exv10w24



 






EXHIBIT 10.24




 




NON-EXCLUSIVE PATENT LICENSE




     THIS
NON-EXCLUSIVE PATENT LICENSE (this “Agreement”) is made and entered into as of the 29th
day of March, 2007 (the “Effective Date”), by and among Palomar Medical Technologies, Inc., a
Delaware corporation, with offices at 82 Cambridge Street, Burlington, MA 01803 (“Palomar”), Alma
Lasers, Inc., a Delaware corporation, with offices at 485 Half Day Road #100, Buffalo Grove, IL
60089, and Alma Lasers, Ltd., an Israeli company, with offices at 7 Halamish Street, Caesarea
Industrial Park, Caesarea, Israel 38900 (Alma Lasers, Inc. and Alma Lasers, Ltd., collectively,
“Alma”) (Palomar on the one hand, and Alma together with all Alma Affiliates (as defined below) on
the other hand, each a “Party”, and together, the
“Parties”).



WITNESSETH:




     WHEREAS, Palomar and MGH (as defined below), on the one hand, and Alma Lasers, Inc., on the
other hand, are parties to a certain patent-related Lawsuit (as defined in the Settlement Agreement
(as defined below));



     WHEREAS, Palomar and MGH, on the one hand, and Alma Lasers, Inc., on the other hand, have
agreed to enter into that certain Settlement Agreement, to be executed contemporaneously with this
Agreement (the “Settlement Agreement”), pursuant to which Palomar and MGH, on the one hand, and
Alma Lasers, Inc., on the other hand, will settle the patent infringement claims in the Lawsuit
among other things;



     WHEREAS, Palomar has a license from MGH under the Anderson Patents (both as defined below)
relating to the use of light to remove hair; and



     WHEREAS, Alma and Alma Affiliates desire to obtain, and Palomar is willing to grant, a
non-exclusive, royalty-bearing sublicense under the Anderson Patents to develop and commercialize
products developed by Alma and Alma Affiliates under the terms of the Settlement Agreement and the
following terms and conditions.



     NOW THEREFORE, the Parties hereby agree as follows:


1. Definitions. The following terms (and their correlatives), in addition to terms
defined on first use herein, shall have the meanings set forth below:




     1.1. Affiliates. 



          (a) “Alma Affiliate” shall mean any person or entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under common control with
Alma (i) as of the Effective Date or (ii) after the Effective Date
provided such person or entity is not an Excluded Third Party at the time such person or
entity first meets the foregoing control requirements (unless Palomar provides its written consent
in its sole discretion), in each case of clauses (i) and (ii), only for so long as such person or
entity satisfies the foregoing control requirements. For clarity, any Third Party that does not
become an “Alma Affiliate” hereunder because of the reference to “Excluded Third Party” in clause
(ii) above shall continue to be treated as a “Third Party” for all purposes hereunder.




 









 








Non-Exclusive Patent License




          (b) “Palomar Affiliate” shall mean any person or entity that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or is under common
control with Palomar (i) as of the Effective Date or (ii) after the Effective Date, in each case
of clauses (i) and (ii), only for so long as such person or entity satisfies the foregoing
requirements.




          (c) “Affiliates” shall mean, with respect to any Third Party, any person or entity
that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is
under common control with such Third Party, in each case only for so long as such person or entity
satisfies the foregoing requirement.




     For purposes of this Section 1.1, “control” and, with correlative meanings, the terms
“controlled by” and “under common control with” shall mean (i) the possession, directly or
indirectly, of the power to direct the management or policies of an entity, whether through the
ownership of voting securities, by contract relating to voting rights or corporate governance, or
otherwise, or (ii) the ownership, directly or indirectly, of at least fifty percent (50%) of the
voting securities or other ownership interest of an 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” shall be deemed established by direct or indirect
ownership of the maximum ownership percentage that may, under such local law, be owned by foreign
interests.



     1.2. “Alma Modules” shall mean Alma Hair Modules and Alma Other Modules, each as
defined below:



          (a) “Alma Hair Module” shall mean any energy source module, Sold by Alma or Alma
Affiliates, that is marketed as being capable of using or uses or is incorporated into a product
or system that uses optical radiation to remove hair. For clarity and without limitation, if in
addition to using optical radiation to remove hair, an Alma Hair Module may be used for the
treatment of skin (including treatment of vascular and pigmented lesions, acne, fat, cellulite,
wrinkles, scars and tattoos, skin tightening, and for other dermatological applications), or
other treatment or cosmetic purpose(s), it shall in all events remain an “Alma Hair Module”
hereunder.




          (b) “Alma Other Module” shall mean any energy source module, Sold by Alma or Alma
Affiliates, that is marketed as being capable of using or uses or is incorporated into a product
or system that uses optical radiation for the treatment of skin (including treatment of vascular
and pigmented lesions, acne, fat, cellulite, wrinkles, scars and tattoos, skin tightening, and
for other dermatological applications) or other treatment or cosmetic purposes, other than hair
removal; in all events, other than an Alma Hair Module.




     1.3. “Alma Products” shall mean Alma Hair Products and Alma Combination Products, each
as defined below. “Alma Other Product” shall mean any product, system,
component or accessory, Sold by Alma or Alma Affiliates, that (i) is not an Alma Product, and
(ii) that is marketed as being capable of using or uses or is incorporated into a product or system
that uses one or more Alma Other Modules. As of the Effective Date, there are no “Alma Other
Products” for purposes of this Agreement.



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Non-Exclusive Patent License




          (a) “Alma Combination Product” shall mean any product, system, component or
accessory, Sold by Alma or Alma Affiliates, (i) that as of the date of its Sale, is marketed as
being capable of using both at least one Alma Other Module and at least one Alma Hair Module, and
(ii) the manufacture, use, sale, offering for sale, or importation of which with an Alma Hair
Module, absent the sublicense granted by Palomar herein, would infringe a Valid Claim of the
Anderson Patents. For clarity and without limitation, Exhibit A lists Alma Combination Products
in existence up to the Effective Date and sets forth examples of when an Alma Other Product or an
Alma Hair Product shall become an “Alma Combination Product” hereunder (and an example of a
marketing technique which does not change an Alma Hair Product into an “Alma Combination Product”
hereunder).




          (b) “Alma Hair Product” shall mean any product, system, component or accessory, Sold
by Alma or Alma Affiliates, (i) that contains an Alma Hair Module, (ii) the manufacture, use,
sale, offering for sale, or importation of which, absent the sublicense granted by Palomar
herein, would infringe a Valid Claim of the Anderson Patents, and (iii) that as of its date of
Sale, is not marketed for use in combination with an Alma Other Module. For clarity and without
limitation, Exhibit B provides additional clarifications and lists items that are Alma Hair
Products in existence up to the Effective Date.




     1.4. “Alma Sublicensee” shall mean any Third Party to which Alma or an Alma Affiliate
grants a permitted sublicense pursuant to Section 2.2 under the sublicense grant from Palomar in
Section 2.1.



     1.5. “Anderson Patents” shall mean (i) the Patents set forth on Exhibit C, and (ii)
all other Patents that claim the right of priority to, or enjoy the benefit of an earlier filing
date of, in whole or in part, directly or indirectly, one or more of the Patents identified in the
immediately preceding clause (i).



     1.6. “Consumer Field” shall mean the field in which products or systems are intended
for or marketed to consumers for personal use. For the avoidance of doubt, the “Consumer Field”
shall exclude products or systems in the Professional Field.



     1.7. “Excluded Third Party” shall mean any Third Party and its Affiliates against
which:



          (a) any suit or action involving any Anderson Patent has been instituted between Palomar or
any Palomar Affiliates and such Third Party or any of its Affiliates; or




          (b) Palomar or any of Palomar Affiliates has an outstanding injunction pertaining to
infringement of the Anderson Patents;



provided, however, that an Excluded Third Party to which Palomar grants a non-exclusive sublicense
under the Anderson Patents within the Professional Field, which sublicense agreement has materially
the same terms as this Agreement, shall no longer be deemed an “Excluded Third Party” hereunder
effective upon the effective date of such sublicense grant; provided, further, that in the event of
an Acquisition (as defined in Section 2.2(e)), such sublicense granted to such Third Party and the
terms of such sublicense agreement (and not this Agreement) shall apply to such Third Party’s
product(s) and technology, and improvements and derivatives thereto.



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Non-Exclusive Patent License




     1.8. “Gillette” shall mean The Gillette Company, and its successors and permitted
assigns of the Gillette Agreement.



     1.9. “Gillette Agreement” shall mean that certain “Amended and Restated


Development and License Agreement” between Palomar and The Gillette Company entered into as of
February 14, 2007 and effective as of February 14, 2003, as such agreement is amended as of the
Effective Date, including the Amendment to the “Amended and Restated Development and License
Agreement” between Palomar and The Gillette Company entered into as of February 14, 2007 and
effective as of February 14, 2003, and as such agreement may be amended or restated thereafter in a
manner that is not materially inconsistent with the terms of this Agreement. A copy of the Gillette
Agreement, excluding exhibits thereto and redactions of other commercially sensitive information,
as amended as of the Effective Date is attached hereto at Appendix A.



     1.10. “Licensed Products” shall mean Alma Products (including those Alma Hair Modules
that alone amount to an “Alma Product” hereunder), provided in each case that such Alma Product is
Sold, marketed, promoted and branded primarily as a product of Alma or one or more of Alma
Affiliates. For clarity, Licensed Products may include future energy source modules, products,
systems, components or accessories Sold by Alma or Alma Affiliates after the Effective Date, as
long as such energy source module, product, system, component and accessory satisfies in full the
definitional requirements for a “Licensed Product” (and its subsidiary definitions) hereunder.



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



     1.12. “MGH Agreement” shall mean that certain “License Agreement” between Palomar and
MGH dated as of August 18, 1995, 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 materially inconsistent
with the terms of this Agreement. A copy of the MGH Agreement, as redacted, as amended as of the
Effective Date is attached hereto at Appendix B.



     1.13. “Net Sales” shall mean, subject to the remainder of this Section 1.13, all
amounts invoiced by Alma and Alma Affiliates, for the Sale to Third Parties of Licensed Products
(collectively, the “Actual Amounts”), less: (i) allowances and adjustments actually
credited to customers for damaged and returned product (which allowances and adjustments may be
taken only on a product-by-product basis, that is an allowance or adjustment on one product, for
example, Sonata System, shall not be taken against Sales of another type of product, for example, a
Soprano System or Harmony System); (ii) promotional, trade, quantity, cash and prompt payment
discounts separately identified on the invoice and actually allowed and taken; and (iii) Third
Party charges of the following kinds collected by the seller from the buyer and separately
identified on the invoice: transportation charges, insurance charges for transportation, sales
taxes, excise taxes and customs duties, and governmental charges levied on or measured by the sale;
provided that: (1) no deductions shall be made from Actual Amounts for any royalties owed or paid
to any person or entity; and (2) Net Sales shall include upgrades or additions to, or partial
replacements for, Licensed Products, where upgrades include but are not limited to swapping a new
Licensed Product for a buyer’s existing product.



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Non-Exclusive Patent License




     For clarity and without limitation, this definition of Net Sales includes Alma
Combination Products which do not include an Alma Hair Module for which no royalties are due
Palomar hereunder for their Sale. However, as provided in Section 4.4, subsequent Sales of Alma
Hair Modules for use with such Alma Combination Products shall affect royalties owed to Palomar.
Thus, it shall be necessary to determine and keep records of the Net Sales attributable to all such
Licensed Products. As a consequence, inclusion of a Licensed Product in this definition of Net
Sales, by itself, shall not indicate that royalties are necessarily due Palomar hereunder on the
Sale of such Licensed Product.



     The following paragraphs provide additional non-limiting examples for calculating Net Sales
hereunder:




	 	•	 	Trade-in of a first Alma Product (such as a Sonata System) in connection with the
Sale of a second Alma Product (such as a Soprano System) shall be treated as follows:
(i) the Net Sales attributed to the Sale of such second Alma Product (a) shall not
include any deduction or other reduction for the trade-in given by Alma for such first
Alma Product, unless Alma paid royalties to Palomar hereunder upon the Sale of such
first Alma Product (e.g., there shall be no such deduction or other reduction when
such first Alma Product is an Alma Other Product), and (b) shall be calculated as set
forth in this definition, and such Sale of such second Alma Product shall be subject
to the royalty obligations set forth in Section 4.4, and (ii) the Net Sales
attributable to any re-Sale of such first Alma Product shall be calculated as set
forth in this definition, and such re-Sale of such first Alma Product shall be subject
to the royalty obligations set forth in Section 4.4. For example, without limiting the
generality of the foregoing, if a customer purchases from Alma a Sonata System for
$60,000 before January 1, 2008, then under Section 4.4, Alma is obligated to pay
Palomar a royalty of $5,100 on such Sale of the Sonata System (8.5% of $60,000). If
that customer then purchases from Alma a Soprano System for $120,000 and is provided a
credit of $20,000 in connection with a trade-in of such Sonata System that such
customer previously purchased before January 1, 2008 (thus paying Alma $100,000), then
under Section 4.4, Alma is obligated to pay Palomar a royalty of $8,500 on such Sale of
the Soprano System (8.5% of $100,000) and no amount shall be due hereunder for the
$20,000 credit provided for the Sonata System. If Alma then re-Sells the traded-in
Sonata System for $40,000 before January 1, 2008, then under Section 4.4, Alma is
obligated to pay Palomar a royalty of $3,400 on such re-Sale of the traded-in Sonata
System (8.5% of $40,000).
	 
