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Execution Copy




NON-EXCLUSIVE PATENT LICENSE




     THIS NON-EXCLUSIVE PATENT LICENSE (this “Agreement”) is entered into this 6th day of
November, 2006 (the “Effective Date”), and shall be treated as in full force and effect as
of October 1, 2006, by and between Palomar Medical Technologies, Inc., a Delaware corporation, with
offices at 82 Cambridge Street, Burlington, MA 01803 (“Palomar”), and Cynosure, Inc., a
Delaware corporation with offices at 5 Carlisle Road, Westford, MA 01886 (“Cynosure”)
(Palomar together with all Palomar Affiliates (as defined below) on the one hand, and Cynosure
together with all Cynosure Affiliates (as defined below) on the other hand, each a “Party”,
and together, the “Parties”).



WITNESSETH:




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



     WHEREAS, Cynosure and Cynosure 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 Cynosure and Cynosure Affiliates under the following terms and conditions;
and



     WHEREAS, Palomar and Palomar Affiliates desire to obtain, and Cynosure and Cynosure Affiliates
are willing to grant, a fully paid up non-exclusive (sub)license under the Cynosure Patents (as
defined below) under the following terms and conditions.



     NOW THEREFORE, the Parties hereby agree as follows:


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




     1.1. Affiliates.



     (a) “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.




          (b) “Cynosure Affiliate” shall mean any person or entity that, directly or indirectly,
through one or more intermediaries (i) is controlled by Cynosure as of the Effective Date or
thereafter or (ii) controls or is under common control with Cynosure (in each case provided such
control arises after the Effective Date); provided, in each case of clause (i) or (ii), 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), and further only for so long as such person or entity
satisfies the foregoing control requirements; provided, further, that El. En. S.p.A. shall not be treated as a “Cynosure Affiliate”
for any purpose hereunder and thus shall be treated as a “Third Party” for all purposes hereunder.
For clarity, (1) Exhibit A lists Cynosure Affiliates as of the Effective Date, and (2) any
Third




 









 








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Party that does not become a “Cynosure 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.




          (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. “Anderson Patents” shall mean (i) the Patents set forth on Exhibit B, and
(ii) all other Patents that claim the right of priority to, or enjoy the benefit of an earlier
filing date of, in whole or in part, directly or indirectly, one or more of the Patents identified
in the immediately preceding clause (i). “Other Anderson Patents” shall mean the following
subset of Anderson Patents: U.S. Patent No. 5,824,023 and 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, U.S. Patent No. 5,824,023 or the application that issued as such U.S. Patent.



     1.3. “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.



     1.4. “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.




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



     1.6. “Gillette Agreement” shall mean that certain “Development and License Agreement”
between Palomar and The Gillette Company dated as of February 14, 2003, as such agreement is
amended as of the Effective Date and as such agreement may be amended or
restated thereafter, provided that any terms of the Gillette Agreement that by operation of
such amendment or restatement limit or restrict Cynosure’s or Cynosure Affiliates’ rights under
this



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Agreement, or impose any additional obligations on Cynosure or Cynosure Affiliates, in each case
other than as specified hereunder (each a “Restrictive Gillette Term”), shall not be
binding on Cynosure or Cynosure Affiliates. In the event that any term of the Gillette Agreement
is amended so that it is a Restrictive Gillette Term, only (i) the unamended terms of the Gillette
Agreement as they existed immediately prior to becoming Restrictive Gillette Terms pursuant to such
amendment or restatement, (ii) the amended terms of the Gillette Agreement that are not Restrictive
Gillette Terms and (iii) all other terms of the Gillette Agreement that are not amended by such
amendment or restatement, in each case shall apply to Cynosure and Cynosure Affiliates, and Palomar
(and not Cynosure or any Cynosure Affiliates) shall be responsible to Gillette for any liability
arising out of any Restrictive Gillette Term. 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.




     1.7. “Licensed Products” shall mean Cynosure Products (including those Cynosure Hair
Modules that alone amount to a “Cynosure Product” hereunder). For clarity, Licensed Products may
include future energy source modules, products, systems, components or accessories Sold by Cynosure
or Cynosure 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.



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



     1.9. “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, provided that any terms of the MGH Agreement that by operation of
such amendment or restatement limit or restrict Cynosure’s or Cynosure Affiliates’ rights under
this Agreement, or impose any additional obligations on Cynosure or Cynosure Affiliates, in each
case other than as specified hereunder (each a “Restrictive MGH Term”), shall not be
binding on Cynosure or Cynosure Affiliates. In the event that any term of the MGH Agreement is
amended so that it is a Restrictive MGH Term, only (i) the unamended terms of the MGH Agreement as
they existed immediately prior to becoming Restrictive Gillette Terms pursuant to such amendment or
restatement, (ii) the amended terms of the MGH Agreement that are not Restrictive MGH Terms and
(iii) all other terms of the MGH Agreement that are not amended by such amendment or restatement,
in each case shall apply to Cynosure and Cynosure Affiliates, and Palomar (and not Cynosure or any
Cynosure Affiliates) shall be responsible to MGH for any liability arising out of any Restrictive
MGH Term. A copy of the MGH Agreement, as redacted, as amended as of the Effective Date is
attached hereto at Appendix B.



     1.10. “Net Sales” shall mean all amounts invoiced by Cynosure and Cynosure 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, a Cynergy System, shall not be taken
against Sales of another type of product, for example, an Apogee 5500 System); (ii) promotional,
trade, quantity, cash and prompt payment discounts separately identified on the



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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.




     For clarity and without limitation, this definition of Net Sales includes Cynosure Combination
Products which do not include a Cynosure Hair Module for which no royalties are due Palomar
hereunder for their Sale. However, as provided in Section 4.4, subsequent Sales of Cynosure Hair
Modules for use with such Cynosure 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 Cynosure Product in connection with the Sale of a second
Cynosure Product shall be treated as follows: (i) the Net Sales attributed to the
Sale of such second Cynosure Product (a) shall not include any deduction or other
reduction for the trade-in given by Cynosure for such first Cynosure Product,
unless Cynosure paid royalties to Palomar hereunder upon the Sale of such first
Cynosure Product (e.g., there shall be no such deduction or other reduction when
such first Cynosure Product is a Cynosure Other Product), and (b) shall be
calculated as set forth in this definition, and such Sale of such second Cynosure
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 Cynosure Product shall
be calculated as set forth in this definition, and such re-Sale of such first
Cynosure 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 Cynosure an Apogee 5500 System for $60,000, then under Section 4.4,
Cynosure is obligated to pay Palomar a royalty of $4,500 on such Sale of the Apogee
5500 System (7.5% of $60,000). If that customer then purchases from Cynosure an
Acclaim 7000 Laser System for $120,000 and is provided a credit of $20,000 in
connection with a trade-in of such Apogee 5500 System that such customer previously
purchased (thus paying Cynosure $100,000), then under Section 4.4, Cynosure is
obligated to pay Palomar a royalty of $7,500 on such Sale of the Acclaim 7000 Laser
System (7.5% of $100,000) and no amount shall be due hereunder for the $20,000
credit provided for the Apogee 5500 System. If Cynosure then re-Sells the
traded-in Apogee 5500 System for $40,000, then under Section 4.4, Cynosure is
obligated to pay Palomar a royalty of $3,000 on such re-Sale of the traded-in
Apogee 5500 System (7.5% of $40,000).




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	 	•	 	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.
	 
	 	•	 	Charges for standard or basic training (often referred to as inservice training
or initial training) or any training by Cynosure or Cynosure 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 Cynosure or any Cynosure 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 is the selling
party’s (i.e., Cynosure or a Cynosure Affiliate, who shall be deemed to be a “Selling
Party”) then current published list price(s) for the Licensed Product(s) in the relevant
country during the applicable calendar quarter, and B is the then current published list prices for
all other components in the Bundled Package that are not Licensed Product(s) in the relevant
country during the applicable calendar quarter. For purposes of this paragraph, if there is no
current published list price(s) for the Licensed Product(s) or other light-based system(s) included
in a Bundled Package, then (i) the applicable values shall be determined by reference to the
average Net Sales price of such Licensed Product(s) or light-based system(s) in the relevant
country during the applicable calendar quarter as Sold separately in bona fide arms-length
transactions by the Selling Party, or (ii) 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, then 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, or (iii) if no average Net Sales
prices of the Licensed Product(s) and the other such light-based system(s) is available for the
United



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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) transfer of a Licensed Product within Cynosure or between Cynosure and
Cynosure 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 Cynosure or Cynosure Affiliates, (ii) a Licensed Product shall be
considered “Sold” upon the earlier of shipment of or receipt of payment for such Licensed Product
or Cynosure or any Cynosure 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
Cynosure Sublicensees (including sales by distributors and subdistributors) shall not give rise to
Net Sales hereunder because those products shall have already been Sold by Cynosure or Cynosure
Affiliates to such Cynosure Sublicensees, with the Net Sales arising from such Sale already
accounted for under this definition, (iv) “amounts invoiced” as used above shall include the value
of any monetary or other consideration to be received by Cynosure or any Cynosure Affiliates from a
Sale of any Licensed Product, (v) Net Sales shall be deemed to be equal to, for any Licensed
Product Sold to any Third Party for less than the seller is then charging or will immediately
thereafter begin charging in bona fide arms-length transactions for comparable products, 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 Cynosure and Cynosure Affiliates
maintained in accordance with U.S. generally accepted accounting principles, consistently applied.



     1.11. “Palomar Product” shall mean any product, system, component, method, process or
accessory, Sold by Palomar or Palomar Affiliates, (i) that as of the date of its Sale, is marketed
as being capable of using or uses or is incorporated into a product or system that uses light to
treat skin, including hair removal, treatment of vascular and pigmented lesions, acne, wrinkles,
scars and tattoos, for other dermatological applications, and other treatment or cosmetic
purpose(s), and (ii) the manufacture, use, sale, offering for sale or importation of which, absent
the (sub)licenses granted by Cynosure and Cynosure Affiliates herein, would infringe a Valid Claim
of the Cynosure Patents. For clarity and without limitation, the products and systems listed on
Exhibit C are products Sold by Palomar and Palomar Affiliates up to the Effective Date.



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



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



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the like, of any such patents or patent applications, and (iii) any foreign or international
equivalents of any of the foregoing.




     1.14. “Professional Field” shall mean the field in which products or systems 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).



     1.15. “Sale” shall mean, with respect to a Licensed Product, the sale, distribution,
lease, use (including training, preceptorships, marketing and promotional uses for which Cynosure
or one or more Cynosure Affiliates is to receive monetary or other consideration), cost-per-shot
arrangements and any other arrangement in which monetary or other consideration is to be received
by Cynosure or one or more Cynosure Affiliates for the use of such Licensed Product.



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



     1.17. “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 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.



     1.18. “Cynosure Modules” shall mean Cynosure Hair Modules and Cynosure Other Modules,
each as defined below:




          (a) “Cynosure Hair Module” shall mean any energy source module, Sold by Cynosure or
Cynosure 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, a Cynosure 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 a
“Cynosure Hair Module” hereunder. By way of example and without limitation, the energy source
modules in the products listed in Exhibit E and Exhibit F in the form they are
Sold by Cynosure as of the Effective Date for hair removal are “Cynosure Hair Modules” for
purposes of this Agreement.




          (b) “Cynosure Other Module” shall mean any energy source module, Sold by Cynosure or
Cynosure 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 a Cynosure Hair Module. By way of example and
without limitation, the energy source modules in the products listed in



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Exhibit E under the heading “List of Cynosure Combination Products” in the form they
are Sold by Cynosure as of the Effective Date for purposes other than for hair removal are
“Cynosure Other Modules” for purposes of this Agreement.




     1.19. “Cynosure Patents” shall mean: (i) the Patents listed on Exhibit D; (ii)
all Patents either owned or controlled with the right to sublicense (in each case in whole or in
part) by Cynosure or any Cynosure Affiliates as of the Effective Date, the practice of which would
infringe any claims of the Patents identified in the immediately preceding clause (i); and (iii)
all Patents claiming the right of priority to, or enjoying the benefit of an earlier filing date
of, in whole or in part, directly or indirectly, to one or more of the Patents identified in the
immediately preceding clause (i) or (ii), but not including claims in such Patents that do not have
a priority date before the Effective Date.



     1.20. “Cynosure Products” shall mean Cynosure Hair Products and Cynosure Combination
Products, each as defined below. “Cynosure Other Product” shall mean any product, system,
component or accessory, Sold by Cynosure or Cynosure Affiliates, that (i) is not a Cynosure
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 Cynosure Other Modules. As of the Effective Date, the
following products in the form they are Sold by Cynosure as of the Effective Date are “Cynosure
Other Products” for purposes of this Agreement: Affirm System, Cynergy PL System, Photogenica SV
System, TriActive System and VStar System.



          (a) “Cynosure Combination Product” shall mean any product, system, component or
accessory, Sold by Cynosure or Cynosure Affiliates, (i) that as of the date of its Sale, is
marketed as being capable of using both at least one Cynosure Other Module and at least one
Cynosure Hair Module, and (ii) the manufacture, use, sale, offering for sale, or importation of
which when sold with a Cynosure Hair Module, absent the sublicense granted by Palomar herein,
would infringe a Valid Claim of the Anderson Patents. For clarity and without limitation,
Exhibit E lists Cynosure Combination Products in existence up to the Effective Date,
examples of when a Cynosure Other Product or a Cynosure Hair Product shall become a “Cynosure
Combination Product” hereunder, and an example of a marketing technique which does not change a
Cynosure Hair Product into a “Cynosure Combination Product” hereunder. Further, the Parties
acknowledge that (A) as of the Effective Date, the Cynosure Combination Products listed on
Exhibit E (the Cynergy and Cynergy III Systems) each include an Nd:YAG laser, which is a
Cynosure Hair Module hereunder, (B) the Nd:YAG laser is used for hair removal through handpieces
providing spot sizes of ten (10), twelve (12) and fifteen (15) millimeters and (C) the Nd:YAG
laser is also used for non-hair removal treatments (e.g., vascular treatments) through handpieces
providing spot sizes of seven (7), five (5) and three (3) millimeters. After the Effective Date,
Cynosure and Cynosure Affiliates may cease to market and sell the Cynergy and Cynergy III Systems
for hair removal and modify such Cynergy and Cynergy III Systems so that the Nd:YAG laser module
included therein only functions when connected to handpieces providing spot sizes of seven (7)
millimeters and less (i.e., so that the Nd:YAG laser will not emit light through spot sizes of
greater than seven (7) millimeters and, thus, will not be practical for hair removal). After the
Effective Date, effective as of the date and solely to the extent that Cynosure and Cynosure
Affiliates cease marketing or selling Cynergy and Cynergy III Systems for hair removal, such
modified Cynergy and Cynergy III Systems shall be deemed Cynosure Other Products hereunder.




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          (b) “Cynosure Hair Product” shall mean any product, system, component or accessory,
Sold by Cynosure or Cynosure Affiliates, (i) that contains a Cynosure 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 a Cynosure Other Module. For clarity
and without limitation, Exhibit F provides additional clarifications and lists items that
are Cynosure Hair Products in existence up to the Effective Date.




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



2. License Grants.




     2.1. By Palomar.



          (a) Licensed Products. Subject to the terms and conditions of this Agreement,
Palomar hereby grants to Cynosure and Cynosure 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 Cynosure Hair Modules that alone amount to a
“Cynosure Product” hereunder are used exclusively with other Cynosure Products or Cynosure Other
Products and no other products or systems of Cynosure, Cynosure 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 when required by this Agreement (including the cure period set forth in
Section 8.3(b)) to Palomar hereunder as provided in Section 4 (including with respect to Sales of
Licensed Products occurring before October 1, 2006, for which Cynosure pays royalties hereunder as
specified in Section 4.2), (ii) the foregoing sublicense grant automatically extends, without any
further action by Cynosure or any Cynosure Affiliates, to each person and entity that is a
“Cynosure Affiliate” as of the Effective Date or becomes a “Cynosure Affiliate” thereafter, but
only for so long as such person or entity remains a “Cynosure Affiliate” hereunder, and (iii)
Palomar shall be in direct privity under this Agreement with any Cynosure Affiliate as a result of
such sublicense grant.




          (b) Limited Sublicensing Rights. Cynosure and Cynosure Affiliates shall not have any
right to grant to any Third Parties any further sublicenses under the sublicense grant set forth
in Section 2.1(a), nor shall any purported sublicenses under such sublicense grants made by
Cynosure or any Cynosure Affiliates or any of their sublicensees prior to October 1, 2006 be valid
or enforceable, except Cynosure, and only those Cynosure Affiliates that are wholly-owned or
majority-owned by Cynosure (directly or indirectly, and taking into account any local law
restrictions as noted in Section 1.1), and no other Cynosure Affiliates, may grant sublicenses
only as may be necessary for (i) Third Parties to distribute Licensed Products Sold by Cynosure or
Cynosure 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 Cynosure or Cynosure
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





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memorialized in writing (and not before). Cynosure Sublicensees shall not have the right to
grant any sublicenses under any such sublicense grant by Cynosure or Cynosure Affiliates.
Cynosure shall be responsible to Palomar for the performance of any Cynosure Affiliates and
Cynosure Sublicensees under any provisions of this Agreement for which Cynosure or any Cynosure
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(a), notwithstanding the patent exhaustion/first
sale doctrine. Apart from the foregoing limited right to grant further sublicenses, Cynosure and
Cynosure Affiliates shall not have any right to make an Assignment or otherwise Transfer such
sublicense grant except pursuant to Section 9.3(a).




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




          (d) Patent Marking. Cynosure and Cynosure 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,
Cynosure and Cynosure 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.




          (e) 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, provided that no such grant may
limit or restrict Cynosure’s or Cynosure Affiliates’ rights under this Agreement






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or impose any obligation on Cynosure or Cynosure Affiliates, other than as specified
hereunder.




          (f) 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(a), either through the direct sublicense from Palomar to
Cynosure and Cynosure Affiliates under Section 2.1(a) or as a Cynosure Sublicensee. Thus, the
Parties have agreed to preclude any Excluded Third Party from becoming a “Cynosure Affiliate”
hereunder as provided in Section 1.1(b), and further have agreed to preclude any Assignment of
this Agreement by Cynosure or any Cynosure Affiliate to or otherwise involving any Excluded Third
Party under Section 9.3(a). Further, Cynosure and Cynosure 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 such person or entity is an “Excluded Third Party”
hereunder, whether by Assignment under Section 9.3(a), asset purchase or sale, bankruptcy,
conveyance, lease, distribution arrangement, manufacturing arrangement (including any foundry
arrangement), license, sublicense, option, other transfer or any other transaction of any type
(any such transaction, an “Acquisition”), the sublicense grant set forth in Section 2.1(a)
(or any sublicense thereunder granted pursuant to Section 2.1(b)) shall not apply to such
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),
and Palomar and its sublicensees shall retain any and all rights to enforce the Anderson Patents
against Cynosure, Cynosure Affiliates, such Excluded Third Party or any other Third Party with
respect to the same.




     2.2. By Cynosure.



          (a) Palomar Products. Cynosure and Cynosure Affiliates hereby grant to Palomar and
Palomar Affiliates a worldwide, perpetual, irrevocable, fully paid up, royalty-free, non-exclusive
license or sublicense, as the case may be, under the Cynosure Patents, to make, have made, use,
sell, offer for sale and import Palomar Products. It is understood and agreed that (i) the
foregoing sublicense grant automatically extends, without any further action by Palomar or any
Palomar Affiliates, to each person and entity that is a “Palomar Affiliate” as of the Effective
Date or becomes a “Palomar Affiliate” thereafter, but only for so long as such person or entity
remains a “Palomar Affiliate” hereunder, and (ii) Cynosure shall be in direct privity under this
Agreement with any Palomar Affiliate as a result of such sublicense grant.




          (b) Limited Sublicensing Rights. Palomar and Palomar Affiliates shall not have any
right to grant to any Third Parties any sublicense under the license and sublicense grants set
forth in Section 2.2(a), nor shall any purported sublicenses under such sublicense grants made by
Palomar or any Palomar Affiliates or any of their sublicensees prior to the Effective Date be
valid or enforceable, except Palomar, and only those Palomar Affiliates that are wholly-owned by
Palomar (directly or indirectly, and taking into account any local law restrictions as noted in
Section 1.1) and no other Palomar Affiliates, may grant sublicenses only as may be necessary for
(i) the sale or distribution of Palomar Products by Third Parties acting as distributors, (ii) the
manufacture of Palomar Products for resale only to Palomar, Palomar Affiliates or such Third Party
distributors, or (iii) the development and commercialization of consumer products in a
collaboration between Palomar or any Palomar





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Affiliate and a Third Party in which Palomar or a Palomar Affiliate has substantial
development and/or commercialization obligations, 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). Palomar Sublicensees shall not have the right to grant
sublicenses under such sublicense grants by Palomar or Palomar Affiliates except in connection
with the sale or other distribution of a Palomar Product. Palomar shall be responsible to
Cynosure for the performance of any Palomar Affiliates and Palomar Sublicensees under any
provisions of this Agreement for which Palomar or any Palomar Affiliate is responsible, even if
such person or entity is also responsible to Cynosure. No purchaser of any Palomar product shall,
by operation of this Agreement, receive any license, sublicense or other rights in, to or under
the Cynosure Patents that exceeds the scope and terms of the sublicense grant set forth in Section
2.2(a), notwithstanding the patent exhaustion/first sale doctrine. Apart from the foregoing
limited right to grant sublicenses, Palomar and Palomar Affiliates shall not have any right to
make an Assignment or otherwise Transfer such license grant except pursuant to Section 9.3(b).




          (c) Cynosure’s Right to Grant Other Sublicenses. Subject to the terms of this
Agreement, Cynosure retains the right to grant sublicenses and other rights in and to the Cynosure
Patents as Cynosure may deem appropriate in its sole discretion, provided that no such
grant may limit or restrict Palomar’s or Palomar Affiliates’ rights under this Agreement or impose
any obligation on Palomar or Palomar Affiliates, other than as specified hereunder.




     2.3. Related Licensing Provisions.



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




          (b) Other Transactions. (i) Palomar may assign, convey, sell, lease, encumber,
license, sublicense or otherwise transfer to or grant any right in or to (collectively,
“Transfer”) a Third Party or a Palomar Affiliate any and all of the Anderson Patents or
the MGH Agreement and (ii) Cynosure and any Cynosure Affiliate may Transfer to a Third Party or
other Cynosure Affiliate any and all of the Cynosure Patents, in each case provided that any such
transaction is made subject to all rights and sublicense(s) of the other Party arising from this
Agreement and shall not shall not impose any additional obligations on such other Party.




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




     2.4. MGH Agreement. Palomar represents and warrants to Cynosure 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



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the expiration of all of the Valid Claims of the Anderson Patents, Cynosure and Cynosure
Affiliates shall no longer have any further royalty obligations to Palomar under this Agreement
from the date of such termination (other than for 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 such termination.




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



3. Other Obligations of Cynosure.




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




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



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               (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 Cynosure or any Cynosure
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, Cynosure and Cynosure Affiliates shall label Licensed
Products commercialized outside the Consumer Field pursuant to the sublicense to the Anderson
Patents granted to Cynosure and Cynosure Affiliates by Palomar under Section 2.1(a) 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, Cynosure and Cynosure 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 Cynosure and Cynosure Affiliates by Palomar under
Section 2.1(a), 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.




          (d) The covenants of Cynosure and Cynosure Affiliates contained in Sections 3.2(a)(i),
3.2(a)(ii) and 3.2(c) shall not prevent Cynosure or any Cynosure 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) Cynosure and Cynosure 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






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the sublicense to the Anderson Patents granted to Cynosure and Cynosure Affiliates by Palomar
under Section 2.1(a), 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 Cynosure or any
Cynosure 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, Cynosure or the Cynosure 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 Cynosure or such Cynosure
Affiliate, as applicable, shall propose a revised calculation, Cynosure or such Cynosure
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 Cynosure or such Cynosure 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 sales by Cynosure,
Cynosure Affiliates, Cynosure Sublicensees and Cynosure’s agents for such year of Licensed
Products, commercialized pursuant to the sublicense under the Anderson Patents granted to Cynosure
and Cynosure Affiliates by Palomar under Section 2.1(a), 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 Cynosure or Cynosure 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.




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     3.4. Other Provisions.



          (a) The provisions of this Section 3 shall apply to Cynosure Sublicensees to the same extent
as Cynosure and Cynosure 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 Cynosure or Cynosure
Affiliates under this Section 3 that have accrued as of the end of the Sublicense Term.




          (b) Palomar represents and warrants to Cynosure 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 G 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. Royalties Arising from Past Sales; Releases.



          (a) Payment. The Parties agree that (A) the aggregate amount of royalties due for Sales of
Licensed Products by Cynosure and Cynosure Affiliates before October 1, 2006 is equal to Ten
Million U.S. Dollars (US$10,000,000), which the Parties understand and agree is based on a royalty
rate of seven and one half percent (7.5%) of applicable Net Sales through September 30, 2006, in
accordance with Section 4.4, and excludes all interest, penalties or damages of any kind
whatsoever accruing before October 1, 2006, and (B) for the avoidance of doubt, subject to payment
of the amount described in clause (A), Cynosure shall not be liable for any interest, penalties or
damages with respect to such royalties due for Sales of Licensed Products by Cynosure and Cynosure
Affiliates before October 1, 2006, in accordance with the release granted by Palomar in Section
4.2(b). Cynosure shall pay to Palomar such amount within two (2) days of the Effective Date. 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.




          (b) Release by Palomar. Upon its receipt of such payment set forth in Section 4.2(a),
Palomar, for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, shall release, acquit and forever discharge Cynosure, each Cynosure Affiliate and
each of their respective current and former principals, officers, directors, equity holders,
members, employees, partners (whether general or limited), distributors, attorneys, parents,
affiliates, subsidiaries, divisions, and successors and assigns (collectively, the “Cynosure
Group”), of and from any and all manner of obligations, damages, demands, costs, expenses,
losses, liens, debts and liabilities, and any and all claims, counterclaims and causes




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of action (whether in law or equity) (collectively, “Claims”), whether known or unknown, that
accrue based on any claim of infringement of the Anderson Patents (including the Other Anderson
Patents) resulting from the manufacture, use, sale, offer for sale or importation of any product
listed on Exhibit E or Exhibit F limited to the form in which those products were
sold and to the treatments for which those products were marketed by Cynosure and Cynosure
Affiliates prior to October 1, 2006, in each case in the Professional Field only, which Palomar
had, has, or may have prior to October 1, 2006 (but not thereafter). Palomar warrants and
represents that it has not assigned or otherwise transferred any Claim released by this Section
4.2(b). Palomar covenants and agrees that it will not sue Cynosure or any member of the Cynosure
Group, individually or collectively, or otherwise pursue or participate in the pursuit of any
claim brought by any person or entity against Cynosure or any member of the Cynosure Group,
individually or collectively, based on any Claim released by this Section 4.2(b). Notwithstanding
the provisions of this Section 4.2(b), nothing in this Agreement shall release, acquit, discharge
or otherwise affect any other Claims related to Palomar’s rights under this Agreement.




          (c) Release by Cynosure. Effective as of October 1, 2006, Cynosure, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, hereby releases,
acquits and forever discharges Palomar, each Palomar Affiliate and each of their respective
current and former principals, officers, directors, equity holders, members, employees, partners
(whether general or limited), distributors, attorneys, parents, affiliates, subsidiaries,
divisions, and successors and assigns (collectively, the “Palomar Group”), of and from any
and all manner of Claims, whether known or unknown, that accrue based on any claim of infringement
of the Cynosure Patents resulting from the manufacture, use, sale, offer for sale or importation
of any product listed on Exhibit C limited to the form in which those products were sold
and to the treatments for which those products were marketed by Palomar and Palomar Affiliates
prior to October 1, 2006, in each case in the Professional Field only, which Cynosure had, has, or
may have prior to October 1, 2006 (but not thereafter). Cynosure warrants and represents that it
has not assigned or otherwise transferred any Claim released by this Section 4.2(c). Cynosure
covenants and agrees that it will not sue Palomar or any member of the Palomar Group, individually
or collectively, or otherwise pursue or participate in the pursuit of any claim brought by any
person or entity against Palomar or any member of the Palomar Group, individually or collectively,
based on any Claim released by this Section 4.2(c). Notwithstanding the provisions of this
Section 4.2(c), nothing in this Agreement shall release, acquit, discharge or otherwise affect any
other Claims related to Cynosure’s rights under this Agreement.




     4.3. No Payments for Certain Products.



          (a) Palomar Products. The Parties acknowledge and agree that the (sub)license grant
by Cynosure and Cynosure Affiliates to Palomar and Palomar Affiliates under the Cynosure Patents
specified in Section 2.2(a) is fully paid up and royalty-free, and Palomar and Palomar Affiliates
shall not pay Cynosure or any Affiliates any amounts or other consideration on account of such
(sub)licenses.




          (b) Certain Licensed Products. The Parties acknowledge and agree that no royalties
are due hereunder for the Sale of (1) Cynosure Other Products, except as provided in




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Section 4.4(c) to the extent that a Cynosure Other Product becomes a Cynosure Combination
Product hereunder, or (2) Cynosure Other Modules, except as provided in Section 4.4(c) upon their
Sale as part of or for use with a Cynosure Combination Product.




          (c) No Limitation. No provision contained herein, including in this Section 4.3(c)
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 Cynosure or any Cynosure Affiliate in the event the
manufacture, use, sale, offering for sale, or importation of any Cynosure Other Product or
Cynosure 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 Cynosure for Net Sales.



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




               (i) Cynosure shall pay to Palomar royalties on Net Sales of each Cynosure Hair Product, except
the Apogee Elite Laser System, in all countries where the manufacture, use, sale, offer for sale or
importation of such Cynosure Hair Product infringes a Valid Claim of the Anderson Patents, equal to
seven and one half percent (7.5%) of such Net Sales. Cynosure shall pay to Palomar royalties on
Net Sales of each Apogee Elite Laser System, in all countries where the manufacture, use, sale,
offer for sale or importation of such Apogee Elite Laser System infringes a Valid Claim of the
Anderson Patents, equal to (i) seven and one half percent (7.5%) of such Net Sales for purposes of
calculating the portion of the payment set forth in Section 4.2 that is attributable to Sales of
the Apogee Elite Laser System by Cynosure and Cynosure Affiliates accruing before October 1, 2006,
(ii) five percent (5%) of such Net Sales of such Apogee Elite Laser System accruing between October
1, 2006 and September 31, 2007, inclusive, (iii) six and one half percent (6.5%) of such Net Sales
of such Apogee Elite Laser System accruing between October 1, 2007 and September 31, 2008,
inclusive, and (iv) seven and one half percent (7.5%) of such Net Sales of such Apogee Elite Laser
System accruing on or after October 1, 2008.



               (ii) In the event that a Cynosure Hair Module is Sold for use with a previously Sold Cynosure
Hair Product, Cynosure shall pay to Palomar royalties of seven and one half percent (7.5%) on Net
Sales attributable to such Cynosure Hair Module in all countries where the manufacture, use, sale,
offer for sale or importation of such Cynosure Hair Module infringes a Valid Claim of the Anderson
Patents.



               (iii) In the event that a Cynosure Other Module is Sold for use with a previously Sold
Cynosure Hair Product, (1) no royalties already paid or owed to Palomar for the previous Sale of
such Cynosure 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 Cynosure Other Module.



