, at the written request of either party and consistent with the terms of
          this Agreement, establish a mutually agreeable procedure for determining
          inventorship of Information and Inventions asserted by one party to be Joint
          Inventions and Joint Technology both during the



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     R&D Period and thereafter. Any such procedure shall be subject to the
dispute resolution procedure set forth in Section 13.1. 



                     (b)  
          U.S. Patents. Any Joint Invention that would be rendered unpatentable in
          the United States solely on account of prior art under one or more of
          subsections 102(e), (f), or (g) of Title 35, U.S.C., but for the absence of
          an obligation of assignment of such Joint Invention (or an undivided interest
          therein) to the other party hereto, is hereby subjected to an obligation of
          assignment to such other party of such interest in such invention as renders
          such Joint Invention patentable in the United States and thereby gives rise to a
          Joint Patent. Such assignment shall have force and effect only with respect to
          Joint Patents granted in the United States. The rights of the parties with
          respect to any Joint Invention subject to an obligation of assignment under this
          Section 8.2(b), except for subject matter patentable to the assignee in the
          absence of the assignment, shall be the same as the rights that would have
          applied under this Agreement had no obligation to assign under this
          Section 8.2(b) existed. If and only if required to give force and effect to
          the immediately preceding sentence and, in such case, only to the extent
          required to give such force and effect, each assignee under this
          Section 8.2(b) hereby grants to each of the assignors under this
          Section 8.2(b) such irrevocable licenses, if any, as are required to vest
          in the assignor all rights the assignor would have enjoyed absence the
          applicable assignment. 




        8.3 Prosecution of
Patents. 



                     (a)  
          Palomar Patents. 



                                     (i)  
          During the Gillette Exclusive License Period. For as long as the license
          grants by Palomar to Gillette contained in Section 4.1(a)(i) and 4.1(a)(ii)
          are in effect and are exclusive (as opposed to non-exclusive) in nature (such
          grants, the “Gillette Exclusive Licenses,” and such period
          the “Gillette Exclusive License Period”), the following
          provisions of this Section  8.3(a)(i) shall apply to the Palomar Patents: 



                                             (1)  
          In General. Subject to Sections 8.3(a)(i)(2) and 8.3(a)(i)(3),
          Palomar shall be responsible for preparing, filing, prosecuting and maintaining
          throughout the world the Palomar Patents. In this regard, Palomar shall prepare,
          file, prosecute and maintain applications to secure Palomar Patents for the
          Female Product Technology and, unless Gillette consents in writing otherwise,
          any other patentable Palomar Know-How, in the United States and all other PCT
          member countries and in such non-PCT member countries as Gillette may from time
          to time designate in writing. Palomar shall pay all Patent Costs incurred by
          Palomar arising from the preparation, filing, prosecution or maintenance of the
          Palomar Patents. 



                                             (2)  
          Cooperation. Palomar shall regularly provide Gillette with copies of all
          patent applications filed by Palomar pursuant to Section 8.3(a)(i)(1) and
          other related material submissions and correspondence with any patent
          authorities, as applicable, in sufficient time to allow for review and comment
          by Gillette. In addition, Palomar shall provide Gillette and its counsel with an
          opportunity to consult with Palomar and its counsel regarding the filing and
          contents of any application, amendment, registration, submission, response or
          correspondence with any patent authorities in connection therewith, and Palomar
          shall accede to the reasonable requests of Gillette regarding the filing and
          prosecution of the Palomar Patents. 




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                                             (3)  
          Election not to Prosecute or Pay Patent Costs. If Palomar elects not (A)
          to pursue the preparation, filing, prosecution or maintenance of a Palomar
          Patent in a particular country, or (B) to take any other action with respect to
          a Palomar Patent in a particular country that is necessary or useful to
          establish or preserve rights thereto or (C) to pay the Patent Costs associated
          with any such activities, then in each such case Palomar shall so notify
          Gillette promptly in writing and in good time to enable Gillette to meet any
          deadlines by which an action must be taken to establish or preserve any such
          rights in such Palomar Patent in such country. Upon receipt of each such notice
          by Palomar or if, at any time, Palomar fails to initiate any such action within
          thirty (30) days after a request by Gillette that it do so (or within such
          shorter time as may be required to prevent the forfeiture of rights), and
          thereafter diligently pursue such action, Gillette shall have the right, but not
          the obligation, to pursue the preparation, filing, or support the continued
          prosecution or maintenance, of such Palomar Patent. If Gillette elects to pursue
          such filing or provide such support, then Gillette shall (x) control the filing,
          preparing, prosecuting and maintaining of such Palomar Patent, with all the
          rights and obligations with respect to such Palomar Patent set forth in
          Sections 8.3(a)(i)(1) and 8.3(a)(i)(2) and reversed, by switching the names
          of the parties in each of those Sections, and (y) be responsible for all Patent
          Costs incurred by Gillette in connection therewith; provided,
          however, that, subject to Section 6.6(b), Gillette shall have the right
          to offset fifty percent (50%) of such Patent Costs against royalties payable by
          Gillette to Palomar, which offset shall not exceed in any Calendar Quarter
          royalties in the amount of one percent (1%) of Net Sales, and (ii) against
          TTPs payable by Gillette to Palomar, which offset shall not exceed in any
          Calendar Quarter TTPs in the amount of one percent (1%) of Net Sales (and which
          offsets shall be applied first to amounts attributable to such royalties and
          second to amounts attributable to TTPs). Subject to Section 6.6(b), offsets not
          exhausted in any Calendar Quarter shall be carried into future Calendar
          Quarters. 



                                             (4)  
          To the extent that a Third Party licensor has retained any right to prepare,
          file, prosecute or maintain or otherwise be involved in the activities specified
          in this Section 8.3(a)(i) with respect to any Palomar Patents, Palomar
          shall use commercially reasonable efforts to cause such Third Party licensor to
          take the actions specified by this Section 8.3(a)(i) in a manner consistent
          with the agreement(s) by which such Third Party retains such rights, but Palomar
          shall not be deemed to be in breach of its obligations under that Section if,
          after using such commercially reasonable efforts, it is unable to comply with
          such obligations because of actions taken or not taken by such Third Party
          licensor. To the extent that Palomar owes such Third Party licensor for any
          Patent Costs arising from such patenting activities, including MGH for the MGH
          Patents, those Patent Costs shall be treated as being incurred by the party that
          is controlling such activities for purposes of allocating Patent Costs under
          this Section 8.3(a)(i), and to the extent that Gillette is responsible for
          any such Patent Costs under Section 8.3(a)(i)(3), Gillette shall reimburse
          Palomar within forty-five (45) days of its receipt of an invoice therefor. For
          example and without limitation, the MGH Patents are examples of such other
          Palomar Patents and the corresponding agreement(s) are the MGH Agreements. 



                                     (ii)  
          After the Gillette Exclusive License Period. After the Gillette Exclusive
          License Period, Palomar shall have the sole right, and sole responsibility for
          all Patent Costs incurred by Palomar, to prepare, file, prosecute and maintain
          the Palomar Patents throughout the world, and Gillette shall have no rights with
          respect thereto. 




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                     (b)  
          Gillette Patents. Gillette shall have the sole right, and sole
          responsibility for all Patent Costs incurred by Gillette, to prepare, file,
          prosecute and maintain the Gillette Patents (including the Gillette Licensed
          Patents) throughout the world, and Palomar shall have no rights with respect
          thereto. During the Exclusivity Period, Palomar shall, at Gillette’s
          reasonable request and sole expense, assist and cooperate in the preparation,
          filing, registration and prosecution of any application, amendment,
          registration, submission, response or correspondence with respect to any
          Gillette Patents that cover or claim any Female Product or Manufacturing Process
          with respect thereto. 



                     (c)  
          Joint Patents. 



                                     (i)  
          In General. Palomar shall have the first right (but not the obligation)
          to prepare, file, prosecute and maintain the Joint Patents throughout the world.
          If Palomar elects not to prepare, file, prosecute or maintain any Joint Patents
          in a particular country, then Palomar shall give Gillette written notice of such
          election at least sixty (60) days before any right would be forfeited if no
          action were taken, and Gillette shall thereafter have the right (but not the
          obligation) to prepare, file, prosecute or maintain such Joint Patent in such
          country. If Gillette elects to prepare, file, prosecute or maintain such Joint
          Patent in such country, then Gillette shall promptly notify Palomar in writing
          of such election. Gillette shall be responsible for all Patent Costs incurred by
          the parties for preparing, filing, prosecuting and maintaining the Joint Patents
          throughout the world (including any Patent Costs paid by Palomar to MGH arising
          from such activities involving MGH Joint Patents, which is addressed further in
          Section 8.3(c)(iii), with Gillette reimbursing Palomar for such Patent
          Costs within forty-five (45) of its receipt of an invoice therefor);
          provided, however, that, subject to Section 6.6(b), Gillette shall
          have the right to offset fifty percent (50%) of such Patent Costs only
          (i) against royalties payable by Gillette to Palomar pursuant to this
          Agreement, which offset shall not exceed in any Calendar Quarter royalties in
          the amount of one percent (1%) of Net Sales, and (ii) against TTPs payable
          by Gillette to Palomar pursuant to this Agreement, which offset shall not exceed
          in any Calendar Quarter TTPs in the amount of one percent (1%) of Net Sales (and
          which offsets shall be applied first to amounts attributable to royalties and
          second to amounts attributable to TTPs). Subject to Section 6.6(b), offsets not
          exhausted in any Calendar Quarter shall be carried into future Calendar
          Quarters. Notwithstanding the above, either party may, upon prior written notice
          to the other party, in the case of Palomar, decline to have credits or offsets
          taken for up to fifty percent (50%) of, and in the case of Gillette, decline to
          pay all of, the Patent Costs for any Joint Patent(s) in a particular country or
          particular countries, which notice shall apply only with respect to Patent Costs
          incurred after the date of delivery of such notice. The declining party shall
          assign to the other party all of such party’s rights, titles and interests
          in and to any such Joint Patent(s) (including any right to claim priority
          thereto) in the relevant country or countries whereupon such Joint Patent(s)
          shall become solely owned by the other party but shall remain subject to any
          license grants to the declining party by the other party hereunder. 



                                     (ii)  
          Cooperation. Each party shall cooperate fully in the other party’s
          preparation, filing, prosecution, and maintenance of the Joint Patents in
          accordance with this Section 8.3(c)(ii) (and in any other proceedings
          before a patent official or office with respect thereto). Such cooperation
          includes, without limitation, (A) promptly executing all papers and
          instruments or requiring employees to execute such papers and instruments as
          reasonable and appropriate so as to enable such party to prepare, file,
          prosecute, and maintain the Joint Patents



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     in any country; and (B) promptly informing the other party of matters that
may affect the preparation, filing, prosecution, or maintenance of any such
Joint Patent, including provision of a copy of any official correspondence
received by such party from a patent office in any country with respect to Joint
Patents. In addition, with respect to any Joint Patents, for so long as such
patent remains jointly owned, the party having prosecution responsibility
therefor agrees to provide the other party a reasonable opportunity to review
and comment on any proposed submission to a patent office at least thirty
(30) days prior to making such submission (unless such patent office allows
less than sixty (60) days for the party having prosecution responsibility
to make a submission, in which case the party shall provide the other party an
opportunity to review and comment on any proposed submission to such patent
office at least ten (10) days prior to making such submission). If the
other party fails to provide comments within fifteen (15) days after
receiving such draft submission (or, in the event the patent office allows less
than sixty (60) days for the responsible party to make such submission, to
provide comments within five (5) days after receiving such draft
submission), the submission shall be deemed approved. If, however, the other
party timely provides comments with respect to such draft submission, the
responsible party agrees to reasonably consider such comments. 



                                     (iii)  
          MGH Joint Patents. With respect to the MGH Joint Patents, because MGH has
          or will have rights to prepare, file, prosecute or maintain or otherwise be
          involved in the activities specified in this Section 8.3(c) for MGH Joint
          Patents, Palomar shall use commercially reasonable efforts to cause MGH to take
          the actions specified by this Section 8.3(c) in a manner consistent with
          the MGH Agreements, but Palomar shall not be deemed to be in breach of its
          obligations under this Section 8.3(c) if, after using such commercially
          reasonable efforts, it is unable to comply with such obligations because of
          actions taken or not taken by MGH. To the extent that Palomar owes MGH for any
          Patent Costs arising from such patenting activities, those Patent Costs shall be
          treated as being incurred by the party that is controlling such activities for
          purposes of allocating Patent Costs under this Section 8,3(c), and to the
          extent that Gillette is responsible for any Patent Costs under
          Section 8.3(c)(i), Gillette shall reimburse Palomar for the Patents Costs
          Palomar owes MGH as provided therein. 




        8.4 Enforcement of
Patents. 



                     (a)  
          Rights and Procedures for Certain Infringement of Palomar Patents During the
          Gillette Exclusive License Period. For any infringement of one or more
          Palomar Patents that occurs during the Gillette Exclusive License Period, the
          following provisions of this Section 8.4(a) shall apply. 



                                     (i)  
          If either party determines that any Palomar Patent is being or was infringed by
          a Third Party’s activities during the Gillette Exclusive License Period and
          that such infringement falls (in whole or in part) within the scope of the
          Gillette Exclusive Licenses, it shall notify the other party in writing and
          provide it with any evidence of such infringement that is reasonably available. 



                                     (ii)  
          Gillette shall have the first right (but not the obligation) to remove any
          infringement referred to in Section 8.4(a)(i) with respect to any Palomar Patent
          by appropriate steps, including filing an infringement suit or taking other
          similar action. In the 



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     event that Gillette takes such steps to remove any such infringement, including
by filing an infringement action, Gillette shall be responsible for the costs
and expenses relating thereto; provided,
          however, that, subject to Section 6.6(b), Gillette shall have the
          right to offset fifty percent (50%) of the total costs and expenses only
          (A) against royalties payable by Gillette to Palomar pursuant to this
          Agreement, which offset shall not exceed in any Calendar Quarter royalties in
          the amount of one percent (1%) of Net Sales, and (B) against TTPs payable
          by Gillette to Palomar pursuant to this Agreement, which offset shall not exceed
          in any Calendar Quarter TTPs in the amount of one percent (1%) of Net Sales (and
          which offsets shall be applied first to amounts attributable to such royalties
          and second to amounts attributable to TTPs). Subject to Section 6.6(b), offsets
          not exhausted in any Calendar Quarter shall be carried into future Calendar
          Quarters. 



                                     (iii)  
          In the event that Gillette fails within ninety (90) days following notice of any
          infringement referred to in Section 8.4(a)(i) to remove such infringement or
          file an infringement lawsuit, Palomar shall have the right (but not the
          obligation) to do so at Palomar’s sole expense. 



                                     (iv)  
          The party other than the party enforcing the applicable Palomar Patent pursuant
          to this Section 8.4(a) (A) shall provide reasonable assistance to the party
          enforcing such patent, including providing access to relevant non-privileged
          documents and other evidence, making its employees available at reasonable
          business hours and for reasonable periods of time, and joining the action to the
          extent necessary to allow the enforcing party to maintain the action, (B)
          provided that in the case of Gillette as the non-enforcing party, Gillette may
          recover its reasonable out-of-pocket costs and expenses pursuant to Section
          8.4(e) and (C) provided that in the case of Palomar as the non-enforcing party,
          Gillette shall pay Palomar’s reasonable out-of-pocket expenses and shall
          have right to off-set the full amount of them according to the procedure set
          forth in the proviso to the second to last full sentence and the last full
          sentence of Section 8.4(a)(ii) with the phrase “fifty percent (50%) of
          the total costs and expenses” therein to be read to refer instead to all of
          such reasonable out-of-pocket expenses for such purposes. The other party shall
          have the right to participate or otherwise be involved in any suit prosecuted by
          the enforcing party at such other party’s sole cost and expense, which cost
          and expense may be recovered by such other party as provided in
          Section 8.3(e). If the other party elects to so participate or be involved,
          the enforcing party shall provide the other party and its counsel with an
          opportunity to consult with the enforcing party and its counsel regarding the
          prosecution of such suit (including reviewing the contents of any non-privileged
          correspondence, legal papers or other documents related thereto), and the
          enforcing party shall accede to reasonable requests of the other party regarding
          such enforcement. 



                                     (v)  
          To the extent that a Third Party licensor has retained any right to enforce or
          otherwise be involved in the activities specified in this Section 8.4(a)
          for any Palomar Patents, Palomar shall use commercially reasonable efforts to
          cause such Third Party licensor to take the actions specified by this
          Section 8.4(a) in a manner consistent with the agreement(s) by which such
          Third Party retains such rights, but Palomar shall not be deemed to be in breach
          of its obligations under Section 8.4(a) if, after using such commercially
          reasonable efforts, it is unable to comply with such obligations because of
          actions taken or not taken by such Third Party licensor. For example and without
          limitation, the MGH Patents are such Palomar Patents and the corresponding
          agreement(s) are the MGH Agreements. 



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                     (b)  
          Rights and Procedures for Certain Infringement of Joint Patents. 



                                     (i)  
          Joint Patents Exclusively Licensed to Gillette under
          Section 4.1(a)(i). For any infringement of one or more Joint Patents
          that are subject to the license contained in Section 4.1(a)(i) and that
          occurs during the Gillette Exclusive License Period, the following provisions of
          this Section 8.4(b)(i) shall apply: If either party determines that any
          Joint Patent is being or was infringed by a Third Party’s activities during
          the Gillette Exclusive License Period and such infringement falls (in whole or
          in part) within the scope of such license grant, it shall notify the other party
          in writing and provide it with any evidence of such infringement that is
          reasonably available. To the extent that any such infringement falls within the
          scope of the Gillette Exclusive Licenses, and only to such extent, Gillette, at
          Gillette’s sole expense, shall have the right (but not the obligation) to
          remove any such infringement with respect to any Joint Patent (but no other
          infringement with respect to any Joint Patent) by appropriate steps, including
          filing an infringement suit or taking other similar action. In the event that
          Gillette fails within ninety (90) days following notice of such infringement to
          remove such infringement or file an infringement lawsuit, Palomar shall have the
          right (but not the obligation) to do so at Palomar’s sole expense;
          provided, however, that if Gillette has commenced negotiations
          with an alleged infringer for discontinuance of such infringement within such
          ninety (90) day period, Gillette shall have an additional ninety (90) days to
          conclude its negotiations before Palomar may bring suit for such infringement.
          The party not enforcing the applicable Joint Patent (A) shall provide reasonable
          assistance to the other party, including providing access to relevant
          non-privileged documents and other evidence, making its employees available at
          reasonable business hours, and joining the action to the extent necessary to
          allow the enforcing party to maintain the action, and (B) provided that in the
          case of Gillette as the non-enforcing party, Gillette may recover its reasonable
          out-of-pocket costs and expenses pursuant to Section 8.4(e) and (C) provided
          that in the case of Palomar as the non-enforcing party, Gillette shall pay
          Palomar’s reasonable out-of-pocket expenses and shall have right to off-set
          the full amount of them according to the procedure set forth in the proviso to
          the second to last full sentence and the last full sentence of
          Section 8.4(a)(ii) with the phrase “fifty percent (50%) of the total
          costs and expenses” to be read to refer instead to all of such reasonable
          out-of-pocket expenses for such purposes. The other party shall have the right
          to participate or otherwise be involved in any suit prosecuted by the enforcing
          party at such other party’s sole cost and expense, which cost and expense
          may be recovered by such other party as provided in Section 8.4(e). If the
          other party elects to so participate or be involved, the enforcing party shall
          provide the other party and its counsel with an opportunity to consult with the
          enforcing party and its counsel regarding the prosecution of such suit
          (including reviewing the contents of any non-privileged correspondence, legal
          papers or other documents related thereto), and the enforcing party shall accede
          to reasonable requests of the other party regarding such enforcement. 



                                     (ii)  
          Joint Patents Exclusively Licensed to Gillette under
          Section 4.1(a)(iii). Pursuant to this Agreement, Palomar has granted to
          Gillette a certain exclusive license with respect to Joint Patents under
          Section 4.1(a)(iii). If Palomar determines that any Joint Patent is being
          or was infringed by a Third Party’s activities and such infringement falls
          (in whole or in part) within the scope of such license grant, Palomar shall
          notify Gillette in writing and provide it with any evidence of such infringement
          that is reasonably available. To the extent that any infringement falls within
          the scope of such license grant, and only to such  



-49- 









     extent, Gillette shall have the exclusive right (but not the obligation), at its
sole expense, to attempt to remove such infringement (but no other infringement
with respect to any Joint Patent), including filing an infringement suit or
taking other similar action, and Palomar shall have no right of enforcement with
respect thereto. Palomar shall provide reasonable assistance to Gillette,
including providing access to relevant non-privileged documents and other
evidence, making its employees available at reasonable business hours, and
joining the action to the extent necessary to allow Gillette to maintain the
action; provided that Gillette shall reimburse Palomar for any reasonable
out-of-pocket costs and expenses incurred by Palomar to provide such reasonable
assistance. Palomar shall have the right to participate or otherwise be involved
in any suit prosecuted by Gillette at Palomar’s sole cost and expense,
which cost and expense may be recovered by Palomar from recoveries made by
Gillette on a pro rata basis with Gillette’s reasonable cost and expense
related to such suit. If Palomar elects to so participate or be involved,
Gillette shall provide Palomar and its counsel with an opportunity to consult
with Gillette and its counsel regarding the prosecution of such suit (including
reviewing the contents of any non-privileged correspondence, legal papers or
other documents related thereto). 



                                     (iii)  
          Joint Patents Exclusively Licensed to Palomar. Pursuant to this
Agreement, Gillette has granted to Palomar certain exclusive license(s) with
respect to Joint Patents, which are in effect as of the Effective Date or shall
become effective upon certain termination events. Those exclusive license grants
are contained in Sections 4.2(d), 10.7(b)(v), 10.7(c)(v), 10.7(d)(v) and
10.8(a)(v) (the “Palomar Exclusive Licenses”). The following
provisions of this Section 8.4(b)(iii) shall apply to the enforcement of
the Joint Patents during the period that any one or more of the Palomar
Exclusive Licenses are in effect (the “Palomar Exclusive License
Period”). If Gillette determines that any Joint Patent is being or was
infringed by a Third Party’s activities during the Palomar Exclusive
License Period for any Palomar Exclusive License and such infringement falls (in
whole or in part) within the scope of such Palomar Exclusive License, Gillette
shall notify Palomar in writing and provide it with any evidence of such
infringement that is reasonably available. Palomar shall have the first right
(but not the obligation), at its sole expense, to attempt to remove such
infringement, including filing an infringement suit or taking other similar
action. In the event that Palomar fails within ninety (90) days following notice
of such infringement to remove such infringement or file an infringement
lawsuit, Gillette shall have the right (but not the obligation) to do so at
Gillette’s sole expense if Gillette reasonably concludes that such
infringement is materially affecting Gillette’s commercialization of the
Female Product(s); provided, however, that if Palomar has commenced negotiations
with an alleged infringer for discontinuance of such infringement within such
ninety (90) day period, Palomar shall have an additional ninety (90) days to
conclude its negotiations before Gillette may bring suit for such infringement.
The party not enforcing the applicable Joint Patents (A) shall provide
reasonable assistance to the other party, including providing access to relevant
non-privileged documents and other evidence, making its employees available at
reasonable business hours, and joining the action to the extent necessary to
allow the enforcing party to maintain the action. In the event that Gillette is
the enforcing party, it shall reimburse Palomar for Palomar’s reasonable
out-of-pocket costs and expenses incurred by Palomar in connection with
providing such assistance to Gillette. The party not enforcing the applicable
Joint Patent(s) shall have the right to participate or otherwise be involved in
any suit prosecuted by the enforcing party at such other party’s sole cost
and expense, which cost and expense may be recovered by such other party as
provided in Section 8.4(e). If such party elects to so participate or be
involved, the enforcing party shall provide such party and its counsel with 



-50- 









     an opportunity to consult with the enforcing party and its counsel regarding the
prosecution of such suit (including reviewing the contents of any non-privileged
correspondence, legal papers or other documents related thereto). 