	 	•	 	Installation charges, whether or not separately invoiced or identified on
an invoice, shall not be deducted from the Actual Amounts.
	 
	 	•	 	Charges for the standard warranty for a Licensed Product, whether or not
separately invoiced or identified on an invoice, shall not be deducted from the
Actual Amounts. However, charges separately identified on an invoice for an extended
warranty (after deducting appropriate charges for the standard warranty) may be
deducted from Actual Amounts.




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Non-Exclusive Patent License





	 	•	 	Charges for standard or basic training (often referred to as inservice training
or initial training) or any training by Alma or Alma Affiliates (collectively
referred to as “Standard Training”) for a Licensed Product, whether or not
separately invoiced or identified on an invoice, shall not be deducted from the
Actual Amounts. However, charges separately identified on an invoice for additional
training by a Third Party (after deducting appropriate charges for the Standard
Training, if such Third Party is to provide the Standard Training) may be deducted
from Actual Amounts.
	 
	 	•	 	Excluding physically separate light-based systems which are covered in the
following paragraph on Bundled Packages, charges for other products, accessories,
parts or items listed on an invoice along with a Licensed Product, with no separate
and distinct price set forth for those other products, accessories, parts or items
on the invoice in question, shall not be deducted from Actual Amounts.





     If Alma or any Alma Affiliate Sells one or more Licensed Product(s), in combination with
other, physically separate light-based systems that are not Licensed Products at a
single price (a “Bundled Package”), then the Net Sales attributable to such Licensed
Product(s), for the purpose of determining Net Sales attributable hereunder, shall be calculated by
multiplying the Net Sales of such Bundled Package by the fraction A/(A+B), where A is the average
Net Sales price of Licensed Product(s) in the relevant country during the applicable calendar
quarter as Sold separately in bona fide arms-length transactions by the selling party (i.e., Alma
or an Alma Affiliate, who shall be deemed to be a “Selling Party”), and B is the total
average Net Sales price of all other light-based system(s) in the Bundled Package that are not
Licensed Product(s) in the relevant country during the applicable calendar quarter, as Sold
separately in bona fide arms-length transactions by such Selling Party. If, in any given country
and applicable calendar quarter, the Licensed Product(s) and other light-based system(s) included
in a Bundled Package are not all Sold separately in bona fide arms-length transactions in such
country by the same Selling Party, Net Sales of a Licensed Product(s) included within the Bundled
Package shall be calculated using the formula above, using the average Net Sales price in the
United States for the applicable calendar quarter of the Licensed Product(s) and the other
light-based system(s), again in bona fide arms-length transactions by a single Selling Party. If no
average Net Sales prices of the Licensed Product(s) and the other such light-based system(s) is
available for the United States for the applicable calendar quarter from bona fide arms-length
transactions by a single Selling Party, the Net Sales of the Licensed Product(s) shall be the
aggregate Net Sales of such assemblage of Products without deduction of any kind.



     For clarity, (i) subject to clause (iii) below, transfer of a Licensed Product within Alma or
between Alma and Alma Affiliates for subsequent Sale to a Third Party shall not be considered a
Sale until a Sale is made to a Third Party and the Net Sales shall be based on the Sale to the
Third Party of such Licensed Product by Alma or Alma Affiliates, (ii) a Licensed Product shall be
considered “Sold” upon the earlier of shipment of or receipt of payment for such Licensed Product
or Alma or any Alma Affiliate recognizing revenue with respect to such sale of Licensed Product in
accordance with U.S. generally accepted accounting principles, consistently applied, and all
royalty obligations on Net Sales of such Licensed Product shall accrue upon the time of Sale
regardless of the time of collection by the selling entity, (iii) sales of Licensed Products by



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Non-Exclusive Patent License



Alma Sublicensees (including sales by distributors and subdistributors) shall not give rise to Net
Sales hereunder because those products shall have already been Sold by Alma or Alma Affiliates to
such Alma Sublicensees, with the Net Sales arising from such Sale already accounted for under this
definition; provided, however, that a Sale or transfer of Licensed Products by Alma or Alma
Affiliates to Alma Sublicensees that purchase such Licensed Products for the resale or distribution
of such Licensed Products in the United States shall not be considered a Sale hereunder until a
Sale is made by such Alma Sublicensee or a Third Party distributor in the United States and the Net
Sales shall be based on such Sale of such Licensed Product by such Alma Sublicensee or Third Party distributor in
the United States, (iv) “amounts invoiced” as used above shall include the value of any monetary or
other consideration to be received by Alma or any Alma Affiliates from a Sale of any Licensed
Product, (v) Net Sales shall be deemed to be equal to, for any Licensed Product (a) Sold to any
Third Party for less than the seller is then charging in bona fide arms-length transactions for
comparable products or (b) donated, transferred or given away free of charge, in each case of
clauses (a) and (b), the average Net Sales price of such Licensed Product in bona fide arms-length
transactions by such seller, (vi) all Sales to any distributors shall include the fair market value
of all cash and other consideration received from such distributor, and (vii) all of the amounts
specified in this definition shall be determined from the books and records of Alma and Alma
Affiliates maintained in accordance with U.S. generally accepted accounting principles,
consistently applied.




     1.14. “Patents” shall mean (i) any patents and patent applications and any patents
issuing therefrom worldwide, (ii) any substitutions, divisions, continuations,
continuations-in-part, reissues, renewals, registrations, confirmations, re-examinations,
extensions, supplementary protection certificates, term extensions (under patent or other law),
certificates of invention and the like, of any such patents or patent applications, and (iii) any
foreign or international equivalents of any of the foregoing.



     1.15. “Professional Field” shall mean the field in which products or systems are
intended or marketed for sale to doctors, health care providers, beauty care professionals or other
commercial service providers for use on or with patients or customers (and not for resale to any
person or entity for personal use).



     1.16. “Sale” shall mean, with respect to a Licensed Product, the sale, distribution,
lease, use (including training, preceptorships, marketing and promotional uses), cost-per-shot
arrangements and any other arrangement in which monetary or other consideration is to be received
by Alma or one or more Alma Affiliates for the use of such Licensed Product. For clarity, the
donation, transferring or giving away free of charge of any Licensed Product hereunder shall
constitute a Sale.



     1.17. “Third Party” shall mean any person or entity, other than Palomar, Alma or any
Palomar Affiliates or Alma Affiliates.



     1.18. “Valid Claim” shall mean either (i) a claim of an issued and unexpired Patent
which has not been revoked or held permanently unenforceable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, and which has not been admitted to be invalid or unenforceable through
opposition, reissue, re-examination or disclaimer or otherwise, or (ii) a



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claim of a pending application for a Patent 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.




2. License Grants.




     2.1.
Sublicense Grant by Palomar. Subject to the terms and conditions of this
Agreement, Palomar hereby grants to Alma and Alma Affiliates a worldwide, royalty-bearing,
non-exclusive sublicense, under the Anderson Patents, to make, use, sell, offer for sale and import
Licensed Products (provided that those Alma Hair Modules that alone amount to an “Alma Product”
hereunder are used exclusively with other Alma Products or Alma Other Products and no other
products or systems of Alma, Alma Affiliates or any Third Parties), in each case only for hair
removal and only outside of the Consumer Field. It is understood and agreed that (i) the foregoing
sublicense grant shall cover only those Licensed Products Sold for which royalties are paid to
Palomar hereunder as provided in Section 4 (including with respect to Sales of Licensed Products
occurring before the Effective Date for which Alma pays royalties hereunder as specified in Section
4.2), (ii) the foregoing sublicense grant automatically extends, without any further action by Alma
or any Alma Affiliates, to each person and entity that is an “Alma Affiliate” as of the Effective
Date or becomes an “Alma Affiliate” thereafter, but only for so long as such person or entity
remains an “Alma Affiliate” hereunder, and (iii) Palomar shall be in direct privity under this
Agreement with any Alma Affiliate as a result of such sublicense grant.



     2.2. Related Licensing Provisions. 




          (a)
Limited Sublicensing Rights. Alma and Alma Affiliates shall not have any right to
grant to any Third Parties any further sublicenses under the sublicense grant set forth in Section
2.1, nor shall any purported sublicenses under such sublicense grants made by Alma or any Alma
Affiliates or any of their sublicensees prior to the Effective Date be valid or enforceable, except
Alma, and only those Alma Affiliates that are wholly-owned by Alma (directly or indirectly, and
taking into account any local law restrictions as noted in Section 1.1) and no other Alma
Affiliates, may grant sublicenses only as may be necessary for (i) Third Parties to distribute
Licensed Products Sold by Alma or Alma Affiliates and for which royalties are payable to Palomar on
Net Sales hereunder, or (ii) the manufacture of Licensed Products by Third Parties for sale only to
Alma or Alma Affiliates and for which royalties are payable to Palomar on later Net Sales hereunder
of such Licensed Products by Alma or Alma Affiliates, provided that, for each of clauses (i) and
(ii), any such Third Parties are not Excluded Third Parties, and further provided that any such
sublicense grants shall apply only to activities occurring on or after the actual date such
sublicense grant is first memorialized in writing (and not before). Alma Sublicensees shall not
have the right to grant any sublicenses under any such sublicense grant by Alma or Alma Affiliates.
Alma shall be responsible to Palomar for the performance of any Alma Affiliates and Alma
Sublicensees under any provisions of this Agreement for which Alma or any Alma Affiliate is responsible, even if such person or
entity is also responsible to Palomar. No purchaser of any Licensed Product shall, by operation of
this Agreement, receive any license, sublicense or other rights in, to or under the Anderson
Patents that exceeds the scope and terms of the sublicense grant set forth in Section 2.1,
notwithstanding the patent exhaustion/first sale doctrine. Apart from the foregoing limited right
to grant further sublicenses, Alma and Alma Affiliates shall not have any right to



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make an Assignment or otherwise Transfer such sublicense grant except pursuant to Section
9.3.




          (b) License Field Limitation. Notwithstanding anything contained herein to the
contrary, (i) Alma and Alma Affiliates shall not exercise, (ii) Alma shall not allow any Alma
Affiliates or Alma Sublicensees to exercise, and (iii) with respect to any distributor, sublicense
or other agreements entered into by Alma or any Alma Affiliates, or purchase orders issued or
accepted by Alma or any Alma Affiliates, in each case after the Effective Date, Alma shall
expressly prohibit in writing all Alma Affiliates and Alma Sublicensees from exercising, the
sublicense grant provided for in Section 2.1 within the Consumer Field. With respect to not
allowing certain activities by Alma Sublicensees as set forth in clause (ii) of the 1st
sentence of this Section 2.2(b), the Parties understand and agree that, without limiting Alma and
an Alma Affiliate’s obligations under such clause, once Alma or any Alma Affiliate learns of any
violation of their obligations not to allow any Alma Sublicensee to conduct those prohibited
activities, Alma and Alma Affiliates shall promptly use commercially reasonable efforts to end all
such prohibited activities by such Alma Sublicensee within a commercially reasonable time period,
and if unable to end all such prohibited activities by such efforts, shall in all events within six
(6) months of first learning of any such prohibited activities by such Alma Sublicensee: (x)
terminate the sublicense to such Alma Sublicensee; and (y) stop Selling (directly or indirectly
through other Alma Sublicensees or otherwise) Licensed Products to such Alma Sublicensee. If
Palomar notifies Alma in writing of any Alma Sublicensee conducting any such prohibited activities,
Alma shall thereafter confirm in writing to Palomar that Alma has complied with the immediately
preceding sentence for such Alma Sublicensee.




          (c) Patent Marking. Alma and Alma Affiliates shall mark all Licensed Products Sold
after the Effective Date in accordance with the patent laws, if any, of the jurisdictions in which
such Licensed Products are manufactured, used or Sold. Without limitation, Alma and Alma
Affiliates shall mark all Licensed Products Sold in the United States after the Effective Date
with the applicable U.S. patent numbers of the applicable Anderson Patents.




          (d) Palomar’s Right to Grant Other Sublicenses. Subject to the terms of this
Agreement, Palomar retains the right to grant sublicenses and other rights in and to the Anderson
Patents as Palomar may deem appropriate in its sole discretion.