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




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



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               (ii) In the event that a Cynosure Hair Module is Sold for use with a previously Sold Cynosure
Other Product, (1) no royalties shall be owed hereunder for the previous Sale of the Cynosure Other
Product, and (2) Cynosure shall pay to Palomar royalties of seven and one half percent (7.5%) on
Net Sales attributable to such Cynosure Hair Module in all countries where the manufacture, use,
sale, offer for sale or importation of such Cynosure Hair Module infringes a Valid Claim of the
Anderson Patents.



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



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




                    (i) Amount. Cynosure shall pay to Palomar a seven and one half percent (7.5%) royalty on the
percentage set forth in the table below of the Aggregate Net Sales (as defined below) attributable
to the Sale of each Cynosure Combination Product, in all countries where the manufacture, use,
sale, offer for sale or importation of such Cynosure Combination Product infringes a Valid Claim of
the Anderson Patents. This Section 4.4(c) shall apply to Sales of the Apogee Elite Laser System,
which shall be deemed a Cynosure Combination Product hereunder, if Cynosure or any Cynosure
Affiliate modifies the Apogee Elite Laser System such that it is marketed as being capable of using
both (i) at least one Cynosure Other Module and (ii) at least one Cynosure Hair Module, in each
case (a) including if Cynosure markets such modified Apogee Elite Laser System between October 1,
2006 and September 31, 2008 and (b) effective as of the date of such modification.



	 	 	 	 	 
	Type of Cynosure Combination Products	 	Percentage of Aggregate Net
	Number of Cynosure Hair	 	Number of Cynosure	 	Sales To Use to Calculate
	Modules	 	Other 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%)






                    (ii) Calculation of Royalties. For purposes of calculating royalties on the Sale of Cynosure
Combination Products, and Cynosure 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 Cynosure Combination Product, i.e., the Cynosure Combination Product and all associated
Cynosure Modules, whether one or more than one Sales were involved. Accordingly, upon each Sale of
a Cynosure Combination Product, or a Cynosure 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 a Cynosure Combination Product, the royalty shall be calculated as
provided in the table above on the Net Sales attributable to such Cynosure Combination Product
(including any Cynosure Modules Sold therewith), which shall be the Aggregate Net Sales for such
purposes;



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



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


Exhibit H sets forth examples of calculating royalties owed for the Sale of Cynosure
Combination Products.




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



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



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



     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 Cynosure may credit any over-payment made
by Cynosure 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




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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 only on Net Sales of
Licensed Products in those countries where the manufacture, use, sale, offer for sale or
importation of such Licensed Product infringes a Valid Claim of the Anderson Patents, 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(a), 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(a), 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).




          (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 Cynosure or one or more Cynosure Affiliates or Cynosure 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 Cynosure and Cynosure Affiliates for such purposes. With respect to attributing
certain marketing activities by Cynosure Sublicensees to Cynosure and Cynosure Affiliates under
this Section 4.5(d), the Parties understand and agree that, once Cynosure or any Cynosure
Affiliate learns of any such marketing activities by any Cynosure Sublicensee that Cynosure and
Cynosure Affiliates do not want to be attributed to them hereunder (the “Non-Applicable
Activities”), Cynosure shall notify Palomar in writing of such Non-Applicable Activities and
the Cynosure Sublicensee(s) involved (unless Palomar first notified Cynosure of such
Non-Applicable Activities, whereupon Cynosure shall confirm in writing that it received such
notice and intends to take the steps set forth below), and Cynosure and Cynosure Affiliates shall
use commercially reasonable efforts to end such Non-Applicable




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Activities within a commercially reasonable period of time. If Cynosure and Cynosure
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 Cynosure and Cynosure Affiliates hereunder; however, if Cynosure and Cynosure
Affiliates are unable to end the Non-Applicable Activities within six (6) months by such efforts,
Cynosure and the Cynosure Affiliates shall immediately (x) terminate the sublicense to such
Cynosure Sublicensee, and (y) stop Selling (directly or indirectly through other Cynosure
Sublicensees or otherwise) Licensed Products to such Cynosure Sublicensee. Cynosure’s and
Cynosure Affiliates’ full compliance with the preceding sentence shall be deemed to fully satisfy
their obligations under this Section 4.5(d) with respect to Cynosure Sublicensees; contingent upon
such full compliance, any such Non-Applicable Activities shall not be attributed to Cynosure or
any Cynosure Affiliate.




          (e) Records. In addition to the records that Cynosure and Cynosure Affiliates are
required to keep under Section 4.9, Cynosure shall maintain, and shall cause Cynosure Affiliates
to maintain, such records, based on the serial number of each Cynosure Product and Cynosure
Module, to verify any royalty calculation for Cynosure Products and Cynosure Modules, and such
records shall be available for audit as provided in Section 4.10.




          (f) Single Royalty. Cynosure shall pay only one royalty hereunder 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 Cynosure, 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 Cynosure 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 Royalty Rate Reduction.



          (a) Potential Reduction in Royalty Rate. Subject to Section 4.6(b), if after the Effective
Date Palomar grants to a Third Party a non-exclusive sublicense under the Anderson Patents within
the Professional Field (but not the Consumer Field), 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 (i.e., 7.5%) (such lower percentage rate, the
“Lower Rate”), then Palomar shall notify Cynosure 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 Product 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 Third Party has sold, in the aggregate, at least One Hundred Thousand
Dollars (U.S. $100,000) in products whose manufacture, use or sale infringe the Anderson Patents
in the United States giving rise to royalties payable to Palomar at the Lower Rate.
Notwithstanding anything in this Agreement to the contrary, any such royalty




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Non-Exclusive Patent License



reduction shall not apply to amounts already paid or payable to Palomar hereunder (including
those identified in Section 4.2).




          (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,
provided that Section 4.6(a) shall apply to any subsequent amendment or restatement of such
existing sublicense, where such amendment or restatement changes the royalty rate, except if any
other provision of this Section 4.6(b) applies, in which case Section 4.6(a) shall not apply;



               (ii) Sublicenses granted by Palomar to settle any bona fide litigation or arbitration;



               (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 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 the
percentage rate specified under Section 4.4 (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;



               (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 an Anderson 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 an Anderson Patent
Challenge as specified in Section 8.6.




     4.7. Royalty Disputes.



          (a) Royalty Dispute and Escrow Account. If Palomar and any of Cynosure or Cynosure
Affiliates shall in good faith dispute whether (i) Cynosure has an obligation to pay to Palomar
royalties for the Sale by Cynosure or any Cynosure Affiliates of any module, product, system,
component or accessory, in each case other than the Cynosure Combination Products

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and handpieces listed in Exhibit E under the heading “List of Cynosure Combination
Products” and the Cynosure Hair Products and handpieces listed in Exhibit F (the
“Cynosure Current Products”), or the appropriate amount of such payment, based on whether
the manufacture, use or sale of such item infringes the Anderson Patents, or whether such item
should be categorized as a Cynosure Hair Module or Cynosure Other Module, or as a Cynosure Hair
Product or Cynosure Combination Product or Cynosure Other Product, as applicable hereunder (but
not based on any other dispute involving royalties, such as the amount of royalties payable on Net
Sales for sales of any module, product, system, component or accessory the categorization of which
is not in dispute, the application of the Net Sales definition, audit disputes, payment
performance by Cynosure, whether any person or entity is a Cynosure Affiliate or Excluded Third
Party hereunder, etc.), or (ii) any dispute regarding the applicability of Section 4.6(a), then in
each case (i) and (ii), the subject Parties (plus Cynosure if the affected Party is a Cynosure
Affiliate) 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, Cynosure shall deposit those royalty amounts that Palomar believes in good faith
it is owed hereunder and that Cynosure 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 Cynosure 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 Cynosure 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 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




          
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(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.




          (c) Cynosure Current Products. During the Term, Cynosure and Cynosure Affiliates shall not
bring, pursue or maintain, allow any Cynosure 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)
seeking a judgment or other decision that the manufacture, use, sale, offering for sale, or
importation of the Cynosure Current Products does not infringe any Valid Claims of the Anderson
Patents (any such claim or other assertion, a “Non-Infringement Challenge”). In the event
that any Non-Infringement Challenge is brought, pursued or maintained in contravention of this
Section 4.7(c), Cynosure and Cynosure Affiliates each understands and agrees that, in addition and
without prejudice to any of Palomar’s other rights or remedies hereunder, (i) Cynosure and
Cynosure Affiliates shall be in material breach of this Agreement, and (ii) Cynosure and Cynosure
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
Non-Infringement Challenge.




     4.8. Reports. Following the Effective Date and for as long as royalties are owed to
Palomar hereunder, Cynosure shall furnish to Palomar a written quarterly calendar report showing,
on a country-by-country basis, for all Sales by Cynosure and Cynosure Affiliates: (i) the Net Sales
of all Licensed Products for which royalties are owed under Section 4.4 during the reporting period
and a reasonably detailed calculation of such Net Sales, including separately identifying Sales
made by Cynosure and Cynosure 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 Cynosure’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
Cynosure Product or Cynosure Other Product from one category to another or within types of Cynosure
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 Cynosure
Combination Products and Cynosure Modules for use with them, including all other information
reasonably necessary, to explain any royalty calculation for Sales of such Products and Modules.
Each report shall be due on the thirtieth (30th) day following the close of each calendar quarter.
If no royalty is due for any royalty period during the Term hereunder, Cynosure shall so report.
The receipt or acceptance by Palomar of any royalty statement or royalty payment shall not prevent
Palomar from subsequently challenging the validity or accuracy of such statement or payment, or the
method used by Cynosure in calculating the same. Further, the acceptance by Palomar of Cynosure’s
payment set forth in Section 4.2 shall not be construed as Palomar’s acceptance of the method used
by Cynosure in calculating any such statement or payment covered thereby or Palomar’s acceptance of
Cynosure using such method for such Sales after October 1, 2006. The above report shall be
regarded as Cynosure’s confidential information and Palomar hereby covenants that it shall not use
or disclose any information included in such report for any purpose other than determining whether
Cynosure and Cynosure Affiliates 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.



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Palomar further agrees that, until such time as such information is no longer confidential
through no fault of Palomar, it shall maintain the report 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.




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



     4.10. Audits. Upon sixty (60) days prior written request by Palomar or MGH, Cynosure
and Cynosure Affiliates shall permit a certified, independent public accountant selected by Palomar
or MGH to have access during normal business hours, at Cynosure and such Cynosure Affiliate’s
premises, to such of the records of Cynosure and Cynosure Affiliates as may be reasonably necessary
to verify the accuracy of the royalty reports and payments hereunder for Sales of Licensed Products
by Cynosure and Cynosure Affiliates on or after October 1, 2006. Palomar may make such a request
not more than once in respect of any calendar year and such request may not apply to any periods
outside of the period of time that the appropriate records are required to be kept hereunder in
accordance with Section 4.9. In the event that such accountant concludes that additional royalties
are owed for the audited period, the additional royalty shall be paid within thirty (30) days of
the date Palomar delivers to Cynosure such accountant’s written report so concluding, together with
interest calculated in the manner provided by Section 4.11. The fees charged by such accountant
shall be paid by Palomar or MGH unless the audit discloses that the royalties payable by Cynosure
for the audited period are at least fifty thousand dollars (U.S. $50,000) more than the royalties
actually paid for such period, in which case Cynosure shall pay the reasonable fees and expenses
charged by such accountant. Palomar agrees that such accountant’s report and all information
subject to review under this Section 4.10 is confidential, that it shall cause such accountant to
retain all such information in confidence, and that it shall not provide such information to MGH
unless MGH agrees to retain all such information in confidence. Palomar hereby covenants and
agrees that Palomar may not use any such information for any purpose other than determining whether
Cynosure or any Cynosure Affiliate has complied with their obligations under, and enforcing the
terms of, this Agreement. Palomar further agrees that, until such time as such information is no
longer confidential through no fault of Palomar, it shall maintain such information in confidence
and treat it in a manner at least as restrictive as the manner in which Palomar treats 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 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 Cynosure 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



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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. 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. 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,
Cynosure and Cynosure 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 Cynosure is required by law to make any deduction or
withhold from any sum payable to Palomar by Cynosure hereunder, then the sum payable by Cynosure
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. Nothing in this Agreement, including any royalty
obligation set forth hereunder, shall be deemed to constitute an admission by Cynosure or any
Cynosure Affiliate that the manufacture, use or Sale by Cynosure or any Cynosure Affiliate of any
of its respective products prior to the Effective Date infringes or will infringe any Valid Claim
of the Anderson Patents (including the Other Anderson Patents). Cynosure and Cynosure Affiliates
each hereby stipulates to the fairness and reasonableness of such royalty obligations and covenants
not to allege or assert, or allow any Cynosure Sublicensees, or allow, cause or encourage or
support any Third Party to allege or assert, that such royalty obligations are unenforceable or
illegal in any way or amount to patent misuse.



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




     5.1 General. Each of Cynosure 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 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 Cynosure. Cynosure hereby represents and warrants to Palomar as of the
Effective Date that (i) together, Exhibit E and Exhibit F contain a complete and
accurate list of all products and systems, and components, accessories and replacement parts for
use therewith, Sold by Cynosure or any Cynosure Affiliates or Cynosure Sublicensees as of the
Effective Date for hair removal, (ii) Exhibit A contains a complete and accurate list of
all persons or entities that are Cynosure Affiliates as of the Effective Date as contemplated by
Section 1.1(b) and (iii) the Cynosure Current Products are royalty-bearing under this Agreement.



     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, CYNOSURE PATENTS
OR ANY OTHER ITEMS OR RIGHTS PROVIDED HEREUNDER, OR OTHERWISE IN CONNECTION WITH THIS AGREEMENT.
WITHOUT LIMITING THE FOREGOING, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES AND
REPRESENTATIONS, WHETHER EXPRESS OR IMPLIED, (i) THAT ANY PRODUCT OR SYSTEM, OR ITS DEVELOPMENT,
MANUFACTURE, MARKETING, SALE, IMPORTATION, DISPOSITION OR USE, OR ANY OTHER ACTIVITIES CONTEMPLATED
BY THIS AGREEMENT, SHALL BE FREE FROM INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER
RIGHTS OF ANY THIRD PARTY, (ii) AS TO THE QUALITY OR PERFORMANCE OF ANY SUCH ITEMS, OR (iii) OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NONINFRINGEMENT.



     5.4. No Consequential Damages. OTHER THAN FOR THE INDEMNIFICATION OBLIGATIONS OF THE
PARTIES 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,



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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, CYNOSURE PATENTS, ANDERSON PATENTS OR ANY OTHER ITEMS OR RIGHTS PROVIDED HEREUNDER, OR
OTHERWISE IN CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT SUCH PARTY KNOWS OR SHOULD HAVE KNOWN
OF THE POSSIBILITY OF SUCH DAMAGE.




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 Cynosure if the affected Party is a Cynosure Affiliate or
Palomar if the affected Party is a Palomar 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.




     7.1. Indemnification by Cynosure and Cynosure Affiliates. Cynosure and Cynosure
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, 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 Cynosure, Cynosure



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Affiliates, Cynosure 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 Cynosure and Cynosure Affiliates against all Losses
that arise out of or are incurred in connection with (i) any representation, warranty or agreement
that is made by Cynosure or any Cynosure Affiliates (or any Cynosure 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. Cynosure and Cynosure 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.




     7.2. Indemnification by Palomar and Palomar Affiliates. Palomar and Palomar
Affiliates shall indemnify, pay on demand, defend and hold Cynosure and Cynosure Affiliates and
their respective directors, officers, employees and agents harmless from and against any and all
Losses that arise out of or are incurred in connection with the development or manufacture of any
Palomar Products or the marketing, distribution, sale, disposition or use by anyone (including
Palomar, Palomar Affiliates and Palomar Sublicensees and any of their agents, resellers and
customers) of any such Palomar Products or provision by anyone of any related services. The
foregoing shall include, without limitation, indemnification by Palomar and Palomar Affiliates
against all Losses that arise out of or are incurred in connection with (i) any representation,
warranty or agreement that is made by Palomar or any Palomar Affiliates (or any Palomar
Sublicensees or agents or resellers of the foregoing) to or with any reseller, customer or other
Third Party with respect to any Palomar Product or related service or that otherwise arises out of
any such transaction, or (ii) any claim that any such Palomar Product or part thereof is defective
(whether in design, materials, workmanship or otherwise) or that otherwise relates to any
attribute, condition or failure of any such Palomar Product, including any claim of product
liability (whether brought in tort, warranty, strict liability or other form of action) or
negligence. Cynosure may participate in the defense of any such Losses. Palomar and Palomar
Affiliates, in the defense of any such Losses, shall not, except with the approval of Cynosure,
consent to entry of any judgment or enter into any settlement which (1) would result in injunctive
or other relief being imposed against Cynosure, or (2) does not include as a term thereof the
giving by the claimant to Cynosure 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 October 1, 2006, 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 (other than the
Other Anderson Patents) (the “Term”).



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     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 Cynosure and Cynosure Affiliates hereunder shall terminate. Upon termination
or expiration of this Agreement, the provisions of Sections 1, 2.1(b), 2.1(c), 2.1(e), 2.2, 2.3(a),
2.3(b), 2.5, 3.4(a), 4.3(a) 4.5(a), 4.5(e), 4.5(g), 4.7(a), 4.7(b), 4.8 to 4.13 (provided, however,
that the audit rights set forth in Section 4.10 shall terminate on the third anniversary of the
termination of this Agreement), 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, Cynosure’s contingent obligation in Section 4.3 to pay royalties to Palomar 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 (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 Cynosure or any Cynosure Affiliate is the breaching Party,
Palomar shall have the right to terminate this Agreement in full upon written notice to Cynosure,
in addition and without prejudice to any other rights or remedies Palomar may have, or (ii) where
Palomar or any Palomar Affiliate is the breaching Party, Cynosure 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 Cynosure may have.




     8.4. Bankruptcy. If Palomar or Cynosure 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 Cynosure. Subject to the terms of this Section 8,
Cynosure 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) By Cynosure.




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               (i) Cynosure and Cynosure Affiliates shall not bring, pursue or maintain, or cause or
encourage any Cynosure Sublicensee or Third Party to bring, pursue or maintain (in each case
including in connection with any action brought by Palomar to enforce Cynosure’s obligation to pay
royalties hereunder), any claim or other assertion in any court or other governmental forum of
competent jurisdiction (including any patent office) seeking a judgment or other decision that any
claims of the Anderson Patents are invalid or unenforceable or not patentable or otherwise not
proper (any such claim or other assertion, an “Anderson Patent Challenge”). In the event
that any Anderson Patent Challenge is brought, pursued or maintained in contravention of this
Section 8.6(a), Cynosure and Cynosure Affiliates each understands and agrees that, in addition and
without prejudice to any of Palomar’s other rights or remedies hereunder, (i) Cynosure and Cynosure
Affiliates shall be in material breach of this Agreement, and (ii) Cynosure and Cynosure 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 Anderson Patent
Challenge.



               (ii) At any time in Palomar’s sole discretion or in the event that (x) the enforceability or
legitimacy of the prohibition on Anderson Patent Challenges contained in Section 8.6(a) is
challenged in any court or other governmental forum by Cynosure, any Cynosure 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 Cynosure, in its sole discretion, at any
time, to replace such prohibition in full with the following provision: with respect to any
Anderson 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 Anderson Patent Challenge are not held
invalid or unenforceable, or (2) such Anderson 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 Anderson Patent Challenge
is first made and thereafter, the royalty rate payable by Cynosure under Section 4.4 shall increase
from seven and one half percent (7.5%), or whichever rate is then-applicable to Sales of the Apogee
Elite Laser System under Section 4.4, to ten percent (10%), and (ii) Cynosure and Cynosure
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 Anderson
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 Anderson Patent Challenge before such determination.



               (iii) Cynosure and Cynosure Affiliates each acknowledges and agrees that all the provisions of
this Section 8.6(a) 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 Cynosure and
Cynosure Affiliates the non-exclusive sublicense under the Anderson Patents provided for in Section
2 without all of the provisions of this Section 8.6(a). Palomar shall have the right, at any time
in its sole discretion, to strike this Section 8.6(a) in part or in full from this Agreement, and
Palomar shall have no liability of any kind whatsoever as a result of the presence or absence of
this Section 8.6(a). This Section 8.6(a) shall not be understood or



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applied to alter any standing or jurisdictional requirements that may apply to any Anderson
Patent Challenge.




          (b) By Palomar.




               (i) Palomar and Palomar Affiliates shall not bring, pursue or maintain, or cause or encourage
any Palomar Sublicensee or 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)
seeking a judgment or other decision that any claims of the Cynosure Patents are invalid or
unenforceable or not patentable or otherwise not proper (any such claim or other assertion, a
“Cynosure Patent Challenge”). In the event that any Cynosure Patent Challenge is brought,
pursued or maintained in contravention of this Section 8.6(b), Palomar and Palomar Affiliates each
understands and agrees that, in addition and without prejudice to any of Cynosure’s other rights or
remedies hereunder, (i) Palomar and Palomar Affiliates shall be in material breach of this
Agreement, and (ii) Palomar and Palomar Affiliates shall reimburse Cynosure for all reasonable
costs and expenses of attorneys, professionals and accountants incurred by Cynosure to respond to
and defend any such Cynosure Patent Challenge.



               (ii) Palomar and Palomar Affiliates each acknowledges and agrees that all the provisions of
this Section 8.6(b) are reasonable, valid and necessary for the adequate protection of Cynosure’s
interest in and to the Cynosure Patents, and that Cynosure would not have granted to Palomar and
Palomar Affiliates the non-exclusive sublicense under the Cynosure Patents provided for in Section
2 without all of the provisions of this Section 8.6(b). Cynosure shall have the right, at any time
in its sole discretion, to strike this Section 8.6(b) in part or in full from this Agreement, and
Cynosure shall have no liability of any kind whatsoever as a result of the presence or absence of
this Section 8.6(b). This Section 8.6(b) shall not be understood or applied to alter any standing
or jurisdictional requirements that may apply to any Cynosure Patent Challenge.


9. General.




     9.1. Entire Agreement; Counterparts. The Parties hereby terminate as of the Effective
Date that certain “Agreement”, dated August 18, 2006, between the Parties, provided that the
obligations of the Parties thereunder with respect to Communications (as defined therein) between
the Parties under that certain Agreement prior to the Effective Date shall survive such termination
and shall remain in effect for a period of five (5) years from the date of such Communications.
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, other than the surviving obligations of that certain Agreement specified in
the first sentence of this Section 9.1. 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,



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or, in the case of Cynosure, any Cynosure 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) Cynosure shall not, nor shall any Cynosure 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) Cynosure may assign this Agreement as a whole,
effective upon written notice to Palomar, to a Cynosure Affiliate if such Cynosure Affiliate
assumes, and has the ability to perform, all of the obligations of Cynosure under this Agreement,
whereupon upon completion of any such permitted assignment, such Cynosure Affiliate shall be
treated as “Cynosure” hereunder for all purposes, or (2) Cynosure may assign this Agreement as a
whole, and any Cynosure Affiliate may assign its rights and obligations hereunder as a whole,
effective upon written notice to Palomar, to Cynosure’s or such Cynosure Affiliate’s (as
applicable) surviving or resulting entity in the event of an acquisition of Cynosure or such
Cynosure Affiliate (as applicable) or any merger or other combination involving Cynosure or such
Cynosure 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(a) 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 Cynosure Affiliate for purposes of this Agreement (and thus
subject to the prohibition set forth in the first sentence of this Section 9.3(a)): (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 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
Cynosure, 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 Cynosure,
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

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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 Cynosure Affiliates
and Palomar Affiliates). For clarity and without limiting the generality of this Section 9.3(c),
any permitted assignee of Cynosure or any Cynosure Affiliate pursuant to Section 9.3(a) shall be
bound by all of Cynosure’s or such Cynosure 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. Waivers; Amendments; Supplements. Except as expressly provided herein, no waiver
by any Party of a breach of any covenant or condition of this Agreement by any other Party shall be
construed to be a waiver of any succeeding breach of the same or any other covenant or condition.
Except as otherwise expressly provided herein, this Agreement or any Exhibit hereunder may not be
changed or amended except by a writing expressly referring to this Agreement signed by both
Parties.



     9.6. Jurisdiction. 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.



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     9.7. 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.



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



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



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



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



     9.12. 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.



     9.13. 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.



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          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




          and to Cynosure at:



Cynosure, Inc.

5 Carlisle Road

Westford, MA 01886

Attention: CEO

Facsimile: (978) 256-6556




          with a required copy to:



William O. Flannery, Esq.

945 Lenox Road

Richmond, MA 01254

Facsimile: (413) 698-3506




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



[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 of the
Effective Date.



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

	 	 

Name: Joseph P. Caruso
	 	 
	 

	 	Title: CEO	 	 
	 

	 	Date: 11/6/06	 	 
	 
	 	 	 	 
	Cynosure, Inc. 	 	 
	 
	 	 	 	 
	By:
	 	/s/ Michael Davin 	 	 
	 

	 	 

Name: Michael Davin
	 	 
	 

	 	Title: CEO	 	 
	 

	 	Date: 11/6/06	 	 







 









 








Non-Exclusive Patent License




Exhibit A

Cynosure Affiliates




Cynosure GmbH




Cynosure S.A.R.L.




Cynosure UK Limited




Cynosure KK




Suzhou Cynosure Medical Devices, Co.




 









 





Non-Exclusive Patent License




Exhibit B

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



U.S. Patent No. 5,824,023



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 JP2,210,720)



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





 









 








Non-Exclusive Patent License




Exhibit C

Palomar Products



EsteLux



MediLux



NeoLux



StarLux



EpiLaser



E2000



RD1200



SLP1000



LightSheer (prior to the 1999 sale to Coherent, Inc.)



Q-YAG 5



Dermatype Skinphotometer



GentleWaves LED Photomodulation



Thermapulse



Including associated handpieces and other accessories for each of the above systems.




 









 








Non-Exclusive Patent License




Exhibit D

Cynosure Patents



5,871,479 “Alexandrite Laser System for Hair Removal and Method Therefor”



7,018,396 “Method of Treating Acne”



SN 11/ 202,014 “Method of Treating Acne”



5,290,273 “Laser treatment method for removing pigement containing lesions from the skin of a
living human”



5,749,868 “Near infra-red selective photothermolysis for ectatic vessels and method therefor”



6,210,426 “Optical Radiation Treatment for Prevention of Surgical Scars”



SN 09/797,124 “Laser Treatment of Wrinkles”



SN 11/035,680 “Multiple wavelength laser workstation”



All Patent equivalents of the foregoing in other jurisdictions.





 









 








Non-Exclusive Patent License




Exhibit E




List of Cynosure Combination Products




Cynergy System




Cynergy III System




Each of the above systems includes associated handpieces.




Narrative Regarding Definition of Cynosure Combination Products




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



     For clarity and without limitation, a product that was one type of product, e.g., a Cynosure
Other Product, may become another type of product, e.g., a Cynosure 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 a Cynosure 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 a Cynosure product is determined to
be a Cynosure Other Product (i.e., it is not capable of containing or using a Cynosure Hair Module,
e.g., the Affirm System), when a specific Cynosure Other Product with a unique serial number is
Sold it shall remain a Cynosure Other Product hereunder even if such system is later modified to
allow a Cynosure Hair Module (e.g., a PhotoLight handpiece) to be Sold for use with such specific
Cynosure Other Product. Thereafter, however, such Cynosure product (e.g., a modified Affirm
System) shall be a Cynosure Combination Product and future Sales of such product, that would
previously have been categorized as Cynosure Other Products upon their Sale, because they are now
capable of using a Cynosure Hair Module, shall be treated upon Sale as Cynosure Combination
Products hereunder.



     Similarly, if a Cynosure product is determined to be a Cynosure Hair Product (i.e., it is not
capable of containing or using a Cynosure Other Module, e.g., the Apogee 5500 System), when a
specific Cynosure Hair Product with a unique serial number is Sold it shall remain a Cynosure Hair
Product hereunder even if such system is later modified to allow a Cynosure Other Module (e.g., the
VStar Pulsed Dye Laser component and handpiece) to be Sold for use with such specific Cynosure Hair
Product. Thereafter, however, such Cynosure product (e.g., a modified Apogee 5500 System) shall be
a Cynosure Combination Product and future Sales of such product, that would previously have been
categorized as Cynosure Hair Products upon their Sale, because they now may use a Cynosure Other
Module, shall be treated upon Sale as Cynosure Combination Products hereunder.




 









 








Non-Exclusive Patent License




Exhibit F

Cynosure Hair Products




PhotoGenica LPIR

Apogee Elite

Apogee 5500

Apogee Express

Apogee-40

Apogee 9300

Apogee 6200

Apogee 100

Apogee D-20

Acclaim 7000

SmartEpil

SmartEpil II

PhotoLight

PhotoSilk & PhotoSilk Plus Systems

Charm

Sure

Si

Cynosure M2 Laser



Each of the above systems includes associated handpieces.




     For clarity and without limitation, in addition to using optical radiation to remove hair, a
Cynosure 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 G

Royalty Calculation Flow Charts



[Omitted]





 










 





Non-Exclusive Patent License




Exhibit H

Royalty Payments Owed On Cynosure 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:



     Cynosure Sells a Cynosure Combination Product (“Product One”), e.g., Cynergy System,
without a Cynosure Hair Module, e.g., without a 1064 Nd:YAG laser, and with only a Cynosure Other
Module, e.g., 585nm pulsed dye laser. The Net Sales attributable to such Sale is $100. No royalty
is owed Palomar on such Sale.



     Cynosure then Sells a Cynosure Hair Module, e.g., a 1064 Nd:YAG laser, for use with Product
One, with Net Sales attributable to the Sale of such Cynosure Hair Module of $40. The Aggregate
Net Sales for Product One, with the Cynosure Other Module and the Cynosure Hair Module, is $140.
Cynosure owes Palomar royalties of $5.25 ($140 x 50% x 7.5%).



     Cynosure then Sells a second Cynosure Hair Module, e.g., a second 1064 Nd:YAG laser, for use
with Product One, with Net Sales attributable to the Sale of such Cynosure Hair Module of $32. The
Aggregate Net Sales for Product One, with the Cynosure Other Module and the two Cynosure Hair
Modules, is $172. Cynosure has paid Palomar the previous royalty of $5.25. The total amount of
royalty now owed is $9.03 ($172 x 70% x 7.5%), so Cynosure owes Palomar royalties of $3.78 ($9.03 -
$5.25).



     Cynosure then Sells a second Cynosure Other Module, e.g., a second 585nm pulsed dye laser, for
use with Product One, with Net Sales attributable to the Sale of such Cynosure Other Module of $28.
The Aggregate Net Sales for Product One, with the two Cynosure Other Modules and the two Cynosure
Hair Modules, is $200. Cynosure has paid Palomar the previous royalty of $9.03. The total amount
of royalty now owed is $10.05 ($200 x 70% x 7.5%), so Cynosure owes Palomar royalties of $1.47
($10.05-$9.03).



     Example Two:



     Cynosure Sells a Cynosure Combination Product (“Product Two”), e.g., Cynergy III
System, with only a Cynosure Hair Module, e.g., 1064 Nd:YAG laser. The Net Sales attributable to
such Sale is $160. Cynosure owes Palomar royalties of $12 ($160 x 100% x 7.5%).



     Cynosure then Sells a Cynosure Other Module, e.g., 585nm pulsed dye laser, for use with
Product Two, with Net Sales attributable to the Sale of such Cynosure Other Module of $90. The
Aggregate Net Sales for Product Two, with the Cynosure Hair Module and the Cynosure Other Module,
is $250. Cynosure has paid Palomar the previous royalty of $12. The total amount of royalty now
owed is $9.38 ($250 x 50% x 7.5%), so Cynosure may take a credit of
$2.62 ($12-$9.38) on future
royalty payments owed Palomar.