                     (c)  
          Rights and Procedures for Certain Infringement of Both Joint Patents and
          Palomar Patents During the Gillette Exclusive License Period. In the event
          of any infringement by a Third Party of both a Palomar Patent(s) and a Joint
          Patent(s), which infringement would otherwise be subject to both
          Sections 8.4(a) and 8.4(b)(i) because such infringement occurred during the
          Gillette Exclusive License Period and falls (in whole or in part) within the
          scope of the Gillette Exclusive Licenses, the parties shall meet to discuss how
          to proceed with respect to such infringement, but only to the extent that such
          infringement falls within the scope of the Gillette Exclusive Licenses. If with
          respect to such infringement either party elects to enforce either the relevant
          Palomar Patent(s) or Joint Patent(s) under Section or, respectively, such
          enforcement shall be consistent with the terms of those Sections. 



                     (d)  
          MGH Joint Patents. With respect to the MGH Joint Patents, because MGH has
          or will have retained rights to enforce or otherwise be involved in the
          activities specified in Section 8.4(b), 8.4(c) and 8.4(g)(i) for MGH Joint
          Patents, Palomar shall use commercially reasonable efforts to cause MGH to take
          the actions specified by those Sections in a manner consistent with the MGH
          Agreements, but Palomar shall not be deemed to be in breach of its obligations
          under those Sections if, after using such commercially reasonable efforts, it is
          unable to comply with such obligations because of actions taken or not taken by
          MGH. 



                     (e)  
          Certain Recoveries; Costs and Expenses. Any amounts recovered by either
          party pursuant to Section 8.4(a), 8.4(b) or 8.4(c), whether by settlement or
          judgment or otherwise, shall be used to reimburse the parties for their
          reasonable costs and expenses (whether directly incurred or offsetable against a
          party) in making such recovery (which amounts shall be allocated pro rata if
          insufficient to cover the totality of such costs and expenses, and in the case
          in which Gillette is responsible for such costs and expenses subject to a right
          of offset under those Sections, to the extent that Gillette has offset any such
          costs or expenses as expressly permitted therein, subject to any other credits,
          offset or other reductions available to Gillette in accordance with the terms of
          this Agreement, Gillette shall pay Palomar the aggregate offset amounts within
          forty-five (45) days of Gillette receiving such amounts), with any remainder
          being allocated between the parties based on the economic interests of the
          parties under this Agreement; provided, however, that in the case of enforcement
          of a Joint Patent, infringement of which falls partly outside of the fields
          exclusively licensed to Gillette, Gillette shall not retain any portion of such
          recovery relating to damages outside such fields. 



Notwithstanding the foregoing, the
remainder shall be allocated in all events so that Palomar receives an amount at least
equal to the amount owed by Palomar to MGH as a result of the enforcement of such MGH
Patents or MGH Joint Patents or to such Third Party licensor as a result of the
enforcement of such Palomar Patents so that Palomar does not incur any liability as a
result of the license of such MGH Patents, MGH Joint Patents and such Palomar Patents. 





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                     (f)  
          Settlement. Except with the consent of the other party, which shall not be
          unreasonably withheld, neither party shall consent to entry of any judgment or
          enter into any settlement with respect to any infringement identified in
          Sections 8.4(a), 8.4(b), 8.4(c) or 8.4(g)(ii) that would result in
          injunctive or other relief being imposed against the other party or would have a
          material adverse affect on the other party’s business. 



                     (g)  
          Retained Rights for Certain Palomar Patents, Gillette Patents and Joint
          Patents. 



                                     (i)  
          Palomar Patents and Gillette Patents. Except as otherwise provided by the
          provisions of Section 8.4(a), 8.4(b) or 8.4(c), each party shall retain the
          sole right to enforce its Patents (e.g., in the case of Palomar, Palomar
          Patents, and in the case of Gillette, Gillette Patents) against all infringers
          at its sole cost and expense. 



                                     (ii)  
          Joint Patents. In the event of any infringement of any Joint Patent that
          is not addressed by either Section 8.4(b)(i), 8.4(b)(ii) or 8.4(b)(iii),
          the parties shall meet to discuss how to proceed with respect to such
          infringement. For avoidance of doubt, it is understood that any infringement of
          any Joint Patent that is subject to those Sections shall not be subject to this
          Section 8.4(g)(ii) even in the event that the party(ies) having rights to
          enforce any such Joint Patent under those Sections declines to do so. If the
          parties are not able to agree on a course of action, either party may assert
          such Joint Patent and initiate an action with respect to such infringement, at
          its sole expense with no obligation to share any resulting recovery, provided
          that such party has given the other party the opportunity to join in such
          assertion and action and to share equally in any expenses and recoveries in
          connection therewith. The party not enforcing such Joint Patent shall provide
          reasonable assistance to the other party, at such other party’s expense,
          including providing access to relevant non-privileged documents and other
          evidence, making its employees available at reasonable business hours, and
          joining the action to the extent necessary to allow the enforcing party to
          maintain the action, provided that in the event that the non-enforcing party has
          not agreed to join in such assertion and action in accordance with the
          immediately preceding sentence, the enforcing party shall reimburse the
          non-enforcing party for any reasonable out-of-pocket costs and expenses incurred
          by the non-enforcing party to provide such reasonable assistance. In no event
          shall this Section 8.4(g)(ii) be construed or applied in any way to limit
          the ability of either party to practice or (sub)license any Joint Patent;
          provided, however, that once a party has commenced an action for
          infringement against a Third Party, the other party shall not grant to such
          Third Party a license under any Joint Patent that may nullify the action for any
          such infringement, with the understanding that the foregoing proviso shall not
          apply to a Third Party Collaboration entered into by either party after the
          commencement of such action but for which substantial good faith negotiations
          had occurred before such commencement. With respect to the
          MGH Joint Patents, because MGH has retained rights to enforce or otherwise be
          involved in the activities specified in this Section 8.4(g)(ii) for MGH
          Joint Patents, Palomar shall use commercially reasonable efforts to cause MGH to
          take the actions specified by this Section 8.4(g)(ii) in a manner consistent
          with the MGH Agreements, but Palomar shall not be deemed to be in breach of its
          obligations under those Sections if, after using such commercially reasonable
          efforts, it is unable to comply with such obligations because of actions taken
          or not taken by MGH. 





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        8.5 Infringement of
Third Party Rights. 



                     (a)  
          Third Party Licenses. If (x) Gillette reasonably concludes, after
          consultation with Palomar and with an independent patent attorney reasonably
          acceptable to the parties, that one or more Patents have issued to a Third Party
          in any country such that Gillette cannot Exploit the Female Product(s) in such
          country without infringing such Patent or (y) as a result of any claim made
          against Gillette or sublicensees alleging that the Exploitation of the Female
          Product(s) by Gillette or any of its sublicensees infringes or misappropriates
          any Patent or any other intellectual property right of a Third Party in any
          country, a judgment is entered by a court of competent jurisdiction from which
          no appeal is taken within the time permitted for appeal, such that Gillette
          cannot Exploit the Female Product(s) in such country without infringing the
          Patent or other proprietary rights of such Third Party, then, in either case,
          Gillette shall have the right (but not the obligation) to negotiate and obtain a
          license from such Third Party as necessary for Gillette and its sublicensees to
          Exploit the Female Product(s) in such country. In the event that Gillette
          determines that a license from such Third Party is not commercially viable for
          Gillette and elects not to obtain a license from such Third Party, Gillette
          shall have no obligation to commercialize the Female Product(s) in such
          country(ies). Notwithstanding the foregoing, prior to Gillette’s entering
          into any such license with a Third Party, with respect to which license Gillette
          shall seek a right to offset royalties owed by Gillette to Palomar hereunder,
          Gillette shall confer with Palomar to discuss in good faith whether any
          design-around or other solutions are reasonably available to Gillette with
          respect to the allegedly infringing technology, provided that Gillette shall
          retain discretion as to whether to seek such license. 



                     (b)  
          Costs of Third Party License. In the event that Gillette obtains a
          license from such Third Party with respect to the Exploitation of Female
          Product(s) pursuant to Section 8.5(a), the royalties and other payments due from
          Gillette to such Third Party shall be allocated between the parties based on the
          intellectual property interests in the Female Product(s) or Manufacturing
          Processes relating thereto that is alleged to infringe the Third Party’s
          patents, as follows: 



                                     (i)  
          In the event that the alleged infringement results solely or predominantly from
          Information or Inventions contained in such Female Product or Manufacturing
          Process that are Controlled by Gillette (other than as a result of this
          Agreement), Gillette shall be solely responsible for the royalties and other
          payments owed to such Third Party pursuant to such license, subject to
          Gillette’s right to adjust the royalty and TTP amounts owed by Gillette to
          Palomar pursuant to Section 6.1(h). 



                                     (ii)  
          In the event that the alleged infringement results solely or predominantly from
          Information or Inventions contained in such Female Product or Manufacturing
          Process that are Controlled by Palomar (other than as a result of this
          Agreement) pursuant to rights under any Core Palomar Patent, Palomar shall be
          responsible for two-thirds and Gillette shall be responsible for one-third of
          the royalties and other payments owed to such Third Party pursuant to such
          license, subject to the last paragraph of this Section 8.5(b). 



                                     (iii)  
          In the event that the alleged infringement results solely or predominantly from
          Information or Inventions contained in such Female Product or





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     Manufacturing Process that are Controlled by Palomar (other than as a result of
this Agreement) pursuant to rights under any Non-Core Palomar Patent, Gillette
shall be solely responsible for the royalties and other payments owed to such
Third Party pursuant to such license, subject to Gillette’s right to adjust
the royalty and TTP amounts owed by Gillette to Palomar pursuant to Section
6.1(h). 



                                     (iv)  
          In the event that the alleged infringement results solely or predominantly from
          Information or Inventions contained in such Female Product or Manufacturing
          Process that are jointly-owned by Palomar and Gillette, Gillette shall be solely
          responsible for the royalties and other payments owed to such Third Party
          pursuant to such license, subject to Gillette’s right to adjust the royalty
          and TTP amounts owed by Gillette to Palomar pursuant to Section 6.1(h). 



All payments to the Third Party
pursuant to any such license shall be made by Gillette to such Third Party and, in the
case of clause (ii) above, and subject to Section 6.6(b), Gillette’s only right of
recovery with respect to Palomar’s two-thirds share of such payments shall be to
offset Palomar’s share of such payments, on a country-by-country basis, only
(A) against royalties payable by Gillette to Palomar pursuant to this Agreement,
which offset shall not exceed in any Calendar Quarter royalties in the amount of one
percent (1%) of Net Sales in each such country, and (B) against TTPs payable by
Gillette to Palomar pursuant to this Agreement, which offset shall not exceed in any
Calendar Quarter TTPs in the amount of one percent (1%) of Net Sales in each such country
(and which offsets shall be applied first to amounts attributable to such royalties and
second to amounts attributable to TTPs). Offsets not exhausted in any Calendar Quarter may
be carried into future Calendar Quarters, subject to the foregoing sentence. 



                     (c)  
          Third Party Litigation. 



                                     (i)  
          In General. In the event that a Third Party institutes a patent, trade
          secret or other infringement suit against a party during the Exclusivity Period,
          alleging that the Exploitation of the Female Product infringes one or more
          patents, trade secrets or other intellectual property rights held by such Third
          Party (an “Infringement Suit”), then Gillette shall have the first
          right, but not the obligation, to assume direction and control of the defense of
          claims arising therefrom. If Gillette determines not to assume such direction
          and control, Palomar shall have the right, but not the obligation, to defend
          against such claims. The party controlling the defense of an Infringement Suit
          shall have the right to compromise or settle any action or claims asserted
          against it by the Third Party; provided, however, that such
          controlling party shall consult with the other party before comprising or
          settling any such action or claim (which consultation shall include, without
          limitation, discussing in good faith whether any design-around or other
          solutions are reasonably available with respect to the allegedly infringing
          technology), and provided further that, such controlling party shall not
          compromise or settle, without the other party’s prior written consent, (a)
          actions or claims asserted against the other party, or (b) in the event that
          such compromise or settlement would result in injunctive relief being imposed
          against the other party. 



                                     (ii)  
          Costs, Damages and Settlements. In the event that either party assumes
          control of any Infringement Suit described in Section 8.5(c)(i), all costs and
          expenses incurred by such party in connection with the defense of such action,
          any damage 




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     awards against either or both parties, and any settlements entered into by such
party, if any, based on a claim that the Exploitation of the Female Product
infringes one or more patents, trade secrets or other intellectual property
rights held by such Third Party, shall be allocated as follows: 



                                             (1)  
          In the event that the alleged infringement results solely or predominantly from
          Information or Inventions contained in such Female Product or Manufacturing
          Process that are Controlled by Palomar (other than as a result of this
          Agreement) pursuant to rights under any Core Palomar Patent, Palomar shall be
          responsible for two-thirds and Gillette shall be responsible for one-third of
          the costs and expenses incurred by the controlling party in connection with the
          action, and of the damage awards and settlements, if any, owed to such Third
          Party; provided, however, that all such amounts shall be paid by
          Gillette in the first instance and, subject to Section 6.6(b), Gillette’s
          only right of recovery with respect to Palomar’s two-thirds share of such
          amounts shall be to offset Palomar’s share of such amounts only (i) against
          royalties payable by Gillette to Palomar pursuant to this Agreement, which
          offset shall not exceed in any Calendar Quarter royalties in the amount of one
          percent (1%) of Net Sales in each such country, and (ii) against TTPs
          payable by Gillette to Palomar pursuant to this Agreement, which offset shall
          not exceed in any Calendar Quarter TTPs in the amount of one percent (1%) of Net
          Sales in each such country (and which offsets shall be applied first to amounts
          attributable to such royalties and second to amounts attributable to TTPs).
          Offsets not exhausted in any Calendar Quarter may be carried into future
          Calendar Quarters, subject to the foregoing sentence. 



                                             (2)  
          In the event that the alleged infringement results solely or predominantly from
          Information or Inventions contained in such Female Product or Manufacturing
          Process that are Controlled by Palomar (other than as a result of this
          Agreement) pursuant to rights under any Non-Core Palomar Patent, by Gillette, or
          jointly by the parties, Gillette shall be solely responsible for all the costs
          and expenses incurred by the parties in connection with the action, and the
          damage awards and settlements, if any, owed to such Third Party. 



                                     (iii)  
          Other Actions and Costs. Except as provided in Sections 8.5(c)(i) and
          8.5(c)(ii), each party shall have the right to control any infringement action
          brought against it by a Third Party, and each party shall bear its own costs and
          expenses and liabilities in connection with any such infringement action. 



                                     (iv)  
          Cooperation. With respect to the defense of an Infringement Suit, the
          non-controlling party shall provide reasonable assistance to the controlling
          party, including providing access to relevant non-privileged documents and other
          evidence, and making its employees available at reasonable business hours;
          provided that the controlling party shall reimburse the non-controlling party
          for any reasonable out-of-pocket costs and expenses incurred by the
          non-controlling party to provide such reasonable assistance, which out-of-pocket
          costs and expenses shall be subject to the allocation of costs provided for in
          Section 8.5(c)(ii). 



                     (d)  
          Retained Rights. Nothing in this Section 8.5 shall prevent either
          party, at its own expense, from obtaining any license or other rights from Third
          Parties it deems appropriate in order to permit the full and unhindered exercise
          of its rights under this Agreement. 



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        8.6 Patent Marking.
Each party shall mark, and shall cause all their agents and (sub)licensees to mark, all
Products made, used or sold under the terms of this Agreement, or their containers, in
accordance with all applicable United States patent-marking laws with respect any United
States Patents licensed to such party by the other party under this Agreement. 




ARTICLE
IX
Confidentiality and Nondisclosure 




        9.1 Confidentiality
Obligations. 



                     (a)  
          General Obligations. Except as provided herein, the parties agree that,
          during the term of this Agreement and for five (5) years after this
          Agreement’s expiration or termination pursuant to ARTICLE X, each party
          shall hold in strict confidence and shall not publish or otherwise disclose,
          directly or indirectly, to any Third Party (other than their employees legal
          counsel, consultants, auditors and advisors who, except in the case of legal
          counsel, are bound in writing by confidentiality obligations no less restrictive
          than those set forth herein, collectively, “Permitted Confidants”) any
          Confidential Information of the other party. During such period, a party shall
          not use for any purpose, directly or indirectly, Confidential Information of the
          other party or its or sublicensees furnished or otherwise made known to it,
          except as permitted hereunder. Access to the disclosing party’s
          Confidential Information shall be restricted to Permitted Confidants of the
          receiving party, who, in each case, need to have access to carry out a permitted
          use. The Confidential Information, and all copies of part or all thereof, shall
          be and remain the exclusive property of the disclosing party, and the receiving
          party shall acquire only such rights as are expressly set forth in this
          Agreement and only for as long as such rights are in effect. Each party shall
          promptly report to the other any conduct relating to the other party’s
          Confidential Information inconsistent with the provisions of this ARTICLE IX,
          and take such action as may be reasonably necessary and legally permissible to
          terminate such conduct. Each party agrees to reproduce and include the other
          party’s proprietary rights notices or reasonable equivalents on any item
          that contains the other party’s Confidential Information. Subject to
          Sections 9.1(b) and 9.1(c), each party shall be free to disclose its own
          Confidential Information in its sole discretion. 



                     (b)  
          Palomar Obligations. Palomar recognizes that upon Gillette’s entry
          into this Agreement, Gillette has an interest in Palomar’s retention in
          confidence of certain information Controlled by Palomar. Accordingly, during the
          Exclusivity Period, Palomar shall, and shall cause its officers, directors,
          employees and agents to, keep confidential, and not publish or otherwise
          disclose to Third Parties (other than Permitted Confidants), and not use
          directly or indirectly for any purpose, any information that solely and directly
          relates to the Female Product Technology, the Palomar U.S. Regulatory
          Documentation, or the development, sales or marketing plans for the Female
          Product Technology, in each case only to the extent applicable in the Exclusive
          Field (the “Palomar Controlled Information”), except to the extent (i)
          the Palomar Controlled Information is in the public domain through no fault of
          Palomar or any of its officers, directors, employees and agents (because such
          Palomar Controlled Information entered the public domain prior to the Effective
          Date or otherwise), (ii) such disclosure or use would be permitted under
          Section 9.2 if such information were Confidential Information of Gillette,
          (iii) such disclosure or use is otherwise expressly permitted by the terms of
          this Agreement or is reasonably necessary for the performance of this Agreement
          or for the exercise of Palomar’s 



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     rights expressly granted by this Agreement, or (iv) compliance with any of the
restrictions contained in this Section 9.1(b) would violate or otherwise
conflict with any Third Party obligations of Palomar. For clarification, the
disclosure by Palomar to Gillette or by Gillette to Palomar of Palomar
Controlled Information shall not cause such information to cease to be subject
to the confidentiality provisions of this Section 9.1(b). All restrictions
with respect to Palomar Controlled Information contained in this
Section 9.1(b) shall not apply to the use directly or indirectly for any
purpose, or disclosure or publication, of any Palomar Controlled Information
that has applicability outside of the Exclusive Field, notwithstanding the fact
that the Palomar Controlled Information has applicability in the Exclusive
Field. 



                     (c)  
          Gillette Obligations. Gillette recognizes that upon Palomar’s entry
          into this Agreement, Palomar has an interest in Gillette’s retention in
          confidence of certain information concerning Joint Technology for which Gillette
          granted Palomar an exclusive license pursuant to Section 4.2(d).
          Accordingly, during the term of this Agreement, Gillette shall, and shall cause
          its officers, directors, employees and agents to, keep confidential, and not
          publish or otherwise disclose to Third Parties (other than Permitted
          Confidents), and not use directly or indirectly for any purpose, any information
          concerning Joint Technology that solely and directly relates to Light-Based
          Products outside the Field (the “Gillette Controlled Information”),
          except to the extent (i) the Gillette Controlled Information is in the public
          domain through no fault of Gillette or any of their respective officers,
          directors, employees and agents (because such Gillette Controlled Information
          entered the public domain prior to the Effective Date or otherwise), (ii) such
          disclosure or use would be permitted under Section 9.2 if such information
          were Confidential Information of Palomar, (iii) such disclosure or use is
          otherwise expressly permitted by the terms of this Agreement or is reasonably
          necessary for the performance of this Agreement or for the exercise of
          Gillette’s rights expressly granted by this Agreement, or (iv) compliance
          with any of the restrictions contained in this Section 9.1(c) would violate
          or otherwise conflict with any Third Party obligations of Gillette. For
          clarification, the disclosure by Gillette to Palomar or by Palomar to Gillette
          of Gillette Controlled Information shall not cause such information to cease to
          be subject to the confidentiality provisions of this Section 9.1(c). All
          restrictions with respect to Gillette Controlled Information contained in this
          Section 9.1(c) shall not apply to the use directly or indirectly for any
          purpose, or disclosure or publication, of any Gillette Controlled Information
          that has applicability in the Field, notwithstanding the fact that the Gillette
          Controlled Information has applicability outside the Field. 



        9.2 Permitted
Disclosures.  Each party may disclose Confidential Information to the extent
that such disclosure is: 



                     (a)  
          Made in response to a valid order of a court of competent jurisdiction or other
          supra-national, federal, national, regional, state, provincial or local
          governmental or regulatory body of competent jurisdiction; provided,
          however, that, except where impracticable for certain disclosures
          (e.g., in the event of medical emergency), the receiving party shall
          first have given notice to the disclosing party and given the disclosing party a
          reasonable opportunity to quash such order and to obtain a protective order
          requiring that the Confidential Information and documents that are the subject
          of such order be held in confidence by such court or agency or, if disclosed, be
          used only for the purposes for which the order was issued; and provided
          further that if a disclosure order is not quashed or a protective order
          is not obtained, the



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      Confidential Information disclosed in response to such
          court or governmental order shall be limited to that information which is
          legally required to be disclosed in response to such court or governmental
          order; 



                     (b)  
          Otherwise required by Applicable Law as reasonably determined by counsel to the
          receiving party; 



                     (c)  
          Made by the receiving party as may be reasonably necessary or useful in
          connection with preparing, filing, prosecuting, maintaining, enforcing and
          defending Joint Technology; 



                     (d)  
          Made by the receiving party as may be reasonably necessary or useful to
          prosecute and/or defend litigation, Disputes or other disputes between the
          parties; 



                     (e)  
          Made by the receiving party to the Regulatory Authorities as required in
          connection with any filing, application or request for Regulatory Approval;
          provided, however, that reasonable measures shall be taken to
          assure confidential treatment of such information; or 



                     (f)  
          Made by the receiving party or its sublicensees to Third Parties as may be
          necessary or useful in connection with permitted subcontracting and
          (sub)licensing transactions (including for purposes of Manufacturing), provided
          that such Third Parties are bound by confidentiality obligations no less
          restrictive than those set forth herein. 




        9.3 Confidential
Information. 



                     (a)  
          Defined. “Confidential Information” of a party shall mean all
          information and know-how and any tangible embodiments thereof provided by or on
          behalf of such party to the other party either in connection with the
          discussions and negotiations pertaining to this Agreement or in the course of
          performing this Agreement, including data; knowledge; practices; processes;
          ideas; research plans; engineering designs and drawings; research data;
          manufacturing processes and techniques; scientific, manufacturing, marketing and
          business plans; and financial and personnel matters relating to the disclosing
          party or to its present or future products, sales, suppliers, customers,
          employees, investors or business but excluding the actual terms included in this
          Agreement. For the avoidance of doubt, (i) Confidential Information of each
          party shall include any and all information provided by one party to the other
          directly relating to Female Products, (ii) Confidential Information of both
          parties shall include all Joint Inventions until such time as the parties
          decline to pursue patent protection on them, (iii) Gillette Confidential
          Information shall include all Gillette Technology, and (iv) Palomar
          Confidential Information shall include (1) Palomar Technology, and
          (2) as provided in Section 8.1(c), all Joint Inventions and Joint
          Technology related thereto solely owned by Palomar until such time (if any) that
          Palomar assigns an interest in them to Gillette. 