          (e) Excluded Third Parties. The Parties intend that no Excluded Third Party, or any of
their products or other technology, is to be granted any rights under the Anderson Patents
sublicensed by Palomar under Section 2.1, either through the direct sublicense from Palomar to Alma
and Alma Affiliates under Section 2.1 or as an Alma Sublicensee. Thus, the Parties have agreed to
preclude any Excluded Third Party from becoming an “Alma Affiliate” hereunder as provided in
Section 1.1(a), and further have agreed to preclude any Assignment of this Agreement by Alma or any
Alma Affiliate to or otherwise involving any Excluded Third Party under Section 9.3. Further, Alma
and Alma Affiliates hereby agree that to the extent that any of them acquires any rights or
interest in or to any product(s) or other technology from any person or entity while or after such
person or entity is an “Excluded Third Party” hereunder, whether by Assignment under Section 9.3,
asset purchase or sale, bankruptcy, conveyance, lease, distribution arrangement, manufacturing
arrangement



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(including any foundry arrangement), license, sublicense, option, other transfer or any other
transaction of any type (any such transaction, an “Acquisition”), the sublicense grant set forth
in Section 2.1 (or any sublicense thereunder granted pursuant to Section 2.2) shall not apply to
such product(s) or technology or any improvements or derivatives thereto (even if such person or
entity at some time after the applicable Acquisition is no longer an “Excluded Third Party”
hereunder, whether pursuant to the provisos set forth in Section 1.7 or otherwise), and Palomar
and its sublicensees shall retain any and all rights to enforce the Anderson Patents against
Alma, Alma Affiliates, such Excluded Third Party or any other Third Party with respect to the
same.




          (f) Prosecution. As between the Parties, Palomar shall have the sole right, but not
the obligation, in its sole discretion (subject to the MGH Agreement) to prosecute, maintain,
enforce and defend the Anderson Patents, and Alma and Alma Affiliates shall have no rights with
respect to any such activities.




          (g)
Other Transactions. Palomar may assign, convey, sell, lease, encumber, license,
sublicense or otherwise transfer to or grant any right in or to (collectively, “Transfer”) a
Third Party or Palomar Affiliate any and all of the Anderson Patents or the MGH Agreement,
provided that any such transaction is made subject to the sublicense grant to Alma and Alma
Affiliates set forth in Section 2.1 and shall not impose any additional obligations on Alma or
Alma Affiliates.




          (h)
Licensing Fees. Except as otherwise expressly provided herein, any amounts or
other consideration owed by Palomar to any Third Party or Palomar Affiliate on account of the
sublicense grant to Alma and Alma Affiliates set forth in Section 2.1 shall be the sole
responsibility of Palomar.




     2.3.
MGH Agreement. Palomar represents and warrants to Alma that the MGH Agreement, as
redacted and attached hereto as Appendix B, is true and complete and in effect as of the
Effective Date. In the event that the MGH Agreement is terminated for
any reason before the expiration of all of the Valid Claims of the Anderson Patents, Alma and
Alma Affiliates shall no longer have any further patent royalty obligations to Palomar under this
Agreement from the date of such termination (other than for patent royalty obligations accrued
hereunder before such date). Notwithstanding anything contained herein to the contrary, Palomar
shall have no liability of any kind whatsoever as a result of any such termination.



     2.4.
No Other Rights. Alma acknowledges and agrees that, as between the Parties,
Palomar and MGH have all right, title and interest in and to the Anderson Patents, and that Alma
and Alma Affiliates shall acquire no right, title or interest in or to the Anderson Patents, by
implication, estoppel or otherwise, other than the sublicense grant to Alma and Alma Affiliates set
forth in Section 2.1 or as otherwise expressly provided herein.



3.
Other Obligations of Alma.




     3.1.
Definitions for this Section 3.



          (a) “Exploit” shall mean to make, have made, import, use, sell, or offer for sale,
including to research, develop, register, modify, enhance, improve, Manufacture, have



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Manufactured, formulate, have used, export, transport, distribute, promote, market or have sold
or otherwise dispose of.




          (b) “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.




          (c) “Manufacture” 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.




     3.2. Covenants.



          (a) For as long as the sublicense grant by Palomar to Alma and Alma Affiliates set forth in
Section 2.1 is in effect (the “Sublicense Term”), Alma and Alma Affiliates shall not Exploit or
otherwise practice the sublicenses to the Anderson Patents granted to Alma and Alma Affiliates by
Palomar under Section 2.1 by:




               (i) developing any Licensed Products intended by Alma or any Alma Affiliates for use (in whole
or in part) in the Consumer Field;



               (ii) marketing any Licensed Products in the Consumer Field; or



               (iii) developing or commercializing in or outside the Consumer 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 Alma or any Alma
Affiliate 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 3.2(a)(iii). All capitalized terms used in this Section 3.2(a)(iii), but
not defined herein, shall have the meanings ascribed to them in the Gillette Agreement.



          (b) During the Sublicense Term, Alma and Alma Affiliates shall label Licensed Products
commercialized outside the Consumer Field pursuant to the sublicense to the Anderson Patents
granted to Alma and Alma Affiliates by Palomar under Section 2.1 with the following phrase (or
similar words which fairly convey such products are for use only outside the Consumer Field):
“not intended for consumer self-use.”




          (c) During the Sublicense Term, Alma and Alma Affiliates shall not, in the development and
commercialization of Licensed Products outside the Consumer Field pursuant to the sublicense to
the Anderson Patents granted to Alma and Alma Affiliates by Palomar under Section 2.1,
intentionally (1) design, modify or otherwise improve any such Licensed Product(s) with the goal
or intent of improving its efficacy or performance in the Consumer Field, or (2) optimize,
induce, support or encourage the use of any such Licensed Products in the Consumer Field.



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          (d) The covenants of Alma and Alma Affiliates contained in
Sections 3.2(a)(i), 3.2(a)(ii) and 3.2(c) shall not prevent Alma or any Alma Affiliates from
conducting any activity, or exercising or granting any licenses or other rights, with respect to
the practice of the Anderson Patents, that has as its goal or intent Exploitation of a product or
system outside the Consumer Field and not Exploitation of a product or system in the Consumer
Field, notwithstanding the possibility that such activity, exercise or grant may have applications
in the Consumer Field.




          (e) All Consumer Field Users (as defined in Section 3.3(a)), other than Palomar, are hereby
granted third-party beneficiary rights to enforce the provisions of this Section 3.2 provided that
Palomar has granted such Consumer Field Users such rights in writing.




     3.3. Economic Adjustments for Off-Label Sales.



          (a) Alma and Alma Affiliates each agrees to make payments to (i) Gillette, (ii) any other
Third Party to which Palomar has granted an exclusive sublicense under the Anderson Patents in a
field that in whole or in part falls within the Consumer Field, and (iii) Palomar (collectively,
“Consumer Field Users”), as appropriate, in the manner set
forth below, to compensate any of them for certain lost profits, if any, resulting from net
off-label purchases during the Sublicense Term of Licensed Products commercialized pursuant to the
sublicense to the Anderson Patents granted to Alma and Alma Affiliates by Palomar under Section
2.1, for use in the Consumer Field.




          (b) In the event that a Consumer Field User shall suffer Lost Profits (calculated in the
manner set forth in Section 3.3(c)) in excess of Five Million Dollars (U.S. $5,000,000) in any
calendar year, then such Consumer Field User may submit a written notice to Alma or any Alma
Affiliate (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) this Agreement. Within one hundred and eighty (180) days after receipt thereof, Alma or the
Alma Affiliate, as applicable, shall (1) remit payment to such Consumer Field User, 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 (U.S. $5,000,000) or (2) provide to such Consumer Field User
a detailed written critique of such calculation, propose a revised calculation of such Consumer
Field User’s Lost Profits based on a new Independent Study, and enclose a copy of such Independent
Study. In the event that Alma or such Alma Affiliate, as applicable, shall propose a revised
calculation, Alma or such Alma Affiliate, as applicable, and such Consumer Field User 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 Alma or such Alma Affiliate, as
applicable, and such Consumer Field User shall fail to reach agreement at such meeting, either of
them may bring a lawsuit in any court of competent jurisdiction to resolve such dispute.




          (c) The Lost Profits of such Consumer Field User for a calendar year during the Sublicense
Term shall be determined as follows. Such Consumer Field User 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




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sales by Alma, Alma Affiliates, Alma Sublicensees and Alma’s agents for such year of Licensed
Products, commercialized pursuant to the sublicense under the Anderson Patents granted to Alma
and Alma Affiliates by Palomar under Section 2.1, that displaced sales by or on behalf of such
Consumer Field User of products, intended for use in the Consumer Field, that use optical
radiation for therapeutic or cosmetic effect, and (B) the sales of such products for such year by
such Consumer Field User and its affiliates, sublicensees and agents that displaced sales of such
Licensed Products by or on behalf of Alma or Alma Affiliates, (C) the average net profit of such
Consumer Field User for each unit of 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 determinations shall be summarized and documented in a
report prepared by such nationally-recognized economic consulting firm (the “Independent
Study”).




          (d) All Consumer Field Users, other than Palomar, are hereby granted third-party beneficiary
rights with respect to the provisions of this Section 3.3 provided that Palomar has granted such
Consumer Field Users such rights in writing.




     3.4.
Other Provisions.



          (a) The provisions of this Section 3 shall apply to Alma Sublicensees to the same extent as
Alma and Alma Affiliates. The provisions of this Section 3 shall be in effect for only as long as
the Sublicense Term, and further shall be in effect with respect to any particular Consumer Field
User for only as long as such Consumer Field User has an exclusive sublicense under the Anderson
Patents in a field that in whole or in part falls within the Consumer Field, provided that the
end of the Sublicense Term shall not affect any obligations of Alma or Alma Affiliates under this
Section 3 that have accrued as of the end of the Sublicense Term.




          (b) Palomar represents and warrants to Alma as of the Effective Date that the Gillette
Agreement, excluding exhibits and redactions of other commercially sensitive information, and
attached hereto as of the Effective Date as Appendix A, is true and complete and in effect as of
the Effective Date.




4.
Compensation.




     4.1.
Flow-Chart. Attached hereto as Exhibit D are flow-charts showing how to
determine royalty payments for the Sale of Licensed Products in accordance with the provisions of
this Section 4. The Parties intend for those flow-charts and the provisions of this Section 4 to be
read and construed as one document in order to understand the royalty obligations hereunder.



     4.2. Patent Royalties Arising from Past Sales.



          (a) Payment. Alma shall pay to Palomar within seven (7) days of the Effective Date Alma’s
good faith estimate (which estimate for Sales of the Harmony System and Aria System to third
party distributors outside the United States accruing before the Effective Date shall be made in
accordance with the assumptions set forth in Section 4.2(d)) of the aggregate amount of royalties
due pursuant to Section 4.4 for Sales of Licensed Products



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(except that the royalty rate applicable to Net Sales of such Licensed Products shall be nine and
one half percent (9.5%) of such Net Sales) by Alma and Alma Affiliates accruing before the
Effective Date, plus interest at the Applicable Rate (as defined in Section 4.2(b)). For clarity,
such Sales shall include Sales of Licensed Products by predecessors in interest to Alma and Alma
Affiliates, including MSQ, Ltd., Orion Lasers, Ltd. and Orion Lasers, Inc. The payment required
by this Section 4.2 shall be made by wire transfer, without deduction for any taxes or other charges, as provided in Section
4.11. The payment required by this Section 4.2 is exclusive of any amounts payable by Alma to
Palomar pursuant to the Settlement Agreement, including pursuant to Section 3(a) of the
Settlement Agreement, or the that certain Trade Dress Settlement Agreement, to be executed
contemporaneously with this Agreement, by and between Palomar and
Alma (the “TDS Agreement”).




          (b) Interest. The payment set forth in Section 4.2(a) will include interest at the Applicable
Rate calculated on a compound basis with a calendar quarterly compounding period from the date in
the middle of the calendar quarter in which the Sale was made until the Effective Date. “Applicable
Rate” shall mean a rate, starting from the first Sale of a Licensed Product until the payment date,
published in The Wall Street Journal, Eastern United States Edition (“WSJ”) as the prime
lending rate.




          (c) Audit. Such Sales of Licensed Products that give rise to the payment in Section 4.2(a) and
applicable interest in Section 4.2(b) shall be auditable for a period of seven (7) years from the
date of each such Sale as contemplated by Sections 4.9 and 4.10, and Alma shall be responsible for
any under-payment of the amount owed Palomar under this Section 4.2 notwithstanding the terms of
this Agreement, the Settlement Agreement or the TDS Agreement (including any release contained in
the Settlement Agreement or TDS Agreement). The Parties acknowledge and agree that Alma shall be
required to pay any initial under-payment under this Section 4.2
(the “Initial Under-Payment”) in full, plus interest at a rate equal to the rate of interest specified in
Section 4.11 (calculated on a compound basis with a monthly compounding period from the date in the
middle of the calendar quarter in which the Sale was made until the date payment is made, or if any
portion of the Initial Under-Payment cannot reasonably be related to any such Sale so as to
determine the start date for such interest calculation, then from January 1, 2006 for such
portion), and not the Applicable Rate, and failure by Alma to pay the Initial Under-Payment, plus
such interest, in full within forty-five (45) days following notice thereof shall constitute a
material breach of this Agreement by Alma. For clarity, only one rate of interest shall apply to
any Sale of Licensed Product, or any portion of Net Sales, not initially reported by Alma that
gives rise to or results in the Initial Under-Payment, which rate of interest shall be equal to the
rate of interest specified in Section 4.11 as determined above and not the Applicable Rate.