     Cynosure then Sells a second Cynosure Hair Module, e.g., a second 1064 Nd:YAG laser, and a
second Cynosure Other Module, e.g., Cynergy PL pulsed light module, for use with



 









 





Non-Exclusive Patent License




Product Two, with Net Sales attributable to both those Sales of Cynosure Modules of $112. The
Aggregate Net Sales for Product Two, with the four Cynosure Modules, is $362. Cynosure has paid
Palomar a total royalty of $9.38, first paying $12 and then taking a credit of $2.62. The total
amount of royalty now owed is $19.01 ($362 x 70% x 7.5%), so Cynosure owes Palomar royalties of
$9.63 ($19.01-$9.38).



     Example Three:



     Cynosure Sells a Cynosure Combination Product (“Product Three”), e.g., Cynergy III
System, with a Cynosure Hair Module, e.g., 1064 Nd:YAG laser, and a Cynosure Other Module, e.g.,
585nm pulsed dye laser. The Net Sales attributable to such Sale is $190. Cynosure owes Palomar
royalties of $7.13 ($190 x 50% x 7.5%).



     Cynosure then Sells a Cynosure Other Module, e.g., Cynergy PL module, for use with Product
Three, with Net Sales attributable to the Sale of such Cynosure Other Module of $70. The Aggregate
Net Sales for Product Three, with the Cynosure Hair Module and the two Cynosure Other Modules, is
$260. Cynosure has paid Palomar the previous royalty of $7.13. The total amount of royalty now
owed is $9.75 ($260 x 50% x 7.5%), so Cynosure owes Palomar royalties
of $2.62 ($9.75-$7.13).



     Cynosure then Sells a second Cynosure Hair Module, e.g., a second 1064 Nd:YAG laser, for use
with Product Three, with Net Sales attributable to the Sale of such Cynosure Hair Module of $75.
The Aggregate Net Sales for Product Three, with the four Cynosure Modules, is $335. Cynosure has
paid Palomar the previous royalty of $9.75. The total amount of royalty now owed is $17.59 ($335 x
70% x 7.5%), so Cynosure owes Palomar royalties of $7.84 ($17.59-$9.75).



ii









 






Non-Exclusive Patent License




Appendix A

Gillette Agreement





 










 





DEVELOPMENT AND LICENSE AGREEMENT




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



RECITALS




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



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



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



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



ARTICLE I

R&D Program




     1.1 In General.




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




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




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



 









 






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




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




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



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




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




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




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




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



-3-









 






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



     1.3 Gillette Rights and Obligations During R&D Period.




     (a) Gillette’s Access Rights.




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




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



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




     (b) Gillette Obligations.




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




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




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




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



-5-









 






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



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



     1.4 R&D Committee.




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




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




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




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



-6-









 






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




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




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



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



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




     1.6 Gillette’s First Decision Point.




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




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



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



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




     1.8 Palomar Costs.




     (a) Additional Activities.




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




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



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




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




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



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ARTICLE II

Commercialization




     2.1 Gillette’s Commercialization Rights and Obligations.




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




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




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




     (iii) Trademarks.




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




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




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



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




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




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




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




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




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


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




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     2.2 Palomar’s Post-R&D Period.




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




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



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



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



ARTICLE III

CUT Supply




     3.1 CUT Supply.




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




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



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




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




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




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




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



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



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



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



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



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




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



ARTICLE IV

License Grants




     4.1 Grants to Gillette.




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




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




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




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




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



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





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




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



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4.2 Grants to Palomar.





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




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




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




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



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





     (e) Sublicenses.




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




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




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




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



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



ARTICLE V

Other Covenants of the Parties




     5.1 Option for the Male Field.




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




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




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




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




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



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




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




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




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



     5.2 Palomar Covenants Relating to Exploitation of Technology and Products.




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



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




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




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



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




     (a) Palomar covenants to Gillette that:




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




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




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




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




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




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



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




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




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




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




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




     (b) Gillette covenants to Palomar that:




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




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



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




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




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




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




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




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




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




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




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



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



     5.4 Economic Adjustments for Off-Label Sales




     (a) Gillette Covenants.




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




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




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



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




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




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




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



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




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




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



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



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



ARTICLE VI

Payments




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




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




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



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




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




     (d) Development Completion Payment(s).




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



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







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



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




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




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




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




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




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



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     (f) Royalties for Female Products.




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




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




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



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




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




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



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



     (a) Lump-Sum Payments for Gillette Joint Independent Products and Other Independent
Products. In partial consideration of the exclusivity granted by Palomar to Gillette
pursuant to ARTICLE IV and ARTICLE V, Gillette hereby agrees to make the following payments to
Palomar:




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



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



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



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



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




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



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




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




     (c) Royalties for Gillette Joint Independent Products. Gillette shall pay to
Palomar on account of sales or distributions of each Gillette Joint Independent


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





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



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




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



     6.3 Payments to Gillette.




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




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



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



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



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



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     6.6 TTP and Royalty Payments.




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




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




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



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



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




     6.8 Records Retention; Audit.




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




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




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




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



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


Banknorth

370 Main Street

Worcester, MA 01608

ABA No.: 211370545

Account No.: 8241022982

Account Name: Palomar Medical Technologies, Inc.




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



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



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



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ARTICLE VII

Reports




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



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



     7.3 Product Recall.





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




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



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ARTICLE VIII

Intellectual Property Rights




     8.1 Intellectual Property Ownership.




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




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




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




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




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



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




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




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



     8.2 Various Patent Matters.




     (a) Inventorship Procedure. During the R&D Period, the R&D Committee shall, at
the written request of either party and consistent with the terms of this Agreement, establish
a mutually agreeable procedure for determining inventorship of Information and Inventions
asserted by one party to be Joint Inventions and Joint Technology both during the R&D Period
and thereafter. Any such procedure shall be subject to the dispute resolution procedure set
forth in Section 13.1.



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



8.3 Prosecution of Patents.





     (a) Palomar Patents.




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




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




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



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




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




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



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




     (c) Joint Patents.




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




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



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




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



     8.4 Enforcement of Patents.




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




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




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



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




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




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




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



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




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




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




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




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




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




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




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




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


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





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




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




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




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




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8.5 Infringement of Third Party Rights.





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




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




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




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




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




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




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


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





     (c) Third Party Litigation.




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




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




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




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




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




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




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




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





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



ARTICLE IX

Confidentiality and Nondisclosure




     9.1 Confidentiality Obligations.




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




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




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




     (c) Gillette Obligations. Gillette recognizes that upon Palomar’s entry into this
Agreement, Palomar has an interest in Gillette’s retention in confidence of certain
information concerning Joint Technology for which Gillette granted Palomar an exclusive
license pursuant to Section 4.2(d). Accordingly, during the term of this Agreement, Gillette
shall, and shall cause its officers, directors, employees and agents to, keep confidential,
and not publish or otherwise disclose to Third Parties (other than Permitted Confidents), and
not use directly or indirectly for any purpose, any information concerning Joint Technology
that solely and directly relates to Light-Based Products outside the Field (the “Gillette
Controlled Information”), except to the extent (i) the Gillette Controlled Information is in
the public domain through no fault of Gillette or any of their respective officers, directors,
employees and agents (because such Gillette Controlled Information entered the public domain
prior to the Effective Date or otherwise), (ii) such disclosure or use would be permitted
under Section 9.2 if such information were Confidential Information of Palomar, (iii) such
disclosure or use is otherwise expressly permitted by the terms of this Agreement or is
reasonably necessary for the performance of this Agreement or for the exercise of Gillette’s
rights expressly granted by this Agreement, or (iv) compliance with any of the restrictions
contained in this Section 9.1(c) would violate or otherwise conflict with any Third Party
obligations of Gillette. For clarification, the disclosure by Gillette to Palomar or by
Palomar to Gillette of Gillette Controlled Information shall not cause such information to
cease to be subject to the confidentiality provisions of this Section 9. 1(c). All
restrictions with respect to Gillette Controlled Information contained in this Section 9.1 (c)
shall not apply to the use directly or indirectly for any purpose, or disclosure or
publication, of any Gillette Controlled Information that has applicability in the Field,
notwithstanding the fact that the Gillette Controlled Information has applicability outside
the Field.



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




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




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




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




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




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




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




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



     9.3 Confidential Information.




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




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




     (i) was already known to the receiving party, other than under an obligation of
confidentiality or non-use, at the time of disclosure to, or, with respect to know-how,
discovery or development by, such receiving party;




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




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




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




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


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




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



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




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




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



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




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




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



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



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ARTICLE X

Term and Termination




     10.1 Term.




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




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



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



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




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




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




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



     10.4 Unilateral Termination of this Agreement by Gillette.




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




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




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




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




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



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



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




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




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




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



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




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




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




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



     10.7 Consequences of Termination of Agreement by Gillette.




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




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



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




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




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




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




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




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




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




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




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



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




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




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




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




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




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



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




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




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




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




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



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




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




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




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




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




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




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




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



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




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




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




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




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




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



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




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




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




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




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




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




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



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     10.8 Consequences of Termination of Agreement by Palomar.




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




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




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




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




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




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




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




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




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




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



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



     10.10 Accrued Rights; Surviving Obligations.




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




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




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



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




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




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



ARTICLE XI

Indemnity




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




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




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



     11.3 Indemnification Procedure.




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




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




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




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




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




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




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




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



     11.4 Limitation on Damages and Liability.




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




     (b) DISCLAIMER.




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




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



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



ARTICLE XII

Representations, Warranties and Covenants




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




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




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




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




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




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



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




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




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




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




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



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




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




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




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




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




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



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




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




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




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




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




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




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




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



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




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




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




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




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




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



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




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




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



ARTICLE XIII

Dispute Resolution




     13.1 In General.




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




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




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




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




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




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



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




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




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




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




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




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




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



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



ARTICLE XIV

Miscellaneous




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




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



     14.2 Assignment.




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




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




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




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




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




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




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




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




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


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




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



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



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



          If to Palomar, to:



Palomar Medical Technologies, Inc.

82 Cambridge Street

Burlington, MA 01803

Attention: President & General Counsel

Facsimile: (781) 993-2300



with a copy to:



Foley Hoag LLP

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Attention: David A. Broadwin

Facsimile: (617) 832-7000





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          If to Gillette, to:



The Gillette Company

4800 Prudential Tower Building

Boston, Massachusetts 02199

Attn: President, Global Business Management — Grooming

Facsimile: (617) 421-8525



with copies to:



The Gillette Company

4800 Prudential Tower Building

Boston, Massachusetts 02199

Attn: Senior Vice President and General Counsel

Facsimile: (617) 421-7874



Covington & Burling

One Front Street

San Francisco, California 94111

Attention: Jim Snipes

Facsimile: (415) 591-6091



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




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



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




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



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



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



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



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




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



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



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



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



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




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



	 	 	 	 	 	 	 	 	 
	THE GILLETTE COMPANY	 	 	 	PALOMAR MEDICAL TECHNOLOGIES, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Peter Klein
	 	 	 	By:
	 	/s/ Joseph P. Caruso
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Peter Klein
	 	 	 	Name:
	 	Joseph P. Caruso
	Title:

	 	Senior Vice
President of
Strategy and
Business
Development
	 	 	 	Title:
	 	Chief Executive Officer and President






[Counterpart Signature Page to Development and License Agreement]





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Appendix A




Definitions 




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



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



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




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




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



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



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



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



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



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




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



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



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



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



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



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



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



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




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



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



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



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



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



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



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



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




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



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



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



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



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



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




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     “Female Product Technology” shall mean the Female Product(s), the Manufacturing Processes and
any Improvements to the foregoing that, during the term of this Agreement, are Controlled by
Palomar, but


excluding any Information and Inventions (a) to the extent claimed by one or more claims of
any Joint Patents, or (b) that otherwise constitute Joint Inventions.



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



     “Good Manufacturing Practices” shall mean the current good manufacturing practices applicable from
time to time to the

Manufacturing of any Female Product pursuant to Applicable Law.



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

of human hair growth, shaft diameter or pigmentation.



     “IDE” shall mean an investigational device exemption as defined in the regulations promulgated by
the FDA for the authorization to

commence human clinical trials, and its equivalent in other countries or regulatory jurisdictions
in the Territory.



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



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




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



     “Independent Product” shall mean any Light-Based Hair Management Product that is not a Female
Product and that is intended or

marketed for use in the Field, and all Improvements thereto.



     “Independent Product Lotion” shall mean any lotion, gel, cream, powder or similar formulation that
is (a) designed specifically for use

with, (b) approved by the FDA for use with, and (c) essential for the functionality of, a Gillette
Joint Independent Product.



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



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

the beginning of the R&D Period.



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



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




     “Joint Know-How” shall mean all Information and Inventions included in the Joint Inventions that
are not generally known, but

excluding any Information and Inventions to the extent claimed by a Joint Patent.



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



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



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

occurs.



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



     “Light-Based Lotion” shall mean any lotion, gel, cream, powder or similar formulation that is (a)
designed specifically for use with,

(b) approved by the FDA for use with, and (c) essential for the functionality of, a Light-Based
Product.



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



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



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




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



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



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



     “Manufacture” and “Manufacturing” shall mean, with respect to a product or system, the
manufacturing, processing, formulating,

packaging, labeling, holding and quality control testing of such product or compound.



     “Manufacturing Process” shall mean any process or step thereof that is necessary or useful for
Manufacturing any Light-Based Hair

Management Product and any Improvement thereto.



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

required by Applicable Law.



     “MGH” shall mean Massachusetts General Hospital.



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



     “MGH Patents” shall mean (a) as of the Effective Date, all Patents in existence and to which
Palomar has received or is entitled to
receive a license from MGH under the MGH Agreements, and (b) all claims contained in a Patent that
makes a priority claim to any of the
Patents that are identified in clause (a) above, provided any such priority claim has an earliest
priority date based solely on the Patents that are
identified in clause (a) above. Without limitation to the foregoing, “MGH Patents” shall include
the Patents listed on Schedule A-3 hereto.



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



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



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



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



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

adjusted by multiplying actual Net Sales of such combination product in such country calculated
pursuant



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




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



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



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



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



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



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



-xi-




 









 








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



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



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



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



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



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



     “Patents” shall mean (a) all patents and patent applications and any patents issuing therefrom
worldwide, (b) any substitutions, divisions,

continuations, continuations-in-part, reissues, renewals, registrations, confirmations,
re-examinations, extensions, supplementary



-xii-




 









 







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




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



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



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



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



     “Premarket Approval” or “PMA” shall mean a premarket approval as defined in the FFDCA, and the
regulations promulgated

thereunder, necessary to market a Female Product in the United States.



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



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



     “Professional Field” shall mean products or systems intended or marketed for sale to doctors,
health care providers or other commercial

service providers for use on or with patients or customers (and not for resale to any Person).



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



-xiii-




 









 








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



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



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



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



     “R&D” shall mean research and development.



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



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



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



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



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



-xiv-




 









 








     ”Territory” shall mean the entire world.



     “Third Party” shall mean any Person other than The Gillette Company, Palomar Medical Technologies,
Inc. and their respective

Affiliates or individuals who are their employees or agents when acting in that capacity.



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



     “Trademark” shall include any word, name, symbol, color, designation or device or any combination
thereof, including any trademark,

trade dress, brand mark, trade name, brand name, logo or business symbol.



     “TTP” shall mean a technology transfer payment.



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



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

are defined in the applicable Sections of this Agreement.



	 	 	 
	Defined Term	 	Section
	“Acquiring Party”

	 	Section 14.2
	“ADR”

	 	Section 13.2(a)
	“Advanced CUT Female Product Costs”

	 	Section 3.2
	“Additional Activities”

	 	Section 1.8(a)
	“Additional Light-Based Hair Management Product”

	 	Section 1.7
	“Additional Product Report”

	 	Section 1.7
	“Agreement”

	 	Preamble
	“Annual Exclusivity Collaboration Payment”

	 	Section 6.1(g)
	“Annual Exclusivity Collaboration Period”

	 	Section 6.1(g)
	“Authorized Overruns”

	 	Section 1.8(a)(i)(2)
	“Commencement Date”

	 	Section 1.1(c)






-xv-




 









 








	 	 	 
	Defined Term	 	Section
	“Commercial Assessment Period Additional Activities”

	 	Section 2.2(a)
	“Confidential Information”

	 	Section 9.3(a)
	“Cure Period”

	 	Section 10.3
	“CUT Female Product”

	 	Section 3.1(a)
	“CUT Product Specifications”

	 	Section 3.1(b)
	“Delivery Date”

	 	Section 3.1(c)
	“Development Completion Payments”

	 	Section 6.1(d)(i)
	“Disclosure Schedule”

	 	Section 12.1
	“Dispute”

	 	Section 13.1
	“Dispute Notice”

	 	Section 12.3(a)(i)
	“Effective Date”

	 	Preamble
	“Estimate”

	 	Section 1.8(a)(2)
	“Evaluation Materials”

	 	Section 5.1(b)(ii)
	“Exclusivity Payment Date”

	 	Section 6.1(g)
	“Failure to Launch Payments”

	 	Section 2.1(b)(ii)
	“Female Product Payment Rate”

	 	Section 6.1(h)
	“First Development Completion Payment”

	 	Section 6.1(d)(i)
	“First Press Release”

	 	Section 9.5
	“Gillette”

	 	Preamble
	“Gillette Controlled Information”

	 	Section 9.1(c)
	“Gillette Exclusive Licenses”

	 	Section 8.3(a)(i)
	“Gillette Exclusive License Period”

	 	Section 8.3(a)(i)
	Gillette License Agreement

	 	Section 5.3(b)(i)
	Gillette Licensee

	 	Section 5.3(b)(i)
	“Indemnification Claim Notice”

	 	Section 11.3(a)
	“Indemnified Party”

	 	Section 11.3(a)
	“Independent Product Payment Rate”

	 	Section 6.4
	“Infringement Suit”

	 	Section 8.5(c)(i)
	“Initial Gillette Specifications”

	 	Section 5.4(a)(i)(1)
	“Initial R&D Plan”

	 	Section 1.1(a)
	“In-License Agreement”

	 	Section 12.3(f)
	“Invoiced Sales”

	 	Definition of “Net Sales”
	“Launch Decision”

	 	Section 2.3
	“Licensed Palomar Patents”

	 	Section 12.3(f)
	“Female Product Payment Rate”

	 	Section 6.1(h)
	“Palomar”

	 	Preamble
	“Losses”

	 	Section 11.1
	“Male Collaboration Agreement”

	 	Section 5.1(c)
	“Male Option”

	 	Section 5.1(a)
	“Male Product”

	 	Section 5.1(a)
	“Male Product Opportunity”

	 	Section 5.1(b)
	“Manufacturing Cost”

	 	Section 3.2
	“Manufacturing Fee”

	 	Section 3.2






-xvi-




 









 








	 	 	 
	Defined Term	 	Section
	“MGH Joint Invention”

	 	Section 8.1(c)(ii)(2)
	“MGH Joint Know-How”

	 	Section 8.1(c)(ii)(2)
	“MGH Joint Patents”

	 	Section 8.1(c)(ii)(2)
	“MGH Joint Technology”

	 	Section 8.1(c)(ii)(2)
	“Neutral”

	 	Section 13.2(a)
	“Non-Disclosure Agreement”

	 	Section 9.8
	“Non-Product Components”

	 	Definition of Net Sales
	“Offer”

	 	Section 10.1(b)
	“Offer Period”

	 	Section 10.1(b)
	“Opportunity Notice”

	 	Section 5.1(b)
	“Opportunity Notice Effective Date”

	 	Section 5.1(b)(iii)
	“Option Exercise Notice”

	 	Section 5.1(b)(iv)
	“Option Exercise Period”

	 	Section 5.1(b)(iv)
	“Overrun”

	 	Section 1.8(a)(2)
	“Owned Palomar Patents”

	 	Section 12.3(f)
	“Palomar Controlled Information”

	 	Section 9.1(b)
	“Palomar Exclusive Licenses”

	 	Section 8.4(b)(iii)
	“Palomar Exclusive License Period”

	 	Section 8.4(b)(iii)
	“Palomar Key Personnel”

	 	Section 1.1(d)
	“Palomar License Agreement”

	 	Section 5.3(a)(i)
	“Palomar Licensee”

	 	Section 5.3(a)(i)
	“Palomar Marks”

	 	Section 2.1(a)(iii)(2)
	“Palomar Medical Technologies, Inc.”

	 	Preamble
	“Palomar U.S. Regulatory Documentation”

	 	Section 1.2(e)
	“Permitted Confidants”

	 	Section 9.1(a)
	“Product/Service Payment Rate”

	 	Section 6.5
	“R&D Advance Payment”

	 	Section 6.1(b)
	“R&D Payments”

	 	Section 6.1(a)
	“R&D Committee”

	 	Section 1.4(a)
	“R&D Committee Chair”

	 	Section 1.4(c)
	“R&D Committee Leader”

	 	Section 1.4(b)
	“R&D Leader”

	 	Section 1.1(d)
	“R&D Period”

	 	Section 1.1(c)
	“R&D Plan”

	 	Section 1.1(a)
	“R&D Plan Subcontracted Activities”

	 	Section 1.1(e)
	“SEC”

	 	Section 9.5
	“Second Development Completion Payment”

	 	Section 6.1(d)(i)
	“Subject Male Product”

	 	Section 5.1(b)(1)
	“Supplemental R&D Plan”

	 	Section 1.7
	“Supplemental R&D Payments”

	 	Section 1.7
	“Ten-Day Notice”

	 	Section 3.1(a)
	“Terms and Conditions”

	 	Section 13.2(b)
	“The Gillette Company”

	 	Preamble
	“Third Party Claim”

	 	Section 11.1






-xvii-




 









 








	 	 	 
	Defined Term	 	Section
	“Total CUT Supply”

	 	Section 3.1(c)






-xviii-





 









 








Exhibit A



R&D Plan




 




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







 









 










Schedule 1.1(d)




Key Personnel


	 	 	 
	 	 	 	 	 	Percent of Time
	Name and Title	 	Responsibilities	 	 	Committed to Project







 




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




 









 










Schedule 12.1




Disclosure Schedule




 




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





12.3(h) and (l)




     Palomar Medical Technologies, Inc. v. Lumenis, Ltd., Lumenis, Inc. ESC Medical Systems, Inc., and
ESC/Sharplan Laser Industries

Ltd., Trial Court, Superior Court Dept., Commonwealth of Massachusetts, Civ. Act. No. 02-4565,
filed October 29, 2002.



     Lumenis, Inc., v. Palomar Medical Technologies, Inc. and The General Hospital Corporation, United
States District Court, Northern

District of California, Civ. Act. No. 02-5176, filed October 24, 2002.



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





 




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




 









 










Schedule 12.3(f)




Palomar Patents




12.3(f)(i): Owned Palomar Patents

[Omitted]




12.3(f)(ii): Licensed Palomar Patents

[Omitted]




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

[Omitted]




 









 





Schedule A-1




Core Palomar Patents




 




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




 









 










Schedule A-2




Costs





 




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




 









 










Schedule A-3




MGH Patents






 




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




 









 










DEVELOPMENT AND LICENSE AGREEMENT




BETWEEN THE GILLETTE COMPANY




AND




PALOMAR MEDICAL TECHNOLOGIES, INC.




EFFECTIVE AS OF FEBRUARY 14, 2003




Contacts:




	 	 	 	 	 
	 

	 	Paul S. Weiner
	 	Michele M. Szynal
	 

	 	Chief Financial Officer
	 	The Gillette Company
	 

	 	Palomar Medical Technologies Inc
	 	617-421-7086
	 

	 	781-993-241
	 	michele_szynal@gillette.com
	 

	 	ir@palmed. com	 	 






 









 






	 	 	 
	

	 	Prudential Tower Building

Boston, MA 02199-8004

Tel 617.421.7000






February 14, 2003




Mr. Joseph P. Caruso

Chief Executive Officer and President

Palomar Medical Technologies, Inc.

82 Cambridge Street,

Burlington, MA 01803




Dear Joe,



Enclosed on behalf of The Gillette Company are two executed originals of the Development and
License Agreement dated February 14, 2003,

which represents an offer to enter into a collaboration with Palomar Medical Technologies, Inc. for
the development and commercialization of light-based, consumer products and systems for personal
use for female hair management.



As we discussed, if Palomar were to develop a Female Product Lotion, as that term is defined in the
above referenced agreement, which
provides Gillette with product exclusivity, Gillette would be prepared to increase the payments for
such lotion from 3% to 6% of Net Sales.
Product exclusivity within this context would mean that the device, i.e., a Light-Based Hair
Management Product intended for use in or
marketed in the Female Field, works only with such lotion and that such lotion would enjoy
intellectual property protection such that no other
party would be legally permitted to commercialize the lotion.



We look forward to working together to advance this technology to its next steps.



Very truly yours,




	 	 	 
	/s/ John E. Troy
 

John E. Troy Director,

	 	 
	Business Development
	 	 






 









 











October 2, 2003




Mr. Michael Buckley

Director, Emerging Technology Ventures

The Gillette Company

37 A Street

Needham, MA 02492-9120




     Re: Amendment of the Development and License Agreement between Palomar Medical Technologies, Inc.
(“Palomar”) and The Gillette Company (“Gillette”) effective as of February 14, 2003 (“Agreement”)



Dear Mr. Buckley:




     Further to our recent discussions, we hereby agree, effective as of the date hereof, that Section
5.3 “Covenants Relating to Exploitation”,

subsection (a)(ii)(2), of the Agreement shall be amended to read in its entirety as follows:




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



     We also hereby agree, effective as of the date hereof, that section 5.3(b)(iii) should be numbered
5.3(b)(ii)(3); section 5.3(b)(iv) should be
numbered 5.3(b)(ii)(4); subsection 5.3(c) should be numbered 5.3(b)(iii); and subsection 5.3(d)
should be numbered 5.3(b)(iv).



     The Parties hereby agree and acknowledge that except as modified by this Amendment, all of the
terms and conditions of the Agreement
shall remain in full force and effect. This letter agreement shall be governed by the laws of the
Commonwealth of Massachusetts (without
reference to the rules of conflict of laws thereof), and any dispute with respect hereto shall be
resolved in accordance with Section 13.1 of the Agreement.



	 	 	 	 
	 

	 	Very truly yours,	 
	 
	 	 	 
	 

	 	PALOMAR MEDICAL TECHNOLOGIES, INC.	 
	 
	 	 	 
	 

	 	/s/ Joseph P. Caruso
 

Name: Joseph P. Caruso
	 
	 

	 	Title: CEO	 
	 
	 	 	 
	 

	 	Date: 10/2/03	 






	 	 	 
	AGREED AND ACCEPTED:
	 	 
	THE GILLETTE COMPANY
	 	 
	 
	 	 
	/s/ Carol S. Fischman
 

Name: Carol S. Fischman

	 	 
	Title: Deputy General Counsel
	 	 
	 
	 	 
	Date:
	 	 
	 
	 	 
	 

Palomar Medical Technologies, Inc.

	 	 
	82 Cambridge Street
	 	 
	Burlington, MA 01803
	 	 
	Tel. 781. 993. 2300
	 	 
	Fax 781. 993. 2330
	 	 
	www.palmed.com
	 	 






 









 





Second Amendment to the February 14, 2003 Development and License Agreement Between The Gillette
Company and Palomar Medical Technologies, Inc. (the “Agreement”)



Whereas, pursuant to the Agreement, the parties are engaged in a collaboration for the development
and commercialization of light-based,

consumer products and systems for personal use for female hair management; and



Whereas, the parties desire to modify the duration and payments relating to the R&D Period of that
collaboration, and clarify Article IX,

Paragraph 9.9.



Now, Therefore, in consideration of the foregoing premises, the mutual promises and covenants of
the parties contained herein, and other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, do
hereby agree as follows effective this 24th day of June 2004:



1. Article I, Paragraph 1.1 (c) of the Agreement is hereby replaced in its entirety by the
following language:



“(c) Duration of the R&D Program. The term of the R&D Program shall commence on May 30,2003 (the
“Commencement Date”) and, shall
end on the latest to occur of (i) August 31, 2006, (ii)the date on which Palomar has completed the
last R&D Activity required to be performed
by Palomar pursuant to the R&D Plan, or (iii) the date on which Regulatory Approval in the United
States is received for the First Female
Product (the “R&D Period”).



2. The first two sentences of Article VI, Paragraph 6.1 (b) of the Agreement are hereby replaced in
their entirety by the following language:
“(b) R&D Payments. For the first thirteen (13) full Calendar Quarters after the Effective Date,
Gillette shall pay to Palomar for each such
Calendar Quarter seven hundred thousand dollars (US$700,000) to support the R&D Activities (each
such payment, an “R&D Payment” and
collectively the “R&D Payments”) in accordance with Section 1.3(b)(iii). For the avoidance of
doubt, Gillette shall be required to pay to
Palomar nine million, one hundred thousand dollars (US$9,100,000) in the aggregate, and no more
than nine million, one hundred thousand
dollars (US$9,100,000) hi the aggregate, unless otherwise expressly provided herein, hi Section
14.2(d), or as the parties may otherwise agree,
in connection with the R&D Program (which amount shall be inclusive of the five hundred thousand
dollar (US$500,000) made by Gillette to
Palomar pursuant to Section 6.1 (a) and credited against payments made in connection with the R&D
Program as provided in that Section).”



3. Appendix A Definitions. The definition “First Decision Point” is amended to read as follows:



“First Decision Point” shall mean thirty (30) days after the later of August 31, 2006 or the date
on which Palomar has completed the last R&D

Activity required to be performed by Palomar pursuant to the R&D Plan.



“FDA Approval Period” shall mean a period of (a) February 14, 2007, in the case of a 510(k)
Product, or (b) February 14, 2008, in the case of a
PMA Product, provided that hi the event that any delay in Regulatory Approval is caused by
Gillette, there shall be a corresponding extension
of the FDA Approval Period.



4. Article 9, Paragraph 9.9 “Publication” of the Agreement is hereby replaced in its entirety by
the following language:





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



     The Parties hereby agree and acknowledge that except as modified by this Amendment, all of the
terms and conditions of the Agreement
shall remain in full force and effect. This Amendment shall be governed by the laws of the
Commonwealth of Massachusetts (without reference
to the rules of conflict of laws thereof), and any dispute with respect hereto shall be resolved in
accordance with Section 13.1 of the Agreement.



	 	 	 
	PALOMAR MEDICAL TECHNOLOGIES, INC.
	 	 
	 
	 	 
	/s/ Joseph P. Caruso
 

Name: Joseph P. Caruso

	 	 
	Title: CEO
	 	 
	 
	 	 
	THE GILLETTE COMPANY
	 	 
	 
	 	 
	/s/ Carol S. Fischman
 

Name: Carol S. Fischman

	 	 
	Title: Deputy General Counsel
	 	 






 









 





Third Amendment to the February 14, 2003 Development and License Agreement Between The Gillette
Company and Palomar Medical Technologies, Inc. (the “Agreement”)



Whereas, pursuant to the Agreement, the parties are engaged in a collaboration for the development
and commercialization of light-based,

consumer products and systems for personal use for female hair management; and



Whereas, the parties desire to modify certain provisions of the Agreement.