                     (b)  
          Exclusions. Notwithstanding the foregoing, information or know-how of a
          party shall not be deemed Confidential Information with respect to a receiving
          party for purposes of this Agreement if such information or know-how: 



                                     (i)  
          was already known to the receiving party, other than under



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     an obligation of confidentiality or non-use, at the time of disclosure to, or,
with respect to know-how, discovery or development by, such receiving party;




                                     (ii)  
          was generally available or known, or was otherwise part of the public domain, at
          the time of its disclosure to, or, with respect to know-how, discovery or
          development by, such receiving party; 



                                     (iii)  
          became generally available or known, or otherwise became part of the public
          domain, after its disclosure to, or, with respect to know-how, discovery or
          development by, such receiving party through no fault of a party other than the
          party that Controls such information and know-how; 



                                     (iv)  
          was disclosed to such receiving party, other than under an obligation of
          confidentiality or non-use, by a Third Party who had no obligation to the party
          that Controls such information and know-how not to disclose such information or
          know-how to others; or 



                                     (v)  
          was independently discovered or developed by such receiving party, as evidenced
          by their written records, without the use of Confidential Information belonging
          to the party that Controls such information and know-how. 



Specific aspects or details of
Confidential Information shall not be deemed to be within the public domain or in the
possession of a party merely because the Confidential Information is embraced by more
general information in the public domain or in the possession of such party. Further, any
combination of Confidential Information shall not be considered in the public domain or in
the possession of a party merely because individual elements of such Confidential
Information are in the public domain or in the possession of such party unless the
combination and its principles are in the public domain or in the possession of such
party. 



        9.4 Use of Name. Except
as expressly permitted by Section 9.5, neither party shall use the name or any other
insignia, symbol, trademark, trade name or logotype of the other party (or any
abbreviation or adaptation thereof) in any publication, press release, promotional
material or other form of publicity without the prior written approval of such other party
in each instance. Subject to Section 9.5, the restrictions imposed by this Section shall
not prohibit either party from making any disclosure identifying the other party that is
required by Applicable Law. 



        9.5 Press Releases and SEC
Filings. Palomar shall have the right, within two (2) business days of
Palomar’s acceptance of the Offer from Gillette of this Agreement pursuant to
Section 10.1(b), to issue a press release in a form to be mutually agreed by the
parties in writing in advance of such issuance (the “First Press Release”).
Gillette understands and agrees that Palomar shall submit this Agreement to the SEC and
Palomar agrees to submit to the SEC, and consult with Gillette with respect to the
preparation and submission of, a confidential treatment request for the Exhibits attached
hereto. Except as otherwise mutually agreed in advance in writing by the parties, neither
party shall issue a press release nor make any other public disclosure of the activities
conducted by the parties pursuant hereto without the prior approval of such press release
or public disclosure by the other party hereto. Each party shall submit any such press
release or public disclosure to the other party, and such other party shall



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have two (2) business days to review and approve any such press release or
public disclosure, which approval shall not be unreasonably withheld. If such
other party does not respond within such two (2) business day period, the press
release or public disclosure shall be deemed approved. If a party obtains the
approval of the other party to make a public disclosure pursuant to this
Section 9.5 in connection with a press release, or a filing with or other
submission to the United States Securities and Exchange Commission (the
“SEC”) or other regulatory authority, or if such press release, filing
or submission is otherwise approved pursuant to the preceding sentence of this
Section 9.5, the party that has obtained (or is deemed to have obtained)
approval to make a disclosure shall be permitted to make subsequent public
disclosures containing statements that are substantially similar to the
statements contained in such previously permitted disclosures, without seeking
the prior approval of the other party with respect to such subsequent
disclosures; provided, however, that in the event that any such
subsequent public disclosure is to be made other than in a filing or submission
to the SEC, prior approval shall be required if such subsequent disclosure will
occur not more than thirty (30) days after the initial disclosure was approved
(or deemed approved, as the case may be). Except to the extent otherwise
provided in the preceding sentence, if a public disclosure is required by
Applicable Law, as reasonably determined by counsel to the party seeking to make
a disclosure, including in a filing with or other submission to the SEC, and
(a) such party has provided copies of the disclosure to the other party as
far in advance of such filing or other disclosure as is reasonably practicable
under the circumstances, (b) such party has promptly notified the other
party in writing of such requirement and any respective timing constraints, and
(c) such party has given the other party a reasonable time under the
circumstances from the date of notice by such party of the required disclosure
to comment upon, request confidential treatment or approve such disclosure, then
such party shall have the right to make such public disclosure at the time and
in the manner reasonably determined by its counsel to be required by Applicable
Law. Notwithstanding anything to the contrary herein, it is hereby understood
and agreed that if in each case set forth in this Section 9.5, the other
party provides comments within the respective time periods or constraints
specified herein or within the respective notice, the party seeking to make such
disclosure or its counsel, as the case may be, shall in good faith
(i) consider incorporating such comments and (ii) use reasonable
efforts to incorporate such comments, limit disclosure or obtain confidential
treatment to the extent reasonably requested by the other party. 



        9.6 Equitable Relief.
Each party acknowledges and agrees that breach of any of the terms of this ARTICLE IX
would cause irreparable harm and damage to the other and that such damage may not be
ascertainable in money damages and that as a result thereof the non-breaching party would
be entitled to seek from a court as is contemplated by Section 13.3 equitable or
injunctive relief restraining any breach or future violation of the terms contained herein
by the breaching party without the necessity of proving actual damages or posting bond.
Such right to equitable relief is in addition to whatever remedies either party may be
entitled to as a matter of law or equity, including money damages, which other remedies
are subject to the provisions of this Agreement concerning the resolution of Disputes. 



        9.7 Termination. Upon
termination of this Agreement for any reason, each receiving party shall (i) return to the
disclosing party all Confidential Information provided in writing by the disclosing party
to the receiving party, and (ii) destroy copies of memoranda and notes prepared by the
receiving party or any of its employees or agents that contain Confidential Information of
the disclosing party; provided, however, that the receiving party may retain



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copies of such Confidential Information in which such party has a proprietary or licensed
interest that survives termination; provided, further, that the terms of
clause (i) and clause (ii) of this Section 9.7 shall not apply with respect to any
Confidential Information contained in reports to a party’s board of directors or
executive committees (or to the extent reference is made thereto in board minutes or
similar documents). Notwithstanding the foregoing, the receiving party and its legal
counsel may each retain a copy of such Confidential Information and memoranda and notes to
be used only in exercising the receiving party’s rights and performing the receiving
party’s obligations under this Agreement, including in the case of a dispute
concerning this Agreement. The return of any Confidential Information will not relieve the
receiving party of any of its obligations hereunder. 



        9.8 Termination of Prior
Non-Disclosure Agreement. This Agreement supersedes the Non-Disclosure Agreement
between the parties dated April 24, 2001, as amended effective as of April 9, 2002 and May
6, 2002 and January 21, 2003 (the “Non-Disclosure Agreement”), but only
insofar as such Confidentiality Agreement relates to the subject matter of this Agreement.
All Confidential Information (as defined in the Non-Disclosure Agreement) exchanged
between the parties under the Non-Disclosure Agreement relating to the subject matter of
this Agreement shall be deemed Confidential Information hereunder and shall be subject to
the terms of this Agreement. 



        9.9 Publication. With
respect to any right of publication in favor of MGH under any MGH Agreement (and only to
the extent of MGH’s rights under any MGH Agreement), in the event that MGH seeks to
publish or present any Joint Technology pursuant to rights granted to it in such
agreement(s), the following procedures shall govern: Promptly upon receipt of notice from
MGH that it desires to make any such presentation or publication, Palomar shall provide to
Gillette the opportunity to review any proposed abstracts, manuscripts or presentations
(including information to be presented verbally) that contains any Joint Technology at
least thirty (30) days prior to the intended submission of such abstract or
manuscript for publication, or at least seven (7) days prior to the intended delivery
of such presentation. Palomar agrees that, upon written request from Gillette that any
such abstract or manuscript for publication not be submitted, or any such proposed
presentation not be made, until Gillette is given a reasonable period of time not to
exceed thirty (30) days to seek Patent protection for any material in such
publication or presentation which it believes is patentable to the extent that Gillette is
entitled to seek Patent protection for such material under this Agreement. Any
publications of a Party under this Section 9.9 shall be subject to the
confidentiality obligations of this ARTICLE IX. In all other respects, except as required
by Applicable Law, neither party shall have the right to publish or present (or to permit
its (sub)licensees, subcontractors, employees or agents to publish or present) any Joint
Technology, except with the prior written consent of the other party. 



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ARTICLE X 
Term and Termination 




        10.1 Term. 



                     (a)  
          Subject to Section 10.1(b), this Agreement shall commence and take effect
          on the Effective Date and shall continue in effect until terminated in
          accordance with this ARTICLE X. 



                     (b)  
          This Agreement shall be executed by Gillette but not Palomar as of the date
          first written above, and Gillette shall Deliver two originals of the executed
          version of this Agreement to Palomar. Upon such execution and Delivery by
          Gillette, this Agreement shall constitute a binding and irrevocable offer by
          Gillette (the “Offer”) for a period of six (6) days after
          Palomar’s receipt of those two executed originals (the “Offer
          Period”). Palomar shall have the right, in its sole discretion, to accept
          the Offer during the Offer Period by executing the two originals Delivered by
          Gillette and Delivering to Gillette one of the fully executed originals and
          retaining the other, provided that Palomar not make any changes or alterations
          to the Offer represented by this Agreement in any way. If Palomar so accepts the
          Offer within the Offer Period, then this Agreement shall become effective as
          provided in Section 10.1(a) and shall be a binding contract upon both of
          the parties. If Palomar either (i) notifies Gillette in writing that it
          rejects the Offer during the Offer Period, or (ii) fails to accept the
          Offer during the Offer Period as provided above, then the Offer shall terminate
          and neither Party shall have any further obligation with respect to the Offer,
          this Agreement or otherwise (except with respect to the Non-Disclosure
          Agreement, which shall survive in full such termination). For purposes of this
          Section 10.1(b), “Deliver” and its correlatives shall mean the
          act of one party providing an original of this Agreement to the other party by
          either: (i) sending such document to the other party by a nationally
          recognized overnight courier as provided in Section 14.5 for delivery on
          the next business day, or (ii) actual receipt of an original of such
          document. 



        10.2 Unilateral Termination
of Exclusivity Period by Gillette. Gillette shall have the right in its sole
discretion to terminate the Exclusivity Period by providing ten (10) days prior written
notice to Palomar. 




        10.3 Termination of this
Agreement by Either Party for Material Breach. 



                     (a)  
          Material Breach. Material failure by a party to comply with any of its
          material obligations contained herein shall entitle the party not in default to
          give to the party in default notice specifying the nature of the default and
          requiring the defaulting party to cure such default. If such default is not
          cured within thirty (30) days, or in the case of breach of any obligation to pay
          monies hereunder, ten (10) business days (the “Cure Period”) after the
          receipt of such notice (or, if such default cannot be cured within the Cure
          Period, if the party in default does not commence actions to cure such default
          within the Cure Period and thereafter diligently continue such actions), the
          party not in default shall be entitled, without prejudice to any of its other
          rights conferred on it by this Agreement, and in addition to any other remedies
          available to it by law or in equity, to terminate this Agreement in its entirety
          effective upon written notice to the defaulting party; provided,
          however, that any right to terminate under this Section 10.3, shall
          be stayed in the event that, during any Cure Period, the party alleged to have
          been in default shall 



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     have initiated dispute resolution in accordance with Section 13.1 with
respect to the alleged default, which stay shall last so long as the initiating
party diligently and in good faith cooperates in the prompt resolution of such
dispute resolution proceedings. 



                     (b)  
          No Challenge. In the event that Gillette, during a period when there is
          in effect a license grant from Palomar to Gillette under the Palomar Patents
          pursuant to this Agreement, asserts a claim in any judicial or governmental
          forum seeking a judgment or other decision that any of the Patent claims of the
          Palomar Patents is invalid or unenforceable, if it is determined by a judicial
          or other governmental authority that no such Patent claims with respect to which
          Gillette made such assertions are invalid or unenforceable, from and after the
          date of such determination, the royalty rate payable by Gillette with respect to
          such license shall double until the date of the earlier to occur of (i) five (5)
          years from the date of such determination, or (ii) a period that corresponds to
          the total number of days that lapsed between the date on which such claim is
          asserted by Gillette in such forum until the date on which such judicial or
          governmental determination becomes final and unappealable. In the event that
          Palomar, during a period when there is in effect a license grant from Gillette
          to Palomar under the Gillette Licensed Patents pursuant to this Agreement,
          asserts a claim in any judicial or governmental forum seeking a judgment or
          other decision that any of the Patent claims of the Gillette Licensed Patents is
          invalid or unenforceable, if it is determined by a judicial or other
          governmental authority that no such Patent claims with respect to which Palomar
          made such assertions are invalid or unenforceable, from and after the date of
          such determination, the royalty rate payable by Palomar with respect to such
          license shall double until the date of the earlier to occur of (x) five (5)
          years from the date of such determination, or (y) a period that corresponds to
          the total number of days that lapsed between the date on which such claim is
          asserted by Palomar in such forum until the date on which such judicial or
          governmental determination becomes final and unappealable. 




        10.4 Unilateral
Termination of this Agreement by Gillette. 



                     (a)  
          Termination by Gillette Within Twelve Months of the Effective Date. At
          any time within twelve (12) months after the Effective Date, Gillette shall have
          the right in its sole discretion to terminate this Agreement in its entirety by
          providing ten (10) days’ prior written notice to Palomar. 



                     (b)  
          Termination by Gillette Upon Determination That the First Female Product
          Requires PMA. Gillette shall have the right, in its sole discretion, to
          terminate this Agreement in its entirety by providing ten (10) days’ prior
          written notice to Palomar within thirty (30) days of the FDA determining
          that the First Female Product is a PMA Product. 



                     (c)  
          Termination by Gillette for Palomar’s Failure to Obtain Regulatory
          Approval in the United States Within FDA Approval Period. Within thirty (30)
          days of the end of the applicable FDA Approval Period, Gillette shall have the
          right in its sole discretion to terminate this Agreement in its entirety by
          providing ten (10) days’ prior written notice to Palomar in the event that
          Palomar fails to obtain Regulatory Approval in the United States for the First
          Female Product within the applicable FDA Approval Period. For avoidance of
          doubt, in the event that Gillette does not terminate this Agreement in such an
          event, then notwithstanding the extent to which Gillette continues to commit
          resources to the activities contemplated by this 



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     Agreement, Palomar shall have the right to continue its efforts, at its sole
cost and expense, to obtain Regulatory Approval in the United States for the
First Female Product and Gillette shall reasonably cooperate in those efforts
through the R&D Committee as originally contemplated by this Agreement.




                     (d)  
          Termination By Gillette at the First Decision Point or the Second Decision
          Point. At any time on or before thirty (30) days after the First Decision
          Point or the Second Decision Point, Gillette shall have the right in its sole
          discretion to terminate this Agreement in its entirety by providing ten (10)
          days’ prior written notice to Palomar. 



        10.5 Unilateral Termination
of this Agreement by Palomar for Gillette’s Breach of Diligence Obligations.
Palomar shall have the right in its sole discretion to terminate this Agreement in its
entirety by providing ten (10) days’ prior written notice to Gillette in the event
that Gillette fails to satisfy its obligations pursuant to Section 2.1(b)(i),
2.1(b)(ii) or 2.1(b)(iii), and in the case of either Section 2.1(b)(i) or 2.1(b)(ii),
Gillette further fails to make a payment to Palomar in accordance with the proviso
contained in each such Section. 



        10.6 Consequences of
Termination of Exclusivity Period. In the event that Gillette terminates the
Exclusivity Period pursuant to Section 10.2, as of the effective date of such
termination, the following terms and conditions shall apply. 



                                     (i)  
          The covenants and other rights granted by Palomar in Sections 5.2 and
          5.3(a), the covenants and other rights granted by Gillette in 5.3(b), and
          Sections 1.7, 5.4 and 9.1(b) shall terminate. 



                                     (ii)  
          The licenses granted by Palomar to Gillette in Section 4.1(a)(i) and
          4.1(a)(ii) shall convert to non-exclusive licenses and the word
          “exclusive” wherever it appears in Sections 4.1(a)(i) and
          4.1(a)(ii) shall be deemed from and after such date to be replaced with the word
          “non-exclusive”; provided, that the licenses contained in
          Sections 4.1(a)(i) and 4.1(a)(ii) shall be deemed to cover only those Female
          Products Launched by Gillette prior to the effective date of the termination of
          the Exclusivity Period, and any Improvements thereto. 



                                     (iii)  
          The Male Option granted by Palomar to Gillette in Section 5.1 and the
          covenant granted by Palomar to Gillette in Section 5.2(b) shall terminate;
          provided, that, in the event that Gillette has, prior to such date,
          exercised the Male Option, Gillette’s rights pursuant to
          Section 5.1(c) shall survive and Gillette’s rights with respect to
          Palomar Male Technology and Palomar’s interest in the Joint Technology in
          the Male Field shall be governed by the terms of the Male Collaboration
          Agreement entered into (or to be entered into) between the parties pursuant to
          such Section. 





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                                (iv)   Gillette hereby grants
to Palomar a worldwide, perpetual, irrevocable, non-exclusive, royalty-bearing,
right and license, with the right to grant sublicenses (through multiple tiers
of sublicensing), under all of Gillette’s right, title and interest in and
to the Gillette Licensed Patents to Exploit in the Female Field only those
Female Products (including prototypes of such products) or Manufacturing
Processes for Female Products (including in each instance Improvements thereto),
all of which products or processes are developed or under development by or for
Gillette (optionally with Palomar hereunder and/or with one or more Third
Parties) at the time of termination of the Exclusivity Period, and any Palomar
Improvements thereto (but not any new or other products), which license grant
shall become effective as of the effective date of such termination and shall be
subject to the payment obligations of Palomar pursuant to Section 6.3.




                                     (v)  
          Gillette shall have no further obligation to make payments to Palomar pursuant
          to Section 6.1(g). 



                                     (vi)  
          In the event that, prior to such date, Palomar has not provided to Gillette an
          Opportunity Notice in accordance with the terms and conditions of Section
          5.1(b), Gillette’s obligations, if any, pursuant to Section 6.2(a)(i) or
          6.2(a)(ii) to make a payment to Palomar in connection with the Launch of an
          Other Independent Product in the Male Field, and Gillette’s obligations, if
          any, pursuant to Section 6.2(b)(ii) to pay to Palomar TTPs with respect to Net
          Sales of Other Independent Product(s) in the Male Field, shall be reduced by
          fifty percent (50%); provided, however, that the fifty percent
          (50%) reduction provided in this Section 10.6(vi) shall not be applicable
          in the event that, (A) within sixty (60) days after the date on which Gillette
          delivers to Palomar the termination notice pursuant to Section 10.2, Palomar
          provides to Gillette a Male Product Opportunity in accordance with the terms of
          Sections 5.1(b) (with such 60-day period being subject to a reasonable extension
          not to exceed thirty (30) days for Palomar to provide the Evaluation Materials
          required by the Opportunity Notice in the event that Gillette notifies Palomar
          that Gillette reasonably believes that it has not received all the Evaluation
          Materials as contemplated by Section 5.1(b)(ii)), or (B) the termination of
          the Exclusivity Period by Gillette becomes effective on or before the second
          (2nd) anniversary of the Effective Date. 



                                     (vii)  
          Except as set forth in this Section 10.6, in all other respects the
          provisions of this Agreement shall survive the termination of the Exclusivity
          Period by Gillette pursuant to Section 10.2. 




        10.7 Consequences of
Termination of Agreement by Gillette. 



                     (a)  
          Termination by Gillette Within Twelve Months of the Effective Date. In
          the event that Gillette terminates this Agreement pursuant to
          Section 10.4(a), as of the effective date of such termination, the
          following terms and conditions shall apply. 



                                     (i)  
          The covenants and other rights granted by Palomar in Sections 5.2 and
          5.3(a), the covenants and other rights granted by Gillette in 5.3(b), and
          Sections 1.7, 5.4 and 9.1(b) shall terminate. 





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                                (ii)  The
licenses granted by Palomar to Gillette in Sections 4.1(a)(i) and 4.1(a)(ii) shall
terminate. 



                                     (iii)  
          The Male Option granted by Palomar to Gillette in Section 5.1 and the
          covenant granted by Palomar to Gillette in Section 5.2(b) shall terminate;
          provided, that, in the event that Gillette has, prior to such date,
          exercised the Male Option, Gillette’s rights pursuant to
          Section 5.1(c) shall survive and Gillette’s rights with respect to
          Palomar Male Technology and Palomar’s interest in the Joint Technology in
          the Male Field shall be governed by the terms of the Male Collaboration
          Agreement entered into (or to be entered into) between the parties pursuant to
          such Section. 



                                     (iv)  
          Except in the case of any payment obligations of Gillette pursuant to
          Sections 6.1(a) and 6.1(b), all payment obligations of Gillette, if any,
          pursuant to Sections 6.1 and 6.2 shall terminate. 



                                     (v)  
          As provided in Section 8.1(c)(i), (1) there shall no be assignment by
          Palomar to Gillette of any interest in any (A) Joint Inventions first
          conceived or reduced to practice during the Restricted Access Period, and
          (B) all relevant Joint Technology, (2) all of such Joint Inventions
          and Joint Technology shall remain solely owned by Palomar and shall no longer be
          treated hereunder as Joint Inventions or Joint Technology, and (3) Palomar
          shall not be required to disclose any such Joint Inventions or Joint Technology
          to Gillette. 



                                     (vi)  
          Except as set forth in this Section 10.7(a), the terms and conditions of
          ARTICLE IV, ARTICLE V and ARTICLE VI (in addition to the provisions listed in
          Section 10.10(b)) shall survive termination of this Agreement by Gillette
          pursuant to Section 10.4(a). 



                     (b)  
          Termination by Gillette Upon Determination That First Female Product Requires
          PMA. In the event that Gillette terminates this Agreement pursuant to
          Section 10.4(b), as of the effective date of such termination, the
          following terms and conditions shall apply. 



                                     (i)  
          The covenants and other rights granted by Palomar in Sections 5.2 and
          5.3(a), the covenants and other rights granted by Gillette in 5.3(b), and
          Sections 1.7, 5.4 and 9.1(b) shall terminate. 



                                     (ii)  
          The licenses granted by Palomar to Gillette in Sections 4.1(a)(i) and
          4.1(a)(ii) shall terminate. 



                                     (iii)  
          The Male Option granted to Gillette by Palomar in Section 5.1 and the
          covenant granted by Palomar to Gillette in Section 5.2(b) shall terminate;
          provided, that, in the event that Gillette has, prior to such date,
          exercised the Male Option, Gillette’s rights pursuant to
          Section 5.1(c) shall survive and Gillette’s rights with respect to
          Palomar Male Technology and Palomar’s interest in the Joint Technology in
          the Male Field shall be governed by the terms of the Male Collaboration
          Agreement entered into (or to be entered into) between the parties pursuant to
          such Section. 




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                                (iv)   Gillette hereby grants
to Palomar a worldwide, perpetual, irrevocable, non-exclusive, royalty-bearing,
right and license, with the right to grant sublicenses (through multiple tiers
of sublicensing), under all of Gillette’s right, title and interest in and
to the Gillette Licensed Patents to Exploit in the Female Field only those
Female Products (including prototypes of such products) or Manufacturing
Processes for Female Products(including in each instance Improvements thereto),
all of which products or processes are developed or under development by or for
Gillette (optionally with Palomar hereunder and/or with one or more Third
Parties) at the time of termination of this Agreement, and any Palomar
Improvements thereto (but not any new or other products), which license grant
shall become effective as of the effective date of such termination and shall be
subject to the payment obligations of Palomar pursuant to Section 6.3.