          (d) Estimate Assumptions. With respect to Alma’s good faith estimate of the royalties due
pursuant to Section 4.4 for Sales of the Harmony System and Aria System by Alma and Alma Affiliates
to third party distributors outside the United States accruing before the Effective Date only, the
Parties acknowledge and agree that where accurate records are not available as to which Alma Hair
Modules and Alma Other Modules were sold for use with particular base units/consoles by such
distributors to end users the following assumptions are acceptable for purposes of determining such
estimate:




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               (i) As of the Effective Date, the Alma Hair Modules and Alma Other Modules Sold for use with
the Aria System base unit/console will also operate on the Harmony System base unit/console. Alma
hereby represents that to the best of its knowledge the foregoing assumption is true.



               (ii) For purposes of Sections 4.2(d)(iii) and 4.2(d)(iv), any Alma Other Modules that can only
operate on the Harmony System base unit/console shall only be included with and applied toward
Sales of the Harmony System base unit/console.



               (iii) Since only one type of Alma Hair Module is Sold for use with the Harmony System and Aria
System base units/consoles as of the Effective Date, where the number of Alma Hair Modules Sold to
a distributor is less than or equal to the number of Harmony System and Aria System base
units/consoles Sold to such distributor as of the Effective Date, it shall be assumed that no more
than one Alma Hair Module was sold for use with any such particular base unit/console by the
distributor to an end user (with priority given to the Harmony System base units/consoles). For
example, if 9 Alma Hair Modules, 5 Harmony System base units/consoles and 5 Aria System base
units/consoles are Sold to a distributor in the aggregate before the Effective Date, then (A) 1
Alma Hair Module would be deemed to have been Sold for use with each of the 5 Harmony System base
units/consoles, and (B) 1 Alma Hair Module would be deemed to have been Sold for use with each of 4
of the Aria System base units/consoles. If the number of Alma Hair Modules Sold to a distributor is
greater than the number of such base units/consoles Sold to such distributor as of the Effective
Date, the number of Alma Hair Modules Sold to such distributor shall be spread evenly over the
number of such base units/consoles Sold to such distributor (with priority given to the Harmony
System base units/consoles). For example, if 12 Alma Hair Modules, 5 Harmony System base
units/consoles and 5 Aria System base units/consoles are Sold to a distributor in the aggregate
before the Effective Date, then (C) 1 Alma Hair Module would be deemed to have been Sold for use
with each of the 5 Harmony System base units/consoles, (D) 1 additional Alma Hair Module would be
deemed to have been Sold for use with each of 2 of the 5 Harmony System base units/consoles, and
(E) 1 Alma Hair Module would be deemed to have been Sold for use with each of the 5 Aria System
base units/consoles.



               (iv) For purposes of determining the number of Alma Other Modules sold for use with a Harmony
System base unit/console or Aria System base unit/console Sold to a particular distributor, (i) the
total number of Alma Other Modules Sold to a distributor that can be operated on both the Harmony
System and Aria System base units/consoles shall be spread evenly over the number of Harmony System
and Aria System base units/consoles Sold to such distributor (with priority given to the Harmony
System base units/consoles) and (ii) the total number of Alma Other Modules Sold to a distributor
that can only be operated on the Harmony System base unit/console shall be spread evenly over the
number of Harmony System base unit/consoles Sold to such distributor. For example, if Alma or Alma
Affiliates Sold to a particular distributor 5 Harmony System base units/consoles, 5 Aria System
base units/consoles and 24 Alma Other Modules, where such Alma Other Modules are operable on both
the Harmony System and Aria System base units/consoles, in the aggregate before the Effective Date, then:
(A) 2 Alma Other Modules would be deemed to have been Sold for use with each of the 5 Harmony
System base units/consoles, (B) 1 additional Alma Other Module would be deemed to have been Sold
for use with each of 4 of the 5 Harmony System base units/consoles,



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and (C) 2 Alma Other Modules would be deemed to have been Sold for use with each of the 5 Aria
System base units/consoles. If in this example, 10 Alma Other Modules that are not operable on the
Aria System base unit/console were also Sold to the distributor in the aggregate before the
Effective Date, then 2 those Alma Other Modules would be deemed to have been sold for use with each
of the 5 Harmony System base units/consoles.




     4.3.
No Payments for Certain Products.



          (a)
Certain Licensed Products. The Parties acknowledge and agree that no royalties
are due hereunder for the Sale of (1) Alma Other Products, except as provided in Section 4.4(c)
to the extent that an Alma Other Product becomes an Alma Combination Product hereunder, or (2)
Alma Other Modules, except as provided in Section 4.4(c) upon their Sale as part of or for use
with an Alma Combination Product.




          (b)
No Limitation. No provision contained herein, including in this Section 4.3 or
Section 4.4 or the definitions in Section 1, shall limit Palomar’s ability to institute any suit
or action and seek any remedy against Alma or any Alma Affiliate in the event the manufacture,
use, sale, offering for sale, or importation of any Alma Other Product or Alma Other Module
infringes any Valid Claim of the Anderson Patents, even if the same is used in combination with a
Licensed Product for which a license is granted and royalties are paid hereunder.




     4.4.
Royalties Payable by Alma for Net Sales.



          (a) Alma Hair Products and Alma Modules Added Thereto.




               (i) Alma shall pay to Palomar royalties on Net Sales of each Alma Hair Product, in all
countries where the manufacture, use, sale, offer for sale or importation of such Alma Hair Product
infringes a Valid Claim of the Anderson Patents (including without limitation in each country in
which an Anderson Patent has issued, regardless of whether such Anderson Patent is the subject of
an opposition proceeding in such country), equal to eight and one half percent (8.5%) of such Net
Sales accruing on or after the Effective Date and before January 1, 2008 and seven and one half
percent (7.5%) of such Net Sales accruing on or after January 1, 2008, in each case except as
expressly set forth in Section 4.2(a) for Net Sales accruing before the Effective Date.



               (ii) In the event that an Alma Hair Module is Sold for use with a previously Sold Alma Hair
Product, Alma shall pay to Palomar royalties of eight and one half percent (8.5%) on Net Sales
accruing on or after the Effective Date and before January 1, 2008 and seven and one half percent
(7.5%) on Net Sales accruing on or after January 1, 2008, in each case which are attributable to
such Alma Hair Module in all countries where the manufacture, use, sale, offer for sale or
importation of such Alma Hair Module infringes a Valid Claim of the Anderson Patents (including
without limitation in each country in which an Anderson Patent has issued, regardless of whether
such Anderson Patent is the subject of an opposition proceeding in such country), except as
expressly set forth in Section 4.2(a) for Net Sales accruing before the Effective Date.



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               (iii) In the event that an Alma Other Module is Sold for use with a previously Sold Alma Hair
Product, (1) no royalties already paid or owed to Palomar for the previous Sale of such Alma Hair
Product hereunder shall be creditable or refundable and there shall be no right of set-off with
respect thereto, and (2) no royalties shall be owed Palomar hereunder on the Net Sales attributable
to such Alma Other Module.



          (b) Alma Other Products, and Alma Modules Added Thereto.




               (i) No royalties shall be owed Palomar hereunder by Alma on the Sale of Alma Other Products.



               (ii) In the event that an Alma Hair Module is Sold for use with a previously Sold Alma Other
Product, (1) no royalties shall be owed hereunder for the previous Sale of the Alma Other Product,
and (2) Alma shall pay to Palomar royalties of eight and one half percent (8.5%) on Net Sales
accruing on or after the Effective Date and before January 1, 2008 and seven and one half percent
(7.5%) on Net Sales accruing on or after January 1, 2008, in each case attributable to such Alma
Hair Module in all countries where the manufacture, use, sale, offer for sale or importation of
such Alma Hair Module infringes a Valid Claim of the Anderson Patents (including without limitation
in each country in which an Anderson Patent has issued, regardless of whether such Anderson Patent
is the subject of an opposition proceeding in such country).



               (iii) In the event that an Alma Other Module is Sold for use with a previously Sold Alma Other
Product, no royalties shall be owed Palomar hereunder on the Net Sales attributable to such Alma
Other Module.



          (c) Royalties Payable by Alma on Alma Combination Products.




               (i) Amount. Alma shall pay to Palomar an eight and one half percent (8.5%) royalty on the
percentage set forth in the table below of the Aggregate Net Sales (as defined below) accruing on
or after the Effective Date and before January 1, 2008 and a seven and one half percent (7.5%)
royalty on such Aggregate Net Sales accruing on or after January 1, 2008, in each case attributable
to the Sale of each Alma Combination Product, in all countries where the manufacture, use, sale,
offer for sale or importation of such Alma Combination Product infringes a Valid Claim of the Anderson Patents
(including without limitation in each country in which an Anderson Patent has issued, regardless of
whether such Anderson Patent is the subject of an opposition proceeding in such country):



	 	 	 	 	 
	Type of Alma Combination Products	 	Percentage of Aggregate Net
	Number of Alma Hair	 	Number of Alma Other	 	Sales To Use to
Calculate      
	Modules	 	Modules	 	Royalty Amount Owed        
	None

	 	One or more
	 	Zero percent (0%), i.e., no
royalty due
	One or more

	 	None
	 	One hundred percent (100%)
	Only one

	 	One or more
	 	Fifty percent (50%)
	More than one

	 	One or more
	 	Seventy percent (70%)







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               (ii) Calculation of Royalties. For purposes of calculating royalties on the Sale of Alma
Combination Products, and Alma Modules for them, the “Aggregate Net Sales” shall be used, wherein
such term shall mean all of the Net Sales attributable to all the components of a particular Alma
Combination Product, i.e., the Alma Combination Product and all associated Alma Modules, whether
one or more than one Sales were involved. Accordingly, upon each Sale of an Alma Combination
Product, or an Alma Module associated therewith, the royalties due Palomar shall be calculated or
recalculated, as the case may be, as follows:



          (1) On the first Sale of an Alma Combination Product, the royalty shall be calculated as
provided in the table above on the Net Sales attributable to such Alma Combination Product
(including any Alma Modules Sold therewith), which shall be the Aggregate Net Sales for such
purposes;




          (2) For an Alma Combination Product previously Sold, upon the Sale of an Alma Module to be
used with such Alma Combination Product, the Net Sales from clause (1) above and the Net Sales
attributable to such Alma Module shall be summed to give the Aggregate Net Sales, and the royalty
shall be calculated as provided in the table above, with the understanding that the percentage of
Aggregate Net Sales to be used to calculate the royalty owed may change if the type of Alma
Combination Product were to change as a result of the Sale of such Alma Module, and either (A) a
credit shall be taken by Alma if and only to the extent that Alma has already paid royalties on
such Alma Combination Product (and no other Alma Product) in excess of the new royalty calculated,
or (B) an additional amount shall be paid by Alma to Palomar for any increase in the royalties
owed; and




          (3) The process in clause (2) above shall be repeated for each Sale of an Alma Module to be
used with such Alma Combination Product.



Exhibit E sets forth examples of calculating royalties owed for the Sale of Alma Combination
Products.




               (iii) Counting Alma Modules. With respect to the foregoing table in Section 4.4(c)(i), for
purposes of determining the number of Alma Modules associated with a particular Alma Combination
Product:



          (1) Each separate Alma Module shall count as either an Alma Hair Module or an Alma Other
Module, even if such module may be used for multiple treatment purposes (e.g., an Alma Other Module
that was marketed for treatment of both wrinkles and acne would count as one Alma Other Module for
the tally); and




          (2) Each Alma Module may only be associated with a single Alma
Combination Product, even if such Alma Module is used with more than one Alma Combination Product,
and each Alma Module shall be associated with that Alma Combination Product that gives to the
greatest extent possible an equal number of each type of Alma Module to all of the Alma Combination Products that use such Alma Module.




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     4.5. Royalties– General. The following provisions shall apply to all royalties due under any
provision of Section 4:




          (a) Limited Right of Set-Off. Except as expressly provided in Section 4.11 and in Section
4.4(c) for royalties payable pursuant to Section 4.4(c), all royalties owed or paid to Palomar
pursuant to this Section 4 shall be non-creditable and non-refundable and there shall be no right
of set-off with respect thereto, provided that Alma may credit any overpayment made by Alma to
Palomar hereunder against future amounts owed Palomar hereunder but otherwise Palomar shall not
be obligated to reimburse any such over-payment.