Now, Therefore, in consideration of the foregoing premises, the mutual promises and covenants of
the parties contained herein, and other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, do
hereby agree as follows effective this 31 day of October 2005:



1. Article I, Paragraph 1.4 (d) of the Agreement is hereby replaced in its entirety by the
following language:



(d) Resolution of Disputes Arising Among the R&D Committee. Issues coming before the R&D Committee
that require action, approval or
resolution and for which the R&D Committee is unable to reach consensus as provided in Section
1.4(c) on a mutually acceptable action,
approval or resolution, shall be resolved by the R&D Committee Chair, provided, however, that at
the request of the Palomar R&D Committee
Leader, made in writing and sent to the Gillette R&D Committee Leader within thirty (30) days of a
final resolution of any dispute by the R&D
Committee Chair, a meeting shall be held between the Chief Executive Officer of Palomar and the
Vice President Technical Product Line
Strategy, Global Technical & Manufacturing of The Gillette Company or such officer as shall be
designated by Gillette, who shall attempt in
good faith to negotiate a resolution (subject to Board of Directors or equivalent approval, where
applicable). In the event of any such escalation
of a dispute, Gillette shall retain the final right of decision, except that in case of any
disputed matter, the resolution of which by Gillette would
result in (i) a significant delay in the timetable for the development or Regulatory Approval of
the First Female Product, or (ii) an increase in
the costs relating to the development or Regulatory Approval of the First Female Product, such
change shall require the mutual written consent
of both parties unless, with respect to clause (ii) only (and not clause (i)), Gillette agrees to
bear one hundred percent (100%) of such additional
costs. This Section 1.4(d) shall not apply to the procedure established by the parties pursuant to
Section 8.2(a).



2. **



3. **




** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.




 









 







4. Article VI, Paragraph 6.1 (g) of the Agreement is hereby replaced in its entirety by the
following language:



(g) Annual Exclusivity Collaboration Payments. As further reimbursement to Palomar for its
development and disclosure of Palomar
Technology as described in Section 6.1(e)(i) and in partial consideration of the exclusivity
granted by Palomar to Gillette pursuant to
ARTICLE IV and ARTICLE V, Gillette shall pay Palomar the Annual Exclusivity Collaboration Payments
(as defined below) set forth in this
Section 6.1 (g). Subject to ARTICLE X, within thirty (30) days after the first anniversary of the
Second Development Completion Payment
Date (such anniversary, the “Exclusivity Payment Date”), and thereafter within thirty (30) days
after each anniversary of the Exclusivity
Payment Date, Gillette shall pay to Palomar ten million dollars (US $10,000,000) (each, an “Annual
Exclusivity Collaboration Payment”). For
the twelve-month period commencing on the first anniversary of the Exclusivity Payment Date and any
future such anniversary of the
Exclusivity Payment Date, as the case may be, and ending twelve months thereafter (each twelve
month period, an “Annual Exclusivity
Collaboration Period”), the Annual Exclusivity Collaboration Payment paid during the first thirty
(30) days of the corresponding Annual
Exclusivity Collaboration Period shall be (A) folly creditable against any and all TTPs or
royalties owed by Gillette to Palomar for Net Sales
during the corresponding Annual Exclusivity Collaboration Period, and (B) payable only once
irrespective of the number of Female Products
that are developed or commercialized by the parties pursuant to this Agreement; provided, however,
that in the event that Gillette elects
pursuant to Section 10.2 to terminate the Exclusivity Period, from and after such termination date
no Annual Exclusivity Collaboration
Payments shall be payable by Gillette to Palomar. For avoidance of doubt, any credits, offsets or
other reductions available under this
Agreement for Gillette to credit against TTPs and royalties owed by Gillette to Palomar (taking
into account Section 6.6(b)) shall not be used to
reduce any Annual Exclusivity Collaboration Payments.




	 	 	 
	PALOMAR MEDICAL TECHNOLOGIES, INC.
	 	 
	 
	 	 
	/s/ Joseph P. Caruso
 

Name: Joseph P. Caruso

	 	 
	Title: CEO
	 	 
	 
	 	 
	THE GILLETTE COMPANY
	 	 
	 
	 	 
	/s/ Carol S. Fischman
 

Name: Carol S. Fischman

	 	 
	Title: Deputy General Counsel
	 	 






 









 






Appendix B




MGH Agreement





 









 





LICENSE AGREEMENT




     THIS AGREEMENT, effective as of August 18, 1995 (EFFECTIVE DATE) between THE GENERAL HOSPITAL
CORPORATION, a not-for-profit corporation doing business as Massachusetts General Hospital, having
a place of business at Fruit Street, Boston, Massachusetts 02114 (“GENERAL”) and Palomar Medical
Technologies, a Delaware corporation having offices at 66 Cherry Hill Drive, Beverly, MA 01915
(“PALOMAR”).



WITNESSETH




     WHEREAS, under research programs funded by GENERAL and the U.S. Government, GENERAL through
research conducted by Dr. R. Rox Anderson, has developed an invention pertaining to the use of
lasers for hair removal;



     WHEREAS, GENERAL and PALOMAR have entered into a Clinical Trial Agreement of even date,
attached hereto as Exhibit A (“Clinical Trial Agreement”), under which PALOMAR is providing funds
and equipment to support clinical trials of said invention at GENERAL;



     WHEREAS, GENERAL has filed a U.S. Patent Application covering said invention and all of the
rights, title and interest of the named inventors—Dr. R. Rox Anderson, Dr. Melanie C. Grossman and
William Farinelli—in said application have been assigned to GENERAL;



     WHEREAS, GENERAL represents to the best of its knowledge and belief that it is the owner of
all rights, title and interest in said patent application and has the right and ability to grant
the license hereinafter described;



     WHEREAS, as a center for research and education, GENERAL is interested in licensing PATENT
RIGHTS and thus benefiting the public and GENERAL by facilitating the dissemination of the results
of its research in the form of useful products, but is without capacity to commercially develop,
manufacture, and distribute any such product; and



     WHEREAS, PALOMAR having such capacity, desires to commercially develop, manufacture, use and
distribute such products throughout the world;



 









 





     NOW THEREFORE, in consideration of the premises and of the faithful performance of the
covenants herein contained, the parties hereto agree as follows:



1. DEFINITIONS




     1.1 (a) The term “ACCOUNTING PERIOD” shall mean each six month period ending June 30 and
December 31.




     (b) The term “AGREEMENT YEAR” shall mean the twelve (12) month period beginning on August 18,
1995 and each succeeding twelve (12) month period thereafter for the term of the Agreement. If not
otherwise specified, terms involving time periods shall be applied pro rata according to any time
frame in which less than the full specified period is involved.



     1.2 The term “AFFILIATE” shall mean any corporation or other legal entity other than PALOMAR
in whatever country organized, controlling, controlled by or under common control with PALOMAR. The
term “control” means possession, direct or indirect, of the powers to direct or cause the direction
of the management and policies of an entity, whether through the ownership of voting securities, by
contract or otherwise. The term “AFFILIATE” with respect to GENERAL shall mean any company
controlling, controlled by, or under common control, directly or indirectly, with GENERAL.



     1.3 The term “LICENSE FIELD” shall, subject to Exhibit B hereof, mean hair reduction and/or
removal.



     1.4 The term “FIRST COMMERCIAL EXPLOITATION” shall mean in each country the first exploitation
by way of sale of any PRODUCT or performance of a SERVICE, by PALOMAR, its AFFILIATES or
SUBLICENSES, (a) following approval, when such approval is necessary, for the marketing of such
PRODUCT or the performance of such SERVICE, by the appropriate governmental agency for the country
in which the exploitation is to be made, or (b) when such government approval is not required in a
country, the first sale of such PRODUCT or performance of such SERVICE in that country.



     1.5 The term “SUBLICENSEE” shall mean any non-AFFILIATE third party licensed by PALOMAR or by
an AFFILIATE to make, have made, use or sell any PRODUCT or SERVICE.



     1.6 The term “NET REVENUES” shall mean the GROSS REVENUES as defined in (b) below received by
PALOMAR or any of its AFFILIATES or SUBLICENSEES for the sale or distribution of any PRODUCT or for
the performance of any SERVICE, less (to the extent appropriately documented) the following amounts
actually paid out by PALOMAR, its AFFILIATE or SUBLICENSEES or credited against the GROSS REVENUES
received by them:




	(a) 	(i)	 	 credits and allowances for price adjustment, rejection, or return of PRODUCTS
previously sold or SERVICES previously performed, including reductions imposed by
Medicare, Medicaid or an HMO;
	 
	 	(ii)	 	rebates and cash discounts to customers allowed and taken;
	 
	 	(iii)	 	amounts for transportation, insurance, handling or shipping charges to customers;




 









 












	 	(iv)	 	taxes, duties and other governmental charges levied
on or measured by the sale of PRODUCTS or SERVICES,
whether absorbed by PALOMAR or paid by the purchaser
so long as PALOMAR’S price is reduced thereby, but
not franchise or income taxes of any kind
whatsoever;
	 
	 	(v)	 	for any revenues in which the United States
government on the basis of its royalty-free license
pursuant to 35 USC Sec. 202(C) to any PATENT RIGHT
requires that the GROSS REVENUES of any PRODUCT or
SERVICE subject to such PATENT RIGHT, be reduced by
the amount of such royalty owed GENERAL pursuant to
paragraph 3.1, the amount of such royalty.





     (b) For any bone fide sale, lease, license, rental or other disposition of a PRODUCT or bona
fide performance of a SERVICE to a bona fide customer by PALOMAR, its AFFILIATES or SUBLICENSEES,
the GROSS REVENUE shall be the gross billing price of the PRODUCT or the gross billing price for
the SERVICES, respectively.



     (c) If PALOMAR or any of its AFFILIATES or SUBLICENSEES sell any PRODUCT in a bona fide sale
as a component of a combination of active functional elements, the GROSS REVENUE of the PRODUCT
shall be determined by multiplying the GROSS REVENUE of the combination by the fraction A over A +
B, in which “A” is the GROSS REVENUE of the PRODUCT portion of the combination when sold separately
during the ACCOUNTING PERIOD in the country in which the sale was made, and “B” is the GROSS
REVENUE of the other active elements of the combination sold separately during said ACCOUNTING
PERIOD in said country. In the event that no separate sale of either such PRODUCT or active
elements of the combination is made during said ACCOUNTING PERIOD in said country, the GROSS
REVENUE of the PRODUCT shall be determined by multiplying the GROSS REVENUE of such combination by
the fraction C over C + D, in which “C” is the standard fully-absorbed cost of the PRODUCT portion
of such combination, and “D” is the sum of the standard fully-absorbed costs of the other active
elements component(s), such costs being arrived at using the standard accounting procedures of
PALOMAR which will be in accord with generally accepted accounting practices.



     (d) If PALOMAR, or any of its AFFILIATES or SUBLICENSEES, commercially uses or disposes of any
PRODUCT by itself (as opposed to a use or disposition of the PRODUCT as a component of a
combination of active functional elements) other than in a bona fide sale to a bona fide customer,
the GROSS SALES PRICE hereunder shall be the price which would be then payable in an arm’s length
transaction. If PALOMAR, or any of its AFFILIATES or SUBLICENSEES, commercially uses or disposes of
any PRODUCT as a component of a combination of active functional elements other than in a bona fide
sale to a bona fide customer, the GROSS SALES PRICE of the PRODUCT



 









 




shall be determined in accordance with paragraph (c) above, using as the GROSS SALES PRICE of the
combination that price which would be then payable in an arm’s length transaction.




     (e) Transfer of a PRODUCT within PALOMAR or between PALOMAR and an AFFILIATE for sale by the
transferee shall not be considered a sale, commercial use or disposition for the purpose of the
foregoing paragraphs; in the case of such transfer the GROSS REVENUE shall be based on sale of the
PRODUCT by the transferee.



     1.7 The term “PATENT RIGHT” shall mean the U.S. Patent Application filed by Dr. Anderson, et.
al. on February 1, 1995 entitled “Permanent Hair Removal Using Optical Pulses,” or the equivalent
of such application, including any division, continuation or any foreign patent application or
Letters Patent or the equivalent thereof issuing thereon or reissue, reexamination or extension
thereof. Subject to Exhibit B hereof, PATENT RIGHTS shall also include those claims in any
continuation-in-part of the aforementioned patent application which claim an invention described or
claimed in said patent application. PATENT RIGHTS shall also include GENERAL’s rights assigned to
GENERAL by an Investigator under the Clinical Trial Agreement, in any patent application or patent
claiming a Study Invention as defined in the Clinical Trial Agreement and as to which PALOMAR has
notified GENERAL of PALOMAR’s desire to have a patent application filed in accordance with
paragraph 2.3 of the Clinical Trial Agreement.



     1.8 The term “PRODUCT” shall mean any article, device or composition, the manufacture, use, or
sale of which




	 	(a)	 	absent the licenses granted herein, would infringe a
VALID CLAIM of any PATENT RIGHT, or
	 
	 	(b)	 	does not infringe a VALID CLAIM of any PATENT RIGHT
licensed to PALOMAR hereunder but the discovery,
development, manufacture or use of which employs
TECHNOLOGICAL INFORMATION.





     1.9 The terms “SERVICE” shall mean any method or service the use, performance of sale of
which:




	 	(a)	 	absent the licenses granted herein, would infringe a
VALID CLAIM of any PATENT RIGHT, or
	 
	 	(b)	 	does not infringe a VALID CLAIM of any PATENT RIGHT
licensed to PALOMAR hereunder but the discovery,
development, manufacture or use of which employs
TECHNOLOGICAL INFORMATION.





     1.10 The term “TECHNOLOGICAL INFORMATION” shall mean any research data, designs, formulas,
process information, clinical data and other information pertaining to any invention claimed in



 









 




PATENT RIGHT which is known to Dr. Anderson on the EFFECTIVE DATE and disclosed to Palomar within
thirty (30) days of the date on which this Agreement is fully executed. This term shall also
include information which is disclosed to PALOMAR by GENERAL in accordance with, and during the
term of, the Clinical Trial Agreement and which pertains to any PATENT RIGHT claiming an Invention
as defined in said Agreement.




     1.11 The term “VALID CLAIM” shall mean any claim of any PATENT RIGHT that has not been (i)
finally rejected or (ii) declared invalid by a patent office or court of competent jurisdiction in
any unappealed and unappealable decision.



2. LICENSE




     2.1 GENERAL hereby grants PALOMAR, subject to the rights of the United States Government:




	 	(a)	 	an exclusive, worldwide, royalty-bearing license in
the LICENSE FIELD under GENERAL’s rights in PATENT
RIGHTS to make, have made, use and sell PRODUCTS and
to perform SERVICES;
	 
	 	(b)	 	the right to sublicense (i) PATENT RIGHTS exclusively
licensed to PALOMAR and (ii) PATENT RIGHTS
non-exclusively licensed to PALOMAR to the extent
such a sublicense is required for a customer to use a
PRODUCT or to practice a SERVICE.





     All licenses pursuant to this paragraph 2.1 are subject to the rights, conditions and
limitations imposed by U.S. law with respect to inventions made in the performance of federally
funded research.



     The above licenses to sell PRODUCTS include the right to grant to the purchaser of products
from PALOMAR, its AFFILIATES, and SUBLICENSEES the right to use such purchased PRODUCTS in a method
coming within the scope of PATENT RIGHT.



     2.2 The granting of any license hereunder is subject to GENERAL’s and GENERAL’s AFFILIATES’
right to make and to use the subject matter described and claimed in PATENT RIGHT for research and
clinical purposes but for no other purpose.



     2.3 Within thirty (30) days of EFFECTIVE DATE, upon request by PALOMAR, GENERAL shall disclose
to PALOMAR, TECHNOLOGICAL INFORMATION which PALOMAR will be entitled to use to the extent such use
does not infringe any GENERAL patent not licensed to PALOMAR hereunder. GENERAL represents to the
best of its knowledge after reasonable enquiry there are no GENERAL patents or applications not
licensed hereunder which would be infringed by such use.



 









 





     2.4 Subject to Exhibit B hereof, GENERAL shall have the right to license any PATENT RIGHT to
any other party for the purpose of manufacturing, using or selling of any PRODUCT or performance of
any SERVICE outside of the LICENSE FIELD.



     2.5 It is understood that nothing herein shall be construed to grant PALOMAR a license express
or implied under any patent owned solely or jointly by General other than the PATENT RIGHTS
expressly licensed hereunder, provided that, in the event that GENERAL’s Office of Technology
Affairs (“OTA”) is notified of a patentable invention assigned or assignable to GENERAL which OTA
believes would, if patented, be infringed by the manufacture, use or sale of a PRODUCT or SERVICE
(“Dominant Invention”), and in the event that at the time OTA is notified of said Dominant
Invention, no third party has been granted exclusive rights, or an option to exclusive rights, in
said Dominant Invention, OTA shall give PALOMAR notice of said Dominant Invention and give PALOMAR
an opportunity to negotiate an exclusive or non-exclusive license under GENERAL’s rights in said
Dominant Invention, whichever is available, it being understood that GENERAL shall have no
obligation to enter into such a license with PALOMAR.



3. DUE DILIGENCE OBLIGATIONS




     3.1 PALOMAR shall itself, or through its AFFILIATES or SUBLICENSEES, use reasonable efforts to
develop and make commercially available PRODUCTS for commercial sales and distribution throughout
the world in the LICENSE FIELD. Such efforts shall consist of:



     (a) Entering into the Clinical Trial Agreement with General attached hereto as Exhibit A and
providing the funding specified in said Agreement;



     (b) Commencing the commercial sale of the PRODUCT or SERVICES outside the United States within
three (3) months after tests on a normal mode ruby laser have been completed and approval has been
received from the Principal Investigator (see Clinical Trial Agreement) that such laser works
acceptably;



     (c) Filing with the U.S. Food and Drug Administration for a 510(k) on any PRODUCT within three
(3) months of receipt of clinical data from GENERAL sufficient for such filing, it being understood
that GENERAL is providing such data to PALOMAR pursuant to the Clinical Trial Agreement. In the
event that GENERAL fails to provide such data, GENERAL and PALOMAR shall confer to establish a
reasonable procedure and schedule to secure approval for such PRODUCT, and in the event that
GENERAL and PALOMAR cannot agree on such procedure and schedule they shall resolve this issue in
accordance with the dispute resolution provisions of paragraph 10.9;



 









 





     (d) Commencing the commercial sale of the PRODUCT or SERVICES within the United States within
six (6) months after FDA clearance is received.



     However, GENERAL shall not unreasonably withhold its consent to any revision in such time
periods whenever requested in writing by PALOMAR and supported by evidence of technical
difficulties or delays in clinical studies or regulatory processes that the parties could not have
reasonably avoided. Failure to achieve one or more of the above objectives within the above stated
time periods or within any extension granted by GENERAL shall result in GENERAL having the right to
cancel upon thirty (30) days notice any exclusive license granted hereunder or convert any
exclusive license to a non-exclusive license.



     3.2 At intervals no longer than every six (6) months, PALOMAR shall report in writing to
GENERAL on progress made toward the foregoing objectives.



4. FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHT




     4.1 GENERAL shall be responsible for the preparation, filing, prosecution and maintenance of
all patent applications and patents included in PATENT RIGHTS. PALOMAR shall reimburse GENERAL for
all reasonable costs (“Costs”) incurred by GENERAL for the preparation, filing, prosecution and
maintenance of all PATENT RIGHTS as follows:



     (a) Subject to paragraph 4.2, for all Costs incurred by GENERAL from and after the EFFECTIVE
DATE, PALOMAR shall pay such Costs directly to legal counsel upon receipt of invoices from GENERAL
or legal counsel;



     (b) For all Costs incurred by GENERAL prior to the EFFECTIVE DATE, PALOMAR shall reimburse
GENERAL within thirty (30) days of the date on which this Agreement is executed by the last party
to sign.



     4.2 With respect to any PATENT RIGHT, each document or a draft thereof pertaining to the
filing, prosecution, or maintenance of such PATENT RIGHT, including but not limited to each patent
application, office action, response to office action, request for terminal disclaimer, and request
for reissue or reexamination of any patent issuing from such application shall be provided to
PALOMAR as follows. Documents received from any patent office or counsel’s analysis thereof shall
be provided promptly after receipt. For a document to be filed in any patent office, a draft of
such document shall be provided sufficiently prior to its filing, to allow for review and comment
by the other party. If as a result of the review of any such document, PALOMAR shall elect not to
pay or continue to pay the Costs for such PATENT RIGHT, PALOMAR shall so notify GENERAL within
thirty (30) days of



 









 




PALOMAR’s receipt of such document and PALOMAR shall thereafter be relieved of the obligation to
pay any additional Costs regarding such PATENT RIGHT incurred after the receipt of such notice by
GENERAL. Such U.S. or foreign patent application or patent shall thereupon cease to be a PATENT
RIGHT hereunder and GENERAL shall be free to license its rights to that particular U.S. or foreign
patent application or patent to any other party on any terms. PALOMAR shall also have the right to
provide comments and recommendations on any action proposed to be taken by GENERAL and GENERAL
agrees to take into account PALOMAR’s recommendations. Where a course of action is followed on a
PATENT RIGHT which is both contrary to PALOMAR’s recommendations and which increases costs over
such recommendation, PALOMAR shall only be responsible for costs which would have been incurred had
its recommendation been followed.




5. ROYALTIES; LICENSE FEES




     5.1 (a) PALOMAR shall pay GENERAL a license issue fee of Two Hundred and Fifty Thousand
Dollars ($250,000) as follows:




(i) Within thirty (30) days of the date of the execution of this Agreement by the last party to
sign hereunder, PALOMAR shall pay GENERAL Fifty Thousand Dollars ($50,000), one half of which shall
be creditable against future royalties paid pursuant to paragraphs 5.1 (b) hereunder;




(ii) On or before January 10, 1996, PALOMAR shall pay GENERAL Two Hundred Thousand Dollars
($200,000) no portion of which shall be creditable against future royalties.




     (b) Beginning with the FIRST COMMERCIAL EXPLOITATION in any country, on all sales of PRODUCTS
anywhere in the world by PALOMAR, its AFFILIATES or SUBLICENSEES, PALOMAR shall pay GENERAL
royalties in accordance with the following schedule, subject to Exhibit B hereof, such undertaking
and schedule having been agreed to for the purpose of reflecting and advancing the mutual
convenience of the parties.




(i) For: (A) each PRODUCT sold by PALOMAR or its AFFILIATES and SUBLICENSEES consisting of (1) a
ruby laser or (2) any other laser sold solely for hair removal, or (3) any non-laser
equipment/disposables used for the practice of a SERVICE, and




(B) any non-laser equipment/disposable sold by PALOMAR or AFFILIATES and SUBLICENSEES which are not
PRODUCTS hereunder but which are used for the practice of a SERVICE,




(I) Five percent (5%) of NET REVENUES so long as the PRODUCT, its manufacture, use or sale is



 









 






covered by a VALID CLAIM of any PATENT RIGHT licensed exclusively to PALOMAR in the country in
question;




(II) Two and one-half percent (2-1/2%) of the NET REVENUES whenever the PRODUCT, its manufacture,
use or sale is covered by a VALID CLAIM of any PATENT RIGHT licensed non-exclusively to PALOMAR in
the country in question;




(III) During each of the eight (8) years next following the FIRST COMMERCIAL EXPLOITATION anywhere
in the world by PALOMAR, its AFFILIATES or LICENSEES, One and one quarter percent ( 1-1/4%) of the
NET REVENUES of PRODUCT on which no royalty is payable under paragraph 5.1(a) or 5.1(b) above.




Paragraph 1.6(c) notwithstanding, it is understood that for purposes of calculating the above
royalty, the royalty on any PRODUCT which constitutes a laser which is produced or manufactured
such that it incorporates, is combined with, or is designed to incorporate or be combined with,
accessories that are used for hair removal (“Modified Laser”) shall be based on the NET REVENUES
for such Modified Laser, and the royalty on any PRODUCT which constitutes accessories used in
modifying a laser but which is sold independently of the laser (“Modification Kits”) shall be based
on the NET REVENUES for such Modification Kits.




(ii) For each PRODUCT sold by PALOMAR consisting of a laser (other than the ruby laser, the sales
of which shall in any event be subject to the 5% royalty described is subparagraph 5(b)(i) above)
sold for hair removal as well as other uses, the parties agree to negotiate in good faith a
commercially reasonable royalty to be paid to GENERAL in accordance with the formula provided for
in paragraph 1.6 (c), provided, that in no event shall said royalty be less than two and a half
percent (2-1/2%) of NET REVENUES received by PALOMAR, its AFFILIATES or SUBLICENSEES.




(iii) (A) (1) For any SERVICE performed by (a) PALOMAR or its AFFILIATES or SUBLICENSEES or (b) any
other third party by virtue of any right or license granted by PALOMAR or its AFFILIATES or
SUBLICENSEES, and




     (2) For any commercial disposition (other than sale) of any PRODUCT by PALOMAR or its
AFFILIATES or SUBLICENSEES,




PALOMAR shall pay GENERAL a commercially reasonable percentage of the NET REVENUES received by
PALOMAR or its AFFILIATES or SUBLICENSEES, the percentage to be established by the parties



 









 







at such time as PALOMAR has knowledge of the method by which NET REVENUES for said SERVICES or
PRODUCTS will be calculated and paid, and in no event later than the FIRST COMMERCIAL EXPLOITATION
of such PRODUCT or SERVICES by said method, and said percentage shall remain in effect for so long
as the SERVICE or PRODUCT is marketed in accordance with said method. In order to aid the parties
in establishing said percentage, PALOMAR shall provide GENERAL with complete information relevant
thereto, including projected NET REVENUES and PALOMAR’s projected net profit margins.




     (B) The payments to be made to GENERAL pursuant to paragraph 5(b)(iii) for PRODUCTS and
SERVICES covered by a VALID CLAIM of any PATENT RIGHT, shall be a commercially reasonable royalty
rate targeted to be in the range of three to five percent (3-5%) of NET REVENUES received by
PALOMAR its AFFILIATES or SUBLICENSEES (which royalty rate the parties anticipate will fall within
the range of twenty to thirty percent (20-30%) of PALOMAR’s estimated profit margin on said
PRODUCTS or SERVICES).




     (C) The payments to be made to GENERAL pursuant to 5(b)(iii) for PRODUCTS and SERVICES not
covered by a VALID CLAIM of any PATENT RIGHT, shall be made for eight (8) years following FIRST
COMMERCIAL EXPLOITATION of such PRODUCT or SERVICE, and shall be a commercially reasonable rate
targeted to be in the range of seventy-five hundredths of one percent to one and one quarter
percent (.75%-1-1/4%) of NET REVENUES received by PALOMAR, its AFFILIATES or SUBLICENSEES, which
the parties anticipate will fall within the range of five to six and one quarter percent (5-6 1/4%)
of PALOMAR’s estimated profit margin on said PRODUCTS or SERVICES.




     (D) Annual minimum royalties:




(1) PALOMAR shall pay GENERAL an annual minimum royalty due and payable no later than the end of
the AGREEMENT YEAR during which the FDA grants 510K approval (actual or deemed), or comparable
approval, of any PRODUCT or SERVICE (“First 510K”), and at the end of each AGREEMENT YEAR
thereafter, provided that no such payment shall be due in the event that the amount of royalties
paid to GENERAL hereunder in an AGREEMENT YEAR are equal to or greater than the annual minimum
royalty due and payable for said AGREEMENT YEAR.




(2) The parties agree to establish the annual amounts of such minimum royalties due for all
Agreement Years within sixty (60) days of PALOMAR’s receipt of notice of the First 510K. The
parties intend that the annual minimum royalty shall be an amount established by the following



 









 






formula: Multiply one-tenth the royalty rate due hereunder for PRODUCTS and SERVICES (or, in the
event that more than one royalty rate is anticipated to be due hereunder, a royalty rate which
reflects a reasonable weighted averaged of the anticipated royalty rates) times PALOMAR’s projected
NET REVENUES for each Agreement Year.




(3) PALOMAR shall owe GENERAL minimum royalties pursuant to this paragraph until the expiration of
the last AGREEMENT YEAR in which PALOMAR holds an exclusive license to PATENT RIGHTS hereunder.




(iv) In the event that the parties fail to agree on the payments or annual minimum royalties due
and payable under paragraphs 5(b)(ii) or 5(b)(iii), the parties agree to resolve this issue in
accordance with the dispute resolution provisions set forth in paragraph 10.9 below.



     5.2 (a) In the event that more than one royalty rate under paragraph 5.1 is applicable to a
PRODUCT or SERVICE, the highest of the applicable royalties shall apply.



     (b) Only one royalty under paragraph 5.1 shall be due and payable to GENERAL by PALOMAR for
any PRODUCT or SERVICE regardless of the number of PATENT RIGHTS covering such PRODUCT or SERVICE.



     5.3 If any license granted pursuant to Section 2 shall be or become non-exclusive and GENERAL
shall license any PATENT RIGHT to another licensee for the purpose of making, using, practicing or
selling PRODUCTS and/or SERVICES in the LICENSE FIELD and accept financial terms which, taken as a
whole, are more favorable to such licensee than herein provided for PALOMAR, GENERAL shall give
written notice thereof to PALOMAR and PALOMAR shall have the option, upon PALOMAR’s written notice
to GENERAL, to revise its license hereunder to such more favorable terms, effective as of the
effective date of GENERAL’s license to said other licensee.



     5.4 In addition to the royalties provided for above, PALOMAR shall pay GENERAL ten percent
(10%) of any and all income, other than a royalty or other payment made pursuant to paragraphs 5.1,
above, including, by way of example, license issue fees and milestone payments received by PALOMAR
from its AFFILIATES and SUBLICENSEES, in consideration for the sublicensing of any right or license
granted to PALOMAR hereunder.



 









 





     5.5 In addition to the payments provided for in paragraphs 5.1 through 5.4, PALOMAR shall pay
GENERAL the following amounts upon the occurrence of the following events, one half of which
payments shall be creditable against future royalties paid pursuant to paragraphs 5.1(b) hereof:



	 	 	 	 	 	 	 
	 

	 	$	20,000	 	 	upon FDA allowance of the first
Investigational Device Exemption with respect to
a PRODUCT incorporating or combined with a ruby,
alexandrite and diode laser.
	 
	 	 	 	 	 	 
	 

	 	$	35,000	 	 	upon FDA approval (actual or deemed), by
the FDA of the first 510(k) or comparable
application with respect to each PRODUCT
incorporating or combined with a ruby,
alexandrite laser and diode laser.
	 
	 	 	 	 	 	 
	 

	 	$	75,000	 	 	upon first issuance in the United States of
a PATENT RIGHT with claims that covers a PRODUCT
or SERVICE.






     5.6 In the event that the royalty paid to GENERAL is a significant factor in the return
realized by PALOMAR so as to diminish PALOMAR’s capability to respond to competitive pressures in
the market, GENERAL agrees to consider a reasonable reduction in the royalty paid to GENERAL as to
each such PRODUCT and SERVICE for the period during which such market condition exists. Factors
determining the size of the reduction will include profit margin on PRODUCT and SERVICES and on
analogous products, prices of competitive products and services, total prior sales by PALOMAR, and
PALOMAR’s expenditures in PRODUCT and SERVICE development.



     5.7 The payments due under this Agreement shall, if overdue, bear interest until payment at a
per annum rate equal to one percent (1%) above the prime rate in effect at the Bank of Boston on
the due date, not to exceed the maximum permitted by law. The payment of such interest shall not
preclude GENERAL from exercising any other rights it may have as a consequence of the lateness of
any payment.



     5.8 PALOMAR shall provide GENERAL at least twice each AGREEMENT YEAR with reports setting
forth PALOMAR’s marketing plans (including the financial terms on which PRODUCTS and SERVICES will
be made available to SUBLICENSEES and end-users) and market projections (including projected NET
REVENUES) for any PRODUCT or SERVICE on which payments to GENERAL have not been determined
hereunder and which PALOMAR contemplates marketing within said AGREEMENT YEAR or the following
AGREEMENT YEAR.