                                     (v)  
          Gillette hereby grants to Palomar a worldwide, perpetual, irrevocable, exclusive
          (including with regard to Gillette), royalty-free, right and license, with the
          right to grant sublicenses (through multiple tiers of sublicensing), under all
          of Gillette’s right, title and interest in and to the Joint Technology to
          Exploit in the Female Field only those Female Products (including prototypes of
          such products) or Manufacturing Processes for Female Products (including in each
          instance Improvements thereto), all of which products or processes are developed
          or under development by or for Gillette (optionally with Palomar hereunder
          and/or with one or more Third Parties) at the time of termination of this
          Agreement, and any Palomar Improvements thereto (but not any new or other
          products), which license grant shall become effective as of the effective date
          of such termination. As of the effective date of such termination and
          thereafter, Gillette shall not practice or use, or grant licenses or other
          rights under, Joint Technology for the purpose of Exploitation of such Female
          Products, provided that, subject to Section 4.2(d) and the other terms and
          conditions of this Agreement, the foregoing restrictions shall not prevent
          Gillette from conducting any activity, or exercising or granting any licenses or
          other rights, with respect to the Joint Technology that has as its goal or
          intent Exploitation of products or systems, other than such Female Products or
          Palomar Improvements thereto, in the Female Field, or products or systems
          outside of the Female Field. 



                                     (vi)  
          Except in the case of any payment obligations of Gillette pursuant to
          Sections 6.1(a) and 6.1(b), all payment obligations of Gillette, if any,
          pursuant to Section 6.1 shall terminate. 



                                     (vii)  
          Except as set forth in this Section 10.7(b), the terms and conditions of
          ARTICLE IV, ARTICLE V and ARTICLE VI (in addition to the provisions listed in
          Section 10.10(b)) shall survive termination of this Agreement by Gillette
          pursuant to Section 10.4(b). 



                     (c)  
          Termination by Gillette for Palomar’s Failure to Obtain Regulatory
          Approval in the United States Within FDA Approval Period. In the event that
          Gillette terminates this Agreement pursuant to Section 10.4(c), as of the
          effective date of such termination, the following terms and conditions shall
          apply. 



                                     (i)  
          The covenants and other rights granted by Palomar in Sections 5.2 and
          5.3(a), the covenants and other rights granted by Gillette in 5.3(b), and
          Sections 1.7, 5.4 and 9.1(b) shall terminate. 




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                                     (ii)  
          The licenses granted by Palomar to Gillette in Sections 4.1(a)(i) and
          4.1(a)(ii) shall terminate. 



                                     (iii)  
          The Male Option granted by Palomar to Gillette in Section 5.1 and the covenant
          granted by Palomar to Gillette in Section 5.2(b) shall survive for a period of
          two (2) years after the effective date of such termination, whereupon the Male
          Option shall immediately terminate, provided, that, in the event that
          Gillette has, prior to the termination of the Male Option, exercised the Male
          Option, Gillette’s rights pursuant to Section 5.1(c) shall survive and
          Gillette’s rights with respect to Palomar Male Technology and
          Palomar’s interest in the Joint Technology in the Male Field shall be
          governed by the terms of the Male Collaboration Agreement entered into (or to be
          entered into) between the parties pursuant to such Section. 



                                     (iv)  
          Gillette hereby grants to Palomar a worldwide, perpetual, irrevocable,
          non-exclusive, royalty-bearing, right and license, with the right to grant
          sublicenses (through multiple tiers of sublicensing), under all of
          Gillette’s right, title and interest in and to the Gillette Licensed
          Patents to Exploit in the Female Field only those Female Products (including
          prototypes of such products) or Manufacturing Processes for Female Products
          (including in each instance Improvements thereto), all of which products or
          processes are developed or under development by or for Gillette (optionally with
          Palomar hereunder and/or with one or more Third Parties) at the time of
          termination of this Agreement, and any Palomar Improvements thereto (but not any
          new or other products), which license grant shall become effective as of the
          effective date of such termination and shall be subject to the payment
          obligations of Palomar pursuant to Section 6.3. 



                                     (v)  
          Gillette hereby grants to Palomar a worldwide, perpetual, irrevocable, exclusive
          (including with regard to Gillette), royalty-free, right and license, with the
          right to grant sublicenses (through multiple tiers of sublicensing), under all
          of Gillette’s right, title and interest in and to the Joint Technology to
          Exploit in the Female Field only those Female Products (including prototypes of
          such products) or Manufacturing Processes for Female Products (including in each
          instance Improvements thereto), all of which products or processes are developed
          or under development by or for Gillette (optionally with Palomar hereunder
          and/or with one or more Third Parties) at the time of termination of this
          Agreement, and any Palomar Improvements thereto (but not any new or other
          products), which license grant shall become effective as of the effective date
          of such termination. As of the effective date of such termination and
          thereafter, Gillette shall not practice or use, or grant licenses or other
          rights under Joint Technology for the purpose of Exploitation of such Female
          Products in the Female Field; provided that, subject to Section 4.2(d) and
          the other terms and conditions of this Agreement, the foregoing restrictions
          shall not prevent Gillette from conducting any activity, or exercising or
          granting any licenses or other rights, with respect to the Joint Technology that
          has as its goal or intent Exploitation of products or systems, other than such
          Female Products or Palomar Improvements thereto, in the Female Field, or
          products or systems outside the Female Field. 



                                     (vi)  
          Except in the case of any payment obligation of Gillette pursuant to
          Sections 6.1(a) and 6.1(b), Gillette’s payment obligations pursuant to
          Section 6.1 shall terminate. 



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                                     (vii)  
          Gillette obligations, if any, to make payments to Palomar pursuant to Section
          6.2(a)(i) or 6.2(a)(ii) on account of a Launch of a Gillette Joint Independent
          Product in the Field, as applicable, and Gillette’s obligations, if any,
          pursuant to Section 6.2(b)(i) to pay to Palomar TTPs with respect to Net Sales
          of a Gillette Joint Independent Product in the Field, shall terminate;
          provided, however, in the event that, subsequent to such
          termination, Gillette exercises the Male Option, Gillette’s obligations, if
          any, to make payments to Palomar pursuant to such Sections shall be reinstated
          from and after the date of the Option Exercise Notice with respect to Gillette
          Joint Independent Products in the Male Field only. 



                                     (viii)  
          Gillette’s obligations, if any, pursuant to Section 6.2(a)(i) or 6.2(a)(ii)
          to make a payment to Palomar in connection with the Launch of an Other
          Independent Product in the Field, and Gillette’s obligations, if any,
          pursuant to Section 6.2(b)(ii) to pay to Palomar TTPs with respect to Net Sales
          of an Other Independent Product in the Field, shall terminate; provided,
          however, in the event that, subsequent to such termination, Gillette
          exercises the Male Option, Gillette’s obligations, if any, to make payments
          to Palomar pursuant to such Sections shall be reinstated from and after the date
          of the Option Exercise Notice with respect to Other Independent Products in the
          Male Field only. 



                                     (ix)  
          Except as set forth in this Section 10.7(c), the terms and conditions of
          ARTICLE IV, ARTICLE V and ARTICLE VI (in addition to the provisions listed in
          Section 10.10(b)) shall survive termination of this Agreement by Gillette
          pursuant to Section 10.4(c). 



                     (d)  
          Termination By Gillette at the First Decision Point or the Second Decision
          Point. In the event that Gillette terminates this Agreement pursuant to
          Section 10.4(d), as of the effective date of such termination, the
          following terms and conditions shall apply. 



                                     (i)  
          The covenants and other rights granted by Palomar in Sections 5.2 and
          5.3(a), the covenants and other rights granted by Gillette in 5.3(b), and
          Sections 1.7, 5.4 and 9.1(b) shall terminate. 



                                     (ii)  
          The licenses granted by Palomar to Gillette in Sections 4.1(a)(i) and 4.1(a)(ii)
          shall terminate. 



                                     (iii)  
          The Male Option granted by Palomar to Gillette in Section 5.1 and the covenant
          granted by Palomar to Gillette in Section 5.2(b) shall terminate;
          provided, that, in the event that Gillette has, prior to such date,
          exercised the Male Option, Gillette’s rights pursuant to
          Section 5.1(c) shall survive and Gillette’s rights with respect to
          Palomar Male Technology and Palomar’s interest in the Joint Technology in
          the Male Field shall be governed by the terms of the Male Collaboration
          Agreement entered into (or to be entered into) between the parties pursuant to
          such Section. 



                                     (iv)  
          Gillette hereby grants to Palomar a worldwide, perpetual, irrevocable,
          non-exclusive, royalty-bearing, right and license, with the right to grant
          sublicenses (through multiple tiers of sublicensing), under all of
          Gillette’s right, title and interest in and to the Gillette Licensed
          Patents to Exploit in the Female Field only those Female Products (including
          prototypes of such products) or Manufacturing Processes for Female Products




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               (including in each instance Improvements thereto), all of which products or
          processes are developed or under development by or for Gillette (optionally with
          Palomar hereunder and/or with one or more Third Parties) at the time of
          termination of this Agreement, and any Palomar Improvements thereto (but not any
          new or other products), which license grant shall become effective as of the
          effective date of such termination and shall be subject to the payment
          obligations of Palomar pursuant to Section 6.3. 



                                     (v)  
          Gillette hereby grants to Palomar a worldwide, perpetual, irrevocable, exclusive
          (including with regard to Gillette), royalty-free, right and license, with the
          right to grant sublicenses (through multiple tiers of sublicensing), under all
          of Gillette’s right, title and interest in and to the Joint Technology to
          Exploit in the Female Field only those Female Products (including prototypes of
          such products) or Manufacturing Processes for Female Products (including in each
          instance Improvements thereto), all of which products or processes are developed
          or under development by or for Gillette (optionally with Palomar hereunder
          and/or with one or more Third Parties) at the time of termination of this
          Agreement, and any Palomar Improvements thereto (but not any new or other
          products), which license grant shall become effective as of the effective date
          of such termination. As of the effective date of such termination and
          thereafter, Gillette shall not practice or use, or grant licenses or other
          rights under Joint Technology for the purpose of Exploitation of such Female
          Products in the Female Field; provided that, subject to Section 4.2(d) and
          the other terms and conditions of this Agreement, the foregoing restrictions
          shall not prevent Gillette from conducting any activity, or exercising or
          granting any licenses or other rights, with respect to the Joint Technology that
          has as its goal or intent Exploitation of products or systems, other than such
          Female Products or Palomar Improvements thereto, in the Female Field, or
          products or systems outside the Female Field. 



                                     (vi)  
          Except in the case of any payment obligations of Gillette pursuant to
          Sections 6.1(a) and 6.1(b), all payment obligations of Gillette, if any,
          pursuant to Section 6.1 shall terminate. 



                                     (vii)    
          Except as set forth in this Section 10.7(d), the terms and conditions of
          ARTICLE IV, ARTICLE V and ARTICLE VI (in addition to the provisions listed in
          Section 10.10(b)) shall survive termination of this Agreement by Gillette
          pursuant to Section 10.4(d). 



                     (e)  
          Termination By Gillette for Palomar’s Material Breach. In the event
          that Gillette terminates this Agreement pursuant to Section 10.3 or 10.11,
          as of the effective date of such termination, the following terms and conditions
          shall apply. 



                                     (i)  
          The covenants granted by Palomar to Gillette in Section 5.2
          and all the terms and conditions of Sections 1.7 and 9.1(b)
          shall terminate. For five (5) years after the effective date of such
          termination, Palomar shall not compete, or grant to a Third Party a license
          under Palomar-Controlled intellectual property with the intention of enabling
          such Third Party to compete, with Gillette in the Field; provided, however, that
          in the event that, prior to Gillette’s termination of this Agreement
          pursuant to Section 10.3, Palomar has offered to Gillette a Male Product
          Opportunity pursuant to Section 5.1(b), and Gillette elected or otherwise failed
          to exercise the Male Option pursuant to Section 5.1(b)(iv), Palomar’s
          obligation as provided in this sentence shall apply only with respect to the
          Female Field, and references in this




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     Section 10.7(e)(i) to the “Field” shall be deemed to be references to
the “Female Field.” The restriction contained in this
Section 10.7(e)(i) shall not prevent Palomar from conducting any activity,
or exercising or granting any rights or licenses, that has as its goal or intent
Exploitation of products or systems outside of the Field, notwithstanding the
possibility that any such products or systems may have applications in the
Field. 



                                     (ii)  
          The Male Option granted by Palomar to Gillette in Section 5.1 and the covenant
          granted by Palomar to Gillette in Section 5.2(b) shall terminate;
          provided, that, in the event that Gillette has, prior to such date,
          exercised the Male Option, Gillette’s rights pursuant to
          Section 5.1(c) shall survive and Gillette’s rights with respect to
          Palomar Male Technology and Palomar’s interest in the Joint Technology in
          the Male Field shall be governed by the terms of the separate agreement entered
          into (or to be entered into) between the parties pursuant to such Section. 



                                     (iii)  
          Except in the case of payment obligations of Gillette pursuant to
          Section 6.1(b) and 6.1(g), which shall terminate, all payment obligations
          of Gillette contained in Section 6.1 shall survive termination of this
          Agreement by Gillette pursuant to Section 10.3. 



                                     (iv)  
          Gillette’s obligations, if any, to make payments to Palomar pursuant to
          Section 6.2(a)(i) or 6.2(a)(ii) on account of a Launch of a Gillette Joint
          Independent Product in the Field, as applicable, and pursuant to
          Sections 6.2(b)(i) and 6.2(c) to pay to Palomar TTPs and royalties on
          account of Net Sales of a Gillette Joint Independent Product in the Field, as
          applicable, shall terminate; provided, however in the event that
          Gillette’s Exploitation of a Gillette Joint Independent Product triggers a
          payment obligation by Palomar to MGH under an MGH Agreement, Gillette’s
          obligations, if any, pursuant to Section 6.2(c) shall not terminate but rather
          Gillette’s obligation shall be reduced to one percent (1%) of Net Sales and
          shall apply only if and to the extent that Palomar has a corresponding payment
          obligation to MGH under an MGH Agreement. 



                                     (v)  
          Gillette’s obligations, if any, pursuant to Section 6.2(a)(i) or 6.2(a)(ii)
          to make a payment to Palomar in connection with the Launch of an Other
          Independent Product in the Field, and Gillette’s obligations, if any,
          pursuant to Section 6.2(b)(ii) to pay to Palomar TTPs with respect to Net Sales
          of an Other Independent Product in the Field, shall terminate. 



                                     (vi)  
          Except as set forth in this Section 10.7(e), the terms and conditions of
          ARTICLE IV, ARTICLE V and ARTICLE VI (in addition to the provisions listed in
          Section 10.10(b)) shall survive termination of this Agreement by Gillette
          pursuant to Section 10.3. 



                     (f)  
          Rights Cumulative. The rights and remedies in Section 10.7 shall be
          cumulative and in addition to any other rights or remedies that may be available
          to Gillette. 



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        10.8 Consequences
of Termination of Agreement by Palomar.  



                     (a)  
          In the event that Palomar terminates this Agreement pursuant to Section 10.3,
          10.5 or 10.11, as of the effective date of such termination, the following terms
          and conditions shall apply. 



                                     (i)  
          The covenants and other rights granted by Palomar in Sections 5.2 and
          5.3(a), the covenants and other rights granted by Gillette in 5.3(b), and
          Sections 1.7, 5.4 and 9.1(b) shall terminate. 



                                     (ii)  
          The licenses granted by Palomar to Gillette in Sections 4.1(a)(i) and 4.1(a)(ii)
          shall terminate. 



                                     (iii)  
          The Male Option granted to Gillette in Section 5.1 and the covenant granted by
          Palomar to Gillette in Section 5.2(b) shall terminate; provided, that, in
          the event that Gillette has, prior to such date, exercised the Male Option,
          Gillette’s rights pursuant to Section 5.1(c) shall survive and
          Gillette’s rights with respect to Palomar Male Technology and
          Palomar’s interest in the Joint Technology in the Male Field shall be
          governed by the terms of the Male Collaboration Agreement entered into (or to be
          entered into) between the parties pursuant to such Section. 



                                     (iv)  
          Gillette hereby grants to Palomar a worldwide, perpetual, irrevocable,
          non-exclusive, royalty-bearing, right and license, with the right to grant
          sublicenses (through multiple tiers of sublicensing), under all of
          Gillette’s right, title and interest in and to the Gillette Licensed
          Patents to Exploit in the Female Field only those Female Products (including
          prototypes of such products) or Manufacturing Processes for Female Products
          (including in each instance Improvements thereto), all of which products or
          processes are developed or under development by or for Gillette (optionally with
          Palomar hereunder and/or with one or more Third Parties) at the time of
          termination of this Agreement, and any Palomar Improvements thereto (but not any
          new or other products), which license grant shall become effective as of the
          effective date of such termination and shall be subject to the payment
          obligations of Palomar pursuant to Section 6.3. 



                                     (v)  
          Gillette hereby grants to Palomar a worldwide, perpetual, irrevocable, exclusive
          (including with regard to Gillette), royalty-free, right and license, with the
          right to grant sublicenses (through multiple tiers of sublicensing), under all
          of Gillette’s right, title and interest in and to the Joint Technology to
          Exploit in the Field only those Female Products (including prototypes of such
          products) or Manufacturing Processes for Female Products (including in each
          instance Improvements thereto), all of which products or processes are developed
          or under development by or for Gillette (optionally with Palomar hereunder
          and/or with one or more Third Parties) at the time of termination of this
          Agreement, and any Palomar Improvements thereto (but not any new or other
          products), which license grant shall become effective as of the effective date
          of such termination. As of the effective date of such termination and
          thereafter, Gillette shall not practice or use, or grant licenses or other
          rights under, Joint Technology for the purpose of Exploitation of such Female
          Products in the Female Field, provided that, subject to Section 4.2(d) and
          the other terms and conditions of this Agreement, the foregoing restrictions
          shall not prevent Gillette from conducting any activity, or exercising or



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      granting any licenses or other rights, with respect to the Joint Technology that
          has as its goal or intent Exploitation of products or systems, other than such
          Female Products or Palomar Improvements thereto, in the Female Field, or
          products or systems outside of the Female Field. 



                                     (vi)  
          Gillette’s payment obligations pursuant to Section 6.1 shall
          terminate. 



                                     (vii)  
          Except as set forth in this Section 10.8, the terms and conditions of
          ARTICLE IV, ARTICLE V and ARTICLE VI (in addition to the provisions listed in
          Section 10.10(b)) shall survive termination of this Agreement by Gillette
          pursuant to Section 10.3 or 10.5. 



                     (b)  
          Rights Cumulative. The rights and remedies of Palomar in this
          Section 10.8 shall be cumulative and in addition to any other rights or
          remedies that may be available to Palomar. 



        10.9 Notice of Certain
Sublicense Grants. In the event that Palomar grants to a Third Party a sublicense
under the license granted by Gillette to Palomar in Sections 10.6(iv), 10.7(b)(iv),
10.7(c)(iv), 10.7(d)(iv), or 10.8(a)(iv), Palomar shall promptly provide to Gillette
written notice of such grant and the identity of the Third Party, together with copies of
those provisions of such Agreement that relate directly to the Gillette Licensed Patents
(e.g., license grant provisions, intellectual property provisions relating to patent
prosecution and enforcement rights). 




        10.10 Accrued Rights;
Surviving Obligations. 



                     (a)  
          Accrued Rights. Termination or expiration of this Agreement for any
          reason shall be without prejudice to any rights that shall have accrued to the
          benefit of a party prior to such termination or expiration. Such termination or
          expiration shall not relieve a party from obligations that are expressly
          indicated to survive the termination or expiration of this Agreement. 



                     (b)  
          Survival. Subject to and without limiting anything contained in Sections
          10.6, 10.7 and 10.8 of this Agreement, Sections 1.2(b), 1.3(b)(iv), 1.5,
          2.1(a)(iii), 10.1(b), 10.6, 10.7, 10.8, 10.9, 10.11, 14.2, 14.3, 14.4, 14.5,
          14.6, 14.8, 14.9, 14.12 and this Section 10.10, and Articles VIII, IX and XIII
          of this Agreement shall survive the termination or expiration of this Agreement
          for any reason. 



                     (c)  
          Work-in-Progress. Upon termination of this Agreement by Palomar pursuant
          to Section 10.3, Gillette shall be entitled, during the following ninety
          (90) days, to finish any work-in-progress and to sell any inventory of the
          Female Products that remains on hand as of the date of the termination, so long
          as Gillette pays Palomar all amounts applicable to said subsequent sales in
          accordance with the terms and conditions set forth in this Agreement. 



        10.11 Termination Upon
Insolvency. Either party may terminate this Agreement if, at any time, the other party
shall file in any court or agency pursuant to any statute or regulation of any state,
country or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or
for an arrangement or for the appointment of a receiver or trustee of that party



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 or of its
assets, or if the other party shall be served with an involuntary petition against it,
filed in any insolvency proceeding, and such petition shall not be dismissed within sixty
(60) days after the filing thereof, or if the other party shall propose or be a party to
any dissolution or liquidation, or if the other party shall make an assignment for the
benefit of its creditors. 



        10.12 Rights in
Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by
Gillette or Palomar are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the United States Bankruptcy Code, licenses of rights to “intellectual
property” as defined under Section 101 of the United States Bankruptcy Code. The
parties agree that the parties, as licensees of such rights under this Agreement, shall
retain and may fully exercise all of their rights and elections under the United States
Bankruptcy Code. The parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against either party under the United States Bankruptcy Code,
the party hereto that is not a party to such proceeding shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual property and
all embodiments of such intellectual property, which, if not already in the non-subject
party’s possession, shall be promptly delivered to it (a) upon any such commencement
of a bankruptcy proceeding upon the non-subject party’s written request therefor,
unless the party subject to such proceeding elects to continue to perform all of its
obligations under this Agreement or (b) if not delivered under clause (a) above, following
the rejection of this Agreement by or on behalf of the party subject to such proceeding
upon written request therefor by the non-subject party. 




ARTICLE XI 
Indemnity 



        11.1 Indemnification of
Gillette. Palomar shall indemnify The Gillette Company and its Affiliates and their
respective directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all losses, damages, liabilities, bodily injury, death
or property damage, costs and expenses (including reasonable attorneys’ and
professionals fees and expenses) in connection with any and all suits, investigations,
claims or demands (collectively, “Losses”), but only to the extent based on or
arising from a suit, investigation, claim or demand made by a Third Party
(a “Third Party Claim”), and arising from or occurring as a result of (a)
the Exploitation by Palomar or any of its agents or sublicensees of any Female Product or
any other product pursuant to a license granted by Gillette to Palomar in this Agreement,
or any materials for making or using the same, or any actual or alleged violation of
Applicable Law resulting therefrom, (b) a breach by Palomar of this Agreement, or (c) the
gross negligence or willful misconduct on the part of Palomar in performing its
obligations under this Agreement, except for those Losses for which Gillette has an
obligation to indemnify Palomar pursuant to Section 11.2, as to which Losses each
party shall indemnify the other to the extent of their respective liability for the
Losses; provided, however, that Palomar shall not be obligated to indemnify
Gillette for any Losses that arise as a result of gross negligence or willful misconduct
on the part of The Gillette Company, its Affiliates and their respective directors,
officers, employees and agents. The foregoing indemnification obligation of Palomar shall
include, without limitation, Losses based on or arising out of (1) any
representation, warranty or agreement that is made by Palomar to any Third Party with
respect to any product described in clause (a)



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 above, (2) actual or asserted
violations of any Applicable Law attributable to any product described in clause (a)
above, or (3) any claim that any product described in clause (a) above is defective
(whether in design, materials, workmanship or otherwise) or that otherwise relates to any
attribute, condition or failure of any such product, including any claim of product
liability (whether brought in tort, warranty, strict liability or other form of action) or
negligence. 