          (b) Multi-Sale Licensed Products. Royalties shall be owed to Palomar hereunder no matter
whether a Licensed Product is Sold in a single transaction, or whether the various components of
a Licensed Product are Sold in a series of transactions. By way of example and without
limitation, if a first component of a Licensed Product that by itself is not a Licensed Product
hereunder is Sold (e.g., an item that is used to remove tattoos but is not a Licensed Product
hereunder), and then thereafter a second component of a Licensed Product that, when combined or
used in combination with the first component, produces a Licensed Product hereunder is then Sold
(e.g., a piece that, when used with the item for tattoo removal, produces optical radiation for
hair removal), royalties shall be owed to Palomar on the Net Sales attributable to all the
components that make up the Licensed Product (for this example, the sum of the Net Sales
attributable to the Sale of the item for tattoo removal and the piece for hair removal).




          (c) Country Issues. Royalties shall be owed and payable on Net Sales of Licensed Products in
any country in the world (i.e., not only the United States) where the manufacture, use, sale,
offer for sale or importation of such Licensed Product infringes a Valid Claim of the Anderson
Patents (including without limitation in each country in which an Anderson Patent has issued,
regardless of whether such Anderson Patent is the subject of an opposition proceeding in such
country), subject to the following understanding for the mutual convenience of the Parties: the
determination of whether the manufacture of a Licensed Product infringes a Valid Claim of the
Anderson Patents shall be determined by assuming that the entire Licensed Product for such
infringement analysis is manufactured in each country in which a part of the Licensed Product
that is materially involved in practicing such a Valid Claim occurs. By way of example and
without limitation, if a part of a Licensed Product that is materially involved in practicing
such a Valid Claim is manufactured in a first country, and another part of a Licensed Product is
manufactured in a second country, for purposes of determining if a royalty is owed to Palomar
hereunder on the manufacture of the Licensed Product as a whole, the entire Licensed Product
shall be assumed to be manufactured in the first country, and if such Valid Claim in the first
country would be, in the absence of the sublicense granted in Section 2.1, infringed by such
manufacture, then a royalty shall be owed to Palomar on the Net Sale attributable to the entire
Licensed Product. Similarly, if the part of the Licensed Product that is manufactured in the
second country is also materially involved in practicing a Valid Claim in the second
country and if such Valid Claim in the second country would be, in the absence of the
sublicense granted in Section 2.1, infringed by such manufacture, then a royalty shall be owed to
Palomar on the Net Sale attributable to the entire Licensed Product. The foregoing shall also
apply in the event a Licensed Product is Sold as components in more than one transaction, as
provided in Section 4.5(b).



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          (d) Treatment of Marketing by Others. For purposes of determining whether any module, product,
system, component, accessory or other good or service is a Licensed Product hereunder, it is
understood and agreed that all marketing activities supported directly or indirectly by Alma or one
or more Alma Affiliates or Alma Sublicensees (which support may include, without limitation,
providing any written marketing materials, supporting any clinical trials, or providing any
consideration (including by reducing amounts owed)) shall be attributed to Alma and Alma Affiliates
for such purposes. With respect to attributing certain marketing activities by Alma Sublicensees to
Alma and Alma Affiliates under this Section 4.5(d), the Parties understand and agree that, once
Alma or any Alma Affiliate learns of any such marketing activities by any Alma Sublicensee that
Alma and Alma Affiliates do not want to be attributed to them hereunder (the “Non-Applicable
Activities”), Alma shall notify Palomar in writing of such Non-Applicable Activities and the Alma
Sublicensee(s) involved (unless Palomar first notified Alma of such Non-Applicable Activities,
whereupon Alma shall confirm in writing that it received such notice and intends to take the steps
set forth below), and Alma and Alma Affiliates shall use commercially reasonable efforts to end
such Non-Applicable Activities within a commercially reasonable period of time. If Alma and Alma
Affiliates are able to end all such Non-Applicable Activities within six (6) months of first
learning of any such Non-Applicable Activities, those Non-Applicable Activities shall not be
attributed to Alma and Alma Affiliates hereunder; however, if Alma and Alma Affiliates are unable
to end the Non-Applicable Activities within six (6) months by such efforts, Alma and the Alma
Affiliates shall immediately (x) terminate the sublicense to such Alma Sublicensee, and (y) stop
Selling (directly or indirectly through other Alma Sublicensees or otherwise) Licensed Products to
such Alma Sublicensee.




          (e) Records. In addition to the records that Alma and Alma Affiliates are required to keep
under Section 4.8, Alma shall maintain, and shall cause Alma Affiliates to maintain, such records,
based on the serial number of each Alma Product and Alma Module, to verify any royalty calculation
for Alma Products and Alma Modules, and such records shall be available for audit as provided in
Section 4.10.




          (f) Single Royalty. Without limiting and in addition to any amounts due and payable to Palomar
under the Settlement Agreement, TDS Agreement or any other agreement, Alma shall pay only one
patent royalty under this Agreement on Net Sales attributable to each Licensed Product whether or
not it is covered by more than one claim of the Anderson Patents and whether or not it infringes
the Anderson Patents in more than one country.




          (g) Waiver. By written notice to Alma, Palomar shall have the right to waive, in its sole
discretion, retrospectively or prospectively, any royalties owed or that would otherwise be owed in
the future to Palomar by Alma as a result of this Agreement, and Palomar shall have no liability of
any kind whatsoever as a result of the presence or absence of any waived obligation.



     4.6. Potential Patent Royalty Rate Reduction.




          (a)
Potential Reduction in Patent Royalty Rate. Subject to Section 4.6(b), if after the
Effective Date Palomar grants to a Third Party that becomes at any time an Excluded Third Party
after the Effective Date (a “Post-Effective Date Excluded Third Party”) a non-



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exclusive sublicense under the Anderson Patents within the Professional Field (but not the
Consumer Field) in order to settle an outstanding suit, action or injunction instituted by
Palomar or any Palomar Affiliates involving the Anderson Patents, which sublicense has materially
the same terms as this Agreement but with a royalty rate on net sales of products whose
manufacture, use or sale infringe the Anderson Patents in the United States that is a lower
percentage than the percentage rate specified under Section 4.4 that applies for Sales occurring
on or after January 1, 2008 (i.e., 7.5%) (such lower percentage rate, the “Lower Rate”), then
Palomar shall notify Alma of the existence of any such sublicense and the Lower Rate, and the
royalty percentage rate set forth in Section 4.4 shall be reduced to the Lower Rate for Net Sales
of Licensed Products accruing on or after January 1, 2008 whose manufacture, use or sale infringe
the Anderson Patents in the United States, which reduction shall become effective as of the date
(but not before) that such Post-Effective Date Excluded Third Party has paid Palomar at least One
Hundred Thousand Dollars (U.S. $100,000) in the aggregate in royalties at the Lower Rate
thereunder on net sales (occurring after the effective date of such sublicense) of products whose
manufacture, use or sale infringe the Anderson Patents in the United States. Notwithstanding
anything in this Agreement to the contrary, any such royalty reduction shall not apply to amounts
(i) already paid or payable to Palomar hereunder (including those identified in Section 4.2 or
Section 4.4), (ii) payable or already paid pursuant to the royalty rate applicable to Net Sales
of Licensed Products accruing before January 1, 2008, or (iii) payable or already paid to Palomar
under the Settlement Agreement or TDS Agreement.




          (b) Exceptions. Section 4.6(a) shall not apply to any of the following sublicenses under
the Anderson Patents granted by Palomar:



               (i) Sublicenses, or rights to sublicenses, that are in effect prior to the Effective Date;



               (ii) Sublicenses granted by Palomar to settle any bona fide litigation or arbitration with any
Third Party that is not a Post-Effective Date Excluded Third Party (such as a Third Party that is
an Excluded Third Party as of the Effective Date);



               (iii) Sublicenses granted by Palomar to settle for infringement of the Anderson Patents
occurring prior to the effective date of such sublicense, so long as the applicable royalty rate
under such sublicense on net sales (occurring after the effective date of such sublicense) of
products whose manufacture, use or sale infringe the Anderson Patents in the United States is equal
to or greater than the percentage rate specified under Section 4.4 for Net Sales accruing on or
after January 1, 2008 (i.e., 7.5%);



               (iv) Sublicenses granted by Palomar for which the consideration owed to Palomar is more than
the payment of royalties on net sales, such as a bona fide license or sublicense to Palomar by such
Third Party under Patents or other intellectual property rights owned or controlled by such Third
Party;



               (v) Sublicenses granted for other than hair removal;



               (vi) Sublicenses granted to Palomar Affiliates;



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               (vii) Sublicenses granted in connection with a development and/or commercialization agreement
in which Palomar has more than de minimus development or commercialization rights or obligations;
and



               (viii) Sublicenses or licenses that apply to more than the Anderson Patents, such as licenses
or sublicenses to other Patents owned or controlled by Palomar or other intellectual property
rights, such as trade secrets, of Palomar.




          (c) Exceptions to a Patent Challenge. Section 4.6(a) shall not apply under any circumstances
if the royalty rate under Section 4.4 increases as a result of a Patent Challenge as specified in
Section 8.6.



     4.7. Royalty Disputes.




          (a) Royalty Dispute and Escrow Account. If Alma shall fail to pay the royalties owed to
Palomar hereunder when due, or if the Parties shall in good faith dispute whether Alma has an
obligation to pay to Palomar royalties for the Sale by Alma or any Alma Affiliate of any item, or
their amount, for whatever reason, the Parties shall first attempt to resolve such dispute (a
“Royalty Dispute”) in accordance with Section 6. If the Parties are unable to resolve a Royalty
Dispute as provided in Section 6, then within seventy-five (75) days of the applicable Dispute
Notice Date from Section 6.1 for such Royalty Dispute, Alma shall deposit those royalty amounts
that Palomar believes in good faith it is owed hereunder and that Alma has failed or refuses to
pay to Palomar (collectively, the “Disputed Amounts”) into an escrow account (the “Escrow
Account”). The Escrow Account shall (1) be under the control of an independent escrow agent that
is a U.S. recognized banking or financial institution and that is reasonably acceptable to
Palomar, (2) accrue interest on all deposited Disputed Amounts at a commercially reasonable rate,
and (3) require that such escrow agent distribute all deposited Disputed Amounts (plus interest
and minus fees for the Escrow Account) at the mutual direction of the Parties or as provided by a
court or other decision-maker agreed to by the Parties. In addition, all fees charged by such
escrow agent for the Escrow Account (the “Escrow Fees”) shall be paid from the deposited Disputed
Amounts, subject to recovery as provided in Section 4.7(b). All subsequent disputed or unpaid
royalties related to an unresolved Royalty Dispute shall be deposited by Alma as additional
deposited Disputed Amounts in the applicable Escrow Account for such Royalty Dispute when the
payment would be due hereunder for those royalties. It is understood and agreed that a new Escrow
Account shall be established for a Royalty Dispute that is unrelated to any then unresolved
Royalty Disputes. This Section 4.7 shall be in addition and without prejudice to any Party’s
other rights or remedies hereunder.




         (b) Costs. In the event that Alma has deposited, or is obligated to deposit, any amounts in
an Escrow Account as provided in Section 4.7(a) for a Royalty Dispute, then in the event that any
suit or action is instituted by either Party to resolve such Royalty Dispute, the prevailing
Party in such suit or action with respect to the issue(s) giving rise to such Royalty Dispute
shall be entitled to recover from the losing
Party all reasonable out-of-pocket fees, costs and expenses (including those of attorneys,
professionals and accountants and all those arising from appeals and investigations) incurred by
the prevailing Party in connection with such Royalty Dispute on or after the applicable Dispute
Notice Date, as well as all applicable



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Escrow Fees (collectively, “Expenses”). In the event that one Party prevails on some issues, and
the other Party prevails on other issues, involved in such Royalty Dispute, then each Party shall
be entitled to recover from the other Party an amount equal to the product calculated by
multiplying (1) the sum total of both Parties’ Expenses for such Royalty Dispute, with (2) such
Party’s Winning Percentage, wherein “Winning Percentage” shall mean the (i) the sum of the
monetary value of the applicable Disputed Amounts for each issue on which a Party prevailed,
divided by (ii) all of the applicable Disputed Amounts.



     4.8.
Annual Reports for Annual Audits. For calendar year 2007 and each calendar year
thereafter as long as royalties are owed to Palomar hereunder, Alma shall prepare for review by a
certified, independent public accountant selected by Palomar (the “Independent Accountant”) in
connection with the Annual Audit (as defined in Section 4.10(b)) a written annual report (each, an
“Annual Report”) showing, on a country-by-country basis, for all Sales by Alma and Alma Affiliates:
(i) the Net Sales of all Licensed Products for which royalties are owed under Section 4.4 during
such year and a reasonably detailed calculation of such Net Sales, including separately identifying
Sales made by Alma and Alma Affiliates and including the amount and reasons for any deductions from
Actual Amounts; (ii) the royalties payable in U.S. dollars owed to Palomar for such Net Sales;
(iii) the dates of the first commercial sale of any new Licensed Product that occurred during the
reporting period and Alma’s proposed categorization of such new Licensed Product; (iv) the exchange
rates used in determining the amount of U.S. dollars; (v) the reclassification of any Alma Product
or Alma Other Product from one category to another or within types of Alma Combination Products
identified in the table above, and a reasonably detailed description for such reclassification; and
(vi) all serial number information regarding specific examples of Alma Combination Products and
Alma Modules for use with them, including all other information reasonably necessary, to explain
any royalty calculation for Sales of such Products and Modules. Each Annual Report shall be due to
the Independent Accountant on or before February 15 after the applicable calendar year. If no
royalty is due for such year, Alma shall so report. The receipt or acceptance by the Independent
Accountant of any Annual Report shall not prevent Palomar from subsequently challenging the
validity or accuracy of such Annual Report or royalty payments based thereon as part of an audit by
Palomar pursuant to Section 4.10.