6. REPORTS AND PAYMENTS




     6.1 PALOMAR shall keep, and shall cause each of its AFFILIATES and SUBLICENSEES, if any, to
keep full and accurate books of accounts containing all particulars that may be necessary for the
purpose of calculating all royalties payable to GENERAL. Such books of account shall be kept at
their principal place of business and, with all necessary supporting data shall, during all
reasonable times for the three (3) years
next following the end of the calendar year to which each shall pertain be open for inspection
at reasonable times and on reasonable notice by GENERAL



 









 




or its designee at GENERAL’s expense for the purpose of verifying royalty statements or compliance
with this Agreement. Such inspections shall be conducted no more than twice during any twelve (12)
month period.




     6.2 In each year the amount of royalty due shall be calculated semiannually as of the end of
each ACCOUNTING PERIOD and shall be paid semiannually within the sixty (60) days next following
such date, every such payment to be supported by the accounting prescribed in paragraph 6.3 and to
be made in United States currency. Whenever conversion from any foreign currency shall be required,
such conversion shall be at the rate of exchange thereafter published in the Wall Street Journal
for the business day closest to the end of the applicable ACCOUNTING PERIOD.



     6.3 With each semiannual payment, PALOMAR shall deliver to GENERAL a full and accurate
accounting to include at least the following information to the extent necessary to determine
royalties:




	 	(a)	 	Quantity of each PRODUCT sold or leased (by country)
by PALOMAR, and its AFFILIATES or SUBLICENSEES;
	 
	 	(b)	 	Total billings for each PRODUCT (by country);
	 
	 	(c)	 	Quantities of each PRODUCT used by PALOMAR and its AFFILIATES or SUBLICENSEES;
	 
	 	(d)	 	Revenues from SERVICES paid to PALOMAR and its AFFILIATES OR SUBLICENSEES;
	 
	 	(e)	 	Names and addresses of all SUBLICENSEES of PALOMAR; and
	 
	 	(f)	 	Total royalties payable to GENERAL.





7. INFRINGEMENT




     7.1 GENERAL will protect its PATENT RIGHTS from infringement and prosecute infringers when, in
its sole judgement, such action may be reasonably necessary, proper and justified.



     7.2 If PALOMAR shall have supplied GENERAL with written evidence demonstrating to GENERAL’s
reasonable satisfaction prima facie infringement of a claim of a PATENT RIGHT by a third party,
PALOMAR may by notice request GENERAL to take steps to protect the PATENT RIGHT. GENERAL shall
notify PALOMAR within sixty (60) days of the receipt of such notice whether GENERAL intends to
prosecute the alleged infringement. If GENERAL notifies PALOMAR that it intends to so prosecute,
GENERAL shall, within three (3) months of its notice to PALOMAR either (i) cause infringement to
terminate or



 









 




(ii) initiate legal proceedings against the infringer. In the event GENERAL notifies PALOMAR that
GENERAL does not intend to prosecute said infringement PALOMAR may, upon notice to GENERAL,
initiate legal proceedings against the infringer at PALOMAR’s expense and in GENERAL’s name if so
required by law. No settlement, consent judgment or other voluntary final disposition of the suit
which invalidates or restricts the claims of such PATENT RIGHTS may be entered into without the
consent of GENERAL, which consent shall not be unreasonably withheld, and shall not be withheld
unless GENERAL assumes responsibility for future expenses in litigation. PALOMAR shall indemnify
GENERAL against any order for payment that may be made against GENERAL in such proceedings. During
the period of any such proceedings initiated by PALOMAR, PALOMAR shall have the right to escrow
fifty percent (50%) of the royalties which would otherwise be paid under this Agreement and to use
such escrowed funds to offset fifty percent (50%) of the expenses of the proceedings. On the
termination of the proceedings, and the payment of (50%) of all expenses in connection therewith,
any funds remaining in the escrow will be promptly paid to GENERAL.




     7.3 In the event one party shall initiate or carry on legal proceedings to enforce any PATENT
RIGHT against any alleged infringer, the other party shall fully cooperate with and supply all
assistance reasonably requested by the party initiating or carrying on such proceedings. The party
which institutes any suit to
protect or enforce a PATENT RIGHT shall have sole control of that suit and shall bear the
reasonable expenses (excluding legal fees) incurred by said other party in providing such
assistance and cooperation as is requested pursuant to this paragraph. The party initiating or
carrying on such legal proceedings shall keep the other party informed of the progress of such
proceedings and said other party shall be entitled to counsel in such proceedings but at its own
expense. Any award paid by third parties as the result of such proceedings (whether by way of
settlement or otherwise) shall first be applied to reimbursement of the unreimbursed legal fees and
expenses incurred by either party, including reimbursement to GENERAL or any escrowed royalties not
otherwise refunded, and then the remainder shall be divided between the parties as follows:




	 	(a)	 	(i) If the amount is based on lost profits, PALOMAR
shall receive an amount equal to the damages the
court determines PALOMAR has suffered as a result of
the infringement less the amount of any royalties
that would have been due GENERAL on sales of PRODUCT
lost by PALOMAR as a result of the infringement had
PALOMAR made such sales; and
	 
	 	 	 	(ii) GENERAL shall receive an amount equal to the royalties it would have received if such sales
had been made by PALOMAR; or




 









 












	 	(b)	 	As to awards other than those based on lost profits,
sixty (60) percent to the party initiating such
proceedings and forty (40) percent to the other
party, provided that in the event that GENERAL has
paid for further litigation subsequent to GENERAL’s
refusal to agree to a settlement, consent judgement
or voluntary final disposition of a suit pursuant to
paragraph 7.2, such awards shall be divided equally
between the parties.





     7.4 For the purpose of the proceedings referred to in this Article 7, the GENERAL and PALOMAR
shall permit the use of their names and shall execute such documents and carry out such other acts
as may be necessary. The party initiating or carrying on such legal proceedings shall keep the
other party informed of the progress of such proceedings and said other party shall be entitled to
counsel in such proceedings but at its own expense, said expenses to be off-set against any damages
received by the party bringing suit in accordance with the foregoing paragraph 7.3.



8. INDEMNIFICATION




     8.1 (a) PALOMAR shall indemnify, defend and hold harmless GENERAL and its trustees, officers,
medical and professional staff, employees, and agents and their respective successors, heirs and
assigns (the “Indemnitees”), against any liability, damage, loss or expense (including reasonable
attorney’s fees and expenses of litigation) incurred by or imposed upon the Indemnitees or any one
of them in connection with any claims, suits, actions, demands or judgments arising out of any
theory of product liability (including, but not limited to, actions in the form of tort, warranty,
or strict liability) concerning any product, process or service made, used or sold pursuant to any
right or license granted under this Agreement.



     (b) Licensees’ indemnification under (a) above shall not apply to any liability, damage, loss
or expense to the extent that it is directly attributable to the negligent activities, reckless
misconduct or intentional misconduct of the Indemnitees.



     (c) PALOMAR agrees, at its own expense to provide attorneys reasonably acceptable to the
GENERAL to defend against any actions brought or filed against any party indemnified hereunder with
respect to the subject of indemnity contained herein, whether or not such actions are rightfully
brought.



     (d) This paragraph 8.1 shall survive expiration or termination of this Agreement.



     8.2 (a) At such time as any product, process or service relating to, or developed pursuant to,
this Agreement is being commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by PALOMAR or by a licensee,



 









 




AFFILIATE or agent of PALOMAR, PALOMAR shall, at its sole cost and expense, procure and maintain
comprehensive general liability insurance in amounts not less than $2,000,000 per incident and
$2,000,000 annual aggregate and naming the Indemnitees as additional insureds. Such comprehensive
general liability
insurance shall provide (i) product liability coverage and (ii) broad form contractual liability
coverage for PALOMAR’s indemnification under paragraph 8.1 of this Agreement. If PALOMAR elects to
self-insure all or part of the limits described above (including deductibles or retentions which
are in excess of $250,000 annual aggregate) such self-insurance program must be acceptable to the
GENERAL and the Risk Management Foundation. The minimum amounts of insurance coverage required
under this paragraph 8.2 shall not be construed to create a limit of PALOMAR’s liability with
respect to its indemnification under paragraph 8.1 of this Agreement.




     (b) PALOMAR shall provide GENERAL with written evidence of such insurance upon request of
GENERAL. PALOMAR shall provide GENERAL with written notice at least fifteen (15) days prior to the
cancellation, non-renewal or material change in such insurance; if PALOMAR does not obtain
replacement insurance providing comparable coverage prior to the expiration of such fifteen (15)
day period, GENERAL shall have the right to suspend this Agreement effective at the end of such
fifteen (15) day period without notice or any additional waiting periods until such coverage is
obtained. If such coverage is not obtained within forty-five (45) days of the original
cancellation, GENERAL shall have the right to immediately terminate this Agreement.



     (c) PALOMAR shall maintain such comprehensive general liability insurance beyond the
expiration or termination of this Agreement during (i) the period that any product, process, or
service, relating to, or developed pursuant to, this Agreement is being commercially distributed or
sold (other than for the purpose of obtaining regulatory approvals) by PALOMAR or by a licensee,
AFFILIATE or agent of PALOMAR and (ii) a reasonable period after the period referred to in (c) (i)
above which in no event shall be less than fifteen (15) years.



     (d) This paragraph 8.2 shall survive expiration or termination of this Agreement.



     8.3 Each party warrants to the other that it has the right to enter into this Agreement, that
this Agreement is not in conflict with any other Agreement of the party, and that the party will
not do anything during the term of this Agreement, or enter into any other Agreement during the
term of this Agreement which is inconsistent herewith. GENERAL further warrants that it is the
owner of the PATENT RIGHTS, that except for certain non-exclusive license rights in the U.S.
Government, no other party has any rights or interest in the PATENT RIGHTS. While GENERAL makes no



 









 




warranty as to the efficacy of this technology for hair removal, PRINCIPAL INVESTIGATOR does
represent that he has completely and accurately disclosed to PALOMAR all information in his
possession as of the date of this Agreement concerning the efficacy and safety of the PRODUCT and
SERVICES, to the extent the PRODUCT and SERVICES are known to him, and PRINCIPAL INVESTIGATOR
agrees that he will continue to disclose any information which he learns of in these areas to
PALOMAR for so long as PALOMAR is funding his research in the field of lasers for hair removal at
GENERAL.




     8.4 OTHER THAN WARRANTIES SET FORTH HEREIN, GENERAL MAKES NO WARRANTY, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY PATENT, TRADEMARK, SOFTWARE, TRADE SECRET,
TANGIBLE RESEARCH PROPERTY, INFORMATION OR DATA LICENSED OR OTHERWISE PROVIDED TO PALOMAR HEREUNDER
AND HEREBY DISCLAIMS THE SAME.



9. TERMINATION




     9.1 Unless otherwise terminated as provided for in this Agreement, the license to PATENT RIGHT
granted hereunder will continue until the last to expire of any PATENT RIGHT, the claims of which
but for this Agreement would be infringed by the manufacture, use, practice or sale of any PRODUCT
or SERVICE.



     9.2 GENERAL shall have the right to terminate any license under U.S. PATENT RIGHTS granted
under this Agreement in the event that, after the FIRST COMMERCIAL EXPLOITATION in the United
States there is a continuous two (2) year period in which no NET REVENUES are generated in the
United States. With respect to PATENT RIGHTS in any other country, GENERAL shall have the right to
convert, on a country by country basis, any exclusive license under PATENT RIGHTS granted under
this Agreement to a non-exclusive license upon written notice in the event that, after the FIRST
COMMERCIAL EXPLOITATION in a country there is a continuous two (2) year period in any country in
which no NET REVENUES are generated in said country. Notwithstanding the foregoing, GENERAL shall
not have the right to terminate a license in the United States or convert an exclusive license to a
non-exclusive license in any other country, in the event that the generation of NET REVENUES is
prevented by force majeure, government regulation or intervention, or institution of a law suit by
any third party.



     9.3 If either party shall fail to faithfully perform any of its obligations under this
Agreement except the due diligence milestones specified in Section 3 herein, the nondefaulting
party may give written notice of the default to the defaulting party. Unless such default is
corrected within thirty (30) days after such notice, the notifying party may terminate this
Agreement and the license hereunder upon thirty (30) days prior written notice, provided that only
one such thirty (30) day grace period shall be



 









 




available in any twelve (12) month period with respect to a default of any particular payment
provision hereunder. Thereafter, at the option of the non-defaulting party, notice of default of
said provision shall constitute termination.




     9.4 In the event that any license granted to PALOMAR under this Agreement is terminated, any
sublicense under such license granted prior to termination of said license shall remain in full
force and effect, provided that:



     (i) the SUBLICENSEE is not then in breach of its sublicense agreement;



     (ii) the SUBLICENSEE agrees to be bound to GENERAL as the licensor under the terms and
conditions of this sublicense agreement, as modified by the provisions of this paragraph 9.4;



     (iii) the SUBLICENSEE, at GENERAL’s written request, assumes in a signed writing the same
obligations to GENERAL as those assumed by PALOMAR under Articles 8 and 10 hereof;



     (iv) GENERAL shall have the right to receive any payments payable to PALOMAR under such
sublicense agreement to the extent they are reasonably and equitably attributable to such
SUBLICENSEE’s right under such sublicense to use and exploit PATENT RIGHTS and/or TECHNOLOGICAL
INFORMATION;



     (v) any exclusive SUBLICENSEE agrees to be bound by the due diligence obligations of PALOMAR
pursuant to paragraph 3.1 hereof (whether set by the parties or by arbitration) in the field and
territory of the sublicense;



     (vi) GENERAL has the right to terminate such sublicense upon fifteen (15) days prior written
notice to PALOMAR and such SUBLICENSEE in the event of any material breach of the obligation to
make the payments described in clause (iv) of this paragraph 9.3, unless such breach is cured prior
to the expiration of such fifteen (15) day period, and shall further have the right to terminate
such sublicense in the event of SUBLICENSEE’s failure to meet its due diligence obligations
pursuant to clause (v) hereof;



     (vii) GENERAL shall not assume, and shall not be responsible to such SUBLICENSEE for, any
representations, warranties or obligations of PALOMAR to such SUBLICENSEE, other than to permit
such SUBLICENSEE to exercise any rights to PATENT RIGHTS and TECHNOLOGICAL INFORMATION that are
granted under such sublicense agreement consistent with the terms of this AGREEMENT.



     9.5 Upon termination of any license granted hereunder, PALOMAR shall pay GENERAL all royalties
due or accrued on the NET REVENUES up to and including the date of termination. In the event of any
termination, PALOMAR shall also have the right to fill all



 









 




existing order for PRODUCTS, provided the royalties set forth herein are paid on such orders.
Further, in the event of any termination as a result either of a default by GENERAL or as a result
of the bankruptcy, insolvency, or other termination of doing business by GENERAL, PALOMAR shall have the option of
maintaining the licenses granted herein in effect provided it continues to pay royalties on NET
REVENUES.




10. MISCELLANEOUS




     10.1 This Agreement, including the Exhibits thereto, constitutes the entire understanding
between the parties with respect to the subject matter hereof and all prior agreements, whether
oral or written, are merged herein.



     10.2 In order to facilitate implementation of this Agreement, GENERAL and PALOMAR are
designating the following individuals to act on their behalf with respect to this Agreement for the
matter indicated below:




	 	(a)	 	with respect to all royalty payments, any
correspondence pertaining to any PATENT RIGHT, or any
notice of the use of GENERAL’s name, for GENERAL,
Vice-President, Patents, Licensing and Industry
Sponsored Research, and for PALOMAR, President;
provided that correspondence relating to the billing
of patent costs shall be copied to, for GENERAL, the
Business Manager, Office of Technology Affairs, and
for PALOMAR, the President.
	 
	 	(b)	 	any amendment of or waiver under this Agreement, any
written notice including progress reports or other
communication pertaining to the Agreement: for
GENERAL, the Vice-President, Patents, Licensing and
Industry Sponsored Research, and for PALOMAR, the
President.
	 
	 	(c)	 	the above designations may be superseded from time to
time by alternative designations made by: for
GENERAL, the President or the Senior Vice President
for Research and Technology Affairs, and for PALOMAR,
the President.





     10.3 This Agreement may be amended and any of its terms or conditions may be waived only by a
written instrument executed by the parties or, in the case of a waiver, by the party waiving
compliance. The failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect its rights at a later time to enforce the same. No
waiver by either party of any condition shall be deemed as a further or continuing waiver of such
condition or term or of any other condition or term.



     10.4 This Agreement shall be binding upon and inure to the benefit of and be enforceable by
the parties hereto and their respective successors and permitted assigns.



 









 





     10.5 Any delays in or failures of performance by either party under this Agreement shall not
be considered a breach of this Agreement if and to the extent caused by occurrences beyond the
reasonable control of the party affected, including but not limited to: Acts of God; acts,
regulations or laws of any government; strikes or their concerted acts of worker; fires; floods;
explosions; riots; wars; rebellion; and sabotage. Any time for performance hereunder shall be
extended by the actual time of delay caused by such occurrence.



     10.6 Neither party shall use the name of the other party or of any staff member, officer,
employee or student of the other party or any adaptation thereof in any advertising, promotional or
sales literature, publicity or in any document employed to obtain funds or financing without the
prior written approval of the party or individual whose name is to be used. For GENERAL, such
approval shall be obtained from the Director of Public Affairs. GENERAL agrees to respond within
ten (10) business days of GENERAL’s receipt of any request for approval under this paragraph,
provided that such request is delivered to the Director of Public Affairs, 101 Merrimac Street,
Fourth Floor, Boston, MA 02114 (Tel. #617-726-2206; fax #726-6465) and is prominently marked
“Urgent — Please respond within ten days.” GENERAL shall not unreasonably withhold its consent to
any use of its name which accurately and appropriately describes the licensee-licensor relationship
of the parties under this Agreement and of the parties’ participation in the Study conducted under
the Clinical Trial Agreement, and which does not imply directly or indirectly any endorsement by
General of any product or service. Company shall not unreasonably withhold its consent to any use
of its name which accurately and appropriately describes the licensee-licensor relationship of the
parties under this Agreement and the parties’ participation in the Study under the Clinical Trial
Agreement.



     10.7 This Agreement shall be governed by and construed and interpreted in accordance with the
laws of the Commonwealth of Massachusetts.



     10.8 This Agreement shall not be assignable by GENERAL without PALOMAR’S written consent
except for the right to receive royalties or other payments payable herein. PALOMAR may at its own
discretion and without approval by GENERAL transfer its interest or any part thereof under this
Agreement to a wholly-owned subsidiary or any assignee or purchaser of the portion of its business
associated with the manufacture and sale of PRODUCT or provision of SERVICES. In the event of any
such transfer, the transferee shall assume and be bound by the provisions of this Agreement.
Otherwise this Agreement shall be assignable by PALOMAR only with the consent in writing of
GENERAL.



 









 





     10.9 For any and all claims, disputes, or controversies arising under, out of, or in
connection with this Agreement, except issues relating to the validity, construction or effect of
any PATENT RIGHT, which the parties shall be unable to resolve within sixty (60) days, the party
raising such dispute shall promptly advise the other party of such claim, dispute, or controversy
in a writing which describes in reasonable detail the nature of such dispute. By not later than
five (5) business days after the recipient has received such notice of dispute, each party shall
have selected for itself a representative who shall have the authority to bind such party and shall
additionally have advised the other party in writing of the name and title of such representative.
By not later than ten (10) business days after the date of such notice of dispute, such
representatives shall agree upon a third party which is in the business of providing Alternative
Dispute Resolution (ADR) services (hereinafter, “ADR Provider”) and shall schedule a date with such
ADR Provider to engage in ADR. Thereafter, the representatives of the parties shall engage in good
faith in an ADR process under the auspices of the selected ADR Provider, and each party shall pay
fifty percent (50%) of the ADR expenses. If within the aforesaid thirty (30) business days after
the date of the notice of dispute the representatives of the parties have not been able to agree
upon an ADR Provider and schedule a date to engage in ADR, or if they have not been able to resolve
the dispute within thirty (30) business days after the termination of ADR, the parties shall have
the right to pursue any other remedies legally available to resolve such dispute in either the
Courts of the Commonwealth of Massachusetts or in the United States District Court for the District
of Massachusetts, to whose jurisdiction for such purposes GENERAL and PALOMAR hereby irrevocably
consents and submits, provided that, with respect to royalties and payments to be determined
pursuant to Section 5 above, and due diligence obligations to be determined in accordance with
paragraph 3.1(a), the parties agree that, no later than sixty (60) days after (a) they have failed
to designate an ADR provider in accordance with this paragraph or (b) the termination of ADR
without resolution, either party may demand in writing submitted to the other party that the
dispute be submitted to binding arbitration as provided for in the next succeeding paragraph.
Notwithstanding the foregoing, nothing in this Paragraph 10.9 shall be construed to waive any
rights or timely performance of any obligations existing under this Agreement.



     The parties agree that any dispute submitted to binding arbitration shall be conducted in
Boston, Massachusetts under the then prevailing rules of the American Arbitration Association
(“AAA”) before a single arbitrator agreed upon by both parties within twenty (20) days after the
serving of a demand for arbitration. In the event the parties fail to select an arbitrator within
the required time period, the arbitrator shall be selected in accordance with the rules of the AAA.
Each party shall pay fifty percent (50%) of the AAA arbitration expenses.



 









 





     10.10 If any provision(s) of this Agreement are or become invalid, are ruled illegal by any
court of competent jurisdiction or are deemed unenforceable under then current applicable law from
time to time in effect during the term hereof, it is the intention of the parties that the
remainder of this agreement shall not be effected thereby, provided the Agreement without such
provision is still operative to accomplish its intended functions. It is further the intention of
the parties that in lieu of each such provision which is invalid, illegal or unenforceable, there
be substituted or added as part of this Agreement a provision which shall be as similar as possible
in economic and business objectives as intended by the parties to such invalid, illegal or
enforceable provision, but shall be valid, legal and enforceable.



     THE PARTIES have duly executed this Agreement as of the date first shown above written.



	 	 	 	 	 	 	 	 	 
	PALOMAR	 	 	 	THE GENERAL HOSPITAL CORPORATION
	 
	 	 	 	 	 	 	 	 
	BY

	 	/s/ Michael H. Smotrich
	 	 	 	BY
	 	/s/ Marvin C. Guthrie, JD
	 

	 	 
	 	 	 	 	 	 
	TITLE

	 	President
	 	 	 	TITLE
	 	VP Patents, Licensing


and Industry Sponsored
Research
	 
	 	 	 	 	 	 	 	 
	DATE

	 	August 18, 1995
	 	 	 	DATE
	 	August 18, 1995






 









 






EXHIBIT A




EXHIBIT A




CLINICAL TRIAL AGREEMENT




     Agreement made this 18th day of August, 1995 (“Effective Date”) between The General Hospital
Corporation, a not-for-profit corporation doing business as Massachusetts General Hospital, having
a principal place of business at Fruit Street, Boston, Massachusetts 02114 (“General”), R. Rox
Anderson, M.D. (“Principal Investigator”), Wellman Laboratories of Photomedicine, Massachusetts
General Hospital, Boston, Massachusetts 02114 (“Principal Investigator”) and Palomar Medical
Technologies, a Delaware corporation having an office at 66 Cherry Hill Drive, Beverly, MA 01915
(“Palomar”).



     Whereas, Dr. Anderson has conducted clinical research on, and General has filed a patent
application relating to, the use of lasers for the removal of hair (the “Field”) for which an
exclusive license to Palomar has been executed as of the Effective Date hereof (the “License
Agreement”);



     Whereas, all of the parties to this Agreement share a common mission of improving the public
health by engaging in research for the purpose of discovering and making available to the public
new and improved medical drugs and devices.



     Whereas, in connection with this mission, Palomar desires to use the data already generated by
Dr. Anderson and to have further clinical research conducted on its device described below and
General and Dr. Anderson, having particular expertise and opportunity, desire to provide this
research.



     Accordingly, the parties agree as follows.



SECTION 1: STUDY PERFORMANCE




     1.1 PROTOCOL Subject to approval by General’s Institutional Review Board (“IRB”) Principal
Investigator agrees to conduct a clinical study of a ruby laser device furnished by Palomar
(hereinafter referred to as the “Study Device, and together with any other devices provided by
Palomar in accordance with paragraph 1.4, as the “Study Device(s)”) in accordance with the study
protocol attached hereto as Schedule A and including any changes to such protocol as may be
required by General’s IRB (which protocol and any other protocol added hereto in accordance with
paragraph 1.4 are hereinafter referred individually to as the “Study” and collectively as the
“Studies.”). In the event of any conflict between Schedule A and the provisions of this Agreement,
the provisions of this Agreement shall govern.



 









 





     1.2 STUDY REVIEW Principal Investigator shall conduct the Studies at General with the prior
approval and ongoing review of all appropriate and necessary review authorities and in accordance
with all applicable federal, state and local laws and regulations. Principal Investigator shall,
when applicable, provide Palomar with written evidence of review and approval of the Studies by
General’s IRB prior to the initiation of the Studies and shall inform Palomar of the IRB’s
continuing review promptly after such review takes place, which shall be at least once per year.
All volunteers shall meet the legal age requirements of the Commonwealth of Massachusetts, the
state in which the Study is to be conducted.



     1.3 STUDY DEVICES Palomar agrees to support the Study by delivering the Study Devices, placing
such Study Devices in proper operating condition for the conduct of the Study, and maintaining such
Study Devices in such operating condition during the term of this Agreement, all at no charge to
General. General and Principal Investigator shall have no liability for any failure to fulfill
their obligations as a result of unavailability of a Study Device. Study Devices will remain
Palomar’s property unless otherwise agreed. The General and Principal Investigator shall safeguard
such property with the degree of care used for its own property and, in accordance with Palomar’s
instructions at any time, shall return or otherwise dispose of all such property. General and
Principal Investigator shall not use any Study Device for any purpose other than the Study, unless
otherwise agreed.



     1.4 SECOND YEAR STUDY On or before July 1, 1996, Principal Investigator shall submit to
Palomar a study protocol for an additional one year clinical study pertaining to the use of a Study
Device provided by Palomar for hair removal, and a budget attendant thereto, which shall not exceed
Two Hundred and Thirty Thousand Seven Hundred and Sixty Seven Dollars ($230,767). Palomar shall
have the opportunity to review and comment on such proposal. Upon approval of Palomar and General’s
IRB, said protocol shall be attached hereto and the study described therein shall be a Study
hereunder subject to the terms and conditions of this Agreement, and payments therefore shall be
made as set forth in the proposal or as otherwise agreed by the parties in writing. It is the
intent of the parties that said Study shall commence or before September 1, 1996.



1.5 STUDIES AT OTHER SITES





     a. Palomar agrees to use best efforts to sponsor Dr. Melanie C. Grossman in New York City, New
York, to conduct a clinical trial of hair removal using a diode laser provided by Palomar.



 









 






     b. Principal Investigator shall be consulted in the selection of other sites and investigators
participating in clinical trials of hair removal using laser devices provided by Palomar.



SECTION 2: RESULTS OF THE STUDY; INVENTIONS




     2.1 OWNERSHIP OF RECORDS, DATA AND INTELLECTUAL PROPERTY Palomar shall own its case report
forms and the data resulting from the Study. General shall own its medical records, research
notebooks and related documentation and any intellectual property resulting from the Studies
subject to paragraph 2.3 below regarding Inventions. General shall have the right to use the data
for research, educational and patient care purposes as well as to comply with any federal, state or
local government laws or regulations. In recognition of Palomar’s legitimate business interest in
keeping unpublished research results from being made available to its commercial competitors,
General and Principal Investigator agree that they shall not knowingly:




	 	(i)	 	disclose the research results to third party
commercial entities in a form or in sufficient detail
suitable for use to obtain pre-marketing approval
from the FDA prior to a publication of the Study; and
	 
	 	(ii)	 	provide the case report forms to third party commercial entities.




Notwithstanding the above, the Palomar shall not use any patient names, or identifying information,
photographs, or other likenesses without first obtaining the specific written informed consent of
such patient for such use, except for purposes of obtaining FDA approval.




     2.2 PUBLICATION The Principal Investigator shall be free to publish the results of the Studies
subject only to the provisions of Section 3 regarding Palomar’s Proprietary Information. The
Principal Investigator shall furnish Palomar with a copy of any proposed publication for review and
comment prior to submission for publication, at least thirty (30) days prior to submission for
manuscripts and at least seven (7) days prior to submission for abstracts. At the expiration of
such thirty (30) day or seven (7) day period, Principal Investigator may proceed with submission
for publication provided, however, that upon notice by Palomar within said thirty (30) or seven (7)
day period that Palomar reasonably believes a patent application



 









 




claiming an Invention (as defined in paragraph 2.3) should be filed prior to such publication, such
submission for publication shall be delayed until any patent application or applications have been
filed by General, pursuant to paragraph 2.3.




     2.3 INVENTIONS The Principal Investigator and any other General personnel performing the Study
under his direction (“Investigators”) who makes an invention in the performance of the Study (“
Study Invention”) shall promptly report and assign such Study Invention to General. General shall
promptly disclose in writing any Inventions to Palomar. Within sixty (60) days of Palomar receiving
an enabling disclosure from General (except in the case of any disclosure received by Palomar in a
proposed publication, to which Palomar shall have an obligation to respond within the time periods
designated in paragraph 2.2 above), Palomar shall notify General in writing if it wishes General to
file a patent application claiming the Study Invention at Palomar’s expense. Any such application
shall be added as a Patent Right under the License Agreement and to the extent General has
ownership rights in the Study Invention by virtue of an assignment by an Investigator hereunder,
such Patent Right shall be treated in accordance with the terms of such License Agreement. In the
absence of such notice, General shall be free to license such patent application to any third party
on any terms.



     2.4 FURTHER RESEARCH



     (a) Investigators shall be free at any time to seek and accept funding for any research in the
Field, from any state or federal agency, private or public foundation except foundations owned or
operated by a commercial entity other than Palomar (“Non-Profit Sponsored Study”). In the event
that during the term of this Agreement an Investigator makes an invention in the Field and in the
performance of any Non-Profit Funded Study, General agrees to give Palomar prompt notice of said
invention and to give Palomar an opportunity to negotiate an exclusive license under General’s
rights in said invention assigned to General by an Investigator, it being understood that General
shall have no obligation to enter into such a license with Palomar.



     (b) In the event that an Investigator during the term of this Agreement or for six (6) months
thereafter wishes to seek funding from any for profit entity for additional research in the Field
(it being understood that for funding sought during the term of this Agreement or any extension
hereof such additional research will be research other than that which is described in the study
protocols appended hereto as Schedule A), said Investigator shall do so in accordance with this
paragraph. The



 









 




Investigator shall submit to Palomar a description of such additional research and a budget of the
costs to be funded by Palomar and a schedule of payment of such costs. Unless the parties shall
otherwise agree in writing, negotiations between them over any such proposal shall not extend
beyond the sixtieth (60) day next following the date when the proposal shall have first been so
made.




     (c) Whenever such negotiations shall end without agreement between the parties to proceed with
the proposed research, the party proposing the additional research may go ahead without the other
party and seek funding from any other sponsor including but not limited to a commercial sponsor for
such proposal, so long as the subject matter of the proposal is not so closely related
scientifically to the Study that sponsorship of such proposal by such other commercial sponsor (i)
would in the opinion of General’s Trustee’s Committee on Technology Affairs after consultation with
Palomar create a conflict of interest for General or any Investigator performing the Study or (ii)
would conflict with the terms and conditions of this Agreement. It is understood that, in the event
that General proceeds to seek support from such other commercial sponsor, for a period of one year
after first offering said proposal to Palomar, General shall not enter into an agreement with a
third party to fund such proposal upon more favorable financial terms than those offered to Palomar
without first offering Palomar the more favorable terms.