        11.2 Indemnification of
Palomar. Gillette shall indemnify Palomar Medical Technologies, Inc., and its
Affiliates and their respective directors, officers, employees and agents, and defend and
save each of them harmless, from and against any and all Losses, but only to the extent
based on or arising from a Third Party Claim, arising from or occurring as a result of (a)
the Exploitation of any Female Product or other product by Gillette or any of its agents
or sublicensees pursuant to a license granted by Palomar to Gillette in this Agreement, or
any materials for making or using the same, or any actual or alleged violation of
Applicable Law resulting therefrom, (b) a breach by Gillette of this Agreement, (c) the
wrongful exercise by Gillette of any Third Party beneficiary rights provided for in
Section 5.3(a)(ii)(3), or (d) the gross negligence or willful misconduct on the part
of Gillette in performing its obligations under this Agreement, except for those Losses
for which Palomar has an obligation to indemnify Gillette pursuant to Section 11.1,
as to which Losses each party shall indemnify the other to the extent of their respective
liability for the Losses; provided, however, that Gillette shall not be
obligated to indemnify Palomar for any Losses that arise as a result of gross negligence
or willful misconduct on the part of Palomar Medical Technologies, Inc., its Affiliates
and their respective directors, officers, employees and agents. The foregoing
indemnification obligation of Gillette shall include, without limitation, Losses based on
or arising out of (1) any representation, warranty or agreement that is made by
Gillette to any Third Party with respect to any Female Product, (2) actual or
asserted violations of any Applicable Law attributable to any Female Product, or
(3) any claim that any Female Product is defective (whether in design, materials,
workmanship or otherwise) or that otherwise relates to any attribute, condition or failure
of any such Female Product, including any claim of product liability (whether brought in
tort, warranty, strict liability or other form of action) or negligence. 




11.3 Indemnification
Procedure. 



                     (a)  
          Notice of Third Party Claim. The indemnified party shall give the
          indemnifying party prompt written notice (an “Indemnification Claim
          Notice”) of any Third Party Claim upon which such indemnified party intends
          to base a request for indemnification under Section 11.1 or 11.2, but in no
          event shall the indemnifying party be liable for any Losses that directly result
          from any delay in providing such notice. Each Indemnification Claim Notice must
          contain a description of the Third Party Claim and the nature and amount of such
          Loss (to the extent that the nature and amount of such Loss is known at such
          time). The indemnified party shall furnish promptly to the indemnifying party
          copies of all papers and official documents received in respect of any Losses.
          All Third Party Claims in respect of a party, its Affiliates or their respective
          directors, officers, employees and agents shall be made solely by such party to
          this Agreement (the “Indemnified Party”). 



                     (b)  
          Control of Defense. At its option, the indemnifying party may assume the
          defense of any Third Party Claim by giving written notice to the Indemnified
          Party within thirty (30) days after the indemnifying party’s receipt of an
          Indemnification Claim Notice. Upon assuming the defense of a Third Party Claim,
          the indemnifying party may appoint as lead counsel in the defense of the Third
          Party Claim legal counsel selected by the indemnifying party,




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     provided that such counsel for the indemnifying party shall be subject to the
reasonable approval of the Indemnified Party. In the event the indemnifying
party assumes the defense of a Third Party Claim, the Indemnified Party shall
immediately deliver to the indemnifying party all original notices and documents
(including court papers) received by any indemnified party in connection with
the Third Party Claim. 



                     (c)  
          Right to Participate in Defense. Without limiting Section 11.3(b),
          any indemnified party shall be entitled to participate in, but not control, the
          defense of such Third Party Claim and to employ counsel of its choice for such
          purpose; provided, however, that such employment shall be at the
          Indemnified Party’s own expense unless (A) the employment thereof has been
          specifically authorized by the indemnifying party in writing, (B) the
          indemnifying party has failed to assume the defense and employ counsel in
          accordance with Section 11.3(b) (in which case the Indemnified Party shall
          control the defense), or (C) the Indemnified Party shall have reasonably
          concluded that there may be a conflict of interest between the indemnifying
          party and the Indemnified Party in the defense of such Third Party Claim, in
          which case the indemnifying party shall pay the reasonable fees and expenses of
          one law firm serving as counsel for the Indemnified Party, which law firm shall
          be subject to reasonable approval by the indemnifying party. 



                     (d)  
          Settlement. With respect to any Losses relating solely to the payment of
          money damages in connection with a Third Party Claim and that will not result in
          the Indemnified Party’s becoming subject to injunctive or other relief or
          otherwise adversely and materially affect the business of the Indemnified Party
          in any manner, the indemnifying party shall have the sole right to consent to
          the entry of any judgment, enter into any settlement or otherwise dispose of
          such Loss, on such terms as the indemnifying party, in its sole discretion,
          shall deem appropriate. With respect to all other Losses in connection with
          Third Party Claims, where the indemnifying party has assumed the defense of the
          Third Party Claim in accordance with Section 11.3(b), the indemnifying
          party shall have authority to consent to the entry of any judgment, enter into
          any settlement or otherwise dispose of such Loss provided (i) it obtains
          the prior written consent of the Indemnified Party (which consent shall not be
          unreasonably withheld), and (ii) include as an unconditional term thereof
          the giving by the Third Party to such Indemnified Party of a release from all
          liability in respect to such Third Party Claim. The indemnifying party shall not
          be liable for any settlement or other disposition of a Loss by an Indemnified
          Party that is reached without the written consent of the indemnifying party,
          unless the indemnifying party has failed to assume the defense and employ
          counsel in accordance with Section 11.3(b). In the event that (i) an
          Indemnified Party seeks indemnification from the indemnifying party under this
          ARTICLE XI for a Third Party Claim, and (ii) the indemnifying party shall
          have acknowledged in writing the obligation to indemnify the Indemnified Party
          hereunder with respect thereto, no Indemnified Party shall admit any liability
          with respect to, or settle, compromise or discharge, such Third Party Claim
          without the prior written consent of the indemnifying party. 



                     (e)  
          Cooperation. In the event that an indemnifying party chooses to defend or
          prosecute any Third Party Claim, the Indemnified Party shall, and shall cause
          each other indemnified party to, cooperate with the indemnifying party in the
          defense or prosecution thereof and shall furnish such records, information and
          testimony, provide such witnesses and attend such conferences, discovery
          proceedings, hearings, trials and appeals as the indemnifying



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     party may reasonably request in connection therewith. Such cooperation shall
include access during normal business hours afforded to the indemnifying party
to, and reasonable retention by the Indemnified Party of, records and
information that are reasonably relevant to such Third Party Claim, and making
indemnified parties and other employees and agents available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder, and the indemnifying party shall reimburse the
Indemnified Party for all its reasonable out-of-pocket costs and expenses in
connection therewith. 



                     (f)  
          Expenses. Except as provided above, the costs and expenses, including
          fees and disbursements of counsel, incurred by the Indemnified Party in
          connection with any claim shall be reimbursed on a Calendar Quarter basis by the
          indemnifying party, without prejudice to the indemnifying party’s right to
          contest the Indemnified Party’s right to indemnification. 




11.4 Limitation on
Damages and Liability. 



                     (a)  
          LIMITATION ON DAMAGES. SUBJECT TO SECTIONS 11.1 AND 11.2, AND EXCEPT
          IN CIRCUMSTANCES OF GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, NEITHER GILLETTE
          NOR PALOMAR SHALL BE LIABLE FOR SPECIAL, INDIRECT, PUNITIVE, INCIDENTAL OR
          CONSEQUENTIAL DAMAGES (INCLUDING FOR LOST PROFITS, DEVELOPMENT COMPLETION OR
          ROYALTIES), WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR
          OTHERWISE, ARISING OUT OF (i) THE EXPLOITATION OF ANY PRODUCT DEVELOPED,
          MANUFACTURED, SOLD OR MARKETED HEREUNDER, (ii) ANY BREACH OF OR FAILURE TO
          PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT, (iii) OR OTHERWISE RELATING TO
          THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN INFORMED OR SHOULD HAVE KNOWN OF THE
          POSSIBILITY OF SUCH DAMAGES. 



                     (b)  
          DISCLAIMER. 



                                     (i)  
          EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, (1) GILLETTE
          HEREBY DISCLAIMS ANY AND ALL WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR
          IMPLIED, WITH RESPECT TO THE GILLETTE TECHNOLOGY, JOINT TECHNOLOGY, GILLETTE
          CONFIDENTIAL INFORMATION, INCLUDING ANY WARRANTY OF QUALITY, TITLE,
          NONINFRINGEMENT, PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR
          PURPOSE, AND (2) WITHOUT LIMITING THE FOREGOING, GILLETTE EXPRESSLY
          DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION (A) AS TO THE
          VALIDITY OR SCOPE OF ANY OF THE INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER,
          (B) THAT ANY FEMALE PRODUCTS, ANY OTHER PRODUCTS OR ANY ACTIVITIES OF THE
          PARTIES CONTEMPLATED BY THIS AGREEMENT, SHALL BE FREE FROM INFRINGEMENT,
          MISAPPROPRIATION OR MISUSE OF ANY THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, OR
          (C) AS TO THE QUALITY OR PERFORMANCE OF ANY INFORMATION AND INVENTIONS OR
          FEMALE PRODUCTS OR ANY OTHER PRODUCTS. 



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                                     (ii)  
          EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, (1) PALOMAR
          HEREBY DISCLAIMS ANY AND ALL WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR
          IMPLIED, WITH RESPECT TO THE PALOMAR TECHNOLOGY, PALOMAR MALE TECHNOLOGY, JOINT
          TECHNOLOGY, PALOMAR CONFIDENTIAL INFORMATION, INCLUDING ANY WARRANTY OF QUALITY,
          TITLE, NONINFRINGEMENT, PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
          USE OR PURPOSE, AND (2) WITHOUT LIMITING THE FOREGOING, PALOMAR EXPRESSLY
          DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION (A) AS TO THE
          VALIDITY OR SCOPE OF ANY OF THE INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER,
          (B) THAT ANY FEMALE PRODUCTS, ANY OTHER PRODUCTS OR ANY ACTIVITIES OF THE
          PARTIES CONTEMPLATED BY THIS AGREEMENT, SHALL BE FREE FROM INFRINGEMENT,
          MISAPPROPRIATION OR MISUSE OF ANY THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, OR
          (C) AS TO THE QUALITY OR PERFORMANCE OF ANY INFORMATION AND INVENTIONS OR
          FEMALE PRODUCTS OR ANY OTHER PRODUCTS. 



        11.5 Insurance. Each
party agrees to maintain during the term of this Agreement such insurance coverage as is
commercially reasonable, taking into to consideration the activities and other
circumstances of such party. If at any time Palomar sells or distributes any Female
Products, products subject to a payment obligations specified in Section 6.3, and
other products that use, embody, are Manufactured using, practice an invention claimed by,
comprise or are comprised of, in whole or in part, Joint Technology, in each case
optionally with one or more Third Parties, Gillette shall have the right to request that
Palomar increase the scope and extent of its coverage and to the extent that such
request(s) is commercially reasonable, Palomar shall comply with such request and obtain
such additional coverage. 




ARTICLE XII 
Representations,
Warranties and Covenants 



        12.1 Representations,
Warranties and Covenants. Except as otherwise disclosed in the Disclosure Schedules
for each party attached hereto as Schedule 12.1 (each, the  “Disclosure
Schedule”), each party hereby represents, warrants and covenants to the other party
as of the Effective Date as follows: 



                     (a)  
          Such party (i) has the power and authority and the legal right to enter into
          this Agreement and perform its obligations hereunder, and (ii) has taken all
          necessary action on its part required to authorize the execution and delivery of
          this Agreement and the performance of its obligations hereunder. This Agreement
          has been duly executed and delivered on behalf of such party and constitutes a
          legal, valid and binding obligation of such party and is enforceable against it
          in accordance with its terms subject to the effects of bankruptcy, insolvency or
          other laws of general application affecting the enforcement of creditor rights
          and judicial principles affecting the availability of specific performance and
          general principles of equity, whether enforceability is considered a proceeding
          at law or equity. 



                     (b)  
          Such party is not aware of any pending or threatened litigation (and has not
          received any communication) that alleges that such party’s activities
          related to this



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      Agreement have violated, or that by conducting the activities as
          contemplated herein such party would violate, any of the intellectual property
          rights of any Third Party. 



                     (c)  
          All necessary consents, approvals and authorizations of all regulatory and
          governmental authorities and other Persons required to be obtained by such party
          in connection with the execution and delivery of this Agreement and the
          performance of its obligations hereunder have been obtained. 



                     (d)  
          The execution and delivery of this Agreement and the performance of such
          party’s obligations hereunder (i) do not conflict with or violate any
          requirement of applicable law or regulation or any provision of the articles of
          incorporation, bylaws, limited partnership agreement or any similar instrument
          of such party, as applicable, in any material way, and (ii) do not conflict
          with, violate, or breach or constitute a default or require any consent under,
          any contractual obligation or court or administrative order by which such party
          is bound, in any material way. 



        12.2 Additional
Representations, Warranties and Covenants of Gillette. Except as otherwise disclosed
in Gillette’s Disclosure Schedule, Gillette represents, warrants and covenants to
Palomar that: 



                     (a)  
          As of the Effective Date, Gillette is a corporation duly organized, validly
          existing and in good standing under the laws of Delaware, and has full corporate
          power and authority and the legal right to own and operate its property and
          assets and to carry on its business as it is now being conducted and as it is
          contemplated to be conducted by this Agreement. 



                     (b)  
          Gillette will use its Commercially Reasonable Efforts to conduct and complete
          the R&D Activities required to be performed by Gillette pursuant to the
          R&D Plan or this Agreement, in accordance with good laboratory, clinical and
          Manufacturing practices and Applicable Law. 



                     (c)  
          As of the Effective Date, Gillette is not debarred or subject to debarment and
          Gillette will not use in any capacity, in connection with the services to be
          performed under this Agreement, any Person who has been debarred pursuant to
          Section 306 of the FFDCA, or who is the subject of a conviction described in
          such section. Gillette agrees to inform Palomar in writing immediately if it or
          any Person who is performing services hereunder is debarred or is the subject of
          a conviction described in Section 306, or if any action, suit, claim,
          investigation or legal or administrative proceeding is pending or, to
          Gillette’s knowledge, is threatened, relating to the debarment or
          conviction of Gillette or any Person performing services hereunder. 



                     (d)  
          At no time shall Gillette (i) assign, transfer, convey or otherwise encumber any
          right, title or interest in or to the Joint Technology, (ii) grant any license
          or other right, title or interest in or to the Joint Technology in any manner,
          or (iii) agree to or otherwise become bound by any covenant not to sue for any
          infringement, misuse or other action or inaction with respect to the Joint
          Technology, in each case that is inconsistent with the grants, assignments and
          other rights reserved to Palomar under this Agreement. 




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                     (e)  
          Gillette shall obtain from each of its sublicensees, employees and agents who
          are performing the R&D Activities rights to any and all Joint Technology,
          such that Palomar shall, by virtue of this Agreement, receive from Gillette the
          licenses and other rights granted to Palomar hereunder. 



                     (f)  
          The Gillette Company shall cause its Affiliates to (i) take all actions required
          by the terms of this Agreement to be taken by The Gillette Company’s
          Affiliates, and all other actions necessary for Gillette to perform its
          obligation and provide to Palomar the rights provided hereunder, and (ii) to
          refrain from taking any and all actions which such Affiliates are prohibited
          from taking by the terms of this Agreement. 



                     (g)  
          Based on information known to Gillette as of the Effective Date, Gillette has
          not reached a definitive conclusion that there are Patents owned or controlled
          by Third Parties (other than those licensed by Palomar to Gillette hereunder)
          that could reasonably be expected to give rise to a payment obligation of
          Palomar under Section 8.5(b)(ii) with reference to Section 8.5(a),
          assuming for the purposes of this Section that the Female Product referred to in
          Section 8.5(a) is the First Female Product described in the Initial R&D
          Plan. 



                     (h)  
          During the Exclusivity Period and for a period of one (1) year thereafter,
          Gillette shall not, without the express, written consent of Palomar in its sole
          discretion, solicit the services of or hire the Person who is the Vice President
          of Research of Palomar as of the Effective Date if at the time of such
          solicitation or hire such Person is an employee of Palomar or was an employee of
          Palomar within the six (6) months preceding such solicitation or hire. 



                     (i)  
          During the Exclusivity Period and for a period of one (1) year thereafter,
          Gillette shall not, without Palomar’s prior written consent, enter into any
          agreement with, or otherwise engage, Massachusetts General Hospital or the Laser
          Center of St. Petersburg Institute of Fine Mechanics and Optics with the goal or
          intent of having such Person perform activities for the Exploitation of
          Light-Based Hair Management Products in the Field. 



                     (j)  
          For purposes of Section 12.1(b) and this Section 12.2, “known to”
          or “knowledge” of Gillette shall refer to the knowledge of Stephan P.
          Williams, Assistant Patent Counsel of Gillette, as of the Effective Date. 



        12.3 Additional
Representations, Warranties and Covenants of Palomar. Except as otherwise disclosed in
 Palomar’s Disclosure Schedule, Palomar represents, warrants and covenants to
Gillette that: 



                     (a)  
          As of the Effective Date, Palomar is a corporation duly organized, validly
          existing and in good standing under the laws of Delaware, and has full corporate
          power and authority and the legal right to own and operate its property and
          assets and to carry on its business as it is now being conducted and as it is
          contemplated to be conducted by this Agreement. 



                     (b)  
          All material (i) Regulatory Documentation, (ii) data and information concerning
          clinical studies or pre-clinical studies for the First Female Product, and (iii)
          data and information concerning the safety and efficacy of the First Female
          Product, that has been 



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     provided by Palomar to Gillette as of the Effective Date is true, correct, and
complete in all material respects as of the date it was provided to Gillette.




                     (c)  
          As of the Effective Date, Palomar does not have any knowledge of any scientific
          or technical facts or circumstances that would materially and adversely affect
          the safety, efficacy or other scientific potential of the Palomar Technology in
          the Field. 



                     (d)  
          Palomar will use its Commercially Reasonable Efforts to conduct and complete the
          R&D Activities required to be performed by Palomar pursuant to the R&D
          Plan or this Agreement, in accordance with good laboratory, clinical and
          Manufacturing practices and Applicable Law. As of the Effective Date, Palomar
          has employed (and, with respect to the R&D Activities, will employ) Persons
          with appropriate education, knowledge and experience to conduct and to oversee
          the conduct of the pre-clinical and clinical studies with respect to the Female
          Product(s). As of the Effective Date, Palomar does not have knowledge of
          anything that could materially and adversely affect the acceptance, or the
          subsequent approval, by the U.S. Regulatory Authority for the U.S. Regulatory
          Approval of the First Female Product. 



                     (e)  
          As of the Effective Date, Palomar is not debarred and is not subject to
          debarment and Palomar will not use in any capacity, in connection with the
          services to be performed under this Agreement, any Person who has been debarred
          pursuant to Section 306 of the FFDCA, or who is the subject of a conviction
          described in such section. Palomar agrees to inform Gillette in writing
          immediately if it or any Person who is performing services hereunder is debarred
          or is the subject of a conviction described in Section 306, or if any action,
          suit, claim, investigation or legal or administrative proceeding is pending or,
          to Palomar’s knowledge, is threatened, relating to the debarment or
          conviction of Palomar or any Person performing services hereunder. 



                     (f)  
          As of the Effective Date, Palomar is the sole and exclusive owner of all right,
          title and interest in and to the Patents listed on Schedule 12.3(f)(i) (the
          “Owned Palomar Patents”), and such rights are not subject to any
          encumbrance, lien or claim of ownership by any Third Party. With respect to the
          Field, as of the Effective Date, Palomar is the sole and exclusive licensee of
          and Controls all right, title and interest in and to the Patents listed on
          Schedule 12.3(f)(ii) (the “Licensed Palomar Patents”) and, except
          as provided in Schedule 12.3(f)(ii), such rights are not subject to any
          encumbrance, lien or claim of ownership by any Third Party. True, complete and
          correct copies of all license agreements pursuant to which any right, title or
          interest in or to any Palomar Patents or Joint Patents are granted to Palomar by
          a Third Party, as amended as of the Effective Date (the “In-License
          Agreements”), have been provided to Gillette and are listed on Schedule
          12.3(f)(iii). The Owned Palomar Patents and the Licensed Palomar Patents
          constitute all of the Palomar Patents as of the Effective Date. During the term
          of this Agreement, Palomar shall not encumber or diminish the rights granted to
          Gillette hereunder with respect to the Palomar Patents, including by not (i)
          committing any acts or permitting the occurrence of any omissions that would
          cause the breach or termination of any In-License Agreement, or (ii) amending or
          otherwise modifying, or permitting to be amended or modified, any In-License
          Agreement. Palomar shall promptly provide Gillette with notice of any written
          notice of alleged, threatened, or actual breach of any In-License Agreement by
          any party to such agreement. As of the Effective Date, neither Palomar nor, to
          their knowledge, any Third Party, is in breach of any In-License Agreement. 



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                     (g)  
          As of the Effective Date, except in the case of intellectual property
          in-licensed by Palomar from MGH, Gillette’s Exploitation of the Palomar
          Technology in the Field (or products or systems that use, embody, are
          Manufactured using, practice an invention claimed by, comprise or are comprised
          of, Palomar Technology in the Field) shall not trigger any payment obligation by
          Palomar to any Third Party. 



                     (h)  
          To Palomar’s knowledge, the Palomar Patents existing as of the Effective
          Date are not invalid or unenforceable, in whole or in part. To Palomar’s
          knowledge, the conception and reduction to practice of the Palomar Patents
          existing as of the Effective Date have not constituted or involved the
          misappropriation of trade secrets or other rights or property of any Third
          Party. There are no claims, judgments or settlements against or amounts with
          respect thereto owed by Palomar relating to the Palomar Patents. No claim has
          been made and no litigation has been commenced or threatened by any Person
          alleging that (i) the Palomar Patents are invalid or unenforceable in any
          respect or (ii) products and services covered by claims of the Palomar Patents
          infringes any Third Party Patents. To Palomar’s knowledge, as of the
          Effective Date, Gillette’s worldwide Exploitation of the First Female
          Product pursuant to the exercise of the licenses granted by Palomar to Gillette
          in this Agreement will not infringe any Third Party Patents (other than Palomar
          Patents). 



                     (i)  
          Except for the license grants and assignment contained in this Agreement, and
          with the acknowledgment that MGH holds certain rights to the MGH Patents under
          the MGH Agreements, as of the Effective Date, Palomar has not (i) assigned,
          transferred, conveyed or otherwise encumbered any of its right, title or
          interest in or to the Palomar U.S. Regulatory Documentation, the Palomar Patents
          or the Palomar Know-How in the Field, (ii) granted any license or other right,
          title or interest in or to the Palomar U.S. Regulatory Documentation, the
          Palomar Patents or the Palomar Know-How in any manner for use in the Field, or
          (iii) agreed to or is otherwise bound by any covenant not to sue for any
          infringement, misuse or otherwise with respect to the Palomar U.S. Regulatory
          Documentation, the Palomar Patents or the Palomar Know-How for use in the Field. 



                     (j)  
          At no time shall Palomar (i) assign, transfer, convey or otherwise encumber any
          right, title or interest in or to the Joint Technology, (ii) grant any license
          or other right, title or interest in or to the Joint Technology in any manner,
          or (iii) agree to or otherwise become bound by any covenant not to sue for any
          infringement, misuse or other action or inaction with respect to the Joint
          Technology, in each case that is inconsistent with the grants, assignments and
          other rights reserved to Gillette under this Agreement. 



                     (k)  
          Palomar shall obtain from each of its sublicensees, employees and agents who are
          performing the R&D Activities rights to any and all Palomar Technology and
          Joint Technology, such that Gillette shall, by virtue of this Agreement, receive
          from Palomar the licenses and other rights in and to the Palomar Technology and
          Joint Technology (including equal undivided ownership interests in Joint
          Technology) that are granted by Palomar to Gillette hereunder, except with
          respect to the MGH Agreements as described in Section 8.1(c)(ii)(2). 