     4.9. Records. Alma and Alma Affiliates shall keep complete and accurate records for seven (7)
years after the Sale of an Alma Product or Alma Module, including records of Net Sales of Alma
Products and Alma Modules.



     4.10. Audits.



          (a) Initial Audit. Beginning within sixty (60) days after the Effective Date, Alma and Alma
Affiliates shall permit the Independent Accountant, which as of the Effective Date is
PriceWaterhouse Coopers LLP, to have access during normal business hours, at Alma and any Alma
Affiliate’s premises, to such of the records of Alma and Alma Affiliates as may be reasonably
necessary to verify the accuracy of the royalty payments under Section 4.2 and interest thereon
(the “Initial Audit”). In the event that such Independent Accountant concludes that additional
royalties or interest thereon are owed for the period before the Effective Date, the additional
royalty shall be paid within thirty (30) days of the date Palomar delivers to Alma such Independent
Accountant’s written report so concluding, together with interest calculated in the




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manner provided above. The fees and expenses charged by such Independent Accountant for the Initial
Audit shall be paid by Alma.




          (b) Annual Audit. Beginning within sixty (60) days on or after February 15 in calendar year
2008 and each calendar year thereafter as long as royalties are owed to Palomar hereunder, Alma and
Alma Affiliates shall permit, and shall cause any Alma Sublicensees and/or Third Party distributors
in the United States to permit, an Independent Accountant to have access during normal business
hours, at Alma and any Alma Affiliate’s premises or the premises of any such Alma Sublicensee or
Third Party distributor, to such of the records of Alma, Alma Affiliates, Alma Sublicensees or such
Third Party distributors as may be reasonably necessary to verify the accuracy of the Annual Report
and payments hereunder for the prior calendar year (each, an “Annual Audit”). Alma, Alma
Affiliates, Alma Sublicensees and such Third Party distributors shall only be subject to an audit
one time with respect to each calendar year. The Independent Accountant shall provide a written
report for each such Annual Audit to Palomar (each, a “Written Report”). In the event that such
Independent Accountant concludes that additional royalties are owed for the applicable calendar
year, the additional royalty shall be paid within thirty (30) days of date the Independent
Accountant delivers to Alma the Written Report so concluding, together with interest calculated in
the manner provided by Section 4.11. If Palomar accepts the results of such Annual Audit set forth
in such Written Report in writing, unless Alma or any of its Alma Affiliates, Alma Sublicensees or
Third Party distributors commits any action constituting fraud, misrepresentation or intentional
misconduct in connection with such Annual Audit, such results shall be a final and binding
determination of the royalties owed to Palomar hereunder solely for the one calendar year covered
by such Annual Audit. Acceptance of any such results for any Annual Audit shall not affect the
interpretation or application of the terms of this Agreement with respect to any other Annual
Audit. For the avoidance of doubt, the acceptance of the results of a prior Annual Audit shall be
deemed an acceptance of the royalties owed for the one calendar year covered by such prior Annual
Audit and shall not prohibit Palomar or an Independent Accountant from auditing the sales of Alma
Combination Products Sold during the calendar year covered by such prior Annual Audit in connection
with calculating royalties properly payable (or credits properly taken) on Aggregate Net Sales for
a calendar year covered by a subsequent Annual Audit. The fees and expenses charged by such
Independent Accountant for Annual Audits shall be paid by Alma.




          (c) Confidentiality. The Annual Reports and Written Reports shall be regarded as Alma’s
confidential information and Palomar hereby covenants that it shall not use or disclose any
information included in such reports for any purpose other than determining whether Alma, Alma
Affiliates, Alma Sublicensees and such Third Party distributors have complied with their
obligations under, and enforcing the terms of, this Agreement, provided that Palomar may share
such information with MGH under a confidentiality agreement between Palomar and MGH. Palomar
further agrees that, until such time as such information is no longer confidential through no
fault of Palomar, it shall maintain the Annual Reports and Written Reports and any information
included therein in confidence and treat such information in a manner at least as
restrictive as its manner of treating its own confidential information of similar nature and
in any event not less than with a reasonable degree of care.




     4.11. Payments. Royalties accrued by the end of a calendar quarter shall be due and payable on
the forty-fifth (45th) day following the close of each calendar quarter. The receipt or



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acceptance by Palomar of any royalty payment shall not prevent Palomar from subsequently
challenging the validity or accuracy of such payment. Late royalty payments, together with interest
thereon accruing under this Agreement from the date when due, shall be payable immediately upon
discovery. Any credits to be taken by Alma as a result of deductions to the royalties already paid
shall be taken from the next payment due hereunder. All payments under this Agreement shall be made
when due hereunder in U.S. dollars by transfer to Palomar to the bank account specified below or
such other bank account as Palomar may designate from time to time. Any payments which fall due on
a date which is a legal holiday in the jurisdiction in which the bank account resides may be made
on the next following day which is not a legal holiday in such jurisdiction. Except with respect to
interest on royalties due for Sales of Licensed Products accruing before the Effective Date, which
is governed by Section 4.2(b), any payments that are not paid on or before the date such payments
are due under this Agreement shall bear interest at a rate equal to the lesser of one and one-half
percent (1.5%) per month or the highest rate permitted by applicable law, including,
notwithstanding the foregoing, interest on any Initial Under-Payment owed pursuant to Section
4.2(c). Interest payable shall be calculated on a compound basis with a monthly compounding period
from the date the payment was due until the date payment is received by Palomar.



	 	 	 	 	 
	 

	 	Bank Name:
	 	Banknorth
	 

	 	Bank Address:
	 	370 Main Street
	 

	 	 	 	Worcester, MA 01608
	 

	 	 	 	Palomar Medical Technologies, Inc.
	 

	 	 	 	Account No. 8241022982
	 

	 	 	 	ABA No. 211370545






     4.12. Taxes and Other Charges. In addition to any other amounts due hereunder, Alma and Alma
Affiliates shall pay all foreign, federal, state, municipal and other governmental excise, sales,
use, property, customs, import, value added, gross receipts and other taxes, fees, levies and
duties of any nature now in force or enacted in the future that are assessed upon or with respect
to the manufacture, use, offer for sale, sale or importation of the Licensed Products, any
royalties or other payments made or owing hereunder, or otherwise arising in connection with this
Agreement or any transactions contemplated hereby, but excluding United States taxes based on
Palomar’s net income. If Alma is required by law to make any deduction or withhold from any sum
payable to Palomar by Alma hereunder, then the sum payable by Alma upon which the deduction or
withholding is based shall be increased to the extent necessary to ensure that, after such
deduction or withholding, Palomar receives and retains, free from liability for such deduction or
withholding, a net amount equal to the amount Palomar would have received and retained in the
absence of such required deduction or withholding.



     4.13. Mutual Convenience of the Parties. The royalty obligations set forth hereunder
(including the royalties payable on Licensed Products manufactured in more than one country as
provided in Section 4.5(c) and Section 4.7 addressing Royalty Disputes), have been agreed to by the
Parties for the purpose of reflecting and advancing their mutual convenience, including the ease of
calculating and paying royalties to Palomar. Alma and Alma Affiliates each hereby stipulates to the
fairness and reasonableness of such royalty obligations and covenants not to allege or assert, or
allow any Alma Sublicensees, or allow, cause or encourage or support any



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Third Party to allege or assert, that such royalty obligations are unenforceable or illegal in any
way for any reason.


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




     5.1 General. Each of Alma and Palomar represents and warrants to the other as of the Effective
Date that:




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




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




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



     5.2. By Alma. Alma hereby represents and warrants to Palomar as of the Effective Date that (i)
together, Exhibit A and Exhibit B contain a complete and accurate list of all products and systems,
and components, accessories and replacement parts for use therewith, Sold by Alma or any Alma
Affiliates or Alma Sublicensees as of the Effective Date, whose manufacture, use or sale infringes
one or more Valid Claims of the Anderson Patents and (ii) (a) there are no Alma Affiliates in
existence and (b) Alma Lasers, Inc. is the successor in interest to Orion Lasers, Inc., and Alma
Lasers, Ltd. is the successor in interest to MSQ, Ltd., each as a result of a merger between Orion
Lasers, Inc. and MSQ, Ltd. (which resulted in Orion Lasers, Inc. and MSQ, Ltd. ceasing to exist as
separate corporate entities apart from their respective successor entities, Alma Lasers, Inc. and
Alma Lasers, Ltd.).



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



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Non-Exclusive Patent License




MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NONINFRINGEMENT.



     5.4. No Consequential Damages. OTHER THAN FOR ALMA’S AND ALMA AFFILIATES’ INDEMNIFICATION
OBLIGATIONS CONTAINED IN SECTION 7, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF BUSINESS,
LOSS OF PROFITS OR LOSS OF USE), WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE),
PRODUCT LIABILITY, OR ANY CAUSE OF ACTION RELATING TO THE LICENSED PRODUCTS, PALOMAR PRODUCTS,
ANDERSON PATENTS, PALOMAR PATENTS, ALMA PATENTS OR ANY OTHER ITEMS OR RIGHTS PROVIDED HEREUNDER, OR
OTHERWISE IN CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT SUCH PARTY KNOWS OR SHOULD HAVE KNOWN OF THE
POSSIBILITY OF SUCH DAMAGE.



6. Disputes.




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



     6.2. Equitable Relief. Notwithstanding the foregoing dispute resolution procedure, in the
event of an actual or threatened breach hereunder, the aggrieved Party may seek equitable relief
(including restraining orders, specific performance or other injunctive relief) without submitting
to such dispute resolution procedure if there is a reasonable likelihood of the occurrence of
irreparable harm during the period of the dispute resolution procedure.



     6.3. Tolling. The Parties agree that all applicable statutes of limitation and time-based
defenses (such as estoppel and laches) shall be tolled while the dispute resolution
procedure set forth in Section 6.1 is pending, and the Parties shall cooperate in taking any
and all actions necessary to achieve such a result.


7. Indemnification. Alma and Alma Affiliates shall indemnify, pay on demand, defend and hold
Palomar and Palomar Affiliates and their respective directors, officers, employees and agents
harmless from and against any and all claims, demands, actions, losses, liabilities,


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




8. Term and Termination.




     8.1. Term. This Agreement shall become effective as of the Effective Date (subject to the last
sentence of Section 2 of the Settlement Agreement), may be terminated as set forth in this Section
8, and otherwise shall remain in full force and effect until the date there are no more Valid
Claims contained within the Anderson Patents (the “Term”).



     8.2.
Effect of Termination. Termination of this Agreement in accordance with this Section 8,
or expiration of this Agreement, shall not affect any rights or obligations of the Parties,
including the payment of amounts due, which have accrued up to the date of such termination or
expiration. Upon any expiration or termination of this Agreement, all rights and licenses granted
to Alma and Alma Affiliates hereunder shall terminate. Upon termination or expiration of this
Agreement, the provisions of Sections 1, 2.2(a), 2.2(b), 2.2(d), 2.2(f), 2.2(g), 2.4, 3.4(a),
4.2(b), 4.2(c), 4.5(a), 4.5(e), 4.5(g), 4.7 to 4.13, 5.2, 5.3, 5.4, 6, 7, 8.2, 8.6 and 9 shall
survive and shall continue in full force and effect in accordance with their terms. In addition, in
the event of termination of this Agreement, Alma’s contingent obligation in Section 4.3(a) to pay
royalties to Palomar shall survive for Net Sales accrued from the Effective Date until the
effective termination date, even if no royalties have yet come due under such Section as of such
termination date.



     8.3. Termination for Material Breach. If either Party:



          (a) materially breaches this Agreement in a manner that cannot be cured; or




          (b) materially breaches this Agreement in a manner that can be cured and such breach remains
uncured for more than (i) twenty (20) days in the case of nonpayment or


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    (ii) forty-five (45) days in the event of any other breach, after the receipt by the breaching
Party of notice specifying the breach and requiring its remedy,



then on each such occasion, (i) where Alma or any Alma Affiliate is the breaching Party, Palomar
shall have the right to terminate this Agreement in full upon written notice to Alma, in addition
and without prejudice to any other rights or remedies Palomar may have, or (ii) where Palomar is
the breaching Party, Alma shall have the right to terminate this Agreement in full upon written
notice to Palomar, in addition and without prejudice to any other rights or remedies Alma may have.
Further, Palomar shall have the right to terminate this Agreement in full upon written notice to
Alma, in addition and without prejudice to any other rights or remedies Palomar may have, in the
event Alma or any Alma Affiliate materially breaches the TDS Agreement.