     (d) When such proposal is accepted by the General and Palomar, it shall be appended hereto as
an additional study protocol and shall be subject to the terms and conditions of this Agreement
unless otherwise specified, and the Study described therein shall commence and budgeted amounts
shall be paid as set forth in the proposal. In the event that the parties reach agreement under
this paragraph 2.4 (d) on a proposal for a non-clinical study, the parties will execute a separate
agreement pertaining to said study, it being the intent of the parties that the terms and
conditions of said non-clinical study be substantially the
same as those of this agreement, subject to the policies of General in effect at the time with
respect to non-clinical sponsored research. The budgeted amounts paid by Palomar in support of any
such clinical or non-clinical study shall be credited toward the sums made available to General
pursuant to paragraph 2.4(e) and 4.3.



     (e) On or before both September 1, 1997 and September 1, 1998, Palomar shall make grants to
General as described in paragraph 4.3 for research of mutual interest to General and Palomar and to
be conducted in the Wellman Laboratories of



 









 




Photomedicine under the direction of Dr. R. Rox Anderson, or any other investigator at General
mutually agreeable to General and Palomar, it being understood that said grants may be used to
support further research in the Field. Said research and the budgets attendant thereto shall be
agreed upon in writing by General and Palomar prior to the commencement of said research. In the
event that General and Palomar reach agreement under this paragraph on a proposal and budget for a
clinical study in the Field, said study shall become a Study hereunder and subject to terms and
conditions as this Agreement. In the event that General and Wellman reach agreement under this
paragraph on a proposal and budget for a clinical study outside the Field, it is the intent of the
parties that said study be subject to terms and conditions substantially the same as this
Agreement. In the event that General and Wellman reach agreement under this paragraph on a proposal
for a non-clinical study, it is the intent of the parties that the terms and conditions of said
non-clinical study be substantially the same as those of this agreement, subject to the policies of
General in effect at the time with respect to non-clinical sponsored research.




     2.5 USE OF NAME No party to this Agreement shall use the name of any other party or of any
staff member, employee or student of any other party or any adaptation, acronym or name by which
any party is commonly known, in any advertising, promotional or sales literature or in any
publicity without the prior written approval of the party or individual whose name is to be used.
For General, such approval shall be obtained from the Director of Public Affairs and for Palomar,
from the President. GENERAL agrees to respond within ten (10) business days of GENERAL’s receipt of
any request for approval under this paragraph, provided that such request is delivered to the
Director of Public Affairs, 101 Merrimac Street, Fourth Floor, Boston, MA 02114 (Tel.
#617-726-2206; fax #726-6465) and is prominently marked “Urgent — Please respond within ten days.”
General shall not unreasonably withhold its consent to any use of its name which accurately and
appropriately describes parties’ participation in the Study conducted under this Clinical Trial
Agreement, and which does not imply directly or indirectly any endorsement by General of any
product or service. Company shall not unreasonably withhold its consent to any use of its name
which accurately and appropriately describes the relationship of the parties under this Agreement
and the scope and nature of the parties’ participation in the Study under the Clinical Trial
Agreement.



     2.6 STUDY RECORDS General shall make Study records available to Palomar representatives upon
request for comparison



 









 




with case report forms. General shall also make such records available upon reasonable request for
review by representatives of the U.S. Food and Drug Administration. General shall retain records of
the Studies including either the original or a copy of all volunteer consent forms in conformance
with applicable federal regulations. Palomar shall notify Principal Investigator of the date the
required approval (e.g., 510K, Pre-Market Approval application (PMA)) is received for a Study
Device; or if the application is not approved, Palomar shall notify Principal Investigator when all
clinical investigations of the Study Devices have been discontinued and the FDA notified.




     2.7 USE OF DATA GENERATED UNDER PRIOR STUDY Principal Investigator shall provide to Palomar
the data generated in the prior clinical trial referenced in the introduction to this Agreement
(“Prior Data”) and Palomar shall pay General for such data in accordance with paragraph 4.2 as
reimbursement to General for its expenses in generating such data. General grants to Palomar the
right to use the Prior Data for submission to the FDA for approval of the use of a laser device for
hair removal, provided that Palomar shall not use any patient names, or identifying information,
photographs, or other likenesses without first obtaining the specific written informed consent of
such patient for such use.



SECTION 3: PALOMAR PROPRIETARY INFORMATION




     3.1 It is anticipated that in the performance of the Studies, Palomar shall provide to
General, Principal Investigator and other General personnel who are designated in writing by the
Principal Investigator as being authorized to receive Proprietary Information and who agrees in
writing to the following confidentiality obligations (each such institution or person individually
referred to in this paragraph 3.1 as “a Recipient” and collectively as “Recipients”), or shall give
Recipients access to, certain information which the Palomar considers proprietary. The rights and
obligations of the parties with respect to such information are as follows:



     (a) For the purposes of this Agreement, “Proprietary Information” refers to information of any
kind which is disclosed by Palomar to a Recipient and which, by appropriate marking, is identified
as confidential and proprietary at the time of disclosure. In the event that proprietary
information must be provided visually or orally, obligations of confidentiality shall attach only
to that information which is confirmed by Palomar in writing within twenty (20) working days as
being confidential.



 









 





     (b) For a period of five (5) years after the Effective Date of this Agreement, each Recipient
agrees to use reasonable efforts, no less than the protection given their own confidential
information, to use Proprietary Information received from the Palomar and accepted by that
Recipient only in accordance with this paragraph 3.1(b).




(i) Each Recipient shall use the Palomar’s Proprietary Information solely for the purposes of
conducting the Study, obtaining any required review of the Study or its conduct, or ensuring proper
medical treatment of any patient or subject. Each Recipient agrees to make Proprietary Information
available only to those employees and students of General who require access to it in the
performance of this Study and to inform them of the confidential nature of such information.




(ii) Except as provided in subsection 3.1(b)(i), each Recipient shall keep all Proprietary
Information confidential unless the Palomar gives specific written consent for release.




(iii) If any Recipient becomes aware of any disclosure not authorized hereunder, that Recipient
shall notify Palomar and take reasonable steps to prevent any further disclosure or unauthorized
use.



     (c) No Recipient shall be required to treat any information as Proprietary Information under
this Agreement in the event: (i) it is publicly available prior to the date of the Agreement or
becomes publicly available thereafter through no wrongful act of any Recipient; (ii) it was known
to any Recipient prior to the date of disclosure or becomes known to any Recipient thereafter from
a third party having an apparent bona fide right to disclose the information; (iii) it is disclosed
by any Recipient in accordance with the terms of the Palomar’s prior written approval; (iv) it is
disclosed by Palomar without restriction on further disclosure; (v) it is independently developed
by any Recipient; or, (vi) any Recipient is obligated to produce it pursuant to an order of a court
of competent jurisdiction or a facially valid administrative, Congressional or other subpoena,
provided that the Recipient subject to the order or subpoena (A) promptly notifies the Palomar and
(B) cooperates reasonably with the Palomar’s efforts to contest or limit the scope of such order.



SECTION 4: PAYMENTS




     4.1 (a) Palomar agrees to support the agreed expenses of the Study appended hereto on the
Effective Date with a research



 









 




grant of Two Hundred Seventeen Thousand Six Hundred and Sixty Seven Dollars ($ 217,667) which
includes indirect costs and indirect costs attendant thereto. Agreed expenses by Palomar are
enumerated in attached Schedule B, and are payable as follows:





Fifty percent (50%) equalling One Hundred Eight Thousand Eight Hundred and Thirty Three Dollars ($
108,833) upon execution of this Agreement by all parties.




Twenty Five Percent (25%) equalling Fifty Four Thousand Four Hundred and Seventeen Dollars
($54,417) upon initial radiation of twenty five (25) patients in the Study.




Twenty Five Percent (25%) equalling Fifty Four Thousand Four Hundred and Seventeen Dollars
($54,417) upon completion of the study and notice thereof to Palomar.



     (b) Palomar agrees to support the expenses of the Study to be performed pursuant to paragraph
1.4 hereof, with a grant of Two Hundred and Thirty Thousand Seven Hundred and Sixty Seven Dollars
($230,767) to be paid in accordance with the terms of said paragraph.



     (c) General agrees to keep complete records of expenses incurred in performing the studies and
Palomar shall have a right to audit such records at the place where such records are maintained, or
at another location mutually agreeable to the parties, on reasonable notice to General provided
such audit shall be conducted no more than twice during any twelve (12) month period. To the extent
such audit reveals an error in amounts paid, the parties agree that suitable adjustments will be
made.



     4.2 Pursuant to paragraph 2.7, Palomar shall pay General for Prior Data the sum of Sixty Eight
Thousand Five Hundred Dollars ($68,500) within thirty (30) days of the date on which the last party
signs this Agreement.



     4.3 On or before both September 1, 1997 and September 1, 1998, Palomar shall make grants to
General of Two Hundred Thousand Dollars ($200,000) per year to be used in accordance with paragraph
2.4(e) hereof.




 










 





     4.4 Checks should be made payable to “The General Hospital Corporation” and sent, along
with a letter indicating the name of the Principal Investigator and Project Number (#5950) for
which the funds are intended, to:



Vice President for Patents, Licensing and

Industry Sponsored Research

Office of Technology Affairs

Massachusetts General Hospital

Thirteenth Street, Building 149, Suite 1101

Charlestown, MA 02129



SECTION 5: TERM AND TERMINATION




     5.1 (a) The term of this Agreement shall be until the completion of the Studies, which is
anticipated to be two (2) year(s) from the Effective Date, unless terminated in accordance with
paragraph 5.2 or 5.3, or unless continued in accordance with paragraph 2.4 (e) above.



     5.2 Any party hereto shall have the right to terminate any Study hereunder in the event that
the emergence of any adverse reaction or side effect with the Study Device is of such magnitude or
incidence, in the opinion of such party, to support termination.



     5.3. If either party shall substantially fail faithfully to perform any of its obligations
under this Agreement, the nondefaulting party may give written notice of the default to the
defaulting party. Unless such default is corrected within sixty (60) days after such notice, the
notifying party, upon thirty (30) days prior written notice may terminate this Agreement, provided
that only one such sixty (60) day grace period shall be available in any twelve (12) month period
with respect to a default of any particular provision hereunder.



     5.4 Any delays in or failures of performance by either party under this Agreement shall not be
considered a breach of this Agreement if and to the extent caused by occurrences beyond the
reasonable
control of the party affected, including but not limited to: Acts of God; acts, regulations or
laws of any government; strikes or other concerted acts of workers; fires; floods; explosions;
riots; wars; rebellion; and sabotage; and any time for performance hereunder shall be extended by
the actual time of delay caused by such occurrence, provided the affected party has used reasonable
efforts to overcome the cause of delay.



     5.5 The obligations of the parties under Sections 2, 3 and 6 shall survive the termination or
expiration of this Agreement.



SECTION 6: INDEMNIFICATION AND INSURANCE




     6.1 INDEMNIFICATION (a) Palomar shall indemnify, defend and hold harmless General and its
trustees, officers,



 









 







medical and professional staff, employees, and agents and their respective successors, heirs and
assigns (the “Indemnitees”), against any liability, damage, loss, or expense (including reasonable
attorney’s fees and expenses of litigation) incurred by or imposed upon the Indemnitees or any one
of them in connection with any claims, suits, actions, demands or judgements arising out of any
theory of product liability (including, but not limited to, actions in the form of tort, warranty,
or strict liability) concerning a Study Device or any modification thereof including any side
effect or adverse reaction, illness or injury attributable to a Study Device and occurring to any
person involved in such Study, provided Palomar shall have no obligation to indemnify, defend and
hold harmless Indemnitees under this paragraph to the extent that such claim, suit, action, demand
or judgement is attributable to any modification to a Study Device that is physically made by an
Indemnitee without the permission of Palomar. General agrees to notify Palomar promptly of any such
claim, suit, action, demand or judgement and General and Principal Investigator agree to reasonably
cooperate with Palomar in the handling thereof.



     (b) Palomar’s indemnification under (a) above shall not apply to any liability, damage, loss
or expense to the extent that it is attributable to the: (i) negligent activities, reckless
misconduct or intentional misconduct of the Indemnitees; or (ii) failure of the Indemnitees to
adhere to the terms of the protocol for a Study.



     (c) Palomar agrees, at its own expense, to provide attorneys reasonably acceptable to the
General to defend against any actions brought or filed against any party indemnified hereunder with
respect to the subject of indemnity contained herein, whether or not such actions are rightfully
brought.



     (d) Company also agrees to reimburse General for the costs of the care and treatment of any
illness or injury to a subject resulting from his or her participation in a Study arising under any
theory of product liability pertaining to a Study Device to the extent that such costs are not
covered by the subject’s medical or hospital insurance or governmental programs providing such
coverage provided, however, that Company’s obligation under this paragraph 6.1(d) shall not apply
to any such illness or injury to the extent that it is attributable to the negligence, reckless
misconduct or intentional misconduct of the Indemnitees or the failure of the Indemnitees to adhere
to the terms of the protocol for a Study.



 









 





     6.2 INSURANCE (a) At such time as a Study Device or any modification thereof is being
commercially distributed or sold (other than for the purpose of obtaining regulatory approvals) by
Palomar or by a licensee, affiliate or agent of Palomar, Palomar shall, at its sole cost and
expense, procure and maintain commercial general liability insurance in amounts not less than
$2,000,000 per incident and $2,000,000 annual aggregate and naming the Indemnitees as additional
insureds. Such commercial general liability insurance shall provide (i) product liability coverage
and (ii) broad form contractual liability coverage for Palomar’s indemnification under paragraph
6.1 of this Agreement. If Palomar elects to self-insure all or part of the limits described above
(including deductibles or retentions which are in excess of $250,000 annual aggregate) such
self-insurance program must be acceptable to the General and the Risk Management Foundation of the
Harvard Medical Institutions, Inc. The minimum amounts of insurance coverage required under this
paragraph 6.2 shall not be construed to create a limit of Palomar’s liability with respect to its
indemnification under paragraph 6.1 of this Agreement.



     (b) Palomar shall provide General with written evidence of such insurance upon request of
General. Palomar shall provide General with written notice at least fifteen (15) days prior to the
cancellation, non-renewal or material change in such insurance.



     (c) Palomar shall maintain such commercial general liability insurance during (i) the period
that the Study Drug or any modification thereof is being commercially distributed or sold (other
than for the purpose of obtaining regulatory approvals) by Palomar or by a licensee, affiliate or
agent of Palomar and (ii) a reasonable period after the period referred to in (c)(i) above which in
no event shall be less than fifteen (15) years.



SECTION 7: MISCELLANEOUS




     7.1 The terms of this Agreement can be modified only by a writing which is signed by General,
Principal Investigator and Palomar.



     7.2 The provisions of this Agreement shall be interpreted under the laws of the Commonwealth
of Massachusetts.



     7.3 No party to this Agreement may assign its obligations hereunder without the prior written
consent of the other parties.



     7.4 This Agreement constitutes the entire understanding between the parties, and supersedes
and replaces all prior



 









 







agreements, understandings, writings and discussions between the parties, with respect to the
subject matter of this Agreement.



     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day
and year first above written.



	 	 	 	 	 	 	 	 	 	 	 
	Palomar	 	 	 	THE GENERAL HOSPITAL CORPORATION

(Federal Tax ID No.: 042 697 983)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BY: 

TITLE:

	 	/s/ Michael H. Smotrich
 

President
	 	 
	 	BY:

TITLE:
	 	/s/ Marvin C. Guthrie
 

Vice President For Patents,
	 	 
	 

	 	 	 	 	 	 	 	Licensing And Industry	 	 
	 

	 	 	 	 	 	 	 	Sponsored Research	 	 
	DATE: August 18, 1995	 	 	 	DATE: August 18, 1995	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	PRINCIPAL INVESTIGATOR	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ R. Rox Anderson	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	R. Rox Anderson, M.D.	 	 	 	 	 	 	 	 
	DATE: August 18, 1995	 	 	 	 	 	 	 	 






 









 






SCHEDULE A




Evaluation of a Pulsed Laser System for Selective

Destruction of Hair Follicles




R. Rox Anderson, NID




John A- Parrish, NID




Christine Diericky, NM




OVERVIEW AND BACKGROUND:




     Unwanted excess growth of tem-dnal (coarse) hair due to endocrine disorders, tumors, drugs, or
heredity is a significant cosmetic problem. In the extreme of hirsutism, abnormal hair growth is
disfiguring. Removal of hair from skin grafts is a problem also. However, the vast majority of
people who dislike
excess hair do not have a medical or iatrogenic problem. Removal of hair is easily done
temporarily by shaving or by epilation with wax or various devices. Permanent hair removal is
traditionally done with electrolysis in which a negative electrode is inserted into each follicle
individually. Electrolysis is painful, tedious, expensive, and often ineffective. The average
number of treatments per follicle is about 6. An alternative, more effective, safe, less tedious
method is needed. Selective photothermolysis using laser pulses may offer this method.



     In a previous study (MGH accession # 937286) we showed that normal-mode ruby laser PULSES ARE
effective and well tolerated for producing selective destruction of hair follicles in normal adult
caucasians with brown or black hair. Based on the principles of selective photothermolysis, and
confirmed in an in-vitro study prior to human studies, we chose a wavelength and pulse duration
which “targets” melanin in the hair follicles. Because melanin is also present in the epidermis, a
handpiece for laser light delivery was devised which tends to spare the epidermis, while maximizing
light intensity deep in the dermis where the follicles are. MGH filed a patent on this device,
which will be licensed under an agreement with Palomar, Inc, who will be supporting this human
study.



     In the first human study, 200 gs, 694nm ruby laser pulses were delivered to shaved vs.
EPILATED sites on the back or extremities, in a range of fluences. The exposures were moderately
painful but typically tolerated without local anesthesia (which itself is painful). No significant
adverse events occurred (e.g. ulceration, scarring, depigmentation). In all subjects, there was a
fluence-dependent growth delay of approximately 6 months for regrowing hairs in the exposure SITES.
At the highest fluence, 6 months after exposure there was an average of about 30% permanent hair
loss. There was no significant difference between epilated and shaved sites, suggesting that the
hair shaft itself is not important for light absorption. Hypopigmentation was NOTED in most
subjects, and was transient.



 









 





THE STUDY PROPOSED HERE:





	 	•	 	Uses a longer pulse duration, to better match follicle thermal relaxation times.
	 
	 	•	 	Examines response to more than one treatment, given 4 weeks apart.
	 
	 	•	 	Tests the hypothesis that hair growth cycle (anagen, telogen, catagen phase) affects response.
	 
	 	•	 	Provides treatment of a hair-bearing
area of concern to the subject, based on
response in each subject’s test sites.





SUBJECTS:




EXCLUSIONS:



Fifty (50) adults with brown or black hair present on the back or legs.




     Keloid history, pregnant, history of radiation treatment or surgery to test or treatment
sites, active infections, hypersensitivity to retin-A, hydroquinone, or mupincin.



LASER AND DELIVERY DEVICE:




     A normal-mode ruby laser (Spectrum, Inc.) emitting up to 30 J pulses at 1-5 ms pulse
duration,~Arill be used. Pulses are delivered through an optical handpiece which provides
refractive index matching, cooling to -10*C, a convergent entrance beam at the skin surface, and
compression of the skin.



     The
optical manipulations maximize delivery of light deep into the dern-iis; cooling raises
the tolerated fluence, provides partial anesthesia, and spares the epidermis by conduction during
LASER PULSE DELIVERY; compression decreases the distance to the deep follicular papillae and drives
blood away, eliminating a competing chromophore. We have established that under these conditions,
the primary site of photothermal injury is the pigmented hair follicles, all the way down to their
deep papillae.



PROTOCOL:




MAPPING AND DETERMINATION OF HAIR GROWTH CYCLES.




     One month prior to laser exposures, ten test areas of 5x5 cm, each containing about 100200
follicles, will be mapped on the thighs or back. The sites will be clipped, using a barber’s
clipper such that the hairs are all 3 mm long. Digital images with a CCD camera and COMPUTER
FRAME-CAPTURE BOARD WILL THEN BE taken at a normal angle of incidence, to record the position and
length of each hair in each test area. The same sites will be imaged again prior to laser exposure.
Anagen hairs will be identified as those with active growth (much greater than 3 nun length)
between the two sets of images. The images will also provide a permanent record of follicle
density, hair shaft density, and individual follicle locations.



 









 





PRE-TREATMENT WITH RETIN-A, HYDROQUINONE:




     For one month prior to laser exposures, a standard regimen of 0. 1% retin-A cream and 4%
hydroquinone cream will be applied daily by each subject to the test sites. Retin-A causes
increased epidermal turnover and as a pre-treatment improves wound healing. Hydroquinone decreases
epidermal pigmentation without influencing follicular pigmentation. Subjects will also be
instructed to avoid sun exposure to the test areas before and during this study. Retin-A can be
irritating with prolonged use, and will be discontinued in any subject experiencing irritation at
the application sites.



LASER EXPOSURES AND FLUENCES:




     Subjects and investigators will wear laser protective eyewear. Eight sites will be shaved
before laser exposures, two sites will be wax-epilated, and all will be cleaned with isopropanol.
Laser exposures will be administered in contiguous exposure spots covering each of the test areas,
at a maximum of 1 Hz, according to the table below. Three fluences will be tested in each subject,
beginning with 25, 50, and 75 j/CM2 as shown in the table below. Fluence may be increased to 50, 75
and 100 j/CM2 ‘based on evaluation of response in the first three subjects. Specifically, the
fluence range will be increased if there is no erosion, ulceration, scarring, or depigmentation at
the one-month followup visit. Based on the same criteria, fluence may be increased again to 75,
100, and 125 j/CM2 following evaluation of the second set of three subjects.



     Local anesthesia will be offered, using 2% xylocaine with epinephrine, given by intradermal
injections around each site. In our experience anesthesia will not be routinely needed, but will
always be offered for the subjects’ comfort.



     Subjects will return 1 month after the first set of laser exposures for evaluation and a
second set of exposures. Each skin site will be photographed and digitally imaged using the CCD
camera system. Responses will also be scored visually for changes in pigmentation, inflammation,
hair reqrowth, and textural changes, using an arbitrary scale shown in a table below. After
evaluations are recorded, a second series of exposures will be performed in those test sites to be
treated twice (see table).



LASER EXPOSURES TABLE




	 	 	 	 	 
	Test sites	 	 	 	 
	(back or thigh)	 	Single treatment	 	2 treatments at 1 month interval
	 

	 	75 J/cn-L2
	 	75 J/cm2
	 

	 	50 J/cm2
	 	50 J/cm2
	 

	 	25 J/cm2
	 	25 J/cm17
	 

	 	75 J/cm2
	 	75 J/cm2
	 

	 	epilated
	 	epilated
	 

	 	75 J/cm2
	 	75 J/cm2
	 

	 	2 passes
	 	2 passes






 









 





SINGLE-TREATMENT:




     A treatment may be performed in a site up to 100 cm2 with excess hair growth of concem to the
subject, using the maximum tolerated fluence according to test site results. We do not expect to
see
scarring, ulcreation, or depigmentation. However, if any of these unwarranted effects do
occur, the treatment fluence will be less than that causing these responses. Skin preparation,
anaesthesia, exposure techniques, and post-exposure care will be identical to that of the test
sites.



POST-EXPOSURE SKIN CARE:




     After the laser exposures, mupircin ointment (Bactroban) will be applied and a sterile
dressing applied. Subjects will be instructed to gently cleanse the
sites with warm water and mild soap (e.g. Dove), and to re-apply mupiricin ointment twice a day until any weeping or crusting has
subsided. Subjects will also be asked to avoid sun exposure, which can cause hyperpigmentation.



RESPONSE GRADING (SUBJECTIVE SCALE)*




	 	 	 	 	 	 	 	 	 
	hair regrowth

	 	none
	 	sparse
	 	moderate
	 	full
	 
	 	 	 	 	 	 	 	 
	hypigmentation

	 	absent
	 	present	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	hyperpigmentation

	 	absent
	 	present	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	depigmentation

	 	absent
	 	present	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	erythema

	 	none
	 	mild
	 	moderate
	 	violaceous
	 
	 	 	 	 	 	 	 	 
	edema

	 	none
	 	mild
	 	moderate
	 	tumescent
	 
	 	 	 	 	 	 	 	 
	textural change

	 	 	 	 	 	moderate
	 	severe
	(includes scarring)

	 	none	 	 	 	 	 	 
	 

	 	 	 	mild	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ulceration

	 	absent
	 	present	 	 	 	 








 




			
	*	 	objective and quantitative endpoints are also included in this study





FOLLOW-UP SCHEDULE:



Hair regrowth and skin response will be recorded at 1 month, 3 months and 6 months after exposures
in all test and treatment sites.




 









 








FLOW CHART OF SUBJECT VISITS




	 	 	 
	Month 0

	 	Evaluation, consent and entry into study.
Mapping, clipping and imaging of 10 test sites.
Retin-A, hydroquinone, sun avoidance
instructions
	 
	 	 
	Month 1

	 	Mapping and imaging of test sites. Shave,
anesthetize if necessary. Laser exposures per
protocol. Wound dressing and wound care
instructions. Retin-A, hydroquinone, sun
avoidance for site.
	 
	 	 
	Month 2

	 	Mapping and imaging of test sties. Response
recording (subjective). Mapping and recording of
treatment site. Laser exposures per protocol
(test and treatment sites). Wound care and wound
care instructions.
	 
	 	 
	Month 3

	 	MAPPING, imaging AND recording of responses.
	 
	 	 
	Month 6

	 	Mapping, imaging and recording of responses.
	 
	 	 
	Month 9

	 	Mapping, imaging and recording of
responses. Conclusion of study. Subject
REMUNERATION ( $500).






 









 






DATA ANALYSIS:



Hair follicle counts, growth cycle and shaft diameter will be determined from digital imaging prior
to laser exposure. The site subject to wax epilation serves primarily as a control for the presence
of hair shafts at
the time of exposure, but will also produce a direct measure of hair follicle depth, by measuring
the depth from skin surface, to the papillae of the epilated hairs. Responses graded subjectively
and objectively (digital imaging) will be correlated against laser fluence and number of
treatments. Computer mapping of regrowing hair against the baseline hair follicle images will be
used to determine the relative sensitivity of amagen vs. telogen/catagen follicles. Data at I
month, 3 months, and 6 months will be compared to establish growth delay patterns and the fraction
of regrowing hairs, as a function of exposure conditions. Changes in hair shaft diameter for those
hairs which regrow will also be compared against baseline values.




RISKS:



The goal of this study is to selectively and permanently destroy hair follicles. Alopecia
(baldness) may result in the test areas and in the treatment area. As with any form of tissue
destruction, there is a risk of infection and/or scarring, which is
minimized by proper wound
care. In a previous human study of this hair removal technique, there was no scarring seen in
approximately 100 test sites. Therefore, the risk of scarring appears to be low. Laser exposures
can also cause temporary or permanent changes in skin pigmentation (skin color). A transient
decrease in skin pigmentation occurred in all of those treated previously, lasting about 3 months.
This is more noticeable in darker skin. Permanent lightening or darkening of skin color is a
possibility, which HAS NOT been observed. The laser removes freckles and common brown “moles”
permanently. In people with extensive freckling, this can cause a color change. New freckles will
eventually form in laser-treated skin, but may take years to do so.




BENEFITS:



The subjects may or may not benefit from removal of unwanted hair in the test and/or treatment
sites. There is no guarantee of success.




REMUNERATION:



Subjects will be paid $500 for participation, to defray travel and other costs.




 









 








VOLUNTEERS NEEDED




FOR HAIR REMOVAL STUDY



Healthy adult volunteers are sought for a medical study at the Massachusetts General Hospital,
aimed at permanent hair removal. A laser will be tested in hair-bearing skin areas on the back or
upper legs. One month later, an area with unwanted hair may also be treated, depending on the test
results. Six visits will be required over nine months, and volunteers must be able to accommodate
this schedule. Subjects will be paid $500 for participation in the study. There is no guarantee
that permanent hair removal will be achieved.




For more information, contact:




Christine Diericky, MD

726-7900




 









 





SCHEDULE B




	 	 	 
	INVESTIGATOR:

	 	R.R. Anderson, M.D.
	 
	 	 
	TITLE OF STUDY:

	 	TBD
	 
	 	 
	SPONSOR:

	 	Palomar
	BUDGET PERIOD:

	 	9/1/95–8/31/96
	 
	 	 
	PERSONNEL:
	 	 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Fringe	 	 	 	 
	Name	 	% Effort	 	 	Salary	 	 	Benefits	 	 	Total	 
	HMS-APPNT.
	 	 	 	 	 	 	 	 	 	 	26.04	%	 	 	 	 
	R.R.Andemon,M-D.
	 	 	10	%	 	 	12,854	 	 	$	3,347	 	 	$	16,201	 
	Christine Dierickx, M.D.
	 	 	100	%	 	 	40,000	 	 	$	10,416	 	 	$	50,416	 
	NON-HMS APPNT.
	 	 	 	 	 	 	 	 	 	 	21.51	%	 	 	 	 
	Senior Technician
	 	 	50	%	 	 	17,500	 	 	$	3,764	 	 	$	21,264	 
	Engineer
	 	 	50	%	 	 	17,500	 	 	$	3,764	 	 	$	21,264	 
	Secretary
	 	 	5	%	 	 	1,500	 	 	$	323	 	 	$	1,823	 
	TEMPORARYSTAFF
	 	 	 	 	 	 	 	 	 	 	11.02	%	 	 	 	 
	Student
	 	 	100	%	 	 	9,000	 	 	 	992	 	 	$	9,092	 
	 
	 	Total Personnel	 	 	 	 	 	 	 	 	 	 	 	120,960	 
	EQUIPMENT
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CCD, digital hair count system
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	8,000	 
	SUPPLIES
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Misc. optics, sources, filters and macro lens
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,800	 
	Imaging software
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,000	 
	Film purchase and developing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,000	 
	Epliators, mv, markers and tapes
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	600	 
	Retin A
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,500	 
	Hydroquinone
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,000	 
	Sunscreen
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,000	 
	Anesthetic (EEMLA; l.d.xylocaine)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,000	 
	Misc. disposables
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	600	 
	Misc. office supplies
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	600	 
	TRAVEL
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,000	 
	PATIENT CARE COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	50 patients @$500 each
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	25,000	 
	MISCELLANEOUS COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Advertising and telephone expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,000	 
	TOTAL DIRECT COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	170,060	 
	INDIRECT COSTS(28%) -TDC-
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	47,617	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	218.788	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







 









 





EXHIBIT B




MASSACHUSETTS GENERAL HOSPITAL

Office of Technology Affairs

Building 149

Thirteenth Street — Suite 1101

Charlestown, MA 02129

617-726-2128 FAX: 617-726-1668




Marvin C. Guthrie, J.D.

Vice President, Patents,

Licensing and Industry Sponsored Research




August 18, 1995




Michael Smotrich, Ph.D.

Palomar Medical Technologies, Inc.