                     (l)  
          To Palomar’s knowledge, there is no actual infringement by a Third Party of
          the Palomar Patents as of the Effective Date. 



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                     (m)  
          Palomar Medical Technologies, Inc. shall cause its Affiliates to (i) take all
          actions required by the terms of this Agreement to be taken by its Affiliates,
          and all other actions necessary for Palomar to perform its obligation and
          provide to Gillette the rights provided hereunder, and (ii) to refrain from
          taking any and all actions which such Affiliates are prohibited from taking by
          the terms of this Agreement. 



                     (n)  
          During the Exclusivity Period and for a period of one (1) year thereafter,
          Palomar shall not, without the express, written consent of Gillette in its sole
          discretion, solicit the services of or hire the Person who is the Director of
          Emerging Technology Ventures as of the Effective Date or the Person who is the
          Director of Dermatologics as of the Effective Date, in each case if at the time
          of such solicitation or hire such Person is an employee of Gillette or was an
          employee of Gillette within the six (6) months preceding such solicitation or
          hire. 



                     (o)  
          For purposes of Section 12.1(b) and this Section 12.3, “known to”
          or “knowledge” of Palomar shall refer to the knowledge of the
          individuals in the positions of President, Chief Financial Officer, General
          Counsel and Vice-President of Research as of the Effective Date. 




ARTICLE XIII 
Dispute Resolution 




        13.1 In General. 



                     (a)  
          Except as provided in Section 13.2, if a dispute arises between the parties
          in connection with or relating to this Agreement or any document or instrument
          delivered in connection herewith (a “Dispute”), the parties shall use
          the following procedures to resolve such Dispute(s). 



                                     (i)  
          A meeting shall be held between the parties within ten (10) days after either
          party gives written notice of a Dispute to the other party (the “Dispute
          Notice”). The meeting shall be attended by a representative of each party
          having decision-making authority regarding the Dispute (subject to Board of
          Directors or equivalent approval, if required), who shall attempt in good faith
          to negotiate a resolution of the Dispute. 



                                     (ii)  
          In the event that such representatives are unable to resolve the dispute within
          thirty (30) days of such meeting, either party may, by written notice to the
          other, invoke the following mediation: the parties shall try in good faith to
          resolve such dispute by mediation administered by the Center for Public
          Resources (“CPR”) in accordance with the then current CPR Model
          Procedure for Mediation of Business Disputes, provided that specific provisions
          of this Section 13.1(a)(ii) shall override inconsistent provisions of such
          CPR Model Procedure. The mediator shall be selected from the CPR Panel of
          Neutrals and the location of the mediation shall be in Boston, Massachusetts. If
          the parties cannot agree upon the selection of the mediator, then CPR shall
          appoint the mediator. The parties shall attempt to resolve such dispute through
          mediation until one of the following occurs: (i) the parties reach a
          written settlement; (ii) the mediator notifies the parties in writing that
          they have reached an impasse; (iii) the parties agree in writing that they
          have reached an impasse; or (iv) the parties have not



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     reached a settlement within forty-five (45) days of the initiation of the
mediation. All aspects of any such mediation, including any resolution or
decision relating thereto, shall be confidential and all participants, including
the mediator, shall be bound by judicially enforceable obligations of strict
confidentiality except to the extent the parties agree in writing to waive in
whole or part such confidentiality. 



                                     (iii)  
          If the parties have not succeeded in negotiating a written resolution of the
          Dispute after following the procedures specified in Sections 13.1(a)(i) and
          13.1(a)(ii), either party may exercise any and all of its judicial rights and
          remedies to resolve the Dispute. 



                     (b)  
          The parties agree that all applicable statutes of limitation and time-based
          defenses (such as estoppel and laches) shall be tolled while the procedures set
          forth in this 13.1 are pending, and the parties shall cooperate in taking
          any and all actions necessary to achieve such a result. 



        13.2 Disputes Regarding
Gillette’s Rights in the Male Field. In the event that the parties are not able
to agree on the terms and conditions to be included in a definitive agreement between the
parties concerning the Male Field as provided in Section 5.1, the following
procedures shall apply: 



                     (a)  
          At the request of either party, the parties shall promptly negotiate in good
          faith jointly to appoint a mutually acceptable neutral Person not affiliated
          with either party (the “Neutral”). If the parties are not able to
          agree on an acceptable Neutral within thirty (30) days after such request, the
          CPR Institute for Dispute Resolution shall be responsible for selecting a
          qualified, disinterested and conflict-free Neutral within fifteen (15) days of
          being approached by either party. The Neutral selected pursuant to this
          Section 13.2(a) shall be a Person who has at least fifteen (15) years of
          business experience with one or more pharmaceutical, biotechnology or medical
          device companies, and shall have had significant experience negotiating
          licensing agreements in the pharmaceutical or medical device industries. The
          Neutral shall conduct an arbitration (the “ADR”) in accordance with
          the terms and conditions of this Section 13.2 and the fees and costs of the
          Neutral and the CPR Institute for Dispute Resolution shall be shared equally by
          the parties. 



                     (b)  
          Within sixty (60) days after such matter is referred to ADR, each party shall
          provide the Neutral with proposed terms and conditions to be included in the
          Male Collaboration Agreement, including proposed financial terms and conditions
          (the “Terms and Conditions”), together with a written memorandum in
          support of such proposed Terms and Conditions, including where possible an
          analysis of the market potential of the Subject Male Product, as well as any
          documentary evidence in support thereof and the Neutral shall provide the
          proposed terms and conditions to the other party after it receives the proposed
          terms and conditions from both parties. 



                     (c)  
          Within thirty (30) days after a party submits its proposed Terms and Conditions,
          the other party shall have the right to respond thereto (but neither party may
          change its proposed Terms and Conditions). The response and any material in
          support thereof shall be provided to the Neutral and the other party. 





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                (d)   The Neutral shall have
the right to meet with the parties as necessary to inform the Neutral's
determination.     Within fifteen (15) days of the receipt
by the Neutral of both parties’ responses, the Neutral shall select the
Terms and Conditions proposed by one of the parties that as a whole is the most
fair and reasonable to the parties in light of the totality of the
circumstances. The Neutral must select the Terms and Conditions proposed by one
or the other of the parties; the Neutral may not combine or otherwise modify the
parties’ proposals. 



                     (e)  
          The parties shall cooperate in good faith to enter into a Male Collaboration
          Agreement that contains such Terms and Conditions no later than thirty (30) days
          of the date of the Neutral’s written notice of its determination. 



                     (f)  
          In the event that the parties are unable to reach agreement on the form of the
          Male Collaboration Agreement within thirty (30) days of the date of the
          Neutral’s written notice of its determination, each party shall submit to
          the Neutral such party’s proposed version of such definitive agreement
          (which version shall contain the Terms and Conditions selected by the Neutral).
          The Neutral shall, within thirty (30) days of such date, select the form of
          definitive agreement proposed by one of the parties that as a whole is the most
          fair and reasonable to the parties in light of the totality of the
          circumstances. The parties shall execute the form of definitive agreement
          selected by the Neutral not later than five (5) business days following the
          selection by the Neutral of the form of definitive agreement and such agreement
          shall be legal, valid and binding and enforceable against the parties. 



        13.3 Interim Relief.
Notwithstanding anything herein to the contrary, nothing in this ARTICLE XIII shall
preclude either party from seeking interim or provisional relief, including a temporary
restraining order, preliminary injunction or other interim equitable relief concerning a
Dispute, either prior to or during the ADR, if necessary to protect the interests of such
party. This Section 13.3 shall be specifically enforceable. 




ARTICLE XIV 
Miscellaneous 



        14.1 Force Majeure.
Neither party shall be held liable or responsible to the other party or be deemed to have
defaulted under or breached this Agreement for failure or delay in fulfilling or
performing any term of this Agreement when such failure or delay is caused by or results
from causes beyond the reasonable control of the non-performing party, including fires,
floods, earthquakes, embargoes, shortages, epidemics, quarantines, war, acts of war
(whether war be declared or not), acts of terrorism, insurrections, riots, civil
commotion, strikes, lockouts or other labor disturbances, acts of God or acts, omissions
or delays in acting by any governmental authority. The non-performing party shall notify
the other party of such force majeure within ten (10) days after such occurrence by giving
written notice to the other party stating the nature of the event, its anticipated
duration, and any action being taken to avoid or minimize its effect. 




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the suspension of performance shall
be of no greater scope and no longer duration than is necessary and the non-performing
party shall use Commercially Reasonable Efforts to remedy its inability to perform;
provided, however, that in the event the suspension of performance continues
for one-hundred and eighty (180) days after the date of the occurrence, and such failure
to perform would constitute a material breach of this Agreement in the absence of such
force majeure, the performing party may terminate this Agreement pursuant to
Section 10.3 by written notice to the other party. 




        14.2 Assignment. 



                     (a)  
          Without the prior written consent of the other party hereto, neither party shall
          sell, transfer, assign, delegate, pledge or otherwise dispose of, whether
          voluntarily, involuntarily, by operation of law or otherwise, this Agreement or
          any of its rights or duties hereunder; provided, however, that
          either party may, without such consent, and upon written notice to the other
          party, assign this Agreement and its rights and obligations hereunder to an
          Affiliate, to the purchaser of all or substantially all of its assets or
          business to which this Agreement relates, or to its successor entity or acquirer
          (the “Acquiring Party”) in the event of a merger, consolidation or
          change in control of such party. Any attempted assignment or delegation in
          violation of the preceding sentence shall be void and of no effect. All validly
          assigned and delegated rights and obligations of the parties hereunder shall be
          binding upon and inure to the benefit of and be enforceable by and against the
          successors and permitted assigns of Gillette or Palomar, as the case may be. In
          the event either party seeks and obtains the other party’s consent to
          assign or delegate its rights or obligations to another party, the assignee or
          transferee shall assume all obligations of its assignor or transferor under this
          Agreement. 



                     (b)  
          Subject to Section 14.2(c), in the event of any permitted assignment by either
          party to an Acquiring Party pursuant to Section 14.2(a), (i) no Information
          and Inventions or Patents or other intellectual property rights of any Acquiring
          Party or its Affiliates in such assignment shall be deemed
          “Controlled” for any purpose hereunder if such Information and
          Inventions, Patents or other intellectual property rights were not so Controlled
          by such party prior to such assignment, and (ii) any contractual
          restrictions on the Technology, Patents and other intellectual property rights
          and other assets of the acquired party shall be binding on the acquiring entity
          as a whole, and (iii) any contractual restrictions on the acquired party’s
          business activities hereunder shall apply only to the division or entity of the
          Acquiring Party into which the acquired party is merged, or into which the
          acquired party’s assets are transferred. 



                     (c)  
          Notwithstanding anything contained in Section 14.2(b) to the contrary, in the
          event of any permitted assignment by either party to an Acquiring Party, the
          party assigning its rights and obligations hereunder shall include in the
          agreement providing for such assignment terms and conditions that (i) require
          the Acquiring Party to restrict access to any Technology for use in the Field,
          or other Confidential Information, in each case that is the subject of the
          license or other rights granted by or to the acquired party in this Agreement,
          to only those scientific, technical or other personnel employed by or assigned
          to the division or entity of the Acquiring Party into which the acquired party
          is merged, or into which the acquired party’s assets are transferred, and
          (ii) prohibit the Acquiring Party from using or accessing in connection with
          other research, development or commercialization projects and activities in the
          Field any such Technology or Confidential Information, in each case to the
          extent that such



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      access or use would constitute a violation of any contractual
          restriction in this Agreement if the acquired party’s rights and interests
          in and to such Technology or Confidential Information had not been assigned to
          the Acquiring Party. 



                     (d)  
          Prior to or during the R&D Period, in the event of any permitted assignment
          by Palomar to an Acquiring Party, for a period of thirty (30) days after Palomar
          and the Acquiring Party enter into the definitive agreement for such permitted
          assignment, Gillette shall have the right, upon ten (10) days prior written
          notice to Palomar (and such Acquiring Party), which notice must be provided
          within such thirty-day period, to withdraw from R&D Activities and to pursue
          independently the research, development and commercialization of any Female
          Product, subject to the following terms and conditions: 



                                     (i)  
          the Second Decision Point shall be deemed to be the date occurring x months
          after the Effective Date, where “x” is the sum of 42 months and the
          number of months of slippage in the R&D Plan as of the date of such notice
          (as determined by reference to the schedule set forth in the Initial R&D
          Plan); 



                                     (ii)  
          Gillette shall pay Palomar three million dollars (US $3,000,000), in the manner
          provided in Section 6.9, upon such withdrawal, which payment shall be fully
          creditable against the Second Development Completion Payment Date; 



                                     (iii)  
          the license grants to Palomar set forth in Sections 4.2(a) and 4.2(b) shall be
          automatically terminated, and the license grant to Palomar set forth in Section
          4.2(c) shall be subject to termination, in the sole discretion of Gillette, upon
          five (5) days’ prior written notice to Palomar; and 



                                     (iv)  
          not earlier than the later to occur of the second anniversary of the Effective
          Date and the first anniversary of such permitted assignment, Gillette in its
          sole discretion may, upon thirty (30) days’ prior written notice to
          Palomar, cause Palomar to disclose to Gillette all Information and Inventions
          relating to or comprising the most commercially promising Male Product that is
          in Palomar’s Control and that Palomar has, directly or indirectly,
          conceived or developed as of the date of such notice, including any information
          set forth in Section 5.1(b)(ii) with respect to such Male Product Opportunity
          that is in Palomar’s Control; provided, however, that such disclosure by
          Palomar shall trigger the Option Exercise Period for purposes of Section
          5.1(b)(iv), notwithstanding the fact that Palomar may not have conducted the
          testing described in Section 5.1(b)(i) with respect to such Male Product
          Opportunity; and provided, further, that in the event that Gillette shall
          exercise the Male Option with respect thereto, then the Male Collaboration
          Agreement to be entered into between the parties shall provide for all future
          research and development activities with respect to such Male Product
          Opportunity to be conducted solely by Gillette and shall reflect the changes to
          the deal structure in the Female Field effected by this Section 14.2(d). 



From and after the date of such
withdrawal by Gillette, Gillette shall have no obligation to make any further R&D
Payment to Palomar or the Acquiring Party, and Gillette shall have the right to seek and
obtain Regulatory Approval in the United States for the Female Product(s) under
development by the parties at the time of Gillette’s withdrawal from the R&D
Activities and



-87- 










 shall have a right to
reference and otherwise use any Palomar U.S. Regulatory Documentation in
connection therewith. 



        14.3 Severability. If
any provision of this Agreement is held to be illegal, invalid or unenforceable under any
present or future law, and if the rights or obligations of any party under this Agreement
will not be materially and adversely affected thereby, (a) such provision shall be fully
severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid
or unenforceable provision had never compromised a part hereof, (c) the remaining
provisions of this Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance herefrom,
and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as a part of this Agreement a legal, valid and enforceable provision as
similar in terms to such illegal, invalid or unenforceable provision as may be possible
and reasonably acceptable to the parties herein. To the fullest extent permitted by
applicable law, each party hereby waives any provision of law that would render any
provision hereof prohibited or unenforceable in any respect. 



        14.4 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts, without reference to the rules of conflict of laws thereof,
provided that any dispute relating to the scope, validity, enforceability or infringement
of any Patent or other intellectual property rights shall be governed by, and construed
and enforced in accordance with, the substantive laws of the jurisdiction in which such
Patent Rights or other right applies. 



        14.5 Notices. All
notices or other communications that are required or permitted hereunder shall be in
writing and delivered personally, sent by facsimile (and promptly confirmed by personal
delivery, registered or certified mail or overnight courier as provided herein), sent by
nationally-recognized overnight courier or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows: 







		If to Palomar, to:	
			Palomar Medical Technologies, Inc.
			82 Cambridge Street 
			Burlington, MA 01803
			Attention: President & General Counsel
			Facsimile: (781) 993-2300
	 	 	 
			with a copy to:
	 	 	 
			Foley Hoag LLP
			155 Seaport Boulevard
			Boston, Massachusetts 02210-2600
			Attention:  David A. Broadwin
			Facsimile:  (617) 832-7000
			




	


-88- 










		If to Gillette, to:	
			The Gillette Company
			4800 Prudential Tower Building 
			Boston, Massachusetts 02199
			Attn:  President, Global Business Management - Grooming
			Facsimile: (617) 421-8525
	 	 	 
			with copies to:
	 	 	 
			The Gillette Company
			4800 Prudential Tower Building
			Boston, Massachusetts 02199
			Attn:  Senior Vice President and General Counsel
			Facsimile: (617) 421-7874
	 	 	 
			Covington & Burling
			One Front Street
			San Francisco, California 94111
			Attention:  Jim Snipes
			Facsimile:  (415) 591-6091
	 	 	 




	


or to such other address as the party
to whom notice is to be given may have furnished to the other party in writing in
accordance herewith. Any such communication shall be deemed to have been given (i) when
delivered, if personally delivered or sent by facsimile on a business day, (ii) on the
business day after dispatch, if sent by nationally-recognized overnight courier, and (iii)
on the third business day following the date of mailing, if sent by mail. It is understood
and agreed that this Section 14.5 is not intended to govern the day-to-day business
communications necessary between the parties in performing their duties, in due course,
under the terms of this Agreement. 



        14.6 Export Control.
Notwithstanding anything else herein, neither party shall directly or indirectly export or
re-export any Female Product, Joint Technology, Palomar Technology, Palomar Male
Technology, Gillette Technology or Confidential Information of the other party, or any
direct product of any of the foregoing, outside the United States, without complying with
all applicable U.S. and foreign export control and other laws and regulations (including
providing the other party any required assurance regarding export and re-export). 



        14.7 Entire Agreement;
Modifications. Other than the Non-Disclosure Agreement, which is addressed in
Section 9.8, this Agreement sets forth and constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof and all prior
agreements, understandings, promises and representations, whether written or oral, with
respect thereto are superseded hereby. Each party confirms that it is not relying on any
representations or warranties of the other party except as specifically set forth herein.
No amendment, modification, release or discharge hereof shall be binding upon the parties
unless in writing and duly executed by authorized representatives of both parties. 



-89- 










        14.8 Relationship of the
Parties. It is expressly agreed that Palomar, on the one hand, and Gillette, on the
other hand, shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither Palomar, on
the one hand, nor Gillette, on the other hand, shall have the authority to make any
statements, representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior written consent of the other party to do so and
no such statements, representations or commitments shall be construed so as to require
either party to expend either funds or efforts or commit resources in excess of those
expressly contemplated by this Agreement. All persons employed by a party shall be
employees of such party and not of the other party and all costs and obligations incurred
by reason of any such employment shall be for the account and expense of such party. 



        14.9 Equitable Relief.
Each party acknowledges and agrees that the restrictions set forth in Sections
2.1(a)(iii), 5.2, 5.3, 5.4, 10.7(e)(i), 12.2(h), 12.2(i) and 12.3(n), and Articles VIII
and IX of this Agreement are reasonable and necessary to protect the legitimate interests
of the other party and that neither party would have entered into this Agreement in the
absence of such restrictions, and that any violation or threatened violation by a party of
any such provision will result in irreparable injury to the other party. Each party also
acknowledges and agrees that in the event of a violation or threatened violation of any
such provision, the other party shall be entitled to preliminary and permanent injunctive
relief, without the necessity of proving irreparable injury or actual damages and without
the necessity of having to post a bond, as well as to an equitable accounting of all
earnings, profits and other benefits arising from any such violation. The rights provided
in the immediately preceding sentence shall be cumulative and in addition to any other
rights or remedies that may be available to such other party. Nothing in this Section 14.9
is intended, or should be construed, to limit either party’s right to preliminary and
permanent injunctive relief or any other remedy for a breach of any other provision of
this Agreement. 



        14.10 Waiver. Any term
or condition of this Agreement may be waived at any time by the party that is entitled to
the benefit thereof, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party waiving such term or condition. The
waiver by either party hereto of any right hereunder or of the failure to perform or of a
breach by the other party shall not be deemed a waiver of any other right hereunder or of
any other breach or failure by said other party whether of a similar nature or otherwise. 



        14.11 Counterparts.
This Agreement may be executed in two (2) or more counterparts, and by different parties
on separate counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. 



        14.12 No Benefit to Third
Parties. Except as otherwise expressly provided in Sections 5.3 and 5.4, the
representations, warranties, covenants and agreements set forth in this Agreement are for
the sole benefit of the parties hereto and their successors and permitted assigns, and
they shall not be construed as conferring any rights on any other Persons. 




-90- 










        14.13 Further
Assurance. Each party shall duly execute and deliver, or cause to be duly executed and
delivered, such further instruments and do and cause to be done such further acts and
things, including the filing of such assignments, agreements, documents and instruments,
as may be necessary or as the other party may reasonably request in connection with this
Agreement or to carry out more effectively the provisions and purposes hereof, or to
better assure and confirm unto such other party its rights and remedies under this
Agreement. 



        14.14 Transaction
Costs.  Each party shall bear its own costs, including attorneys' fees, in
connection with negotiating and entering into this Agreement.



        14.15 English Language.
This Agreement shall be written and executed in the English language. Any translation into
any other language shall not be an official version thereof, and in the event of any
conflict in interpretation between the English version and such translation, the English
version shall control. 



        14.16 References.
Unless otherwise specified, (a) references in this Agreement to any Article, Section,
Schedule or Exhibit shall mean references to such Article, Section, Schedule or Exhibit of
this Agreement, (b) references in any section to any clause are references to such clause
of such section, (c) references to any agreement, instrument or other document in this
Agreement refer to such agreement, instrument or other document as originally executed or,
if subsequently varied, replaced or supplemented from time to time, as so varied, replaced
or supplemented and in effect at the relevant time of reference thereto, and (d)
references to Sections include subsections, which are part of the related Section (e.g., a
section numbered “Section 1.1(d)” would be part of
“Section 1.1" and references to “Section 1.1” would also
refer to material contained in the subsection described as
“Section 1.1(d)”). 



        14.17 Construction.
Except where the context otherwise requires, wherever used, the singular shall include the
plural, the plural the singular, the use of any gender shall be applicable to all genders
and the word “or” is used in the inclusive sense. The captions of this Agreement
are for convenience of reference only and in no way define, describe, extend or limit the
scope or intent of this Agreement or the intent of any provision contained in this
Agreement. The term “including” as used herein shall mean including, without
limiting the generality of any description preceding such term. The language of this
Agreement shall be deemed to be the language mutually chosen by the parties and no rule of
strict construction shall be applied against either party hereto. 




-91- 










        IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
duly authorized representatives as of the date first above written. 







	THE GILLETTE COMPANY	 	PALOMAR MEDICAL TECHNOLOGIES, INC.
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	By: /s/ Peter Klein
		By: /s/ Joseph P. Caruso

	Name:  Peter Klein		Name:  Joseph P. Caruso
	Title:  Senior Vice President of Strategy and Business Development		Title:  Chief Executive Officer and President
	 	 	 




	



[Counterpart
Signature Page to Development and License Agreement] 




-92- 












Appendix A 




Definitions  



        This
Appendix to the Development and License Agreement (the “Agreement”) entered into
as of February 14, 2003, by and between Gillette and Palomar provides agreed upon
definitions applicable to the parties for purposes of the Agreement. 



        The
contents of this Appendix A are hereby incorporated into the Agreement and are governed by
the terms and conditions of the Agreement, including the confidentiality provisions set
forth therein. The following capitalized terms, whether used in the singular or the plural
and correlatives thereof, shall have the following meanings as used in the Agreement: 



             “510(k)  
          Notification” shall mean a 510(k) Notification within the meaning of
          FFDCA, and the regulations promulgated thereunder, necessary to market a Female
          Product in the United States. 