     8.4. Bankruptcy. If Palomar or Alma is subject to a petition for relief under any bankruptcy
legislation, or makes an assignment for the benefit of creditors, or is subject to the appointment
of a receiver for all or a substantial part of such Party’s assets, and such petition, assignment
or appointment is not dismissed or vacated within sixty (60) days, the other Party, in addition and
without prejudice to any other rights or remedies, shall have the right to terminate this Agreement
in full upon written notice to such affected Party.



     8.5. Termination for Convenience by Alma. Subject to the terms of this Section 8, Alma shall
have the right to terminate this Agreement in full for convenience (i) upon at least three (3)
months prior written notice to Palomar, which notice shall set forth the date for such termination,
and (ii) upon payment in full of all amounts due Palomar hereunder through such termination date;
provided that, as of such termination date, there are no (A) good faith disputes subject to the
dispute resolution process set forth in Section 6 involving royalties owed to Palomar hereunder,
and (B) yet unresolved Royalty Disputes.



     8.6. Patent Challenges.




          (a) Alma and Alma Affiliates shall not bring, pursue or maintain, allow any Alma Sublicensee
to bring, pursue or maintain, or allow, cause or encourage any Third Party to bring, pursue or
maintain, any claim or other assertion in any court or other governmental forum of competent
jurisdiction (including any patent office, such as in any European or Japanese opposition
proceedings) seeking a judgment or other
decision that any claims of the Anderson Patents are invalid or unenforceable or not
patentable or otherwise not proper (any such claim or other assertion, a “Patent Challenge”). In
the event that any Patent Challenge is brought, pursued or maintained in contravention of this
Section 8.6(a), Alma and Alma Affiliates each understands and agrees that, in addition and
without prejudice to any of Palomar’s other rights or remedies hereunder, (i) Alma and Alma
Affiliates shall be in material breach of this Agreement, and (ii) Alma and Alma Affiliates shall
reimburse Palomar for all reasonable costs and expenses of attorneys, professionals and
accountants incurred by Palomar and MGH to respond to and defend any such Patent Challenge. For
clarity, compelled testimony in response to a court order shall not amount to a “Patent
Challenge” hereunder, provided that (1) Alma provides Palomar with advance written notice of such
testimony as early as practicable, and (2) such testimony is limited to the scope of the order to
the extent possible.



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          (b) At any time in Palomar’s sole discretion or in the event that (x) the enforceability or
legitimacy of the prohibition on Patent Challenges contained in Section 8.6(a) is challenged in
any court or other governmental forum by Alma, any Alma Affiliates or any Third Party (including
any governmental agency), or (y) such prohibition is held to be unenforceable or otherwise not
legal by any court or other governmental agency of competent jurisdiction, then Palomar may elect
by written notice to Alma, in its sole discretion, at any time, to replace such prohibition in
full with the following provision: with respect to any Patent Challenge, if either (1) it is
determined by a court or other governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, that any of the claims of the Anderson Patents
subject to such Patent Challenge are not held invalid or unenforceable, or (2) such Patent
Challenge is not maintained or diligently pursued after being brought before any such
determination, in addition and without prejudice to any of Palomar’s other rights or remedies
hereunder, (i) from the date such Patent Challenge is first made and thereafter, the royalty
rates payable by Alma under Section 4.4 shall each increase to ten percent (10.0%), and (ii) Alma
and Alma Affiliates shall reimburse Palomar for all reasonable costs and expenses of attorneys,
professionals and accountants incurred by Palomar and MGH to respond to and defend such Patent
Challenge. All additional royalties owed to Palomar as a result of such royalty increase shall be
due within ten (10) days of the earlier of the date of such determination or the termination of
such Patent Challenge before such determination.




          (c) Alma and Alma Affiliates each acknowledges and agrees that, without limitation, (i) the
Alma Hair Products and Alma Combination Products including one or more Alma Hair Modules, existing
as of the Effective Date, infringe Valid Claim(s) of the Anderson Patents as of the Effective Date
and have infringed Valid Claim(s) of the Anderson Patents since the first manufacture, use and/or
Sale of such products and (ii) royalties shall be payable to Palomar pursuant to Sections 4.2 and
4.4 on Net Sales of Alma Hair Products and Alma Combination Products for the manufacture, use
and/or Sale of the same in the United States, Japan, Canada, France, Germany, Spain, Great Britain,
Italy, China and Hong Kong commencing from the first manufacture, use and/or Sale of the same by
Alma or Alma Affiliates. Further, Alma and Alma Affiliates each covenants not to directly or
indirectly (i) bring, pursue, maintain, assert or raise, (ii) allow, cause or support any Alma
Sublicensee to bring, pursue, maintain, assert or raise or (iii) cause or support any Third Party
to bring, pursue, maintain, assert or raise (in each case including in connection with any action
brought by Palomar to enforce Palomar’s obligation to pay royalties pursuant to Section 4.4), in
each case any claim, counterclaim, defense or other contention or assertion in any judicial,
governmental or other forum seeking a judgment or other decision that any of the foregoing items do
not infringe any such Valid Claim(s). In the event that any such claim, counterclaim, defense or
other contention or assertion is brought, pursued, maintained, asserted or raised in contravention
of this Section 8.6(c), Alma shall be in material breach of this Agreement.




          (d) Alma and Alma Affiliates each acknowledges and agrees that all the provisions of this
Section 8.6 are reasonable, valid and necessary for the adequate protection of Palomar’s interest
in and to the Anderson Patents, and that Palomar would
not have granted to Alma and Alma Affiliates the non-exclusive sublicense under the Anderson
Patents provided for in Section 2 without all of the provisions of this Section 8.6. Palomar shall
have the right, at any time in its sole discretion, to strike this Section 8.6 in part or in full
from this Agreement, and Palomar shall have no liability of any kind whatsoever as a result of the
presence or absence of



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this Section 8.6. This Section 8.6 shall not be understood or applied to alter any standing or
jurisdictional requirements that may apply to any Patent Challenge.



9. General.




     9.1. Entire Agreement; Counterparts. This Agreement (including the Exhibits and Appendices)
constitutes the entire agreement between the Parties relating to the subject matter hereof and
supersedes and replaces all previous agreements, practices or courses of dealings between the
Parties, whether written or oral, relating to the subject matter hereof, provided that that certain
Rule 408 – Confidentiality Agreement, dated as of February 14, 2006, between Palomar and Alma shall
terminate as of the Effective Date as to any disclosures occurring after the Effective Date, but
shall remain in full force and effect with respect to all applicable disclosures occurring and
rights and obligations accruing prior to the Effective Date. This Agreement may be executed in
counterparts with the same force and effect as if each of the signatories had executed the same
instrument.



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



     9.3. Assignment.




          (a) Alma shall not, nor shall any Alma Affiliate with respect to its rights and obligations
hereunder, assign this Agreement, in whole or in part, or otherwise Transfer any of its rights or
interests, nor delegate any of its obligations, hereunder, in any case whether voluntarily,
involuntarily, by operation of law or otherwise, without the prior written consent of Palomar in
its sole discretion, provided that (1) Alma may assign this Agreement as a whole, effective upon
written notice to Palomar, to an Alma Affiliate if such Alma Affiliate assumes, and has the
ability to perform, all of the obligations of Alma under this Agreement, whereupon upon
completion of any such permitted assignment, such Alma Affiliate shall be treated as “Alma”
hereunder for all purposes, or (2) Alma may assign this Agreement as a whole, and any Alma
Affiliate may assign its rights and obligations hereunder as a whole, effective upon written
notice to Palomar, to Alma’s or such Alma Affiliate’s (as applicable) surviving or resulting
entity in the event of an acquisition of Alma or such Alma Affiliate (as applicable) or any
merger or other combination involving Alma or such Alma Affiliate (as applicable), provided that
none of the Third Party(ies) involved in any such acquisition, merger or combination (including
any successor entity or acquirer) is an Excluded Third Party. Any attempt to assign, Transfer or
delegate all or any portion of this Agreement in violation of this Section 9.3 shall be void and
constitute a material breach of this Agreement. Any of the following transactions shall, without
limitation, be deemed an “Assignment” of a Party or any Alma Affiliate for purposes of this
Agreement (and thus subject to the prohibition set forth in the first sentence of this
Section 9.3): (i) a merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving an entity pursuant to which the stockholders of such
entity immediately preceding such transaction hold less than a



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majority of the equity interests in the surviving or resulting entity of such transaction; (ii)
any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended) becomes a “beneficial owner” (as such term is defined in Rule 13d-3
promulgated under such Act) (other than the applicable entity), directly or indirectly, of
securities of such entity representing fifty percent (50%) or more of the combined voting power
of such entity’s then outstanding securities; or (iii) a sale or other disposition by an entity
of assets or earning power aggregating a majority of the assets or earning power of such entity
or those assets relating primarily to the subject matter of this Agreement.




          (b) (1) Palomar may assign this Agreement as a whole, effective upon written notice to Alma,
to a Palomar Affiliate if such Palomar Affiliate assumes, and has the ability to perform, all of
the obligations of Palomar under this Agreement, whereupon upon completion of any such permitted
assignment, such Palomar Affiliate shall be treated as “Palomar” hereunder for all purposes, or
(2) Palomar may assign this Agreement as a whole, and any Palomar Affiliate may assign its rights
and obligations hereunder as a whole, effective upon written notice to Alma, to any entity as
part of any Assignment provided that such entity assumes, and has the ability to perform, all of
the obligations of Palomar or such Palomar Affiliate under this Agreement. Any attempt to assign
all or any portion of this Agreement in violation of this Section 9.3(b) shall be void.




          (c) This Agreement shall be binding upon, and inure to the benefit of, the legal
representatives, successors and permitted assigns of the Parties (including Alma Affiliates and
Palomar Affiliates). For clarity and without limiting the generality of this Section 9.3(c), any
permitted assignee of Alma or any Alma Affiliate pursuant to Section 9.3 shall be bound by all of
Alma’s or such Alma Affiliate’s, as applicable, obligations hereunder, including its royalty
obligations under Section 4.4. Except as otherwise expressly provided herein
(including in Sections 3.2(e) and 3.3(d)) and for the potential non-Party indemnitees identified
in Section 7, there shall be no third-party beneficiaries, either express or implied, to this
Agreement.



     9.4. Severability. Except as otherwise expressly provided herein, if any term, covenant or
condition of this Agreement or the application thereof to any Party or circumstance shall, to any
extent, be held to be invalid or unenforceable (including the terms of Section 8.6) by a court of
competent jurisdiction, then (i) the remainder of this Agreement, or the application of such term,
covenant or condition to Parties or circumstances other than those as to which it is held invalid
or unenforceable, shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid
and be enforced to the fullest extent permitted by law, and (ii) the Parties hereto covenant
and agree to renegotiate any such invalid or unenforceable term, covenant or application thereof in
good faith in order to provide a reasonably acceptable alternative to the term, covenant or
condition of this Agreement or the application thereof that is invalid or unenforceable, it being
the intent of the Parties that the basic purposes of this Agreement are to be effectuated.



     9.5. Publicity and Disclosure of Terms of this Agreement. The Parties agree that the initial
public announcements of the execution of this Agreement shall be in the forms of press releases to
be agreed upon by the Parties on or before the Effective Date and attached to the Settlement
Agreement. The Parties also agree that Palomar will file a copy of this Agreement



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with the United States Securities and Exchange Commission and other similar or comparable
governmental bodies, authorities or agencies, if necessary.



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



     9.7. Jurisdiction. Subject to and without limiting Section 4.7, the Parties hereby irrevocably
consent to the exclusive jurisdiction and venue of any state or federal court sitting in the
Commonwealth of Massachusetts, over any action or proceeding arising out of or relating to this
Agreement or any agreement or document delivered in connection herewith or therewith, and agree
that all claims in respect of such action or proceeding may be heard and determined in such state
or federal court. Each of the Parties consents to the jurisdiction of such court or courts and
agrees that the service upon it of a summons and complaint by ordinary mail shall be sufficient for
such court or courts to exercise personal jurisdiction over the Parties. The Parties waive any
objection to any action or proceeding in any state or federal court sitting in the Commonwealth of
Massachusetts, on the basis of forum non-convenes, lack of personal jurisdiction or otherwise.
Notwithstanding the foregoing, if any action or proceeding may not be brought in any such court
because all such courts lack subject matter jurisdiction, the Parties may bring such action or
proceeding in a court of appropriate jurisdiction.