66 Cherry Hill Drive

Beverly, MA 01915

Tel: 508-921-9300

Fax: 508-921-5801




Dear Dr. Smotrich:




     A License Agreement between the General Hospital Corporation (“General”) and Palomar Medical
Technologies, Inc. (“Palomar”) has been entered into on this date (“License Agreement”) pertaining
to the U.S. Patent Application filed by Dr. R. Rox Anderson, et.al. on February 1, 1995 entitled
“Permanent Hair Removal Using Optical Pulses,” (Licensed Patent Application”) and Palomar has
indicated its interest in paying the costs of seeking advice from General’s patent counsel with
respect to the possibility of adding to the Licensed Patent Application one or more cont inuat ions
-in -part which would expand the claimed applications of the device described in the Licensed
Patent Application to uses other than hair removal, e.g. for removal of congenital nevi, tatoos and
port wine stains (“New Use (s) 11) . In the event that counsel advises in favor of filing such cont
inuat ions-in-part, we understand that Palomar will pay the costs of preparing and filing same.
General hereby acknowledges that Dr. Anderson’s rights, assigned to General, in said
continuations-in-part will, once so filed, be treated as PATENT RIGHTS under the License Agreement
subject to the following:



     1. The LICENSE FIELD described in paragraph 1.3 of the License Agreement shall be amended to
include the field(s) of the New Use(s)’.



     2. For each New Use claimed in a continuation-in-part, General and Palomar shall establish,
within twelve (12) months of the filing of said continuation-in-part, due diligence milestones
appropriate to the New Use which shall be incorporated into Section 3 of the License Agreement. It
is understood that General may require funding of research at General in the field of the New Use
as part of the due diligence milestones, which funding will be creditable against the sums due
General under paragraph 4.3 of the Clinical Trial Agreement which is appended as Exhibit A to the
License Agreement. In the event that Palomar and General fail to reach agreement on said
milestones, this matter shall be determined



 









 







in accordance with the dispute resolution provisions set forth in paragraph 10.9 of the License
Agreement.




     3. The royalty owed General by Palomar under paragraph 5.1(b)(ii) on NET REVENUES for a
PRODUCT consisting of a non-ruby laser sold for hair removal as well as other uses shall be five
percent (5-%) so long as the other uses include as least one New Use.



     4. Royalties due General by Palomar on NET REVENUES derived by Palomar, its AFFILIATES and
SUBLICENSEES on:




     (a) a PRODUCT constituting either a laser, or any product constituting any non-laser
equipment/disposables, which in either case is sold solely f or New Uses or f or New Uses in
combination with uses other than hair removal, and




     (b) SERVICES and other commercial dispositions described in paragraph 5. 1 (b) (iii) (A)
(1) and (2) of the License Agreement, which SERVICES and other commercial dispositions involve
the use or sale of New Uses,
shall be negotiated in good faith by the partids in accordance with the procedure described in
paragraph 5.1(iii) and 5.1(iv).



     5. Minimum annual royalties on PRODUCTS or SERVICES made, used, or sold for New Uses (whether
or not sold in combination with other uses) shall be calculated in accordance with paragraph 5. 1
(b) (iii) (C) .



     6. In all other respects, the PATENT RIGHTS claiming New Use(s) shall be treated as PATENT
RIGHTS under the License Agreement.



     Kindly sign the enclosed copy of this letter agreement to indicate Palomar’s assent to the
above terms.



	 	 	 	 	 
	 

	 	 	 	Sincerely,
	 

	 	 	 	 
	 

	 	 	 	/s/ Marvin C. Guthrie
	 

	 	 	 	 
	 

	 	 	 	Marvin C. Guthrie
	The terms of this Letter Agreement are agreed to by Palomar:	 	 
	 
	 	 	 	 
	Name:

	 	/s/ Michael H. Smotrich	 	 
	 

	 	 	 	 
	Title:

	 	President	 	 
	Date:

	 	August 18, 1995	 	 






 









 






FIRST AMENDMENT




     This is a First Amendment to the License Agreement between THE GENERAL HOSPITAL CORPORATION, a
not-for-profit corporation doing business as Massachusetts General Hospital, having a place of
business at Fruit Street, Boston, Massachusetts 02114 (“GENERAL”) and Palomar Medical Technologies,
a Delaware corporation having offices at 66 Cherry Hill Drive, Beverly, MA 01915 (“PALOMAR”),
effective August 18, 1995 (“License Agreement”).




For good and valuable consideration GENERAL and PALOMAR hereby agree to amend the License
Agreement as follows:




1. In paragraph 5.1(b)(iii)(B), delete the following words:




“(which royalty rate the parties anticipate will fall within the range of twenty to thirty
percent (20-30%) of PALOMAR’s estimated profit margin on said PRODUCTS or SERVICES)”




2. In paragraph 5.1(b)(iii)(C), delete the following words:




“which the parties anticipate will fall within the range of five to six and one quarter
percent (5-6 1/4%) of PALOMAR’s estimated profit margin on said PRODUCTS or SERVICES”




3. This First Amendment shall be effective as of August 18, 1995.



	 	 	 	 	 	 	 
	Agreed to:	 	 	 	 
	 
	 	 	 	 	 	 
	PALOMAR	 	THE GENERAL HOSPITAL CORPORATION
	 
	 	 	 	 	 	 
	BY:

	 	/s/ Michael H. Smotrich
	 	BY:
	 	/s/ Nikki J. Zapol
	 

	 	 
	 	 	 	 
	TITLE:

	 	President
	 	TITLE:
	 	Managing Director
	 

	 	 	 	 	 	Office of Technology Affairs
	DATE December 14, 1995	 	DATE January 2, 1996






 









 






SECOND AMENDMENT




     This is a Second Amendment to the License Agreement between THE GENERAL HOSPITAL CORPORATION,
a not-for-profit corporation doing business as Massachusetts General Hospital, having a place of
business at Fruit Street, Boston, Massachusetts 02114 (“GENERAL”) and Palomar Medical Technologies,
a Delaware corporation having offices at 66 Cherry Hill Drive, Beverly, MA 01915 (“PALOMAR”),
effective August 18, 1995 (“LICENSE AGREEMENT”).



     For good and valuable consideration GENERAL and PALOMAR hereby agree to amend the License
Agreement by amending certain paragraphs and adding the following new paragraphs to the LICENSE
AGREEMENT, effective February 14, 1997 (“THE AMENDMENT EFFECTIVE DATE”):


Add the following “Whereas” clauses after the sixth existing “Whereas” clause:




     WHEREAS, under research programs funded by GENERAL and the U.S. Government, GENERAL, through
research conducted by Dr. R. Rox Anderson, has developed inventions pertaining to methods of hair
removal using epilation (“Additional Invention”); and



     WHEREAS, GENERAL and PALOMAR have entered into a Research Agreement effective March 1, 1997,
attached hereto as Exhibit A-2 (“Epilation Research Agreement”), under which PALOMAR is providing
funds and equipment to support research at GENERAL of said invention pertaining to methods of hair
removal using epilation; and



     WHEREAS, GENERAL is interested in licensing the Additional Invention to PALOMAR so that
PALOMAR can commercially develop, manufacture, use and distribute products and services based on
said Additional Invention throughout the world;


IN SECTION 1, “DEFINITIONS”, AMEND PARAGRAPH 1.10 TO READ AS FOLLOWS:




     1.10 The term “TECHNOLOGICAL INFORMATION” shall mean any research data, designs, formulas,
process information, clinical data and other information pertaining to any invention claimed in
PATENT RIGHT which is known to Dr. Anderson on the EFFECTIVE DATE and disclosed to Palomar within
thirty (30) days of the date on which this Agreement is fully executed. THE TERM SHALL ALSO INCLUDE
ANY RESEARCH DATA, DESIGNS, FORMULAS, PROCESS INFORMATION, CLINICAL DATA AND OTHER INFORMATION
PERTAINING TO ANY INVENTION CLAIMED IN EPILATION PATENT RIGHT WHICH IS KNOWN TO DR. ANDERSON ON THE
AMENDMENT EFFECTIVE DATE AND DISCLOSED TO PALOMAR WITHIN THIRTY (30) DAYS OF THE AMENDMENT
EFFECTIVE DATE. This term shall also include information which is disclosed to PALOMAR by GENERAL
in accordance with, and during the term of, the Clinical Trial Agreement OR THE EPILATION RESEARCH
AGREEMENT and which pertains to any PATENT RIGHT claiming an Invention as defined in EITHER said
Agreement.



 









 




IN SECTION 1, “DEFINITIONS”, ADD THE FOLLOWING NEW PARAGRAPHS:




     1.12 The term “EPILATION PATENT RIGHT” shall mean the U.S. Patent Application Serial Number
08/314,082, filed September 28, 1994, naming Dr. R. Rox Anderson as inventor, and titled “Method of
Hair Removal”, and the PCT Application Serial Number PCT/US95/12275 filed September 22,
1995, or any division, continuation and any foreign counterparts of the aforementioned patent
applications or the equivalent claims of any Letters Patent or the equivalent thereof issuing
thereon or reissue, reexamination or extension thereof. EPILATION PATENT RIGHTS shall also include
those claims in any continuation-in-part of the aforementioned patent applications which claim an
invention described or claimed in said patent applications.



     1.13 The term “EPILATION PRODUCT” shall mean any article, device or composition, the
manufacture, use or sale of which would, absent the licenses granted herein, infringe a VALID CLAIM
of an EPILATION PATENT RIGHT, or does not infringe a VALID CLAIM of any EPILATION PATENT RIGHT
licensed to PALOMAR hereunder but the discovery, development, manufacture or use of which employs
TECHNOLOGICAL INFORMATION.



     1.14 The term “EPILATION SERVICE” shall mean any method or service, the use, performance, or
sale of which would, absent the licenses granted herein, infringe a VALID CLAIM of an EPILATION
PATENT RIGHT, or does not infringe a VALID CLAIM of any EPILATION PATENT RIGHT licensed to PALOMAR
hereunder but the discovery, development, manufacture or use of which employs TECHNOLOGICAL
INFORMATION.



     1.15 The term “EPILATION LICENSE FIELD” shall mean hair reduction and/or removal using
chromophores which, when excited by laser pulses, destroy hair follicles by mechanisms other than
photochemical mechanisms.


IN SECTION 2, “GRANT”, ADD THE FOLLOWING NEW PARAGRAPHS:




     2.6 GENERAL hereby grants PALOMAR, subject to the rights of the United States Government, an
exclusive, worldwide, royalty-bearing license in the EPILATION LICENSE FIELD to make, have made,
use and sell EPILATION PRODUCTS and to perform EPILATION SERVICES. In the event an exclusive
license is not available in a country, GENERAL will grant PALOMAR the most exclusive license
available in that country.



     2.7 The above licenses to sell EPILATION PRODUCTS include the right to grant to the purchaser
of products from PALOMAR, its AFFILIATES, and SUBLICENSEES the right to resell and to use such
purchased EPILATION PRODUCTS in a method coming within the scope of the corresponding PATENT RIGHT.



     2.8 The granting of any license hereunder is subject to GENERAL’s and GENERAL’s AFFILIATES’
right to make and to use the subject matter described and claimed in EPILATION



 









 




PATENT RIGHT for research and clinical purposes but, for those PATENT RIGHTS exclusively licensed,
for no other purpose.



IN SECTION 3, “DUE DILIGENCE”, ADD THE FOLLOWING NEW PARAGRAPH:




     3.3 PALOMAR shall itself, or through its AFFILIATES or SUBLICENSEES, use reasonable efforts to
develop and make commercially available EPILATION PRODUCTS or EPILATION SERVICES for commercial
sales and distribution throughout the world in the EPILATION LICENSE FIELD. Such efforts shall
consist of:



     (a) Entering into the Epilation Research Agreement with General attached hereto as Exhibit A-2
and providing the funding specified in said Agreement;



     (b) Within six (6) months of the conclusion of the research governed by said Agreement, but in
no case greater than three (3) years from the AMENDMENT EFFECTIVE DATE hereof, PALOMAR and GENERAL
shall establish (i) additional objective milestones for the development of EPILATION PRODUCTS or
EPILATION SERVICES, and (ii) a schedule of the dates by which PALOMAR shall achieve such
milestones.



     Failure to achieve one or more of the above objectives or the objectives selected in
accordance with (b) above within the agreed upon time periods or within any extension granted by
GENERAL shall result in GENERAL having the right to cancel upon thirty (30) days notice any
exclusive license to EPILATION PATENT RIGHTS granted hereunder or convert any exclusive license to
EPILATION PATENT RIGHTS to a non-exclusive license. If the parties do not agree on any such
milestones, or if PALOMAR decides not to develop EPILATION PRODUCTS or EPILATION SERVICES,
PALOMAR’s license to EPILATION PATENT RIGHTS shall be terminated. Notwithstanding the foregoing,
provided that PALOMAR is in compliance with the due diligence milestones in paragraph 3.1 of the
License Agreement, and has complied with milestone (a) in this paragraph 3.3, GENERAL shall only be
entitled to terminate PALOMAR’s license to EPILATION PATENT RIGHTS on account of PALOMAR’s breach
of this Agreement, including but not limited to any failure by PALOMAR to make the annual minimum
royalty payments specified in paragraph 5.12(a) herein.


IN SECTION 4: “FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHT”, ADD THE FOLLOWING NEW
PARAGRAPHS:




     4.3 GENERAL shall be responsible for the preparation, filing, prosecution and maintenance of
all patent applications and patents included in EPILATION PATENT RIGHTS, and shall keep PALOMAR
informed of the prosecution of such patents and applications in accordance with Paragraph 4.2 of
the LICENSE AGREEMENT.



     4.4 PALOMAR shall reimburse GENERAL for one-half of its Costs for the prosecution and
maintenance of EPILATION PATENT RIGHTS incurred prior to and subsequent to the AMENDMENT EFFECTIVE
DATE, provided that, if GENERAL grants license rights in EPILATION PATENT RIGHTS to DUSA
Pharmaceuticals, Inc. and any other



 









 




entity, PALOMAR shall pay the same fraction of Costs as said other licensees, which in no event
will exceed one-third.



IN SECTION 5, “ROYALTIES”, ADD THE FOLLOWING NEW PARAGRAPHS:




     5.9 PALOMAR shall pay a license fee of ten thousand ($10,000) dollars within thirty (30) days
of execution of this Amendment, which is attributable to EPILATION PATENT RIGHTS. No portion of
said license fee shall be creditable against future royalties.



     5.10 For sales of any PRODUCT or SERVICE as defined in the LICENSE AGREEMENT that is, or
incorporates, an EPILATION PRODUCT or an EPILATION SERVICE, the royalties shall be determined as
follows:



     (a) For sales governed by Paragraph 5.1(b)(i) of the LICENSE AGREEMENT, the royalty specified
therein shall be increased by one-half (0.5%) percent, except those sales governed by Paragraph
5.1(b)(i)(B)(III), for which the royalty specified therein shall be increased by one-quarter
(0.25%) percent, in addition to any increase in accordance with Paragraph 5.10(a) hereunder.



     (b) For sales governed by Paragraphs 5.1(b)(ii) or 5.1(b)(iii) of the LICENSE AGREEMENT, the
parties will negotiate a commercially reasonable royalty as specified in the LICENSE AGREEMENT,
provided that the maximum value specified for said commercially reasonable royalty rate shall be
increased by one-half (0.5%) percent, except those sales governed by Paragraph 5.1(b)(iii)(C), for
which the maximum value specified for the royalty specified therein shall be increased by
one-quarter (0.25%) percent, either of which increase shall be in addition to any increase in
accordance with Paragraph 5.10(b) hereunder.



     5.11 For sales of any EPILATION PRODUCT or EPILATION SERVICE within the LICENSE FIELD
specified in Paragraph 1.3 of the LICENSE AGREEMENT that is not a PRODUCT or SERVICE, as the case
may be, under the LICENSE AGREEMENT, the applicable royalty shall be that specified in paragraph
5.1(b) of the LICENSE AGREEMENT which would have been the case if the EPILATION PRODUCT or
EPILATION SERVICE, were a PRODUCT or a SERVICE, as the case may be.



     5.12 The annual minimum royalties specified in Paragraph 5.1(b)(iii)(D) of the LICENSE
AGREEMENT shall be calculated based on the royalty rates selected for PRODUCTS and SERVICES in
accordance with paragraphs 5.1(b)(ii) and 5.1(b)(iii) of the LICENSE AGREEMENT and paragraph 5.10
of this Amendment. In addition, PALOMAR shall pay the following annual minimum royalties.



     (a) In consideration for the licenses to EPILATION PATENT RIGHTS granted herein, twenty
thousand ($20,000) dollars per AGREEMENT YEAR, beginning with the AGREEMENT YEAR next following the
completion of PALOMAR-funded clinical trials at GENERAL, until the last AGREEMENT YEAR in which
PALOMAR holds an exclusive license in the EPILATION LICENSE FIELD to EPILATION PATENT RIGHTS
hereunder.



 









 




IN SECTION 5, “ROYALTIES”, AMEND PARAGRAPH 5.4 TO READ AS FOLLOWS:




     5.4 In addition to the royalties provided for above, PALOMAR shall pay GENERAL ten percent
(10%) of any and all income, other than a royalty or other payment made pursuant to paragraphs 5.1,
5.10 OR 5.11 of the LICENSE AGREEMENT, including, by way of example, license issue fees and
milestone payments received by PALOMAR from its AFFILIATES and SUBLICENSEES, in consideration for
the sublicensing of any right or license granted to PALOMAR under this Amendment.


IN SECTION 7, “INFRINGEMENT”, ADD THE FOLLOWING NEW PARAGRAPH:




     7.5 The provisions of this Section 7 shall apply only to any PATENT RIGHTS exclusively or
co-exclusively licensed to PALOMAR in the country in which the alleged infringement is taking
place.



	 	 	 	 	 	 	 
	Agreed to:	 	 	 	 
	 
	 	 	 	 	 	 
	PALOMAR	 	THE GENERAL HOSPITAL CORPORATION
	 
	 	 	 	 	 	 
	BY

	 	/s/ Michael H. Smotrich
	 	BY
	 	/s/ Nikki J. Zapol
	 

	 	 
	 	 	 	 
	TITLE

	 	President
	 	TITLE
	 	Managing Director
	 

	 	 	 	 	 	Office of Technology Affairs
	DATE February 14, 1997	 	DATE February 18, 1997






 









 






EXHIBIT A-2




RESEARCH AGREEMENT




     This Agreement is made as of the 1st day of March, 1997 (“Effective Date”), between Palomar
Medical Technologies, a Delaware corporation having offices at 66 Cherry Hill Drive, Beverly, MA
01915 (“PALOMAR”), (hereinafter called “PALOMAR”), and The General Hospital Corporation, a
not-for-profit Massachusetts corporation doing business as Massachusetts General Hospital, Fruit
Street, Boston, Massachusetts 02114 (hereinafter called “GENERAL”).



     WHEREAS, in an Amendment to the License Agreement between GENERAL and PALOMAR effective August
18, 1995, effective on February 14, 1997 and executed on even date herewith (“the AMENDED LICENSE
AGREEMENT”), GENERAL has granted PALOMAR an exclusive license within the EPILATION LICENSE FIELD
(as hereinafter defined) to certain patent rights relating to hair removal; and



     WHEREAS PALOMAR desires GENERAL to perform research and evaluation in the field of hair
removal relating to said patent rights, herein described upon the terms provided.



     NOW THEREFORE, the parties hereto agree as follows:



     1. The research project described in Appendix A and funded by PALOMAR (“Project”) shall be
performed by Dr. R. Rox Anderson (the “Principal Investigator”) and other GENERAL personnel working
under the direction of the Principal Investigator (“Investigators”). At the conclusion of the
Project, a report disclosing the results of the research shall be provided to PALOMAR, which shall
have the right to use such results to the extent such use does not infringe any GENERAL patent not
expressly licensed to PALOMAR herein.



     2. This agreement shall remain in effect for a term of two years from the Effective Date,
provided however that, prior to the commencement of the human study that is the subject of “Aim 4”
in Appendix A, the parties will execute a clinical trial agreement substantially equivalent to the
agreement included in Exhibit A of the AMENDED LICENSE AGREEMENT, and the terms of said clinical
trial agreement shall govern said human study.



     3. PALOMAR agrees to provide GENERAL with a grant of two hundred three thousand seven hundred
fifty seven dollars ($203,757) which includes the full direct costs of the Project and the full
indirect costs attendant thereto, as shown in the Budget attached hereto as Appendix B. The
foregoing grant shall be paid on the following schedule:



     $50,090 upon execution of this Agreement;



     $50,000 on or before September 1, 1997;



     $ 51,833.50 on or before March 1, 1998; and



     $ 51,833.50 on or before September 1, 1998.



 









 




Payment shall be made to “The General Hospital Corporation” and shall be sent to:



Vice President for Patents, Licensing and Industry Agreements

Office of Technology Affairs

Massachusetts General Hospital

Thirteenth Street, Building 149, Suite 1101

Charlestown, MA 02129




     4. In the event that PALOMAR discloses to any GENERAL personnel any information which relates
to the Project that PALOMAR considers confidential, the rights and obligations of the parties with
respect to such information shall be governed by the terms and conditions set forth in Appendix C.



     5. The Principal Investigator shall have the right to present or publish the results of the
research done at GENERAL and shall provide an early draft of any such presentation or manuscript or
abstract for review by PALOMAR prior to its first presentation or submission for publication, at
least thirty (30) days in advance in the case of a presentation or manuscript, and at least seven
(7) days in advance in the case of an abstract. At the end of such thirty or seven days, as the
case may be, the Principal Investigator shall have the right, in his/her discretion, to make such
presentation or to submit such manuscript for publication, provided, however, that upon notice by
PALOMAR within said thirty or seven day period that PALOMAR reasonably believes a patent
application claiming an Invention (as defined in paragraph) should be filed prior to such
publication, such submission for publication shall be delayed until any patent application or
applications have been filed by GENERAL, pursuant to paragraph 6.



     6. The Principal Investigator and any other Investigator who shall conceive and reduce to
practice an invention, solely or jointly, in the performance of Project (hereinafter referred to as
“Invention”) shall promptly report such Invention to GENERAL and shall assign all of his or her
rights, title and interest in the Invention to GENERAL. GENERAL shall promptly advise PALOMAR in
writing of each Invention disclosed to GENERAL and shall discuss with PALOMAR whether a patent
application or applications (Hereinafter referred to, together with any patents issued thereon, as
“Patent Rights”) pertaining to such Invention should be filed and in which countries. In the event
of joint inventorship between PALOMAR personnel and GENERAL Investigators, PALOMAR personnel shall
assign all of their rights, title and interest in the Invention to PALOMAR, and GENERAL
Investigators shall assign all of their rights, title and interest in the Invention to GENERAL, and
the Invention will be deemed to be jointly owned. If both parties mutually agree that Patent Rights
should be filed, applications assigned solely to GENERAL shall
be filed by GENERAL, and applications owned jointly by GENERAL and PALOMAR shall be filed as
mutually agreed upon by the parties. In the event PALOMAR is not interested in having Patent Rights
filed with respect to a particular Invention, PALOMAR shall advise GENERAL of such fact within
ninety (90) days from the date on which the Invention was



 









 




disclosed to PALOMAR by GENERAL and GENERAL shall be free to file and prosecute Patent Rights on
such Invention at its own expense and to license such Patent Rights to any other party.




     All information given to PALOMAR by GENERAL in accordance with this paragraph 6 will be held
in confidence by PALOMAR so long as such information remains unpublished or publicly undisclosed by
GENERAL.



     All patent costs pertaining to any Patent Rights filed by mutual agreement of PALOMAR and
GENERAL, including preparation, filing, prosecution, issuance and maintenance costs, shall be borne
by PALOMAR as follows. For any Patent Right, the scope of which is no broader than the EPILATION
LICENSE FIELD defined below, PALOMAR shall bear one hundred percent (100%) of patent costs, and for
any Patent Right, the scope of which is broader than the EPILATION LICENSE FIELD or which contains
embodiments outside the EPILATION LICENSE FIELD, PALOMAR shall bear patent costs as provided in
paragraph 4.4 of the AMENDED LICENSE AGREEMENT.



     As to any Patent Rights assigned in whole or in part to GENERAL and filed by mutual agreement
of the parties, to the extent not prohibited by the United States Government or prevented by the
obligations of GENERAL to any other sponsor of research at GENERAL, PALOMAR shall have for the
twelve (12) months next following the filing of such Patent Rights in the United States Patent and
Trademark Office the option to obtain a world-wide, royalty bearing, exclusive license under
GENERAL’s rights therein with the right to sublicense, in the field of hair reduction and/or
removal using chromophores which, when excited by laser pulses, destroy hair follicles by
mechanisms other than photochemical mechanisms (the “EPILATION LICENSE FIELD”). In the event that
GENERAL is prohibited or prevented as aforesaid from granting an exclusive license within the
EPILATION LICENSE FIELD to any Patent Right hereunder, GENERAL will grant to PALOMAR the most
exclusive license within the EPILATION LICENSE FIELD that it is able to grant to PALOMAR. It is
understood that GENERAL will reserve the right to use any Invention for research, clinical and
educational purposes, and that if federal funding supports the Invention, PALOMAR’s license will be
subject to the royalty-free non-exclusive license granted to the U.S. government by statute (35 USC
sec.202(c)(4)).



     This option is to be exercised by written notice to GENERAL during said twelve month period
and the negotiation, during the six (6) months next following such notice, of an amendment to the
AMENDED LICENSE AGREEMENT granting PALOMAR a license to Patent Rights under the terms thereof,
unless the parties otherwise agree in writing. In the absence of such notice by COMPANY and
agreement on license terms, GENERAL may grant a license to such Patent Rights to any other party.



     7. GENERAL and PALOMAR shall each be responsible and shall hold the other harmless for any
injury to persons or damage to property to the extent that such injury or damage is caused by the
negligence or willful misconduct of their employees or staff in carrying out the Project; provided,
however, PALOMAR will defend, indemnify and hold harmless GENERAL



 









 




and its trustees, employees and staff against any and all actions, suits, claims, demands or
prosecutions that may be brought or instituted against GENERAL and/or its trustees, employees and
staff based on or arising out of the manufacture, use, sale or other distribution of any product by
PALOMAR, its affiliates or licensees excepting any such action, suit, claim, demand or prosecution
which is based solely on the negligence or willful misconduct of GENERAL and/or its trustees,
employees or staff in the use of such product.




     8. Each party agrees that it will not use the name or logo of the other party or of any
employee or staff member of the other party in any advertising, promotional material or publicity
without the prior written approval of the party or person whose name or logo is to be used.



     9. If either party shall fail to faithfully perform any of its obligations under this
Agreement, the non-defaulting party may give written notice of the default to the defaulting party.
Unless such default is corrected within thirty (30) days after such notice, the notifying party may
terminate this Agreement upon written notice.



     10. The obligations of the parties under Paragraphs 5,6,7 and 8 shall survive the termination
of this Agreement.



     11. This Agreement shall be governed by the laws of the Commonwealth of Massachusetts,
regardless of the choice of law rules of any jurisdiction.



     IN WITNESS WHEREOF, GENERAL and PALOMAR have caused this instrument to be executed.



	 	 	 	 	 	 	 
	PALOMAR	 	THE GENERAL HOSPITAL CORPORATION
	 
	 	 	 	 	 	 
	BY:

	 	/s/ Michael H. Smotrich
	 	BY:
	 	/s/ Nikki J. Zapol
	 

	 	 
	 	 	 	 
	TITLE:

	 	President
	 	TITLE:
	 	Managing Director
	 

	 	 	 	 	 	Office of Technology Affairs
	 
	DATE: February 14, 1997	 	DATE: February 18, 1997





I have read paragraphs 5 and 6 of the foregoing Agreement and agree to comply with the obligations
of the Principal Investigator stated therein. In addition, I have read Appendix C and agree to
comply with the obligations of GENERAL stated therein.




	 	 	 	 	 
	 	 	 
	 	/s/ R. Rox Anderson
 	 
	 	DATE: February 14, 1997 	 
	 	 	 



 









 






	 	 	 	 	 



APPENDIX A




Dye-assisted laser injury to hair follicles

R. Rox Anderson, MD

Christine Dierickx, MD

Salvadore Gonzales, MD



The broad goal is to evaluate dye-assisted laser hair removal.



Aim 1: (6 months) Screen FDA—approved aqueous dyes which absorb at 690-800 nm. for the ability to
penetrate deeply into hair follicles and/or stain follicular epithelium, in skin IN VITRO.





     a. 3 dyes (ICG; carbon suspension; MB)



     b. effect of vehicle (range of C1-C4 alcohols; effect of surfactants; DMSO)



     c. role of epilation


Aim 2: (4 months) Quantify follicular injury with vs. without dye, in skin IN VITRO.




     a. most promising dye + ruby



     b. most promising dye(s) + diode


Aim 3: (2 months) Write and submit human study for approval of IRB, FDA.



Aim 4: (9 months) Compare laser hair removal with vs. without dye in a pilot human study.




     a. one dye and one laser — depends on findings of aims 1, 2



     b. open-label bilateral comparison study in 12 volunteers, backs/thighs



     c. fluence and dye concentrations depend on findings in aims 1, 2



     d. quantitative hair counts and re-growth (paired comparison in each volunteer)




 









 





APPENDIX B




	 	 	 
	INVESTIGATOR:

	 	R.R. Anderson, M.D.
	 
	 	 
	TITLE OF STUDY:

	 	Dye-assisted laser injury to hair follicles
	 
	 	 
	SPONSOR:

	 	Palomar
	BUDGET PERIOD:

	 	3/1/97-2/28/99
	 
	 	 
	PERSONNEL
	 	 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	FRINGE	 	 	YEAR 1	 	 	YEAR 2	 
	NAME	 	% EFFORT	 	 	SALARY	 	 	BENEFITS	 	 	TOTAL	 	 	TOTAL	 
	HMS-APPNT
	 	 	 	 	 	 	 	 	 	 	26.20	%	 	 	 	 	 	 	 	 
	R.R. Anderson, MD
	 	 	A.N.	 	 	None Requested	 	 	 	0	 	 	 	0	 	 	 	0	 
	Christine Dierickx, MD
	 	 	A.N.	 	 	None Requested	 	 	 	0	 	 	 	0	 	 	 	0	 
	Salvador Gonzalez, MD
	 	 	80	%	 	$	48,000	 	 	 	12,576	 	 	 	60,576	 	 	 	62,999	 
	NON-HMS APPNT
	 	 	 	 	 	 	 	 	 	 	21.90	%	 	 	 	 	 	 	 	 
	Senior Technician
	 	 	25	%	 	$	9000	 	 	 	1,971	 	 	 	10,971	 	 	 	11,410	 
	Total Personnel
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	71,547	 	 	 	74,409	 
	EQUIPMENT
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 
	SUPPLIES
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Misc. Disposables
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,000	 	 	 	1,000	 
	Misc. Dyes
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,000	 	 	 	1,000	 
	Film And Film Developing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	525	 	 	 	525	 
	Cryostat Baldes
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	500	 	 	 	500	 
	Barrier Filters For Dye Detection
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	400	 	 	 	400	 
	Office Supplies And Screening Time
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	750	 	 	 	750	 
	Total Supplies
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	4,175	 	 	 	4,175	 
	TRAVEL
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	600	 	 	 	600	 
	PATIENT CARE COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subject reimbursement (estimate)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,000	 	 	 	2,000	 
	MISCELLANEOUS COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Advertising and telephone expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	250	 	 	 	250	 
	Histology
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,500	 	 	 	1,500	 
	Total Miscellaneous
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,750	 	 	 	1,750	 
	TOTAL DIRECT COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	80,072	 	 	 	82,934	 
	INDIRECT COSTS (25%)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	20,018	 	 	 	20,733	 
	TOTAL COSTS
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	100,090	 	 	$	103,665	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






	 	 	 	 	 
	 

	 	/s/ Marcia L. Smith
	2/13/97	 
	 	 	 
	 

	 	Marcia L. Smith	 	 
	 

	 	Director for Proposal and Award Mgmt.	 	 