             “510(k)  
          Product” shall mean a Female Product, the sale of which requires a
          510(k) Notification but not a PMA. 



        “Accessory
Product” shall mean a Female Accessory Product or a Light-Based Accessory
Product, as the case may be. 



        “Affiliate”
shall mean, with respect to a Person, any corporation or other business entity that,
directly or indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person. For purposes of this definition,
“control” and, with correlative meanings, the terms “controlled by”
and “under common control with” shall mean (a) the possession, directly or
indirectly, of the power to direct the management or policies of a business entity,
whether through the ownership of voting securities, by contract relating to voting rights
or corporate governance, or otherwise, or (b) the ownership, directly or indirectly, of at
least fifty percent (50%) of the voting securities or other ownership interest of a
business entity (or, with respect to a limited partnership or other similar entity, its
general partner or controlling entity); provided, that if local law restricts
foreign ownership, control will be established by direct or indirect ownership of the
maximum ownership percentage that may, under such local law, be owned by foreign
interests. 



        “Applicable
Law” shall mean the applicable laws, rules, regulations, including any rules,
regulations, guidelines, or other requirements of the Regulatory Authorities, that may be
in effect from time to time in the Territory. 



        “Calendar
Quarter” shall mean each period of three consecutive calendar months ending on
March 31, June 30, September 30 and December 31. 



        “Calendar
Year” shall mean each successive period of twelve months commencing on January 1
and ending on December 31. 



        “Clinical
Trials” shall mean, with respect to a Female Product, the clinical trials
required by the FDA for Regulatory Approval of such product in the United States, or
equivalent 



-i- 










trials required by Regulatory Authorities for Regulatory Approval of such
product in a Major Market. 



        “Commercial
Assessment Period” shall mean the period commencing on the First Development
Completion Payment Date and terminating on the Commercial Assessment Period Termination
Date. 



        “Commercial
Assessment Period Termination Date” shall mean the later of (a) the first (1st)
anniversary of the end of the R&D Program, or (b) in the event that Gillette elects to
have Palomar Manufacture the CUT Female Product for use in CUTs pursuant to
Section 3.1, two hundred and forty (240) days after the date of delivery by Palomar
to Gillette of the total number CUT Female Product units required to be delivered by
Palomar in accordance with ARTICLE III (subject to adjustments to such period pursuant to
Section 3.1(d)). 



        “Commercially
Reasonable Efforts” shall mean, with respect to the research, development,
Manufacture or commercialization of Female Product(s), efforts and resources comparable to
those used in the medical device industry for a product of similar commercial potential at
a similar stage in its lifecycle, taking into consideration its safety and efficacy, its
cost to develop, the competitiveness of alternative products, its proprietary position,
the likelihood of regulatory approval, its profitability, and all other relevant factors.
Commercially Reasonable Efforts shall be determined on a market-by-market basis for each
Female Product. 



        “Consumable”
shall mean a product, or a part or component of a product (including the container,
canister, apparatus or device for holding, administering or delivering such product),
which product, part or component thereof (a) is intended to be depleted by consumer
use (e.g., coolants), (b) requires periodic replacement (e.g.,
containers for holding, delivering or administering any coolants, etc., or with respect to
a Light-Based Hair Management Product, portions of such product that may be replaced
depending on the design, such as the radiation source), or (c) replacement parts for
any Light-Based Hair Management Product. 



        “Consumer
Field” shall mean products or systems intended for or marketed to consumers for
personal use. For the avoidance of doubt, the “Consumer Field” shall exclude (i)
products or systems in the Professional Field, and (ii) products or systems developed
for and sold or distributed to governmental entities for treatment of medical conditions
in military personnel. 



        “Consumer
Use Tests” or “CUTs” shall mean one or more tests conducted by
or on behalf of Gillette to determine consumer preferences with respect to a Female
Product, including the features or function thereof. 



        “Control”
shall mean, with respect to any item of Information and Invention, Patent or other
intellectual property right, possession of the right, whether directly or indirectly, and
whether by ownership, license or otherwise, to assign, or grant a license, sublicense or
other right to or under, such Information and Invention, Patent or other right as provided
for herein without violating the terms of any agreement or other arrangement with any
Third Party. 



        “Controlled
Information” shall mean the Palomar Controlled Information or Gillette Controlled
Information, as the case may be. 



-ii- 









        “Core
Palomar Patents” shall mean those Palomar Patents listed on Schedule A-1 hereto,
and any substitutions, divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations, extensions, supplementary
protection certificates, and any international or foreign equivalent of any such Patent,
but excluding any continuation-in-part of any MGH Patents. 



        “Costs”
shall mean, with respect to certain activities, all costs actually incurred by a party (or
any of its subcontractors) in connection with the performance of those activities during a
period, and overhead calculated in accordance with the methodology exemplified on Schedule
A-2 hereto. For any activity related to the research, development and/or commercialization
of Female Products, “Costs” may include the costs of (a) research and
development, (b) studies on clinical aspects conducted internally or externally,
(c) preparing, submitting, reviewing or developing data or information for the
purpose of submission to a governmental authority to obtain, maintain or expand Regulatory
Approvals, (d) consultants necessary for the purpose of obtaining, maintaining or
expanding Regulatory Approvals and handling those regulatory affairs, (e) regulatory
and validation activities for Manufacturing plant and product, (f) Manufacturing
Process and other process development, process improvement and scale-up and recovery
costs, and (g) data management, statistical designs and studies, document
preparation, and other administration expenses associated with the activities in question
(including expenses associated with the clinical testing program or post-marketing studies
required to maintain Regulatory Approvals). 



        “CUT
Product Specifications” shall mean the written specifications and quality control
testing procedures for the Female Product(s), as finally determined by Gillette in
accordance with the terms of this Agreement. 



        “Europe”
shall mean the European Union as it may be constituted from time to time. 



        “Exclusive
Field” shall mean (i) until the Male Option Termination Date (if any), the
Field, and (ii) after the Male Option Termination Date (if any), the Female Field
(and not the Male Field). For avoidance of doubt, if the Male Option Termination Date does
not occur, then the Exclusive Field shall be the Field. 



        “Exclusivity
Period” shall mean the period commencing on the Effective Date and ending on the
earliest date on which (a) Gillette terminates such period pursuant to Section 10.2,
(b) Gillette terminates this Agreement pursuant to Section 10.4(a), 10.4(b),
10.4(c), 10.4(d) or 10.3, or (c) Palomar terminates this Agreement pursuant to Section
10.3 or 10.5. 



        “Exploit”
shall mean to make, have made, import, use, sell, or offer for sale, including to
research, develop, register, modify, enhance, improve, Manufacture, have Manufactured,
formulate, have used, export, transport, distribute, promote, market or have sold or
otherwise dispose of. 



        “Exploitation”
shall mean the making, having made, importation, use, sale, offering for sale or
disposition of a product or process, including the research, development, registration,
modification, enhancement, improvement, Manufacture, formulation, optimization, import,
export, transport, distribution, promotion or marketing of a product or process. 



-iii- 









        “FDA”
shall mean the United States Food and Drug Administration and any successor agency
thereto. 



        “FDA
Approval Period” shall mean a period of (a) thirty-nine (39) months after
the Effective Date, in the case of a 510(k) Product, or (b) fifty-one (51) months
after the Effective Date, in the case of a PMA Product, provided that in the event that
any delay in Regulatory Approval is caused by Gillette, there shall be a corresponding
extension of the FDA Approval Period. 



        “Female
Accessory Product” shall mean (a) any apparatus, component, accessory, disposable
or Consumable which is (i) designed specifically for, (ii) intended or marketed for sale
or sold for use with, and (iii) physically integrated in or physically attached to, a
Female Product, or (b) any Female Product Lotion. By way of example, and without
limitation, a “Female Accessory Product” shall include any such apparatus,
component, accessory, disposable, or Consumable comprising (i) a canister that is designed
to dispense coolant and attaches to an apparatus comprising a Female Product, or (ii) a
replaceable head for dispensing Optical Radiation from a Female Product, and shall not
include any lotions or gels other than the Female Product Lotion. 



        “Female
Field” shall mean any product or system, which is intended or marketed for female
Hair Management in the Consumer Field. 



        “Female
Product” shall mean (a) a Light-Based Hair Management Product intended for use in
or marketed in the Female Field, which either (i) is developed in whole or in part by
Palomar or Gillette in connection with R&D Activities, Additional Activities, or
Commercial Assessment Period Additional Activities or (ii) uses, embodies, is Manufactured
using, practices an invention claimed by, comprises or is comprised of, in whole or in
part, Palomar Technology or Joint Technology, (b) all Female Accessory Products with
respect thereto, and (c)  an Improvement to any of the foregoing. For the avoidance
of doubt, “Female Product” shall exclude any (a) power sources, or (b) razors,
blades, electric shavers or similar devices (even if any such power source, razor, blade,
electric shaver or similar device may be used with, or is recommended to improve the
efficacy of, a Light-Based Hair Management Product), except to the extent that any such
power source, razor, blade, electric shaver or similar device is (1) not marketed and
sold for uses independent of Light-Based Hair Management Products, (2) is physically
integrated in or physically attached to a Light-Based Hair Management Product, and (3) is
specifically designed for and sold for use with, a Light-Based Hair Management Product. 



        “Female
Product Lotion” shall mean any lotion, gel, cream, powder or similar formulation
that is (a) designed specifically for use with, (b) approved by the FDA for use with, and
(c) essential for the functionality of, a Female Product. 




-iv- 









        “Female
Product Technology” shall mean the Female Product(s), the Manufacturing Processes
and any Improvements to the foregoing that, during the term of this Agreement, are
Controlled by Palomar, but excluding any Information and Inventions (a) to the extent
claimed by one or more claims of any Joint Patents, or (b) that otherwise constitute Joint
Inventions. 



        “FFDCA”
shall mean the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et
seq. as amended. 



        “Field”
shall mean the Female Field and the Male Field, collectively. 



        “First
Commercial Sale” shall mean the first sale or distribution of any Product by
Gillette or any of its sublicensees that gives rise to Net Sales under this Agreement. 



        “First
Decision Point” shall mean the later to occur of (a) nine hundred and forty-two
(942) days after the Effective Date, in the event that Palomar delivers to Gillette the
Initial Prototypes on or before the Commencement Date, or (b) the sum of (i) the number of
days after the Commencement Date until Palomar delivers to Gillette the Initial Prototypes
and (ii) nine-hundred and forty-two (942) days, in the event that Palomar delivers to
Gillette the Initial Prototypes after the Commencement Date. 



        “First
Development Completion Payment Date” shall mean (a) the First Decision Point, in
the event that Palomar has obtained Regulatory Approval in the United States with respect
to the First Female Product at least ten (10) days prior to the First Decision Point, or
(b) thirty (30) days after the date on which Regulatory Approval in the United States is
obtained by Palomar with respect to the First Female Product, in the event that Palomar
has not obtained Regulatory Approval in the United States with respect to the First Female
Product at least ten (10) days prior to the First Decision Point. 



        “First
Female Product” shall mean the Light-Based Hair Management Product intended for
use in the Female Field (a) developed in whole or in part by Palomar or Gillette pursuant
to the Initial R&D Plan, and (b) comprising an apparatus for delivering Optical
Radiation to areas of the skin, for which a party seeks Regulatory Approval in the United
States in accordance with the terms of this Agreement. 



        “GAAP”
shall mean United States generally accepted accounting principles, consistently
applied. 



        “Gillette
Confidential Information” shall mean Confidential Information of Gillette. 



        “Gillette Improvement”
shall mean an Improvement to a Female Product or a Manufacturing Process for a Female
Product, which Improvement is first conceived or reduced to practice by or on behalf of
Gillette after the date on which the Exclusivity Period or this Agreement is terminated,
as applicable. 



        “Gillette
Joint Independent Product” shall mean an Independent Product Exploited by or on
behalf of Gillette, optionally with one or more Third Parties, in the Field, which uses,
embodies, is Manufactured using, practices an invention claimed by, comprises or is
comprised of Joint Technology. 



-v- 









        “Gillette
Know-How” shall mean all Information and Inventions that (a) Gillette Controls
(other than pursuant to this Agreement) as of the Effective Date or at any time during the
term of this Agreement that are necessary or useful for, or otherwise related to, the
Exploitation of Light-Based Hair Management Products in the Female Field and that are not
generally known, and (b) that Gillette discloses and makes available to Palomar for use in
connection with the R&D Activities, Additional Activities or Commercial Assessment
Period Additional Activities, but excluding (i) any Information and Inventions to the
extent claimed by one or more of the Gillette Patents or Joint Patents, and (ii) any Joint
Know-How. 



        “Gillette
Licensed Patents” shall mean those Gillette Patents that (a) are Controlled
(other than pursuant to this Agreement) by Gillette and (b) claim Information and
Invention(s) that are conceived prior to or during the term of the Agreement and are
incorporated in Female Products (including prototypes of such products) or Manufacturing
Processes for Female Products, which products or processes are developed or under
development by Gillette (by subcontract, with Palomar hereunder or with one or more Third
Parties) at the time of termination of the Exclusivity Period or termination of this
Agreement, as applicable and pursuant to ARTICLE X, but only with respect to such claims
and no other claims of such patents; provided, however, that “Gillette
Licensed Patents” shall exclude Patent claims to the extent that they claim razors,
blades, electric shavers or similar devices, products or parts thereof. 



        “Gillette
Patents” shall mean all Patents that (a) Gillette Controls (other than
pursuant to this Agreement), as of the Effective Date or at any time during the term of
this Agreement, that in each case are necessary or useful for, or otherwise related to,
the Exploitation of any Light-Based Hair Management Product in the Female Field and (b)
Patents that claim Information or Inventions that Gillette discloses and makes available
to Palomar for use in connection with the R&D Activities, Additional Activities or
Commercial Assessment Period Additional Activities; but excluding the Joint Patents. 



        “Gillette
Regulatory Documentation” shall mean all Regulatory Documentation developed by
Gillette. 



        “Gillette
Technology” shall mean the Gillette Patents and the Gillette Know-How,
collectively. 



        “Good
Manufacturing Practices” shall mean the current good manufacturing practices
applicable from time to time to the Manufacturing of any Female Product pursuant to
Applicable Law. 



        “Hair
Management” shall mean (a) the removal of human hair shafts or changes in
the associated structures, and (b) any other reduction of human hair growth, shaft
diameter or pigmentation. 



        “IDE”
shall mean an investigational device exemption as defined in the regulations
promulgated by the FDA for the authorization to commence human clinical trials, and its
equivalent in other countries or regulatory jurisdictions in the Territory. 



        “Improvement”
shall mean any modification, variation or revision to a product, system or technology
or any discovery, technology, device, process or formulation related to such



-vi- 









product, system or technology, whether or not patented or patentable or
otherwise protectable by intellectual property rights, including any enhancement
in the efficiency, operation, Manufacture (including any Manufacturing Process),
ingredients, preparation, presentation, formulation, means of delivery, powering
or operating or packaging of such product, system or technology, any discovery
or development of any new or expanded uses for such product, system or
technology, or any discovery or development that improves the stability, safety
or efficacy of such product, system or technology or reduces cost of operation
or Manufacture. 



        “Independent
Accessory Product” shall mean (a) any apparatus, component, accessory, disposable
or Consumable which is (i) designed specifically for, (ii) intended or marketed for sale
or sold for use with, and (iii) physically integrated in or physically attached to, a
Gillette Joint Independent Product, or (b) any Independent Product Lotion and shall not
include any lotions or gels other than the Independent Product Lotion. 



        “Independent
Product” shall mean any Light-Based Hair Management Product that is not a Female
Product and that is intended or marketed for use in the Field, and all Improvements
thereto. 



        “Independent
Product Lotion” shall mean any lotion, gel, cream, powder or similar formulation
that is (a) designed specifically for use with, (b) approved by the FDA for use with, and
(c) essential for the functionality of, a Gillette Joint Independent Product. 



        “Information
and Inventions” shall mean all technical, scientific and other know-how and
information, trade secrets, knowledge, technology, means, methods, processes, practices,
formulas, instructions, skills, techniques, procedures, experiences, ideas, technical
assistance, designs, drawings, assembly procedures, computer programs, apparatuses,
specifications, data, results and other material, pre-clinical and clinical trial results,
Manufacturing procedures, test procedures and purification and isolation techniques,
(whether or not confidential, proprietary, patented or patentable or otherwise
protectable) in written, electronic or any other form now known or hereafter developed,
and all Improvements, whether to the foregoing or otherwise, and other discoveries,
developments and inventions (whether or not confidential, proprietary, patented or
patentable or otherwise protectable). 



        “Initial
Prototypes” shall mean the six (6) Prototypes that Palomar is required pursuant
to the R&D Plan to deliver to Gillette at or near the beginning of the R&D Period. 



        “Joint
Inventions” shall mean any and all Information and Inventions that are (a) first
conceived or reduced to practice jointly (as determined under U.S. patent law) by or on
behalf of representatives, employees, agents or research partners of Palomar and
representatives, employees, agents or research partners of Gillette during the term of the
Agreement, either together or jointly (as determined under U.S. patent law) with a Third
Party(ies), (b) first conceived or reduced to practice by or on behalf of representatives,
employees, agents or research partners of Gillette, either alone or jointly (as determined
under U.S. patent law) with Third Party(ies) during the term of the Agreement in
connection with activities arising from, or performed pursuant to, the R&D Plan, or in
the course of performing Additional Activities or Commercial Assessment Period Additional
Activities, or (c) first conceived or reduced to practice by or on behalf of
representatives, employees, agents or research partners of Palomar,



-vii- 









either alone or jointly (as determined under U.S. patent law) with a Third
Party(ies) during the term of the Agreement in connection with activities
arising from, or performed pursuant to, the R&D Plan, or in the course of
performing Additional Activities or Commercial Assessment Period Additional
Activities. 



        “Joint
Know-How” shall mean all Information and Inventions included in the Joint
Inventions that are not generally known, but excluding any Information and Inventions to
the extent claimed by a Joint Patent. 



        “Joint
Patents” shall mean any Patents to the extent one or more claims of such Patents
claim any Joint Inventions. 



        “Joint
Technology” shall mean the Joint Patents and the Joint Know-How, collectively. 



        “Launch”
shall mean, with respect to a product or system, the date on which the First
Commercial Sale of such product or system occurs. 



        “Light-Based
Accessory Product” shall mean any apparatus, component, accessory, disposable or
Consumable (a) which (i) is designed specifically for, (ii) is intended or marketed for
sale or sold for use with, and (iii) is physically integrated in or physically attached
to, a Light-Based Product ; or (b) any Light-Based Lotion. 



        “Light-Based
Lotion” shall mean any lotion, gel, cream, powder or similar formulation that is
(a) designed specifically for use with, (b) approved by the FDA for use with, and (c)
essential for the functionality of, a Light-Based Product. 



        “Light-Based
Product” shall mean a process, product or system that achieves one or more of the
following effects with the use of Optical Radiation: (i) Hair Management outside the
Field, (ii) the treatment or prevention of cellulite, cosmetic anti-aging skin
applications (including wrinkle reduction, improvement in skin tone, texture and
elasticity, and removal of pigmented and vascular lesions), (iii) body recontouring,
(iv) the removal, treatment or prevention of warts, subcutaneous fat, acne, tattoos,
scars, birth marks, oily skin, odor, moles and blemishes, and (v) any other
improvement of skin condition, appearance, tone or texture other than in connection with
Hair Management in the Field; provided, however, that as used in Sections
5.3(a) and 5.3(b) and 5.4, “Light-Based Product” shall include, without
limitation, all processes, products or systems that use Optical Radiation to achieve Hair
Management, and all Light-Based Accessory Products. 



        “Light-Based
Hair Management Product” shall mean (a) a process, product or system, which
product or system comprises an apparatus for delivering Optical Radiation, and which is
intended or marketed for Hair Management in the Consumer Field, and (b) any (i) apparatus,
component, accessory, disposable or Consumable which is (1) designed specifically for, (2)
intended or marketed for sale or sold for use with, and (3) physically integrated in or
physically attached to, such a process, product or system, or (ii) any lotion, gel, cream,
powder or similar formulation that is (1) designed specifically for use with, (2) approved
by the FDA for use with, and (3) essential for the functionality of, such process, product
or system. Such product or systems may include other mechanisms for Hair Management
(e.g., chemical, mechanical, magnetic, acoustic, radio frequency, temperature, or
electrical) to the extent that such



-viii- 









mechanisms are designed specifically for, intended or marketed for sale or sold
for use with, and physically integrated in or physically attached to such
product or system. For the avoidance of doubt, “Light-Based Hair Management
Products” shall exclude any (a) power sources, or (b) razors, blades,
electric shavers or similar devices (even if use of any such power source,
razor, blade, electric shaver or similar device may be used with, or use
thereof, is recommended to improve the efficacy of a Light-Based Hair Management
Product), except to the extent that any such power source, razor, blade,
electric shaver or similar device is (1) not marketed and sold for uses
independent of such product or system, (2) is physically integrated in or
physically attached to such product or system, and (3) is specifically designed
for and sold for use with, such product or system. 



        
“Major Market” shall mean each of the United States, Canada, Europe and
Japan. 



        “Male
Field” shall mean any product or system, which is intended or marketed for male
Hair Management in the Consumer Field. 



        “Male
Option Termination Date” shall mean (i) in the event that Gillette does not
exercise the Male Option when a Male Product Opportunity is offered by Palomar to
Gillette, the date on which the Male Option terminates pursuant to Section 5.1(b)(v),
or (ii) in the event that Gillette exercises the Male Option pursuant to
Section 5.1(b)(iv), the first date on which the Male Collaboration Agreement becomes
effective. 



        “Manufacture”
and “Manufacturing” shall mean, with respect to a product or system, the
manufacturing, processing, formulating, packaging, labeling, holding and quality control
testing of such product or compound. 



        “Manufacturing
Process” shall mean any process or step thereof that is necessary or useful for
Manufacturing any Light-Based Hair Management Product and any Improvement thereto. 



        “Marketing
Authorization” shall mean, with respect to a Female Product, a 510(k)
Notification or a PMA, whichever (if any) is required by Applicable Law. 



        “MGH”
shall mean Massachusetts General Hospital. 



        “MGH
Agreements” shall mean (a) that certain License Agreement by and between
Palomar and MGH, dated August 18, 1995, (b) that certain Clinical Trial Agreement by
and between Palomar and MGH, dated August 18, 1995, and (c) that certain Joint Patent
Agreement by and between Palomar and MGH, dated January 1, 2000, in each case as such
agreement is amended as of the Effective Date and as such agreement may be amended or
restated thereafter in a manner that is not inconsistent with the terms of this Agreement. 



        “MGH
Patents” shall mean (a) as of the Effective Date, all Patents in existence
and to which Palomar has received or is entitled to receive a license from MGH under the
MGH Agreements, and (b) all claims contained in a Patent that makes a priority claim
to any of the Patents that are identified in clause (a) above, provided any such
priority claim has an earliest priority date based solely on the Patents that are
identified in clause (a) above. Without 



-ix- 









limitation to the foregoing, “MGH
Patents” shall include the Patents listed on Schedule A-3 hereto. 



        “MGH
Valid Claim” shall mean a claim contained in a pending application for a MGH
Patent or MGH Joint Patent in such country which claim was filed in good faith and has not
been abandoned or finally disallowed without the possibility of appeal or refiling of said
application in such country. 



