EX-10.1 NON-EXCLUSIVE LICENSE AGREEMENT

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:

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     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 1 ^st 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.

                    (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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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 (45 ^th ) 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.

     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

Non-Exclusive Patent License

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,

Non-Exclusive Patent License

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

34

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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.

Non-Exclusive Patent License

     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)”).

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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.

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).

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.

      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) Su pply 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.

     (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

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

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

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

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

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

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

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

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

ARTICLE II
Commercialization

      2.1 Gillette’s Commercialization Rights and Obligations.

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

     (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

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.

      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

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

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.

      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

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).

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.

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),

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

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

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

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).

      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;

     (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;

     (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

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

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)).

     (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

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:

     (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

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.

     (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

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.

     (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

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

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

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.

      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

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)&