 









 






APPENDIX C




PALOMAR PROPRIETARY INFORMATION




     It is anticipated that in the performance of the Project, the Principal Investigator will
be provided with or given access by PALOMAR to certain information which PALOMAR considers
proprietary (GENERAL and Principal Investigator are referred to herein each as a “RECIPIENT” and
collectively as “RECIPIENTS.”) The rights and obligations of the parties with respect to such
information are as follows:


1. PROPRIETARY INFORMATION. For the purposes of this
Agreement, “Proprietary Information” refers to information of any kind which is disclosed by
PALOMAR to RECIPIENTS and which, by appropriate marking, is identified as confidential and
proprietary at the time of disclosure. In the event that proprietary information must be provided
visually or orally, obligations of confidence shall attach only to that information which is
confirmed by PALOMAR in writing within ten (10) working days as being confidential.



2. USE AND CARE OF PROPRIETARY INFORMATION. For a period of three (3) years after receipt of
Proprietary Information, each RECIPIENT agrees to use reasonable efforts, no less than the
protection given its, his or her own confidential information, to use Proprietary Information
received from PALOMAR and accepted by that RECIPIENT only in accordance with this paragraph 2.




     (a) Each RECIPIENT shall use PALOMAR’s Proprietary Information solely for the purposes of
carrying out the Project described in the Research Agreement attached hereto. Each RECIPIENT agrees
to make Proprietary Information available only to those employees and students of GENERAL who
require access to it in the performance of the Research Agreement and to inform them of the
confidential nature of such information.



     (b) Except as provided in subparagraph 2(a), each RECIPIENT shall keep all Proprietary
Information confidential unless PALOMAR gives specific written consent for release.



     (c) If any RECIPIENT becomes aware of any disclosure not authorized hereunder that
RECIPIENT shall notify PALOMAR and take reasonable steps to prevent any further disclosure or
unauthorized use.



     (d) When the Proprietary Information is no longer required for the purposes of this
Research Agreement, each RECIPIENT shall return or dispose of any tangible records of it as
directed by PALOMAR.



     (e) It is agreed by PALOMAR and GENERAL that the transfer of Proprietary Information
shall not be construed as a grant of any right or license with respect to the information delivered
except as set forth herein or in a duly executed research or license agreement.



 









 




3. INFORMATION NOT COVERED It is agreed by PALOMAR and GENERAL that information shall not be deemed
Proprietary Information in the event:




     (a) it is publicly available prior to the date of
the Agreement or becomes publicly available thereafter through no wrongful act of GENERAL;



     (b) it was known to GENERAL prior to the date of disclosure or becomes known to GENERAL
thereafter from a third party having no obligation to PALOMAR to keep such information
confidential;



     (c) it is disclosed by GENERAL in accordance with the terms of PALOMAR’s prior written
approval;



     (d) it is disclosed by PALOMAR without restriction on further disclosure;



     (e) it is independently developed by GENERAL; or



     (f) GENERAL is obligated to produce it pursuant to an order of a court of competent
jurisdiction or a valid administrative or
Congressional subpoena, provided that GENERAL (i) promptly notifies PALOMAR and (ii) cooperates
reasonably with PALOMAR’s efforts to contest or limit the scope of such order.



 









 





THIRD AMENDMENT



This is a Third Amendment to the License Agreement between THE GENERAL HOSPITAL CORPORATION, a
not-for-profit corporation doing business as Massachusetts General Hospital, having a place of
business at Fruit Street, Boston, Massachusetts 02114 (“GENERAL”) and Palomar Medical Technologies,
Inc. a Delaware corporation having offices at 82 Cambridge Street, Burlington, MA 01803
(“PALOMAR”), dated August 18, 1995 (“LICENSE AGREEMENT”).



WHEREAS, Paragraph 5.1(b)(ii) of the LICENSE AGREEMENT provides that PALOMAR and GENERAL are
to negotiate in good faith a commercially reasonable royalty to be paid by PALOMAR and GENERAL for
PRODUCTS consisting of a laser (other than a ruby laser) sold for hair removal as well as other
uses;



WHEREAS, PALOMAR has developed a non-ruby laser that is sold for both hair removal
and leg vein treatment (“LIGHTSHEER DIODE LASER”) and the parties have agreed that ***% is the
commercially reasonable royalty to be paid by PALOMAR to GENERAL on PALOMAR’S sales of the
LIGHTSHEER DIODE LASER.



WHEREAS, PALOMAR and Coherent have entered into an Agreement and Plan of Reorganization dated
December 7, 1998 pursuant to which, among other things, Coherent will purchase PALOMAR’S Star
Medical Technologies, Inc. (“Star”) subsidiary and pay PALOMAR an ongoing royalty on sales of
Coherent products that, absent a sublicense, would infringe PATENT RIGHTS licensed exclusively to
PALOMAR by MGH under the LICENSE AGREEMENT; and



WHEREAS, PALOMAR intends to sublicense
PATENT RIGHTS to other companies engaged in the manufacture and marketing of lasers in the LICENSE
FIELD, and GENERAL agrees and acknowledges that it is in the best interests of PALOMAR and GENERAL
for PALOMAR to do so and that PALOMAR will bear certain costs in doing so.



For good and valuable consideration GENERAL AND PALOMAR hereby agree to amend the LICENSE
AGREEMENT as provided herein, effective November 17, 1997 (“AMENDMENT EFFECTIVE DATE”). From and
after the AMENDMENT EFFECTIVE DATE, all references in the LICENSE AGREEMENT shall be deemed to be
references to such LICENSE AGREEMENT as amended hereby. Notwithstanding the foregoing, nothing in
this Amendment is intended to alter in any way the resolution reached between PALOMAR and GENERAL
of the issues arising from the 1999 royalty audit of PALOMAR by GENERAL.




*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule A)




 









 







1. In Section 1.8, add the following new subsection:



(c) The term “PRODUCT” shall not include any PRODUCT used by Palomar, its sales agents,
representatives or distributors solely for
demonstration and marketing purposes. In no event shall such demonstration/marketing units exceed
20% of the total number of any particular PRODUCT manufactured by PALOMAR. GENERAL shall receive
the applicable royalty rate due on any monetary or other valuable consideration received by Palomar
for said demonstration/marketing units, which shall not include the value of promotional and
marketing activities employing such demonstration units, nor shall it include the value of
technical or scientific collaborations between PALOMAR and the recipient of such demonstration
units for which collaborations no monetary consideration is received by PALOMAR.



2. In Section 5.1(b), delete each reference to SUBLICENSEES in subsection (i) and (ii) and add
the following new subsections:



(v) For each LIGHTSHEER DIODE LASER sold by PALOMAR or its AFFILIATES, *** percent (***%) of
NET REVENUES, so long as
the LIGHTSHEER DIODE LASER, its manufacture, use or sale is covered by a VALID CLAIM of any PATENT
RIGHT licensed exclusively to PALOMAR in the country in question.



(vi) For PRODUCT sold by a PALOMAR SUBLICENSEE, GENERAL shall receive *** percent (***%) of
the sublicensing revenues (including up-front fees and milestone payments) received by PALOMAR from
such SUBLICENSEE; provided, however, that in no case shall GENERAL receive less than *** percent
(***%) of the NET REVENUES for PRODUCTS sold by SUBLICENSEES (so long as the PRODUCT, its
manufacture, use or sale is covered by a VALID CLAIM of any PATENT RIGHT licensed exclusively to
PALOMAR in the country in question). PALOMAR and GENERAL agree that for each PALOMAR SUBLICENSE
that includes a non-monetary component, PALOMAR and GENERAL will agree to specific allocation of
the non-monetary component by separate letter agreement.



(vii) If the royalty rate (calculated as a percentage of PRODUCT NET REVENUE) paid by a
SUBLICENSEE to PALOMAR is lower than the royalty rate paid by PALOMAR to GENERAL, then GENERAL
agrees to consider a reduction in the royalty rate paid by PALOMAR to GENERAL in accordance with
Paragraph 5.6.




*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule A)




 









 







3. In Section 7.2, delete the last two sentences, beginning with the words “During the period of
any such proceedings” and ending with “will be promptly paid to GENERAL.”



4. Delete the
first sentence in paragraph 8.2(a) in its entirety and replace it with the following: “At such time
as any product, process or service relating to, or developed pursuant to, this Agreement is being
commercially distributed or sold (other than for the purpose of obtaining regulatory approvals) by
PALOMAR or by a licensee, AFFILIATE or agent of PALOMAR, PALOMAR shall, at its sold cost and
expense, procure and maintain commercial general liability insurance with limits of $1,000,000 each
occurrence and $1,000,000 annual aggregate for bodily injury and property damage liability
combined. In addition, Palomar shall, at its sole cost and expense, procure and maintain excess
Umbrella Liability insurance with limits of at least $3,000,000 each occurrence and $3,000,000
annual aggregate for bodily injury and property damage liability combined.”



5. Delete
the words “PALOMAR shall provide GENERAL with written notice at least fifteen (15) days prior to
the cancellation, non-renewal or material change in such insurance” in the second sentence of
paragraph 8.2(b) and replace them with the words “Should any of the above-described policies be
cancelled before the expiration date thereof, the issuing company will endeavor to mail at least
ten (10) days written notice to the certificate holder, but failure to mail such notice shall
impose no obligation or liability of any kind upon Palomar, its agents or representatives.”



6. Add the words “provided that PALOMAR or its successors remains in business during such time
period” at the end of paragraph 8.(c).




 









 








7. Terms not otherwise defined herein shall have the meaning given to them in the LICENSE
AGREEMENT. Except as amended by the First and Second Amendments to the LICENSE AGREEMENTS,
effective August 18, 1995 and February 17, 1997 respectively, and this THIRD AMENDMENT, the LICENSE
AGREEMENT shall remain in effective in accordance with its terms.



	 	 	 	 	 
	Agreed to:	 	 
	 
	 	 	 	 
	PALOMAR MEDICAL TECHNOLOGIES, INC.
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Joseph P. Caruso
 

Joseph P. Caruso
	 	 
	Title:

	 	President	 	 
	Date:

	 	11/20/00	 	 
	 
	 	 	 	 
	THE GENERAL HOSPITAL CORPORATION
	 
	 	 	 	 
	By:

	 	/s/ Nikki J. Zapol	 	 
	 

	 	 	 	 
	Name:

	 	Nikki J. Zapol	 	 
	Title:
	 	 	 	 
	Date:

	 	11/17/00	 	 






 









 





FOURTH AMENDMENT



This is a Fourth Amendment to the License Agreement between and The General Hospital
Corporation, a not-for-profit corporation doing business as Massachusetts General Hospital having a
principal place of business at Fruit Street, Boston, Massachusetts 02114 (“General”) and Palomar
Medical Technologies, Inc., a Delaware corporation, having a principal place of business at 82
Cambridge Street, Burlington, Massachusetts 01803 (“Palomar”), dated August 18, 1995 (the “License
Agreement”).



WHEREAS, Paragraph 5.1(b)(ii) of the License Agreement provides that Palomar and General are
to negotiate in good faith a commercially reasonable royalty to be paid by Palomar to General for
Products sold for hair removal as well as other uses;



WHEREAS, Palomar has developed the
SLP1000 Diode Laser System and associated hand pieces (“SLP1000”) and the EsteLux Pulsed-Light
System and associated hand pieces (“EsteLux”) for hair removal and other applications, and the
Parties have agreed to commercially reasonable royalty rates to be paid by Palomar to General on
Palomar’s sales of the SLP1000 and EsteLux systems and the associated hand pieces under Paragraph
5.1(b)(ii) of the License Agreement;



WHEREAS, GENERAL represents to the best of its
knowledge and belief that it is the owner of all rights, title and interest in U.S. Patent No.
5,824,023 (defined below as “PHOTON RECYCLING PATENT RIGHTS”) and has the right and ability to
grant the license hereinafter described;



WHEREAS, under research programs funded by
PALOMAR through the Clinical Trial Agreement effective August 18, 1995, as amended July 1, 1998,
August 1, 1999, and July 9, 2001 (“Clinical Trial Agreement”) and in accordance with the Joint
Patent Agreement effective January 1, 2000 (“Joint Patent Agreement”), GENERAL and PALOMAR, through
research conducted by their employees and consultants, have developed joint inventions (defined
below as ADDITIONAL PATENT RIGHTS);



WHEREAS, as a center for research and education,
GENERAL is interested in licensing ADDITIONAL PATENT RIGHTS and PHOTON RECYCLING PATENT RIGHTS and
thus benefiting the public and GENERAL by facilitating the dissemination of the results of its
research in the form of useful products, but is without capacity to commercially develop,
manufacture, and distribute any such product; and



WHEREAS, PALOMAR having such capacity,
desires to commercially develop, manufacture, use and distribute such products throughout the
world;



For good and valuable consideration General and Palomar hereby agree to amend the
License Agreement as provided herein, effective June 1, 2000 (“Amendment Effective Date”). From and
after the Amendment Effective Date, all references in the License Agreement shall be deemed to be
references to such License Agreement as amended hereby.




 









 







Paragraph 1. DEFINITIONS:



Add the following new material to the bottom of Paragraph 1.7:



The term “ADDITIONAL PATENT RIGHTS” shall mean GENERAL’s rights in *** and any other
divisional or continuation patent applications naming one or more GENERAL employees as inventors to
the extent the aforementioned are jointly owned with PALOMAR. ADDITIONAL PATENT RIGHTS shall also
include those claims in any continuation-in-part of the aforementioned patent applications which
claim an invention described or claimed in the above listed original filings to the extent the
aforementioned are jointly owned with PALOMAR. ADDITIONAL PATENT RIGHTS shall also include future
Joint Inventions arising under the Joint Patent Agreement for which PALOMAR elects to obtain an
exclusive license under Section 3 thereof.



The term “PHOTON RECYCLING PATENT RIGHTS” shall mean GENERAL’s rights in U.S. Patent No.
5,824,023, filed April 16, 1996 and entitled “Radiation-Delivery Device”, including any division,
continuation or any foreign patent application or Letters Patent or the equivalent thereof issuing
thereon or reissue, reexamination or extension thereof. PHOTON RECYCLING PATENT RIGHTS shall also
include those claims in any continuation-in-part which claims an invention described or claimed in
U.S. Patent No. 5,824,023.



In Paragraph 1.8(a), 1.9(a), and 1.11, add “or ADDITIONAL PATENT RIGHT or PHOTON RECYCLING
PATENT RIGHT” after each instance of “PATENT RIGHT”.



Paragraph 2. LICENSE:



In Paragraphs 2.1(a), 2.1(b)(i) and 2.1(b)(ii), add “and ADDITIONAL PATENT RIGHTS” after each
instance of “PATENT RIGHT” and add new subparagraph 2.1(b)(iii):




*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule C)




 









 







(iii) PHOTON RECYCLING PATENT RIGHTS non-exclusively licensed to PALOMAR to the extent such a
sublicense is required for a customer to use a PRODUCT or to practice a SERVICE or is required by a
PALOMAR SUBLICENSEE of PATENT RIGHTS or ADDITIONAL PATENT RIGHTS under Paragraphs 2.1(a) or 2.1(c)
to make, have made, use and sell PRODUCTS and perform SERVICES.



In Paragraph 2.1, add the following new subparagraphs:



c) an exclusive, worldwide, royalty-bearing license in
all fields under GENERAL’s rights in ADDITIONAL PATENT RIGHTS to make, have made, use and sell
PRODUCTS and to perform SERVICES; and



d) a non-exclusive, worldwide, perpetual,
irrevocable, fully paid up license in all fields under GENERAL’s rights in PHOTON RECYCLING PATENT
RIGHTS to make, have made, use and sell PRODUCTS and to perform SERVICES.



In the last paragraph of Paragraph 2.1 and in Paragraph 2.2 add “or ADDITIONAL PATENT RIGHTS
or PHOTON RECYCLING PATENT RIGHTS” after “PATENT RIGHT”, and in Paragraph 2.5, add “and ADDITIONAL
PATENT RIGHTS and PHOTON RECYCLING PATENT RIGHTS” after “PATENT RIGHT”.



Paragraph 3. DUE DILIGENCE OBLIGATIONS:



In Paragraph 3.1, at the end of the first sentence delete “in the LICENSE FIELD” and replace
subparagraph (c) with the following new subparagraph (c):



(c) Filing with the U.S. Food
and Drug Administration for a 510(k) *** on any PRODUCT within *** of receipt of clinical data from
GENERAL or other research facility sufficient for such filing, it being understood that GENERAL is
providing such data to PALOMAR pursuant to the Clinical Trial Agreement. In the event that GENERAL
fails to provide such data, GENERAL and PALOMAR shall confer to establish a reasonable procedure
and schedule to secure clearance for such PRODUCT, and in the event that GENERAL and PALOMAR cannot
agree on such procedure and schedule they shall resolve this issue in accordance with the dispute
resolution provisions of Paragraph 10.9.



In Paragraph 3.1, replace subparagraph (d) with the following new subparagraph (d):



(d) Commencing commercialization of the PRODUCTS or SERVICES within the United States within
*** after FDA clearance is received ***.



In Paragraph 3, add the following new Paragraph 3.3:




*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule B)





 









 







3.3 If, during the period that PALOMAR has an exclusive license in all fields under ADDITIONAL
PATENT RIGHTS, a third party requests a sublicense to the ADDITIONAL PATENT *** PALOMAR shall share
any sublicensing royalties with GENERAL in accordance with Paragraphs 5.1(b)(vi) and 5.1(b)(viii).



The exclusive licenses granted to PALOMAR in Paragraph 2.1(c) under each patent or patent
application in ADDITIONAL PATENT RIGHTS shall be for all fields of use for a period equal to ***
(“Exclusive Period”). On the termination of the Exclusive Period, said license shall automatically
terminate in all fields of use excluding the LICENSED FIELD and any other fields covered under
separate license agreements. PALOMAR may retain an exclusive license in a field *** the parties
shall negotiate a license agreement in said field of use having appropriate due diligence
provisions, milestone payments and PRODUCT royalties. If the parties are unable to agree on license
terms, either party may demand in writing submitted to the other party that the dispute be
submitted to binding arbitration as provided in the second paragraph of Paragraph 10.9 of the
License Agreement. For the avoidance of doubt, the parties agree that PALOMAR’s license under
ADDITIONAL PATENT RIGHTS in the LICENSED FIELD shall remain exclusive unless terminated in
accordance with the License Agreement. In the event that PALOMAR does not elect to continue its
exclusive license in a field, GENERAL shall be free to license its undivided interest in said
patent or patent applications in such non-exclusive field to any third party in all territories
without further approvals from or accounting to PALOMAR, in which case, PALOMAR’s obligations to
pay royalties to GENERAL under such patent or patent applications in such non-exclusive field shall
terminate. For the avoidance of doubt, PALOMAR shall continue to be obligated to pay GENERAL
royalties under such patent or patent applications in exclusive fields.



Paragraph 4. FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHT



In Paragraph 4.1, add “and PHOTON RECYCLING PATENT RIGHTS” after “PATENT RIGHTS” in the first
sentence. After the first sentence add the following new sentence “PALOMAR shall only reimburse
GENERAL for Costs incurred by GENERAL for the preparation, filing, prosecution and maintenance of
all PHOTON RECYCLING PATENT RIGHTS as set forth in Paragraph 5.1(c).”




*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule B)




 









 







In Paragraph 4, add the following new Paragraphs:



4.3 PALOMAR shall continue to be responsible for the preparation, filing, prosecution and
maintenance of all patent applications and patents included in ADDITIONAL PATENT RIGHTS. PALOMAR
shall continue to be responsible for all costs incurred for the preparation, filing, prosecution
and maintenance of all ADDITIONAL PATENT RIGHTS.



4.4 With respect to any ADDITIONAL PATENT RIGHTS, each document or a draft thereof pertaining
to the filing, prosecution, or maintenance of such ADDITIONAL PATENT RIGHTS, including but not
limited to each patent application, office action, response to office action and request for
reissue or reexamination of any patent issuing from such application shall be provided to GENERAL
as follows. Documents received from any patent office or counsel’s analysis thereof shall be
provided promptly after receipt. For a document to be filed in any patent office, a draft of such
document shall be provided sufficiently prior to its filing, to allow for review and comment by
GENERAL. If as a result of the review of any such document, PALOMAR shall elect not to pay or
continue to pay the Costs for such ADDITIONAL PATENT RIGHTS, PALOMAR shall so notify GENERAL within
thirty (30) days of PALOMAR’s receipt of such document and PALOMAR shall thereafter be relieved of
the obligation to pay any additional Costs regarding such ADDITIONAL PATENT RIGHTS incurred after
the receipt of such notice by GENERAL. Such U.S. or foreign patent application or patent shall
thereupon cease to be a ADDITIONAL PATENT RIGHT hereunder and GENERAL shall be free to license its
rights to that particular U.S. or foreign patent application or patent to any other party on any
terms. GENERAL shall also have the right to provide comments and recommendations on any action
proposed to be taken by PALOMAR and PALOMAR agrees to take into account GENERAL’s recommendations.
Where a course of action is followed on a ADDITIONAL PATENT RIGHT which is both contrary to
PALOMAR’s recommendations and which increases costs over such recommendation, PALOMAR shall only be
responsible for costs which would have been incurred had its recommendation been followed.



Paragraph 5. ROYALTIES; LICENSE FEES



In Paragraph 5.1(b), add the following new subparagraphs:



(viii) For PRODUCT sold by a PALOMAR SUBLICENSEE covered by a VALID CLAIM of any ADDITIONAL
PATENT RIGHTS but not covered by a VALID CLAIM of any PATENT RIGHTS, GENERAL shall receive ***
percent (***%) of the sublicensing revenues (including up-front fees and milestone payments)
received by PALOMAR from such SUBLICENSEE; provided however, that in no case shall GENERAL receive
less than *** percent (***%) of the NET REVENUES for PRODUCTs sold by SUBLICENSEEs (so long as the
PRODUCT, its manufacture, use or sale is covered by a VALID CLAIM of any ADDITIONAL PATENT RIGHTS
in the country in question). PALOMAR and GENERAL agree that for each PALOMAR SUBLICENSEE that
includes a non-monetary component, PALOMAR and GENERAL will agree to the specific allocation of the
non-monetary component by separate letter agreement.




*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule A)





 









 







(ix) For each SLP1000 system sold by PALOMAR or its AFFILIATES, including any hand piece(s) sold
therewith, *** percent (***%) of NET REVENUES, so long as the SLP1000 system and hand pieces, their
manufacture use or sale is covered by a VALID CLAIM of any PATENT RIGHT or ADDITIONAL PATENT RIGHT
licensed exclusively to PALOMAR in the country in question.



(x) For each EsteLux base system and LuxY handpiece sold by PALOMAR or its AFFILIATES, ***
percent (***%) of NET REVENUES, and for each LuxR and LuxRs handpiece sold by PALOMAR or its
AFFILIATES, *** percent (***%) of NET REVENUES, *** in all cases so long as the EsteLux system and
LuxY, LuxR and LuxRs hand pieces, their manufacture use or sale is covered by a VALID CLAIM of any
PATENT RIGHT or ADDITIONAL PATENT RIGHT licensed exclusively to Palomar in the country in question.
***



(xi) For each PRODUCT sold by or SERVICE performed by PALOMAR or its AFFILIATES that
is not subject to previous provisions of this Paragraph 5.1(b) and is not covered by a VALID CLAIM
of any PATENT RIGHT, the parties agree to negotiate in good faith a commercially reasonable royalty
rate to be paid to GENERAL by PALOMAR, so long as the PRODUCT or SERVICE, its manufacture, use or
sale is covered by a VALID CLAIM of any ADDITIONAL PATENT RIGHT licensed to PALOMAR in the country
in question. General agrees that the following shall be considerations in setting such royalty
rate: (1) the royalty rates known to be payable to licensors for products or processes of a similar
nature, which are on the market or under development by competing entities; and (2) the fact that
Palomar is a co-inventor. General further agrees that, for ADDITIONAL PATENT RIGHTS, if the parties
can mutually agree on a royalty that an unaffiliated third party commercial entity might pay, in an
arms-length transaction, for a product covered by such ADDITIONAL PATENT RIGHTS (a “third party
commercial royalty rate”), PALOMAR’s royalty rate shall not exceed fifty percent (50%) of such
third party commercial royalty rate.



In Paragraph 5, add the following new subparagraph 5.1(c):




*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule A)




 









 







5.1 (c) Upon execution of this Fourth Amendment, PALOMAR shall pay GENERAL *** for the fully paid
up non-exclusive license to the PHOTON RECYCLING PATENT RIGHTS provided in Paragraph 2.1(d) and ***
as reimbursement for Costs incurred by GENERAL for the preparation, filing, prosecution and
maintenance of all PHOTON RECYCLING PATENT RIGHTS.



Paragraph 7. INFRINGEMENT:



In Paragraph 7.1, add “and ADDITIONAL PATENT RIGHTS” after “PATENT RIGHT” and throughout the
remainder of Paragraph 7 add “or ADDITIONAL PATENT RIGHTS” after each instance of “PATENT RIGHT”.



Paragraph 8. INDEMNIFICATION:



In Paragraph 8.3, add the following sentences after the second sentence:



“GENERAL further warrants that it is the joint owner with PALOMAR of the ADDITIONAL PATENT
RIGHTS, that except for
PALOMAR’s rights as a joint inventor, no other party has any rights or interest in the ADDITIONAL
PATENT RIGHTS. GENERAL also warrants that it is the sole owner of the PHOTON RECYCLING PATENT
RIGHTS.”



Paragraph 9. TERMINATION and Paragraph 10. MISCELLANEOUS:



In
Paragraphs 9.1, 9.2, 9.4(vii) and 10.2(a) add “and ADDITIONAL PATENT RIGHT” after each instance of
“PATENT RIGHT”.



Terms not otherwise defined herein shall have the meaning given to them
in the License Agreement. Except as amended by the First, Second and Third Amendment, effective
August 18, 1995, February 17, 1997, November 17, 1997, respectively, and this Fourth Amendment, the
License Agreement shall remain in effect in accordance with its terms.




	 	 	 	 	 
	Agreed to:	 	 
	 
	 	 	 	 
	PALOMAR MEDICAL TECHNOLOGIES, INC.
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Joseph P. Caruso
 

Joseph P. Caruso
	 	 
	Title:

	 	CEO	 	 
	Date:

	 	2/18/03	 	 
	 
	 	 	 	 
	THE GENERAL HOSPITAL CORPORATION
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Frances Toneguzzo
 

Frances Toneguzzo Ph.D.
	 	 
	Title:

	 	Director, Corporate Sponsored Research & Licensing	 	 
	Date:

	 	2/18/03	 	 






*** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.

(Schedule A)




 









 








FIFTH AMENDMENT

MGH Agt. No. 2006A20842




     This is a Fifth Amendment to the License Agreement between and The General Hospital
Corporation, a not-for-profit corporation doing business as Massachusetts General Hospital, having
a principal place of business at Fruit Street, Boston, Massachusetts 02114 (“General”) and Palomar
Medical Technologies, Inc., a Delaware corporation, having a principal place of business at 82
Cambridge Street, Burlington, Massachusetts 01803 (“Palomar”) (collectively, the “Parties”), dated
August 18, 1995 (the “License Agreement”).



     WHEREAS, Paragraph 5.1(b)(ii) of the License Agreement provides that Palomar and General
are to negotiate in good faith a commercially reasonable royalty to be paid by Palomar to General
for Products sold for hair removal as well as other uses;



     WHEREAS, Palomar has developed
the NeoLux Pulsed-Light System and associated hand pieces, EsteLux Pulsed-Light System and
associated hand pieces, the MediLux Pulsed-Light System and associated hand pieces and the StarLux
Pulsed-Light and Laser System and associated hand pieces for hair removal and other applications,
and the Parties have agreed to commercially reasonable royalty rates to be paid by Palomar to
General on Palomar’s sales of NeoLux, EsteLux, MediLux and StarLux systems and the associated hand
pieces under Paragraph 5.1(b)(ii) of the License Agreement;



     For good and valuable
consideration General and Palomar hereby agree to amend the License Agreement as provided herein,
effective March 1, 2006 (“Amendment Effective Date”). From and after the Amendment Effective Date,
all references in the License Agreement shall be deemed to be references to such License Agreement
as amended hereby.


Paragraph 5. ROYALTIES; LICENSE FEES



In Paragraph 5.1(b), replace in its entirety subparagraph (x), which was introduced in the
Fourth Amendment to the License Agreement effective June 1, 2000, with the following new
subparagraph (x):




     (x)



     (1) For each NeoLux base system and each EsteLux base system sold by PALOMAR or its
AFFILIATES, **;



     (2) For each MediLux base system sold by PALOMAR or its AFFILIATES, **;



**Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.





 









 






EXECUTION
VERSION




(3) For each LuxY handpiece for use with a NeoLux, EsteLux, or MediLux base system sold by PALOMAR
or its AFFILIATES, **;




(4) For each StarLux base system and LuxY handpiece for use with
a StarLux base system sold by PALOMAR or its AFFILIATES **;
and




(5) For each LuxR and LuxRs handpiece for use with a NeoLux, EsteLux, MediLux, or StarLux
base system sold by PALOMAR or its AFFILIATES, **.



     The royalty rates enumerated above in Paragraph 5.1(b), Subparagraph (x)(1)-(5) shall
apply in all cases so long as the manufacture, use, or sale of the NeoLux, EsteLux, MediLux and
StarLux systems and LuxY, LuxR and LuxRs hand pieces is covered by a VALID CLAIM of any PATENT
RIGHT or ADDITIONAL PATENT RIGHT licensed exclusively in the LICENSE FIELD to Palomar in the
country in question.



     It is the intent of the Parties that upon executing this Fifth Amendment, the royalty rates
mutually agreed upon herein will be fixed for the commercial life of the NeoLux, EsteLux, MediLux
and StarLux systems and the LuxY, Lux R and LuxRs hand pieces. The Parties further acknowledge that
these royalty rates will apply only within the LICENSE FIELD of “hair reduction and/or hair
removal,” as defined in the original License Agreement dated August 18, 1995.



     Terms not otherwise defined herein shall have the meaning given to them in the License
Agreement. Except as amended by the First, Second, Third and Fourth Amendments, effective August
18, 1995, February 17, 1997, November 17, 1997, and June 1, 2000, respectively, and this Fifth
Amendment, the License Agreement shall remain in effect in accordance with its terms.



** Omitted pursuant to request for confidential treatment by

Palomar Medical Technologies, Inc. and filed separately with the SEC.




REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.




 









 








EXECUTION VERSION




	 	 	 	 	 
	Agreed to:	 	 
	 
	 	 	 	 
	PALOMAR MEDICAL TECHNOLOGIES, INC.
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Joseph P. Caruso
 
 Joseph
P. Caruso	 	 
	Title:

	 	CEO	 	 
	Date:

	 	3/20/06	 	 
	 
	 	 	 	 
	THE GENERAL HOSPITAL CORPORATION
	 
	 	 	 	 
	By:

	 	/s/ Frances Toneguzzo	 	 
	 

	 	 	 	 
	Name:

	 	Frances Toneguzzo Ph.D.	 	 
	Title:

	 	Director, Corporate Sponsored Research & Licensing	 	 
	Date:

	 	3/13/06