        “Net
Sales” shall mean, for any period, the gross amount invoiced by Gillette and its
agents and (sub)licensees from or on account of the sale or distribution of Product(s) to
bona fide unrelated Third Parties (the “Invoiced Sales”), less deductions
actually taken for: (a) normal and customary trade, quantity and cash discounts and sales
returns and allowances, including (i) those actually granted on account of price
adjustments, billing errors, rejected goods, damaged goods, returns and rebates; (ii)
allowances and rebates paid to distributors; and (iii) chargebacks; (b) freight, postage,
shipping and insurance expenses to the extent that such items are actually incurred in
shipping such Products to such Third Parties and included in the gross amount invoiced;
(c) customs and excise duties and other duties related to the sales to the extent that
such items are actually incurred and included in the gross amount invoiced; (d) sales and
other taxes and duties directly related to and actually incurred for the sale or delivery
of Product(s) (but not including taxes assessed against the income derived from such
sale); (e) distribution expenses to the extent that such items are included in the gross
amount invoiced; (f) any other similar and customary deductions that are consistent with
GAAP in effect from time to time, or in the case of non-United States sales, other
applicable accounting standards; and (g) any such invoiced amounts that are not collected
by Gillette or its (sub)licensees. Any of the deductions listed above that involves a
payment by Gillette and its agents and (sub)licensees shall be taken as a deduction in the
Calendar Quarter in which the payment is accrued by such entity. Deductions pursuant to
subsection (g) above shall be taken in the Calendar Quarter in which such sales are no
longer recorded as a receivable. 



        For
purposes of calculating Net Sales, sales between or among The Gillette Company and its
Affiliates or their agents or (sub)licensees shall be excluded from the computation of Net
Sales, but sales by The Gillette Company or its Affiliates or their licensees or
sublicensees to Third Parties shall be included in the computation of Net Sales. No
deduction shall be made for any item of cost incurred by Gillette, its agents or
(sub)licensees in preparing, manufacturing, shipping, distributing or selling Products
except as expressly permitted in the foregoing paragraph. 



        Such
amounts shall be determined from the books and records of the entity that invoiced the
Third Party, maintained in accordance with GAAP in effect from time to time consistently
applied. To the extent Gillette or its agents or (sub)licensees receive consideration
other than or in addition to cash with respect to the sales, promotion, or distribution of
Products, Net Sales shall include the fair market value of such additional consideration. 



        In
the event that a Product is sold in any country in the form of a combination product
containing one or more products, devices, components, Accessories or Consumables that are
not Products (“Non-Product Components”), Net Sales of such combination product
will be adjusted by multiplying actual Net Sales of such combination product in such
country calculated pursuant



-x- 









to the first paragraph of this Section by the fraction A/(A+B), where A is the
average invoice price in such country of the Product(s), if sold separately in
such country, and B is the average invoice price in such country of the
Non-Product Components. If, in a specific country, the Non-Product Components in
the combination product are not sold separately in such country, Net Sales shall
be adjusted by multiplying actual Net Sales of such combination product
calculated pursuant to the first paragraph of this Section by the fraction A/C,
where A is the average invoice price in such country of the Product(s)and C is
the invoice price in such country of such combination product. If, in a specific
country, a Product(s) is not sold separately, Net Sales shall be calculated by
multiplying actual Net Sales of such combination product calculated pursuant to
the first paragraph of this Section by the fraction (C-B)/C, where B is the
average invoice price in such country of the Non-Product Components in the
combination product and C is the invoice price in such country of the
combination product. If, in a specific country, both a Product(s) and the
Non-Product Components, are not sold separately, a market price for such Product
and such Non-Product Components shall be negotiated by the parties in good faith
based upon the costs, overhead and profit as are then incurred for such
combination product and all similar products, devices, systems, components,
Accessories or Consumables then being made and marketed by Gillette and having
an ascertainable market price. 



        “Non-Core
Palomar Patents” shall mean all Palomar Patents other than Core Palomar Patents. 



        “Non-Light-Based
Product” shall mean a process, product or system that achieves one or more of the
following effects without the use of Optical Radiation: (a) Hair Management,
(b) the treatment or prevention of cellulite, cosmetic anti-aging skin applications
(including wrinkle reduction, improvement in skin tone, texture and elasticity, and
removal of pigmented and vascular lesions), (c) body recontouring, (d) the
removal, treatment or prevention of warts, subcutaneous fat, acne, tattoos, scars, birth
marks, oily skin, odor, moles and blemishes, and (e) any other improvement of skin
condition, appearance, tone or texture. 



        “Optical
Radiation” shall mean optical radiation that is intended to have or has a
therapeutic function. 



        “Other
Independent Product” shall mean an Independent Product intended for use in or
marketed in the Field (a) that is not a Gillette Joint Independent Product, and
(b) that is Launched by or on behalf of Gillette, optionally with one or more Third
Parties, during the Exclusivity Period or within seven (7) years after the first to
occur of the termination of (i) the Exclusivity Period, or (ii) this Agreement. 



        “Palomar
Confidential Information” shall mean Confidential Information of Palomar. 



        “Palomar Know-How”
shall mean all Information and Inventions in the Control (other than pursuant to this
Agreement) of Palomar as of the Effective Date or at any time during the term of this
Agreement that are necessary or useful for, or otherwise related to, the Exploitation of
Light-Based Hair Management Products in the Female Field and that are not generally known,
but excluding (a) any Information and Inventions to the extent claimed by one or more of
the Palomar Patents or Joint Patents, and (b) any Joint Know-How. Palomar Know-How shall
include, subject to the preceding exclusion, all clinical, safety, Manufacturing and
quality control 



-xi- 









data and information Controlled by Palomar and related to the Female
Product Technology. 



        “Palomar
Improvement” shall mean an Improvement to a Female Product or a Manufacturing
Process for a Female Product, which Improvement is first conceived or reduced to practice
by or on behalf of Palomar after the date on which the Exclusivity Period or this
Agreement is terminated, as applicable. For the avoidance of doubt, Palomar Improvements
shall exclude any Gillette Improvements. 



        “Palomar
Male Know-How” shall mean all Information and Inventions in the Control (other
than pursuant to this Agreement) of Palomar as of the Effective Date or at any time during
the term of this Agreement that are necessary or useful for, or otherwise related to, the
Exploitation of Light-Based Hair Management Products in the Male Field and that are not
generally known, but excluding (a) any Information and Inventions to the extent claimed by
one or more of the Palomar Patents or Joint Patents, and (b) any Joint Know-How. Palomar
Know-How shall include, subject to the preceding exclusion, all clinical, safety,
Manufacturing and quality control data and information Controlled by Palomar and related
to the Male Field. 



        “Palomar
Male Patents” shall mean (a) the MGH Patents, and (b) all of the
Patents that Palomar Controls (other than pursuant to this Agreement), as of the Effective
Date and at any time during the term of this Agreement, that in each case are necessary or
useful for, or otherwise related to, the Exploitation of any Light-Based Hair Management
Product in the Male Field, but excluding the Joint Patents. The “Palomar Male
Patents” shall include all Patents listed in Schedule 12.3(f), and any
substitutions, divisions, continuations, continuations-in-part, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary protection
certificates, and any international or foreign equivalent of any Patent, but excluding any
continuation-in-part of any MGH Patents. 



        “Palomar
Male Technology” shall mean the Palomar Male Patents and the Palomar Male
Know-How, collectively. 



        “Palomar
Patents” shall mean (a) the MGH Patents, and (b) all of the Patents
that Palomar Controls (other than pursuant to this Agreement), as of the Effective Date
and at any time during the term of this Agreement, that in each case are necessary or
useful for, or otherwise related to, the Exploitation of any Light-Based Hair Management
Product in the Female Field, or that contain a claim covering any Female Product
Technology, but excluding the Joint Patents. The “Palomar Patents” shall include
all Patents listed in Schedule 12.3(f), and any substitutions, divisions,
continuations, continuations-in-part, reissues, renewals, registrations, confirmations,
re-examinations, extensions, supplementary protection certificates, and any international
or foreign equivalent of any Patent, but excluding any continuation-in-part of any
MGH Patents. 



        “Palomar
Technology” shall mean the Palomar Patents and the Palomar Know-How,
collectively. 



        “Patents”
shall mean (a) all patents and patent applications and any patents issuing therefrom
worldwide, (b) any substitutions, divisions, continuations, continuations-in-part,
reissues, renewals, registrations, confirmations, re-examinations, extensions,
supplementary



-xii- 









 protection certificates, term extensions (under applicable patent law or
other Applicable Law), certificates of invention and the like, and any provisional
applications, of any such patents or patent application, and (c) any foreign or
international equivalent of any of the foregoing. 



        “Patent
Costs” shall mean the fees and expenses paid to outside legal counsel and other
Third Parties (including Third Party licensors of Patents, such as MGH for the Palomar
Patents), allocated in-house costs of legal counsel, and filing and maintenance expenses,
incurred in connection with preparing, filing, prosecuting and maintaining Patents,
including costs of patent interference, re-examination, reissue, opposition or similar
proceedings relating thereto. 



        “PCT”
shall mean the Patent Cooperation Treaty, opened for signature June 19, 1970, 28
U.S.T. 7645. 



        “Person”
shall mean an individual, sole proprietorship, general partnership, limited
partnership, limited liability partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, cooperative, joint
venture or other similar entity or organization, including a government or political
subdivision, department or agency of a government, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person as the
context may require. 



        “PMA
Product” shall mean a product, the sale of which requires the filing with and
approval by the FDA of a PMA. 



        “Premarket
Approval” or “PMA” shall mean a premarket approval as defined in the
FFDCA, and the regulations promulgated thereunder, necessary to market a Female Product in
the United States. 



        “Product”
shall mean a Female Product, Gillette Joint Independent Product, Other Independent
Product, or any product or system Exploited by Palomar pursuant to any license under the
Gillette Licensed Patents that is granted by Gillette to Palomar in this Agreement, as the
case may be. 



        “Product
Specifications” shall mean the written specifications for the design and
Manufacture of a product or system. 



        “Professional
Field” shall mean products or systems intended or marketed for sale to doctors,
health care providers or other commercial service providers for use on or with patients or
customers (and not for resale to any Person). 



        “Prototypes”
shall mean one or more prototypes of the Female Product Manufactured or made by or on
behalf of either party during the R&D Period for the purposes of evaluating, testing
or improving such product pursuant to the R&D Plan and this Agreement, which in the
case of any such unit delivered by Palomar to Gillette shall have been Manufactured or
made pursuant to the then-current Product Specifications. 



        “Regulatory
Approval” shall mean, on a country-by-country basis, the right with respect to a



-xiii- 









Female Product to sell or
distribute such product or system for female Hair Man agement in the Consumer
Field. In the case of the United States, sale or distribution of a Female
Product may require a determination by the FDA of substantial equivalence
(within the meaning of 21 C.F.R. § 807.100) following the filing with the
FDA of a 510(k) Notification, or in the event that a PMA is required, the
approval by the FDA of such PMA, and in the case of any other country or
territory, any necessary international or foreign approvals. 



        “Regulatory
Authority” shall mean any applicable supra-national, federal, national, regional,
state, provincial or local regulatory agencies, departments, bureaus, commissions,
councils or other government entities regulating or otherwise exercising authority with
respect to the Exploitation of the Female Product Technology in the Territory. 



        “Regulatory
Documentation” shall mean all applications, registrations, licenses,
authorizations and approvals (including all Regulatory Approvals), all correspondence
submitted to or received from Regulatory Authorities (including minutes and official
contact reports relating to any communications with any Regulatory Authority) and all
supporting documents and all clinical studies and tests, relating to any Female Product
Technology, and all data contained in any of the foregoing, including all IDEs, 510K
Notifications, PMA Notifications, Marketing Authorizations, advertising and promotion
documents, adverse event files, complaint files and Manufacturing records. 



        “Restricted
Access Period” shall mean the period commencing on the Commencement Date and
ending on the date of the later to occur of (a) three hundred and sixty five (365) days
after such date, in the event that Palomar delivers to Gillette the Initial Prototypes on
or before the Commencement Date, or (b) the sum of (i) the number of days after the
Commencement Date until Palomar delivers to Gillette the Initial Prototypes and (ii) three
hundred and sixty five (365) days, in the event that Palomar delivers to Gillette the
Initial Prototypes after the Commencement Date. 



        “R&D”
shall mean research and development. 



        “R&D
Activities” shall mean those tests, studies and other activities set forth in, or
required in order to obtain the information set forth in, the R&D Plan and such other
tests, studies and other activities as may be specified from time to time by the R&D
Committee with respect to the subject Female Product. 



        “R&D
Program” shall mean the program of R&D Activities carried out by the parties
pursuant to the R&D Plan. 



        “Safety
and Efficacy Standards” shall mean, with respect to a Subject Male Product, (a) a
demonstrated safety performance at least as safe as the prototype Female Product presented
by Palomar to Gillette on May 6 and 7, 2002, and (b) a resulting hair growth clearance
period longer than the period resulting from shaving with a conventional blade device, in
each case as evidenced by studies at least as stringent as those provided by Palomar to
Gillette on May 6 and 7, 2002. 



        “Second
Decision Point” shall mean thirty (30) days after the Commercial Assessment
Period Termination Date. 



        “Second
Development Completion Payment Date” shall mean the date of the Second Decision
Point. 



-xiv- 










        “Territory”
shall mean the entire world. 



        “Third
Party” shall mean any Person other than The Gillette Company, Palomar Medical
Technologies, Inc. and their respective Affiliates or individuals who are their employees
or agents when acting in that capacity. 



        “Third
Party Collaboration” shall mean, in the case of either Gillette or Palomar, a
collaboration with a Third Party with respect to a product, system or other technology
with respect to which Gillette or Palomar, as the case may be, has material co-development
obligations or co-promotion rights or co-marketing rights. 



        “Trademark”
shall include any word, name, symbol, color, designation or device or any combination
thereof, including any trademark, trade dress, brand mark, trade name, brand name, logo or
business symbol. 



        “TTP”
shall mean a technology transfer payment. 



        “Valid
Claim” shall mean (i) for all Patents, with respect to a particular country,
a claim of an issued and unexpired Patent in such country that has not been revoked or
held permanently unenforceable or invalid by a decision of a court or governmental agency
of competent jurisdiction from which no appeal can be taken or has been taken within the
time allowed for appeal, and has not been abandoned, disclaimed, denied or admitted to be
invalid or unenforceable through reissue or disclaimer or otherwise in such country, and
(ii) for all MGH Patents and MGH Joint Patents but no other Patents, with respect to
a particular country, an MGH Valid Claim. 



        Terms
Defined Elsewhere in this Agreement. The following terms, whether used in the singular
or the plural and correlatives thereof, are defined in the applicable Sections of this
Agreement. 







	Defined Term  	 	Section  
	"Acquiring Party" 	  	Section 14.2 
	"ADR" 	  	Section 13.2(a) 
	"Advanced CUT Female Product Costs" 	  	Section 3.2 
	"Additional Activities" 	  	Section 1.8(a) 
	"Additional Light-Based Hair Management Product" 	  	Section 1.7 
	"Additional Product Report" 	  	Section 1.7 
	"Agreement" 	  	Preamble 
	"Annual Exclusivity Collaboration Payment" 	  	Section 6.1(g) 
	"Annual Exclusivity Collaboration Period" 	  	Section 6.1(g) 
	"Authorized Overruns" 	  	Section 1.8(a)(i)(2) 
	"Commencement Date" 	  	Section 1.1(c) 






	


-xv- 











	Defined Term  	 	Section  
	"Commercial Assessment Period Additional Activities" 	  	Section 2.2(a) 
	"Confidential Information" 	  	Section 9.3(a) 
	"Cure Period" 	  	Section 10.3 
	"CUT Female Product" 	  	Section 3.1(a) 
	"CUT Product Specifications" 	  	Section 3.1(b) 
	"Delivery Date" 	  	Section 3.1(c) 
	"Development Completion Payments" 	  	Section 6.1(d)(i) 
	"Disclosure Schedule" 	  	Section 12.1 
	"Dispute" 	  	Section 13.1 
	"Dispute Notice" 	  	Section 12.3(a)(i) 
	"Effective Date" 	  	Preamble 
	"Estimate" 	  	Section 1.8(a)(2) 
	"Evaluation Materials" 	  	Section 5.1(b)(ii) 
	"Exclusivity Payment Date" 	  	Section 6.1(g) 
	"Failure to Launch Payments" 	  	Section 2.1(b)(ii) 
	"Female Product Payment Rate" 	  	Section 6.1(h) 
	"First Development Completion Payment" 	  	Section 6.1(d)(i) 
	"First Press Release" 	  	Section 9.5 
	"Gillette" 	  	Preamble 
	"Gillette Controlled Information" 	  	Section 9.1(c) 
	"Gillette Exclusive Licenses" 	  	Section 8.3(a)(i) 
	"Gillette Exclusive License Period" 	  	Section 8.3(a)(i) 
	Gillette License Agreement 	  	Section 5.3(b)(i) 
	Gillette Licensee 	  	Section 5.3(b)(i) 
	"Indemnification Claim Notice" 	  	Section 11.3(a) 
	"Indemnified Party" 	  	Section 11.3(a) 
	"Independent Product Payment Rate" 	  	Section 6.4 
	"Infringement Suit" 	  	Section 8.5(c)(i) 
	"Initial Gillette Specifications" 	  	Section 5.4(a)(i)(1) 
	"Initial R&D Plan" 	  	Section 1.1(a) 
	"In-License Agreement" 	  	Section 12.3(f) 
	"Invoiced Sales" 	  	Definition of "Net Sales" 
	"Launch Decision" 	  	Section 2.3 
	"Licensed Palomar Patents" 	  	Section 12.3(f) 
	"Female Product Payment Rate" 	  	Section 6.1(h) 
	"Palomar" 	  	Preamble 
	"Losses" 	  	Section 11.1 
	"Male Collaboration Agreement" 	  	Section 5.1(c) 
	"Male Option" 	  	Section 5.1(a) 
	"Male Product" 	  	Section 5.1(a) 
	"Male Product Opportunity" 	  	Section 5.1(b) 
	"Manufacturing Cost" 	  	Section 3.2 
	"Manufacturing Fee" 	  	Section 3.2 






	


-xvi- 











	Defined Term  	 	Section  
	"MGH Joint Invention" 	  	Section 8.1(c)(ii)(2) 
	"MGH Joint Know-How" 	  	Section 8.1(c)(ii)(2) 
	"MGH Joint Patents" 	  	Section 8.1(c)(ii)(2) 
	"MGH Joint Technology" 	  	Section 8.1(c)(ii)(2) 
	"Neutral" 	  	Section 13.2(a) 
	"Non-Disclosure Agreement" 	  	Section 9.8 
	"Non-Product Components" 	  	Definition of Net Sales 
	"Offer" 	  	Section 10.1(b) 
	"Offer Period" 	  	Section 10.1(b) 
	"Opportunity Notice" 	  	Section 5.1(b) 
	"Opportunity Notice Effective Date" 	  	Section 5.1(b)(iii) 
	"Option Exercise Notice" 	  	Section 5.1(b)(iv) 
	"Option Exercise Period" 	  	Section 5.1(b)(iv) 
	"Overrun" 	  	Section 1.8(a)(2) 
	"Owned Palomar Patents" 	  	Section 12.3(f) 
	"Palomar Controlled Information" 	  	Section 9.1(b) 
	"Palomar Exclusive Licenses" 	  	Section 8.4(b)(iii) 
	"Palomar Exclusive License Period" 	  	Section 8.4(b)(iii) 
	"Palomar Key Personnel" 	  	Section 1.1(d) 
	"Palomar License Agreement" 	  	Section 5.3(a)(i) 
	"Palomar Licensee" 	  	Section 5.3(a)(i) 
	"Palomar Marks" 	  	Section 2.1(a)(iii)(2) 
	"Palomar Medical Technologies, Inc." 	  	Preamble 
	"Palomar U.S. Regulatory Documentation" 	  	Section 1.2(e) 
	"Permitted Confidants" 	  	Section 9.1(a) 
	"Product/Service Payment Rate" 	  	Section 6.5 
	"R&D Advance Payment" 	  	Section 6.1(b) 
	"R&D Payments" 	  	Section 6.1(a) 
	"R&D Committee" 	  	Section 1.4(a) 
	"R&D Committee Chair" 	  	Section 1.4(c) 
	"R&D Committee Leader" 	  	Section 1.4(b) 
	"R&D Leader" 	  	Section 1.1(d) 
	"R&D Period" 	  	Section 1.1(c) 
	"R&D Plan" 	  	Section 1.1(a) 
	"R&D Plan Subcontracted Activities" 	  	Section 1.1(e) 
	"SEC" 	  	Section 9.5 
	"Second Development Completion Payment" 	  	Section 6.1(d)(i) 
	"Subject Male Product" 	  	Section 5.1(b)(1) 
	"Supplemental R&D Plan" 	  	Section 1.7 
	"Supplemental R&D Payments" 	  	Section 1.7 
	"Ten-Day Notice" 	  	Section 3.1(a) 
	"Terms and Conditions" 	  	Section 13.2(b) 
	"The Gillette Company" 	  	Preamble 
	"Third Party Claim" 	  	Section 11.1 






	


-xvii- 











	Defined Term  	 	Section  
	"Total CUT Supply" 	  	Section 3.1(c) 






	


-xviii- 











Exhibit A 




R&D Plan 



** This material has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the SEC. An aggregate of 17 pages were omitted pursuant to a
request for confidential treatment and filed separately with the SEC.











Schedule 1.1(d) 




Key Personnel 





			Percent of Time
	Name and Title 	Responsibilities  	Committed to Project 





	


** This material has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the SEC. An aggregate of 17 pages were omitted pursuant to a
request for confidential treatment and filed separately with the SEC.











Schedule 12.1 




Disclosure Schedule 



** This material has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the SEC. An aggregate of 17 pages were omitted pursuant to a
request for confidential treatment and filed separately with the SEC.



     12.3(h) and (l) 



             Palomar Medical Technologies, Inc. v. Lumenis, Ltd., Lumenis, Inc. ESC Medical Systems, Inc., and ESC/Sharplan Laser
Industries Ltd., Trial Court, Superior Court Dept., Commonwealth of Massachusetts, Civ. Act. No. 02-4565, filed October 29, 2002.



             Lumenis, Inc., v. Palomar Medical Technologies, Inc. and The General Hospital Corporation, United States District Court,
Northern District of California, Civ. Act. No. 02-5176, filed October 24, 2002.



             Palomar Medical Technologies, Inc. and The General Hospital Corporation v. Altus Medical, Inc. v. Palomar Medical
Technologies, Inc. and The General Hospital Corporation, United States District Court, District of Massachusetts, Civ. Act. No. 02-10258-RWZ. 



** This material has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the SEC. An aggregate of 17 pages were omitted pursuant to a
request for confidential treatment and filed separately with the SEC.









Schedule 12.3(f) 




Palomar Patents 




12.3(f)(i): Owned Palomar
Patents  



** This material has been omitted
pursuant to a request for confidential treatment and has been filed separately with the
SEC. An aggregate of 17 pages were omitted pursuant to a request for confidential
treatment and filed separately with the SEC. 



12.3(f)(ii): Licensed
Palomar Patents  



** This material has been omitted
pursuant to a request for confidential treatment and has been filed separately with the
SEC. An aggregate of 17 pages were omitted pursuant to a request for confidential
treatment and filed separately with the SEC. 



12.3(f)(iii): In-License
Agreements  



** This material has been omitted
pursuant to a request for confidential treatment and has been filed separately with the
SEC. An aggregate of 17 pages were omitted pursuant to a request for confidential
treatment and filed separately with the SEC. 










Schedule A-1 




Core Palomar Patents 



** This material has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the SEC. An aggregate of 17 pages were omitted pursuant to a
request for confidential treatment and filed separately with the SEC. 










Schedule A-2 




Costs 



**This material has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the SEC. An aggregate of 17 pages were omitted pursuant to a
request for confidential treatment and filed separately with the SEC. 










Schedule A-3 




MGH Patents 



** This material has been
omitted pursuant to a request for confidential treatment and has been filed
separately with the SEC. An aggregate of 17 pages were omitted pursuant to a
request for confidential treatment and filed separately with the SEC. 


























DEVELOPMENT AND
LICENSE AGREEMENT 




BETWEEN 




THE GILLETTE COMPANY 




AND 




PALOMAR MEDICAL TECHNOLOGIES,
INC. 




EFFECTIVE AS OF
FEBRUARY 14, 2003