     9.8. Governing Law. This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the Commonwealth of Massachusetts, without regard to its
principles of conflicts of laws; provided that any dispute relating to the scope, validity,
enforceability, infringement, patentability or misuse of any Patent shall be governed by, and
construed and enforced in accordance with, the substantive laws of the jurisdiction in which such
Patent originates, except to the extent such dispute is within the scope of Section 8.6, in which
case the provisions of Section 8.6 shall govern such dispute.



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



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



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



     9.12. Parties Advised by Counsel. This Agreement has been negotiated between unrelated Parties
who are sophisticated and knowledgeable in the matters contained in this



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Agreement and who have acted in their own self interest. In addition, each Party has had the
opportunity to seek advice of legal counsel. This Agreement shall not be interpreted or construed
against any Party to this Agreement because that Party or any attorney or representative for that
Party drafted or participated in the drafting of this Agreement.



     9.13. Compliance. The Parties shall comply with all federal, state and local laws (including
regulations, orders and ordinances) now or hereafter enacted, of any jurisdiction in which
performance occurs or may occur hereunder. Without limitation, each Party hereby acknowledges that
the rights and obligations of this Agreement are subject to the laws and regulations of the United
States relating to the export of products and technical information, and it shall comply with all
such laws and regulations. Except as otherwise expressly provided herein, each Party shall be
solely responsible for its violations of any of the foregoing.



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



          Notices shall be sent to Palomar at:



Palomar Medical Technologies

82 Cambridge Street

Burlington, MA 01803

Attention: CEO

Facsimile: (781) 993-2377




          with a required copy to:



Palomar Medical Technologies

82 Cambridge Street

Burlington, MA 01803

Attention: General Counsel

Facsimile: (781) 993-2377




          and a further required copy to:



Goodwin Procter LLP

Exchange Place

53 State Street

Boston, MA 02109

Attention: Kingsley L. Taft, Esq.

Facsimile: (617) 523-1231




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          and to Alma at:



Alma Lasers, Inc.

485 Half Day Road #100

Buffalo Grove, IL 60089

Attention: CEO

Facsimile: 224-377-2050




     9.15. Captions, Section Headings. As used in this Agreement, “including” means “including but
not limited to”, and “herein”, “hereof” and “hereunder” refer to this Agreement as a whole. The
Section headings used herein are for reference and convenience only, and shall not enter into the
interpretation of this Agreement. Unless otherwise expressly provided herein, any reference to a
number of “days” hereunder shall refer to calendar days. References to Sections include
subsections, which are part of the related Section (e.g., a section numbered “Section 2.2” would be
part of “Section 2”, and references to “Section 2” would also refer to material contained in the
section described as “Section 2.2”).



[remainder of this page intentionally left blank]




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



	 	 	 	 	 
	Palomar Medical Technologies, Inc.	 	 
	 
	 	 	 	 
	By:
	 	/s/ Joseph P. Caruso	 	 
	 

	 	 

Name: Joseph P. Caruso
	 	 
	 

	 	Title: CEO	 	 
	 

	 	Date:	 	 
	 
	 	 	 	 
	Alma Lasers, Inc.	 	 
	 
	 	 	 	 
	By:
	 	/s/ Howard Kelly	 	 
	 

	 	 

Name: Howard Kelly
	 	 
	 

	 	Title: CEO	 	 
	 

	 	Date:	 	 
	 
	 	 	 	 
	Alma
Lasers, Ltd.	 	 
	 
	 	 	 	 
	By:
	 	/s/ Howard Kelly	 	 
	 

	 	 

Name: Howard Kelly
	 	 
	 

	 	Title: CEO	 	 
	 

	 	Date:	 	 







 










 







 Non-Exclusive Patent License




Exhibit A




List of Alma Combination Products




Harmony System* (or Lovely System*)




Aria System*




 





* The system includes a base unit and associated handpieces and accessories.




Narrative Regarding Definition of Alma Combination Products




     By way of example, and without limitation, if an Alma Other Product includes an energy source
module that is not an Alma Hair Module, and Alma or one or more Alma Affiliates or Alma
Sublicensees begins at some time to market such energy source module for hair removal, such energy
source module shall be deemed an Alma Hair Module and all Sales of such Alma product (previously
deemed Alma Other Product) shall thereafter be treated as Sales of Alma Hair Products or Alma
Combination Products hereunder.



     For clarity and without limitation, a product that was one type of product, e.g., an Alma
Other Product, may become another type of product, e.g., an Alma Combination Product, for the
reasons described above and in Section 4.4 (e.g., marketing of an energy source module for hair
removal). However, product type is determined at the time of Sale. Thus, once a specific example of
an Alma product with a unique serial number is Sold, its product type is determined. That is, for
example and without limitation, at the time of Sale, if an Alma product is determined to be an Alma
Other Product (i.e., it is not capable of containing or using an Alma Hair Module), when a specific
Alma Other Product with a unique serial number is Sold it shall remain an Alma Other Product
hereunder even if such system is later modified to allow an Alma Hair Module to be Sold for use
with such specific Alma Other Product, with such Sale of an Alma Hair Module being subject to
Section 4.4(a)(ii). Thereafter, however, such Alma product shall be an Alma Combination Product and
future Sales of such product, that would previously have been categorized as Alma Other Products
upon their Sale, because they are now capable of using an Alma Hair Module, shall be treated upon
Sale as Alma Combination Products hereunder.



     Similarly, if an Alma product is determined to be an Alma Hair Product (i.e., it is not
capable of containing or using an Alma Other Module, e.g., the Soprano System), when a specific
Alma Hair Product with a unique serial number is Sold it shall remain an Alma Hair Product
hereunder even if such system is later modified to allow an Alma Other Module to be Sold for use
with such specific Alma Hair Product. Thereafter, however, such Alma product (e.g., modified
Soprano System) shall be an Alma Combination Product and future Sales of such product, that would
previously have been categorized as Alma Hair Products upon their Sale, because they now may use an
Alma Other Module, shall be treated upon Sale as Alma Combination Products hereunder.



     As of and prior to the Effective Date, the Sonata System, the Soprano System and the Soprano
XL System are Alma Hair Products because they are capable of using only an Alma Hair Module and are
not capable of using an Alma Other Module. As of the Effective Date, the



(i)









 





 Non-Exclusive Patent License



Harmony System and Aria System are each an Alma Combination Product because each is capable of
using both at least one Alma Other Module and at least one Alma Hair Module. If Alma markets to its
customers that they can “upgrade” the systems they buy to include additional features but means
that the customer returns one system (e.g., the Sonata System, the Soprano System or the Soprano XL
System) and purchases a new system (e.g., the Harmony System or the Aria System), then the purchase
of the new system is a new sale for purposes of calculating royalties, such that royalties are paid
both on the sale of the first system and the sale of the new system. Though Alma may market this as
an “upgrade”, it does not change the categorization of the Soprano, Soprano XL, Sonata, Harmony or
Aria systems. The Soprano, Soprano XL and Sonata Systems remain Alma Hair Products because as of
the date of Sale they were not capable of using an Alma Other Module.




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Exhibit B

Alma Hair Products



Sonata System* (or Mythos 500TM Hair Removal Diode Laser*)

Soprano System*

Soprano XL System*




 





* The system includes a base unit and associated handpieces and accessories.




     For clarity and without limitation, in addition to using optical radiation to remove hair, an
Alma Hair Product may further use optical radiation for treatment of skin (including treatment of
vascular and pigmented lesions, acne, wrinkles, scars and tattoos, and for other dermatological
applications), and other treatment or cosmetic purpose(s).



 









 






 Non-Exclusive Patent License




Exhibit C

Anderson Patents



Issued Patents



U.S. Patent Nos. 5,595,568 & 5,735,844



European Patent Nos. EP 0 806 913 B1; EP 1 230 900 B1 & EP 1 219 258 B1

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



Chinese Patent No. ZL96191751.2



Japanese Patent No. 3,819,025



Canadian Patent No. 2,210,720



Hong Kong Patent No. 1048754



 Pending Applications



Canada: Appl. No. 2,550,682



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



Japan: Appl. No. 2005-311144 (Div of JP 3,819,025)




All Patent equivalents of each of the foregoing in other jurisdictions.




 









 










 Non-Exclusive Patent License




Exhibit D

Royalty Calculation Flow Charts




 









 













 









 














 









 








 Non-Exclusive Patent License




Exhibit E

Royalty Payments Owed On Alma Combination Products




     The examples set forth in this Exhibit are for clarification purposes only and are not
intended to be limiting in any way.



     Example One (based on activities occurring after the Effective Date but before January 1,
2008):



     After the Effective Date, Alma Sells an Alma Combination Product (“Product One”), e.g., a
Harmony System, without an Alma Hair Module and with only an Alma Other Module, e.g., a Long-Pulsed
Nd:YAG Treatment Head (1064nm). The Net Sales attributable to such Sale is $100. No royalty is owed
Palomar on such Sale.



     Alma then Sells an Alma Hair Module, e.g., an AFT Treatment Head for Hair Removal (650-950nm),
for use with Product One, with Net Sales attributable to the Sale of such Alma Hair Module of $40.
The Aggregate Net Sales for Product One, with the Alma Other Module and the Alma Hair Module, is
$140. Alma owes Palomar royalties of $5.95 ($140 x 50% x 8.5%).



     Alma then Sells a second Alma Hair Module for use with Product One, with Net Sales
attributable to the Sale of such Alma Hair Module of $32. The Aggregate Net Sales for Product One,
with the Alma Other Module and the two Alma Hair Modules, is $172. Alma has paid Palomar the
previous royalty of $5.95. The total amount of royalty now owed is $10.23 ($172 x 70% x 8.5%), so
Alma owes Palomar royalties of $4.28 ($10.23 — $5.95).



     Alma then Sells a second Alma Other Module, e.g., Pulsed UVB Treatment Head, for use with
Product One, with Net Sales attributable to the Sale of such Alma Other Module of $28. The
Aggregate Net Sales for Product One, with the two Alma Other Modules and the two Alma Hair Modules,
is $200. Alma has paid Palomar the previous royalty of $10.23. The total amount of
royalty now owed is $11.90 ($200 x 70% x 8.5%), so Alma owes Palomar royalties of $1.67
($ 11.90 — $10.23).



     Example Two (based on activities occurring after the Effective Date but before January 1,
2008):



     After the Effective Date, Alma Sells an Alma Combination Product (“Product Two”), e.g., a
Harmony System, with only an Alma Hair Module. The Net Sales attributable to such Sale is $160.
Alma owes Palomar royalties of $13.60 ($160 x 100% x 8.5%).



     Alma then Sells an Alma Other Module, e.g., Q-Switched Nd:YAG Treatment Head, for use with
Product Two, with Net Sales attributable to the Sale of such Alma Other Module of $90. The
Aggregate Net Sales for Product Two, with the Alma Hair Module and the Alma Other Module, is $250.
Alma has paid Palomar the previous royalty of $13.60. The total amount of royalty now owed is
$10.63 ($250 x 50% x 8.5%), so Alma may take a credit of $2.97 ($13.60 — $10.63) on future royalty
payments owed Palomar.



 









 





 Non-Exclusive Patent License




     Alma then Sells a second Alma Hair Module and a second Alma Other Module, e.g., Pixel Er:YAG,
for use with Product Two, with Net Sales attributable to both those Sales of Alma Modules of $112.
The Aggregate Net Sales for Product Two, with the four Alma Modules, is $362. Alma has paid Palomar
a total royalty of $10.63, first paying $13.60 and then taking a credit of $2.97. The total amount
of royalty now owed is $21.54 ($362 x 70% x 8.5%), so Alma owes Palomar royalties of $10.91 ($21.54 — $10.63).



     Example Three (based on activities occurring after the Effective Date but before January 1,
2008):



     After the Effective Date, Alma Sells an Alma Combination Product (“Product Three”), e.g., a
Harmony System, with an Alma Hair Moduleand an Alma Other Module, e.g., Er:YAG Treatment Head. The
Net Sales attributable to such Sale is $190. Alma owes Palomar royalties of $8.08 ($190 x 50% x
8.5%).



     Alma then Sells an Alma Other Module, e.g., Near Infrared, for use with Product Three, with
Net Sales attributable to the Sale of such Alma Other Module of $70. The Aggregate Net Sales for
Product Three, with the Alma Hair Module and the two Alma Other Modules, is $260. Alma has paid
Palomar the previous royalty of $8.08. The total amount of royalty now owed is $11.05 ($260 x 50% x
8.5%), so Alma owes Palomar royalties of $2.97 ($11.05 — $8.08).



     Alma then Sells a second Alma Hair Module for use with Product Three, with Net Sales
attributable to the Sale of such Alma Hair Module of $75. The Aggregate Net Sales for Product
Three, with the four Alma Modules, is $335. Alma has paid Palomar the previous royalty of $11.05.
The total amount of royalty now owed is $19.93 ($335 x 70% x 8.5%), so Alma owes Palomar royalties
of $8.88 ($19.93 — $11.05).



 









 





 Non-Exclusive Patent License




Appendix A

Gillette Agreement




 









 








 Non-Exclusive Patent License




Appendix B

MGH Agreement